Sleeping with the Industry

FOR YEARS, critics have accused the Bush administration of being in
bed with the oil industry. They thought they were speaking
figuratively, but they weren't.

According
to a scathing new report by the inspector general of the Interior
Department, employees of the department who handle royalty payments
from the oil and gas industry for drilling on federal land have
accepted gifts from industry executives - and had sexual relations with
them as well. With admirable understatement, Inspector General Earl
Devaney declared, "Sexual relationships with prohibited sources cannot,
by definition, be arms-length."

His office's investigations, he said, revealed "a culture of ethical failure" and an agency rife with conflicts of interest.

The
report justifies the skepticism of many in Congress over the industry's
recent push to use high oil prices to win permission to drill in the
Outer Continental Shelf. A department that is as cozy with industry as
the report spells out cannot be counted on to protect the public's
financial, safety, or environmental interests - especially if the oil
industry starts drilling in crucial fishing areas like New England's
Georges Bank.

Devaney's report zeroed in on officials in the
department's Minerals Management Service who handled contracts with oil
companies that paid their royalties in barrels of petroleum, which the
government then sold. But the report also puts a new light on
revelations in recent years that the service has looked the other way
and allowed the industry to escape royalties altogether for offshore
drilling in the Gulf of Mexico. According to government auditors, the
failure of service employees to collect payments aggressively could
cost taxpayers $10.5 billion over 25 years.

The Clinton
administration shares blame for this loss of revenue. In the 1990s, the
administration persuaded oil companies to drill in deep-water areas
with the promise they would not have to pay royalties on oil they
discovered. Interior officials failed to include a standard provision
that royalties would be due if the barrel price of oil exceeded $34,
which it long since has. This omission was brought to the attention of
Bush administration officials no later than 2004, but they never made
any effort to renegotiate the contracts.

Members of Congress are
already planning hearings in response to the new report. They should
expand its scope to ask broadly whether the Interior Department has
sufficient independence from the oil industry to oversee the drilling
that is already going on - not to mention any new drilling in
environmentally sensitive areas.