Department of Billion-dollar Bungling

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Complaints are beginning to pile up against the U.S. Interior Department. And they're coming not just from outside critics but also from people in the agency. The problems surfacing are serious: managerial incompetence, bureaucratic snafus that are costing taxpayers billions of dollars, and a pervasive forgive-and-forget attitude toward senior department officials who cross ethical lines.

The Project on Government Oversight, a private watchdog group, released a study this week charging that Interior's Minerals and Management Service (MMS) has become far more lax the past four years in collecting unpaid royalties from the land it leases to oil and natural gas companies. From 2002 to 2005, MMS's auditing and compliance division collected $48 million not paid on mineral leases, which is "less than half the average $115 million collected annually in the division's first 20 years," according to Beth Daley, the watchdog organization's director of investigations. The drop in collections, Daley says, came after the auditing and compliance division cut its staff by 26% and began relying more on a computerized checking system of the leases "based upon information provided from the industry."

But the watchdog group's beef with Interior is tepid compared with the blast delivered a day earlier by the department's own inspector general, Earl Devaney. In scorching testimony before a House Government Reform subcommittee the no-nonsense Devaney charged that during his seven years as Interior's IG his revelations of misdeeds and foul-ups have been routinely "disregarded by the department." Numerous IG reports on regulations circumvented, procurement irregularities, project failures and bureaucrats being awarded bonuses despite their failures have been met with "vehement challenges" by Interior officials "to the quality of our audits, evaluations and investigations," he told lawmakers.

One of the most expensive examples of "bureaucratic bungling," according to Devaney, was a department program in the late 1990s to encourage oil-company exploration in deep waters of the Gulf of Mexico, where it's more difficult than it is on land to extract the crude. Those leases exempted the companies from having to pay royalties to the federal government. The agreements, however, were supposed to have a clause in them that lifted the exemption if oil prices shot past $36 a barrel. (Oil currently sells for more than $60 a barrel.) But because of a foul-up in drafting the deepwater leases, 1,000 of them issued in 1998 and 1999 didn't contain the language lifting the exemption for higher prices. And, Devaney says, mid-level Interior bureaucrats kept their superiors in the dark about the omission for five years. The Government Accountability Office estimates that the mistake has so far cost taxpayers $2 billion in lost royalty revenue and that number could eventually soar to $10 billion.

Rather than heads rolling for infractions, the Cabinet agency has become a fault-free zone, Devaney claims. "Short of a crime, anything goes at the highest levels of the Department of Interior," says the former Secret Service agent. "Ethics failures on the part of senior department officials—taking the form of appearances of impropriety, favoritism, and bias—have been routinely dismissed with a promise 'not to do it again.'" In numerous instances top officials who leave the department under a cloud, said Devaney, "are sent off with a party paying tribute to their good service."

A case Devaney found particularly troubling was that of Steven Griles, Interior's deputy secretary in George W. Bush's first term. Devaney in 2004 referred 25 possible ethics violations by Griles to the Office of Government Ethics outside of Interior. That office cleared Griles of 23 of the violations but referred the remaining two to then-Secretary Gale Norton for a decision. Devaney says Norton refused, over his objections, to take any action against her deputy.

Griles, who left the department in January 2005, says he was cleared because all the allegations investigated by the IG were "conclusively and unquestionably proven to be false." Norton tells TIME that of the two potential violations the ethics office kicked back to her, "one was about a dinner Steve Griles had in the home of a lobbyist (which Griles paid for), and the other was a question about the definition of a 'particular matter' under federal ethics guidelines. On that latter point, I simply viewed Mr. Devaney's interpretation as legally incorrect."

Meanwhile, Dirk Kempthorne, who replaced Norton as Interior Secretary last July, insists he's taking Devaney's "allegations concerning issues dating back to 1998 very seriously." Kempthorne points out that his first day on the job he sent a letter to Interior employees titled "Our Ethical Responsibilities." Since then, the new Interior chief says he's been preaching to his workers that when they're unsure whether something is ethical or not, "if in doubt... don't."

Congress, however, wants to see more than employee pep talks. "The Interior Department breached its fiduciary duty to the American people," says Republican Rep. Darrell Issa, who chairs the government reform panel's Energy and Resources Subcommittee. "It is charged with holding our natural resources in trust." Instead, he complains, the department "squandered billions."