Interior Sued to Obtain Oil Royalty Revenue Data

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Interior Sued to Obtain Oil Royalty Revenue Data

Feds Claim Prices Oil Company Paid for Royalty-In-Kind Oil Are Trade Secrets

Washington, DC — The U.S. Interior Department is wrongly withholding information that will reveal whether taxpayers are being ripped off in a controversial oil and gas royalty program, according to a lawsuit filed today by Public Employees for Environmental Responsibility (PEER). Interior claims that disclosure of bidding and contracting information about its Royalty-In-Kind sales would reveal oil company trade secrets.

Royalty payments on oil and gas from offshore tracts and public lands are one of the federal government’s greatest sources of non-tax revenues. One royalty collection method, called Royalty-In-Kind (RIK), lets companies pay federal royalties in the form of oil or natural gas rather than cash. Interior, in essence, acts as an oil broker by selling this oil or natural gas on the market in order to obtain its share. Currently, the RIK program sells more than 150,000 barrels of crude oil per day.

The RIK program was tarred by an official investigation last September which found Interior employees engaging in sex and drug parties with oil officials and accepting illegal gifts. Previous official investigations have found contract irregularities. In a report this April, the Government Accountability Office concluded that Interior’s “reports to the Congress did not fully describe the performance of the royalty-in-kind program and, in some instances, may have overstated the benefits of the program”.

“We are trying to find out whether the Royalty-In-Kind program collects as much as it should or whether it benefits oil companies at the expense of the taxpayer,” stated PEER Executive Director Jeff Ruch.

On March 20, 2009, Interior denied a Freedom of Information Act (FOIA) request for the records needed to determine whether RIK is yielding the appropriate return to the federal government on the somewhat contradictory grounds that the information relates “solely to the internal personnel rules and practices of the agency” and consists of “trade secrets” and confidential commercial oil company data. After an administrative appeal yielded no change, PEER filed a lawsuit under FOIA to pry loose the information.

Interior’s refusal to disclose what price the companies pay it for the RIK oil makes it difficult to evaluate the effectiveness of the program. Interior’s stance also appears at odds with pledges by President Obama to run an open, transparent government and to err on the side of disclosure in administering the Freedom of Information Act.

“We believe that Interior’s stated bases for withholding these documents is without merit and will not withstand scrutiny.” said Christine Erickson, who filed the suit today in the U.S. District Court for the District of Columbia. “What oil companies bid or pay the federal government should be a matter or public record and certainly does not qualify as a trade secret.”


Read the PEER lawsuit

View the Inspector General report on sex and drugs in the RIK program

Read the GAO report calling for greater accountability in the RIK program

Look at President Obama’s memo on the Freedom of Information Act

Phone: 202-265-7337

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Silver Spring, MD 20910-4453

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Environmental Responsibility

PEER is a 501(c)(3) organization
EIN: 93-1102740