Sex & Drugs & Royalty-in-Kind

From Energy Current:

A report released by the Department of the Interior Office of the Inspector General has revealed ethical violations by employees of the Royalty In Kind (RIK) program. The report alleges “unbridled unethical conduct” by employees, including illicit sexual relations with both RIK employees and members of the oil and gas industry, illegal drug use, and acceptance of numerous gifts and gratuities from oil and gas companies. …

The RIK program, based in Denver, Colo., is designed to allow MMS to take possession of a percentage of oil and gas produced from a federal lease as a royalty payment. The oil and gas is then marketed and sold by MMS. According to MMS officials, in 2007 the RIK program resulted in a US$63 million gain over royalties paid in value.

The employees involved are not “regulators” that oversee offshore oil production; they are not the “watchdogs” of the offshore leasing program for the Gulf of Mexico, as Sen. Bill Nelson (D-FL) alleges. They are part of a group set up to maximize the value of the government’s oil revenue by trading barrels of oil. They have barrels to sell, and lots of them, and their customers are refineries and other oil traders in the private sector. That’s not a normal government function, and it’s a legitimate question whether government should even be in that business in the first place.

It would be as if the government set up a trading desk at the NYMEX or the Chicago Board of Trade to trade orange juice or pork bellies. A reasonable person might guess that they might identify more closely with the trading culture that surrounds them, and that sooner or later they would run afoul of Federal norms.

Note also that they juiced the government’s take by roughly 0.5%, or 50 cents per barrel on a $100 barrel of oil. And these clowns probably did the accounting. Was it really worth it?

Of course, congressional Democrats, including the so-called “leadership”, will attempt to use this incident as a roadblock on the way toward opening access to the 85% of the Outer Continental Shelf that is currently off-limits to oil and gas exploration.

From the Denver Post:

Democrats immediately seized on the allegations. From House Speaker Nancy Pelosi to Colorado Gov. Bill Ritter, they issued statements arguing that a too-cozy relationship between oil companies hurts taxpayers.

“The investigation also must closely examine how much this type of corruption has cost American – and Colorado – taxpayers,” Ritter said. “The oil-and-gas industry already benefits from taxpayer-funded subsidies, so the question is: how much has this scandal cost us in lost revenue?”

Pelosi, who Wednesday unveiled new energy legislation, tied in President Bush and Vice-President Dick Cheney.

“Little did we know how cozy the relationship between Big Oil and the Administration’s regulators have been,” Pelosi said. “This report documents the ‘pervasive culture of exclusivity’ that has cheated the American taxpayer out of billions of dollars owed them by the oil companies.

Once again, Nancy doesn’t know what she’s talking about. These traders actually made money for the Treasury, it’s just that the government should never have been in that business to begin with.

From Energy Current:

Speaking to reporters, Democratic Senator Bill Nelson of Florida said, “We now have proof that they [MMS] are both literally and figuratively in bed with big oil.”

“Big oil has used sex and drugs and illegal gifts with U.S. government watchdogs that are charged with keeping a watchful eye on the oil industry’s offshore leasing program in the Gulf of Mexico.” … “This all shows the oil industry holds shocking sway over the administration and key federal employees. This is why we must not allow big oil’s agenda to be jammed through Congress.”

Lawmakers in both the House of Representatives and the Senate have been preparing new bills which would allow more offshore drilling along America’s coast. Nelson has promised to filibuster any Senate bill aimed at expanded offshore drilling.

So, even though the two issues are totally unrelated, Senator Nelson will use this incident as his excuse for an attempt to derail the effort for expanded drilling access.*Cross-posted at The Minority Report*