National Defense Authorization Act for Fiscal Year 2009

Floor Speech

NATIONAL DEFENSE AUTHORIZATION ACT FOR FISCAL YEAR 2009 -- (Senate - September 10, 2008)

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Mr. WYDEN. First, I wish to note that my friend and colleague, Senator Smith, was just on the floor. I wish to commend him for all the work he has done for the vulnerable families in our country. He and Sharon, of course, have suffered the loss, a loss almost unbearable to all of us who are parents. They have done everything they possibly could to stand up for other families across the country.

Since our colleague spoke, and very movingly, on the floor, I wish to take a special note, before I begin my comments on another subject, of his advocacy because I think it has been extremely important for millions of families in our country.

MINERALS MANAGEMENT SERVICE

Mr. President, I have come to the floor to talk about a new report that the Interior inspector general has released on the offshore oil and gas leasing program.

Several years ago, I stood on the floor and spoke for several hours in an effort to draw the Senate's attention to the mismanagement of this offshore oil and gas leasing program. Today we have learned, with the inspector general's report, that nothing has changed. What they have shown, the inspector general in this report, is that the Royalty-in-Kind program, one of the key royalty programs that they looked at, is a horror story of mismanagement and misconduct.

The inspector general looked at the Minerals Management Service, and said, with respect to this royalty program, there is a ``culture of ethical failure.'' Nearly one-third of the entire staff of the Royalty-in-Kind program accepted gifts and gratuities from the oil and gas companies with which they were conducting official business.

There are stories of drug use. There are stories of inappropriate sexual relationships. The inspector general confirmed that two Royalty-in-Kind employees were running a side consulting business for oil and gas companies with which the Royalty-in-Kind program was doing business.

The inspector general's report detailed how Royalty-in-Kind managers, instead of working for the taxpayers' interests, were working for their own self-interest, ingratiating themselves with the very oil companies they were charged to negotiate fair deals with on behalf of American taxpayers.

Now, some are probably wondering exactly how much money has been lost as a result of this mismanagement and misconduct. The bottom line from the inspector general's investigation is there is no way to determine how extensive the abuses in this program have been. There is no way to determine exactly how much money the American taxpayer has lost. Because the record keeping has been so shoddy, it is not possible to figure out exactly what these losses are.

I am very hopeful, as a result of this extraordinarily important report by the inspector general, that it will be possible to clean house finally at the Minerals Management Service. I hope it will be possible.

You say to yourself: How can it be that these things are done at this agency today? What would it take to get a serious audit program at the Mineral Management Service? I hope it will be possible now to make changes in this program, to make it crystal clear that the Federal Government will no longer employ someone serving an interest other than the public's.

Whether you are a secretary or manager or the guy or the gal who is cleaning up, if you want to work for the public, then you need to take the public's trust seriously.

Now, you say to yourself, this should pretty much go without saying. But particularly this afternoon, as the Congress is on the eve of a historic debate about the future of energy policy, you ought to say: Let's clean up the abuses that are taking place in existing leasing programs that are going to continue and possibly be expanded under the legislation that the Congress will consider shortly.

Some of the Minerals Management Services problems also involve a law that was written originally in the mid-1990s, when the price of oil was low. When the price of oil was around $15 a barrel, the Congress said: Let's give oil companies a financial incentive to drill on new leases in the Gulf of Mexico. The law said that while the oil companies were drilling on public land, they didn't have to pay the Federal Government the required royalties until the price of oil rose high enough for the companies to make a profit, obviously a little bit different time than today. Oil prices, of course, have not stayed low. It turns out that royalty relief didn't phase out the way it should have.

We learned the Minerals Management Service, the part of the Interior Department charged with issuing and administering offshore leases, bungled things so badly they forgot to include provisions in the leases requiring royalties on those particular leases. The Government Accountability Office has estimated that just this dereliction of duty would cost American taxpayers as much as $11.5 billion. The Government Accountability Office recently has updated that amount and the impact is several billions of dollars higher.

