REP. MALONEY INVESTIGATES INTERIOR ROYALTY SETTLEMENTS

Mar 13, 1997
Press Release
Washington, D.C.-- Today, Rep. Maloney requested a legal opinion from the General Accounting Office regarding whether or not the Department of Interior’s Minerals Management Service (MMS) had proper authorization to negotiate royalty settlements with major oil companies.  She also sent a letter to Attorney General Janet Reno asking for the Justice Department’s policy and role in these settlements.  Rep. Maloney has focused attention on two Interior Department negotiated settlements with Exxon and Chevron.  These settlements may have resolved more than $1 billion in outstanding claims for only $218 million.
Rep. Maloney has contented that the Debt Collection Act restricts federal agencies from settling claims over $100,000 unless specifically approved by the Department of Justice.  Rep. Maloney commented regarding these settlements, “The stakes were too high, and the claims were too complex for the Justice Department and the GAO not to be significantly involved.”  In her letter to the GAO, Maloney questions the Interior Department’s assertion that the statutory language “take appropriate actions to make additional collections” is equivalent to compromise of claims which would release the restriction.  She stated, “There is no legislative history supporting the Department’s broad view of the word ‘collections’.  In this case, Congress must make a specific grant for compromise authority.  It did not.  The Debt Collection Act still stands.”  

    Rep. Maloney disagreed with the Department of Interior’s position that royalty issues are not claims until it has been fully litigated.  Rep. Maloney stated, “According to the Debt Collection Act, Federal agencies must seek authorization from the Justice Department to compromise claims of the government over $100,000.”  Rep. Maloney continued, “Congress did not intend to restrict federal agencies from compromising claims over $100,000 in litigation, yet not restrict agencies for compromising billions of dollars in claims before litigation.

    Rep. Maloney not only questioned the legal authority of the settlements, but she also questioned the wisdom of the settlements.  According to a Department of the Interior Inspector General report, MMS “did not contain adequate documentation on the estimated values of the issues.”  In one example, “Documentation in the settlement file was insufficient to explain the $360.4 million difference in the estimated values of this issue.”  The Exxon and Chevron settlement agreements may have prevented the government from collecting nearly $200 million on the issue of undervalued royalties alone.

    In a letter to Assistant Secretary Robert Armstrong, Maloney states, “In 1993, the Department of Interior’s policy office issued several reports based on California’s litigation which alerted MMS to a substantial royalty undervaluation problem.  These documents were widely circulated Department-wide including throughout MMS’ settlement team, Royalty Management Program, and Director’s office.”  MMS’s own staff then issued a report stating that major oil producers in California could owe the government as much as $422 million, excluding interest, in royalty payments.  Rep. Maloney said, “Once MMS understood the magnitude of the problem, they should not have signed settlement agreement with Exxon.  This is a perfect reason why the Justice Department and the GAO should have been involved.”

    Rep. Maloney introduced today the Royalty Settlement Reform Act of 1997 which would require that the Secretary of Interior must personally approve any settlement that exceed $2 million in outstanding claims, and the Royalty Collection Reform Act of 1997 which 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.
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