Dissatisfied over responses from US Department of the Interior officials, a House committee’s chairman and the chairman of its energy and resources subcommittee demanded more information from Interior Sec. Dirk A. Kempthorne about missing price thresholds in federal deepwater leases.
House Reform Committee Chairman Thomas M. Davis III (R-Va.) and Energy and Resources Subcommittee Chairman Darrell E. Issa (R-Calif.) said the Government Accountability Office estimates that $2 billion in federal revenues has been lost since price thresholds were omitted from the leases in 1998-99. The omissions could cost the federal government another $8 billion over the life of the leases, they added.
In an Aug. 3 letter to Kempthorne, Davis and Issa wrote: “This is a matter of paramount importance not only for this committee but for the American people. We are concerned, however, that [Interior] may not share that same sense of urgency.”
When Issa’s subcommittee began its deepwater royalty relief oversight investigation in early March, the chairman requested documents from then-Interior Sec. Gale A. Norton to help them determine “why price thresholds did not appear in these leases.” The request included “any records relating to directives, departmental guidelines, orders, instructions, or other communications as to how the leases were to be created, negotiated, reviewed, approved, and signed during the time between Jan. 1, 1996, and Dec. 31, 2000,” Davis and Issa said.
Although Interior sent the subcommittee three boxes of documents, which it said was “an exhaustive production,” the lawmakers said recent conversations with Interior’s legislative counsel Jane Lyder and US Minerals Management Service’s congressional liaison Lyn Herdt “have given us the impression that the department may have withheld critical information from this committee’s investigation.”
Davis and Issa said Lyder and Herdt referred to “people who may have ordered the elimination of price thresholds in the deepwater leases.” Yet when asked why the department had not previously tendered that information, Lyder and Herdt replied, “Chairman Issa did not specifically ask for it.”
‘Glass of milk’
The letter quoted Herdt as explaining that Interior does not produce the entire refrigerator when it is asked for only a glass of milk. “The original request asked for ‘the refrigerator;’ the department took it upon itself to produce only a ‘glass of milk,’” Davis and Issa said.
They said they suspect Interior also has not produced critical information contained in electronic communications, which Issa also requested in his original letter. The agency sent only 12 e-mails to the subcommittee and, when asked why there were so few, said that e-mails from 1998 and 1999 no longer existed and “that e-mail was not popular or sophisticated in the late 1990s,” the lawmakers said.
“The Interior inspector general’s office, however, reports that it has reviewed 5,000 e-mails from 1998 and 1999 alone regarding the deepwater leases. In other words, the department produced only 12 out of the thousands of e-mails we asked it to produce,” they continued.
An Interior source told OGJ that, of the e-mails the agency’s IG office reviewed, only about 100 may have been of some interest but they all fell outside the dates requested by the subcommittee. Interior inspector general investigators found no e-mails on the subject of the 1998 and 1999 price threshold on lease sales prior to MMS’s addressing the problem in 2000, the source added.
In an official response, Tina Kreisher, DOI’s communications director, said the agency followed all of its normal procedures in responding to the subcommittee’s document requests.
“To the best of our knowledge, we have been fully responsive and have supplied every document previously requested. Sec. Kempthorne has spoken to Government Reform Chairman Tom Davis and assured him we will fully cooperate with him concerning oil and gas leasing during the 1998 and 1999 period that predates this administration,” she said.
Davis and Issa said the subcommittee has made progress in its investigation but they are nonetheless concerned that DOI may have withheld critical information.
“If this is the case, then it has intentionally impeded this duly authorized congressional investigation.” Davis and Issa did not place blame on Lyder and Herdt, “as we realize that they may only be the messengers of an aggressive campaign to frustrate this investigation. Nevertheless, the result is the same: After systematic delays, the department still has not produced what we have asked,” they wrote Kempthorne.
Continuing controversy
The discovery early this year that the price thresholds were omitted from the deepwater leases during 1998 and 1999 prompted Senate Energy and Natural Resources Committee Chairman Pete V. Domenici at a Feb. 16 hearing on Gulf of Mexico leasing to ask MMS Director Johnnie Burton how the agency was responding.
“We are working on that, and will be happy to discuss it with you,” Burton replied. She later said that omission of the price thresholds was an administrative error (OGJ, July 3, 2006, p. 32).
Dianne Feinstein (D-Calif.) and Judd Gregg (R-NH) sponsored an amendment to DOI’s fiscal 2007 budget that would bar bidding on future federal leases to any deepwater Gulf lessee that had not renegotiated terms from its 1998 and 1999 leases. The Senate Appropriations Committee adopted the amendment June 29.
At a June 28 hearing before Issa’s subcommittee, witnesses from domestic exploration and production subsidiaries of ExxonMobil Corp., Royal Dutch Shell PLC, Chevron Corp., ConocoPhillips, and Kerr-McGee Corp. emphasized that producers do not negotiate lease terms but accept what the federal government gives them if they decide to bid. Several said their companies were renegotiating terms from 1998 and 1999 deepwater gulf leases in response to MMS requests.
Issa said that on July 27 Chris Oynes, regional director of the MMS Gulf of Mexico office in New Orleans, testified that he could not recall being notified of missing price thresholds in the leases in 1998 and 1999, even though J. Keith Couvillon, deepwater land manager at Chevron North America Exploration & Production Co., said at the same hearing that the company had done just that.
Other House and Senate members have called for renegotiated deepwater leases with price thresholds for that period. And while the two Outer Continental Shelf leasing reform bills that passed the House and Senate this summer contain several major differences that will need to be reconciled in conference in September, both specify that all future federal oil and gas leases will contain price thresholds.