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Is the U.S. Interior Department wrongly withholding information that will reveal whether taxpayers are being ripped off in a controversial oil and gas royalty program? Public Employees for Environmental Responsibility (PEER) seem to think so, according to a lawsuit they filed today. Interior claims that disclosure of bidding and contracting information about its Royalty-In-Kind (RIK) sales would reveal oil company trade secrets.

The Royalty-In-Kind Program is responsible for managing Minerals Revenue Management’s (MRM) commercial oil and gas sales activity. The RIK Program is currently selling over 800,000 MM-Btu of natural gas per day and over 150,000 barrels of crude oil per day.

Simply put, Interior acts as an oil broker, selling this oil and gas in order to obtain its shares. 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, making over $4 billion in 2007. RIK allows companies to pay federal royalties in the form of oil or natural gas rather than cash.

An investigation last September found that Interior employees (19 RIK marketers and other RIK employees – approximately 1/3 of the entire RIK staff) were engaging in sex and drug parties with oil officials, and 8 of the 19 employees received gifts exceeding the allowable limit.

In an April report, 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”.

The lawsuit comes in response to the the Interior’s April 20th denial to yield to a Freedom of Information Act (FOIA) request for the records needed to determine whether RIK is yielding the appropriate return to the federal government. The request was denied 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.

The purpose of the PEER lawsuit is to “[try] 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. The Interior’s refusal to disclose the prices that oil companies pay for RIK oil makes it difficult to gauge the effectiveness of the program.

The Interior’s stance also appears at odds with pledges by President Obama to run an open, transparent government. The President said of the Freedom of Information Act (FOIA) that “[FOIA], which encourages accountability through transparency, is the most prominent expression of a profound national commitment to ensuring an open Government. At the heart of that commitment is the idea that accountability is in the interest of the Government and the citizenry alike.”

He went on to say that “In the face of doubt, openness prevails. The Government should not keep information confidential merely because public officials might be embarrassed by disclosure, because errors and failures might be revealed, or because of speculative or abstract fears.”

“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 on public record and certainly does not qualify as a trade secret.”

Photo Credit: liz~colorado via flickr under Creative Commons License