[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]




 
 REPORTS, AUDITS AND INVESTIGATIONS BY THE GOVERNMENT ACCOUNTABILITY 
 OFFICE (GAO) AND THE OFFICE OF INSPECTOR GENERAL (OIG) REGARDING THE 
                      DEPARTMENT OF THE INTERIOR

=======================================================================

                           OVERSIGHT HEARING

                               before the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                           February 16, 2007

                               __________

                            Serial No. 110-1

                               __________

       Printed for the use of the Committee on Natural Resources



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                     COMMITTEE ON NATURAL RESOURCES

               NICK J. RAHALL II, West Virginia, Chairman
              DON YOUNG, Alaska, Ranking Republican Member

Dale E. Kildee, Michigan             Jim Saxton, New Jersey
Eni F.H. Faleomavaega, American      Elton Gallegly, California
    Samoa                            John J. Duncan, Jr., Tennessee
Neil Abercrombie, Hawaii             Wayne T. Gilchrest, Maryland
Solomon P. Ortiz, Texas              Ken Calvert, California
Frank Pallone, Jr., New Jersey       Chris Cannon, Utah
Donna M. Christensen, Virgin         Thomas G. Tancredo, Colorado
    Islands                          Jeff Flake, Arizona
Grace F. Napolitano, California      Rick Renzi, Arizona
Rush D. Holt, New Jersey             Stevan Pearce, New Mexico
Raul M. Grijalva, Arizona            Henry E. Brown, Jr., South 
Madeleine Z. Bordallo, Guam              Carolina
Jim Costa, California                Luis G. Fortuno, Puerto Rico
Dan Boren, Oklahoma                  Cathy McMorris Rodgers, Washington
John P. Sarbanes, Maryland           Bobby Jindal, Louisiana
George Miller, California            Louie Gohmert, Texas
Edward J. Markey, Massachusetts      Tom Cole, Oklahoma
Peter A. DeFazio, Oregon             Rob Bishop, Utah
Maurice D. Hinchey, New York         Bill Shuster, Pennsylvania
Patrick J. Kennedy, Rhode Island     Dean Heller, Nevada
Ron Kind, Wisconsin                  Bill Sali, Idaho
Lois Capps, California               Doug Lamborn, Colorado
Jay Inslee, Washington
Mark Udall, Colorado
Joe Baca, California
Hilda L. Solis, California
Stephanie Herseth, South Dakota
Heath Shuler, North Carolina

                     James H. Zoia, Chief of Staff
                   Jeffrey P. Petrich, Chief Counsel
                 Lloyd Jones, Republican Staff Director
                 Lisa Pittman, Republican Chief Counsel


                                 ------                                

                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on February 16, 2007................................     1

Statement of Members:
    Pearce, Hon. Stevan, a Representative in Congress from the 
      State of New Mexico........................................     1
        Letters submitted for the record.........................    48
    Rahall, Hon. Nick J., II, a Representative in Congress from 
      the State of West Virginia.................................     1

Statement of Witnesses:
    Devaney, Earl E., Inspector General, U.S. Department of the 
      Interior...................................................     2
        Prepared statement of....................................     7
        Response to questions submitted for the record...........    89
    Nazzaro, Robin M., Director, Natural Resources and 
      Environment, U.S. Government Accountability Office.........    11
        Prepared statement of....................................    15
        Response to questions submitted for the record...........    90



   OVERSIGHT HEARING ON ``REPORTS, AUDITS AND INVESTIGATIONS BY THE 
  GOVERNMENT ACCOUNTABILITY OFFICE (GAO) AND THE OFFICE OF INSPECTOR 
        GENERAL (OIG) REGARDING THE DEPARTMENT OF THE INTERIOR''

                              ----------                              


                           February 16, 2007

                     U.S. House of Representatives

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Committee met, pursuant to call, at 10:01 a.m. in Room 
1324, Longworth House Office Building, Hon. Nick J. Rahall, II 
[Chairman of the Committee] presiding.
    Present: Representatives Rahall, Kildee, Christensen, 
Napolitano, Grijalva, Costa, Sarbanes, Miller, Markey, Hinchey, 
Kind, Capps, Herseth, Duncan, Pearce, Brown, McMorris Rodgers, 
Gohmert, Shuster, Heller and Sali.

STATEMENT OF THE HONORABLE NICK J. RAHALL, II, A REPRESENTATIVE 
          IN CONGRESS FROM THE STATE OF WEST VIRGINIA

    The Chairman. The Committee on Natural Resources is meeting 
today to receive testimony from the Interior Department's 
Office of Inspector General and the Government Accountability 
Office on reports, audits and investigations regarding the 
Interior Department.
    I would say to the Members of the Committee that there are 
some very pressing and compelling matters relating to the 
management of the agency which deserve our attention. That is 
why I have asked the IG and the GAO to be our first witnesses 
at our first hearing this Congress.
    I believe the time for opening statements on this issue is 
past and so I have no further comments.
    I am going to recognize Mr. Pearce for whatever opening 
statements he wishes to make.

 STATEMENT OF STEVAN PEARCE, A REPRESENTATIVE IN CONGRESS FROM 
                    THE STATE OF NEW MEXICO

    Mr. Pearce. Thank you, Mr. Chairman. I appreciate the 
hearing.
    I would indicate to the IG that my wife and I had an oil 
field service company, and we operated during the period of 
time here. There were some things that did not ring and match 
my experience and so the presentation and the questions that 
come are heartfelt, watching an industry in deep distress.
    Competitors of ours laid off 68 to 70 percent of their 
employees. My wife and I elected not to do that, but it was 
surely an outflow of cash that caused us not to. Companies were 
stopping investing in west Texas, east New Mexico, and they are 
moving offshore because of the Deepwater Royalty Relief Act.
    Those decisions people are relaying to me, and so there are 
things that obviously I perceive from my background in a 
different way. If you would be gracious enough to answer those 
questions.
    Mr. Chairman, again I appreciate the opportunity to discuss 
these issues and would yield back.
    The Chairman. Thank you.
    I now recognize Mr. Earl Devaney, the Inspector General, 
U.S. Department of the Interior, and Ms. Robin Nazzaro, 
Director, Natural Resources and Environment, U.S. Government 
Accountability Office, to proceed as they wish for 15 minutes 
each.

STATEMENT OF EARL E. DEVANEY, OFFICE OF INSPECTOR GENERAL, U.S. 
                   DEPARTMENT OF THE INTERIOR

    Mr. Devaney. Thank you, Mr. Chairman. With your permission 
I would like to submit my full statement for the record and 
then make some abbreviated remarks right now if I could.
    The Chairman. Without objection. That will be the case for 
both of you.
    Mr. Devaney. Thank you very much.
    Mr. Chairman and members of the Committee, I want to thank 
you for this unusual opportunity for me to comment and share my 
views concerning the wide array of ongoing challenges faced by 
the Department of Interior and impart to you some success 
stories as well.
    In thinking about how to frame my testimony today, I 
concluded that it would be most useful to the Committee if I 
were to discuss with you the Department's successes and 
continuing challenges in the context of our audits, evaluations 
and investigative work over the last several years.
    Let me begin by telling you about some of the changes that 
have taken place in the Office of Inspector General since I 
last testified before this committee in July of 2000. 
Historically our office had done little to change its approach 
to auditing and investigating, tending to focus solely on 
problems rather than identify and propose possible solutions.
    For years a standard audit recommendation included seeking 
additional funding to correct a deficiency or shortcoming. 
Today, with shrinking budgets and increasing demands on every 
component in the Department, we realize that this 
recommendation had to be augmented with creative suggestions on 
ways to redistribute, share or leverage existing resources.
    For example, in an evaluation requested by the Department 
of its Equal Opportunity Office, we asked our team to identify 
best practices, shared resources and consolidation of functions 
as they looked for ways to fix a poorly managed program. 
Although this was a new approach, the Department received our 
final report enthusiastically and adopted the key 
recommendations emanating from this report, which involved 
little or no new personnel.
    We also endeavor whenever possible to focus our efforts on 
high-risk or high-impact issues that touch upon multiple 
bureaus. Naturally such an effort is more labor intensive and 
takes longer to complete. Thus, we see a logical decrease in 
our raw numbers. On the other hand, when we issue one of these 
reports we are providing the Secretary with the unique 
opportunity to implement recommendations that have a much 
greater impact on the Department as a whole.
    For instance, we recently issued our report on the 
Department's Radio Communication Program, which impacts 
multiple DOI bureaus. We presented findings that touched on the 
overall Radio Communications Program and provided 
recommendations that should, if implemented, address health and 
safety issues, correct infrastructure shortcoming and save 
money throughout the entire Department.
    Within the last couple of years we have conducted similarly 
structured audits and evaluations on such diverse issues as 
grants, cooperative agreements, competitive sourcing, land 
acquisitions, hazardous materials on public lands, fleet 
management and workers' compensation. All of these reports are 
available on our website.
    In addition, we have changed the way we measure our 
success, moving away from the traditional IG approach of 
measuring success by statistics, such as the number of audits 
or the number of arrests. Although it is more of a challenge, I 
prefer to measure our success by articulating how our 
recommendations have improved the Department's overall 
operations or caused a real change in behavior.
    Having said all this, however, I am not here to say that 
all is well at the Department of Interior. In fact, the 
Department faces some enormous challenges in several areas. I 
would like to highlight one of those matters specifically and 
discuss several more general issues of concern that I have.
    I am sure that this committee is well aware of our recent 
audit and investigation into the royalty-related matters at the 
Minerals Management Service. Ironically, in 1993, 14 years ago 
this month, one of my predecessor IGs testified before this 
very committee, also identified MMS' royalty collections and 
the audit coverage of royalties as having significant 
deficiencies.
    In short, our audit of MMS' compliance review process found 
that compliance reviews play a useful role and can provide a 
broader coverage of royalties using fewer resources than 
traditional audits. They do not, however, provide the same 
level of detail or assurance that a traditional audit provides.
    As a result, we concluded that compliance reviews should 
only be used in conjunction in audits in the context of a well-
designed risk-based compliance strategy. We also identified two 
principal weaknesses that prevent MMS from maximizing the 
benefits of compliance reviews.
    First, we discovered that very few full audits were ever 
triggered by anomalies discovered in the compliance review 
process. We also learned that because the program's performance 
measures were tied to dollar figures, only the big companies 
and leases were being reviewed, leaving hundreds of smaller 
companies that MMS never looked at.
    With few exceptions, MMS agreed with our commendations; 
most notably, MMS agreed to revise its performance measures and 
to develop and pilot a risk-based compliance strategy and, as 
promised, MMS has now provided us with an action plan for 
implementing all of these changes.
    At the same time as our audit we conducted an investigation 
into the failure of MMS to include price thresholds in the 
terms of deepwater leases issued in 1998 and 1999. We have 
determined that MMS intended to include price thresholds in 
leases issued pursuant to the Deepwater Royalty Relief Act as 
evidenced in the first leases issued in 1996 and 1997, as well 
as in 2000, but while MMS was developing new regulations 
related to the Deepwater Royalty Relief Act there was 
significant confusion among MMS operational components and the 
Office of Solicitor as to whether or not the regulations would 
address price thresholds.
    In the end, the regulations did not, and the price 
thresholds were left out of the leases. Although we find 
massive finger pointing and blame enough to go around, we did 
not find a smoking gun or any evidence that the omission of 
price thresholds was deliberate. This was, however, a very 
costly mistake.
    Although featured most prominently in recent headlines, MMS 
does not have a corner on issues of concern. As an example, my 
office has been active in assessing the Department's IT 
security program. Like most IGs, each year we conduct an annual 
FISMA evaluation, along with several evaluations and 
investigations of specific program components related to IT 
security.
    In fact, last year we issued 14 reports to the Department 
with recommendations for improvement. Overall while we are 
seeing continued progress in IT security, significant 
weaknesses still exist. Although we have credited the 
Department with making that progress, we have concluded that 
Interior is not yet in full compliance with FISMA.
    Other security concerns of the Department lie in the 
protection of our national icons and dams. More than three 
years have elapsed since we issued the results of our last 
assessment in 2003 of the Department's efforts to develop and 
enhance security at our national icon parks, such as the Statue 
of Liberty or the monuments on the mall.
    At that time the Park Service lacked commitment, continuity 
and consistency in the planning and execution of security at 
these parks. While we believe that they have since made great 
strides in security implementation, the results of a recent 
survey of Park Police offices who help secure most of the icons 
indicate otherwise. We will soon do a follow-up assessment to 
determine the present state of security at the icons.
    With respect to the protection of our critical dams, we 
found in 2005 that the Bureau of Reclamation had made 
significant progress in developing a coordinated, comprehensive 
program to secure its dam facilities, although we found the law 
enforcement component within BOR to be the weakest link in the 
overall program. Since that time, BOR has committed to 
strengthening its law enforcement program and has addressed 
many of our concerns.
    This presents a natural segue to the state of all law 
enforcement at the Department of Interior. Last year we 
completed our second progress report on the Secretary's 
Directives for Implementing Law Enforcement Reform resulting 
from a major assessment we finished in 2002.
    After nearly four years of effort, we found that the 
Department and the bureaus continued to struggle with the 
implementation of the Secretary's directives with only 10 of 25 
directives fully implemented.
    As a result, we have committed to conduct future 
assessments focusing on the effectiveness of specific 
Departmental law enforcement programs. For instance, we are 
about to issue our first report on the Fish and Wildlife law 
enforcement program, which will describe mixed results.
    Law enforcement in Indian Country gives us great concern, 
but it is only one of many concerns that plague the Bureau of 
Indian Affairs and the American Indians who rely on its 
services. In 2004 we issued a report with alarming findings 
about the state of Indian detention facilities.
    As we were conducting our assessment of Indian detention 
facilities, the death of a 16-year-old Indian girl at a 
boarding school detention facility prompted us to conduct a 
separate investigation that uncovered dual failure by the BIA 
Office of Indian Education Programs and the Office of Law 
Enforcement Programs to address safety and security issues 
surrounding the boarding school detention facility.
    BIA has made some progress in addressing these deplorable 
conditions we found in Indian Country detention facilities, but 
it has much left to do particularly in the areas of adequate 
staffing, which also translates to officer safety and medical 
care for prisoners.
    Moving to another area of concern, I have well-grounded 
continuing concerns about the management and oversight 
conducted over the insular affairs governments by the Office of 
Insular Affairs. U.S. monies provided to the insular affairs 
islands are not insubstantial. The latest annual audited 
financial reports show the receipt and use of at least $683 
million of Federal funds.
    The accountability issues related to these funds have been 
well documented in our reports over the years and are well 
known by Federal grantor agency officials, including the Office 
of Insular Affairs officials who are charged with monitoring 
awards made to the insular areas. Over the years, however, 
Federal oversight and corrective action enforcement has been 
primary performed through periodic visits and/or long-distance 
efforts, which have not proved to be particularly effective.
    Although we have had longstanding concerns about the lax 
practices of the Department's fee for service entities where 
the Department for a fee will award and manage contracts for 
other Federal agencies, concerns which were borne out when the 
Department found itself embroiled in the acquisition scandal 
related to interrogation service at Abu Ghraib prison in Iraq, 
we have been unable to express a definite critique until 
recently.
    In a just released joint audit with the OIG for the 
Department of Defense done of the Department's two primary fee-
for-service entities, we found that in providing acquisition 
services to DOD DOI did not always follow appropriation or 
procurement laws, regulations and rules. As a result, Interior 
left DOD vulnerable to fraud, waste and abuse and made itself 
vulnerable to potential sanctions, loss of acquisition business 
and, most importantly, a loss of public trust.
    Throughout the Department the appearance of preferential 
treatment in awarding contacts and procurements has come to our 
attention far too frequently, and the failure of Department 
officials to remain at arm's length from prohibited sources is 
pervasive.
    In the last two years alone, we have uncovered golf 
outings, dinners, hunting trips, concert tickets and box seats 
at sporting events as being accepted by DOI officials from 
prohibited sources. We have also chronicled exclusive access 
and special favors provided by DOI employees to select outside 
entities, all of which at a minimum are violations of the 
standards of ethical conduct for employees of the Executive 
Branch. Many of these DOI officials were Senior Executive 
Service employees or political appointees.
    In the end, the offending employees were primarily scolded 
or counseled and directed to take ethics training. For others 
no disciplinary action was taken whatsoever, which leads me to 
the root of my greatest frustration as the IG at Interior--a 
culture replete with a lack of accountability.
    In 2004, we issued our report on conduct and discipline in 
the Department. Among our findings was a clear perception by 
employees that there is a significant amount of misconduct that 
goes unreported and that discipline is administered 
inconsistently. We also found that supervisors receive less 
sanctions for the same misconduct than nonsupervisors.
    Our own statistics bear this out. For the years of 2003 to 
2006, 71 employees were identified as potentially subject to 
administrative action. However, action was taken against less 
than half of those employees. The percentage of actions taken 
against SES and GS-15s was markedly lower than for every other 
GS level below them.
    Moreover, the SESs were remarkably immune to any adverse 
action greater than a reprimand. Of 21 SES employees subject to 
administrative action, more than half received no discipline at 
all. The remainder received a reprimand, a transfer or allowed 
to resign.
    I have testified before about this frustration in the House 
as recently as September of 2006 when I described ethical 
failures on the part of senior Department officials, both 
political and career. I would like to be clear about one thing. 
I have gone on the record recently to say that I believe that 
99.9 percent of Interior employees are hard working, ethical 
and well intentioned. Unfortunately, it only takes a few people 
to cast a shadow of impropriety over the entire Department and 
erode the public trust.
    From my office's perspective, I would point to the Abramoff 
scandal as an example of how the conduct of one or two people 
can cause enormous diversion of resources best evidenced by the 
commitment we have made to that investigation with 10 agents 
dedicated to the case now three years running. Since my office 
has had no increase in staffing levels in the seven years I 
have been the IG, we have little capacity to adjust for such 
diversions of staff.
    Mr. Chairman, I also want to make it clear that Secretary 
Kempthorne has inherited these cultural problems. In fairness 
to him, I have discerned a dramatic shift in attitude since his 
arrival. The Secretary has clearly signaled, both in terms of 
his messages to Interior employees and in discussions with me 
personally, his clear intention to create and sustain a culture 
of ethics and accountability during his tenure as Secretary of 
Interior.
    He has now hired an experienced professional chief ethics 
officer for the Department and has recently created an 
accountability board to advise him on disciplinary matters. 
Therefore, I am hopefully optimistic that this culture will 
soon become a thing of the past.
    This concludes my formal testimony. Thank you for the 
opportunity to appear before you here today. I will be happy to 
answer any questions you have.
    [The prepared statement of Mr. Devaney follows:]

              Statement of The Honorable Earl E. Devaney, 
          Inspector General for the Department of the Interior

    Mr. Chairman and members of the Committee, I want to thank you for 
the unusual opportunity for me to comment and share my views concerning 
the wide array of ongoing challenges faced by the Department of the 
Interior (Department or DOI) and impart to you some success stories, as 
well.
    In thinking about how to frame my testimony today, I concluded that 
it may be most useful to the Committee if I were to discuss with you 
the Department's successes and its continuing challenges in the context 
of our audit/evaluation and investigative work over the last several 
years.
    Let me begin by telling you about some of the changes that have 
taken place in the Office of Inspector General (OIG) since I last 
testified before this Committee in July of 2000. At that time, I was 
less than a year into my tenure as Inspector General (IG), but had 
already begun my effort to transform the OIG. Utilizing a philosophy 
that blends cooperation with strong oversight and enforcement, I 
believe that my office has now evolved into a high-performing, results-
oriented oversight entity dedicated not only to detecting and 
preventing fraud, waste and mismanagement, but also to assisting the 
Department in identifying and implementing new and better ways of 
conducting business.
    Historically, the OIG for DOI had done little to change its 
approach to auditing and investigating, tending to focus solely on 
problems, rather than identify and propose possible solutions. We have 
since developed a number of new tools to accomplish our mission. For 
instance, we often conduct evaluations, rather than audits, to quickly 
examine programs, determine the conditions, and provide the Department 
with the information it needs to implement change. In our 
investigations, we supplement our reports with products such as 
management advisories and assessment reports, in which we describe 
underlying conditions that allow or contribute to a specific problem or 
crime, and provide the Department with suggested actions it might take 
to correct the condition.
    For years, a standard audit recommendation included seeking 
additional funding to correct a deficiency or shortcoming. With 
shrinking budgets and increasing demands on every component in the 
Department, we realized that this recommendation had to be augmented 
with creative suggestions on ways to redistribute, share, or leverage 
existing resources. For example, in an evaluation requested by the 
Department of its Equal Employment Opportunity Office, we asked our 
team to identify best practices, shared resources, and consolidation of 
functions as they looked for ways to fix a poorly managed program. 
Although this was a new approach, the Department received our final 
report enthusiastically and adopted the key recommendations emanating 
from the report, which involved little or no money or personnel. I 
would like to think that such creative, cost-saving recommendations can 
become our norm.
    We also endeavor, whenever possible, to focus our efforts on high-
risk or high-impact issues that touch upon multiple bureaus. Naturally, 
such an effort is far more labor intensive and takes longer to 
complete; thus, we see a logical decrease in our raw numbers. On the 
other hand, we are providing the Secretary with the opportunity to 
implement recommendations that have a much greater impact on the 
Department as a whole. For instance, we recently issued our report on 
the Department's Radio Communication Program, which impacts multiple 
DOI bureaus. We presented findings that touched on the overall Radio 
Communication Program and provided and recommendations that should, if 
implemented, address health and safety issues, correct infrastructure 
shortcomings, and save money throughout the Department. Within the last 
couple of years, we have conducted similarly structured audits and 
evaluations on such diverse issues as grants, cooperative agreements, 
competitive sourcing, land acquisitions, hazardous materials on public 
lands, fleet management, and worker's compensation.
    In addition, we have changed the way we measure our success, moving 
away from the traditional IG approach of measuring success by 
statistics--such as the number of audits or the number of arrests. 
Although it is more of a challenge, I prefer to measure our success by 
articulating how our recommendations and suggestions have improved the 
Department's mission and overall operations or effected a real change 
in behavior. For instance, when we issued a Report of Investigation in 
2003 that was highly critical of the conduct of certain Departmental 
officials who had circumvented valuation requirements in a proposed 
land exchange, the Department, to its credit, promptly undertook a 
wholesale restructuring of its appraisal program and policies.
    Having said all this, however, I am not here to say that all is 
well at the Department of the Interior. In fact, the Department faces 
some enormous challenges in several areas. I would like to highlight 
one of those matters specifically and discuss several more general 
issues of concern that I have.
    I am sure that this Committee is well aware of our recent audit and 
investigation into royalty-related matters at the Minerals Management 
Service (MMS). Ironically, in 1993--14 years ago this month--one of my 
predecessor IGs, testifying before this very committee, also identified 
MMS' royalty collections and audit coverage of royalty collections as 
having significant deficiencies.
    In short, our audit of MMS' compliance review process found that 
compliance reviews play a useful role in MMS' greater Compliance and 
Asset Management Program. Compliance reviews can provide a broader 
coverage of royalties, using fewer resources than traditional audits. 
They do not, however, provide the same level of detail or assurance 
that a traditional audit provides. As a result, we concluded that 
compliance reviews should only be used in conjunction with audits, in 
the context of a well-designed, risk-based compliance strategy. We also 
identified two principal weaknesses that prevent MMS from maximizing 
the benefits of compliance reviews. First, we discovered that very few 
full audits were ever triggered by anomalies discovered in the 
compliance review process. We also learned that because the program's 
performance measures were tied to dollar figures, only the big 
companies and leases were being reviewed, leaving hundreds of smaller 
companies that MMS never looked at.
    With few exceptions, MMS agreed with our recommendations; most 
notably, MMS agreed to revise its performance measures and to develop 
and pilot a risk-based compliance strategy for its compliance review 
process; and, as promised, MMS has now provided us with an Action Plan 
for implementing all of these changes.
    Contemporaneous with this audit, we conducted an investigation into 
the failure of MMS to include price thresholds in the terms of 
deepwater leases issued in 1998 and 1999. We have determined that MMS 
intended to include price thresholds in leases issued pursuant to the 
Deepwater Royalty Relief Act, as evidenced in the first leases issued 
in 1996 and 1997, as well as in 2000; but while MMS was developing new 
regulations relating to the Deepwater Royalty Relief Act, there was 
significant confusion among MMS operational components and the Office 
of Solicitor as to whether or not the regulations would address price 
thresholds. In the end, the regulations did not, and the price 
thresholds were left out of the leases. Although we found massive 
finger-pointing and blame enough to go around, we did not find a 
``smoking gun'' or any evidence that the omission of price thresholds 
was deliberate; this was, however, a very costly mistake.
    Although featured most prominently in recent headlines, MMS does 
not have a corner on issues of concern. As an example, my office has 
been active in assessing the Department's Information Technology (IT) 
security program. Like most other OIGs, we conduct an annual Federal 
Management Security Management Act (FISMA) evaluation, along with 
several evaluations and investigations of specific program components 
related to IT security each year. In fact, last year we issued 14 
reports to the Department with recommendations for improvement. Our 
work includes technical assessments of both internal and external 
threats and actual penetration testing to determine the effectiveness 
of security provisions for DOI's networks.
    Our work has provided the Department with detailed assessments of 
the state of IT security and numerous recommendations to address 
security vulnerabilities. Overall, while we are seeing continued 
progress in IT security, significant weaknesses still exist. Although 
we have credited the Department with making that progress, we have 
concluded that DOI is not yet in full compliance with FISMA. 
Specifically, we continue to see weaknesses in the quality of DOI's 
Certification and Accreditation practices and problems regarding 
implementation of security configuration standards for computers and 
networks.
    A significant impediment to improving cyber security and gaining 
full compliance with FISMA is DOI's decentralized IT management 
structure. My office supports the concept of reorganizing and 
centralizing key IT security functions. This concept would probably not 
enjoy widespread support from the various bureaus of the Department, 
each of which maintains an autonomous Chief Information Officer (CIO). 
However, a stronger centralized CIO function with adequate resources 
for technical efforts such as computerized asset management and 
continuous monitoring would materially improve cyber security at DOI.
    Other security concerns lie in the protection of our national icons 
and dams. More than 3 years have elapsed since we issued the results of 
our last assessment in 2003 of the Department's efforts to develop and 
enhance security at our national icon parks. At that time, the National 
Park Service (NPS) lacked commitment, continuity, and consistency in 
the planning and execution of protections of the national icon parks. 
While we believe that they have since made strides in security 
implementation, the results of a recent survey of the Park Police 
officers who help secure the icons indicate otherwise. We intend to 
undertake a follow-up assessment to determine the present state of 
security over our national icons.
    With respect to the protection of our critical dams, we found in 
2005 that the Bureau of Reclamation (BOR) had made significant progress 
in developing a coordinated, comprehensive program to secure its dam 
facilities, although we found the law enforcement component within BOR 
to be the weakest link in the overall program. Since that time, 
however, BOR has committed to strengthening its law enforcement and has 
addressed many of our concerns.
    This presents a natural segue to the state of law enforcement at 
DOI. Last year, we completed our second Progress Report on the 
Secretary's Directives for Implementing Law Enforcement Reform 
resulting from a major assessment we finished in 2002.. After nearly 4 
years of effort, we found that the Department and bureaus continued to 
struggle with the implementation of the Secretary's Directives, with 
only 10 of 25 fully implemented. As a result, we have committed to 
conduct future assessments focusing on the effectiveness of specific 
Departmental law enforcement programs. For instance, we are about to 
issue our first report on the Fish and Wildlife law enforcement 
program, which will describe mixed results.
    Law enforcement in Indian Country is also of great concern, but it 
is only one of many problems that plague the Bureau of Indian Affairs 
(BIA) and the American Indians who rely on its services. In 2004, we 
issued a report with alarming findings about the state of Indian 
detention facilities. As we were conducting our assessment of Indian 
detention facilities, the death of a 16-year-old Indian girl at a 
boarding school detention facility prompted us to conduct a separate 
investigation that uncovered dual failure by the BIA Office of Indian 
Education Programs and Office of Law Enforcement Programs to address 
safety and security issues surrounding the boarding school detention 
facility. BIA has made some progress in addressing the deplorable 
conditions we found in Indian detention facilities, but it has much 
left to do, particularly in the areas of adequate staffing, which also 
translates to officer safety, and medical care for prisoners.
    I also have well-grounded, continuing concerns about the management 
and oversight conducted over the Insular Area Governments by the Office 
of Insular Affairs. U.S. monies provided to the Insular Areas are not 
insubstantial--the latest annual audited financial reports showed the 
receipt and use of at least $683 million of federal funds. The 
accountability issues related to these funds have been well documented 
in our reports over the years, and are well known by Federal grantor 
agency officials, including Office of Insular Affairs officials, who 
are charged with monitoring awards made to the Insular Areas. Over the 
years, however, federal oversight and corrective action enforcement has 
been primarily performed through periodic visits and/or long-distance 
efforts, which have not necessarily proved to be particularly 
effective. It may be time for all federal grantor agencies to 
critically evaluate their oversight responsibilities and processes for 
the purpose of identifying and implementing much-needed reforms. Such 
an evaluation should include implementing a comprehensive program to 
regularly emphasize to Insular Area government officials the need for 
and benefits of improved accountability. In addition, annual government 
ethics training should be emphasized because accountability issues have 
occurred as a result of questionable and/or weak ethical practices, as 
well as the ignoring and/or circumventing of established policies and 
procedures. My office maintains a permanent presence in the U.S. Virgin 
Islands and Pacific islands, providing independent audit coverage, and 
in the Pacific helping to develop the capacity of the Public Auditors. 
Sadly, because our findings repeat themselves over and over again, we 
could almost report our audit results without even conducting the audit 
work. As for our capacity-building efforts in the Pacific, while they 
are enthusiastically embraced by the Public Auditors, their respective 
governments do not necessarily welcome the enhanced oversight, and do 
not extend appropriate support for their own Public Auditors or OIGs. 
Recently, DOI's Office of Insular Affairs has also inexplicably 
eliminated the grants that the Public Auditors desperately relied upon 
for travel and training related to our capacity building activities.
    Although we have had long-standing concerns about the lax practices 
of DOI's fee-for-service entities--DOI procurement functions authorized 
to charge fees to award and manage contracts for other federal 
agencies--concerns which were borne out, to some degree, in the 
acquisition scandal related to interrogation services at Abu Ghraib 
prison in Iraq, we have been unable to express a definitive critique 
until recently. In a recently released report, emanating from a joint 
audit with the OIG for the Department of Defense (DOD) of DOI's two 
primary fee-for-service entities, we found that in providing 
acquisition services to DOD, DOI did not always follow appropriation 
and procurement laws, regulations, and rules. As a result, DOI left DOD 
vulnerable to fraud, waste, and abuse, and made itself vulnerable to 
potential sanctions, loss of acquisition center business, and a loss of 
public trust.
    Throughout the Department, the appearance of preferential treatment 
in awarding contracts and procurements has come to our attention far 
too frequently, and the failure of Department officials to remain at 
arms length from prohibited sources is pervasive. In the last 2 years 
alone, we have uncovered golf outings, dinners, hunting trips, concert 
tickets, and box seats at sporting events being accepted by DOI 
officials from prohibited sources; we have also chronicled exclusive 
access and special favors provided by DOI employees to select outside 
entities, all of which are, at a minimum, violations of the Standards 
of Ethical Conduct for Employees of the Executive Branch. Many of these 
DOI officials were Senior Executive Service or political appointees.
    In the end, the offending officials were primarily scolded and 
directed to take ethics training; for others, no action was taken 
whatsoever, which leads me to the root of my greatest frustration as 
the IG for Interior--a culture replete with a lack of accountability.
    In 2004, we issued our report on Conduct and Discipline in the 
Department. Among our findings was a clear perception by employees that 
there is a significant amount of misconduct that goes unreported and 
that discipline is administered inconsistently. We also found that 
supervisors received lesser sanctions for the same misconduct than non-
supervisors.
    Our own statistics bear this out: For the years 2003--2006, 71 
employees were identified as potentially subject to administrative 
action; however, action was taken against less than half of those 
employees. Fifty-five percent of these employees were GS-14s and below, 
yet 71 percent of the actions taken were against this group. SESers and 
GS-15s comprised 45 percent of these employees, but action was taken in 
only 31 percent of their cases.
    More simply stated, the percentage of actions taken against SES and 
GS-15s is markedly lower than for every GS-level below them. Moreover, 
the SES is remarkably immune to any adverse action greater than a 
reprimand--of 21 employees subject to administrative action, more than 
half received no discipline at all; the remainder received a reprimand, 
a transfer, or were allowed to resign. I have testified before about 
this frustration as recently as September 2006, when I described ethics 
failures on the part of senior Department officials, both political and 
career--taking the form of appearances of impropriety, favoritism, and 
bias--that have been routinely dismissed with a promise that they will 
``not do it again.''
    In this regard, I would like to be clear on one thing: I have gone 
on record to say that I believe that 99.9 percent of DOI employees are 
hard-working, ethical, and well-intentioned. Unfortunately, it only 
takes a few people to cast a shadow of impropriety over the entire 
Department and erode the public trust. From my office's perspective, I 
would point to the Abramoff scandal as an example of how the conduct of 
one or two people can cause an enormous diversion of resources, best 
evidenced by the commitment we have made to that investigation, with 10 
agents dedicated to the case, now 3 years running. Since my office has 
had no increase in staffing levels in the 7 years I have been the IG at 
Interior, we have little capacity to adjust for such diversions of 
staff.
    Mr. Chairman, I also want to make it clear that Secretary 
Kempthorne has inherited these cultural problems. In fairness to him, I 
have discerned a dramatic shift in attitude since his arrival. The 
Secretary has clearly signaled, both in terms of his messages to 
Interior employees and in discussions with me, his clear intention to 
create and sustain a culture of ethics and accountability during his 
tenure as Secretary of the Interior. He has now hired an experienced, 
professional chief ethics officer for the Department and has recently 
created a Conduct Accountability Board to advise him on disciplinary 
matters. Therefore, I am hopefully optimistic that this culture will 
soon become a thing of the past.
    This concludes my formal testimony. Thank you for the opportunity 
to appear here before the Committee today. I will be happy to answer 
any questions you may have.
                                 ______
                                 

