Ending a failed program

Saturday, Sept. 19, 2009 | 2:05 a.m.

The sex, drug and gift-taking scandal that rocked the federal Minerals Management Service a year ago was not the only problem plaguing this agency that handles billions of dollars.

Government reports and audits had been consistently critical of how the agency was managing one of its long-standing programs, saying that taxpayers were not being well served.

The program is called “royalty in kind.” The term refers to the fact that energy companies leasing federal land for drilling are allowed to make a good portion of their lease payments not in cash, but in quantities of oil and gas.

Sold on the open market, that oil and gas theoretically earns good money for the Treasury Department. But the reports had shown that the Minerals Management Service was not running the program properly. The agency was producing losses of tens of millions of dollars.

Wednesday, Interior Secretary Ken Salazar, in an appearance before the House Natural Resources Committee, announced that he would be phasing out the royalty-in-kind program.

“Clearly, the department’s energy leasing and royalty programs have not been working as they should and the American people have not been receiving the full benefits from these valuable assets,” Salazar said.

There is no logical reason why the lease payments have not always been required to be straightforward, that is, in cash. Taking possession of oil and gas for resale is a risky and complicated extra step that simply is not necessary.

Committee Chairman Nick Rahall, D-W.Va., praised Salazar’s decision, saying it will “end the opportunity for mischief, or the temptation, and perhaps provide a more decent return for the American taxpayer.”

The opportunity and temptation for mischief have certainly been there, as the scandal uncovered last year proved. The Interior Department’s attorney general found that several federal employees attached to the royalty-in-kind program had created a “culture of substance abuse and promiscuity” in their dealings with employees of energy companies.

With the program losing money and almost inviting gross conflicts of interest, Salazar was right in deciding to phase it out.