Jan 27, 1997
Press Release
Washington, D.C.-- Today, Rep. Maloney announced that the Department of Interior’s Minerals Management Service (MMS) may not have had proper authorization to negotiate royalty settlements with major oil companies containing more than a billion dollars in claims.  Maloney has sent a letter to Interior Secretary Bruce Babbitt containing a legal analysis questioning the authority of the Department.  Specifically, the letter states that MMS needed the Justice Department’s authorization to resolve settlements over $100,000, settlements which are printed in the Federal Register.  Furthermore, affected States and Indian tribes should have been parties to the negotiations, and since the settlements were in dispute, the Interior Department should have referred the matter to the General Accounting Office for resolution and instruction.

Rep. Maloney has been particularly concerned with two Interior Department negotiated settlements with Exxon and Chevron which has prevented the government from collecting nearly $200 million in unpaid royalties from Federal leases in California.  In 1993, Exxon signed an agreement with the Federal government for $44 million, and in 1994, Chevron signed an agreement for $150 million; the agreements resolved all Federal royalty issues before 1989.  Rep. Maloney said, “I was amazed to learn that MMS knew about the seriousness of the unpaid royalty issue in California before the agreements, and yet received no money in the final settlements.  How can you neglect to try to collect $200 million?

    The Department of Interior’s Inspector General had additional concerns regarding settlements.  Late last year, the IG wrote a scathing review of these settlements and could not substantiate that the settlements were negotiated in the best interests of the Government, States and Indian tribes.  The report states, “There was no documentation for the estimated values of the issues concerning the underpayment of royalties to be negotiated, the arguments for reducing the values of issues, and/or the reasons why the values of issue were reduced as a result of negotiations.”  Rep. Maloney added, “The IG report confirmed that MMS did not leave a paper trail, so we have no idea how much money we lost.  The report showed that MMS could not justify resolving more than $1 billion in outstanding claims for $218 million.  

    According to Rep. Maloney, “I am surprised that MMS held these secret meetings with large oil companies resolving huge royalty disputes without the proper authorization.  I know Secretary Babbit.  He would have wanted to review settlements of this size.”   Rep. Maloney concluded, “This process needs fixing.  I am announcing today that I will immediately introduce the Royalty Settlement Reform Act of 1997.  This bill would require that the Secretary of Interior must personally approve any settlement that exceed $2 million in outstanding claims.  I will also introduce the Royalty Collection Reform Act of 1997.  This bill would move the royalty collection from the Department of Interior’s Royalty Management program to the Department of Treasury’s Financial Management Service, to better insure that funds owed the government are collected.