STATEMENT OF ROBIN M. NAZZARO, DIRECTOR, NATURAL RESOURCES AND 
       ENVIRONMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Ms. Nazzaro. Thank you, Mr. Chairman and Members of the 
Committee. I am pleased to be here today to discuss our work at 
the Department of the Interior.
    As the stewards for more than 500 million acres of Federal 
land and 1.8 billion acres of subsurface oil, gas and mineral 
rights, the Department is responsible for a wide array of 
programs to ensure that our nation's natural resources are 
adequately protected and that access to and use of those 
resources is appropriately managed.
    Difficult challenges face this Congress and Administration 
in fulfilling these responsibilities as a steward of the 
nation's natural resources under increasing budgetary 
constraints. While our recent reports indicate that Interior 
agencies have improved the management of some of the programs 
that we have reported on over the years, some issues remain 
problematic. Moreover, recent work has identified new problems 
that need to be addressed.
    My testimony today focuses on management challenges in six 
key areas: Resource protection, Indian and insular affairs, 
land appraisal, deferred maintenance, revenue collection and 
contracts and grants.
    The first area that I will discuss is the need to 
strengthen resource protection efforts. The average number of 
acres burned by wildland fires annually from 2000 to 2005 was 
70 percent greater than the average number burned during the 
1990s, while appropriations for these activities tripled to $3 
billion.
    Despite concurrence with our recommendations, Interior, 
working with USDA, has yet to complete a cohesive national 
strategy that identifies long-term options and associated 
funding needs for responding to wildland fire issues.
    Nor have the Departments developed a tactical plan to 
inform the Congress about steps and timeframes they need to 
develop in such a strategy. While they have undertaken steps to 
improve upon the information that they use to assess and 
allocate resources for addressing wildland fire threats, it 
remains unclear whether the agencies will successfully complete 
any of these efforts.
    In addition, the Bureau of Land Management and the Fish and 
Wildlife Service have not been effectively carrying out their 
important responsibilities for ensuring that hardrock mining, 
oil and gas operations occurring on their lands do not cause 
unnecessary environmental harm.
    Specifically we found that BLM was not ensuring that 
hardrock mining operations had sufficient financial assurances 
to provide for proper reclamation of disturbed lands. When 
operators with insufficient financial assurances fail to 
reclaim BLM land disturbed by hardrock mining operations, BLM 
is left with public land that poses risks to the environment 
and public health and safety and requires millions of dollars 
to reclaim.
    Further, BLM has struggled to deal with the dramatic 
increase in oil and gas operations on Federal and private lands 
for which the Federal government retains mineral rights and are 
permitted by BLM. This increased workload has lessened BLM's 
ability to meet environmental mitigation responsibilities for 
oil and gas operations. BLM has the authority to cover its 
expenses for processing oil and gas permits. However, the 
Energy Policy Act of 2005 prohibited Interior from initiating 
the new fee.
    Similar to the concerns we have about BLM's protection of 
environmental resources from oil and gas activities, Fish and 
Wildlife Service was not consistently inspecting oil and gas 
operations in national wildlife refuges to ensure that 
environmental standards were being met. While the agency has 
implemented training for staff overseeing these activities and 
has begun to collect better data, Fish and Wildlife Service has 
not formally clarified its authority to oversee these 
activities.
    A second area of concern is the persistent management 
problem in the Indian and island community programs. While 
Interior has taken significant steps in the last 10 years to 
address weaknesses in certain Indian programs, including 
establishing the Office of the Special Trustee to oversee and 
coordinate the Department's implementation of trust fund 
management reforms, it is still in the process of implementing 
key reforms to effectively manage over 300,000 trust fund 
accounts with assets over $3 billion. OST has not prepared a 
timetable for completing the remaining Trust Fund Reform Act 
activities and OST's termination.
    Further, although the Department's consolidated financial 
statements for the fiscal year ending September 30, 2006, 
received an unqualified audit opinion, the management of Indian 
trust funds continue to be reported as a material internal 
control weakness, and information security was reported as an 
internal control weakness.
    We have also reported on serious delays in BIA's program 
for determining whether the Department will accept land in 
trust. Many Indians believe that having their land placed in 
trust status is fundamental to safeguarding it against future 
loss and ensuring sovereignty.
    In 1980, the Department established a regulatory process 
intended to provided a uniform approach for taking land in 
trust. While we found that BIA is generally following its 
regulations, it has no deadlines for making decisions. Over 
1,000 land in trust applications from tribes and individual 
Indians are currently pending.
    In addition, the Department could be doing more to assist 
the island communities of American Samoa, Guam, the 
Commonwealth of the Northern Mariana Islands and the U.S. 
Virgin Islands and three sovereign island nations with 
longstanding financial and program management difficulties in 
accurately accounting for expenditures, collecting taxes and 
other revenues, controlling the level of expenditures and 
delivering program services. These problems have resulted in 
numerous Federal agencies designating some of the governments 
as high risk grantees.
    Despite management improvements, a third area of concern is 
land appraisal. Over the years we and Interior's IG have 
reported on the difficulties BLM and other Federal land 
management agencies have had in managing land exchanges and the 
associated land appraisals. Thus, the Federal government has 
lost millions of dollars because of inadequate appraisals.
    While major program changes have been made, significant 
problems continue. Specifically to remedy decades of problems 
with objectivity of its land appraisals, Interior removed the 
land appraisal function from its land management agencies and 
consolidated it into a departmental office, the Appraisal 
Services Directorate.
    This was a substantial move in the right direction to help 
ensure the independence of the appraisal function. However, 
appraisals we reviewed still do not adhere to appraisal 
standards in large part because appraisers appeared not to 
apply the specialized skills needed to perform their duties for 
certain appraisals. Thus, the Federal government continues to 
risk losing millions of dollars if land is undervalued.
    Also the Directorate does not have a system for ensuring 
that it sets and meets realistic timeframes for appraisal 
services which can impact the ability of land management 
agencies to carry out land acquisitions. We continue to monitor 
the agency efforts in this area.
    The fourth area that needs to be addressed is the deferred 
maintenance backlog. The Department owns, builds, purchases and 
contracts services for assets such as visitor centers, schools, 
office buildings, roads, bridges, dams, irrigation systems and 
reservoirs. The deterioration of these facilities can adversely 
impact the visitor experience and public health and safety, 
reduce employee morale and productivity and increase the need 
for costly major repairs or early replacement of structures and 
equipment.
    While the Department has made progress addressing major 
recommendations, prior recommendations to improve information 
as far as deferred maintenance needs of the Park Service 
facilities and BIA schools, its maintenance backlog continues 
to grow substantially. The Department's estimate increased from 
between $8 billion and $11 billion in 2003 to between $9 and 
$17 billion in 2006, an increase of up to 51 percent.
    We also recently reported on the estimated $850 million in 
deferred maintenance backlog for 16 BIA irrigation projects. It 
is not clear how the Department will secure needed funding to 
reduce this daunting backlog to a manageable level.
    Thus, the fifth area needing management attention is 
revenue collection. The Federal government may not be 
collecting all revenue that it could be, and some programs that 
receive revenue do not have needed controls.
    For example, Minerals Management Service, as we have heard 
from the IG, may have foregone billions of dollars in oil and 
gas royalties because it issued lease contracts in 1998 and 
1999 that failed to include important price thresholds above 
which royalty relief would no longer be applicable. At least $1 
billion in royalties has already been lost.
    Moreover, MMS estimates that foregone royalties from leases 
issued between 1996 and 2000 could be as high as $80 billion. 
Currently we are assessing MMS' estimate of these royalties in 
light of changing oil and gas prices, revised estimates of 
future oil and gas production and other factors.
    We also reported that while required by law to ensure that 
the Department continues to collect a certain level of revenue 
from geothermal leases, it is not collecting the necessary 
information to do so. One of the factors that can most affect 
the geothermal royalty revenue, the price of electricity, is 
outside the control of the managing agencies.
    Although it is impossible to predict with reasonable 
assurance how these prices will change in the future, Interior 
must make its best effort to mitigate the impact of changing 
prices if Federal royalty revenue is to remain the same. This 
mitigation can only be achieved if MMS routinely collects 
revenue data from electricity sales.
    In addition, the National Park Service is authorized to 
collect fees from a number of different types of uses of its 
lands and waters, but has not done so in all cases. For 
example, the Park Service was not collecting all required fees 
from companies conducting air tours in and around three highly 
visited national parks because of an inability to verify the 
number of air tours conducted and confusion resulting from 
different geographic applicability governing air tours.
    Interior has also been slow to implement authorities for 
charging fees for recreational uses in part because of a lack 
of internal controls and accounting procedures for collecting 
fees.
    In addition, should the Congress choose to authorize it to 
do so, BLM could collect more in grazing fees, thereby bringing 
its fees more in line with the fees charged by other Federal 
agencies which employ market-based approaches to setting fees.
    For example, in 2004 BLM charged $1.43 per animal unit 
month, while other Federal agencies charged up to $112 per 
animal unit month. BLM collected about $12 million in receipts, 
while its costs for implementing the grazing program, including 
range improvements, were about $58 million.
    The last area that I would like to highlight is the need 
for controls over contracts and grant management. Our recent 
work echoes some of the IG's concerns in particular with regard 
to interagency contracting and grant management.
    For example, DOD has relied on Interior's contracting 
services, including support for the war in Iraq. Interior did 
not always ensure that contracts received fair and reasonable 
prices and may have missed opportunities to achieve savings for 
millions of dollars in purchases. In addition, substantial 
work, as much as 20 times above the original value of a 
particular contract, was added to existing contracts without 
determining that prices were fair and reasonable.
    Regarding grants, the National Park Service provides grants 
to nonFederal entities for activities related to the Chesapeake 
Bay. From 2000 to 2005, the agency awarded 189 grants, over $6 
million, yet we found a backlog of uncompleted grants and 
continued awards to nonperforming grantees.
    To conclude, Mr. Chairman, I would like to note that, like 
the IG, in 1993 GAO testified at a broad oversight hearing on 
Interior before this committee similar to today's hearing. At 
the time we testified that Interior faced serious challenges to 
addressing the declining condition of the nation's natural 
resources and the related infrastructure under its 
responsibility.
    Unfortunately, almost 15 years later our testimony is very 
similar. While some of the programs have improved, evaluations 
of additional programs reveal that many of the same persistent 
management problems--a lack of adequate data to understand the 
condition of its natural resources and infrastructure and the 
actions necessary to improve them, a lack of adequate controls 
and accountability to ensure Federal resources are properly 
used and accounted for and a lack of adequate strategic 
planning and guidance for program implementation.
    Clearly the Department needs to address management and 
control gaps in its programs and assure its activities are 
carried out in the most cost effective and efficient manner, 
but difficult choices remain for improving the condition of the 
nation's natural resources and the Department's infrastructure 
in light of the Federal deficit and long-term fiscal challenges 
facing the nation.
    Either new sources of funding need to be identified and 
pursued or the Department must determine the services it can 
continue and the standards it will use for maintaining its 
facilities and lands.
    As we stated in our testimony almost 15 years ago, we 
believe that in reaching these decisions policymakers should 
know the full extent of the resource shortfalls facing Federal 
natural resource management agencies. In addition, it is 
essential for the Department to identify the impacts on 
services and infrastructure that would occur should serious 
cutbacks be necessary.
    Mr. Chairman, this concludes my prepared statement. I would 
be pleased to answer any questions that you or Members of the 
Committee may have at this time.
    [The prepared statement of Ms. Nazzaro follows:]

    Statement of Robin M. Nazzaro, Director, Natural Resources and 
           Environment, U.S. Government Accountability Office

    Mr. Chairman and Members of the Committee:
    I am pleased to be here today to discuss our work at the Department 
of the Interior. As the stewards for more than 500 million acres of 
federal land and 1.8 billion acres of the Outer Continental Shelf, 
Interior agencies are responsible for a wide array of programs to 
ensure that our nation's natural resources are adequately protected and 
that access to and use of those resources is appropriately managed. 
Difficult choices face this Congress and administration in fulfilling 
the federal government's responsibilities as a steward of these 
resources under increasing budgetary constraints. My testimony today 
includes findings from a number of reports we have issued over the past 
few years on some of Interior's natural resource management programs. 
Specifically, I will discuss management challenges in six key areas: 
(1) resource protection, (2) Indian and insular affairs, (3) land 
appraisals, (4) deferred maintenance, (5) revenue collection, and (6) 
contracts and grants.
Summary
    In summary, our reports indicate that while Interior agencies have 
improved the management of some of the programs we have reported on 
over the years, some issues remain problematic. Moreover, more recent 
work has identified new problems that need to be addressed. In many 
cases, Interior agencies have work underway or planned to address our 
recommendations, but we have not evaluated these efforts.
      Management of resource protection efforts needs to be 
strengthened. Our work on the challenges that Interior, working with 
the U.S. Department of Agriculture (USDA), faces in protecting the 
nation against the threat of wildland fires has revealed a continued 
need for several improvements. Despite concurrence with our previous 
recommendations, Interior and USDA have yet to complete a cohesive 
national strategy that identifies long-term options and associated 
funding needs for responding to wildland fire issues. Nor have the 
departments developed a tactical plan to inform the Congress about the 
steps and time frames needed to develop such a strategy. And while they 
have undertaken steps to improve upon the information they use to 
assess and allocate resources for addressing wildland fire threats, it 
remains unclear whether the agencies will successfully complete these 
efforts. In addition, the Bureau of Land Management (BLM) and the Fish 
and Wildlife Service (FWS) have not been effectively carrying out their 
important responsibilities for ensuring that hardrock mining, oil, and 
gas operations occurring on their lands do not cause unnecessary 
environmental harm. Specifically, we found that BLM was not ensuring 
that hardrock mining operations had sufficient financial assurances to 
provide for proper reclamation of disturbed lands and was not 
effectively carrying out its environmental mitigation responsibilities 
for oil and gas operations. Similarly, we reported that FWS was not 
consistently inspecting oil and gas operations in national wildlife 
refuges to ensure that environmental standards were being met.
      Management problems in Indian and island community 
programs persist. While Interior has taken significant steps in the 
last 10 years to address weaknesses in certain Indian programs, it is 
still in the process of implementing key trust fund reforms, and 
several concerns exist about the completion of these reforms. We have 
also reported on serious delays in the Bureau of Indian Affairs' (BIA) 
program for determining whether the department will accept land in 
trust: over 1,000 land in trust applications from tribes and individual 
Indians are currently pending. In addition, the department could be 
doing more to assist seven island communities--four U.S. territories 
and three sovereign island nations--with long-standing financial and 
program management deficiencies.
      Land appraisals continue to fall short of standards. Over 
the years, we and Interior's Inspector General (IG) have reported on 
the difficulties BLM and other federal land management agencies have 
had in managing land appraisals and the loss of millions of federal 
dollars resulting from inadequate appraisals. While major program 
changes have been made, significant problems continue. Specifically, we 
found that appraisals still do not adhere to appraisal standards and, 
thus, the federal government risks losing millions of dollars more if 
land is undervalued. In addition, Interior does not have a process for 
setting and meeting realistic deadlines for completing appraisals, 
which can be particularly important for transactions in areas with 
changing land values.
      Deferred maintenance backlog needs to be addressed. While 
Interior has made progress addressing prior recommendations to improve 
information on the deferred maintenance needs of National Park Service 
facilities and BIA schools, its maintenance backlog continues to grow 
substantially--the department's estimate increased from between $8.1 
billion and $11.4 billion in 2003, to between $9.6 billion and $17.3 
billion in 2006. It is not clear how the department will secure needed 
funding to reduce this daunting backlog to a manageable level. In 
addition, we recently reported that better information was needed on 16 
BIA irrigation projects with an estimated $850 million in deferred 
maintenance. Specifically, we found that some of the irrigation 
projects classified items as deferred maintenance when they were 
actually new construction, and some had incomplete information on their 
deferred maintenance needs.
      Revenue collection needs more management attention. 
Recent work indicates that the federal government may not be collecting 
all the revenue that it could be and that some programs that receive 
revenue do not have needed controls. For example, we reported that 
billions of dollars in oil and gas royalties may be forgone because of 
a failure to include important price limitations in leases during 1998 
and 1999. We also reported that while the department is required by law 
to continue to collect a certain level of revenue from geothermal 
leases, it is not collecting the necessary information to do so. 
Furthermore, the National Park Service is authorized to collect fees 
from a number of different types of uses of its lands, but has not done 
so in all cases. Finally, should the Congress choose to authorize it to 
do so, BLM could be collecting more in grazing revenue, thereby 
bringing its fees more in line with the fees charged by other federal 
agencies.
      Contract and grant management lack needed controls. 
Interior's management of contracts and grants has been identified as a 
management challenge by Interior's IG for a number of years. Recent 
work we have conducted echoes some of the IG's concerns, in particular 
with regard to a lack of management controls. Specifically, we reported 
on weaknesses in (1) management of two Interior interagency contracting 
mechanisms that the Department of Defense (DOD) has used to obtain 
services and (2) a program that provides grants to nonfederal entities 
for activities related to the Chesapeake Bay.

Background
    The Department of the Interior has jurisdiction over more than 500 
million acres of land--about one-fifth of the total U.S. landmass--and 
over 1.8 billion acres of the Outer Continental Shelf. As the guardian 
of these resources, the department is entrusted to preserve the 
nation's most awe-inspiring landscapes, such as the wild beauty of the 
Grand Canyon, Yosemite, and Denali national parks; our most historic 
places, like Independence Hall and the Gettysburg battlefield; and such 
revered national icons as the Statue of Liberty and the Washington 
Monument. At the same time, Interior is to provide for the 
environmentally sound production of oil, gas, minerals, and other 
resources found on the nation's public lands; honor the nation's 
obligations to American Indians and Alaskan Natives; protect habitat to 
sustain fish and wildlife; help manage water resources in western 
states; and provide scientific and technical information to allow for 
sound decision-making about resources. In recent years, the Congress 
has appropriated about $10 billion annually to meet these 
responsibilities. With these resources, Interior employs about 73,000 
people in eight major agencies and bureaus at over 2,400 locations 
around the country to carry out its mission.
    Interior's management of this vast federal estate is largely 
characterized by the struggle to balance the demand for greater use of 
its resources with the need to conserve and protect them for the 
benefit of future generations. GAO, among others, have identified 
management problems facing the department and have made many 
recommendations to improve its agencies and programs. In some cases, 
Interior has made significant improvements; in others, progress has 
been slow. As a result, several major management challenges remain.

Management of Resource Protection Efforts Needs to Be Improved
    Although Interior, working with USDA's Forest Service, has taken 
steps to help manage perhaps the most daunting challenge to its 
resource protection mission--protecting lives, private property, and 
federal resources from the threats of wildland fire--concerns remain. 
In addition, Interior's programs for managing hardrock mining, oil, and 
gas operations have not adequately protected federal resources from the 
environmental effects of these activities.

Wildland Fire Management Challenges Persist
    The wildland fire problems facing our nation continue to grow. The 
average number of acres burned by wildland fires annually from 2000 to 
2005 was 70 percent greater than the average number burned annually 
during the 1990s, and appropriations for the federal government's 
wildland fire management activities tripled from about $1 billion in 
Fiscal Year 1999 to nearly $3 billion in Fiscal Year 2005. Experts 
believe that catastrophic damage from wildland fire will continue to 
increase until an adequate long-term federal response is implemented 
and has had time to take effect. While USDA's Forest Service receives 
the majority of fire management resources, Interior agencies--the 
National Park Service, BIA, FWS, and, particularly, BLM--are key 
partners in responding to the threats of wildland fire. Consequently, 
most of our work and recommendations on wildland fire management 
address both departments.
    The Interior agencies and the Forest Service have not yet developed 
a cohesive strategy that identifies long-term options and associated 
funding estimates for addressing wildland fire threats, as we first 
recommended in 1999;\1\ nor have they developed a tactical plan that 
outlines the critical steps and time frames needed to complete such a 
strategy, as we recommended in 2005.\2\ While the agencies together 
issued a document in February 2006 titled Protecting People and Natural 
Resources: A Cohesive Fuels Treatment Strategy, it does not identify 
long-term options or associated funding estimates.\3\ Also, although 
the agencies have undertaken some tasks over the past 7 years that they 
stated are important to developing the cohesive strategy that we 
recommended, we have concerns about when and whether such tasks will be 
completed as planned.\4\ For example, the agencies began developing two 
modeling systems to help them (1) allocate resources to respond to 
wildland fires and (2) identify the extent, severity, and location of 
wildland fire threats to our nation's communities and ecosystems; these 
systems are slated for completion in 2008 and 2009, respectively. We 
are concerned, however, that the agencies' recent endorsement of 
significant, mid-course design changes to the resource allocation model 
may not fulfill key project goals, including determining the most cost-
effective allocation of resources. In addition, the agencies currently 
have no plans to routinely update data in the threat modeling system--
this would be necessary, for example, after major fires, hurricanes, or 
other factors have significantly altered the landscape. Such updated 
data are necessary to accurately capture the nature of wildland fire 
threats and to optimize allocation of resources over time. For these 
reasons, we continue to believe that a cohesive strategy and tactical 
plan would be helpful to the Congress and the agencies in making 
informed decisions about effective and affordable long-term approaches 
to addressing the nation's wildland fire problems.
---------------------------------------------------------------------------
    \1\ GAO, Western National Forests: A Cohesive Strategy Is Needed to 
Address Catastrophic Wildfire Threats, GAO/RCED9965 
(Washington, D.C.: Apr. 2, 1999).
    \2\ GAO, Wildland Fire Management: Important Progress Has Been 
Made, but Challenges Remain to Completing a Cohesive Strategy, 
GAO05147 (Washington, D.C.: Jan. 14, 2005).
    \3\ GAO, Wildland Fire Management: Update on Federal Agency Efforts 
to Develop a Cohesive Strategy to Address Wildland Fire Threats, 
GAO06671R (Washington, D.C.: May 1, 2006).
    \4\ GAO, Wildland Fire Management: Lack of a Cohesive Strategy 
Hinders Agencies' Cost Containment Efforts, GAO07427T 
(Washington, D.C.: Jan. 30, 2007).
---------------------------------------------------------------------------
    In addition, in 2006, we reported that the agencies needed to 
develop better guidance on sharing the costs of suppressing fires among 
federal and nonfederal entities.\5\ In some cases, these entities used 
different cost-sharing methodologies for fires with similar 
characteristics, which resulted in inconsistent sharing of costs among 
federal and nonfederal entities. The cost-sharing method used can have 
consequences in the millions of dollars for the entities involved. As 
of January 2007, the agencies were updating their guidance on possible 
cost-sharing methods and when each typically would be used, but it is 
unclear how the agencies will ensure that the guidance is followed.
---------------------------------------------------------------------------
    \5\ GAO, Wildland Fire Suppression: Lack of Clear Guidance Raises 
Concerns about Cost Sharing between Federal and Nonfederal Entities, 
GAO06570 (Washington, D.C.: May 30, 2006).
---------------------------------------------------------------------------
    Finally, as we testified last month, preliminary findings from our 
ongoing work indicate that the effectiveness of the agencies' efforts 
to contain wildfire suppression costs may be limited because the 
agencies have not clearly defined their cost-containment goals, 
developed a strategy for achieving those goals, or developed related 
performance measures.\6\ In addition, for efforts to contain wildfire 
suppression costs to be effective, once the agencies have defined their 
cost-containment goals, they need to integrate them with other goals of 
the wildland fire program--such as protecting life and property--and to 
recognize that trade-offs will be needed to meet desired goals within 
the context of fiscal constraints.
---------------------------------------------------------------------------
    \6\ GAO07427T.
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Hardrock Mining Operations Lack Needed Financial Assurances
    Under BLM regulations, hardrock mining operators who extract gold, 
silver, copper, and other valuable mineral deposits from land belonging 
to the United States are required to provide financial assurances, 
before they begin exploration or mining, to guarantee that the costs to 
reclaim land disturbed by their operations are paid.\7\ However, we 
reported in June 2005 that BLM did not have a process for ensuring that 
adequate assurances were in place.\8\ As a result, some assurances may 
not fully cover all future reclamation costs, some operators do not 
have financial assurances, and some have either outdated reclamation 
plans and cost estimates or none at all. When operators with 
insufficient financial assurances fail to reclaim BLM land disturbed by 
hardrock mining operations, BLM is left with public land that poses 
risks to the environment and public health and safety, and requires 
millions of federal dollars to reclaim. For example, we reported that 
48 hardrock operations had ceased to operate and had not been reclaimed 
since the financial assurance requirement began in 1981; for 43 of 
these sites, BLM identified a total of about $56 million in unfunded 
reclamation costs. We also reported that BLM's system for managing 
financial assurances did not have current information or track certain 
information critical to managing the program.
---------------------------------------------------------------------------
    \7\ Unlike operations that extract oil and gas from federal lands, 
hardrock mining operations are not required to pay royalties on the 
minerals they extract.
    \8\ GAO, Hardrock Mining: BLM Needs to Better Manage Financial 
Assurances to Guarantee Coverage of Reclamation Costs, 
GAO05377 (Washington, D.C.: June 20, 2005).
---------------------------------------------------------------------------
    In response to our 2005 recommendations, BLM has taken substantial 
steps to correct these problems. In 2006, the agency modified its 
system for managing financial assurances to track key data. BLM also 
began requiring its state office directors to use a newly created 
report available from the system to ensure that adequate financial 
assurances are in place, and to (1) develop corrective action plans to 
address any financial assurance deficiencies with operators and (2) 
certify that reclamation cost estimates are adequate. If implemented 
properly, these efforts should ensure that appropriate financial 
assurances are in place to pay for necessary reclamation of federal 
lands.

Increases in Oil and Gas Permitting Activities Lessen BLM's Ability to 
        Meet Its Environmental Protection Responsibilities
    The number of oil and gas operations occurring on or under federal 
lands and private lands for which the federal government retains 
mineral rights that are permitted by BLM, has increased dramatically--
more than tripling from Fiscal Year 1999 to Fiscal Year 2004--in part 
as a result of the desire to reduce the country's dependence on foreign 
sources of oil and gas. In June 2005, we reported that BLM has 
struggled to deal with this permitting workload increase while also 
carrying out its responsibility to mitigate the impacts of oil and gas 
development on land that it manages.\9\ Overall, BLM officials told us 
that staff had to devote increasing amounts of time to processing 
drilling permits, leaving less time to ensure mitigation of the 
environmental impacts of oil and gas development. For example, two 
field offices we visited that had the largest increases in permitting 
activity were each able to meet their annual environmental inspection 
goals only once in the past 6 years. BLM has authority to assess and 
charge fees to cover its expenses for processing oil and gas permits, 
which would enable it to supplement its program resources. While the 
agency had not exercised this authority at the time of our report, it 
had begun taking steps to develop a fee structure for these permits. To 
help BLM better respond to its increased workload, we recommended that 
the agency finalize and implement this fee structure to recover its 
costs for processing applications for oil and gas drilling permits.
---------------------------------------------------------------------------
    \9\ GAO, Oil and Gas Development: Increased Permitting Activity Has 
Lessened BLM's Ability to Meet Its Environmental Protection 
Responsibilities, GAO05418 (Washington, D.C.: June 17, 
2005).
---------------------------------------------------------------------------
    In response to our recommendation, BLM issued a proposed regulation 
in July 2005 that included a $1,600 fee for processing oil and gas 
permits.\10\ However, the next month, the Congress prohibited Interior 
from initiating the new fee in the Energy Policy Act of 2005, and the 
final regulation did not include the proposed fee.\11\ Nevertheless, 
the department has continued to express interest in initiating such a 
fee and has proposed that the Energy Policy Act be amended to allow the 
fee to move forward.
---------------------------------------------------------------------------
    \10\ 70 Fed. Reg. 41532, 41542 (July 19, 2005).
    \11\ Pub. L. No. 109-58, title III, subtitle F, Sec.  365(i), 119 
Stat. 594, 725 (2005) and 70 Fed. Reg. 58854 (Oct. 7, 2005).
---------------------------------------------------------------------------
FWS Oversight of Oil and Gas Activities in Wildlife Refuges Needs 
        Improvement
    Similar to the concerns we have about BLM's protection of 
environmental resources from oil and gas activities, we reported in 
2003 that FWS's oversight of oil and gas operations on wildlife refuge 
lands was not adequate.\12\ For example, we found that some refuge 
managers took extensive measures to oversee operations and enforce 
environmental standards, while others exercised little or no control. 
We found that such disparities occurred for two primary reasons. First, 
FWS had not officially determined its authority to require permits--
which would include environmental conditions to protect refuge 
resources--of all oil and gas operations in refuges; we believe the 
agency has such authority. Second, refuge managers lacked guidance, 
adequate staffing levels, and training to properly oversee oil and gas 
activities. We also found that FWS was not collecting complete and 
accurate information on damage to refuge lands as a result of oil and 
gas operations and what steps were needed to address that damage.
---------------------------------------------------------------------------
    \12\ GAO, National Wildlife Refuges: Opportunities to Improve the 
Management and Oversight of Oil and Gas Activities on Federal Lands, 
GAO03517 (Washington, D.C.: Aug. 28, 2003).
---------------------------------------------------------------------------
    FWS has taken some steps to address recommendations we made to 
resolve these problems. For example, the agency has implemented 
training for staff overseeing oil and gas activities and has begun 
collecting better data on the nature and extent of oil and gas 
activities. However, FWS has not implemented two key recommendations 
that would strengthen its ability to protect refuge resources.
      First, because FWS had not formally clarified its 
authority to oversee all types of oil and gas operations on refuges, we 
recommended that the agency (1) determine its authority to oversee such 
operations and report that determination to the Congress and (2) seek 
from the Congress any additional authority that might be needed to 
apply a consistent and reasonable set of controls over all oil and gas 
activities occurring on national wildlife refuges. To date, FWS has not 
finalized its determination, but it has indicated that it does not 
believe it has the authority to require permits of all oil and gas 
operations that would include steps that must be taken to protect 
refuge resources. Further, FWS has indicated that it does not believe 
it needs additional authority to effectively manage oil and gas 
operations on refuges. We continue to believe, however, that FWS does 
have the authority to require such permits of all operators. Moreover, 
because of the effects of oil and gas activities on refuge resources 
that we previously reported, we also continue to believe that if FWS 
ultimately determines that it does not have the authority to require 
permits, it should seek this authority from the Congress in order to 
adequately protect refuges.
      Second, although FWS has taken steps to identify the 
level of staffing it needs to adequately oversee oil and gas activities 
occurring on national wildlife refuges, it has not--as we recommended--
sought the funding to meet those needs through appropriations, its 
authority to assess fees, or other means.

