Last week, I wrote this diary on the news that former Deputy Secretary of the Interior J. Stephen Griles had received a letter from the Justice Department indicating he was a target of an investigation, and may well be indicted, we assume, for false statements he made while under oath before the Senate Indian Affairs Committee. The gist of that false testimony was that Griles was not in contact with Jack Abramoff and had not provided assistance for Abramoff's tribal clients within the Interior (which oversees federal Indian tribes.)
The real shocker was the news that Department of Justice lawyer, and former Interior Solicitor and Counselor to Secretary Gale Norton, Sue Ellen Wooldridge, was also being investigated by the grand jury, and thus had submitted her resignation. The cherry on the cake? Wooldridge and Griles are romantically involved.
This morning, the New York Times posted a detailed story on the Director of the Mineral Management Service, Rejane "Johnnie" Burton, who, it seems, may soon be leaving Interior in order to spend more time with her lawyer.
From today's NYTimes:
WASHINGTON, Jan. 15 — Johnnie M. Burton, who runs the Interior Department’s troubled program to collect royalties on oil and gas pumped on public lands, is under attack and out of sight.
As director of the Minerals Management Service, Ms. Burton has faced widespread complaints from Congress for months that her agency is mismanaged, unaccountable and on the verge of losing billions of dollars owed by oil and gas companies that drill in the Gulf of Mexico.
On Thursday, the Interior Department’s inspector general is expected to tell the Senate Energy Committee that Ms. Burton either ignored or remained unacceptably blind to a leasing blunder that will, if left unchanged, let oil companies escape as much as $10 billion in royalties over the next five years.
The Senate hearing comes amid rising bipartisan anger about potentially huge losses to taxpayers that have prompted an investigation by the Justice Department into the agency’s multibillion dollar "royalty in kind" program.
Yet Ms. Burton — a diminutive Algerian-born former French teacher and state official from Wyoming — will not be testifying. In her place will be an assistant secretary of the Interior, C. Stephen Allred, who joined the department less than four months ago.
Senior Interior officials have kept Ms. Burton out of public view, and many colleagues assume she will soon leave the agency.
A staunch Republican, Ms. Burton served six years in the Wyoming state legislature. When voters elected a Republican governor, Ms. Burton became director of the state’s Department of Revenue for six years. Because Wyoming’s state revenue comes almost entirely from energy and mining, Ms. Burton became well-versed in many of the same issues posed in collecting federal royalties on oil and gas.
Ms. Burton lost her job in Wyoming in 2002, after voters ousted the Republican governor, Jim Geringer. While she knew Vice President Dick Cheney, who also comes from Wyoming, acquaintances say it was her ties to state political leaders and her experience with energy taxation that won her the job at Interior.
Johnnie Burton came to Interior in March, 2002, at the point where a key issue was the promotion of coal-methane drilling/production in the Powder River Basin of Wyoming and Montana. This was a particularly important issue for Interior Deputy Secretary J. Steven Griles, as a number of his former clients had financial interests in the area. He even risked violation of his "conflict of interest" exclusions by sending a letter in April, 2002, to the regional EPA office, protesting an impending negative report on proposed drilling in the PRB. Burton's expertise on the subject, particularly as Director of the Wyoming Department of Revenue, made her a plum candidate for Griles, and I'm willing to go out on a limb and suggest he was responsible for her hire.
As I plan on spending a lot of time detailing the misdeeds of the Norton/Griles Interior swamp, I took the time to annotate the org chart I included in last week's diary:
Less than a month after Burton joined Interior, Griles invited her to a very cozy dinner party at the home of his former lobbying partner at National Environmental Strategies, Marc Himmelstein [link, pdf] Jim Cason, Kathleen Clarke and Rebecca Watson also attended. Himmelstein retained most of Griles' gas, oil and coal clients when he joined Interior in 2001, and a many had significant interests in the Powder River Basin. The meeting was so controversial, it, like the memo to EPA earlier that week, Griles became the subject of an ethics probe by the Office of the Inspector General.
It's quite possible that Burton is the key link in understanding Griles ardent interest in the Indian Trust Fund case.
I've maintained for a few years now that there were certain interests whose greatest fear in regards to Cobell v. Babbitt/Norton/Kempthorne was that the court, namely presiding Judge Royce Lamberth, would agree with the litigants that, due to the massive destruction and neglect of royalty reciepts on the side of the US government over the past century, that it was necessary instead to demand that the lessors, those extraction industries with leases on Indian land, open their accounting books to auditors.
