Reported by Staff

The Interior Department is ending a controversial oil-and-gas royalty program that was the centerpiece of a drug and sex scandal in the federal Minerals Management Service, Interior Secretary Ken Salazar said this morning.

Testifying before the House Natural Resources Committee today, the Secretary told lawmakers that he would phase out the scandal-ridden Royalty-in-Kind program which allows energy companies drilling on federal land to pay royalties in the form of oil or gas, instead of cash.

We’ve reported on this issue, and its Wyoming roots, previously on Wyoming Energy News, including last year’s Interior’s inspector report detailing “a culture of substance abuse and promiscuity,” including alleged cocaine use and sex with industry contacts, over a five-year period at the Denver-based office of the MMS that deals with royalty-in-kind payments.

What’s more, an audit report issued by the federal Government Accountability Office this week found that the Interior Department had lost at least $21 million in royalty-in-kind payments it was owed but never collected.

The department “is forgoing revenues for gas royalties owed to the federal government because it does not provide reasonable assurance that it accurately and promptly identifies and collects on [royalty-in-kind] gas imbalances,” the report said in summary.

Salazar, who pledged to “clean up” the scandals at MMS and throughout Interior upon taking office in January, noted the audit’s findings in his announcement today.

“Clearly, the Department’s energy leasing and royalty programs have not been working as they should and the American people have not been receiving the full benefits from these valuable assets,” he said in a press release. “After a thorough review of the controversial Royalty in Kind program, I am today announcing a phased-in termination of the program and an orderly transition over time to a more transparent and accountable royalty collection program.”

The lobbying arm of the oil industry, the American Petroleum Institute immediately criticized the decision, saying it would create new bureaucracy and cost taxpayers money.