Management Problems in Indian and Island Community Programs Persist
    GAO has reported on management weaknesses in Indian programs for a 
number of years. While the department has taken significant steps in 
the last 10 years to address these weaknesses, it is still in the 
process of implementing key trust fund reforms, and several concerns 
exist about the completion of these reforms. We have also reported on 
serious delays in BIA's program for determining whether the department 
will accept land in trust. In addition, the department could be doing 
more to assist seven island communities--four U.S. territories and 
three sovereign island nations--with long-standing financial and 
program management deficiencies.

Indian Trust Funds and Assets Need to Be More Effectively Managed
    The Secretary of the Interior administers the government's trust 
responsibilities to tribes and individual Indians, including 
maintaining about 1,450 trust fund accounts for more than 250 tribal 
entities with assets of about $2.9 billion and about 300,000 individual 
Indian trust fund accounts with assets of about $400 million. 
Management of Indian trust funds and assets has long been plagued by 
inadequate financial management, such as poor accounting and 
information systems; untrained and inexperienced staff; backlogs in 
appraisals, determinations of ownership, and record-keeping; lack of a 
master lease file or accounts-receivable system; inadequate written 
policies and procedures; and poor internal controls.
    In response to these problems, the Congress enacted the American 
Indian Trust Fund Management Reform Act of 1994, which among other 
things, established the Office of the Special Trustee (OST) to oversee 
and coordinate the department's implementation of trust fund management 
reforms.\13\ In December 2006, we reported that OST had made progress 
implementing reforms, and it estimated that almost all key reforms 
needed to develop an integrated trust management system and to provide 
improved trust services would be completed by November 2007.\14\ 
However, OST also estimated that data verification for leasing 
activities would not be completed for all Indian lands until December 
2009. Furthermore, OST's most recent strategic plan, issued in 2003, 
did not include a timetable for implementing trust reforms or a date 
for OST's termination, as required by the reform act. As a result, we 
recommended, among other things, that the department provide the 
Congress with a timetable for completing the trust fund management 
reforms. The department agreed with our recommendation and stated that 
it expects to have a timetable for implementing the remaining trust 
reforms by late June 2007, including a date for the proposed 
termination or eventual deposition of OST. Although the department's 
consolidated financial statements for the fiscal year ending September 
30, 2006, received an unqualified audit opinion, the management of 
Indian trust funds continued to be reported as a material internal 
control weaknesses, and information security was reported as an 
internal control weakness.
---------------------------------------------------------------------------
    \13\ Pub. L. No. 103-412, 108 Stat. 4239 (1994). Also, in 1996, a 
class action lawsuit was filed by Elouise Cobell, a member of the 
Blackfeet Tribe, and others against the federal government concerning 
the department's management of Indian trust fund accounts (Cobell v. 
Kempthorne). The lawsuit is still ongoing and the recent attempts 
during the 109th Congress for a legislative settlement were not 
enacted.
    \14\ GAO, Indian Issues: The Office of the Special Trustee Has 
Implemented Several Key Trust Reforms Required by the 1994 Act, but 
Important Decisions about Its Future Remain, GAO07104 
(Washington, D.C.: Dec. 8, 2006).
---------------------------------------------------------------------------
Improvements Needed in BIA's Processing of Land in Trust Applications
    BIA is the primary federal agency charged with implementing federal 
Indian policy and administering the federal trust responsibility for 
1.9 million American Indians and Alaska Natives. BIA provides basic 
services to 561 federally recognized Indian tribes throughout the 
United States, including social services, child welfare services, and 
natural resources management on about 54 million acres of Indian trust 
lands. Trust status means that the federal government holds title to 
the land in trust for tribes or individual Indians; land taken in trust 
is no longer subject to state and local property taxes and zoning 
ordinances. Many Indians believe that having their land placed in trust 
status is fundamental to safeguarding it against future loss and 
ensuring their sovereignty. In 1980, the department established a 
regulatory process intended to provide a uniform approach for taking 
land in trust.\15\ While some state and local governments support the 
federal government's taking additional land in trust for tribes or 
individual Indians, others strongly oppose it because of concerns about 
the impacts on their tax base and jurisdictional control.
---------------------------------------------------------------------------
    \15\ 25 C.F.R. pt. 151.
---------------------------------------------------------------------------
    We reported in July 2006 that while BIA generally followed its 
regulations for processing land in trust applications, it had no 
deadlines for making decisions on them.\16\ Specifically, the median 
processing time for the 87 land in trust applications with decisions in 
Fiscal Year 2005 was 1.2 years--ranging from 58 days to almost 19 
years. We also found that while there was little opposition to 
applications with decisions in Fiscal Year 2005 from state and local 
governments, some state and local governments we contacted said (1) 
they did not have access to sufficient information about the land in 
trust applications and (2) the 30-day comment period was not 
sufficient. We recommended, among other things, that the department 
move forward with adopting revisions to the land in trust regulations 
that include (1) specific time frames for BIA to make a decision once 
an application is complete and (2) guidelines for providing state and 
local governments more information on the applications and a longer 
period of time to provide meaningful comments on the applications. The 
department agreed with our recommendations, and BIA has developed a 
corrective action plan to implement them by June 30, 2007.
---------------------------------------------------------------------------
    \16\ GAO, Indian Issues: BIA's Efforts to Impose Time Frames and 
Collect Better Data Should Improve the Processing of Land in Trust 
Applications, GAO06781 (Washington, D.C.: July 28, 
2006).
---------------------------------------------------------------------------
Improve Effectiveness and Accountability for Island Programs
    The Secretary of the Interior has varying responsibilities to the 
island communities of American Samoa, Guam, the Commonwealth of the 
Northern Mariana Islands, and the U.S. Virgin Islands, all of which are 
U.S. territories--as well as to the Federated States of Micronesia, the 
Republic of the Marshall Islands, and the Republic of Palau, which are 
sovereign nations linked with the United States through Compacts of 
Free Association. The Office of Insular Affairs (OIA) carries out the 
department's responsibilities for the island communities. OIA's mission 
is to assist the island communities in developing more efficient and 
effective government by providing financial and technical assistance 
and to help manage relations between the federal government and the 
island governments by promoting appropriate federal policies. The 
island governments have had long-standing financial and program 
management deficiencies. Specifically, island governments experience 
difficulties in accurately accounting for expenditures, collecting 
taxes and other revenues, controlling the level of expenditures, and 
delivering program services.
    In December 2006, we reported on serious economic, fiscal, and 
financial accountability challenges facing the U.S. insular areas of 
American Samoa, Guam, the Commonwealth of the Northern Mariana Islands, 
and the U.S. Virgin Islands.\17\ The economic challenges stem from 
dependence on a few key industries, scarce natural resources, small 
domestic markets, limited infrastructure, shortages of skilled labor, 
and reliance on federal grants to fund basic services. To help 
diversify and strengthen their economies, OIA sponsors conferences and 
business opportunities missions to the areas to attract U.S. 
businesses; however, there has been little formal evaluation of these 
efforts. In addition, efforts to meet formidable fiscal challenges and 
build strong economies are hindered by financial reporting that does 
not provide timely and complete information to management and oversight 
officials for decision making. The insular area governments have also 
submitted required audits late, received disclaimer or qualified audit 
opinions, and had many serious internal control weaknesses identified. 
As a result of these problems, numerous federal agencies have 
designated these governments as ``high-risk'' grantees. Interior and 
other federal agencies are working to help these governments improve 
their financial accountability, but more should be done.
---------------------------------------------------------------------------
    \17\ GAO, U.S. Insular Areas: Economic, Fiscal, and Financial 
Accountability Challenges, GAO07119 (Washington, D.C.: 
Dec. 12, 2006).
---------------------------------------------------------------------------
    To increase the effectiveness of the federal government's 
assistance to the U.S. insular areas, we recommended, among other 
things, that the department (1) increase coordination activities with 
officials from other federal grant-making agencies on issues of common 
concern relating to the insular area governments, such as single audit 
reports, high-risk designations, and deficiencies in financial 
management systems and practices and (2) conduct formal periodic 
evaluations of OIA's conferences and business opportunities missions, 
assessing their impact on creating private sector jobs and increasing 
insular area income. The department agreed with our recommendations, 
stating that they were consistent with OIA's top priorities and ongoing 
activities. We will continue to monitor OIA's actions on our 
recommendations.
    Also in December 2006, we reported on challenges facing the 
Federated States of Micronesia and the Republic of the Marshall 
Islands.\18\ In 2003, the United States amended a 1986 compact with the 
countries by signing Compacts of Free Association with the two 
governments. The amended compacts provide the countries with a combined 
total of $3.6 billion from 2004 to 2023, with the annual grants 
declining gradually. We found that for 2004 through 2006, compact 
assistance to the respective governments was allocated largely to the 
education, infrastructure, and health sectors, but that neither country 
has planned for long-term sustainability of the grant programs, taking 
into account the annual decreases in grant funding. In addition, both 
countries' single audit reports for 2004 and 2005 indicated (1) 
weaknesses in their ability to account for the use of compact funds and 
(2) noncompliance with requirements for major federal programs. For 
example, the Federated States of Micronesia's audit report for 2005 
contained 57 findings of material weaknesses and reportable conditions 
in the national and state governments' financial statements for sector 
grants and 45 findings of noncompliance. We recommended, among other 
things, that the department work with the countries to establish plans 
to minimize the impact of declining assistance and to fully develop a 
reliable mechanism for measuring progress towards program goals. The 
department concurred with our recommendations.
---------------------------------------------------------------------------
    \18\ GAO, Compacts of Free Association: Micronesia and the Marshall 
Islands Face Challenges in Planning for Sustainability, Measuring 
Progress, and Ensuring Accountability, GAO07163 
(Washington, D.C.: Dec. 15, 2006).
---------------------------------------------------------------------------
Land Appraisals Continue to Fall Short of Standards
    Over the years, we and Interior's IG have reported on the 
difficulties BLM and other federal land management agencies have had in 
managing land appraisals. Conducting appraisals is an important 
function--between November 2003 and May 2006, for example, Interior 
appraised more than 6.5 million acres of land that was valued at over 
$7 billion. Land appraisals are needed when Interior agencies are 
buying, exchanging, or leasing land. Such transactions are an integral 
part of Interior's land management in order to achieve specific 
purposes, such as consolidating existing holdings, acquiring land 
deemed important for wildlife habitat or recreational opportunities, 
and opening land to the development of energy and mineral resources. 
Interior generally requires land acquisitions to be based on market 
value and, thus, objective land appraisals are essential. Past reports, 
however, have identified serious problems with Interior agencies' 
appraisal programs, particularly with regard to appraisal independence, 
and have identified millions of dollars that the federal government had 
lost because of inadequate appraisals.
    While Interior has made major program changes, significant problems 
continue. Specifically, to remedy decades of problems with the quality 
and objectivity of its land appraisals, Interior removed the land 
appraisal function from its land management agencies and consolidated 
it into a departmental office--the Appraisal Services Directorate--in 
November 2003. This was a substantial move in the right direction to 
help ensure the independence of the appraisal function, and we reported 
in September 2006 that the objectivity of appraisals has improved since 
the directorate's inception.\19\ However, we also identified two major 
remaining challenges.
---------------------------------------------------------------------------
    \19\ GAO, Interior's Land Appraisal Services: Actions Needed to 
Improve Compliance with Appraisal Standards, Increase Efficiency, and 
Broaden Oversight, GAO061050 (Washington, D.C.: Sept. 
28, 2006).
---------------------------------------------------------------------------
      First, there is still wide variation in the quality of 
appraisals for land transactions involving potentially billions of 
dollars. For example, about 40 percent of Interior's appraisals for 
land transactions that we reviewed did not comply with recognized 
appraisal standards. This lack of compliance occurred, in large part, 
because appraisers appeared not to apply the specialized skills needed 
to perform their duties for certain appraisals. In addition, peer 
reviews of appraisals were cursory, with reviewers approving appraisals 
without considering property characteristics that can impact the value 
of land, such as the presence of roads.
      Second, the directorate does not have a system for 
ensuring that it sets and meets realistic time frames for appraisal 
delivery. Of the 3,500 appraisals completed since the directorate was 
created, over 70 percent missed their deadlines, with an average delay 
of 4 months. Delays in delivery of appraisals can impact the ability of 
land management agencies to carry out land acquisition missions, and 
some land deals have been scuttled as a result.
    Since our report last fall, Interior has taken encouraging steps to 
address our recommendations. For example, Interior has stated that it 
has implemented a compliance inspection program for appraisals that are 
considered ``high risk'' to help ensure that such appraisals comply 
with recognized appraisal standards. We will continue to monitor the 
department's progress in this area. In addition, we currently we have a 
review under way to evaluate Interior's management of land exchanges.

Deferred Maintenance Backlog Needs to Be Addressed
    In addition to the challenges the department faces in adequately 
maintaining the natural resources under its stewardship, it also faces 
a challenge in adequately maintaining its facilities and 
infrastructure. The department owns, builds, purchases, and contracts 
services for assets such as visitor centers, schools, office buildings, 
roads, bridges, dams, irrigation systems, and reservoirs; however, 
repairs and maintenance on these facilities have not been adequately 
funded. The deterioration of facilities can adversely impact public 
health and safety, reduce employees' morale and productivity, and 
increase the need for costly major repairs or early replacement of 
structures and equipment. In 2003, we reported that the department 
estimated that the deferred maintenance backlog was between $8.1 
billion and $11.4 billion. In November 2006, the department estimated 
that the deferred maintenance backlog for Fiscal Year 2006 was between 
$9.6 billion and $17.3 billion, an increase of between 18 to 51 percent 
(see table 1).

[GRAPHIC] [TIFF OMITTED] T3552.001

    Interior is not alone in facing daunting maintenance challenges. In 
fact, we have identified the management of federal real property, 
including deferred maintenance issues, as a governmentwide high-risk 
area since 2003.\20\ While Interior has made progress addressing prior 
recommendations to improve information on the maintenance needs of Park 
Service facilities and BIA schools, the challenge of how the department 
will secure the significant funding needed to reduce this maintenance 
backlog to a manageable level remains.
---------------------------------------------------------------------------
    \20\ GAO, High-Risk Series: An Update, GAO03119 
(Washington, D.C.: Jan. 2003); GAO, High-Risk Series: Federal Real 
Property, GAO03122 (Washington, D.C.: Jan. 2003); GAO, 
High-Risk Series: An Update, GAO05207 (Washington, 
D.C.: Jan. 2005); GAO, High-Risk Series: An Update, 
GAO07310 (Washington, D.C.: Jan. 2007).
---------------------------------------------------------------------------
    While some programs have improved information on their deferred 
maintenance needs, in February 2006, we reported that similar 
information is still needed for 16 BIA irrigation projects with an 
estimated $850 million in deferred maintenance.\21\ For example, we 
found that some of the irrigation projects classified items as deferred 
maintenance when they were actually new construction, and some had 
incomplete information on their deferred maintenance needs. To further 
refine the deferred maintenance estimate for the 16 irrigation 
projects, BIA plans to hire experts in engineering and irrigation to 
conduct thorough condition assessments of all 16 irrigation projects 
every 5 years. The first such assessment was completed in July 2005, 
with all 16 assessments expected to be completed by 2010.
---------------------------------------------------------------------------
    \21\ GAO, Indian Irrigation Projects: Numerous Issues Need to Be 
Addressed to Improve Project Management and Financial Sustainability, 
GAO06314 (Washington, D.C.: Feb. 24, 2006).
---------------------------------------------------------------------------
Revenue Collection Needs More Management Attention
    For many years, Interior's IG has identified revenue collection as 
a top management challenge for the department because of the 
significant potential for underpayments given that it collects, on 
average, over $10 billion annually. Work we have conducted in the past 
2 years also raises questions about how and when Interior is collecting 
authorized revenues from oil and gas leases, geothermal leases, 
recreational uses, and grazing and whether funds are properly 
controlled and accounted for.

Substantial Revenue May Be Forgone Because of Royalty Relief
    We testified in January 2007 on ongoing work investigating the 
Minerals Management Service's (MMS) implementation of the Outer 
Continental Shelf Deep Water Royalty Relief Act of 1995 and other 
authorities for granting royalty relief for oil and gas leases.\22\ We 
reported that MMS had issued lease contracts in 1998 and 1999 that 
failed to include price thresholds above which royalty relief would no 
longer be applicable. As a result, large volumes of oil and natural gas 
are exempt from royalties, which significantly reduces the amount of 
royalty revenues that the federal government can collect. At least $1 
billion in royalties has already been lost because of this failure to 
include price thresholds. MMS has estimated that forgone royalties from 
leases issued between 1996 and 2000 under the act could be as high as 
$80 billion. However, there is much uncertainty in MMS's estimate as a 
result of, for example, the inherent difficulties in estimating future 
production and prices, as well as ongoing litigation addressing MMS's 
authority to set price thresholds for some leases. Other authorities 
for granting royalty relief may also affect future royalty revenues. 
Specifically, under discretionary authority, the Secretary of the 
Interior administers programs granting relief for certain deep water 
leases issued after 2000, certain deep gas wells drilled in shallow 
waters, and wells nearing the end of their productive lives. In 
addition, the Energy Policy Act of 2005 mandates relief for leases 
issued in the Gulf of Mexico during the 5 years following the act's 
passage, provides relief for some gas wells that would not have 
previously qualified for royalty relief, and would provide relief in 
certain areas of Alaska where there currently is little or no 
production.
---------------------------------------------------------------------------
    \22\ In order to promote oil and gas production, the federal 
government has at times and in specific cases provided ``royalty 
relief''--the waiver or reduction of royalties that companies would 
otherwise be obligated to pay. See GAO, Oil and Gas Royalties: Royalty 
Relief Will Likely Cost the Government Billions, but the Final Costs 
Have Yet to Be Determined, GAO07369T (Washington, D.C.: 
Jan. 18, 2007).
---------------------------------------------------------------------------
    The U.S. Comptroller General has highlighted royalty relief as an 
area needing additional oversight by the 110th Congress.\23\ Currently, 
we are assessing MMS's estimate of forgone royalties in light of 
changing oil and gas prices, revised estimates of future oil and gas 
production, and other factors. We are also seeking to identify 
comprehensive studies that quantify the potential benefits of royalty 
relief. We intend to issue a report on these issues later this year.
---------------------------------------------------------------------------
    \23\ GAO, Suggested Areas for Oversight for the 110th Congress, 
GAO07235R (Washington, D.C.: Nov. 17, 2006).
---------------------------------------------------------------------------
Revenue from Geothermal Leases May Change
    In May 2006, we reported that a change in how royalties on 
geothermal leases are disbursed may result in a change in the amount of 
royalties collected by the federal government.\24\ Specifically, while 
the Energy Policy Act of 2005 included provisions to encourage 
geothermal development, it also reduced the royalty percentage the 
federal government receives. Despite this, the act directs the 
Secretary of the Interior to seek, for most leases, to maintain the 
same level of royalty revenues as before the act. This could be 
accomplished by negotiating different royalty rates based on past 
royalty history, provided that electricity prices remain constant. 
Although it is impossible to predict with reasonable assurance how 
these prices will change in the future, Interior must make its best 
effort to mitigate the impact of changing prices if federal royalty 
revenue is to remain the same. This mitigation can only be achieved if 
there is timely and accurate knowledge of the revenues that lessees 
collect when they sell electricity. However, we reported that MMS does 
not routinely collect revenue data from electricity sales. Without such 
knowledge, MMS will have difficulty collecting the same level of 
royalties from lessees under the new royalty process. To demonstrate 
its commitment to collect the same level of royalty revenues as prior 
to passage of the act, we recommended that MMS routinely collect future 
sales revenues for electricity when royalty payments are due. MMS has 
plans to address these issues, and we will continue to monitor their 
efforts.
---------------------------------------------------------------------------
    \24\ GAO, Renewable Energy: Increased Geothermal Development Will 
Depend on Overcoming Many Challenges, GAO06629 
(Washington, D.C.: May 24, 2006).
---------------------------------------------------------------------------
Interior Has Not Maximized Revenue Collections from Recreational and 
        Other Uses
    Interior agencies are authorized--and in some cases required--to 
collect fees for a variety of uses. For example, the Park Service 
collects fees from air tour operators at selected national parks and 
from individuals and companies conducting commercial filming. However, 
we found that the agencies were not collecting such fees in the 
following cases:
      In May 2006, we reported that the Park Service was not 
collecting all required fees from companies conducting air tours in or 
around three highly visited national parks because of (1) an inability 
to verify the number of air tours conducted over the three national 
parks and, therefore, to enforce compliance and (2) confusion resulting 
from differing geographic applicability of legislation governing air 
tours in national parks.\25\
---------------------------------------------------------------------------
    \25\ GAO, National Park Air Tour Fees: Effective Verification and 
Enforcement Are Needed to Improve Compliance, GAO06468 
(Washington, D.C.: May 11, 2006).
---------------------------------------------------------------------------
      In May 2005, we reported that the Park Service could be 
collecting more revenue through the permits it issues for special park 
uses, such as special events, but was not doing so because park units 
were not consistently applying criteria for charging permit fees.\26\ 
In addition, the Park Service had not implemented a May 2000 law that 
required the collection of location fees for commercial filming and 
still photography, resulting in significant annual forgone revenues. In 
response to our recommendation, the Park Service began collecting 
location fees in May 2006.
---------------------------------------------------------------------------
    \26\ GAO, National Park Service: Revenues Could Increase by 
Charging Allowed Fees for Some Special Uses Permits, 
GAO05410 (Washington, D.C.: May 6, 2005).
---------------------------------------------------------------------------
      In September 2006, we reported that Interior agencies 
have been slow to implement authorities for charging fees for 
recreational uses of federal lands and waters.\27\ We also reported 
that some agencies lacked adequate controls and accounting procedures 
for collecting fees.
---------------------------------------------------------------------------
    \27\ Total fee collections in Fiscal Year 2004 were about $192 
million. See GAO, Recreation Fees: Agencies Can Better Implement the 
Federal Lands Recreation Enhancement Act and Account for Fee Revenues, 
GAO061016 (Washington, D.C.: Sept. 22, 2006).
---------------------------------------------------------------------------
Additional Revenue Could be Generated Through an Adjustment to BLM 
        Grazing Fees
    Ten federal agencies manage grazing on over 22 million acres, with 
BLM and the Forest Service managing the vast majority of this 
activity.\28\ In total, federal grazing revenue amounted to about $21 
million in Fiscal Year 2004, although grazing fees differ by agency. 
For example, in 2004, BLM and the Forest Service charged $1.43 per 
animal unit month, while other federal agencies charged between $0.29 
and $112 per animal unit month.\29\ We reported in 2005 that while BLM 
and the Forest Service charged generally much lower fees than other 
federal agencies and private entities, these fees reflect legislative 
and executive branch policies to support local economies and ranching 
communities.\30\ Specifically, BLM fees are set by a formula that was 
originally established by a law that expired, but use of the formula 
has been extended indefinitely by Executive Order since 1986. This 
formula takes into account a rancher's ability to pay and, therefore, 
the purpose is not primarily to recover the agencies' costs or capture 
the fair market value of forage. Instead, the formula is designed to 
set a fee that helps support ranchers and the western livestock 
industry. Other federal agencies employ market-based approaches to 
setting grazing fees.
---------------------------------------------------------------------------
    \28\ The 10 agencies are the BLM, FWS, Park Service, Bureau of 
Reclamation, Forest Service, Department of Energy, Army Corps of 
Engineers, Army, Air Force, and Navy. In addition, a number of other 
federal agencies manage some minor grazing-related activities.
    \29\ An animal unit month is the amount of forage (vegetation such 
as grass and shrubs) that a cow and her calf eat in a month (or one 
bull, one steer, one horse, or five sheep).
    \30\ GAO, Livestock Grazing: Federal Expenditures and Receipts 
Vary, Depending on the Agency and the Purpose of the Fee Charged, 
GAO05869 (Washington, D.C.: Sept. 30, 2005).
---------------------------------------------------------------------------
    Using this formula, BLM collected about $12 million in receipts in 
Fiscal Year 2004, while its costs for implementing its grazing program, 
including range improvement activities, were about $58 million. Were 
BLM to implement approaches used by other agencies to set grazing fees, 
it could help to close the gap between expenditures and receipts and 
more closely align its fees with market prices. We recognize, however, 
that the purpose and size of BLM's grazing fee are ultimately for the 
Congress to decide.

Contract and Grant Management Lack Needed Controls
    Interior's management of contracts and grants has been identified 
as a management challenge by Interior's IG for a number of years. Our 
recent work echoes some of the department's IG's concerns, in 
particular with regard to interagency contracting and grant management 
for the Chesapeake Bay Gateways grant program.

Interior's Management of Interagency Contracting Activities Needs 
        Improvement
    The Department of Defense (DOD) has used interagency contracting to 
help support the war in Iraq, including contracting with Interior. 
Governmentwide, the use of interagency contracts to procure goods and 
services has continued to increase over the past several years. Because 
of this continued growth, limited expertise in using these contracts, 
and unclear lines of responsibility, GAO has designated interagency 
contracting as a governmentwide high-risk area.\31\ In our review of 11 
task orders Interior issued on behalf of DOD--amounting to about $66 
million--we found numerous breakdowns in management controls.\32\
---------------------------------------------------------------------------
    \31\ GAO, High-Risk Series: An Update, GAO07310 
(Washington, D.C.: Jan. 31, 2007).
    \32\ GAO, Interagency Contracting: Problems with DOD's and 
Interior's Orders to Support Military Operations, 
GAO05201 (Washington, D.C.: Apr. 29, 2005).
---------------------------------------------------------------------------
    Specifically, we found that Interior:
      issued task orders that were beyond the scope of the 
contract, in violation of federal competition rules;
      did not comply with additional DOD competition 
requirements when issuing task orders for services on existing 
contracts;
      did not comply with ordering procedures meant to ensure 
the best value for the government; and
      inadequately monitored contractor performance.
    Moreover, we found that the contractor was allowed to play a role 
in the procurement process normally performed by the government because 
the officials at Interior and DOD responsible for the orders did not 
fully carry out their roles and responsibilities. In response to the 
concerns identified, Interior and DOD initiated actions to strengthen 
management controls. In our report, we made recommendations to further 
refine their efforts.
    In 2005, we also reported on weaknesses in Interior's GovWorks. 
GovWorks is a government-run, fee-for-service organization that 
provides various services, including contracting services, on which DOD 
has relied.\33\ Specifically, Interior did not always ensure that 
GovWorks contracts received fair and reasonable prices and may have 
missed opportunities to achieve savings from millions of dollars in 
purchases. In addition, GovWorks added substantial work--as much as 20 
times above the original value of a particular order--without 
determining that prices were fair and reasonable. We made 
recommendations to Interior to improve the manner in which GovWorks 
funds are used to ensure value and compliance with procurement 
regulations. Interior concurred with our recommendations and identified 
actions to take to address them. We will continue to monitor their 
implementation of these actions.
---------------------------------------------------------------------------
    \33\ Such organizations are referred to as ``franchise funds.'' See 
GAO, Interagency Contracting: Franchise Funds Provide Convenience, but 
Value to DOD Is Not Demonstrated, GAO05456 (Washington, 
D.C.: July 29, 2005.)
---------------------------------------------------------------------------
Chesapeake Bay Gateways Grant Program Lacks Needed Controls
    In September 2006, we reported on weaknesses in the Park Service's 
management of grants provided to nonfederal entities under its 
Chesapeake Bay Gateways Program.\34\ In 1998, Congress passed the 
Chesapeake Bay Initiative Act to establish (1) a network of locations 
where the public can access and experience the bay and (2) a grant 
program to accomplish this objective. From 2000 through 2005, the Park 
Service awarded 189 grants totaling over $6 million to support the 
network. However, our review revealed several accountability and 
oversight weaknesses in the Park Service's management of these grants, 
including (1) inadequate training of Park Service staff, (2) a lack of 
timely grantee reporting on progress and finances, (3) continuing 
awards to nonperforming grantees, and (4) a backlog of uncompleted 
grants. To enhance accountability and oversight, we recommended that 
the department
---------------------------------------------------------------------------
    \34\ GAO, Chesapeake Bay Gateways Program: National Park Service 
Needs Better Accountability and Oversight of Grantees and Gateways, 
GAO061049 (Washington, D.C.: Sept. 14, 2006).
---------------------------------------------------------------------------
      develop and implement a process to determine the extent 
to which grants are effectively meeting program goals;
      ensure that staff responsible for grant management are 
adequately trained;
      ensure that grantees submit progress and financial 
reports in a timely manner; and
      ensure that grants are awarded only to applicants who 
completed any previous grants they received or to applicants who have 
demonstrated the capacity for completing a grant on schedule.
    Interior concurred with our recommendations and has plans to 
implement them.

Concluding Observations
    To conclude, Mr. Chairman, I would like to note that in 1993, GAO 
testified at a broad oversight hearing on Interior before this 
Committee, similar to today's hearing. At that time, we testified that 
Interior faced serious challenges to addressing the declining condition 
of the nation's natural resources and related infrastructure under its 
responsibility. Unfortunately, almost 15 years later, the message in my 
testimony today is very similar. While some of the programs we 
evaluated in the past have improved, evaluations of additional programs 
reveal many of the same persistent management problems--a lack of 
adequate data to understand the condition of its natural resources and 
infrastructure and the actions necessary to improve them, a lack of 
adequate controls and accountability to ensure federal resources are 
properly used and accounted for, and a lack of adequate strategic 
planning and guidance for program implementation. Clearly the 
department needs to address management and control gaps in its programs 
and ensure its activities are carried out in the most cost-effective 
and efficient manner, but difficult choices remain for improving the 
condition of the nation's natural resources and the department's 
infrastructure in light of the federal deficit and long-term fiscal 
challenges facing the nation. Either new sources of funding need to be 
identified and pursued, or the department must determine the services 
it can continue and the standards it will use for maintaining its 
facilities and lands. As we stated in our testimony nearly 15 years 
ago, we believe that in reaching these decisions, policy makers should 
know the full extent of the resource shortfalls facing federal natural 
resource management agencies. In addition, it is essential for the 
department to identify the impacts on services and infrastructure that 
would occur should serious cutbacks be necessary in order to maintain a 
certain standard of quality.
    Mr. Chairman, this concludes my prepared statement. I would be 
pleased to answer any questions that you or other Members of the 
Committee may have at this time.

GAO Contact
    For further information about this testimony, please contact me at 
(202) 512-3841 or [email protected]. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this statement.

                          Related GAO Products

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2007.
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    High-Risk Series: An Update. GAO-05-207. Washington, D.C.: January 
2005.
    Major Management Challenges and Program Risks: Department of the 
Interior. GAO-03-104. Washington, D.C.: January 2003.
    High-Risk Series: An Update. GAO-03-119. Washington, D.C.: January 
2003.
    High-Risk Series: Federal Real Property. GAO-03-122. Washington, 
D.C.: January 2003.
    Major Management Challenges and Program Risks: Department of the 
Interior. GAO-01-249. Washington, D.C.: January 2001.
    High-Risk Series: An Update. GAO-01-263. Washington, D.C.: January 
2001.
    Major Management Challenges and Program Risks: Department of the 
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    High-Risk Series: An Update. GAO/HR-99-1. Washington, D.C.: January 
1999.

