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Sex, Drugs And Oil

Sex, Drugs And Oil

Joshua Zumbrun 09.10.08, 8:33 PM ET

WASHINGTON, D.C. –Who would have thought the sleepy Interior Department, with the dull task of managing federal land, would produce an office with the culture of an out-of-control frat house? 

And yet. A report issued Sept. 10 by the department’s inspector general accuses employees in the department’s Denver Minerals Management Service of a litany of ethical violations, including drug abuse and engaging in sexual relationships with oil company employees. 

The report was instantly appropriated as a political weapon in Congress’ heated debate over expanded offshore drilling. 

First the sleepy stuff: The Minerals Management Service has the job of collecting royalties from companies that have profitable leases to extract resources from federal lands. Its Royalty in Kind program lets such companies pay in oil and gas, instead of money, which the department then sells directly. 

Now the rest: The report says, “we learned that some RIK employees frequently consumed alcohol at industry functions, had used cocaine and marijuana, and had sexual relations with oil and gas company representatives.” 

As these companies had direct business with the department, much of this contact was prohibited, with relationships to be kept at arms-length. The report said that two female RIK employees, known in the industry as “MMS Chicks,” had engaged in sexual relations with representatives from the companies. “Sexual relationships with prohibited sources cannot, by definition, be arms-length,” the report notes. 

One Department of Interior employee admitted to romantic relationships with an employee of Chevron (nyse: CVX – news – people ) and with an employee of Royal Dutch Shell (nyse: RDSA – news – people ), the report says. Another admitted to a sexual relationship with an employee of Shell. 

The report also identifies four companies that had provided gifts to RIK employees while maintaining a business relationship: Chevron, Shell, Gary Williams Energy Corporation and Hess Corporation (nyse: HES –news – people ). Chevron and Shell conducted business as producers on leases where the Minerals Management Service collects royalties and also buys oil from the RIK program. Hess also operates MMS leases, and Gary Williams Energy purchases RIK products. 

For Shell, Chevron, and Gary Williams Energy, the report details several thousand dollars of gifts from employees of each company that Department of Interior employees should not have accepted, including meals, hotel rooms, ski lodge stays, and golf and paintball outings. Spokesmen for Shell and Chevron said they had not yet seen or had time to review the reports. Gary Williams Energy did not immediately respond to a request for comment. 

The investigation looked at one Hess employee who typically split eating expenses with an RIK employee. On a few occasions the Hess employee picked up the tab and was not reimbursed. The value of gifts, in the form of meals, was $243 over five years. Jon Pepper, a spokesman for Hess, says the company cooperated fully with the inspector general’s investigation, and found no wrongdoing on the part of the employee. 

The report alleges that between Jan. 1, 2002, and July 2006, roughly one-third of the RIK staff–19 employees–inappropriately socialized with and received “a wide array” of gifts from companies with which the department did official business. For eight employees, the gifts exceeded allowable limits, and two employees held unauthorized outside employment. 

The gifts and gratuities detailed in the report were not enormous, but frequent. Two RIK marketers received gifts and gratuities at least 135 times from four oil and gas companies, which the report says is “a textbook example of improperly receiving gifts from prohibited sources.”

The report, now available at the inspector general’s Web site, also alleges that Gregory Smith, then head of Denver’s Royalty-in-Kind office, obtained cocaine from another RIK employee and engaged in sex with office subordinates. In addition, Smith allegedly steered government contracts to a consulting firm that he was working for part-time. 

In a letter from DOI Inspector General Earl Devaney to Interior Secretary Dick Kempthorne, Devaney said the investigation had cost $5.3 million, involved 233 witnesses and obtained and reviewed 470,000 pages of documents, since problems began to be investigated in July 2006. 

Devaney wrote, “I know you have shared my frustration with the length of time these investigations have taken, primarily due to the criminal nature of some of these allegations, protracted discussions with DOJ and the ultimate refusal of one major oil company–Chevron–to cooperate with our investigation.” 

A statement from Chevron, e-mailed by corporate media adviser Scott Walker, contradicted Devaney’s statement, “We can’t comment on a report that we haven’t seen. We have cooperated with the government investigation and produced all of the documents that the government requested months ago. I cannot provide additional information about this issue at this time.” 

Inspector General Devaney wrote, “In summary, our investigation revealed a relatively small group of individuals wholly lacking in acceptance of or adherence to government ethical standards.” 

A sex scandal involving oil companies and government employees seems created for Democrats to use as a political weapon. And they were quick to do so. 

House Speaker Nancy Pelosi, D-Cal., said in a statement, “The allegations of illicit and unethical behavior detailed in the inspector general’s report are directly related to the energy debate taking place in the Congress this week.” 

“The improper activities detailed in this report are extremely troubling,” said Sen. Jeff Bingaman, D.-Ariz.,chairman of the Senate Energy and Natural Resources Committee. “American taxpayers deserve to have confidence that their interests are being protected when it comes to collecting royalties from the production of public oil and gas resources, especially given the potential for expanded domestic drilling. Unfortunately, that confidence has been eroded.”

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