Interior Dept. Officials Told Auditor Not to Bill Oil Company; Jury Trial Scheduled in False Claims Act Case

Johnnie Burton, Director of the Minerals Management Service at the U.S. Department of Interior (DOI), is implicated in efforts to prevent a major oil producer from being billed for drilling fees it owed the federal government, according to an affidavit filed for an upcoming trial. Also implicated are officials at the troubled Officer of the Solicitor at DOI, the same office faulted earlier this year with approving gas leases in the Gulf of Mexico that lacked price thresholds, leading to billions of dollars in estimated losses for the government.

The U.S. District Court in Colorado ruled against oil producer Kerr-McGee's most recent appeal in a False Claims Act case filed by whistleblower and former DOI auditor Bobby Maxwell. The 10-day jury trial is set to begin January 16, 2007.

Maxwell has charged senior DOI officials with failing to pursue $12 million in oil royalties that the company allegedly underpaid the federal government. Maxwell is one of four current and former DOI auditors who have filed fraud lawsuits over the failure to collect drilling fees from oil and gas companies. He was fired by DOI within weeks of his legal case being made public, despite an award-winning career spanning more than 20 years in the federal government.

Respected energy analyst, Peter Ashton, also issued a report in the Maxwell case finding that Kerr-McGee reported a per barrel oil price that was an estimated $1.50 lower for the purposes of paying royalties than it was able to get later on the market (p. 13). Ashton's report also notes that the State of Louisiana performed its own audit of state leases under Kerr-McGee (p. 11) and found underpayments.

State and Native American auditors also have raised concerns about collections of oil and gas drilling fees on public lands. A letter from POGO to a DOI advisory committee described an attempt by the Minerals Management Service to gut an independent organization -- the State and Tribal Royalty Audit Committee -- which has been critical of the federal government's drilling fee collections. Following a meeting of the advisory committee this week, an internal review was announced to examine DOI's royalty collection policies.

The DOI Inspector General is expected to issue a report in the coming weeks concerning its review of the agency's auditing and enforcement of fees paid for oil and gas leases. Earlier this month, the House Government Reform Committee announced that the Government Accountability Office would also examine these issues.

FOR MORE INFORMATION:

Written Statement of Beth Daley Director of Investigations, Project On Government Oversight to the Royalty Policy Committee, November 14, 2006.

POGO's Written Testimony for the House Government Reform Committee regarding the Interior Department: A Culture of Managerial Irresponsibility and Lack of Accountability? September 14, 2006.

Copy of Bobby Maxwell's Amended Complaint. September 7, 2004.

A pdf copy of Peter Ashton's Analysis.