Resource Protection Efforts
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January 30, 2007.
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Washington, D.C.: June 21, 2006.
    Wildland Fire Suppression: Lack of Clear Guidance Raises Concerns 
about Cost Sharing between Federal and Nonfederal Entities. GAO-06-570. 
Washington, D.C.: May 30, 2006.
    Wildland Fire Management: Update on Federal Agency Efforts to 
Develop a Cohesive Wildland Fire Strategy. GAO-06-671R. Washington, 
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    Wildland Fire Management: Timely Identification of Long-Term 
Options and Funding Needs Is Critical. GAO-05-923T. Washington, D.C.: 
July 14, 2005.
    Wildland Fire Management: Important Progress Has Been Made, but 
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Washington, D.C.: January 14, 2005.
    Wildland Fires: Forest Service and BLM Need Better Information and 
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GAO-04-705. Washington, D.C.: June 24, 2004.
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Identify and Prioritize Lands Needing Fuels Reduction. GAO-03-805. 
Washington, D.C.: August 15, 2003.
    Wildland Fire Management: Reducing the Threat of Wildland Fires 
Requires Sustained and Coordinated Effort. GAO-02-843T. Washington, 
D.C.: June 13, 2002.
    Severe Wildland Fires: Leadership and Accountability Needed to 
Reduce Risks to Communities and Resources. GAO-02-259. Washington, 
D.C.: January 31, 2002.
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Other Resource Protection Products
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    Wind Power: Impacts on Wildlife and Government Responsibilities for 
Regulating Development and Protecting Wildlife. GAO-05-906. Washington, 
D.C.: September 16, 2005.
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Guarantee Coverage of Reclamation Costs. GAO-05-377. Washington, D.C.: 
June 20, 2005.
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BLM's Ability to Meet Its Environmental Protection Responsibilities. 
GAO-05-418. Washington, D.C.: June 17, 2005.
    Oil and Gas Development: Challenges to Agency Decisions and 
Opportunities for BLM to Standardize Data Collection. GAO-05-124. 
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Improve the Consultation Process. GAO-04-93. Washington, D.C.: March 
19, 2004.
    National Wildlife Refuges: Opportunities to Improve the Management 
and Oversight of Oil and Gas Activities on Federal Lands. GAO-03-517. 
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Managing Indian Trust Responsibilities and Island Communities
Indian Trust Funds
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07-295R. Washington, D.C.: January 19, 2007.
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Several Key Trust Reforms Required by the 1994 Act, but Important 
Decisions about Its Future Remain. GAO-07-104. Washington, D.C.: 
December 8, 2006.
    Indian Trust Funds: Individual Indian Accounts. GAO-02-970T. 
Washington, D.C.: July 25, 2002.
    Indian Trust Funds: Tribal Account Balances. GAO-02-420T. 
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Indian Land Management
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D.C.: October 20, 2006.
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Better Data Should Improve the Processing of Land in Trust 
Applications. GAO-06-781. Washington, D.C.: July 28, 2006.
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Project Management and Financial Sustainability. GAO-06-314. 
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Island Communities
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Improvement. GAO-05-41. Washington, D.C.: December 17, 2004.
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Accountability and Oversight of Grantees and Gateways. GAO-06-1049. 
Washington, D.C.: September 14, 2006.
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Value to DOD Is Not Demonstrated. GAO-05-456. Washington, D.C.: July 
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2005.
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    [GRAPHIC] [TIFF OMITTED] T3552.007
    
                                 ______
                                 
    The Chairman. Thank you. I want to thank both of you for 
being here with us today and for your service in each of your 
capacities.
    You, Mr. Devaney, I understand have now over seven years as 
IG and a very commendable law enforcement background prior to 
that. I certainly commend you for your service and appreciate 
your testimony today. It is pretty scathing, and I do agree 
with you that I believe there is a new attitude, a new spirit 
with the new Secretary Kempthorne now in charge. Time will only 
tell, of course, but I am very confident that the whole 
attitude and culture at the Department of Interior will face a 
new beginning.
    My first question is for you, Mr. Devaney. It has come to 
my attention that the MMS official who was charged with 
overseeing the OCS oil and gas leases issued during 1998 and 
1999 without price thresholds was recently promoted to be in 
charge of that agency's entire offshore program.
    Considering the GAO has noted that the failure to include 
price thresholds in those leases will cost the American 
taxpayers $10 billion in lost revenue, to say the least it is 
quite stunning that this person has been promoted.
    In your testimony this morning you stated that your 
greatest frustration as the IG at the Interior Department is 
that it has ``a culture replete with a lack of 
accountability.'' With that noted, I think one of the most 
fundamental problems with the MMS is that while it is charged 
with promoting energy production, it is also charged with 
auditing the same companies it closely works with, and the 
check and balance of that system is that MMS then audits 
itself.
    Do you think, for example, that audits and compliance 
reviews of royalty payments should be handled by your office 
rather than the MMS so that we can, to use your words, break 
this culture replete with a lack of accountability?
    Mr. Devaney. Mr. Chairman, I think that recent events 
probably suggest that we should take another look at this issue 
where that auditing takes place in the Department.
    A little bit of history. I think in the mid-1980's 
originally that function was in the IG's office and then some 
years later it was given over to MMS, so at one time it was 
within the IG's office. It was much smaller at the time.
    I have asked my staff to prepare a white paper on that 
subject, which I would be glad to deliver to you and other 
members of the Committee when we have it finished, but I think 
the potential for a conflict of interest or at least the 
appearance of a conflict exists.
    I think audit organizations have an obligation to remain 
independent. I think there is a need to examine the oil 
companies' books occasionally and a need to track the 
recommendations that are made to MMS and the companies.
    I think on the plus side of having it in the IG's office, I 
think that the Department would be less prone to criticism, 
quite frankly, so I think there are some very good arguments to 
be made that it should be in the IG's office. On the other 
hand, I am not particularly anxious to inherit some of the 
issues going on there right now and take on that program. It 
would be an enormous challenge.
    I think we need to think about this a little bit. We are 
doing this white paper. I will get it up to you as soon as we 
are done, and then I need to have some discussions within the 
Department as well.
    The Chairman. You just made an interesting statement that 
perhaps examining the books of the oil companies would be 
appropriate. I assume that is not being done then under MMS?
    Mr. Devaney. Well, to be fair there is a combination of 
auditing and compliance reviews going on. As I said earlier, 
compliance reviews are more of a checklist type of activity 
that can be done from a desk, principally done in Denver I 
understand.
    They are doing actual audits. There are less audits being 
done today than there were in the past. There are less auditors 
in MMS today than there were in the past. In theory that is 
probably the way it should be if they are doing more compliance 
reviews, but compliance reviews depend almost totally on the 
oil companies telling MMS what they are producing.
    My main problem with compliance reviews is when there is an 
anomaly identified in a compliance review from my perspective 
that should trigger a real audit where someone goes out, knocks 
on the door and asks for the books. We didn't find any evidence 
of that when we looked at this program.
    The Chairman. How long ago was the IG in charge of MMS?
    Mr. Devaney. In charge of the auditing?
    The Chairman. In charge of the auditing I meant, yes.
    Mr. Devaney. Actually, I think what happened and I am told 
what happened--I certainly wasn't there--is that one of my 
predecessors got in a tiff with a chairman like yourself, and 
the program was taken away from the IG's office and given back 
over to MMS I want to say in the late 1980's, so it has been 
quite a while.
    The Chairman. Quite a while. All right. Let me ask you one 
further question.
    You testified that your office still has 10 agents 
dedicated to the Abramoff scandal alone and that you have 
little capacity to adjust for such diversions of staff because 
you have received no increase in staff levels for the seven 
years you have been the IG. Have you requested increased staff? 
If so, what has been the response?
    Mr. Devaney. I have asked for an increase in both auditors 
and investigators each and every year.
    To be fair, I get a fairly good reception at the Secretary 
level and over at OMB, but when it comes over here something 
happens. I am not sure what it is, but the bottom line is that 
I have just about the exact same number of people I had when I 
started seven years ago.
    Now, within the Cabinet we are probably the seventh largest 
Department in the Cabinet, and we are probably third from the 
bottom in terms of IG staff so there is an inequity there I 
think that we need to have an adjustment on. I don't think I am 
talking about a huge increase in staff. I think we might be 
talking about 20 or 30 people might give me a much greater 
capacity to do more things or to do the things I am doing now 
better.
    The Chairman. So you have requested about 20 additional 
staff?
    Mr. Devaney. I haven't requested numbers like that, no.
    The Chairman. OK.
    Mr. Devaney. I have been asking for small increases every 
year and don't seem to get them. I would love to be in a 
position to ask for 20 to 30 people. I understand. I am also a 
realist. I understand the budget situation.
    The bottom line here is that I think the premise of your 
question was I don't have the resources to get tangled up in an 
investigation like Abramoff. We have been the codirector of 
that investigation along with the FBI now for three years. That 
is an enormous undertaking, as you can imagine, and has just 
burned up all kinds of staff folks that I could be using in 
other places.
    The Chairman. Thank you. I appreciate it.
    I recognize Mr. Pearce.
    Mr. Pearce. Thank you, Mr. Chairman.
    I don't consider, Mr. Devaney, Democrats to be the enemy 
nor Republicans to be the enemy. Frankly, I find almost every 
single one of us are up here trying to make the decisions.
    All of us rely on reports like yours. Your report is going 
to be quoted and it is going to be used in the context of 
pitched battles. If you have questions about your report or if 
you don't have questions about the report, it significantly 
affects the discussion.
    I find deep flaws in this report. I will walk through 
those, and then we will begin to deconstruct them through the 
following questions as through the Committee members.
    You state that the price thresholds were left out as a 
mistake. That at the end of the day is the core of the 
discussion. Was it a mistake, or was it an intentional policy? 
You state that there was no smoking gun on page 5, yet the 
smoking gun of the letter from Carolita Kallaur, which I have 
here, was left out.
    Now, you could draw your conclusion, but if my friends on 
the other side of the aisle saw a letter saying these decisions 
not to put this royalty on this land was deliberate, you say 
there is no smoking gun, but you left her out of your report. 
It is not here.
    You said that it was a mistake. You said that it was a 
policy, that they should have been there. Not once do you give 
one thing in here that declares a policy. You instead form an 
opinion when you leave key things out.
    I think my friends on the other side of the aisle would 
form a different idea if you said I am giving you both. Read 
both. My conclusion. That would be significantly different than 
your saying that there is no smoking gun.
    You in your Senate testimony answered a question there. You 
said there is significant confusion by lease writers. Someone 
in the Senate asked you well, what about this question that 
came and said no, the omissions were deliberate? That was a 
statement that is exact. You said it was a low level official.
    Your answer in the Senate was it was a low level official, 
and yet when we take a look at it, it was instead the 
supervisor of all the sales of that region under the Clinton 
Administration who says no, this was deliberate. We left these 
price thresholds out deliberately.
    You do not point in this continuum of time that there were 
four times when there were prior thresholds included, and then 
there were nine consecutive times where they weren't included. 
You don't say in your report that the readers of my report 
should hear that I feel like it is not there.
    You don't make that clear, and it is a great disservice, 
sir, because there are going to be pitched battles on the 
outcome of your words, and I really sincerely wonder.
    You talk about the preferential treatment of high level DOI 
officials, and you went six times to this Johnnie Burton, who 
is the Bush administrator. She is simply doing what is written 
into the contracts. You did not go once to Clinton 
administrators, neither Secretary Babbitt nor Assistant 
Secretary Armstrong. They were the ones who took the action.
    It was imperative in my reading as a legislator sitting up 
here trying to deconstruct. If you declared a mistake, you 
should go back to the people who did it because there is a 
letter from a lady who says no, the omissions were deliberate. 
She has died, and now you put words in her mouth that she 
didn't really mean that. We are going to leave it out.
    Aye-yi-yi, my friend. You have unleashed the devils inside 
people who want the case to be one of fracture and one of 
partisanship, and I wonder why you did that, sir? I am not out 
of time if you want to address it. We are going to have plenty 
of time to talk about every single issue.
    Thank you, Mr. Chairman. He can answer if he would like, 
but the omissions are extreme and disconcerting.
    Mr. Devaney. Congressman, first let me say I stand behind 
our investigation, and the agents that conducted that 
investigation are very experienced agents. As you pointed out, 
the individual you are talking about is deceased, and we don't 
have an opportunity to talk to her.
    Getting to your continuum, the timeline if you will, I 
think we state rather clearly that we think the mistake was 
made after the leases had addendums attached to them later on 
when the Royalty Relief Act was being thought about in the 
Department. There was a terrible breakdown in communication 
between the various components of MMS and also almost a total 
disconnect from the Solicitor's Office.
    Now, in 2000 she found out, and I don't know what email you 
are referring to there, but she found out that those addendums 
had been left off, and the new Royalty Relief Act did not cover 
the price thresholds. She made a decision not to bring that up 
the chain of command to the Directorate, the previous directors 
of MMS.
    We did talk to both of those directors that were there at 
the time, and they say that she never brought that to their 
attention. We can't talk to her.
    Mr. Pearce. If I might?
    Mr. Devaney. Go ahead.
    Mr. Pearce. If I could, sir, reclaim my time? The 
supervisor in the Gulf of Mexico, the one that you have 
declared to be low ranking and I don't declare him to be low 
ranking, he took a lie detector and said no, that the highest 
levels called me to instruct me.
    But if I could go through, you are talking about 
significant confusion. First of all, we had the advanced notice 
to proposed rulemaking. No mention of price controls in that. 
Then we had the interim rule. That was in 1996. That was about 
a month later. Then almost two years later you have the final 
rule.
    None of those mentioned price controls, so you have three 
steps in the process. None mention price controls. Then you 
have one, two, three, four, five lease sales that occur after 
the final rulemaking. Not one of them included in the period of 
time, this five months to the first sale.
    This is all under the Clinton Administration. This is all 
Secretary Babbitt and those people. This is not a Bush cronyism 
deal. This is President Clinton, Secretary Babbitt, and you 
have five months from the final rule to the first sale, and 
then you have subsequent sales. Never did they include price 
thresholds until one thing happened, and that is what I was 
referring to in my opening statement.
    The price of oil during this period for west Texas crude 
was $6. It was $10 for the stuff they are selling out there. 
The nation believed--this is the economist dated back in that 
period of time said we are awash in oil. It is more apparent to 
me that the Clinton Administration did not feel like we needed 
any price caps because the world belief was that we were never 
going to get to the $28 threshold.
    Those things were left out, and yet you never once in this 
entire voluminous report mention all of the other side of the 
testimony for people who are trying to reasonably come up with 
conclusions that support their viewpoint. We both do it up 
here, and for you not to mention some balancing on the other 
side, sir, is a travesty.
    Thank you, Mr. Chairman. I yield back.
    The Chairman. Mr. Devaney, do you wish to respond?
    Mr. Devaney. Only that the mistake that we speak to from 
our perspective was that there was an assumption made by the 
folks who were working this issue within the Department of 
Interior that the Royalty Relief Act would include the price 
threshold language that had been addendums to prior leases.
    It didn't include that language at the end of the day, and 
therefore they were left out. We felt like that was a mistake 
made, a costly mistake made. It was caught later on by some MMS 
employees, and when it was brought to her attention she decided 
not to bring it to the attention of the folks in Washington, 
D.C., a deliberate not to bring it to the attention of the 
folks in Washington, D.C.
    Only on one other occasion in 2004 did it come to the 
attention of anybody, and at that particular time they based 
their opinion at that time on the solicitor's previous opinion 
that this couldn't be corrected. Quite frankly, that may be 
true, but I think they should have reexamined that issue in 
2004 as well.
    When I talked about, for instance, in my Senate testimony 
about a cavalier attitude, I wasn't speaking about Johnnie 
Burton per se. I was talking about the whole range of people 
ranging from the Clinton Administration to the Republican 
Administration that when they found this error to have been 
made, this mistake was made, they didn't look at it in the 
robust way that we all looking back now probably would say they 
should have; at least I feel that way.
    The Chairman. Thank you, Mr. Devaney. That is one of the 
purposes of these hearings is to ask questions and to exercise 
our oversight. Many of these questions perhaps have not been 
asked over the last six years, so that is what we are in the 
process of doing here.
    The Chair recognizes the gentleman from California, Mr. 
Miller.
    Mr. Miller. Thank you very much, Mr. Chairman, and thank 
you for calling this hearing.
    I guess I am honored that both of you referred to my first 
oversight hearing when I was Chairman of this committee where 
GAO and the IG testified. I must say I am horrified that you 
are back here today almost recounting the same set of 
circumstances within this Department. That is a tragedy for the 
stewardship of this Department and certainly for the taxpayer 
of this nation. Is this a question of competency?
    Mr. Devaney. Congressman, I don't think we are talking 
about competency. I think we are talking about an issue will 
come up, there is a whole lot of attention paid to it, but six 
months later we are on to another issue, both the IG's office, 
perhaps GAO. We are looking at other things.
    We have made recommendations, and it is not until we come 
back maybe three or four years later and take a look at this 
issue again that we find, much to at least our dismay, that 
these recommendations haven't been implemented. People have 
just stopped caring about that particular issue.
    Mr. Miller. Ms. Nazzaro?
    Ms. Nazzaro. We have never really tried to determine I 
guess why some of these things are happening from the 
standpoint that you are taking of are the people incompetent 
other than, you know, in some cases we have talked about a lack 
of training, and typically the agency does take action and 
implement training.
    I think the other thing we see is that policies and 
procedures are put in place that a lot of times address our 
recommendations, but then it is the implementation of those, 
and I think, as Mr. Devaney said, priorities change and then 
the agency goes on to something else.
    They are continuously being asked to do more with less. 
Priorities change, and they move their attention to something 
else. Too often we are seeing----
    Mr. Miller. Who moves their attention to something else?
    Ms. Nazzaro. The agency.
    Mr. Miller. The Department of Interior?
    Ms. Nazzaro. The Department of the Interior clearly.
    Mr. Miller. Both of you have given us wholesale testimony 
here department by department--Minerals Management, the 
National Park Service, the BLM. It appears that every issue has 
been resolved against the taxpayer of this country. I mean, is 
this policy then if it is not competency?
    Ms. Nazzaro. Let me give you one example.
    Mr. Miller. The leakage that you have outlined in both of 
your testimonies is just horrifying. I mean, if it is not 
competency it starts to look like policy or starts to look like 
criminal activity.
    Ms. Nazzaro. Let me give you an example. A year ago I was 
up before a number of committees testifying on what the 
Interior, working with USDA, was doing on wildland fire 
management. We identified that they were developing some key 
information systems that we thought were critical to developing 
a strategic plan.
    These key data and modeling systems would give them 
information on the existing situation and what they were going 
to need to do. A budget allocation tool was one of them. This 
was the fire program analyses.
    Now this year we come back, and we find out that while the 
agency started all of these activities nothing is nearing 
completion, and we are even wondering whether any of them are 
going to be completed because they have just changed their 
focus, and now they say well, situations change and so now we 
are going to take a different tactic.
    So they are still trying to address some of the same 
problems, but the solutions that we felt were near at hand, you 
know, are no longer being pursued.
    Mr. Miller. Mr. Devaney, in your testimony you talked about 
the question of political appointees and GS-15s and above and 
this problem.
    What has been done? You know, in the military you do 
lessons learned. We have had from Jack Abramoff to Steven 
Griles to a whole host of people in this Department. What are 
the lessons learned? How do you prevent this from happening?
    I know there is a disciplinary board that you talked about. 
That is kind of after the fact. The cow or the money is gone.
    Mr. Devaney. Right. That is a shift I have tried to make. 
In all of our investigations, for instance, we now look for 
what we call an opportunity to issue a management advisory.
    A management advisory at the end of an investigation tries 
and tells a bureau or the Department how can you prevent this 
mischief from happening again. How can you prevent this crime 
from happening again? It is a form of crime prevention.
    Mr. Miller. Do you have any idea what the loss has been 
when you look across the resources that we lease, we sell, what 
the loss has been to the taxpayer?
    Mr. Devaney. No, I don't. I mean, you could certainly roll 
up all of our--both GAO's and IG's--reports and look at the 
numbers we have attached to those reports, but it is certainly 
a lot of money.
    Mr. Miller. It is how much?
    Mr. Devaney. Well, if you were to add in, for instance, not 
collecting appropriate royalties it could be in the billions.
    Mr. Miller. Tens of billions.
    Mr. Devaney. Tens of billions.
    Mr. Miller. A hundred billion. Well, let me stop at tens of 
billions.
    Mr. Devaney. Tens of billions.
    Mr. Miller. You know, I really thank you both for your 
service and your offices for the service because apparently you 
are all that stand between us and a wholesale criminal 
conspiracy here.
    This agency is really the steward of our culture, our 
heritage, our history, our natural assets, be they of value for 
sale or lease or to be admired as among the wonders of the 
world.
    To continue to receive these reports year after year after 
year raises I think the most serious questions. I have great 
respect for public servants. I do not use the word criminal 
lightly, but you cannot have this much leakage going on and 
this many issues resolved against the taxpayer without some 
intent, without doing somebody a favor.
    Something is very, very wrong in this Department. It is 
tens of billions, and it may be in excess of $100 billion. 
Maybe we should add up all of your reports because you just 
don't get to operate on behalf of the public in the manner in 
which this Department has been operating.
    Thank you, Mr. Chairman.
    The Chairman. The Chair recognizes the gentleman from 
Tennessee, Mr. Duncan.
    Mr. Duncan. Thank you, Mr. Chairman.
    Ms. Nazzaro, I want to ask about something else for just a 
moment. I remember in 2000 in front of the Forests Subcommittee 
of this Committee we were told that if we did not have more 
thinning of the forests, more cutting of trees in our national 
forests, that there were 40 million acres in imminent danger of 
catastrophic forest fires.
    I listened with great interest when you said that the 
percentage of acres burned has gone up by 70 percent from 2000 
to 2005 as opposed to or compared to the 1990s and that the 
appropriations for Federal fire fighting has gone from $1 
billion to $3 billion. It has tripled.
    We got that warning. We get that warning almost every year, 
yet there are these extremist groups that don't want you to cut 
any trees. It is hard for me to understand, but how many acres 
have been burned since 2000? Do you know? You said it has gone 
up 70 percent. I just wondered.
    Ms. Nazzaro. I don't have readily available the exact 
number. If you would like it, we could certainly get back with 
you and tell you exactly.
    Mr. Duncan. I understand.
    Ms. Nazzaro. I know we have had a couple years that have 
been record seasons, so certainly the acreage is pretty 
significant.
    You are right. You know, overaccumulation of vegetation is 
a primary cause.
    Mr. Duncan. I understand several million acres, but I 
didn't know exactly how many. It is sort of sad really.
    Mr. Devaney, this activity has been called bureaucratic 
bumbling under Secretary Babbitt or worse names. Now, I have 
understood that it amounted to or I have seen estimates of $10 
billion, but you are saying that it could be in the many tens 
of billions?
    Mr. Devaney. Well, it could be if nothing changes from now 
and the leases continue to be issued without the price 
thresholds in them. That is a GAO estimate.
    Mr. Duncan. You know, in the last Congress we passed out of 
this committee a bill and passed it in the House that required 
renegotiation of these leases or mandated the payment of fees.
    I do understand that six of those leases have been 
renegotiated and that others are in the process of being 
renegotiated. Is that correct?
    Mr. Devaney. That is my understanding. That is what 
Assistant Secretary Allred tells me the situation is.
    Mr. Duncan. So the Department is trying to do something 
about that problem that this Administration didn't create, but 
they are trying to fix it even prior to final legislative 
activity?
    Mr. Devaney. Yes, they are.
    Mr. Duncan. Ms. Nazzaro, you said that there has been no 
payment or a great underpayment of air tour fees in three 
heavily visited national parks. Which parks were you talking 
about?
    Ms. Nazzaro. The three parks that we were referring to are 
Haleakala, Grand Canyon and Hawaii Volcanoes National Park. 
Those are three that have high use of air tour operations.
    Mr. Duncan. OK. I want to yield the balance of my time to 
Mr. Pearce.
    Mr. Pearce. Thank you.
    Mr. Devaney, my colleague mentioned that you are the only 
thing that stands between us and wholesale criminal activity. 
Now, if I get this right, the final rule was made in January of 
1998 saying that it did not include price threshold.
    Now, this criminal activity we are talking about, there was 
a sale on February 13, 1998, there was a sale on 7-24-98, there 
was a sale on 2-12-99, there was a sale on 7-1-99, a sale on 7-
14-00.
    Who was the Secretary at the time of those sales, and were 
price thresholds included in those? I am trying to get clear 
who are the culprits in this criminal activity. Who was the 
Secretary, and who was the Minerals Management director?
    Mr. Devaney. I know you understand that I didn't say 
criminal.
    Mr. Pearce. No, no. You nodded in consent though. You liked 
the term as a valiant warrior. It felt good.
    Mr. Miller. You shouldn't interpret the actions of the 
witness.
    Mr. Pearce. I will withdraw those words. I thank you.
    Mr. Devaney. During that time period, Secretary Babbitt was 
the Secretary of Interior.
    Mr. Pearce. So am I to understand that it appears wholesale 
criminal activity occurred and the sales did not have any price 
thresholds in Sale Nos. 169, 171, 172, 173 and 175?
    The last sale occurred then in 2000, and it did have a 
price threshold, but we have five instances of significant 
malfeasance when the final view is set. Is that correct? Am I 
reading that correctly?
    Mr. Devaney. What I would say is that mistakes were made in 
both Administrations.
    Mr. Pearce. Thanks. I yield back the time.
    The Chairman. The gentleman from Massachusetts, Mr. Markey?
    Mr. Markey. Thank you, Mr. Chairman, very much.
    Mr. Devaney, your testimony today sheds new and substantial 
light on one particular area of Interior's mismanagement. The 
Interior Department has an upside-down system that punishes 
junior employees while rewarding or giving a pass to senior 
officials who have been responsible for horrendous errors in 
judgment and potentially criminal activities and the loss of 
billions in taxpayers' revenues.
    In your testimony today you say you discovered the failure 
of the Interior Department official to remain at arm's length 
from prohibited sources is pervasive. Without compromising any 
ongoing criminal activities, could you please give the 
Committee more specifics of the most pervasive activities that 
you would consider to be the worst that you have encountered?
    Mr. Devaney. Well, I think that list that I mentioned 
includes some of my answer. I mean, seemingly we are talking 
about the lack of recognition of what a prohibited source is 
and then followed by a feeling that it is OK to take gratuities 
from contractors, prohibited sources, vendors doing business 
before the Department of Interior.
    Some of those gratuities have included the things I 
mentioned--sporting events, meals, hunting trips, fishing 
trips, football games, you name it.
    Mr. Markey. Was this sort of behavior isolated to MMS, or 
did you find similar practices at other Interior Department 
agencies?
    Mr. Devaney. No. I would say this goes across the board.
    Mr. Markey. Across the board. How were these violations at 
MMS initially uncovered?
    Mr. Devaney. Well, quite frankly through doing one 
investigation you uncover matters that, you know, need separate 
investigations, and now we are up to half a dozen 
investigations, so it is talking to witnesses. It is talking to 
whistleblowers that have come forward.
    A lot of the things that have come to our attention we 
didn't open cases on. On some of these more flagrant violations 
we have.
    Mr. Markey. Were any of the individuals who committed these 
violations given above average performance ratings, bonuses or 
other preferential meritorious treatment during the same period 
as the violations occurred? If so, how many?
    Mr. Devaney. Well, I can't speak to the MMS folks that may 
be involved in some of that behavior, but in the past it has 
not been unusual for us to find folks that are behaving badly 
that have gotten awards and bonuses during that period of time.
    Mr. Markey. Could you check on those numbers and provide 
them to the Committee, please?
    Mr. Devaney. Yes, I will.
    Mr. Markey. Were any of the individuals who committed these 
violations given bonus pay during the same periods as the 
violations which occurred?
    Mr. Devaney. If you are talking about MMS employees, we are 
not done with that investigation so I don't have the answer to 
that.
    Mr. Markey. When you have that number could you please 
provide that to the Committee?
    Mr. Devaney. Certainly.
    Mr. Markey. You state in your testimony that disciplinary 
action was taken against fewer than half of the employees 
engaging in this type of behavior. That statement is shocking 
and probably is reason enough for the Committee to question 
Interior officials directly at some point soon.
    In addition, you note that the majority of enforcement 
actions for misconduct were taken against less senior 
employees, GS-14s and below, and supervisors received less 
severe punishment for the same misconduct. The double standard 
reinforces the upside-down system of punishments and rewards 
that is pervasive at the Department of Interior.
    To what do you attribute that in your now investigation of 
the agency?
    Mr. Devaney. First of all, there is a decentralization in 
Interior that I think helps contribute to this. Some of these 
matters are decided in the western states and out of 
Washington, D.C., so there is certainly no consistency about 
punishment.
    You can find inconsistent punishments within the same 
bureau for the same offense sometimes in the same region simply 
because a different solicitor and a different human resource 
person was providing the advice. We have made recommendations 
to the Department as to how to strengthen that process. I think 
they have made some improvements in that area.
    Secretary Kempthorne and I have talked about this very 
issue. He is as concerned about it as I am, and he has I think 
given the appropriate direction to folks to start working full 
speed in this area, so we will see.
    Mr. Markey. Well, your report is a blistering, scalding 
indictment of the way business is conducted at the Department 
of Interior. It identifies a cozy cooperation between 
Department of Interior officials and oil and gas and other 
industries that are supposed to be supervised by the Department 
of Interior for the benefit of the American taxpayer.
    I thank you and I thank the GAO for your reports to us. I 
congratulate the Chairman of the Committee, Mr. Rahall. This is 
a hearing which we should have had last year, the year before, 
the year before. It is long overdue in this committee.
    I think that the last Chairman of this committee really let 
down the American people in not having a hearing of this 
nature, given the fact that there were so many serious 
allegations that were out there, and I congratulate you, Mr. 
Chairman, for making this your first hearing because I think 
there is a lot more for us to uncover. I yield back the 
balance.
    The Chairman. The gentleman from South Carolina, Mr. Brown, 
is recognized.
    Mr. Brown. Thank you very much, Mr. Chairman, and I thank 
the witnesses for being here today.
    I know there has been a lot of grilling you on who was at 
fault, who did this, who did that. After this hearing, I mean, 
what action do we plan to take if there has been some 
wrongdoings? You know, who are we going to charge? How are we 
going to correct the problem? Do you have a thought on that, 
either one of you?
    Mr. Devaney. Congressman, I would say that to date we have 
issued an audit, and we have issued one investigation.
    We have several other investigations ongoing, so leaving 
those aside for a moment with respect to the audit, as I 
testified, MMS produced for us in almost record time an action 
plan to implement our recommendations. They are well underway 
in trying to address the concerns that we raised in our audit 
report.
    Just yesterday the Secretary delivered to me a letter that 
outlines the corrective actions he is taking as a result of the 
investigative report that we issued some time ago, so in both 
of those instances the Secretary and Assistant Secretary have 
acted very promptly, and I am delighted with this new approach.
    Mr. Brown. I would just like to add, you know, all the 
rumors we see going around is we are importing some 60 percent 
of our petroleum from offshore, and the enemy that wants to 
really do us in is starting to focus now on the supply lines 
coming into America.
    I am telling you, we have to put political issues aside and 
get serious about trying to improve our resources on the 
American soil, whether it is petroleum or nuclear power or 
whatever. We have to put the political issues aside and get 
basically back to the real problem that faces this nation.
    With that, I would like to yield the balance of my time to 
Mr. Gohmert.
    Mr. Gohmert. I thank my friend, Mr. Brown. You know, 
credibility is always an issue. When I was reading some of your 
testimony I was staggered at some of the allegations because if 
there is criminal wrongdoing it needs to be rooted out wherever 
it is.
    I am hearing things and I am reading things, and I am 
trying to get a grasp of your credibility, quite frankly. You 
said in here that when you came in over seven years ago you had 
about the exact same number of employees, and you said you have 
been asking for small increases every year and don't seem to be 
getting them. You got laughs when you said you get good 
reception with the Secretary, but something happens when it 
gets over here.
    Well, from the DOI budget documents it indicates in 1999 
when you came on there were 238 employees. In 2000 there were 
251, an increase of 13; 2001, 253; and in fact now in 2006 
there are 261, 23 more than there were when you came in 1999; 
and for 2008 it looks like there would be 273.
    I am wondering. Are you not aware of these additional 
employees? Do we need an IG to do an IG inspection of the IG? 
Were you not aware that these employees were there?
    Mr. Devaney. Sir, I am talking about on board FTEs, the 
number of people that were on board. I think when I first came 
on----
    Mr. Gohmert. So these employees are not on board? What do 
you mean by on board?
    Mr. Devaney. I am talking about let us go back to 1999 when 
I came to Interior. I hired up to about 255 or 256, in that 
area, almost immediately and then probably grew to about 260 
that first year. We have gone up, a little up and down, but 
right now we are about where we were.
    Mr. Gohmert. OK. Do you deny that you have 261 employees 
right now? Do you deny that?
    Mr. Devaney. I might not have that many right now, no. I 
don't think I do have that right now.
    Mr. Gohmert. OK. Thank you. Then you need to get with DOI 
and do an Inspector General report on their budget documents.
    Now, with regard to the mistakes being made you said 
mistakes were made by both Administrations. Isn't it a fact 
that the Bush Administration has seen to there being price 
thresholds in every lease they have negotiated? Isn't that 
right? Do you need to do another Inspector General report?
    Mr. Devaney. No. Every one that has been leased after a 
certain time period does include the price threshold language, 
yes.
    Mr. Gohmert. That this Bush Administration has negotiated?
    Mr. Devaney. Yes. Yes.
    Mr. Gohmert. So this cozy relationship with my friend from 
Massachusetts, this cozy cooperation actually was with 
Secretary Babbitt's Interior Department. Thank you.
    I see my time has expired. There is a lot more to explore 
here. I yield back for now.
    The Chairman. The Chair will, with the indulgence of the 
gentleman from Michigan, recognize the gentlelady from the 
Virgin Islands as she has a plane to catch, so I would like to 
recognize Ms. Christensen now for five minutes.
    Mrs. Christensen. Thank you, Mr. Chairman, and thank you, 
Mr. Kildee, for allowing me to go first.
    Good morning to our panelists. I want to thank the 
Inspector General, Mr. Devaney, and Ms. Nazzaro of GAO for 
their testimony, especially with regard to the insular areas.
    As both of you know, the Subcommittee on Insular Affairs 
has been reestablished, and I am going to be chairing it. I do 
appreciate all of the work that the IG and GAO have performed 
in insular areas and look forward to working with both of you 
in the future to chart a better course for our U.S. territories 
of the freely associated states.
    Mr. Devaney, going through your testimony and listening to 
you this morning I really applaud the change that you have made 
in your office to better improve the workings of the Department 
and their operations.
    Throughout your tenure there have been numerous 
recommendations made by your office to improve local 
territorial government accountability of both Federal and local 
funding. The GAO, on the other hand, in its most recent 
December report also highlighted problems of accountability in 
these areas as well.
    As I listened to the testimony this morning, I think I have 
a better understanding of why we are having problems because 
the Department that has oversight for us is not doing that well 
either.
    Many of our problems involve insular governments being able 
to account for Federal dollars that we spend as reflected in 
your reports. Given these and the other problems, I really also 
think that the Office of Insular Affairs should have enough 
resources to assist these territories. I don't think that they 
have been funded to respond, nor have they maximized their 
efforts.
    I know Mr. Devaney knows because we have talked about it, 
but in the 108th Congress and 109th, due to concerns I had for 
my constituents and for the future of the Virgin Islands, I 
introduced a bill to create an independent chief financial 
officer.
    In testimony I was extremely disappointed that the Office 
of Insular Affairs, in spite of repeated reports from the IG 
detailing the lack of accountability, they testified against 
the legislation.
    I wanted to ask both of you given the experience what is 
your reaction to the Office of Insular Affairs testifying 
against legislation that was meant to create a chief financial 
officer to balance the books, certify expenditures and account 
for all Federal and local funds?
    You, Ms. Nazzaro, also say that that is something that the 
office ought to be doing in your statement. Do you think that 
such a position, something similar to what was created for the 
District of Columbia, could help the Virgin Islands Government 
or other insular governments?
    Ms. Nazzaro. I am not familiar with the legislation that 
you talk about or the proposal.
    Mrs. Christensen. Are you familiar with D.C.?
    Ms. Nazzaro. With D.C. and why there would be an objection 
to this, but we certainly endorse the concept of having a chief 
financial officer.
    The kind of concerns that we have been, you know, finding 
in the past and the issues that we have raised have been for 
the greatest part financial issues. Certainly having somebody 
like a chief financial officer in charge and being held 
accountable should certainly be a welcome step forward.
    Mrs. Christensen. Mr. Devaney?
    Mr. Devaney. I would concur with that thought. I am equally 
not familiar with the specifics of your bill or why we would 
have opposed it, but in general anything that would improve the 
financial accountability of the insular islands is----
    Mrs. Christensen. Because your reports go back before the 
108th and have continued since the 108th Congress citing the 
same deficiencies, correct?
    Ms. Nazzaro. Correct.
    Mr. Devaney. Yes.
    Mrs. Christensen. Mr. Devaney, in putting together your 
audit reports I would imagine there is a great deal of 
interaction with local governments, but after the audit have 
you seen any effort by the Office of Insular Affairs to sit 
down with the heads of these insular governments and discuss 
the implementation or work with us to respond to the 
recommendations of those audits?
    Mr. Devaney. I have seen some of that. I have seen the 
current Deputy Assistant Secretary. Mr. Cohen and I have had a 
number of productive discussions, and I know he has gone out 
and talked to the island governments about accountability.
    He also has been fairly supportive of my efforts to develop 
a capacity for the island public auditors. In your case it is 
an IG, but in most of the Pacific islands they are called 
public auditors.
    We have been doing an awful lot of work in terms of 
training and bringing those auditors to the United States, 
working with us and sending them back home to hopefully export 
some of the things we are doing. They have been supportive of 
issues like that on occasion.
    Mrs. Christensen. OK. It doesn't seem from your testimony 
that there has been much improvement, however.
    Mr. Devaney. There really actually hasn't been much 
improvement at all, and sometimes I feel like we really don't 
have to go out and do the audit, particularly one we have done 
before, because there hasn't been improvement in the ensuing 
years.
    Mrs. Christensen. My time has expired. I thank you again 
for recognizing me and Mr. Kildee for passing to allow me time.
    The Chairman. Thank you.
    The Chair recognizes the gentlelady from Washington, Ms. 
McMorris Rodgers.
    Mrs. McMorris Rodgers. Thank you, Mr. Chairman, and I too 
want to say thank you to both panels for being here today.
    I have some questions regarding the Endangered Species Act 
and some of the inconsistencies in the way it has been 
implemented, but at this time I think I would prefer to yield 
my time to our Ranking Member, Mr. Pearce from New Mexico.
    Mr. Pearce. I thank the gentlelady for yielding.
    Mr. Devaney, you used the words flagrant violations, and 
when I read Ms. Carolita Kallaur she was a Clinton appointee 
during Clinton's Administration, right? Carolita Kallaur was 
during the Clinton Administration?
    Mr. Devaney. Yes. Yes.
    Mr. Pearce. OK. Her letter doesn't seem like there is 
anything to be uncovered here. I think that term got used, 
uncovered. She simply says in the letter:
    ``In contrast, because Congress did not mandate the 
specific element for terms of new leases we did not address it 
in regulation. Rather, we determined that the specific form of 
certain elements such as price triggers would be best 
determined at the time of sale to allow more flexibility on the 
application form. For notices of sale held in 1998 and 1999, 
the price trigger language was left out of the notices and the 
lease documents.''
    Mr. Chairman, I would request unanimous consent to submit 
this whole sheaf of letters there that are back and forth.
    The Chairman. Without objection. So ordered.
    Mr. Pearce. In fact, if I could get a staffer to carry this 
out to Mr. Devaney? This in fact is the letter that did not get 
included in this document. It seems to be a signal document, 
that letter.
    Mr. Devaney, when it comes right down to the cutting point, 
the point of impact, you keep using the word mistake. A mistake 
would mean that there is a policy in place. Can you tell me 
where, anywhere, that you found that policy written, referred 
to, hinted at?
    I have showed you that the sales, and I am not here to 
defend the Clinton Administration, but I do not think that 
there is double dealing on the part of the Clinton 
Administration. I don't think that there was any apparent 
criminal activity. I think there was just a conscious decision 
that the price may never get up to where it was going to get 
there.
    Can you show me where you draw your conclusion, page 5 of 
your testimony, that a policy was there and a mistake was made 
because they didn't comply with the policy?
    Mr. Devaney. The mistake that I have been talking about, 
the mistake noted in the report and the mistake noted in my 
testimony since then, is that the one part of MMS felt that the 
price thresholds were going to be included in the Royalty 
Relief Act.
    Mr. Pearce. Show me. Where is the documentation of that in 
this report? Where is the documentation that somebody thought 
they were going to be included?
    Mr. Devaney. I believe it is in there, sir.
    Mr. Pearce. Yes. You made the report. Would your staff 
right behind you not during this time, but during the next time 
we ask questions, I would like for you to have your staff show 
me the document where the policy is in place because the whole 
question between my friends on the other side of the aisle and 
ourselves is you are saying a mistake was made, which means 
that there was a policy in place, and I am telling you, sir, 
that these earmarks, these red deals, are because we have 
dissected that report, and I don't find where you have referred 
to a policy.
    I do not find one fact, and yet I find continuing things--
the notice of rule, the temporary rule, the final rule. Nothing 
is in there, and yet you say that there is some mistake that 
kind of slipped through in the black of the night because there 
is some confusion, and I don't find the confusion. Ms. 
Kallaur's letter has no confusion. It simply says we made it. I 
would really like to have that documentation where you say a 
policy was in place that was ignored.
    Mr. Devaney. If I could, sir, I really think I never said 
policy in the report, and I haven't said policy today. What I 
am talking about is the practice of the Department was to put 
addendums on these leases that included the price threshold 
language. In the process of developing the procedures and rules 
within the Department of the Interior, when the Royalty Relief 
Act took place part of MMS' management felt like the price 
thresholds were going to be included in the Royalty Relief Act.
    Mr. Pearce. If I could reclaim my turn, sir. Now you said 
you never said there was a policy, but this synopsis that comes 
straight from you and this is early in the document that you 
dig that up. It says we found that shortly after the inception 
the Outer Continental Shelf Deepwater Royalty Relief Act of 
1995, MMS made the policy decision.
    Now you declare this in your statement. Do you document--I 
want to know how you drew the conclusion that MMS made a 
policy. Your words, sir, your words, your document, and now you 
are saying you did not say it. I see the time is exposed, but 
we can have a shot at this, and if you would get your staff to 
show me where that policy is, that is a key to the whole 
discussion here. I do not think that you can show a policy that 
shows the Clinton Administration to be illegal, to be the 
criminals that they are being made out here, because you have 
already said yourself that the Bush Administration included the 
price thresholds in every single one of their negotiations.
    I am not here to defend the administration under Clinton, 
but I will tell you, sir, I think that you did not do and 
include everything that should have been included.
    Thank you, I yield back.

