Sex, Drugs and Big Oil

Posted by Jeffrey St. Clair on September 10th, 2008 | Link

Interior Dept. scandal: Sex, drugs, energy deals probed at Denver office
Denver Post staff and wire reports

WASHINGTON — Federal investigators say government officials handling billions of dollars in oil royalties engaged in illicit sex with employees of energy companies, and received improper gifts.
The alleged transgressions involve 13 Interior Department employees in Denver and Washington. Alleged improprieties include rigging contracts, working part-time as private oil consultants and having sexual relationships with — and accepting golf, ski trips and dinners from — oil company employees, according to three reports released Wednesday by the Interior Department’s Inspector General.
The Inspector General also claims the former head of the Denver Minerals Management Service, or MMS, office — which markets oil to energy companies — was having sex and using illegal drugs with subordinates.
Last month, the Denver Post reported on the pending release of the Inspector General’s report, saying it was expected to help explain breakdowns in accountability in government energy deals and other questionable activities discovered by the office’s investigators and whistle-blowers in recent years.
During the past year, in September and again in May, inspector general reports have portrayed MMS as a nest of conflict, lapsed controls and potential criminal conduct. Last year, the division collected $11 billion from fees charged to oil, gas and mining companies for extracting offshore minerals in addition to production on federal and Indian lands.
MMS officials have allowed certain oil companies to skirt bidding procedures, modify sales contracts and avoid paying interest on royalties owed to the government, according to documents.
After four Interior auditors working for the Denver office raised alarms in whistle-blower suits – filed during the past four years – about what they considered fraudulent activities by oil corporations, all but one were reassigned or saw their jobs eliminated.
At the center of recent scrutiny is MMS’s royalty-in-kind program.
The oil-and-gas lobby long pushed for such a system before it was implemented in 2004 under then-Interior Secretary Gale Norton.
The program, known as RIK, allows energy companies to pay the government a share of the actual oil product for the right to drill, instead of cash, avoiding accounting rules.
Such sales are held to fill the nation’s Strategic Petroleum Reserve or to make oil available on the open market.
While many oil-industry experts view the program as potentially simpler than paying the government cash, Interior managers have allowed energy companies to twist rules at transaction levels generally unseen by the public, investigators say.
Oil corporations have frequently won changes to sales contracts and been allowed to submit bids after deadlines, tilting deals to their financial favor, without explanation and with little or no scrutiny of government lawyers, examiners have found.
Such practices, the inspector general concluded, lead to potential favoritism for certain energy companies, still unnamed, as well as taxpayer losses. An examination this year of 718 bid packages turned up changes to 118 that appeared to inappropriately benefit corporations by $4.4 million – at the expense of the government.
Hints of unethical and potentially illegal activity were threaded through the May and September reports. “RIK staff had
inappropriate relationships with industry executives RIK personnel still meet,” one report said. “Potential criminal conduct of managers” needs to be explored, according to the other report.