As we've seen recently in regards to oil and gas leases on federal land negotiated since the late '90s, opening those books has proven beyond a doubt that these indutries shafted the US government of royalties, to the tune of several billion dollars. Should the books be opened on land leased from individual Indians and tribes since the late 1880s, the numbers might be monumental (Cobell analysts have suggested numbers surpassing 100 billion.) Even a Republican Congress would have a difficult time making the US government swallow such losses, and would demand significant compensation from industry.
Johnnie Burton's expertise was oil and gas royalties, which is why it is astounding that she ignored the Clinton Administiration's "blunder" and failed to fix the problem years after it was discovered by MMS. However, it's less surprising when we take a gander into Ms. Burton's past performance as Director of the Wyoming Department of Revenue back in the late 1990s, when she re-wrote tax and royalty regulations which benefitted industry, particularly BP. From the court docs:
- The DOA [Department of Audit], in the process of auditing gas processing plants in southwest Wyoming in 1996, raised the issue of production taxes and royalties as direct costs of producing. The auditors believed production taxes and royalties should be included as direct costs. These were the first audits of production reported after the statutory change in 1990. [Transcript Vol. V, pp. 71-72, 76, 100; Vol. VI, pp. 313-315].
- Ms. Burton initially agreed production taxes and royalties should be included as direct costs of producing within the direct cost ratio. This decision was based, at least in part, on legal advice from a senior assistant attorney general stating that since the oil and gas valuation statue was silent on the issue of exclusion, production taxes and royalties could not be excluded. [Transcript Vol. V, pp. 32-33, 35-36, 38, 54, 88; Vol. VI, pp. 313-315; Exhibit 103].
- Ms. Burton, after her initial determination production taxes and royalties should be included as direct costs, reconsidered her decision, and subsequently issued a memo in October, 1996, instructing the DOA to exclude production taxes and royalties from the direct cost ratio of the proportionate profits method. [Transcript Vol. V, pp. 32-33, 35-37, 52; Vol. VI, pp. 313-315; Exhibit 103].
- The DOA disagreed with Ms. Burton on exclusion of production taxes and royalties from the direct cost ratio. The interpretation by DOA was production taxes and royalties should be included in the ratio as direct costs of production. [Transcript Vol. V, pp. 43-44].
Of course, as is SOP at Interior, their response to the current Gulf Coast oil and gas royalty scandal was to put another fox in charge of the henhouse: Again from the Times:
In November, Interior officials announced that a new task force of outside experts would evaluate the royalty program. Officials named David T. Deal, a longtime lawyer for the American Petroleum Institute, to head the panel.
The NYTimes article paints Burton as "less a decision maker than a loyal soldier"; however, it's increasingly clear that Burton has been an active and willing flack for the extraction industries for years. And fortunately for us, it's that ambition to be the go to woman for industry, especially after the departure of Griles, which may land Burton in legal hot water.
Besides her testimony in front of Congress that she didn't know about the lease "loophole" until 2006 (despite her deputy claiming she knew in 2004), Burton once again finds herself in the middle of a honest-to-goodness "stolen" royalties lawsuit (from the Times):
On Tuesday, a federal jury in Denver will hear allegations by a top former auditor at the Minerals Management Service that the Kerr-McGee Corporation cheated the government out of at least $12 million in royalties — and that senior agency officials in Washington ordered him to drop the case.
The allegations are part of a lawsuit by Bobby L. Maxwell, a former auditing supervisor in Denver, who is now suing as a private citizen under a law that rewards whistle blowers for recovering money from companies that defraud the government.
Kerr-McGee has steadfastly denied any wrongdoing, and the Minerals Management Service has insisted that Mr. Maxwell’s case has no merit.
But a federal judge has refused to dismiss the allegations, and a jury could reach a verdict by early February. If Mr. Maxwell wins, Kerr-McGee could be required to pay more than $50 million in back royalties and penalties. Ms. Burton would face pressure to explain why her agency swept aside Mr. Maxwell’s findings.
It's important to reiterate that the Mineral Management Service is responsible for the payment of royalties by mining and drilling companies on both federal and Indian land.
It's still unclear as to why Sue Ellen Wooldridge is being investigated. And despite all we know about Griles misdeeds, the missing link with Jack Abramoff is his motivation for helping him out in the first place; Abramoff's issues were primarily casino and land-in-trust, whereas Griles was a coal and BigOil pirate. So what quid did Griles receive for Abramoff's quo?