Ken Salazar takes a step forward by booting Interior's royalties program
One of Ken Salazar's first moves as Secretary of the Interior was to visit the Lakewood office of the Minerals Management Service — an obscure, scandal-plagued agency responsible for collecting billions in oil and gas royalties from companies drilling on federal lands — and vow to clean up the place. The heavily symbolic moment was artfully staged, with Salazar decked out in his trademark cowboy hat and bolo tie, slinging tough talk about a new sheriff in town.
Nine months later, the former Colorado senator has finally taken substantive steps to go along with the symbolism. In a speech to the House Committee on Natural Resources two weeks ago, Salazar announced that he was terminating the MMS royalty-in-kind (RIK) program, a much-reviled experiment in letting foxes guard henhouses. "The royalty-in-kind program has been a blemish on this department," he said. "The American people have not been receiving the full benefits from these valuable assets."
The news was hailed by government watchdog groups as an important move toward extricating the Department of the Interior from the corruption and mismanagement of the Bush administration. But it was also a belated one. When he came to Lakewood in January, Salazar indicated that he'd be reviewing RIK and hoped to have specific reform proposals in a few weeks. That it actually took him 33 weeks says something about the complexity of the problems at Interior — and about the new secretary's cautious approach to taming the beast.
Department of the Interior
True, the gears of government grind excruciatingly slow and exceedingly fine. But the snarl of bureaucracy is particularly severe at Interior, a faction-ridden agency that manages one-fifth of the land mass of the United States and must contend with the competing demands of energy producers, ranchers, hikers, miners, hunters, Indian tribes, environmentalists and Winnebago-driving park enthusiasts. The previous administration had tilted heavily toward oil and gas leases, at the expense of endangered species and other pressing concerns. In his first few weeks on the job, Salazar unveiled a multi-layered agenda that involved tackling everything from crumbling park roads to alternative energy development to climate change ("The Zen of Ken," April 2).
Salazar has pursued his goals with the same plodding, consensus-building spirit he exhibited in the Senate. He's held a dizzying array of press conferences and town meetings, sought to placate alarmed oilmen and suspicious greenies, and invited public involvement like no Interior chief ever has before. His proposed offshore energy development policy drew more than 450,000 public comments — an impressive number, but imagine the nightmare logistics of trying to digest that much feedback, let alone use it in shaping policy.
A similar cover-all-bases approach seems to have guided the decision to end the RIK program. Royalty-in-kind was supposed to streamline MMS dealings with energy companies by allowing the government to collect royalties in the form of actual oil and gas reserves instead of cash. Yet as a series of General Accounting Office reports and whistleblower accounts have demonstrated, the supposed benefits of RIK were an illusion. The program led to a drastic decrease in the auditing of royalty payments, relying instead on "self-reporting" by the industry. Over the past decade, the government has lost billions in royalty revenues thanks to RIK and other "business-friendly" schemes ("Fighting Mad," November 16, 2006).
Worse, the program became a magnet for scandal. In the Lakewood office, MMS employees who were supposedly overseeing royalty collection became cozy with energy company execs — in some cases, they were literally in bed together. An internal investigation of improper gifts, boozy parties and allegations of in-office drug use generated lurid headlines and a perception that the entire DOI had bent over for industry ("Crossing Over," September 18, 2008).
Pulling the plug on RIK should have been a no-brainer for the new regime. Yet it still took months of review before the decision was finalized, and the transition back to a cash-on-the-barrel royalty scheme, complete with aggressive auditing, will probably take months more. The glacial process is indicative of the challenge Salazar faces in changing the course of an agency that has traditionally favored powerful energy interests over the public in its resource management policies. Although the pro-industry bias accelerated under Bush, it didn't start there; for the past 25 years, the United States has had one of the lowest royalty rates for oil and gas of any industrialized country.
And MMS is hardly the only Interior agency to display that bias. In recent years, the Bureau of Land Management has opened up its lands for oil and gas drilling at an unprecedented rate, often ignoring its own internal review procedures and issuing "categorical exclusions" that allow drilling without the usual environmental impact analysis. Salazar has halted some of the more egregious lease schemes, including a fire sale of oil and gas rights near national parks in Utah. But one of the most crucial tests of the new secretary is looming in his own home state: what to do about the impending drilling of the Roan Plateau.
The Roan is one of the most biologically diverse areas in Colorado, a haven for black bears, mountain lions, rare plants and the world's purest strain of Colorado River cutthroat trout. But it also sits on an estimated $22 billion worth of natural gas ("Raiding the Roan," January 1, 2004). Last summer, despite locals' protests and opposition from most of the state's political leadership — including then-senator Salazar — the BLM auctioned off gas leases on 35,000 acres atop the plateau. Environmental groups went to court, claiming the leases were improper and the environmental review inadequate.
"This was the Bush administration ramming the leases down Colorado's throat," says Michael Chiropolos, lands program director for Western Resource Advocates, one of the parties in the lawsuit. "They wanted to get these lands locked up and leased before they left office. The fact is, the Piceance Basin is being drilled like a pincushion. There's no need to go after the Roan right now."
Secretary Salazar now finds himself defending in court a leasing decision that he fought as a senator. Earlier this year, DOI officials were working behind the scenes with the enviros and the lease owner, Vantage Energy, to find a solution that would protect much of the top of the plateau. But settlement talks apparently broke down in June, after Vantage sold most of its interest in the leases to the Bill Barrett Corporation for $60 million. Barrett execs have stated that they hope to start drilling next year and that more than 3,000 potential drilling sites are available. The BLM's environmental analysis projects just 210 wells in the first two decades of drilling, but acknowledges that the actual number of wells over time could number in the thousands.
A court-ordered settlement conference is scheduled for November; a ruling in the case could come by the end of the year. Depending on the outcome, Salazar may face the tough decision of declaring the leases invalid — and refunding the energy industry's money — or presiding over the transformation of one of Colorado's last wild places into an industrial zone.
"Right now we're sort of at an impasse," says Michael Freeman, staff attorney for Earthjustice, another plaintiff in the lawsuit. "We're still hopeful that Secretary Salazar and the BLM will do the right thing."
The new sheriff has said he wants to do the right thing, from restoring balance in the leasing process to protecting endangered species. But it all takes time. Meanwhile, the showdown over the Roan is rapidly approaching high noon.
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