    [The letters submitted for the record by Mr. Pearce 
follow:]

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    The Chairman. The gentleman from Michigan, Mr. Kildee.
    Mr. Kildee. Thank you.
    Mr. Hinchey. Mr. Chairman, can we have a response?
    The Chairman. Yes. A main response.
    Mr. Devaney. My staff has just pointed out to me that 
witnesses said there was a policy but that it was not written 
down, so if there is a reference to a policy it makes reference 
to a witness interview that probably is included in that report 
where a witness said we had a policy and then when the question 
was asked by our investigators, was it written down, the answer 
was no.
    And in fact the Solicitor and I have had conversations; he 
has been desperately trying to find a policy and he cannot find 
one.
    You know, there was a practice, as I mentioned earlier, to 
put addendums onto the leases. As I said there was a policy, 
but it was never written down so there was no official written 
policy of the Department of Interior.
    The Chairman. The gentleman from Michigan, Mr. Kildee?
    Mr. Kildee. Thank you, Mr. Chairman.
    Mr. Devaney, in your testimony you said in the last two 
years alone we have uncovered golf outings, dinners, hunting 
trips, concert tickets and box seats at sporting events being 
accepted by DOI officials from prohibited sources.
    We have also chronicled exclusive access and special favors 
provided by DOI employees to select outside entities, all of 
which are at a minimum a violation of standards of ethical 
conduct for employees of the Executive Branch. This has been 
referred to the Justice Department?
    Mr. Devaney. Yes. It is our practice to refer all of them 
to the Justice Department.
    Mr. Kildee. And have there been any indictments or 
convictions yet as a result of these events of taking from 
prohibited sources?
    Mr. Devaney. No, sir, there haven't been, but many of these 
things are still under investigation.
    Mr. Kildee. OK. You mentioned that all that has been done 
so far then, but they have been referred to the Justice 
Department, is that they were directed to take ethics training, 
and they were also scolded.
    In the Congress we take these things more seriously for our 
own Members. We have at least two Members now who are in the 
Federal penitentiary for having done similar things here. Do 
you anticipate or do you have any idea what the Justice 
Department may do to anticipate any indictments coming from 
these actions which were similar to some of the actions that 
the Members of Congress were put in the Federal penitentiary 
for?
    Mr. Devaney. Well, I can only say, sir, that our practice 
is to work with U.S. Attorney's Offices and main Justice early 
on in the investigations so that they are with us the entire 
investigation as we develop these things.
    I mean, I think there are a lot of reasons why matters such 
as these it might be decided by the Department to take them 
criminally, and it might be decided by the Department to allow 
the Department of Interior to take some administrative action.
    My real concern is when the Department of Justice decides 
not to take criminal action and it comes back to the Department 
of Interior to take corrective administrative action that often 
times that corrective action is a reprimand or counseling or 
two hours of ethics training, which in my mind is not enough of 
an administrative action.
    Mr. Kildee. When we talk about tens of billions of dollars, 
that is a mighty sum and it may be much more than that.
    It seems to me when it comes to tens of billions of 
dollars--and I know this number and how much one official may 
be responsible for is not easy to ascertain right now--but with 
tens of billions of dollars, ethics training is kind of a mild 
way of dealing with this.
    We can't ask them that, of course, but I would hope that 
some subscribe to the Ten Commandments that say thou shalt not 
steal. You have tens of billions of dollars, of taxpayers' 
dollars, and they are responsible in some way for that. To my 
mind that is a violation of thou shalt not steal.
    I would hope that the Interior Department would really urge 
the Justice Department to go after these people just as they 
went after Members of Congress for doing similar things. I 
think this would send a great message not only to the Interior 
Department, but everyone in the Executive Branch.
    I have been here for 30 years. I have served with six 
Presidents. None of them have been saints. None of them have 
been totally sinners. I think that we need to send a message to 
the Executive Branch that we are not going to tolerate stealing 
from the taxpayers.
    I would hope that the Interior Department and the other 
branches of government involved in similar matters like this 
would urge the Justice Department to pursue this in a criminal 
matter.
    I yield back the balance of my time. I would be happy to 
yield to you.
    Mr. Markey. If I may, just to get back to Mr. Pearce, we 
agreed that the Clinton Administration made a mistake. We 
agreed.
    What we are trying to understand is why Johnnie Burton 
continues to refuse to ask for additional leverage that will 
make it possible for her to renegotiate these leases or to 
impose a fee and in fact is saying she does not want 
legislation to pass----
    The Chairman. Would the gentleman yield?
    Mr. Markey.--which will give her that ability. This goes 
right at the heart now of a problem, a mistake identified, tens 
of billions of dollars at stake and Johnnie Burton and this 
Department of Interior continuing to say they oppose the 
legislation which would give them the leverage to recollect 
tens of billions of dollars that could be used for other 
purposes.
    That is what this is all about. That is the heart of the 
question. We concede that it was a mistake during the Clinton 
Administration. What we want to know is what this 
Administration is going to do to correct the mistake. They are 
saying we don't want the authority to be able to collect the 
tens of billions of dollars. That is the heart of the question.
    When we get an answer to that from the Bush Administration 
then we will know that they are serious about this problem.
    The Chairman. The gentleman from Texas, Mr. Gohmert, is 
recognized.
    Mr. Gohmert. Thank you, Mr. Chairman. I do appreciate your 
having this hearing. These are good things.
    To follow up on my friend from Massachusetts talking about 
a mistake, you have mentioned a mistake. Mistakes were made by 
both Administrations. Well, we have to get to the bottom of it. 
Actually leaving out the price thresholds was only done during 
the Clinton Administration.
    If I put on my old judge hat, if you have a mutual mistake 
it is a basis for rescission and renegotiating the contract. If 
you have a matter of fraud, it is a basis for redoing the 
contract, so I am still troubled.
    If it's not a mutual mistake, then you have problems 
renegotiating, but looking at page 7 of your report it looks 
like you have some good leverage here to go forth and find that 
there may have been fraud.
    You have three people listed here. According to John Rodi, 
R-O-D-I, the supervisor of Gulf of Mexico sales, to me not a 
low level employee either, but he said that he was directed to 
remove all royalty suspension language and also to no longer 
attach the addenda containing the royalty relief restriction. 
He gave three names there that you put in your report as who 
may have directed that. He couldn't remember, but it was one of 
the three.
    Now, having been involved in criminal investigations 
before, man, if you can get something narrowed down to three 
suspects you have a great case to work. You have it narrowed 
down to three suspects, and if there was fraud involved I don't 
care what Administration hired them, what party they may vote 
for. If there is something worthy of prison, prison ought to 
happen just like it did with Duke Cunningham. That was worthy 
of prison.
    I want to know why do you keep saying it was a mistake when 
you have three suspects here who according to this one person 
in your report says these people directed him to take it out? 
That is not a mistake. Somebody had a premeditated thought and 
told him to take it out, leave the addenda out.
    I want to know why has that not been investigated so we 
could pursue the issue of fraud? As my good friend Mr. Kildee 
pointed out, the Ten Commandments ought to be coming into play. 
People shouldn't be allowed to steal, and if anybody from any 
Administration is doing that they ought to be held accountable.
    I am just concerned that when you came in, in 1999, maybe 
some of these folks, maybe because you were coming in, the 
Clinton Administration--I don't know, but just seeing, you 
know, basically potential almost criminal activity from Bush, 
and then we are giving this pass when we have a case here that 
ought to be made. Would you explain why this has not been 
pursued?
    Mr. Devaney. Sir, we did pursue those three people. In one 
case we interviewed the gentleman. Let us just call them 
Gentlemen A, B and C.
    Mr. Gohmert. I think that is fair because two of them 
didn't do it.
    Mr. Devaney. Gentleman A cooperated with our investigators, 
gave a statement, took a polygraph, passed.
    Gentleman B has been cooperative before, was cooperative 
this time, gave a written statement. There is a body of 
evidence outside of just talking to him that suggests he was 
telling the truth, so that is Gentleman B.
    Gentleman C is no longer employed by the Department of 
Interior, and we attempted to talk to him on two occasions. 
Quite frankly, he is just not capable of being talked to, so we 
are left with a very uncomfortable situation of not knowing 
which of these three people told that first gentleman, Mr. 
Rodi, to take it out.
    Mr. Gohmert. OK. My time is running out. Have you followed 
the money? Are there any ties between this cozy cooperation 
potential between the oil and gas industry and any one of these 
three? You know that is where you go. Have you looked at that?
    Mr. Devaney. The investigators looked at that and could not 
find any evidence of that.
    Mr. Gohmert. How far have they looked into it?
    Mr. Devaney. Well, they did the normal investigative 
practice.
    Mr. Gohmert. Do they have the power to subpoena?
    Mr. Devaney. Absolutely. Bank records.
    Mr. Gohmert. And has any of this been turned over to DOJ to 
pursue?
    Mr. Devaney. We talked to DOJ about this case from day one 
and worked with them the entire way, so in essence my 
investigators were taking direction from DOJ all during this 
matter.
    Mr. Gohmert. You said you have 10 agents that are working 
on the Abramoff matter. My experience is when the FBI comes in 
they put the lid on everything and it is hard to get anything 
done.
    What are these 10 agents doing? You said yourself a while 
ago that when DOJ takes an action you have to wait until it 
comes back to you to go forward. What are those 10 agents doing 
while the DOJ is doing this Abramoff case?
    Mr. Devaney. Well, the Abramoff case is being worked by a 
task force of FBI agents, my agents and IRS agents under the 
direction of the Department of Justice. That has been the case 
for three years.
    They are working round the clock on that investigation. 
There have been some results that have become public, and there 
are more results to come.
    Mr. Gohmert. I would hope so. Thank you.
    I yield back.
    The Chairman. The Chair recognizes the gentlelady from 
California, Ms. Napolitano.
    Mrs. Napolitano. Thank you, Mr. Chair.
    Sorry I came a little late, but I have a slew of questions. 
I will dump them on you, and then those that you can't answer I 
would appreciate an answer in writing if you would.
    I am listening to this, and it is hard to believe that this 
is continuing to happen. Mr. Devaney, you called it mischief. I 
am sorry. This is not mischief. This is total fraud and abuse 
of the taxpayers' money.
    You say that you have had prosecution. How many? How many 
more are expected? Is there any expectation of recovery of some 
of the money from the individuals who may have taken these 
trips illegally, that may have abused some of the agency's 
standards?
    Do your employees take ethics classes like all of our 
employees? Do they sign a conflict of interest and report their 
income and from what areas, their holdings? All of those 
questions I would like to have answered.
    What are you doing to pursue the refund, if you will, the 
recovery of lost revenues? I totally agree with the gentleman 
that we need to be able to not just have your investigators 
involved, but the Department of Justice, the FBI, if that is 
what is necessary because you are talking about possibly more 
than $1 billion. You are talking about money that could be well 
utilized in other areas to do the services that are required by 
you as steward of the natural resources of this country.
    The issue of the scolding of the employees. Do they get a 
salary decrease because they are not complying with the 
standards of ethics that is required of every single Federal 
employee? Those are just for starters, and then I have some 
others.
    You state on page 2 that you try when you can to focus on 
high risk or high impact issues that touch upon multiple 
bureaus. Have you considered whether the Bureau of Indian 
Affairs, the National Park Service and the Bureau of 
Reclamation are fully cooperating to protect the public from 
possible failure of unsafe dams? How safe are the dams under 
the jurisdiction of these agencies? That is Question 1.
    Question 2, page 15. In your statement you refer to an 
estimated $850 million backlog of maintenance on Bureau of 
Indian Affairs irrigation projects. Since water supplies are 
often a key component of claims made by tribes against the U.S. 
Government, isn't the Secretary placing his trust 
responsibilities to the tribes at risk if this maintenance 
backlog is not eliminated?
    Question 3. On page 6 of your statement you refer to 
security risk and protection of our national icons and dams. 
Specifically with regard to dams, has it been possible to 
determine whether fully secured facilities can be guaranteed if 
project water and power users are held responsible for security 
costs?
    I don't expect you to remember all of them, but certainly 
you can give it a try.
    Mr. Devaney. Let me talk about dams just a minute. You 
know, we did an assessment of dams in 2005, and much to my 
delight it came out very good. The Bureau of Reclamation has 
provided a consistent level of security for the dams that was 
very impressive and in sharp contrast to the assessment of the 
national icons, the monuments on the mall, the Statue of 
Liberty.
    We were very impressed with what BOR had done. We made some 
minor recommendations. They have since embraced those 
recommendations, so I think the situation with dams has been 
very thoughtfully done, and to the extent that security can be 
provided in this day and age I think it is being provided, 
particularly to the dams that BOR oversees.
    A number of the issues you raise are probably questions 
that are more appropriate for the Department officials to 
answer for you rather than an IG, but with respect to the 
resources deployed in criminal investigations we work with the 
FBI all the time. Some cases we do jointly. Abramoff would be a 
good example of that. Some cases we do separately.
    They work on cases on Department of Interior officials 
without us. We work on cases on Department officials without 
them. It is a matter of coming together. I have a good, solid 
relationship with the hierarchy of the FBI. We come together. 
We decide the division of labor, the utility of us working 
together or not. Often times, almost all the time, we are 
working with DOJ. Often times DOJ will suggest a division of 
labor.
    All of those concerns that you might have about that I 
think you should feel comforted that those kinds of discussions 
are going on and those relationships exist between my office, 
the FBI and the Department of Justice.
    Mrs. Napolitano. OK. I will submit these questions, and 
hopefully you will get your other individual areas to respond.
    I am out of time. Thank you. I would like to have a second 
round.
    The Chairman. The gentleman from Nevada, Mr. Heller?
    Mr. Heller. Thank you, Mr. Chairman. My questions surround 
wildfire management, but due to time constraints and the 
direction of today's hearing I would yield my time to the 
Ranking Member, Mr. Pearce.
    Mr. Pearce. I thank the gentleman for yielding.
    Mr. Devaney, when we last spoke we had kind of interrupted. 
You were just getting to the point of saying that we had not a 
written policy, but a policy that was in fact not written down, 
a policy of innuendo you might say.
    Is that going to stand up in court? Do you think that the 
challenges to that unwritten policy will stand up in court?
    Mr. Devaney. I am not a lawyer, sir, so I don't really 
know.
    Mr. Pearce. OK.
    Mr. Devaney. I mean, I have had discussions with the 
Solicitor, and----
    Mr. Pearce. That is fair enough. If you are not a lawyer, I 
won't ask you. I suspect that it probably won't.
    You have a quite impressive resume, and I do appreciate 
your service. In your years of IG work, how many unwritten 
policies have you had to interpret like this?
    Mr. Devaney. We have come across a lot of unwritten 
policies at the Department of Interior.
    Mr. Pearce. OK. Fair enough. You would say that to be in 
the hundreds or thousands?
    Mr. Devaney. No, I wouldn't say hundreds, but perhaps a 
dozen or so.
    Mr. Pearce. Twelve? Twelve unwritten policies?
    First of all, let me flip this chart around. My good 
colleague and friend from Massachusetts had wondered why the 
Bush Administration doesn't really want to renegotiate. Once 
these contracts or once these sales are made under the Clinton 
Administration, people put money into these. This is probably a 
$1 billion to $2 billion investment.
    As a business, you can live with any cost structure, but 
you have to know it going in. You make decisions. It is just a 
mathematical calculation. For instance, people wonder why Exxon 
is not a major player offshore. They put billions of dollars in 
a few of these platforms, and they ended up with dry holes. 
Exxon got burned deep enough that they didn't want to go back.
    What we are doing now is we are going to renegotiate these 
contracts. People signed them in good faith, and I don't think 
there was a mistake made. I think that Ms. Kallaur's letter was 
accurate; that we made decisions not to include the price 
thresholds. I think it is because they believed the price would 
never go up.
    The documents at the time were screaming that we are aflood 
in oil. In fact, the belief was the price was going to go down 
to $5. Now, they made a calculation. It was a bad judgment. 
What you are going to do is renegotiate those billion dollar 
investments, some of which won't ever pay off. What you are 
going to do is you are going to cause people to quit putting 
their money in them because of your testimony.
    I really worry about that because if we don't drill that 
well, if we don't put those billion dollar investments in, what 
is going to happen is we are going to start importing more and 
more oil. We are going to shut those things down.
    If that is what this Congress wants to do, that is fine, 
but I don't think the Clinton mistake was unethical. I do not 
think there were some shenanigans. I don't think there was the 
deliberate malfeasance. I think they made a judgment.
    Now, you declare it to be a mistake and yet you are having 
a significant discussion. You can put the slide down. You had a 
significant discussion with Mr. Gohmert talking about the three 
individuals. You even knew them, A, B and C, and you even knew 
the circumstances in referring to the Justice Department.
    Now, those are not mistakes. Those are deliberate acts. 
When you start using the terminology deliberate and that two 
have cooperated and C hasn't, that he is not capable, you have 
thought yourself in the bottom of your heart that it was a 
mistake, but it was instead deliberate, and yet not one time in 
this report, this great, big report, not one time do you give 
us that balancing opinion. Instead, your whole testimony is 
that it was a mistake, it was a mistake, it was a mistake, it 
was a mistake.
    You took sale after sale after sale by the Clinton 
Administration and never once gave the alternative view that 
these appear to be deliberate. You instead say it is a mistake, 
and now it should be corrected. What you are going to do is you 
are going to cause people to lose money and get burned so bad 
in the Gulf that we are going to start importing more oil and 
not less oil, and that, sir, I am not sure we can declare as a 
positive service to the country.
    Thank you. I yield back.
    The Chairman. The gentleman from Arizona, Mr. Grijalva, is 
recognized.
    Mr. Grijalva. Thank you, Mr. Chairman, and thank you very 
much for this hearing. It is compelling, disturbing, but very 
necessary. I appreciate very much, Mr. Chairman, this committee 
reengaging in its oversight responsibility.
    Let me, if I may. Both IG and GAO have documented instances 
in which the appraisal process in the Department of Interior 
failed to meet accepted appraisal standards. Can either of you 
comment on the quality of the appraisal process within the 
Department not only for land sales, but exchanges and other 
transactions as well?
    Why does this continue to be a problem, and what impact do 
nonstandard appraisal practices have on the value the American 
public receives for sale or exchange of its lands?
    Back home in another life when I served as a county 
commissioner this was a constant problem, the appraisal 
process. You see it replicated at a much higher level here at 
the Department of Interior, so if either one of you can comment 
on that question I would appreciate it very much.
    Ms. Nazzaro. To get to your last question, we recently did 
some work on BLM's land appraisal services, and while we do 
commend the Department of Interior for creating ASD and 
consolidating those functions so that it is no longer the 
program offices that are doing the appraisal review functions 
and we now have an independent reviewer. Certainly we feel that 
was a step in the right direction.
    However, we do feel that there is a need for stronger 
compliance with standards, and there are very spelled out 
appraisal standards that need to be complied with. If you don't 
have compliance with that, you have no assurance that the lands 
are being appropriately valued and that the taxpayer then is 
being well served.
    The biggest problem we saw in our most recent work was 
where you needed to have a technical expertise. Say the 
property had water on it or was a forested land. You needed to 
have some understanding of how you value properties with those 
kind of assets. The appraisal reviewers and the appraisers 
themselves in these cases did not have that expertise, so it 
brought into question then the accuracy of the appraisal itself 
without that expertise.
    Mr. Devaney. Congressman, I was very pleased when former 
Secretary Norton put together a group of people to look at 
appraisals within the Department. It followed a couple of 
disturbing reports that we issued about land appraisals.
    They worked very hard and put together a program where they 
have an appraisal office not at the Department of Interior, and 
from what we were seeing at the time was eight different 
bureaus, eight different appraisals and eight different 
approaches to appraisals.
    This new office purports to try to have one appraisal 
process and brings a degree of transparency that was not 
present before, so we hope it works. I welcomed the GAO look at 
it recently, and I know the Department is looking at their 
report.
    Mr. Grijalva. Thank you. The other question has to do with 
the maintenance backlog with our National Park Service. There 
was a commitment made in 2000 by the President that we would 
lower that. The backlog was at $5 billion, and within five 
years we would eradicate that backlog.
    Three years later your GAO report estimated again that it 
was still at $5 billion. Is GAO able to estimate the current 
size of the backlog--I know you mentioned between $9.6 and 
$17.3 billion--that is facing the National Park Service? Are we 
any closer after seven years to really addressing that issue of 
retiring that backlog?
    Ms. Nazzaro. The numbers that you were citing actually came 
out of a recent report that our group on physical 
infrastructure did and giving the range. They were looking 
primarily at facilities and associated infrastructure, so it 
did not include things like roads.
    Actually for the Park Service itself we have our most 
recent work was about a year ago, and we did continue to put 
the $5 billion number in there. We have not looked at backlog 
maintenance per se as to the accuracy of that number, but that 
is the number that we continue to estimate for the Park 
Service.
    Mr. Grijalva. One quick question if I may for Mr. Devaney. 
The state of tribal detention is very disturbing. Seventy-nine 
percent of those facilities are well below the minimum for 
staffing and infrastructure.
    The President's current budget has $16 million for 
combating methamphetamine and $16 million for staffing of law 
enforcement personnel and training. Do you feel this request 
includes adequate funding to satisfy and address the needs in 
Native American detention facilities?
    Mr. Devaney. I think it is a huge step forward, and I think 
it is a welcomed step. They have continued problems there, 
really serious problems, and staffing is in large part the 
cause of it.
    It is not always the problem of having the money or the 
staff position. It is sometimes finding people to fill those 
positions and go to some of the remote areas. It is a difficult 
proposition, but this is a good step. It is a good thing, and I 
am eager to see if it helps as it should.
    Mr. Grijalva. Thank you.
    I yield back, Mr. Chair.
    The Chairman. The gentleman from Idaho, Mr. Sali, is 
recognized.
    Mr. Sali. Thank you, Mr. Chairman.
    Mr. Devaney, with respect to the rule that was enacted and 
the five leases that Mr. Pearce talked about, I understood your 
testimony earlier that all that took place during the Clinton 
Administration DOI under the Clinton Administration. Is that 
correct?
    Mr. Devaney. I believe it is, yes.
    Mr. Sali. And with respect to those leases, yes or no, was 
there any criminal activity on the part of anybody in the 
Department of Interior with respect to any of those leases or 
the enactment of that rule?
    Mr. Devaney. No, based on our investigation.
    Mr. Sali. With respect to those leases and the enactment of 
that rule, was there any violation of policy, written or 
unwritten, on the part of the folks in the Clinton 
Administration DOI?
    Mr. Devaney. To the extent that policy is unwritten, that 
is not a healthy situation. I have used and will continue to 
use that a mistake was made. I truly believe a mistake was 
made.
    Mr. Sali. I didn't ask you if a mistake was made. I asked 
you if there was a violation of policy.
    Mr. Devaney. A violation of policy in my mind would presume 
that there was written policy, and there wasn't any so no.
    Mr. Sali. OK.
    The Chairman. Would the gentleman from Nevada yield on that 
question?
    Mr. Sali. I would yield.
    The Chairman. Yes?
    Mr. Sali. Yes.
    The Chairman. I am sorry. Idaho. I am sorry. I apologize.
    You know, I have been quiet during this whole question of 
whether there was a policy in place or not. That seems to be 
not the issue here. There was a practice in place, and those 
leases issued in 1996 and 1997 where a threshold was put in 
place through an addendum the statute was enforced.
    It was in those 1998 and 1999 leases where that practice 
did not continue and no thresholds were put in place, and once 
that was discovered in the year 2000 the thresholds were 
replaced again, reinstituted through an addendum, again 
enforcing the statute. That happened only after it came to 
light through various press accounts that the thresholds were 
not in place on these 1998 and 1999 leases.
    Whether there was a policy or not, there was a practice in 
place, and now I understand there is even a lawsuit in place, 
that Kerr-McGee is instituting a lawsuit. Their lawsuit 
questions the MMS authority to set these price thresholds from 
the entire period, 1996 to 2000, and depending on the outcome 
of this litigation preliminary estimates of MMS indicate if 
Kerr-McGee is successful we lose another $60 billion in lost 
revenue. It seems to me that the point being made on the 
Minority side is arguing in favor of the Kerr-McGee lawsuit.
    I yield back to the gentleman.
    Mr. Sali. Reclaiming my time, Mr. Chairman.
    Mr. Devaney, you would agree that the U.S. Government is 
bound by the law of contract in this country, wouldn't you?
    Mr. Devaney. In a general sense, yes.
    Mr. Sali. Well, it seems to me, based on the documents that 
are in front of you, that there was a conscious decision to 
leave out this addendum dealing with these royalty payments.
    As opposed to the notion of stealing that was suggested by 
one of the Members, it appears to me that in an era when we had 
very low prices for crude oil a bad deal was made. Isn't the 
United States bound to that bad deal because we have contracts 
in place in the form of these leases?
    Mr. Devaney. Sir, I suspect that will be a matter of 
litigation at some point. I really don't have any basis to----
    The Chairman. Would the gentleman yield?
    Mr. Sali. Serious charges have been made here today, and 
serious charges are made in your report. You have said today to 
me that you don't think that there was criminal activity 
involved. There was no violation of any policy.
    There seems to be some kind of practice, which was not 
followed in this case and apparently was consciously not 
followed. So aren't we just stuck with a bad deal that was made 
during the Clinton Administration?
    Mr. Devaney. That may be the case, yes.
    Mr. Sali. Thank you.
    Mr. Devaney. That may be the case.
    Mr. Sali. I would yield the balance of my time to the 
Ranking Member.
    Mr. Pearce. Yes. And in response to what the Chairman says, 
the Clinton Administration did find out. He says on July 20, 
2000, the Clinton Administration reinstituted it. Doesn't it 
make sense that if they discovered this loophole that was there 
that they would go back and redo the five sales prior to that 
if they really discovered the loophole?
    It looks more like there was a conscious decision to put 
price supports in. The price fell. The world got awash in oil. 
They made a conscious decision on five sales they didn't think 
the price was ever going to get up to $28, and then when the 
price started banging back up toward that then in 2000, but 
never once did the Clinton Administration decide to go back and 
recalculate. They are still in power. It is not the cronyism 
with the oil companies that we are alleging against the Bush 
Administration.
    If you could address why if the Clinton Administration 
discovered it--in the last sale in the whole timeline of sales 
it is there--how did you reason that in your mind that it was a 
mistake?
    Mr. Devaney. When that employee found out about it, and I 
would not describe him as a senior member of MMS. When he found 
out about it he brought it to the attention of his supervisor.
    I think there was consultation with the Solicitor's Office, 
and at that time they rendered the opinion or a particular 
solicitor rendered the opinion--a solicitor/ attorney, not the 
Solicitor rendered the opinion--that it was too late, that that 
could not be fixed, those leases that didn't have it, but they 
then began to put the threshold language back in.
    The Chairman. The gentleman from California is recognized, 
Mr. Costa.
    Mr. Costa. Thank you very much, Mr. Chairman. I, too, 
commend you for this hearing. As the Subcommittee Chairman of 
this subject matter, I hope we will continue to work on this in 
further detail because I think today is the beginning, but 
obviously much more work needs to be done.
    A couple questions that relate to your testimony, Mr. 
Devaney. You talked about a smoking gun, but you talked about 
no evidence of omission of price threshold was determined.
    Then in your reference to the questions from the gentleman 
from Texas about Mr. A, B and C, in your opinion do you believe 
that there was any or has been any criminal intent?
    Mr. Devaney. We found no evidence of criminal intent. Even 
if A, B and C, one of them had told Mr. Rodi to leave it out I 
still believe that they were under the impression that by 
leaving it out it would be included in the Royalty Relief Act, 
so it would have been included.
    Even if we were to identify the individual that had 
actually told----
    Mr. Costa. So you don't believe there was criminal intent?
    Mr. Devaney. No, I don't.
    Mr. Costa. OK. As it relates to the Chairman referred to as 
a practice, a practice that was applied and not applied, in 
effect does this become a de facto policy in your opinion?
    Mr. Devaney. It was certainly the practice at the time, as 
stated earlier.
    Mr. Costa. OK. We have established for the point that at 
the time it was the practice. I think looking back at the past 
is instructive as it relates to where we are today, but I am 
also very focused on where we move forward because of the 
current circumstances.
    What do you think is the most significant obstacle in 
getting Mineral and Management Services back on track as far as 
the audits, the compliance activities that are concerned?
    Mr. Devaney. Well, as I said earlier, I think we have to 
look at the whole issue of where audits are done at Interior. I 
also mentioned I am not particularly anxious to take that 
function on, but----
    Mr. Costa. But it seems like it might be a good area for us 
to begin with the Subcommittee, don't you think?
    Mr. Devaney. It is an interest, I think. The time has come 
to reconsider that issue, yes.
    Mr. Costa. And my final question. As we know, steps are 
currently being taken to remedy the situation with Mineral and 
Management Services to include price thresholds in terms of 
deepwater leases that were issued in 1998 and 1999.
    Mineral and Management Services I understand has determined 
that an independent panel should be convened to review those 
procedures and processes surrounding the management of the 
mineral revenue that is estimated I guess in this testimony 
could be as much as maybe $10 billion. What are your thoughts 
on this?
    Mr. Devaney. That any independent body looking at this 
situation can have something positive to add, and I would 
welcome their views.
    Mr. Costa. $10 billion is positive, I would guess.
    Mr. Devaney. Yes.
    Mr. Costa. Well, we will continue to work with you. We 
appreciate your cooperation.
    I have some other questions that I will submit at a later 
time, Mr. Chairman, and I give back the balance of my time.
    The Chairman. The gentleman from Maryland, Mr. Sarbanes?
    Mr. Sarbanes. Thank you, Mr. Chairman. Thanks for holding 
this hearing.
    I have not been in Congress more than six weeks now so I am 
new to this, but there is a theme emerging in all the hearings 
just about I have participated in so far, and that is a 
significant lack of accountability at the highest levels.
    You know, whether we are talking about $10 million of cash 
that was sent overseas to Iraq for foreign ministries that is 
unaccountable for, $10 million in questionable contractor costs 
in that context, whether we are talking about $10 million in 
unwarranted royalty relief, my head is exploding with the sheer 
volume of this and magnitude of it.
    Before I came here I spent a lot of time working with 
healthcare organizations, in particular at times with respect 
to compliance programs that the Office of Inspector General for 
HHS requires those institutions to implement.
    There are a lot of technical requirements that an 
organization needs to adhere to, but the bottom line 
understanding that I came away with is that no compliance 
program will ever work if you don't have a buy-in right at the 
top and leadership that sets the tone for the organization at 
its highest levels. It becomes easier as you move down the 
chain to look the other way on things that matter and on 
accountability.
    I would just like you to speak with respect to the 
Department of the Interior based on these reviews that you have 
done, and you have spoken to this somewhat so I am asking you 
again to describe where you think the most significant source 
of breakdown in accountability was. Was it a resource question, 
was it a competence question, or was it a leadership question 
in terms of setting the tone?
    Mr. Devaney. Let me make two distinctions between now and--
let me speak to that first.
    Now Secretary Kempthorne has signaled in a host of ways his 
