Oil lease foul-up may not be accident, congressmen say

WASHINGTON — Two congressmen said Thursday someone at the Interior Department may have deliberately removed provisions from offshore drilling contracts, giving oil companies a multibillion-dollar windfall.

They also said the department has refused to provide critical e-mails and documents that could clear up the mystery over the contracts and provisions that dictate how much in royalty payments the companies must pay the government on the leases issued in 1998-99.

“We believe the department may have deliberately withheld crucial information” that could determine if the issue involves a deliberate action, complained Reps. Tom Davis, R-Va., and Darrell Issa, R-Calif.

Davis, chairman of the House Government Reform Committee, and Issa, chairman of its investigations subcommittee, demanded in a letter to Interior Secretary Dirk Kempthorne that additional documents and e-mails be provided concerning the 1990s drilling leases.

Issa has held several hearings on the matter, which concerns the failure of the department’s Minerals Management Service to include a provision in the 1998-99 leases that would have required payment of royalties on oil or gas taken if the market price reached a certain point.

Because the provision was left out of leases issued those two years, the leaseholders have not had to pay royalties and won’t for years to come, although oil and gas prices have soared well above the royalty trigger.

The Congressional Budget Office estimates that as a result the government has already lost $2 billion in royalties and stands to lose another $8 billion over the life of the leases, said Issa.

Interior officials have told Issa’s committee at two separate hearings that they believe the royalty threshold provision — which had been in earlier leases and was again in leases issued in 2000 and later — apparently was left out by mistake, but that they have not been able to pinpoint the reason. The Interior Department’s inspector general also has been investigating the circumstances surrounding the leases.