The Congress has held hearings on this management failure, but the fact is, nothing has been done to fix the problem.

To add further insult to the injuries suffered by taxpayers, the oil companies operating in the gulf, led by Kerr McGee, sued the Federal Government, claiming they shouldn't pay royalties on any of the oil from any of the 1995 to 2000 leases, no matter how high the price of oil went. They got a judge in Louisiana to agree with them. The Federal Government is appealing the case.

Senator Kyl and I have been working on a bipartisan basis to try to get this corrected, but in the 2005 Energy bill, the Congress extended the exemptions for new leases in the Gulf of Mexico from royalty payments for both oil and natural gas wells, despite the fact that oil was already $50 a barrel. This is a loophole that remains in effect until June of 2010 and is going to allow current and future leases in the Gulf to continue to avoid even more royalties while additional profit is generated at record prices.

The Bush administration has proposed repealing these 2005 royalty relief provisions, but they are still in place.

This is the time to get control of this runaway stallion. We are talking about millions, certainly billions, in terms of the cumulative cost of the program, and these practices take your breath away.

Let me read from one paragraph from the summary the inspector general has issued. One paragraph talking about three employees says: The results of this investigation paint a disturbing picture of three senior executives who were good friends and remained calculatedly ignorant of the rules governing postemployment restrictions, conflict of interest, and Federal acquisition regulations to ensure that two lucrative contracts would be awarded to a company created by one of them and then later joined by another.

These are such clear examples of abuse that no matter what one says, you have to say this is unacceptable. The inspector general found that between 2002 and 2006, nearly one-third of the entire Royalty-in-Kind staff socialized with and received a wide array of gifts and gratuities from oil and gas companies with which the Royalty-in-Kind Program was conducting official business. We are talking about 135 occasions involving gifts and gratuities. They went on to say that the inspector general discovered a culture of substance abuse and promiscuity in the Royalty-in-Kind Program, alcohol abuse associated with the program, where there was socializing by staff with the industry.

I have suggested two steps today that strike me as obvious changes that should be put in place. First, there needs to be an effort to clean house at the Minerals Management Service so that we get these practices behind us. We also have to get back in the serious business of auditing these programs where millions and billions of dollars are involved.

I want to commend particularly the inspector general of the Department of the Interior for his outstanding work in putting together this report. This is one of a series of reports that the inspector general has issued in this area. I and the chairman of the Energy Committee, Senator Bingaman, have worked closely with colleagues to try to get these changes put in place. Senator Bingaman in particular has offered a number of promising legislative changes to deal with the royalty issue.

I wanted colleagues to know in particular about this Office of Inspector General inquiry into the Minerals Management Service, given the debate that is about to begin in the Senate.

We will be, as far as I can tell, spending much of the remainder of this session talking about these and similar programs. I happen to think it is possible for us to do our work in a bipartisan fashion, get in place energy changes that will allow us, in the area of alternative energy supplies and renewables, to make significant progress. I have made it clear that particularly with respect to additional opportunities for drilling, be it in the Gulf of Mexico, and maybe other areas, I am open. What I am not open to is the continued abuse of taxpayers in these essential programs involving public resources. We are talking about public lands. We are talking about public resources. It is one thing when private companies drill on private lands. It is quite another when they are developing energy on public lands and, in my view, taking advantage of programs that were set up years ago when the price of oil was $15 a barrel.

It is time to clean house at the Minerals Management Service. It is time to get back in the business of accountability and rigorous oversight of these leasing programs that involve such extensive amounts of taxpayer funds.

I hope all colleagues will look at the report issued by the inspector general of the Department of the Interior. It provides a clear roadmap for how the Congress ought to proceed in terms of correcting these programs, ending the pattern of abuse and mismanagement, and changing the channel from the current horror show of mismanagement and misconduct at the Minerals Management Service.

I yield the floor and suggest the absence of a quorum.

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