Democrats Push for Oil and Gas Royalty Inquiry

Democrats Push for Oil and Gas Royalty Inquiry



Feb 2007 - Senate Democrats on 
Thursday turned up the heat on the Interior Department’s 
oversight of oil and gas royalties. They called for a 
congressional investigation of a program that allows the 
federal government to collect royalty payments in the form of 
oil and gas rather than cash. 
The royalty-in-kind program is already under criminal 
investigation by the U.S. Justice Department and is the 
subject of an investigation by the Interior Department’s 
Office of the Inspector General. 
Under the program, Interior’s Minerals Management Service, 
MMS, collects oil and gas in lieu of royalties and sells the 
commodities on the open market. 
Oil rig in the Gulf of Mexico 
The Bush administration wants to double the size of the 
royalty-in-kind program, which currently collects some $4 
billion annually, by 2009. If the program is doubled, it would 
cover about 80 percent of offshore royalties, mostly from 
federal leases in the Gulf of Mexico. 
That "defies logic," said Senator Ron Wyden, an Oregon 
Democrat. 
Wyden and Senator Jeff Bingaman, a New Mexico Democrat who 
chairs the Senate Energy Committee, have asked for an 
investigation by the Government Accountability Office, GAO, 
the independent investigative arm of Congress. 
The Minerals Management Service has been under increased 
scrutiny by lawmakers because of concerns with the 
royalty-in-kind program, as well as errors with offshore 
leases under the Clinton administration that could cost the 
federal government some $10 billion in lost royalties. 
Drilling in the deep waters of the Gulf of Mexico 
Wyden noted that two recent attempts by the GAO to get 
information on the program failed to assess its status because 
the Minerals Management Service was unable to provide complete 
and accurate records. 
"They can’t find out from MMS something resembling full and 
accurate data … or even the financial nuts and bolts of how 
the program works," Wyden said during a Senate Energy 
Committee hearing Thursday on the Interior’s budget. "Why is 
it so hard?" 
"You would think it would not be," responded Interior 
Secretary Dirk Kempthorne, who said he would wait for the 
report from the inspector general before taking action to 
modify the program. 
"There is an ongoing investigation there," he told the 
committee. "We continue to press for those answers." 
"I really do hope the department will now make this an urgent 
priority," Wyden told Kempthorne. "I’m going to get to the 
bottom of this." 
Secretary of the Interior Dirk Kempthorne at his confirmation 
hearing before the Senate Energy and Natural Resources 
Committee. May 4, 2006. 
The hearing was Kempthorne’s first appearance before the 
committee since his confirmation, and he faced criticism for 
several parts of the Bush administration’s proposed $10.7 
billion budget for the Interior Department in FY 2008. 
The budget, for the second year running, includes a provision 
to sell some $350 million of public land held by the Bureau of 
Land Management, another agency within the Interior 
Department. 
The spending plan for the U.S. Forest Service budget, which is 
part of the U.S. Agriculture Department, also contains 
language to sell off some $800 million of federal forestland. 
Both provisions were rejected by Congress last year and 
sparked considerable controversy. 
During his confirmation hearing last year, Kempthorne told 
senators he opposed the concept of selling public lands to 
reduce the deficit - something Colorado Democratic Senator Ken 
Salazar reminded him of Thursday. 
Colorado Senator Ken Salazar 
"There was a bipartisan push against that," Salazar said. 
"[It] is the wrong way to go and something I will oppose very 
strongly." 
Administration officials have implied the difference in this 
year’s provision is that not all the funds are targeted for 
deficit reduction. Still, Kempthorne appeared to say that land 
sales provision was not of his doing. 
"We did have that discussion and I still believe as I did 
then," Kempthorne told Salazar. "I don’t agree with selling 
land for the purposes of deficit reduction." 
Western senators also took issue with the administration’s 
plan to cut some $42 million from the payment in lieu of 
taxes, PILT, program, which provides money to local counties 
that contain large tracts of federal land. 
Oregon Senator Ron Wyden 
Wyden said the cuts could mean some counties will be unable to 
provide "basic services" and asked Kempthorne if the 
department had done any analysis on the ramifications of the 
cuts. "I don’t know of an analysis that has been completed on 
that," Kempthorne replied. 
Kempthorne, a former Idaho Republican governor, added that one 
solution he favors is allowing additional timber harvest from 
federal lands. 
That resonated with Senator Larry Craig, a fellow Idaho 
Republican, who said "we are scrambling to keep timber 
dependent school districts alive." 
The law that authorizes the U.S. Forest Service to share 25 
percent of the gross receipts from timber sales on national 
forests with rural counties to fund schools expired at the end 
of last year, but the previous Congress did not act on 
reauthorization. 
2004 Timber sale on Oregon's Willamette National Forest 
Rural counties have said they will have to begin laying off 
teachers in March if the law is not reauthorized. 
The president’s FY 2008 budget seeks to extend the law - known 
as the Secure Rural Schools and Community Self-Determination 
Act of 2000 - through 2011. 
The PILT cut "is a frustration," said Craig, who added that 
rural counties are also paying the price for the fact that 
"America has fallen in love with its public lands." 
These counties are increasingly having to foot the bill for 
"life flights and emergencies that result from this love 
affair," Craig told colleagues. 
New Mexico senators took aim at the issue of Indian water 
rights, urging Kempthorne to make settlements a greater 
priority. 
"Un-adjudicated Indian water rights claims in the western 
United States pose a serious impediment to effective water 
management," said Senator Pete Domenici, a New Mexico 
Republican. 
Domenici called the $34 million earmarked in the budget for 
Indian land and water settlements "not adequate." 
He raised concern about the state of settlements involving 
three New Mexican tribes. The largest of the three is with the 
Navajo Nation and would require the federal government to 
spend more than $900 million over 20 years. 
"I hear unfortunate messages from the administration that it 
will not be supportive of these settlements," Bingaman said. 
Flyover of the Navajo Reservoir in extreme southwestern 
Colorado shows low water, affecting water levels along the 
Colorado River in New Mexico and Arizona. January 2007. 
Bingaman questioned if "something of a double standard" was at 
play, pointing to the Bush administration’s willingness to 
agree to costly water settlements in California and Arizona. 
The administration is trying to take care of 19 pending 
settlements and has formed a task force to try and expedite 
the process, Kempthorne said. 
In the cases cited by Bingaman, he added, legislation was 
passed by Congress and "then the funding followed." 
"That’s what we are trying to do here," Bingaman responded. 
"We are trying to enact legislation but we want your support." 

Kempthorne declined to pledge support, but told Bingaman a 
draft environmental impact statement on the Navajo settlement 
should be completed by the end of next month. 
"We will stay actively involved and dedicated to a 
resolution," Kempthorne promised.

---