What follows are some sections from a Mineral Management Service report about an investigation into the agency that manages the nation’s natural mineral resources on the Outer Continental Shelf and on some federal and Indian lands. Although the report was filed in September, 2008, it does offer a view of the Service's culture:

RESULTS IN BRIEF

We initiated this investigation in July of 2006 after receiving allegations from a confidential source (CS) that improprieties were occurring within the Minerals Management Service’s (MMS) Royalty in Kind Program (RIK).

The CS specifically alleged that RIK marketers had developed inappropriate relationships with representatives of oil companies doing business with the U.S. Department of the Interior (DOI). The CS asserted that the inappropriate relationships included RIK employees frequently attending oil and gas industry social functions and accepting gifts from company representatives.

Our investigation confirmed that between January 1, 2002, and July 2006, 19 RIK marketers and other RIK employees – approximately 1/3 of the entire RIK staff – had socialized with, and had received a wide array of gifts from, oil and gas companies with whom the employees were conducting official business. With respect to eight specific RIK employees, these gifts exceeded the allowable limits.

We also discovered that two of the RIK employees who accepted gifts also held unauthorized outside employment. Both of these employees had failed to seek MMS approval for their outside work and similarly failed to report the income they received from this work on their financial disclosure forms. In addition, we learned that one MMS employee, not affiliated with the RIK Program, had received approval for outside work but had failed to report the income received from it.

Finally, our investigation revealed an organizational culture lacking acceptance of government ethical standards, inappropriate personal behaviors, and a program without the necessary internal controls in place to prevent future unethical or unlawful behavior.

We are forwarding this report to the Assistant Secretary for Land and Minerals Management for whatever adverse action he deems appropriate for the DOI employees involved.

BACKGROUND

Minerals Management Service

MMS manages the nation’s natural mineral resources on the Outer Continental Shelf and on some federal and Indian lands. MMS also collects, accounts for, and disburses more than $8 billion per year in revenue from these offshore and onshore mineral leases. Two major programs comprise MMS – Offshore Minerals Management and Minerals Revenue Management (MRM). Offshore Minerals Management manages the mineral resources in federal waters, while MRM is responsible for managing all revenues associated with offshore and onshore federal mineral leases. Together, these programs are one of the federal government’s greatest sources of non-tax revenues.

MRM processes rents and royalties from nearly 70,000 leases annually and employs approximately 600 federal and 300 contract personnel. The Federal Oil and Gas Royalty Management Act of 1982, 30 U.S.C. § 1701, and the Federal Oil and Gas Royalty Simplification and Fairness Act of 1996, 30 U.S.C. § 1701, form the basis for MRM oversight and regulatory enforcement activities.

MRM collects royalties from oil and gas companies through requirements established in two types of leases. Royalty in Value (RIV) leases require that the lessee pay the federal government, through MRM, a percentage of the monetary value of the oil or gas brought to the market. RIK leases differ in that MRM takes possession of a percentage of the product (oil or gas) at a designated delivery point, which is often the platform where the oil or gas is brought to the surface. MRM then markets and sells it.

According to statistics maintained by MMS, RIK sells over 800 million cubic feet of natural gas and 150,000 barrels of oil every day. The value of RIK oil and gas sales in fiscal year (FY) 2006 was reported at over $4 billion, or approximately $11 million per day.

In addition to marketing and selling oil and gas, RIK is responsible for transporting and processing these products. Because RIK does not own or operate any pipelines or processing plants, it contracts with oil and gas companies for these services. At the end of FY 2006, RIK reported holding 32 contracts for the sale or exchange of oil and gas. During this same period, it also held 97 contracts for transportation, processing, and miscellaneous services. These 97 contracts were valued at approximately $29 million.

Read the entire report at the Department of the Interior of the Office of the Inspector General.