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Two federal energy officials may have fed information on unpaidoil royalties that they obtained from producers underconfidentiality agreements to a Washington D.C.-based watchdoggroup to use as ammunition against the producers in a”whistle-blower” lawsuit seeking recovery of back royalties inCalifornia. They may also have “steered the Department of Interiortoward a [royalty] policy favorable” to certain parties, accordingto a report by an investigator with the General Accounting Office(GAO) that was released last week.
These were the key findings of GAO’s Paul Thompson who — atthe request of Chairman Frank Murkowski (R-AK) of the Senate EnergyCommittee — was detailed to the committee to conduct a six-monthinvestigation into reports that two oil policy advisors with theDepartment of Energy (DOE) and Department of Interior (DOI) werepaid $383,600 each by the Project on Government Oversight (POGO) inNovember 1998 in return for possibly sharing information that ledto POGO’s lawsuit to recover back oil royalties. The proceedsapparently represented the policy advisors’ share of a royaltysettlement involving Mobil Oil.
Although “the information does not directly establish” thateither Robert Berman, who serves in DOI’s Office of Policy Analysis(OPA), or Robert Speir, a DOE policy advisor and expert on oilvaluation in California who has since retired, “shared their workproducts or related materials with POGO” in return for thepayments, it points strongly in this direction, according toThompson’s report.
“Both officials were a) POGO’s allies in its campaign againstthe [California] oil companies; b) described by [POGO’s DanielleBrian Stockton] as individuals who should have been allowed to joinher and POGO as parties in its qui tam lawsuit; and c) [were] paidsubstantial amounts from POGO’s lawsuit proceeds.” POGO officialscontend the payments, which were made between 1986 and 1996, were”public service awards” in recognition of Berman’s and Speir’swhistle-blower efforts. The report said the payments to the menthus far represent a drop in the bucket. They “stand to receivepotentially millions of dollars more” under a written agreementwith POGO, the report noted.
The GAO investigator concluded there was a “reasonable concern”that Berman and Speir used their “positions and information theygathered” to provide POGO with leverage for its whistle-blowerlawsuit. “To the extent that this concern could inhibit thewillingness of industry and others to share information, it wouldlimit the [DOI’s] ability to administer the oil royalty program andsimilar programs in the future.”
So far, POGO’s lawsuits have been aimed at recovery of back oilroyalties, but the group’s Brian-Stockton indicated at a Housesubcommittee hearing in May that POGO is turning its attention tounderpaid natural gas royalties, which she said will “dwarf thoseof oil royalties.”
The House Energy and Mineral Resources Subcommittee passed aresolution in late June citing three POGO officials for refusing toanswer questions about the payments made to Speir and Berman. Citedwere Keith Rutter, POGO’s assistant executive director; Henry M.Banta, director and former chairman of POGO’s board; andBrian-Stockton, executive director of the group.
The House subcommittee’s resolution was the first step in acontempt of Congress action against the POGO officials. Theresolution now must be acted on by the House Resources Committee,which expects to take up the issue when it returns from its recessin September, and the full House before being sent to theDepartment of Justice (DOJ), which then would decide whether toprosecute the POGO officials. The three could face fines of up to$1,000 and a year in prison. In addition to the House, theinspector generals of the DOI and DOE are investigating the matter,but “apparently little has been done” by them so far, said Sen.Murkowski.
While Berman and Speir allegedly were feeding POGO ammunitionfor its back royalty lawsuit, the two men also were “substantiallyinvolved in key stages” of developing DOI’s new valuation policyfor oil royalties “in ways that served the interests of POGO’schairman [then Banta] and its executive director [Brian-Stockton],”according to Thompson’s report. Banta retired as POGO’s chairman in1998, at which time he became a D.C. attorney representing thestate of California in its lawsuit to recover back oil royalties.Interior meanwhile was heavily involved in shaping its new oilroyalty valuation policy, which went into effect this past June.
“Nothing in the information indicates how the [DOI] would haveformulated its royalty policy had the two advisors not beeninvolved,” but “the possibility exists that…..Berman and Speirwere motivated in their actions by the prospect of participating inor sharing in the proceeds of a POGO qui tam action” against oilproducers, the report said.
“Aside from concerns about the possibility that the [DOI’s]process may have been unduly influenced, this matter also raisesreasonable concerns that the integrity of the royalty program mayhave been compromised by the appearance of impropriety generated bythe payments,” the 42-page report said.
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