Over the past year, I have been fascinated by articles in the New York Times regarding the failure of the Interior Department to collect billions of dollars annually from oil and gas companies that drill on federal lands. The pathetic performance by the Interior Department should be a start warning about government competence in other areas and moreover their ability to tackle the very complex and important issue of medical care. Stated differently, if the government will not or cannot collect royalty revenues from drilling on federal properties can we realistically expect the government to improve our medical system.

 

The department’s chief independent investigator has now released a report that highlights mismanagement, ethical lapses and fears of retaliation against whistle-blowers. Stated simply, the interior department has for years either covered up incompetence or fraud. The cozy relationship between the interior department and the oil companies was highlighted by the interior department’s decision not to demand that oil companies pay back interest on underpayment in royalty payments because it would cause a “hardship” on the oil companies. Last year, the Interior department estimated that the government might lose $10 billion in revenue over the next decade because of a legal mistake in oil and gas leases that had been ignored for six years. In essence, the inspector general has summarized the Interior Department’s failure to collect royalties was a result of flaws in their operations from top to bottom. For example, the Interior Department cannot get its own system to do the calculations on what amount the oil companies owe the Federal Government. 

 

In 1922 high level officials of the Harding Administration were guilty of providing leases of oil property to Sinclair Oil Company in return for bribes. Fast forward-- The failure of Interior officials to get royalty payments for leases in the Gulf of Mexico cost the American taxpayer Billions of Dollars.

 

According to New York Times, September 14, 2006, the Interior Department’s chief official responsible for investigating abuses accused top officials at the agency of tolerating widespread ethical failures, cronyism to cover-ups of incompetence.

 

“Simply stated, short of a crime, anything goes at the highest levels of the Department of the Interior,” charged Earl Devaney, the Interior Department’s inspector general at a hearing of the House Government Reform subcommittee on energy. “Ethics failures on the part of senior department officials have been routinely dismissed with a promise ‘not to do it again.’”

 

“Absent criminal charges” high-level officials under the cloud of investigations are sent off with a party, paying tribute to their good service.

 

Three years ago, Mr. Devaney scathingly criticized the Interior Department’s auditing program for oil and gas royalties. Beyond finding that investigators had missed millions of dollars in underpayments, his office uncovered evidence that agency auditors had lost key files, and then tried to fool investigators by forging and backdating the missing documents. The department gave a bonus to the official who came up with the false papers.

 

The interior department signed 1,100 leases for off-shore drilling that inadvertently let energy companies escape billions of dollars in royalties on gas and oil produced in the Gulf of Mexico. The leases signed in 1998 and 1999 during the Clinton Administration, allow companies to escape normal federally royalties—usually 12.5 percent of sales—on the tens of millions of barrels of oil on each lease. 

 

This problem was first disclosed by the New York Times in March. Government officials now estimate that the mistake could cost the Treasury as much as $10 billion over the next decade.