Secretary of the Interior Ken Salazar wants the Justice Department to take another look into scandals at the Minerals Management Service with an eye to further criminal prosecution and plans to undertake a “fundamental restructuring of the MMS royalty program,” which last year reaped $23.4 billion from oil and gas companies that drill on public land. Salazar, the former Democratic senator named recently to the Obama Cabinet, announced his plans for MMS Thursday afternoon after meeting with the agency’s employees in Lakewood.
Salazar unveiled a strict code of ethics for the agency, the subject of scathing internal reports last fall that found employees engaged in sex, illegal drug use and deals with oil and gas companies that led to two criminal convictions on conflict-of-interest charges. Justice officials declined to prosecute two MMS employees cited in the reports, and they couldn’t be disciplined because they had already left the agency.
“There’s a new sheriff in town,” said Salazar, flanked by the department’s inspector general, Earl Devaney, and chief of staff, Tom Strickland, who was U.S. attorney for Colorado when Salazar served as the state attorney general.
Salazar announced that Strickland will lead a review of possible criminal conduct by MMS employees involved in the scandals. “Given the seriousness of the findings of the OIG (Office of Inspector General),” Salazar said, “I want to make sure that those who blatantly … (flouted) the law receive the appropriate sanction.”
Strickland said that after the review he hopes to be able say that “the people who have betrayed the public trust have been held accountable.” The former prosecutor will also review personnel actions taken against MMS employees involved in the scandals. Last year eight employees were punished, with discipline ranging from reprimands to termination. Strickland will “determine whether the sanctions were appropriate, or if additional sanctions are needed,” Salazar said.
At the root of the scandals, Salazar told MMS employees, was “an outdated and flawed royalty collection system,” including the controversial royalties-in-kind program, which collects royalties in oil and gas instead of cash. Critics charge the program cheats taxpayers out of billions of dollars by selling the oil below market value.
Salazar said his review of the royalty system would include establishing payment for renewable energy, such as wind farms, produced on public lands. “All ideas for reform will be on the table,” Salazar said. “We need a system that delivers a fair value to the taxpayer, is straightforward and transparent, and is less vulnerable to the type of abuses we have seen.” He told reporters he would be more specific “in the next month or so.”
Last year Colorado collected a record $178.4 million from MMS for its share of royalties from drilling on public lands. The state ranks third in the nation in royalty revenue, behind Wyoming’s $1.2 billion and New Mexico’s $614.8 million.
The several hundred MMS employees who gathered to hear Salazar welcomed their boss “with open arms,” he said, even though he came to deliver a tough message directed at an agency whose reputation he has described as “tarnished.” “I am speaking with you because the ethical lapses in this office, and the individuals who engaged in blatant and criminal conflicts of interest and self dealing, set one of the worst examples of corruption and abuse in government,” Salazar told the employees, according to a transcript of his remarks.
Salazar said he “assured them most of them are good employees,” and he blamed the scandals that rocked the agency on inadequate oversight. The sweeping MMS code of ethics Salazar introduced with the admonition, “The American people must have no reason to question the loyalty, reliability, or integrity of MMS employees,” includes a strict ban on accepting gifts — a practice at the heart of the scandals exposed in last year’s reports. “[E]ven if a regulatory exclusion or exception may apply,” the code reads, “it is never inappropriate and frequently prudent for an employee to decline a gift offered by a prohibited source or because of his official position.”
“Our agenda for reform will reach every part of this department,” Salazar told MMS employees. “But it will also send a loud and clear signal to the special interests outside of this department who have become accustomed to the ‘anything goes’ attitude in Washington over the last eight years. The ‘anything goes’ era is over. And this department and the Minerals Management Service will lead the way in ending it.”
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Here are the OIG reports on the MMS scandals, thanks to Paul Kiel at ProPublica. Some of the PDF files are quite large.
• Here’s the cover letterfrom Inspector General Earl Devaney, providing an overview of the scandal and the “culture of ethical failure” at MMS.
• A redacted report on Gregory Smith details the sex, drugs and oil lease imbroglio the inspector general discovered.
• A redacted report on MMS oil marketing examines ethical problems with the group charged with selling oil on behalf of taxpayers. As many as one-third of the MMS employees in this office accepted gratuities from the industry, according to the report.
• A redacted report on former Associate Director Lucy Denett, accused of handing contracts to a friend, who pleaded guilty to federal charges earlier this year.
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