Statements on Introduced Bills and Joint Resolutions

Floor Speech

STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS -- (Senate - September 24, 2008)

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By Mr. WYDEN (for himself and Mr. Barrasso):

S. 3556. A bill to improve the administration of the Minerals Management Service; to the Committee on Energy and Natural Resources.

Mr. WYDEN. Mr. President, today Senator Barrasso and I are introducing legislation to reform the Minerals Management Service at the U.S. Department of Interior. Most Americans have probably never heard of the Minerals Management Service. At least they hadn't heard of it until the Inspector General of the Interior Department issued a report a couple of weeks ago documenting sordid details of MMS employees accepting gifts and dinners and drugs and sex from employees of the oil and gas companies they were supposed to be doing business with on behalf of American taxpayers.

The MMS is responsible for collecting over $10 billion a year in lease and royalty payments from companies that drill for oil and gas and mine coal and minerals on our Federal public lands, both onshore and offshore. MMS is also the agency that actually issues the leases for drilling to oil and gas companies off our coasts. And when you hear the call for more oil drilling just remember that it is MMS that's responsible for issuing those leases and making sure that oil and gas companies protect the environment and pay their fair share of royalties to the American people. And that should give everyone pause.

Two years ago, I stood here on the floor and spoke for several hours to draw the Senate's attention to the mismanagement of our offshore oil and gas leasing program involving MMS and the royalty relief program. The problem then was the failure of MMS to include a key clause in almost 1,000 leases that would have required oil and gas companies to pay the U.S. Treasury higher royalties if the price of oil and gas increased.

The law MMS was supposed to be implementing was originally written back in the mid-1990's when oil prices were low--around $15 a barrel, to encourage drilling by giving oil companies a break on paying royalties on new leases in the Gulf of Mexico. The royalties didn't kick in until the price of oil rose to a certain point where the companies would make a profit. Oil prices, as we now know, didn't stay low, but it turns out that ``royalty relief'' didn't phase out the way it should have. We learned that the MMS had bungled things so badly that they forgot to include provisions in their leases requiring any royalties on those particular leases.

At the time, the Government Accountability Office estimated that this single dereliction of duty--which covered leases issued between 1995 and 2000--would cost American taxpayers as much as $11.5 billion ..... and that was based on oil prices of between $50 and $70 dollars--half of what oil prices have been this year. GAO recently updated that amount to as much as $14.7 billion. We held hearings on this problem in the Energy Committee but the bottom line is that nothing has been done to fix this problem.

We have also learned from Inspector General and from agency whistleblowers that MMS has essentially stopped conducting audits of the billions of dollars of royalty payments it collects, and it has allowed oil and gas companies to improperly change the amount they owe by allowing them to self-report adjustments to their royalties affecting millions of dollars in payments.

Most recently, the Inspector General for the Department of Interior, Earl Devaney, has issued a report that details his office's criminal investigation into the Royalty-in-Kind program at the Minerals Management Service. Under the Royalty-in-Kind program, oil and gas companies are allowed to pay their royalties to the Federal Government not in dollars, but by physically delivering barrels of oil or cubic feet of gas to MMS. MMS, in turn, is responsible for selling that oil and gas and turning the proceeds over to the Treasury. The Inspector General found that instead of putting the American people first, employees of the RIK program put themselves first. Mr. Devaney's investigation, in his words, found ``a culture of ethical failure.''

I am not going to go through all of the sordid details of what the IG found, but I do ask unanimous consent to include his four page summary following my remarks.

The bottom line is that this is an agency that is broken and needs to be fixed. The legislation that Sen. BARRASSO and I are introducing will start to fix it.

The legislation has five major components

It requires that the head of the MMS be appointed by the President and must be confirmed by the Senate. MMS is the only major bureau within the Interior Department that does not require its director to be confirmed by the Senate.

It requires MMS to implement a comprehensive audit program, including on-site financial audits of royalty payments.

It gives the Secretary of the Interior 60 days to implement all of the Inspector General's recommendations from both the May business practices report and the more recent September ethics report. If that deadline is not met, the Royalty-in-Kind (RIK) Program would be suspended.

It requires the Secretary to annually ``re-certify'' that the RIK program meets all Federal ethics and procurement laws and regulations. If that recertification is not completed, the RIK program would be suspended.

It directs the Inspector General to annually review the MMS program, including the RIK certification process.

I am pleased that Sen. BARRASSO, the ranking Republican member of the Subcommittee on Public Lands and Forests, which I chair, has agreed to be an original cosponsor of this bill. While it does not specifically address every single problem at MMS, it will begin to establish some basic accountability in an agency that has demonstrated that it has none.

Mr. President, I ask unanimous consent that the text of the bill and a letter of support be printed in the Record.

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