http://www.buzzflash.com/articles/analysis/213

5/23/2007

Developing New Bush Scandal Helping Big Oil Companies Hide Billions
from Government at Taxpayer Expense

A BUZZFLASH NEWS ANALYSIS

Corruption within the Department of Interior may have allowed oil
companies to improperly save billions at the expense of the taxpayers.
The Department's Inspector General has already made at least two
criminal referals to the FBI and the Justice Department, and
Congressional Democrats have launched several investigations and
introduced new legislation to fix the problem.

In a nutshell, oil companies leasing federal land to drill for oil are
required to pay the government royalties based on a percentage of
their sales.

But under the Royalty-in-Kind program, the companies can pay in the
form of oil and gas instead of cash.

The problem is that oil prices have increased more than the value of
the oil and gas royalty revenues being recieved, meaning that the oil
companies are managing to withhold a growing amount of their profits
from Uncle Sam.

As you might guess, Royalty-in-Kind was proposed and remains supported
by the oil industry, and Bush implanted officials with deep ties to
the oil industry in charge of the agency responsible for enforcing the
program, the Minerals Management Service (MMS).

In light of the growing scandal, MMS Director Johnnie Burton has
already announced that she will be retiring by the end of May.

Burton started an oil exploration business before becoming a staunch
Republican politician in Wyoming, where she developed ties with *****
Cheney.

Greg Smith became the new head of MMS, but he just announced his own
sudden retirement Tuesday.

"It appears this Administration uses retirement like some perverse
witness protection program," said Rep. Nick Rahall.

"Get them out of the spotlight and off the list of in-the-know folks
who could provide damaging evidence. Instead of Watergate's 'follow
the money,' the Bush Administration has "follow the retirements.' "

Rep. Rahall is chairman of the House Natural Resources Committee,
which held a hearing Wednesday on the Energy Policy Reform and
Revitilization Act aimed at eliminating the oil royalty corruption and
loopholes, among other things.

Much of the controversy surrounds a mistake inadvertantly created
during the Clinton Administration that went unaddressed and not
publically acknowledged until 2006.

MMS Director Burton claimed at the time that she had only recently
discovered the problem, but midlevel officials spotted the mistake in
2000 and the Interior Department's Inspector General and even top
Republicans say she either knew or should have known about the mistake
as early as 2004.

The delay allowed oil companies to save more money and prevented the
chance for easier lease renegotiations since energy prices were much
lower at the time.

But wait, there's more!

A former Interior auditor-turned-whistleblower revealed that he was
ordered by senior Washington officials to drop a case against the
Kerr-McGee Corporation for cheating the government out of at least $12
million in royalties.

A jury found the company guilty of underpayment, though the case
remains pending in federal court on appeal.

MMS Director Burton "is a person who apparently never saw an oil and
gas royalty payment audit she liked," Rep. Rahall said Wednesday.

"Under her reign, the average number of annual audits conducted
plummeted from 540 to 144. And left on the wayside were billions of
dollars in royalty payments owed to the American people."

As MMS Director, Burton was responsible for auditing participating
companies.

The Bush Administration (and the oil industry) want the percentage of
oil and gas royalties to double by 2009 and continue to insist that
the Royalty-in-Kind scheme is simpler and more efficient because it
reduces accounting and transaction efforts.

But it is this very reduction in reporting through a de facto "honor
system" that has allowed oil companies to keep more money while also
preventing the Government Accountability Office from being able to
evaluate whether the program is actually profitable to the government.

"The fact that the Interior Department would now take steps to expand
this program defies logic," Senator Ron Wyden (D-OR) said.

Evidence that four top Interior officials were paid as consultants for
oil companies hoping for contracts inspired one of the two criminal
investigations.

With indictments pending and more Congressional hearings planned,
there is no telling what else will be revealed in this scandal.

___________________________________________________

Harry