intention to change the culture of Interior and at least try to 
change the culture of Interior during his tenure as Secretary. 
He has issued ethics memos to all employees. He has done 
tapings on ethics that go out to the entire Department.
    He has created, most importantly I think, an accountability 
board to review decisions made at a lower level if there is any 
controversy as to what the administrative punishment is, so I 
applaud him for those efforts.
    He has taken all of my suggestions in both the audit and 
the investigation I have proffered so far in the MMS matter to 
heart and has directed the Department to implement my 
recommendations, so I couldn't say enough positive things about 
the direction this problem seems to be going in.
    When I have talked about some of the things I have done 
today, it has been an historical look back over the last two or 
three years that has not been so good. The Abramoff 
investigation, for instance, may in fact color some of my view 
about the culture that was at Interior that would allow someone 
to come into the Interior and try to influence things as he 
purportedly did, so I think times are changing for the 
positive, and that is a bit of good news.
    I think people now understand that if somebody takes meals, 
gratuities, golf that a punishment of attending ethics training 
for two hours just doesn't cut it. I think there is a 
recognition of that right now, and I am hopefully optimistic, 
as I suggested, that this is going to change.
    Mr. Sarbanes. Does the Department of Interior have any 
particular vulnerabilities to this kind of a culture of lack of 
accountability that you would identify?
    I mean, are there any ways in which it is sort of uniquely 
vulnerable to the kinds of accountability issues that we have 
talked about when you compare it to maybe some other agencies 
out there? Maybe not uniquely, but things that you would point 
to as special characteristics that require a particular 
vigilance and particular accountability measures to be in 
place.
    Mr. Devaney. I think so. As I have thought about it, one 
way to look at it is that outside of money--let us say that 
that is over at Treasury--everything else that somebody would 
want is at Interior. Oil, gas, minerals, land, water. All the 
commodities outside of money are there at Interior.
    There is a lot of money at stake, and when there is a lot 
of money at stake my background suggests to me that bad people 
will show up eventually, so I think the extra vigilance at the 
Department of Interior is necessary.
    Mr. Sarbanes. Thank you.
    The Chairman. The gentleman from New York, Mr. Hinchey.
    Mr. Hinchey. Thank you very much, Mr. Chairman. I 
appreciate your holding this hearing. I think it has been very 
interesting and very valuable.
    I want to also express my appreciation to both of you for 
the work that you have done and continue to do. I think it is 
very important to all of us here in the Congress, and it is 
certainly important to the American people. I thank you for it.
    The door was opened to these no royalty leases back in 1995 
when the Congress passed an energy bill which provided that 
opportunity. It struck me at the time as being very odd that we 
would encourage the consumption of a finite resource by 
encouraging people to go get it and not having to pay anything 
for it to the people who owned it, which were the public of 
this country.
    It seemed to me very bizarre. That was one of the reasons 
why I voted against that particular bill. That seems to me to 
have opened the door for these leases that were given out in 
1998 and 1999.
    When was it that this issue of no royalty leases came to 
the attention of the Secretary of the Department of the 
Interior here in Washington? I believe you said earlier in your 
testimony that the information about this was confined to 
Denver for a long period of time. Can you give us a little 
timeframe on that, how it evolved?
    Mr. Devaney. Well, I think there was a deliberate effort on 
the part of the lady that was mentioned earlier that is now 
deceased to prevent the information coming up the chain of 
command.
    We talked to the two directors that were there at the time. 
Neither one of them heard about this and indicated that had 
they heard about it they would have brought it to the 
Secretary's attention.
    We found no evidence that either Secretary Babbitt or 
Secretary Norton heard about this, and my view is that 
Secretary Kempthorne heard about it when he read it in the New 
York Times.
    Mr. Hinchey. So no one in the Secretary's office knew 
anything about it until that article appeared in the New York 
Times, based upon all the information that you have?
    Mr. Devaney. Based on what I know, yes. That is true.
    Mr. Hinchey. I thought it was back in 2004 that they got 
information here in Washington.
    Mr. Devaney. That would have been at the director of MMS 
level. The associate director informed at least as an email 
exchange, and the director, having looked at the emails, agrees 
that there probably was a brief discussion.
    In fairness, by this time this decision made in the 
Solicitor's Office that nothing could be done about it no 
matter what had become embedded in the thinking. Therefore, the 
issue was not taken any higher.
    Mr. Hinchey. So they just assumed that the leases could not 
be renegotiated or that some other action could have been taken 
by the Congress to make adjustment in that? They just let it 
slide and let it continue?
    Mr. Devaney. I would characterize it as a dependence upon 
the solicitor's opinion that they were depending on that had 
for a number of years suggested to them that there was nothing 
they could do about it.
    Mr. Hinchey. I just want to ask you a couple of questions 
about some specific people who were involved in this.
    It is my understanding that your investigation of the 
missing price thresholds for those leases back in 1998 and 1999 
led your investigators to focus on a man by the name of Chris 
Oynes. Is that name familiar to you?
    Mr. Devaney. It is. The focus of our investigation on Mr. 
Oynes centered around his testimony in front of the House I 
believe last fall and the testimony of some industry folks that 
had suggested that at a series of meetings they had brought the 
price threshold issue up.
    Mr. Oynes testified that he didn't recall that, and we took 
him from the hearing room to a polygraph room and polygraphed 
him, and he tested truthfully in that what he said at that 
hearing, he actually was telling the truth.
    Mr. Hinchey. Telling the truth that he did not remember any 
of the things that were going on?
    Mr. Devaney. Right. That is correct.
    Mr. Hinchey. When I read that it sounded to me very much 
like the Libby case with an awful lot of bad memories going on 
in people in important positions in this Administration.
    There is another man by the name of J. Steven Griles who 
was a lobbyist for the oil industry, the energy industry 
generally. Has your investigation focused on his activities?
    Mr. Devaney. With respect to MMS?
    Mr. Hinchey. Yes.
    Mr. Devaney. No.
    Mr. Hinchey. No? In what respect then?
    Mr. Devaney. We concluded an investigation in I believe it 
was 2004 on a series of ethical issues on Mr. Griles, proffered 
that report to the Department.
    You know, other investigations of him are ongoing, and I 
don't care to discuss them.
    Mr. Hinchey. OK. But they have to do with the Abramoff 
situation? Is that right?
    Mr. Devaney. It is fair to say that.
    Mr. Hinchey. But the focus of your attention has nothing to 
do with the Minerals Management circumstances and the leases?
    Mr. Devaney. No.
    Mr. Hinchey. No. OK. Thank you very much.
    The Chairman. The gentleman from Wisconsin, Mr. Kind?
    Mr. Kind. Thank you, Mr. Chairman. Mr. Chairman, I want to 
thank you here today for having a hearing as important as this 
one is.
    You can't help but listen to your testimony, read your 
testimony, Mr. Devaney, and not sit here and just feel very 
angry in regards to the culture of unethical conduct that has 
just permeated DOI now for a number of years with no effective 
oversight, no effective accountability other than a slap on the 
wrist and don't do it again.
    It is just infuriating, and it should be for the American 
taxpayer too to understand how business has been conducted over 
the last few years, especially at DOI. Obviously we have a huge 
task before us now on the Committee.
    Mr. Devaney, I am reading your testimony, and one thing 
that really jumps out at me is this is the first time that you 
have been brought back to testify before this very committee 
since what, 2001, almost six years now?
    Mr. Devaney. It may be 2000. July of 2000.
    Mr. Kind. 2000. Right. A tremendously long time, given what 
has been going on and the information that has come to public 
light in recent years too.
    If anything, we should be having more hearings like this on 
a regular basis for updates from both of you as we proceed.
    My goodness, the last two years alone you have uncovered 
golf outings, dinners, hunting trips, concert tickets, box 
seats at sporting events being accepted by DOI officials from 
prohibited sources, chronicled exclusive access and special 
favors provided by DOI employees to outside entities, all of 
which at a minimum violates standards of ethical conduct for 
employees of the Executive Branch, and yet there seems to be 
very little accountability to this type of activity that has 
been taking place.
    I guess we are going to need some guidance on how we 
tighten this up and how we can provide more effective 
oversight, including right here in this committee.
    Mr. Devaney, you were just recently testifying in regards 
to the OCS 1998-1999 leases that, and this is in your words 
again before the Senate committee, at a minimum it was a 
shockingly cavalier management approach to an issue with such 
profound fiscal ramifications, a jaw-dropping example of 
bureaucratic bungling and a reliance on a surname process which 
dilutes responsibility and accountability.
    I guess my first question is whether it was a mistake, 
whether it was deliberate, whether it was fraud, have steps 
been taken now to ensure that this can't happen again in the 
future?
    Mr. Devaney. A mistake in answer to part one, and I am 
reassured by the steps that the Secretary and the Assistant 
Secretary already have taken to see that the recommendations we 
are making are being implemented, and I think I couldn't ask 
for more right now. We will see.
    Mr. Kind. Director Nazzaro, let me ask you just quickly. 
There has been a request I think made on the Senate side for a 
GAO review of the Royalty In Kind Program.
    Ms. Nazzaro. Yes.
    Mr. Kind. Do you have any idea how long that review is 
going to take place before we get something back from your 
office?
    Ms. Nazzaro. Actually I just saw it, but I don't have an 
exact date for that report. You know, I really can't estimate 
because while we have a typical length of jobs, I mean, it 
depends on what the issues are, the complexity.
    We always work with the Committees though, what your 
timetables are as to what you need, you know, and be able to 
provide that.
    Mr. Kind. Well, we will follow up with you.
    Ms. Nazzaro. That is what I was going to say. I mean, we 
will have to get the individual team. Some of it depends on 
having the right resources available too to provide the right 
technical expertise.
    Mr. Kind. That is fine. Let me just shift the focus a 
little bit on the National Wildlife Refuge System and that. I 
co-chaired the recently formed congressional Wildlife Refuge 
Caucus here, and what I would like to do is if you are not 
fully up to speed submit some written questions and get a 
response from you that I can share with the 100 plus colleagues 
that have joined this refuge caucus.
    You may or may not be aware that in 2003 GAO did complete a 
comprehensive study in regards to oil and gas activities in the 
Wildlife Refuge System. It had certain findings and 
recommendations, most notably the Fish and Wildlife Service 
oversight of oil and gas activities in our refuges were spotty 
and inadequate.
    The Service had failed to determine its authority to permit 
and regulate oil and gas operations occurring on refuges, 
notwithstanding the GAO's belief that Fish and Wildlife had 
adequate authority.
    Training, guidance, financial resources available to 
Service personnel to oversee and manage oil and gas activities 
were inadequate at best. The Service should seek additional 
authority from Congress to apply a consistent and responsible 
set of controls over these oil and gas activities.
    Now, there are more specific questions I want to submit to 
you, and it would probably be easier, given my limited time, to 
do it in writing, but could you give us just a little bit of 
overview in regards to the follow-up of these recommendations, 
if they are taking place, if changes are being implemented in 
this regard?
    Ms. Nazzaro. We have a standard process similar to what the 
IG was talking about his process where we do follow up with 
recommendations, track them to make sure that the agencies are 
complying with our recommendations, and that is how we measure 
our success rather than numbers of reports as well.
    As to the specifics on those recommendations, where they 
are right now, I don't have that information, but I do know 
there was some inconsistency as to whether they really were 
accepting our recommendations because we were saying they 
needed additional authority. They said they had enough 
authority, although their inspections were spotty, so there 
seemed to be some inconsistencies.
    I would say it certainly would be worthy of us to do some 
follow-up work, and we could respond to you.
    Mr. Kind. Given that my time is expiring, I will do that. I 
will follow up with some written questions and hopefully get a 
written response from you then that I can share with more of 
our colleagues.
    Ms. Nazzaro. That would be fine.
    Mr. Kind. I want to thank you both for being here. I know 
this isn't the easiest testimony that you have to provide when 
you come before Congress, but it is incredibly important, and 
we need to hear this and then have the guts to take effective 
action to address these challenges.
    Thank you, Mr. Chairman, again.
    The Chairman. Thank you.
    The gentlelady from California, Ms. Capps?
    Ms. Capps. Thank you again, Mr. Chairman, for this is quite 
an interesting orientation for this new Member to this 
committee to have this hearing today, and I certainly hope that 
this is the first of many similar kinds with these and other 
witnesses to begin to provide this kind of oversight.
    I want to turn to the implementation of the Healthy Forest 
Initiatives Hazardous Fuels Reduction Program, and I am going 
to try to have time to address each of you. My first question 
or set will be for Ms. Nazzaro.
    There are many shortfalls still in this program, and most 
recently the USDA Office of Inspector General concluded, and I 
quote, ``The Forest Service cannot clearly identify by level of 
risk to communities from wildfire. It cannot demonstrate to 
stakeholders its accomplishments in reducing those risks.''
    Similar findings were reported in a 2006 Inspector General 
report for DOI's related fuel program stating, and I quote, 
``Neither Interior Department bureaus nor the Forest Service 
has a standard methodology for quantifying risk reduction.''
    This conclusion echoes past findings by the GAO of Federal 
efforts as a whole. Now, we all agree that agencies must target 
their fuel reduction efforts in communities and other high risk 
areas, but it seems to me that not much has changed since the 
passage of the Healthy Forest Initiative.
    Spending on hazardous fuels reduction continues to go up, 
but we haven't seen evidence of the change in risk to 
communities. I wonder, Ms. Nazzaro, if you agree with that?
    Ms. Nazzaro. I would agree with that, and I think that gets 
to the issue that we were raising earlier about the need for 
this cohesive strategy because it is not just for managing the 
wildland fire, but to take into account the other missions that 
the agency has and what tradeoffs would need to be made so, you 
know, what money needs to be spent on fire suppression, what 
needs to be spent on vegetation management, restoration rehab.
    That is why we are asking that they develop a cohesive 
strategy--you know, what actions do they need, what objectives, 
what are their goals--and then some way to hold them 
accountable for this information and decisions that they make, 
as well as putting associated funding so that the Congress 
knows what we are buying.
    At this point we keep spending more and more, but we aren't 
seeing much of a dent.
    Ms. Capps. Because of the brevity of this I hope that we 
can continue to probe this topic further, but I wonder how many 
times GAO has made recommendations to land management agencies? 
What are the impediments? What are the hurdles?
    You talk about this cohesive strategy. Would it be 
targeting that specific area?
    Ms. Nazzaro. The cohesive strategy that we have asked for 
was originally to address wildland fires, but more recently we 
have come back now and said that not only do they need to take 
that into account, but it has to take into account all the 
other missions that the agency has and figure out, you know, 
what these tradeoffs are going to be, and so it was 
specifically addressed to the Department of the Interior, 
working with the Forest Service.
    Ms. Capps. OK. Thank you.
    Mr. Devaney, your office has recommended that the 
Department, in coordination with the Forest Service, develop 
performance measures related to hazardous fuels treatment that 
are based on the outcomes and not simply on acres treated.
    My question has to do with whether or not DOI has moved 
forward in implementing this recommendation, which seems to me 
to be a very good one.
    Mr. Devaney. I had a specific conversation about that 
recommendation with the Deputy Secretary, and she indicated she 
agreed with it and was going to move forward on it.
    I will check back in with her if you would like me to. I 
would be glad to let you know.
    Ms. Capps. I would appreciate knowing the specific ways 
that this is--to me, I think this is a good recommendation for 
performance measures rather than just simply acres treated to 
get at the real outcomes.
    The latest estimate I have seen on another related topic 
for the maintenance backlog in national parks is between $4.5 
and $9.7 billion. Is that an accurate estimate of the backlog? 
Do you have similar figures?
    Ms. Nazzaro. The national parks, the last number that we 
are on record with was $5 billion.
    Ms. Capps. It is my understanding Park Service had 
undertaken an analysis to provide a more detailed analysis of 
the condition of its facilities known as the facility condition 
index. What is the status of that analysis?
    Ms. Nazzaro. We actually have not followed up with, you 
know, what the current status is. We have no ongoing work 
there, but I do know that they were trying to put this database 
in place. That was probably the last time we did work was 
making a recommendation to that kind of a vehicle or an 
information system so that they actually know the condition.
    What happens time and time again though, it seems like as 
they start to address a few projects and a few more projects 
fall onto that list there also wasn't clear definitions as to 
what constituted a maintenance backlog versus new construction 
and so they were coming up with definitions to clarify so that 
you knew what you were talking about when you talk about 
maintenance backlog versus a new construction of an item.
    Say maybe the deteriorating condition got so bad, so now 
rather than replacing a structure you just needed to develop or 
build a whole new structure.
    Ms. Capps. It sounds like there is a considerable amount of 
work still to be done.
    Ms. Nazzaro. Certainly. We have not done anything for a 
while on that issue.
    Ms. Capps. Can we in Congress expect to receive this 
information at any point?
    Ms. Nazzaro. As you know, we do our work at your request. 
We have not been requested at this point. I have no ongoing 
work looking at any Interior backlog issues.
    Mr. Devaney. Could I just mention that we are doing an 
audit right now on the health and safety issues surrounding the 
maintenance backlog, so we do have a product that is going to 
be coming. I will make sure you get that. I think it does 
address the issue of some of the questions you asked.
    Ms. Capps. Mr. Chairman, I think this information would be 
very useful for us to get a better understanding of current 
conditions in national parks and forests.
    Thank you.
    The Chairman. I thank the gentlelady.
    The gentlelady from South Dakota, Ms. Herseth?
    Ms. Herseth. Thank you, Mr. Chairman. I want to echo the 
gratitude expressed by Members of the Committee on both sides 
for today's hearing and the important oversight that we are 
initiating in the 110th Congress.
    The Inspector General and Director Nazzaro's testimonies 
point to a number of critical oversight opportunities, and I 
appreciate their willingness to share their work with the 
Committee.
    Of the many topics raised, I am particularly interested in 
Mr. Devaney's work on law enforcement in Indian country. My 
district is home to a number of large land-based treaty tribes, 
three of whom ran out of Low Income Home Energy Assistance 
Program funds this week because of temperatures 20 below zero.
    One family in a rural community on the Rosebud Reservation 
contacted the tribal government office asking for emergency 
assistance because they had to start burning clothes to keep 
children in the home and elders in the home warm.
    So when you cite in a report, Mr. Devaney, in 2004 
specifically to the BIA's detention program, in my opinion a 
service provided along with the need for quality healthcare and 
quality education and resources to meet basic survival needs, 
when you cite that the program is riddled with problems and in 
our opinion is a national disgrace with many facilities having 
conditions comparable to those found in Third World countries, 
I couldn't agree more.
    You go on to state, ``In short, our assessment found 
evidence of a continuing crisis of inaction, indifference and 
mismanagement throughout the BIA detention program.''
    I couldn't agree more, which is why this hearing and 
hopefully further hearings will help us get at some of the 
problems of that culture of indifference in the BIA as it 
relates to their responsibilities to meet our obligations as a 
Federal government to tribal communities, some of which are the 
poorest in the country, that are in South Dakota, that are in 
Arizona, that are in New Mexico, that are in North Dakota, 
throughout the Great Plains and other parts of this country 
that don't have lucrative gaming operations to meet the basic 
needs of the people who live in these communities.
    It is a Federal government obligation, and I certainly 
appreciate the work that you did two and a half years ago to 
uncover and reveal the scope of the problem in law enforcement 
and detention facilities in particular.
    My first question is given what you found in 2004, can you 
tell me how you would describe the current environment at the 
BIA as it relates to acting on the 25 recommendations in the 
report or whether or not they have done anything to move beyond 
a narrower focus on law enforcement versus a more holistic 
approach that puts greater emphasis on the connection between 
law enforcement and detention facilities?
    Mr. Devaney. Let me take that last point first. I think 
that that was one of our main criticisms that within the law 
enforcement program detention facilities was dead last, and it 
needed to be raised up at least as a co-equal with special 
agent force and the tribal police officer program as well.
    I think it is fair to say that they have made some 
progress. As I mentioned earlier, I continue to be concerned 
about their staffing levels at detention facilities. It is 
very, very difficult to find staff that can be trained and sent 
to school and then brought back and work in the detention 
facility when they could go off the reservation and make much 
more money if they were a detention officer in a local county 
jail, for instance.
    You know, that is one of the main issues. We found that 
there was a disconnect between the Department of Justice 
building brand new facilities on reservations where the tribe 
could not get anybody to actually man the brand new jail so 
they couldn't open the brand new jail.
    I think some of that has been corrected. I know there have 
been some high level discussions between DOJ and DOI, but we 
still have big problems out there. We are still settling 
lawsuits from some of those earlier problems, people committing 
suicide at alarming rates, people escaping.
    It is slow, incremental progress. I know that they are 
working very hard. It is not because they don't want to fix it. 
It is just a huge problem. Money is not the only answer, but it 
is a big part of it. I think that the President's budget in 
2008 does start to address some of those money issues.
    Ms. Herseth. Before my time elapses I just want to comment 
on your response because I agree that it is not just a funding 
issue, and I agree that the President's proposed budget is a 
good step, particularly as methamphetamine distribution when 
Indian country is used as transport sites because they are so 
geographically isolated is something that we need to address so 
as not to exacerbate the other problems and challenges that we 
are already faced with.
    The only exception I will take to your answer, and I 
appreciate it, is the difficulty of finding people in these 
staffing levels because I could share with you and plan to an 
example in South Dakota where the Lower Brule Sioux Tribe and 
the Crow Creek Sioux Tribe, who are located right across the 
river from one another, after millions of dollars in 
improvements to the jail at Crow Creek a new detention facility 
was built on Lower Brule.
    Necessary. It was needed. Their jail would have qualified 
in one of those that you reviewed that was just crumbling and 
was not secure, was not safe to staff to inmates, to anyone.
    Without consulting, I think that the BIA wants to somehow 
consolidate and close the jail for staffing reasons, even 
though I am not satisfied with their responses, and then also 
has postponed the full operation and opening of the new center 
at the Lower Brule Sioux Tribe community because they have been 
so far behind in staffing, and yet there are a number of people 
on that tribe who have had credentials in the past, training in 
the past.
    And so in many instances it is not just finding people to 
serve in these areas. It is BIA's lack of responsiveness, lack 
of action to adequately train and certify individuals to work 
at either the new facilities or the ones that we have poured 
millions of dollars into to keep open, but then closed because 
of the staffing problems.
    Thank you, Mr. Chairman, for allowing me to go over my 
time.
    The Chairman. Thank you.
    The Chair will now start a second round of questioning. The 
gentleman from California, Mr. Miller?
    Mr. Miller. Thank you.
    Mr. Devaney, I want to clear up a point here. What was the 
Department's official response to your 2004 investigation of 
Mr. Griles and his ties to lobbyists?
    Mr. Devaney. We proffered a report to the Secretary which 
outlined 25 potential ethical violations. We also gave that at 
the same time to the Office of Government Ethics.
    They came back and said that with respect to 23 of those 25 
potential ethical lapses they were not, in their opinion, 
ethical problems.
    Mr. Miller. That is the Office of Government Ethics?
    Mr. Devaney. The Office of Government Ethics.
    Mr. Miller. In the Department of Interior?
    Mr. Devaney. No.
    Mr. Miller. No? OK.
    Mr. Devaney. No. The Office of Government Ethics.
    Mr. Miller. The office. OK.
    Mr. Devaney. And so at the end of the day there were two 
issues for the Secretary to decide. She and I had a 
conversation, and that was the end of the discussion. Nothing 
happened to Mr. Griles.
    Mr. Miller. So nothing happened to Mr. Griles. Had you 
known at the time of your investigation that Sue Ellen 
Woodbridge, who served as the chief deputy to Secretary Norton, 
solicited an ethics advisor to Mr. Griles, had a close personal 
relationship with Mr. Griles, would that have made a 
difference?
    Mr. Devaney. It would have made me more upset. I didn't 
know.
    Mr. Miller. You did not know. No, I know you did not know. 
This has come to light now, and this is the same person who we 
are told I think it is in today's paper or yesterday's has 
signed off on an agreement with ConocoPhillips at the same 
time.
    She is over now I guess at the Department of Justice doing 
ethics or was. I guess she is now under investigation by the 
Department of Justice, but it raises concerns.
    You know, I used the term criminal, and it wasn't just a 
question of whether it was about the offshore leases. My 
concern is I have been involved with this Department a long 
time. I have been on the onshore leases and the offshore 
leases, and I have been in tight sands leases and loose sands 
leases and all the rest of the things that go on in this 
Department.
    One of the things you see is an incredible complexity of 
how royalties are calculated and recalculated. It is very 
interesting because the complexity in itself lends itself to 
losing whether it is barrels in kind or whether it is reporting 
on the value of a barrel of gas or a million cubic feet of gas.
    There are a lot of different benchmarks that are set, and I 
suggest that the complexity in fact is working against the 
interest of the taxpayer. It is interesting that each time the 
states go out and audit this and each time the Indian tribes go 
out and audit it they find a lot of money that they are owed, 
but apparently the Department of Interior can't find the money 
that it is owed or to change the system or to find in favor of 
the taxpayers.
    With respect to the leases, this two-year period which has 
been in question is interesting and important, but then we see 
supposedly in the public record that one of the companies came 
in and said there is a mistake in our lease or there is 
something wrong with this lease and brought it to the attention 
of this fellow, Oynes--Oynes, is it--who is now going to head 
up this whole program. He says he doesn't remember, and I think 
you had him in your investigation. That was a credible 
position.
    I wonder where were the other oil companies? Did they come 
in? I mean, this is like when the court gives you too much 
change at the cash register. What did your mother tell you to 
do? Give it back, right?
    So now we have one oil company, and I guess it was Chevron. 
Is that Chevron? Chevron went in and said the lease is wrong. 
We have another oil company saying no, I am entitled. I am 
entitled to my ill-gotten goods.
    Mr. Devaney. Actually, Congressman, I think the reference 
to Chevron, two Chevron executives had stated that they had 
been at a meeting of oil companies and MMS and had mentioned 
the fact that these thresholds were not in the lease and 
brought it up in effect.
    Mr. Oynes testified that he had no memory of that. We 
verified through polygraph that he didn't. That is not to say 
it didn't come up or it did come up, but he just simply did not 
remember, and he was probably being truthful when he said that.
    Mr. Miller. He may be truthful, but I guess then it goes to 
his judgment. If somebody in a meeting such as that informed 
you that a provision that was designed to collect billions of 
dollars or hundreds of millions or whatever the price of oil 
is, substantial increased revenues, and the people who that 
would work against, if these provisions weren't in the lease, 
come in and tell you they have made a mistake and you just move 
along, I wonder what else they were discussing in that meeting 
if it is more important than that?
    Now this person is going to head up this program? My 
colleague from California, Mr. Issa, said this kind of defies 
both ethical standards and judgment. I mean, I am not asking 
for your comment. I am just quite stunned here.
    Now the idea is that these oil companies are going to argue 
that they are entitled to hold onto their bargain. I guess that 
will boil down to a question in litigation. I mean, there is 
some question of can you sign this contract contrary to the law 
and whether the contract is valid at all since it is apparently 
outside the law that requires for these thresholds to be put.
    The courts will decide that, but again I am concerned about 
a continuation. I appreciate that the new Secretary is doing 
all and you think this direction, and I will take you at your 
word and I hope so and I know the Secretary and I believe him 
to be an honorable man, but somehow this culture has to change.
    I mean, several of my colleagues have mentioned it also. 
Where is the accountability? I mean, there is nobody in the 
Bush Administration that ever lost a job for reasons of ill-
doing. It just doesn't happen. Where is the accountability 
here? I am at a loss to understand how we can do it.
    I think you are reporting the largest increase in backlog 
in recent times. What are we, $17 billion behind the curb on 
backlog?
    Ms. Nazzaro. I believe it was up to that, yes.
    Mr. Miller. Up to that.
    Ms. Nazzaro. Yes.
    Mr. Miller. And so then this is the same agency, one of the 
few that has the ability to collect these resources on behalf 
of the public for the use of the public resources, and somehow 
they are just leaking out all over the system.
    I mean, I don't know how we expect to meet the mission of 
the agency in terms of the public use and the care of these 
resources. How do we cure that backlog?
    Ms. Nazzaro. Well, I think some of the issues that were 
raised today are good ones. You talk about the complexity of 
the organization, the resources that they have to manage, and I 
think it all points to the need for additional oversight.
    You know, the role we play, the role you play, I think is 
all very important. The CG sent a memo to Congress just a few 
weeks ago about areas for near term oversight, and some of 
those areas that he highlighted were very similar to the things 
you are bringing up here today.
    In fact, three of those areas--the acquisition and 
contracting, to make sure that contractors are playing 
appropriate roles and that there is agency oversight; computer 
security, do they have the information systems, do they have 
protection capabilities and are they reporting security 
incidences; certainly the issue that we have been discussing 
the majority of the hearing today, the fair value collection of 
oil royalties on Federal lands.
    I think these all need additional oversight. You talk about 
accountability. I mean, one area that we have seen, we were 
talking just earlier about BIA. BIA has had an acting director 
for the better part of the last six years. From what I have 
seen, you know, if you don't have somebody in charge, you don't 
have accountability so clearly there are some people problems. 
There are some resource problems at the agency. There is 
certainly lack of accountability, and there needs to be more 
oversight.
    Mr. Miller. Well, there does. Mr. Chairman, I want to thank 
you for this hearing. Again, it kind of I think would shock the 
taxpayers of this country to understand. I think this is the 
first time the IG has been here since the year 2000.
    I will just tell you that every time we have done an in-
depth investigation of these royalty programs in some cases we 
have found two sets of books. In some cases we have found 
double pricing. In some cases we have found companies selling 
resources to themselves off the books at differential prices to 
change their obligations and liabilities to the taxpayers under 
the leases
    This has gone on and gone on and gone on. There is no 
system in the U.S. Government, although it is being challenged 
now by Iraq and Katrina, but there is no system that has been 
more gained against the taxpayer than this system of royalty 
payments for the use of public lands almost for any purpose.
    Some of it appears to be the failures of the Departments. 
Others of it I strongly believe is the active, active 
engagement and effort to keep the fair royalties that the 
public is entitled to under these leases from going to the 
public for the leases of their resources, the use of their 
resources, which we are supposed to do.
    So often people ask us in our town hall meetings why don't 
you run the government like a business? It appears over the 
last five years we have been running the government for 
business, and we ought to think about running the government 
like a business and get the people their due.
    I don't know any company that would have this kind of 
liability and loss of assets and loss of payments and loss of 
