The Interior Department Scandal And Drilling

As Congress prepares to debate oil drilling in U.S. coastal waters, the Interior Department is caught up in a wide-ranging ethics scandal. John Dimsdale of Marketplace tells Madeleine Brand that the scandal could have an impact on oil-drilling legislation.

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MADELEINE BRAND, host:

From NPR News, this is Day to Day. The ethics problem at the Interior Department continues to unfold, specifically in the little-known but powerful Minerals Management Service. The Interior Department's watchdog reports that employees in that division accepted gifts, they steered government contracts to friends, and they had sexual relations with oil and gas-company representatives. Joining us now is John Dimsdale from Marketplace, and John, first, what is the Minerals Management Service? I hadn't heard of it until yesterday.

JOHN DIMSDALE: Well, it's responsible for collecting royalty revenues from companies that extract oil and other minerals from federal property. And last year, they collected 11 billion dollars from the oil and gas industry. So, it's a big source of revenue. In fact, sometimes Minerals Management is the second largest source of income for the federal government, second only to the IRS. And remember, this scandal comes just as Congress is debating whether to allow more oil drilling, especially on the Outer Continental Shelf under the ocean.

BRAND: That's right. So, let's go into the details of this scandal. What did the Interior Department's inspector general find?

DIMSDALE: Well, this report makes it sound like a very dysfunctional place. It alleges cocaine and marijuana use, and even promiscuous sex between government employees and the industry that they oversee. The inspector general says the relationship between the industry and the revenue collectors is supposed to be at arm's length, but most of the oil-company people that investigators talked to said they bought meals or drinks, entertainment, for government employees.

The inspector general also alleges that lucrative government contracts were given to friends and former colleagues of the bureau. And this isn't the first criticism by the inspector general of the Minerals Management office. Last year, that office was accused of making mistakes in the royalties that calculated for the industry. It saved companies more than 10 billion dollars. So, at the very least, this latest investigation gives ammunition to the people who say that the Bush administration is too close to the oil and gas industry.

BRAND: And so, this directly affects taxpayers and consumers?

DIMSDALE: Well, you know, the head of the Minerals Management Agency says, no, that the agency has been collecting the proper amount of royalties, but the report says some oil companies were allowed to revise their payments downward after their contracts were finalized. And outsiders have to wonder why would the industry be giving gifts to employees of this agency, if they didn't want something in return?

BRAND: OK. Still on oil, another story. OPEC announced it will be cutting production. What does that mean?

DIMSDALE: Well, they do want to cut production to keep the price high, but you know, Saudi Arabia said today that it isn't necessarily going to stick to those quotas and produce what the cartel imposed late on Tuesday. So, the prospect that Saudi Arabia might continue to crank out high levels of crude is pushing oil prices down, even as Hurricane Ike barrels down on the Gulf of Mexico.

BRAND: OK. Thanks, John. That's John Dimsdale of public radio's daily business show, Marketplace.

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BRAND: Stay with us. There's more ahead as NPR's Day to Day continues.

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