Federal investigators probe Interior Department officials' ties to oil, gas contracts

(AP) Federal investigators are looking at whether Interior Department officials played favorites or took money from companies vying for big oil and gas contracts.

The probe is the latest in a series of investigations into Interior's handling of $10 billion a year in royalties paid by companies on the $60 billion in oil and gas they produce from leased public lands.

The latest investigations into Interior's handling of oil royalties were reported Saturday by The New York Times, which cited unidentified officials speaking on condition of anonymity because the investigations were not yet made public.

Those royalties are the federal government's second-biggest source of revenues, behind only taxes. Other investigations are looking at multibillion-dollar shortfalls in royalty payments.

The Justice Department is investigating the allegations based on the work of the Interior Department's inspector general's office, an internal watchdog. Rep. Ed Markey, D-Mass., said his staff were told earlier this month of two related matters that the Interior inspector general's office referred to the FBI and Justice Department.

Markey said Saturday in a statement given to The Associated Press that it was "beyond the pale" that several Denver-based officials in Interior's Minerals Management Service may have illegally benefited by acting as paid consultants to some of the oil and gas companies. At issue is whether the officials steered oil-trading contracts to favorite companies.

The Minerals Management Service helps oversee a program the Bush administration has promoted that allows companies to pay "in-kind" amounts of oil and gas, rather than cash royalties, for drilling federal lands. Such payments total about $3.7 billion in oil and gas a year.

Interior sent most of the oil and gas to fill the Strategic Petroleum Reserve, but lately has sold it by hiring private companies that solicit bids. Through that bidding, companies offering the highest premium over daily market prices is supposed to win the oil-trading contract.

"The allegation that any senior official who is responsible for collecting royalties from companies that drill on public lands is also taking money from those companies as a consultant is beyond a conflict of interest, if true, it is a crime," according the statement Saturday from Markey, a senior member of the House Resources Committee.

"The Interior Department is riddled with people who got their jobs because they were close to the oil industry and could be expected to tilt every decision accordingly," he said. "Royalties owed to the government from production on public lands have become the currency of cozy cooperation between industry and its special friends in the Interior Department."

Markey promised that Democrats taking over Congress in January will fully examine the royalties program, which Congress has begun investigating.

Efforts to reach the Interior Department on Saturday for comment were unsuccessful.

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Minerals Management Service: http://www.mms.gov