royalties, loss of lease payments and all the rest of this that 
wouldn't operate in a different fashion than this group is 
operating, and I don't know any board of directors, as this 
committee is, that would stand by over five years and never ask 
a question in light of this, never ask the compliance officers, 
if you will, the enforcement officers, if you will, the 
investigative officers to come before a committee in that 
entire time.
    It is not like we were short on public information. It is 
just a tragedy. It is a tragedy for the protection of these 
resources, and it is a tragedy for the taxpayer.
    Mr. Chairman, I hope this is one of many oversight hearings 
that we have in this committee.
    The Chairman. I thank the gentleman.
    The gentleman from New Mexico, Mr. Pearce?
    Mr. Pearce. Again, thank you, Mr. Chairman, for the 
hearing. I do appreciate the testimony from both of our 
witnesses.
    The gentleman from New York asked a fair question a bit ago 
about why would we have originally written the law. If I could 
get my staffer to get off the Blackberry and turn that? Again, 
back at the time that this was going on the price of oil was in 
the high teens, and there just was no stimulation to come and 
do these things. These are very extraordinarily expensive.
    They are so expensive that again Exxon, the biggest 
producer in the world, had two percent of the production in the 
Gulf, and now they are evacuating that because they continue to 
drill dry holes. They put this thing out there, and frankly as 
long as stockholders insist on rates of return for their stock 
the CEOs and the boards of directors are going to say you be 
very cautious about making that investment.
    We passed a law that was to stimulate, and actually the 
stimulation worked pretty good. There were very few of these 
units, and now they are coming up and popping up. In the area 
that my company worked in, my wife and I, we produced 30 and 40 
barrels a day from those wells. These things produce hundreds 
of thousands.
    Believe me, I was looking at it from the other side of the 
equation when you all passed the law up here that stimulated it 
because I saw those major companies leave my home town, and 
when they left they took the engineers and the accountants and 
all the professionals. These small rural towns in America, they 
depend on these companies. When they evacuate, a lot of the 
brain capital, a lot of the mental capital is gone.
    I was looking at it from the perspective of a guy that was 
building wagons when the cars were invented and so that is a 
fair question, but the policy has worked well.
    We are in a difficult circumstance. You did your audit in 
2003, Mr. Devaney. Did you really delve into this matter of 
these leases at that point?
    Mr. Devaney. My audit?
    Mr. Pearce. Did you do an audit in 2003?
    Mr. Devaney. I think our audit was more recent than that. 
Our audit was in 2005.
    Mr. Pearce. Well, you did a previous audit.
    Mr. Devaney. Our previous audit of Royalty In Kind?
    Mr. Pearce. Or of anything. So these issues didn't come up 
then? If they did, they didn't get leaked to the New York 
Times? What?
    Mr. Devaney. No.
    Mr. Pearce. In other words, this conversation is fairly 
recent.
    Mr. Devaney. Yes.
    Mr. Pearce. And yet you are not a supporter of the 
position, so why didn't this conversation come up?
    I mean, the New York Times has it now. They had it before 
we did. How was it that we didn't get into this conversation 
three or four years ago? How is it that we are now in a new 
Congress and things are coming up? That is a curiosity to me.
    I would like to go to your smoking gun. There is no smoking 
gun. Now, when I look again at the timeline, and my timeline 
takes me back to the advanced notice of the proposed 
rulemaking, 2-23-96, no inclusion of price thresholds. That is 
not a smoking gun to you that they did not include that?
    Mr. Devaney. That would have been the time they were 
putting price thresholds in addendums.
    Mr. Pearce. So no smoking gun that is not in the policy?
    Mr. Devaney. No.
    Mr. Pearce. OK. Now, in that particular ANPR DOI 
specifically asked. DOI asked whether price thresholds should 
apply to the 1996-2000 leases.
    Now, why do you think they would ask that question if there 
is this--what kind of policy was that that we had? This 
innuendo policy. We have an innuendo policy, one that is not 
written. Why do you think that DOI would formally ask that 
question?
    Mr. Devaney. I have no idea.
    Mr. Pearce. You don't have an idea, but it was not a 
smoking gun. It didn't ever appear to you it might have been 
because they really were asking the question? They ask a 
question that deals directly with the question, and in your 
testimony at page 5 we see no smoking guns.
    Aye-yi-yi. Not only did they put it in the announced ANPR. 
They put it in the interim rule without it. I am holding the 
Federal Register, Volume 63. The rules came out with nothing 
about the price thresholds, and nowhere in here do you see a 
smoking gun.
    Now, you can see there are great disagreements between 
those of us on the Committee, but I think that we could come to 
a resolution if you had offered more of the balance, more of 
the question, more of the heartrending questions. Was this a 
mistake, or was this a policy decision that was a bad judgment?
    You have fueled, my friend, very serious things that are 
going to get played out over the internet, not to speak of the 
difficult discussions that have to go on here about how do we 
sort our way through this very difficult thing that we are in.
    No one says it is fair. It is just after you build those 
doggone $1.5 billion platforms to go and change the rules, is 
that right? Is that fair? Are we going to start changing the 
rules when people buy a house with say a public guarantee of 
their mortgage? Can you go back and change those things?
    Once you begin to be cavalier about that we have serious 
questions about the good faith of the government, and the thing 
that I think is cavalier is that you never mentioned once in 
your report. You declare you didn't see a smoking gun. You 
didn't put the letters in.
    I will yield back.
    The Chairman. Do you wish to respond, Mr. Devaney?
    Mr. Devaney. Well, I respectfully disagree, and I think we 
issued a good report. We were issuing a report on how the 
threshold language was left out and what people did about it 
when they found it, and that is what we did.
    We did our best to find out who instructed who to take them 
out. We weren't able to do that, and I have characterized the 
whole thing as a mistake. I have encompassed almost everybody 
involved in both Administrations by saying that I think that 
everybody should have paid more attention to this.
    I think when a junior solicitor offers a legal opinion and 
it involves such a financial stake----
    Mr. Pearce. That was a Clinton solicitor or a Bush 
solicitor?
    Mr. Devaney. That was not the Solicitor.
    Mr. Pearce. During whose term?
    Mr. Devaney. A career attorney.
    Mr. Pearce. During whose term?
    Mr. Devaney. During both Administrations. He is still there 
today.
    Mr. Pearce. OK. Let us get it clear because right now it 
appears the whole finger is pointing at the Bush 
Administration.
    Mr. Devaney. No, sir. I don't mean to do that. This is a 
career solicitor who rendered an opinion and then that became 
the Department's legal opinion.
    I believe that at multiple times during this timeline 
somebody should have said let us get the Solicitor in the room. 
Let us get somebody from the Department of Justice over here to 
talk about this issue.
    Mr. Pearce. Is that finding in this book that they should 
have gone to the Solicitor or the Justice Department? Did you 
put that finding in the book?
    Mr. Devaney. I certainly criticized that solicitor. He has 
testified in Congress and has been criticized. He has been 
criticized for his role in this saga, yes.
    Mr. Pearce. Because that is a significant thing. If you 
feel the Solicitor should have, that finding should be jumping 
off of pages as much as the no smoking gun and the culture of 
corruption and the things that do jump off the page.
    Again, Mr. Chairman, I appreciate it. I yield to the 
gentleman from California, Mr. Miller.
    Mr. Miller. Just on this point, this isn't about pin the 
tail on the donkey whether it is going to be Clinton or Bush.
    You know, these rigs are always used as a driving force why 
we have to provide royalty relief or concessions to the oil 
companies. When we were doing this I opposed this policy and 
opposed it strenuously and thought we had it defeated a couple 
times, and then it got way beyond royalty relief. It got into 
royalty holidays and the rest of that.
    I represent a number of different oil companies in my 
district, and I went to the CEO of one of the big international 
oil companies and I asked him about this policy. Was this 
helpful or hurtful? He said you know, he said the bets we make 
today and the timelines we have are so big that it really 
doesn't matter what your policy is. When I make a decision to 
build this kind of rig or to contract for this kind of rig, it 
is Katy bar the door.
    He said we do business in the most hostile environments in 
the world, both politically and environmentally. We make those 
bids 10 years in advance, sometimes even longer. He said what 
you do or do not do with royalties will make very little 
difference to us.
    He said what has happened in this case, however, is there 
are some boys who made some bad bets in the Gulf and they are 
seeking relief. He said you go ahead and do it if you want, but 
it will have no impact on whether or not people make the 
decisions to come to the Gulf.
    He said don't ever forget where the Gulf of Mexico is. It 
is under the umbrella of the United States military. It is the 
safest place in the world to drill. He said it is a hostile 
environment sometimes, but it is the safest place in the world 
to drill. It has its advantages. They are there, and they are 
there in a very big way.
    The point he was making is that perhaps what was going on 
here was not so much about these big billion dollars bets that 
we like to attribute to the oil people. The fact of the matter 
is they make these bets, and sometimes you make the wrong bet. 
Sometimes the environment changes, the economy changes, the 
price of oil changes, but they have tremendous resilience.
    They are to be admired. They do this all over the world. 
They run into trouble in countries and assets are taken away 
and diminished and all of the rest of that. They stay in the 
business.
    We keep acting like but for this they won't drill for where 
they know there is one hell of a lot of oil. It is an 
interesting theory. It just never turned out to be true.
    I thank the gentleman for yielding.
    The Chairman. I thank the gentleman from California. Let me 
follow up on your testimony, Ms. Nazzaro, in regard to the vast 
array of responsibilities that come under this committee's 
jurisdiction, as well as within the Department of Interior, and 
the opportunities for oversight, the need for oversight I 
should say, and the opportunities for further revenue 
collections for the American taxpayers, the owners of these 
public lands.
    Included in that would not possible reclamation fees and/or 
royalties on the hardrock mining of public lands in the West be 
a relevant pursuit for additional revenues for the American 
taxpayer?
    Ms. Nazzaro. I think that is going to be the challenge to 
figure out when we talk about all these problems, particularly 
where we say Interior needs more resources, is how are we going 
to fund it and are there opportunities within the Department to 
collect more revenue.
    Hardrock mining is an area where we do not collect 
royalties right now. There has also been a big change in the 
rec fee, in the recreation fee program, in the demonstration 
project. Those monies went toward the backlogged maintenance.
    With the new program a lot of that is going to change as to 
where the money is going. Some of the larger parks may not be 
getting the same monies they were getting in the past.
    I think there are a number of opportunities for revenue 
collection that, you know, we could certainly pursue with you 
and your staff later off-line as well.
    The Chairman. I appreciate that, and we certainly would 
look forward to your continued input and advice wherever we can 
find additional revenues that the American taxpayers deserve to 
be receiving from the use of their lands.
    Ms. Nazzaro. Thank you.
    The Chairman. The gentleman from Nevada, do you wish to 
have a second round? Mr. Heller?
    Mr. Heller. Yes. Thank you, Mr. Chairman. I want to yield 
my time to the Ranking Member.
    Mr. Pearce. Whenever you all finish, I will do a little 
questioning.
    The Chairman. OK. I am sorry. You are yielding?
    Mr. Heller. Yes.
    The Chairman. OK.
    Mr. Pearce. Thank you, Mr. Chairman. You have been very 
indulgent. The questions are difficult.
    Mr. Devaney, you have been very kind and gracious. I, by 
the way, found things in the report that I agree with. The 
exposure in our western lands in the forests is extreme. It is 
a problem I have been working at. We cannot get the Forest 
Service to cut trees.
    We actually did in one community, and the water table began 
to rise immediately in spring. It was putting out 200 gallons a 
minute and in January of last year was putting out almost four 
million a minute because that water has been percolating down 
like it should. The West should never have the tree load that 
it has per acre.
    Again based on the report that I have heard today, your 
testimony in the Senate, your testimony here, I still conclude 
the following: There was no statute that required the inclusion 
of price thresholds. There was no regulation that required the 
inclusion of price thresholds. There was no written policy that 
required the inclusion of price thresholds. There was, 
according to your testimony, an innuendo policy, but we have 
very direct contravening statements. We have statements that 
say that was not the truth.
    There was a deliberate chain of command instead that caused 
the removal of price thresholds. Those were all done by the 
Clinton Administration, by their Department of Interior, not 
involving any lessee at all. The Clinton Administration had 
months.
    When I look at the timetable after that final rule for them 
to uncover this confusion, I see one month to the first sale, 
six months to the next sale, 13 months to the next one, 18 
months to the next one, 30 months, and then I see the inclusion 
on a later sale in 2000.
    Those don't feel like mistakes. They feel like deliberate 
omissions, and yet your report does not include one shred of 
the deliberateness. I can understand that you would come up 
with a different conclusion. I don't require or even suggest 
that my conclusions are perfect. I suggest reasonable people 
and us up here making these decisions need the balance of the 
discussion.
    I find it problematic that you interviewed six people over 
four hours, and that testimony muddles the facts relative to 
when Johnnie Burton may have learned of the Clinton leases, yet 
in contrast to that four hours you spent only 30 minutes for 
the two Clinton Administration MMS directors actually 
responsible for the Clinton leases, never asking them once--not 
once--what they did to make sure prices thresholds were 
included in the policy.
    You never spoke once to Clinton Secretary Babbitt or 
Clinton Assistant Secretary Bob Armstrong. I don't see a 
mistake. I don't see a low level blunder. I do not think the 
Clinton Administration was that inept. I am not a supporter, 
never will be, but I don't think they were inept enough to go 
30 months without discovering what you describe as the mistake.
    I do see what appears to range from a clear decision not to 
include price thresholds to studied indifference once their 
absence is pointed out, and that studied indifference you point 
out yourself that they declared well, maybe it is too late.
    I see leases that were given to lessees not subject to 
negotiation, take it or leave it. The price of oil was at $10. 
The water was deep. Those billion dollar platforms are a 
tremendous risk. I see a bad prediction by the Clinton 
Administration about whether the price of oil would ever reach 
$28, which is that threshold at which time the royalties would 
kick in.
    I see the majority of this House looking for a way to 
unwind valid, binding contracts. I saw in the Washington Post 
that those efforts were akin to what Hugo Chavez in Bolivia 
would do. Your testimony is playing a key part in those efforts 
to take actions that even the Washington Post describe in such 
terrible fashion.
    If you agree to an adjustable rate mortgage with your bank 
because you don't think the interest rates will go up, you 
don't get to go back and renegotiate for a fixed mortgage 
because you guessed wrong.
    I don't know where we go from here. I think your testimony 
could have given more of the balance, and I think that your 
report should have given more of the balance. You are the last 
check, sir. You are the one that people quote.
    You are the one that people are going to read your 
comments. Nobody is going to read this report. They are going 
to read your comments, and when you say there is no smoking gun 
they are going to run political ads, and they are going to go 
on diatribes based on that.
    I don't know exactly what the situation was. I don't know 
exactly what the cure is, but I think you had an obligation to 
present a little bit more balanced picture here today.
    I appreciate your service. People never, never are thanked. 
I don't disagree with you as a human being. I don't take fault 
with you, but you had an obligation in this case to give us a 
clear understanding of what our decision should include.
    I appreciate your work and I appreciate your balanced 
responses today and I appreciate your kindness in the way that 
you dealt with very difficult questions, but frankly that is 
our job to ask those difficult questions, and I just have been 
trying to do my job in as respectable a way as I can.
    Thank you, Mr. Chairman. I appreciate this opportunity.
    Mr. Hinchey. May we hear a response?
    Mr. Devaney. Congressman, I appreciate your point of view. 
I still believe we did a very credible investigation. I believe 
that the investigators that worked this case tried their very 
best to identify how the threshold language was left out and 
what happened when people found out about it. I don't suspect 
we will agree on that, but I appreciate the opportunity to 
respond to your questions today and the way you asked them.
    The Chairman. Does the gentleman from California wish to be 
recognized?
    Mr. Costa. Yes. Thank you, Mr. Chairman.
    Because of time I will probably submit the balance of my 
questions, but I would like to shift this discussion a little 
bit to the GAO and to the recommendations involving the BLM, 
the report on hardrock mining that you provided testimony on 
that talks about need to better manage financial assurances to 
guarantee the coverage of reclamation costs.
    Do you believe there are adequate protections based on that 
report in place to ensure that hardrock mining operations are 
reclaimed and not abandoned for taxpayers to pay for?
    Secondly, what steps do you believe should be implemented 
for the BLM to implement and accomplish necessary protections?
    Ms. Nazzaro. Based on our work, we do not believe that 
there is adequate financial assurances currently to cover the 
reclamation costs should someone walk away from one of these 
operations. That leaves the government vulnerable to pay for 
those.
    Mr. Costa. I think there are a number of examples already 
out there.
    Ms. Nazzaro. We identified 48 hardrock operations that had 
ceased and had not been reclaimed by operators.
    Mr. Costa. Do you believe there are more than 48?
    Ms. Nazzaro. I really can't say. I mean, based on the work 
we did this is how many we identified. You know, we could 
certainly do more work to try to identify how more prevalent 
this is.
    I think that gets to some of the recommendations that we 
made that they need to have better data to even know what they 
have out there because in some cases they did not have the 
right information to even know. I think some of these were new 
to them.
    I can tell you what our specific recommendations were in 
this case here. We directed BLM to require state office 
directors to develop action plans for ensuring that the 
operators have these adequate financial assurances and to 
improve the reliability and sufficiency of their automated 
information systems.
    Like I said, they didn't even know where there were 
financial assurances and where there weren't and where there 
were mines that were mining operations that were not being 
addressed.
    Mr. Costa. Well, that is obviously a problem. Do you think 
the Department is taking the steps necessary to ensure that the 
revenue collections for oil and gas and geothermal leases on 
Federal lands are occurring in what I think most of us would 
believe and our taxpayers would want to have in a transparent 
and responsible manner to ensure the maximum collection?
    Ms. Nazzaro. No. That was another report where we had a 
disagreement from the agency in that we felt that they did need 
to do more to improve the inspections of these operations. We 
found sporadic inspections varying by refuge, some doing a 
better job than others.
    We felt that they needed to have better guidance out there 
as to what exactly they were supposed to do. We suggested that 
they seek additional guidance from Congress. They felt they 
had.
    Mr. Costa. Did you cite specific recommendations on how to 
improve that transparency and collection effort that might 
serve as a guide to any congressional action we might consider?
    Ms. Nazzaro. We did. We made several recommendations to 
Fish and Wildlife Service's management of these activities, 
including collecting better data, improving training, oversight 
and land acquisition practices and strengthening permitted 
authority.
    We also recommended that the Service seek additional 
authority, as I was saying, to regulate these private mineral 
rights, and that was where they said they felt they had 
adequate authority, but again we found sporadic oversight of 
those operations.
    Mr. Costa. It sounds like, Mr. Chairman, something that we 
are going to have to pursue at greater length, and we will 
attempt to do that with the Subcommittee's efforts.
    I will submit the other questions at a later date. Thank 
you very much.
    The Chairman. The gentleman from Idaho, Mr. Sali?
    Mr. Sali. Thank you, Mr. Chairman.
    Ms. Nazzaro, you have criticized Interior's program for 
managing hardrock mining, and I think this is a quote, that 
``They have not adequately protected Federal resources from the 
environmental effects of mining.''
    There was a National Academy of Sciences study on hardrock 
mining on Federal lands in 1999 concluding that existing 
framework of laws and regulations for mining on public lands 
were ``effective.''
    Can you explain why the GAO conclusion is so dramatically 
different from the National Academy of Science?
    Ms. Nazzaro. Well, the reason we felt they were inadequate 
was because they were not coming back in and reclaiming these 
mines, so I mean you are disrupting the environment there.
    I mean, that is the assumption is that you can go in, have 
the authority to do these operations, but then you have to come 
back and reclaim the lands. We found that they were not doing 
it.
    These 48 operations that we talk about were going to cost 
the government about $136 million to do that since these people 
basically abdicated their responsibility.
    Mr. Sali. But it would be fair to say that the Department 
thought that the laws were effective; that is why they differed 
from you and the National Academy of Sciences disagreed with 
you, and yet somehow you have reached this different conclusion 
which apparently would be in minority with at least those 
sources that we have discussed here?
    Ms. Nazzaro. Let me see what the specifics were as to their 
disagreement.
    In responding to our draft, Interior said that they 
appreciated the advice and critical assessment that we had 
provided. However, they did not acknowledge or address specific 
deficiencies in the report. They disagreed with our 
recommendations, stating that guidance was already issued that 
ensured that proper management attention was being provided.
    If they are saying proper management attention is being 
done and we are seeing people are walking away from these 
operations and not reclaiming them and there were no financial 
assurances in place so the government is being left, you know, 
with the bill to reclaim these they obviously didn't have 
adequate policies and procedures in place. Either that, or they 
just weren't implementing their policies and procedures if they 
had them in place.
    Mr. Sali. OK. You agree with me that on BLM lands less than 
one-tenth of one percent of the land area is impacted by 
hardrock mining? You would agree with that statement?
    Ms. Nazzaro. I really don't know the extent to which BLM 
has hardrock mining operations going on, to what extent.
    Mr. Sali. You don't know what area it does cover?
    Ms. Nazzaro. Andrea, is it less than a percent? We would 
have to check on that percentage.
    Mr. Sali. But you are able to give an estimate of how much 
it will cost to reclaim that area irrespective of how much land 
there is?
    Ms. Nazzaro. No. For these 48 that we found, you know, 
where there were problems, but as to what percentage of their 
BLM lands have hardrock mining I don't have a number in front 
of me as to what the percentage is.
    Mr. Sali. Do you think part of the problem could be, for 
example, when a plan of operation is submitted for a mining 
operation that maybe the agency doesn't have either enough 
manpower or the expertise within the manpower that they do have 
to properly review the plans and establish the bond amounts 
that might be required?
    Ms. Nazzaro. That really wasn't the focus on this exercise. 
It was really whether these financial assurances were in place, 
and when you look at that----
    Mr. Sali. Isn't the bond amount the financial assurance?
    Ms. Nazzaro. Right, but they just didn't have any. It 
wasn't that they were in the wrong amount. These people just 
did not have anything in place.
    Mr. Sali. And could that be because either we don't have 
the right people in place or we don't have enough people in 
place with the agency? Is that your claim?
    Ms. Nazzaro. It is possible. That is certainly possible.
    Mr. Sali. You don't know though?
    Ms. Nazzaro. I don't know. We did not identify that there 
were significant resource problems, but we did identify that 
billions of dollars in hardrock minerals had been extracted and 
so you think if they are taking billions of dollars of these 
resources they should be able to do something to reclaim.
    Mr. Sali. So you don't know how much land is involved, and 
you don't know if the agency had the right people involved, but 
you do know that the amount wasn't correct for the bond for the 
financial assurances. Is that correct?
    Ms. Nazzaro. We knew that there were some instances where 
they did not have financial assurances so they did not have a 
bond in place to even reclaim it so somebody could walk away 
and there was no bond in place to hold them accountable.
    Mr. Sali. And would it be possible that no bond would be 
required in those instances?
    Ms. Nazzaro. OK. We did find a statistic in here in our 
background that said less than one-tenth of one percent of BLM 
lands are affected by these operations, so it is a small 
amount, but after 1990 these assurances were required for any 
operation.
    Mr. Sali. All right. Thank you, Mr. Chairman.
    The Chairman. The gentleman from New York, Mr. Hinchey? Do 
you have further questions?
    Mr. Hinchey. Mr. Devaney, we mentioned a little earlier the 
gentleman who ran the Minerals Management Service for the Gulf 
of Mexico for 13 years and how he couldn't remember certain 
significant information.
    According to my colleague, Darrell Issa, who did an 
investigation here, he found it quite amazing that that was the 
case, and also he found it amazing that he has now been 
appointed associate director by his former and still now 
present boss in the agency.
    It strikes me that you may not want somebody with that poor 
a memory to be moving up to the associate director role. What 
do you think?
    Mr. Devaney. Congressman, I am rarely, if ever, consulted 
on promotions within the Department of Interior. I am probably 
the last person they would ask.
    I don't have a view on it. I really don't. The only contact 
we have had with him has been over this one issue. He appeared 
to be very truthful about his lack of memory and so I really 
don't have a view. You know, he has been in the Department a 
long time, some 30 years, so somebody found him qualified and 
promoted him. Like I said, they didn't consult me.
    Mr. Hinchey. Well, I would agree that the fact that he has 
been there for 30 years makes him seem like a very solid person 
when you compare that with other people who have been back and 
forth, in and out within the Department and then going to 
lobbying firms and then coming back to the Department and then 
going out lobbying again.
    I mean, that has been a pattern that has existed for a long 
time depending upon what kind of Administration and who was in 
it depended on where they might be at any particular moment.
    My colleague, Mr. Miller, raised an issue, and I can't 
repeat it exactly, but the issue had to do with ethical 
considerations. Do you remember what he was asking?
    Mr. Devaney. Not specifically.
    Mr. Hinchey. He was asking about ethical considerations, 
and you said that someone, and I believe in the Department of 
Justice, made a determination that there was no problem, that 
no ethical violations had occurred.
    Mr. Devaney. Maybe earlier we were talking about the first 
report on former Secretary Griles and I had stated that we had 
sent our report to the Department, as well as the Office of 
Government Ethics. They are the government's experts on 
government ethics.
    Mr. Hinchey. Is that at DOJ?
    Mr. Devaney. No, it is not at DOJ. It is a separate agency. 
Office of Government Ethics is a separate body that opines and 
issues ethics advisories to the entire government.
    We sent it to them, and they came back and said that of the 
25 things that we had teed up for consideration they didn't 
find any problem with 23 of those things, but did find problems 
with two specific instances, and it was over those two specific 
instances that I ultimately had a conversation with former 
Secretary Norton.
    Mr. Hinchey. With regard to the timeframe concerning the 
revelation of the fact that we had these 1,100 contracts, 
roughly 1,100 contracts without lease arrangements and how that 
evolved over time, based upon your testimony and what you have 
said here tonight most of that information was contained in 
Denver for a long period of time?
    Mr. Devaney. That is the primary place where royalties are 
collected and operated out of, yes.
    Mr. Hinchey. Yes. Right. Do you know when that information 
began to emerge from Denver up through the Minerals Management 
Service into Washington?
    Mr. Devaney. Well, there were only two occasions, one in 
the year 2000, and at that point once again the solicitor's 
opinion stood and the matter was not brought up the chain of 
command, and then in 2004 there is some indication that once 
again it came up to the director's level, but never made it to 
the Secretary's level.
    Mr. Hinchey. Have you questioned at the director's level 
the director and asked him why he never sent it to the 
Secretary?
    Mr. Devaney. We talked to her during our investigation, and 
she stated to us if it did occur, and the emails that we had 
suggested that a conversation might have occurred, that it was 
a very brief conversation, and it probably was held in the 
context of by the way, the Solicitor's Office says we can't do 
anything about it, so she went on to other things.
    Those are the only two times that it came up per se. 
Neither time did it come up to the Secretary.
    Mr. Hinchey. No, but it was contained from the Secretary by 
other people.
    It seems that the person who revealed this to the New York 
Times must have had a sense of frustration over the inability 
of this issue to evolve through the agency and to be resolved 
in an appropriate way. So at some point somebody stepped 
forward and revealed this to the New York Times and of course 
they published the story and then everybody says that they just 
learned about it then. But obviously there were a lot of other 
people at fairly high ranks within the agency who were aware of 
it, but nevertheless did not take any appropriate action.
    Mr. Devaney. I would love for the New York Times to 
identify their source so I could go talk to that person but I 
don't think they will, so I have no reason to believe that it 
is either a high official or perhaps even an auditor out in 
Denver or whatever.
    Mr. Hinchey. Can you give us a listing of the way in which 
the information evolved in Denver and then from Denver up into 
the agency up into Washington and who was involved with that 
transition?
    Mr. Devaney. Well, actually while most of the activity 
takes place in Denver the actual discovery in 2000 and also the 
inquiry in 2004 emanated from New Orleans in the royalty 
collection group down there. There is a small component down in 
the Gulf as well.
    Mr. Hinchey. Yes.
    Mr. Devaney. So in 2000 it was an analyst that realized 
suddenly that he was looking at leases that didn't have the 
language in it, so he brought it to the attention of his 
supervisor, and that was the occasion when a decision was made 
to deal with it within the component of MMS that Mrs. Kallaur 
was running and not to bring it up the chain of command.
    In 2004, the information was brought to the associate 
director's of Minerals Resources attention here in Washington, 
and it is he that had a brief conversation with the director of 
MMS, Johnnie Burton.
    Mr. Hinchey. Thank you very much.
    Thank you, Mr. Chairman.
    The Chairman. Mr. Pearce?
    Mr. Pearce. Thank you, Mr. Chairman. Just one comment that 
the staff gave to me after Mr. Miller was making his comments 
that the royalty relief would not work any difference. Actually 
the number of bidders are up by 400 percent. If you get more 
bidders then the price goes up.
    Of all the questions that failed to drive Mr. Devaney over 
the edge, I am afraid the next one might do that.
    Mr. Chairman, will we be given an opportunity to submit 
questions for the witnesses to answer in writing, and what is 
the timeframe for submitting those questions?
    The Chairman. The answer is yes. The usual procedure is 10 
days.
    Mr. Pearce. OK. Just clarifying that for the record then.
    Thank you again, and I thank you both for your testimony. 
It has been good. Thank you both for your service.
    The Chairman. Thank you, both of you, for not only being 
with us today, being very patient in answering the questions of 
all the Committee Members.
    I thank the Committee Members on both sides of the aisle 
for their participation, and, as I opened my line of 
questioning to both of you, we certainly commend and thank you 
for your service. It is difficult. We know that. You can only 
try to be as straightforward as is humanly possible. I 
certainly believe you both have done that.
    The bottom line in this gentleman's opinion is certainly 
that something is amiss in the administration of this program, 
and the American taxpayers have been the ones that missed out.
    We will continue oversight hearings. It is indeed this 
Chairman's intention to exercise that responsibility of ours in 
a very vigorous manner, and we will follow up with more 
hearings on this issue.
    It is also this gentleman's desire that we find out how the 
problem can be fixed and how we can prevent it from occurring 
in the future. It is not this gentleman's intention to point 
fingers in a partisan manner at any Administration. Obviously 
mistakes were made under both, and they should have been 
brought forward to the American people's attention at an 
earlier time.
    The solution that we may come up with in this committee 
within our jurisdiction I hope will be reached in a bipartisan 
fashion. We have seen a number of committees address this issue 
in the past and more I am sure will continue to address it, so 
obviously, as I said, there is a problem. Something is amiss, 
and we need to correct it for the American taxpayer. That needs 
to be done in a bipartisan fashion.
    With that I will conclude this hearing and thank the 
witnesses again for being with us.
    [Whereupon, at 1:27 p.m. the Committee was adjourned.]

