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The New York Times: Interior Official Says She Will Not Try to Recoup Lease Money

Published: September 22, 2006

WASHINGTON, Sept. 21 — A top official at the Interior Department said on Thursday that she would not try to recover $1.3 billion in royalties that the government lost as a result of flawed oil and gas leases it signed in the late 1990’s.

“That would be very hard to recoup,” said Johnnie M. Burton, director of the Minerals Management Service of the Interior Department, at a forum held by Platt’s, an oil industry newsletter.

Ms. Burton added that she had little or no bargaining power — and did not want any — to force more than 50 companies to renegotiate offshore drilling leases that currently allow them to escape as much as $10 billion in royalty payments over the next decade.

Administration officials say that they are close to reaching agreement with Shell Oil and BP and that they have held talks with about 10 companies. But more than half of the companies that hold the flawed leases have not responded to the government’s pleas.

“I don’t like to say ‘negotiate’ because I really don’t have anything to trade,” Ms. Burton said. Rather, she said, the government had told the companies that “we would really appreciate it” if they changed their contracts.

Even if the companies do agree to change their leases, she said, the government would not try to recapture the $1.3 billion in royalty payments that the companies have already been able to escape.

At issue are hundreds of offshore drilling leases for the Gulf of Mexico that were signed in 1998 and 1999 and that allow companies to extract up to 87.5 million barrels of oil per lease without paying royalties to the government. In what investigators believe was an unintentional bungle, the leases omitted a clause that would normally require companies to pay the full 12.5 percent royalty if oil prices climbed above about $36 a barrel.

Democrats reacted angrily to Ms. Burton’s remarks, as well as to new allegations by a group of federal auditors who have charged that the Interior Department blocked them from recovering underpayments by more than two dozen companies.

“If things keep going like this, we’re going to need two sets of handcuffs: one for the oil companies and one for the bureaucrats,” said Representative George Miller, Democrat of California.

In May, the House passed a Democratic proposal that would pressure companies to change their leases by prohibiting those that refuse to do so from acquiring additional federal leases in the future. But the measure has stalled because Republican leaders in both the House and Senate are opposed to it.

Democratic lawmakers also called for investigations into new allegations by three current and one former federal auditor that the Interior Department had stopped them from trying to recover $30 million in deliberate underpayments by oil companies.

The allegations, disclosed on Thursday by The New York Times, were made in lawsuits that the auditors filed under a law to encourage whistle-blowers.

“These claims, while as yet unproven, are serious and cannot be brushed aside,” wrote Senator Jeff Bingaman of New Mexico and Representative Nick J. Rahall II of West Virginia in a letter to the Interior Department’s inspector general.

Ms. Burton dismissed the allegations, saying that the auditors “did not follow proper procedure” in filing the lawsuits. and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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