    [Additional material submitted for the record follows:]

Response to questions submitted for the record by The Honorable Earl E. 
     Devaney, Inspector General for the Department of the Interior

Questions from Congressman Pearce
Question A. Royalty Collection Compliance Review Process
     In your testimony, you are critical of MMS's royalty revenue 
compliance process because it prioritzes the largest companies and 
largest leases. I understand from the MMS that by focusing on the 
largest companies and leases, the compliance program captures over 70% 
of the domestic production on federal lands. Please provide the 
Subcommittee with a comparison of MMS's royalty revenue audit and 
compliance process with:
        1)  the audit and compliance review process of the Internal 
        Revenue Service towards taxpayers
        2)  the investigation and review process of the Securities and 
        Exchange Commission towards public companies it oversees.
     Included in that comparison, please compare the percentage of 
audits or full investigation [sic] conducted by the IRS and SEC, 
respectively, with the percentage of audits conducted by MMS.
    Answer: Our critique was that because MMS Compliance and Asset 
Management program's performance measures are driven strictly by dollar 
amount, only big companies and leases are being reviewed (9% of 35,457 
leased properties and 20% of 2,880 companies), leaving hundreds of 
smaller companies and thousands of leases that MMS never looks at. We 
were also critical that MMS 1) did not distinguish its results from 
among audits, compliance reviews and RIK analyses; 2) had no mechanism 
to trigger a full audit from a compliance review, and 3) that MMS' 
methodology for predicting revenues does not provide a valid figure for 
calculating its compliance index.
    While we have endeavored to obtain public information concerning 
IRS and SEC audits and investigations, we are unable to make a 
meaningful comparison of MMS' processes relative to the IRS and SEC. 
For example, the IRS describes its enforcement efforts utilizing 
``examinations,'' ``document matching,'' and ``criminal enforcement,'' 
while the SEC appears to employ ``enforcement,'' ``enforcement 
assistance,'' ``examinations,'' and ``disclosure reviews.''
    We are not confident that any of these compliance and enforcement 
tools can be equated to MMS' audits, compliance reviews and RIK 
analyses. We include the IRS' ``Fiscal Year 2006 Enforcement and 
Service Results'' and the SEC's 2006 Performance and Accountability 
Report for reference.
Question B. Clinton 1998 and 1999 Oil and Gas Leases
    In your statement regarding the 1998 and 1999 Clinton leases you 
state that there was ``significant confusion among MMS operational 
components and the office of Solicitor as to whether or not the 
regulations would address price thresholds.'' The final regulations 
were signed in September of 1997. That final regulation was not filed 
in the federal register until January of 1998 and the next lease sale 
was not held until February of 1998. If this was all the result of 
``confusion,'' shouldn't the confusion have been cleared over the 
course of those 4--5 months?
    Answer: Ideally, the omission of price thresholds in the lease 
documents should have been identified and corrected quickly. 
Unfortunately, MMS did not have processes in place in 1998 and 1999 for 
the independent review of the actual lease documents. For example, the 
attorney with the Office of the Solicitor who was in a position to 
identify the omission, since he worked on both the regulations and the 
Notices of Sale, did not review the actual lease documents, but only 
the Notices of Sale. Thus, the omission--or ``confusion''--was not 
recognized or corrected until an MMS employee was reviewing the lease 
documents for a wholly unrelated purpose.
     Your investigative report regarding the 1998 and 1999 Clinton 
Lease Report was leaked to the New York Times before it was presented 
to Congress. Have you begun an internal investigation into the source 
your New York Times leaks? If not, why not? If so, how has that 
employee been reprimanded?
    Answer: The New York Times has reported on several issues being 
investigated by my office. Various articles have contained information 
that had not been publicly released at the time of publication. In one 
instance, we had provided limited information to the Department about 
the investigation, but had also conducted a considerable number of 
employee interviews. While we generally request that witnesses not 
discuss their interviews with OIG investigators, we cannot prevent them 
from doing so. Furthermore, we have interviewed a number of qui tam 
relators and whistleblowers in these matters who may well have been 
talking to the press as well as to us.
    In regard to the Report of Investigation on the 1998 and 1999 
leases, which we released publicly contemporaneous with my testimony 
before the Senate Energy Committee on January 18, 2007, we had provided 
copies of the report to the Department and the Senate Energy Committee 
2 days prior. I do not know how the New York Times obtained the 
information that was published in the articles, in either instance. One 
of the articles referred to ``sources'' that appear to have been 
disgruntled MMS employees. The other article was published the morning 
after we provided the report to the Department and the Senate Energy 
Committee. This would not be the first time one of our reports was 
leaked by someone who had come by it properly. Thus, the OIG is not 
conducting an investigation into either of these incidents.
     Question: Concerns have been raised regarding the appointment of 
Chris Oynes to the position of Associate Director of Minerals 
Management Service's Offshore Minerals Management Program. I understand 
that the agency in advance of that appointment contacted you to confirm 
that you saw no culpability by Mr. Oynes with respect to the Clinton 
1998 and 1999 leases. Is that correct?
    Answer: As I recall, I was contacted by two senior departmental 
officials who asked me whether we had developed information in the 
course of our investigation that would prevent the appointment of Mr. 
Oynes as the Associate Director of MMS' Offshore Minerals Management 
Program. Since Mr. Oynes successfully passed a polygraph concerning his 
memory, as he related it to a House subcommittee in testimony, my 
response was, ``No.'' I was not asked my opinion as to whether or not 
such an appointment was wise or appropriate.
                                 ______
                                 
    [The response to questions submitted for the record by Ms. 
Nazzaro follows:]

March 28, 2007

The Honorable Nick J. Rahall II
Chairman, Committee on Natural Resources
House of Representatives

Sub ject: Posthearing Questions: Major Management Challenges at the 
Department of the Interior

Dear Mr. Chairman:

    On February 16, 2007, I testified at the Committee's oversight 
hearing on ``Reports, Audits, and Investigations by the Government 
Accountability Office and the Office of Inspector General Regarding the 
Department of the Interior.'' 1 This letter responds to your 
February 26, 2007 request, in which members of the Committee asked 
additional questions about GAO's past reports. To answer these 
questions, we relied primarily on a number of GAO reports, as well as 
our body of knowledge in these areas. We prepared this letter during 
March 2007 in accordance with generally accepted government auditing 
standards. Because this letter was primarily based on previously issued 
reports, we did not seek agency comments on a draft of this letter. Our 
responses to the questions follow.
---------------------------------------------------------------------------
    \1\ GAO, Department of the Interior: Major Management Challenges, 
GAO-07-502T (Washington, D.C.: Feb. 16, 2007).
---------------------------------------------------------------------------
    1. Based on GAO's reports and audits, what are the fiscal costs 
resulting from mismanagement of programs and the revenue losses 
associated with the failure to collect fair market value for the use 
and development of resources under the jurisdiction of the Department 
of the Interior? What priorities should Congress pursue to address 
these problems?
    Past GAO reports have identified a number of areas in which the 
Department of the Interior (Interior) has not collected all revenue 
authorized. The most significant source of forgone revenue owing to 
mismanagement is the department's implementation of the Outer 
Continental Shelf Deep Water Royalty Relief Act enacted in 1995--
amounting to at least $1 billion--because of the failure to include 
price thresholds in leases issued in 1998 and 1999. All other sources 
of potential lost revenue from Interior programs that we have reported 
on pale in comparison with this amount. We have also identified revenue 
that the department could collect should the Congress choose to give it 
additional authority in certain programs.
    Oil and gas revenue. While precise estimates remain elusive at this 
time, as we testified, our work to date shows that royalty relief under 
the Outer Continental Shelf Deep Water Royalty Relief Act will likely 
cost billions of dollars in forgone royalty revenue; at least $1 
billion has already been lost. 2 In October 2004, the 
Minerals Management Service (MMS) estimated that forgone royalties on 
deep water leases issued under the act from 1996 through 2000 could be 
as high as $80 billion in total. However, there is much uncertainty in 
these estimates because of ongoing legal challenges and other factors 
that make it unclear how many leases will ultimately receive royalty 
relief and of the inherent complexity in forecasting future royalties. 
We are currently assessing MMS's estimate in light of changing oil and 
gas prices, revised estimates of future oil and gas production, and 
other factors. At the completion of our work we hope to provide a 
discussion of some of the alternative ways to address the forgone 
revenue.
---------------------------------------------------------------------------
    \2\ GAO, Oil and Gas Royalties: Royalty Relief Will Likely Cost the 
Government Billions, but the Final Costs Have Yet to Be Determined, 
GAO-07-369T (Washington, D.C.: Jan. 18, 2007)
---------------------------------------------------------------------------
    Oil and gas permit fees. Should the Congress choose to provide 
Interior with new legislative authority, additional revenues could be 
collected to process applications for oil and gas permits. In June 
2005, we recommended that the Bureau of Land Management (BLM) use its 
authority and move forward with its plans to establish a fee structure 
that would recover its costs for processing applications for oil and 
gas permits. 3 In response to our recommendation, BLM issued 
a proposed regulation in July 2005 that included a $1,600 fee for 
processing oil and gas permits. 4 However, the Energy Policy 
Act of 2005, which was enacted 2 months after our report was issued, 
prohibited Interior from initiating the new fee. In its Fiscal Year 
2008 budget request, Interior has proposed that the Energy Policy Act 
be amended to allow the new fee to move forward. Interior estimates 
that the new fee would generate $21 million in additional revenue for 
Fiscal Year 2008.
---------------------------------------------------------------------------
    \3\ GAO, Oil and Gas Development: Increased Permitting Activity Has 
Lessened BLM's Ability to Meet Its Environmental Protection 
Responsibilities, GAO-05-418 (Washington, D.C.: June 17, 2005).
    \4\ 70 Fed. Reg. 41532, 41542 (July 19, 2005).
---------------------------------------------------------------------------
    Air tour revenue. In May 2006, we reported that Interior's National 
Park Service was not collecting all the required fees from companies 
conducting air tours over three highly visited national park units that 
are authorized to collect fees. 5 Since it began collecting 
this fee in 1994, the Park Service has collected about $19 million at 
the three park units. However, we identified almost $2 million in fees 
that had not been collected. The Park Service was not collecting all 
the required fees because of (1) an inability to verify the number of 
air tours conducted over the three park units and, therefore, to 
enforce compliance and (2) confusion resulting from differing 
geographic applicability of two laws governing air tours in or around 
park units.
---------------------------------------------------------------------------
    \5\ GAO, National Parks Air Tour Fees: Effective Verification and 
Enforcement Are Needed to Improve Compliance, GAO-06-468 (Washington, 
D.C.: May 11, 2006).
---------------------------------------------------------------------------
    We also reported that the Park Service could collect additional 
revenues if the Congress expanded the authority to charge air tour fees 
from the current three park units to an additional 83 units with air 
tours. 6 While the three park units account for about one-
half of all the air tour activity, expanding the fee would enable the 
Park Service to collect additional revenue to help develop and monitor 
air tour management plans. Depending on the number of additional park 
units included in an expansion of the air tour fee authority, the Park 
Service could potentially collect approximately an additional $1 
million to $4 million annually.
---------------------------------------------------------------------------
    \6\ GAO-06-468.
---------------------------------------------------------------------------
    Grazing revenue. In September 2005, we reported that the grazing 
fee BLM and the U.S. Department of Agriculture's Forest Service charge, 
which was $1.43 per animal unit month (AUM) in 2004, 7 is 
established by formula and is generally much lower than the fees 
charged by other federal agencies, states, and private ranchers. 
8 Other federal agencies, states, and private ranchers 
generally establish fees to obtain the fair market value of the forage 
and, as a result, charged fees ranging from $0.29 to $112 per AUM in 
Fiscal Year 2004, depending on the location, range condition, and 
accompanying in-kind service. The formula used to calculate the BLM and 
the Forest Service grazing fee incorporates rancher's ability to pay; 
therefore, the current purpose of the fee is not primarily to capture 
the fair market value of the forage or to recover the agencies' 
expenditures. As a result, BLM's and the Forest Service's grazing 
receipts fell short of their expenditures on grazing in Fiscal Year 
2004 by almost $115 million. We reported that if the purpose of the 
grazing fees was to recover expenditures, the agencies' grazing fees 
would have been about $7.64 and $12.26 per AUM, respectively. 
Alternatively, if the purpose of the fees was to gain fair market 
value, the agencies' fees would vary depending on the market. As I 
stated in my testimony, were BLM to implement approaches other agencies 
use to set grazing fees, it could help close the gap between 
expenditures and receipts, and more closely align its fees with market 
prices. We recognize, however, that the purpose and the amount of BLM's 
grazing fee are ultimately for the Congress to decide.
---------------------------------------------------------------------------
    \7\ An AUM is the amount of forage that a cow and her calf can eat 
in 1 month.
    \8\ GAO, Livestock Grazing: Federal Expenditures and Receipts Vary, 
Depending on the Agency and the Purpose of the Fee Charged, GAO-05-869 
(Washington, D.C.: Sept. 30, 2005).
---------------------------------------------------------------------------
    Royalties from hardrock mining. As we reported in June 2005, the 
General Mining Act of 1872 encouraged development of the West by 
allowing individuals to stake claims and obtain rights to gold, silver, 
copper, and other valuable hardrock mineral deposits on land belonging 
to the United States. 9 The law, however, does not authorize 
the collection of royalties. Since 1872, thousands of claimants and 
operators have extracted billions of dollars of hardrock minerals from 
federal lands without being required to pay royalties on any hardrock 
minerals extracted. A February 2007 Congressional Budget Office report 
stated that $35 million in revenue could be generated over a 5-year 
period should the Congress authorize an 8-percent royalty on the net 
proceeds from all future production of hardrock minerals from federal 
lands. 10 The report also notes that if the 8-percent 
royalty was applied to gross proceeds, it would generate additional 
revenue and be less costly to administer.
---------------------------------------------------------------------------
    \9\ GAO, Hardrock Mining: BLM Needs to Better Manage Financial 
Assurances to Guarantee Coverage of Reclamation Costs, GAO-05-377 
(Washington, D.C.: June 20, 2005).
    \10\ Congressional Budget Office, Budget Options (Washington, D.C.: 
Feb. 2007). The Congressional Budget Office's estimate assumes that the 
states in which mining takes place would receive 10 percent of the 
royalty receipts, and that there would be no surge in patenting 
activity before royalties were imposed; such a surge could boost 
immediate patenting receipts and diminish future royalties.
---------------------------------------------------------------------------
    2. As you cited in your 2005 report entitled, ``Oil and Gas 
Development: Increased Permitting Activity Has Lessened BLM's Ability 
to Meet Its Environmental Protection Responsibilities,'' BLM staff do 
not have the necessary resources to perform the required environmental 
inspections. The Bush Administration's FY 2008 budget proposal will 
increase the number of Applications for Permits to Drill (APDs) 
processed by nearly 55 percent from 7,736 to nearly 12,000 in 2008. 
While it is important that the Bush Administration focus its efforts to 
meet the Nation's growing demand for energy, it must be mindful of the 
vast growth and environmental effects that this will have on the 
``Evolving West.'' What effect will this continued increase in permit 
approvals have on the surrounding communities and environment? Is there 
a ``tipping point?'' And, if so, at what point do you think the 
Administration's emphasis on oil and gas development will become 
excessive?
    In June 2005, we reported that the increased permitting activity 
between 1999 and 2004 had occurred at the expense of environmental 
mitigation activities owing to a lack of resources available to conduct 
mitigation activities. 11 The effect of a continued increase 
in permit approvals on surrounding communities and the environment will 
depend on (1) the environmental stipulations in the leases, (2) the 
conditions of approval in the permits, and (3) BLM's level of 
monitoring and enforcement of the lease stipulations and permit 
conditions. If BLM is required to process even more permits without 
receiving any additional resources, it is likely that the agency's 
ability to perform the necessary environmental mitigation activities 
would continue to be eroded.
---------------------------------------------------------------------------
    \11\ GAO-05-418.
---------------------------------------------------------------------------
    Before the Energy Policy Act was enacted in August 2005, BLM had 
the authority to assess and charge fees to cover its expenses for 
processing oil and gas permits. The revenues from such fees would have 
enabled BLM to supplement its program resources. As I noted in my 
response to Question 1, we had recommended, and BLM had begun to 
establish, a fee structure to recover its costs for processing 
applications for oil and gas permits, but the Energy Policy Act 
prohibited Interior from initiating the new fee. Nevertheless, Interior 
has continued to express interest in initiating such a fee and has 
proposed that the Energy Policy Act be amended to allow the fee to move 
forward. Authorizing such a fee to cover BLM's expenses for processing 
permits could presumably free bureau staff up to carry out 
environmental mitigation responsibilities, should the agency choose to 
use the resources for this purpose.
    The extent to which federal lands should be used for oil and gas 
exploration and development and the environmental effects that will be 
tolerated are policy decisions that are up to the Congress and the 
administration to make. Balancing the competing demands for the use of 
these lands is an ongoing challenge for the Congress and the agencies 
that manage them.
    3a. As you will recall, GAO found that the Fish and Wildlife 
Service (FWS) had very poor records characterizing the environmental 
threat of oil and gas activities on refuge lands. To your knowledge, 
has the Service completed a comprehensive assessment of the cumulative 
environmental impacts of oil and gas development on refuges?
    FWS has taken some steps to identify a possible approach to 
developing and maintaining data on the effects of oil and gas 
activities on refuge resources, although it has not identified funding 
to support this effort. It is not clear whether the agency will conduct 
a comprehensive assessment of the cumulative environmental impacts of 
oil and gas development on refuges once it gathers these data.
    3b. GAO also found that the Fish and Wildlife Service did not have 
any inventory of oil and gas infrastructure on refuges and was unable 
to estimate future reclamation costs. Has the Service completed this 
inventory and compiled a list and cost estimate for outstanding 
reclamation needs?
    Collecting data on the nature and extent of oil and gas activities 
on refuge lands is part of the effort described in response to Question 
3a. Because the data have not yet been collected under this effort, FWS 
cannot comprehensively identify needed reclamation or associated costs.
    3c. Has the Fish and Wildlife Service developed consistent system-
wide policies and permit procedures, including revised fees for oil and 
gas activities and infrastructure on refuges, and revised the agency's 
Refuge Manual accordingly? And, do we have any estimates of the amount 
of revenue the United States could be collecting, but is not, due to 
the agency's failure to act?
    FWS has drafted a handbook for the management of oil and gas 
activities on wildlife refuges, although it has not yet been made final 
or public. Therefore, it is not clear what FWS's policies or procedures 
will be. We have not examined what revenue is available to FWS through 
fees for oil and gas activities and infrastructure on refuges. It is 
important to note that FWS only has the authority to retain money paid 
for damages to refuge lands in Louisiana and Texas. The money is to be 
used to make damage assessments, mitigate or restore damages, and 
monitor and study recovery of the resources. As of the August 2003 
issuance of our report, fees had only been collected in Louisiana. 
12 To address this inconsistency, FWS officials told us they 
are drafting guidance to clarify how these regions should apply their 
authority to collect and retain fees. Furthermore, Congress would need 
to provide FWS with the authority to retain money paid for damages for 
refuge lands beyond Louisiana and Texas.
---------------------------------------------------------------------------
    \12\ GAO, National Wildlife Refuges: Opportunities to Improve the 
Management and Oversight of Oil and Gas Activities on Federal Lands, 
GAO-03-517 (Washington, D.C.: Aug. 28, 2003).
---------------------------------------------------------------------------
    3d. GAO reported that the Service has adequate authority to 
regulate outstanding mineral rights on refuges and recommended that the 
Service work with the Solicitor's office to determine the Service's 
existing authority to issue permits and set reasonable conditions. Did 
the Service ever follow through on this recommendation?
    According to FWS officials, the agency has consulted with 
Interior's Office of the Solicitor, which has concurred with the 
discussion of FWS's authority in the draft oil and gas handbook 
mentioned in the response to Question 3c. However, it is not clear what 
the official FWS position is concerning the agency's authority because 
the handbook is not yet public.
    4a. As 2006 drew to a close approximately 100 lawsuits were filed 
by Indian tribes against the United States for an accounting of their 
tribal trust funds because the 109th Congress adjourned without 
extending the statute of limitations for such claims as it has since 
2001. In the past the GAO has encouraged the United States to explore 
the settlement of these claims before they erupted into litigation. 
Does the GAO still support the settlement concept? Does the GAO have 
any opinion whether Congress should re-extend the statute of 
limitations to avoid litigation?
    While we have long recommended consideration of a legislated 
process for settlement of claims before litigation is filed, we do not 
have a position on legislated settlement of the existing lawsuits or 
extension of the statute of limitations for tribal trust fund claims. 
From 1992 through 1997, we monitored and reported on various aspects of 
Interior's planning, execution, and reporting of results for its tribal 
trust fund account reconciliation project, which was statutorily 
required beginning in 1987. Between 1992 and 1996, we reported that, 
although Interior had made a massive attempt to reconcile tribal 
accounts during its reconciliation project, missing records and systems 
limitations made full reconciliation impossible. Accordingly, as early 
as 1992, we recommended to Interior that it consider alternatives to 
account reconciliation including, if other options were unsuccessful, 
seeking a legislated settlement process. Since 1997, many tribes have 
initiated lawsuits with claims related to account balances.
    4b. The GAO's recent (December 2006) report on the Office of the 
Special Trustee (OST) indicates that the OST uses contractors 
extensively, but reports from Indian Country indicate that the OST has 
not made much of an effort to make contracting opportunities available 
to Indian tribes. In light of the overall federal policy of tribal 
self-determination, do you agree that there should be some effort to 
use Native American businesses to the greatest extent possible?
    We are not in a position to offer an opinion on this issue because 
our December 2006 report did not examine OST's efforts to make 
contracting opportunities available to Indian tribes. 13 
However, we found that OST's largest contractor in Fiscal Years 2004 
and 2005 was Chickasaw Nation Industries, an Indian-owned 8(a) small 
business. OST used an indefinite delivery, indefinite quantity contract 
with Chickasaw Nation Industries that allowed OST to award contract 
task orders quickly because there is no requirement for competition. 
OST's second largest contractor in Fiscal Years 2004 and 2005 was SEI 
Investments--which is not an Indian-owned 8(a) small business--for the 
operation and maintenance of OST's trust fund accounting system, a 
modified off-the-shelf version of SEI's commercial trust accounting 
system. More than 150 large financial and investment institutions use 
SEI's trust management systems.
---------------------------------------------------------------------------
    \13\ GAO, Indian Issues: The Office of the Special Trustee Has 
Implemented Several Key Trust Reforms Required by the 1994 Act, but 
Important Decisions about Its Future Remain, GAO-07-104 (Washington, 
D.C.: Dec. 8, 2006).
---------------------------------------------------------------------------
    4c. No one thought that the Office of the Special Trustee would 
exist in 2007. It was supposed to be a temporary position. Should 
Congress set a specific date for the termination of that office as a 
number of Indian tribes have requested?
    We believe the requirements in the American Indian Trust Fund 
Management Reform Act of 1994 are sufficient for establishing a 
termination date for OST. 14 The act directed OST to develop 
a comprehensive strategic plan with a timetable for implementing 
identified trust fund management reforms and a date when OST will be 
terminated. However, we found that OST had not established a timetable 
or a date for OST's termination, and we recommended that the Secretary 
of the Interior direct the Special Trustee to provide the Congress with 
a timetable for completing trust fund management reforms. In response, 
Interior stated that it expects to have a timetable by late June 2007 
for implementing the remaining trust reforms including a date for the 
proposed termination or eventual disposition of OST.
---------------------------------------------------------------------------
    \14\ GAO-07-104.
---------------------------------------------------------------------------
    The Congress, in its review of Interior's timetable, may disagree 
with the duration of the trust reforms and choose an alternative 
completion and termination date. OST plans to complete almost all of 
its key trust fund management reforms by November 2007. OST told us 
that after November 2007 it will still need to verify the data in the 
Bureau of Indian Affair's trust asset and accountability management 
system for (1) Indian lands with recurring income for which the land 
and leasing records in the management system matched with the 
information in the legacy realty system and (2) Indian lands without 
recurring income.
    4d. Over the last few years the Office of the Special Trustee has 
taken authorities and programs away from the Bureau of Indian Affairs 
as well as millions of valuable resources. This was never intended by 
Congress when OST was established. Did your studies show what the 
Department of the Interior plans to do with all these activities when 
they finally shut down the Office of the Special Trustee? Did you 
receive any assurances that the administration will continue these 
programs or can this build-up of OST be a precursor to terminating 
these responsibilities?
    Regarding the first part of the question, neither the Secretary of 
the Interior nor the Special Trustee has stated what will be done when 
the trust reforms are completed. Accordingly, we recommended that the 
Secretary provide the Congress with a plan for future trust operations, 
including, if the decision is made to terminate OST, a determination of 
where these operations will reside. 15 The American Indian 
Trust Fund Management Reform Act of 1994 states that the Special 
Trustee, in providing the Congress with a 30-day notice of completion, 
may recommend the continuation, or permanent establishment, of OST if 
the Special Trustee concludes that continuation or permanent 
establishment is necessary to efficiently discharge the Secretary's 
trust responsibilities.
---------------------------------------------------------------------------
    \15\ GAO-07-104.
---------------------------------------------------------------------------
    Regarding the second part of your question, the Special Trustee for 
American Indians shares your concern that OST's trust fund management 
responsibilities must continue into the future whether or not OST 
itself is terminated. OST has made a significant investment in 
developing an integrated trust management system to better ensure that 
ownership of lease and other income is accurately identified and paid 
into appropriate trust accounts. Taxpayer funds would be wasted if 
these programs were terminated without another capable organization 
identified to fulfill the Secretary's trust fund responsibilities.
    5. I understand that most of the properties listed in your report 
regarding financial assurances for hardrock mining were in bankruptcy. 
In some instances, the discrepancy in the bond amount and the actual 
amount of money required for reclamation were due to the fact that 
reclamation conditions were exacerbated as a result of the bankruptcy 
(insufficient funds to run water pumps, etc.). In other words, the bond 
would have been adequate had the company remained solvent. Would 
legislation such as the Good Samaritan legislation introduced in the 
109th Congress by Congressman Duncan, H.R. 5404, which provides limited 
liability to private parties willing to assume reclamation (and 
contribute money or in kind services), help the federal government in 
reclaiming these properties?
    Having adequate financial assurances to pay reclamation costs for 
BLM land disturbed by hardrock operations is critical to ensuring that 
the land is reclaimed if operators fail to complete reclamation as 
required. Financial assurances must be based on sound reclamation plans 
and current cost estimates so that BLM can be confident that financial 
assurances will fully cover reclamation costs. However, in our June 
2005 report, we found that BLM did not have a process for ensuring that 
adequate assurances were in place. 16 As a result, we 
reported that 48 hardrock operations in seven states had ceased and had 
not been reclaimed by operators, as required, leaving BLM with about 
$56.4 million in unfunded reclamation costs. Reclamation costs were not 
paid by the operators in these cases because some of the operators had 
outdated reclamation plans or cost estimates, while other operators had 
no financial assurances at all.
---------------------------------------------------------------------------
    \16\ GAO-05-377.
---------------------------------------------------------------------------
    Our work on hardrock mining was completed nearly a year before the 
Good Samaritan legislation was introduced. Consequently, we did not 
evaluate the legislation's applicability to the problems that we found 
with financial assurances for hardrock mining operations. However, the 
recommendations in our report are intended to help BLM avoid being left 
with unfunded reclamation costs in the future. Specifically, we 
recommended that BLM state office directors establish an action plan 
for ensuring that operators of hardrock operations have required 
financial assurances and that the financial assurances are based on 
sound reclamation plans and current cost estimates, so that they are 
adequate to pay all of the estimated costs of required reclamation if 
operators fail to complete the reclamation. If properly implemented, 
this should help BLM reduce or eliminate instances where financial 
assurances are underestimated or based on unsound reclamation plans. 
While the agency has taken steps to implement these recommendations, we 
have not fully evaluated the impact of its actions.

                               - - - - -

    We are sending copies of this report to the Chairman and Ranking 
Minority Members with jurisdiction over the Department of the Interior 
and The Honorable Dirk Kempthorne, Secretary of the Interior. We will 
make copies available to others upon request, and the report will be 
available at no charge on the GAO Web site at http://www.gao.gov. If 
you have any questions, please contact me on (202) 512-3841 or at 
[email protected]. Contact points for our offices of Congressional 
Relations and Public Affairs may be found on the last page of this 
report.

Sincerely yours,

Robin M. Nazzaro
Director, Natural Resources and Environment

                                 
