Oil sex scandal may affect drilling debate

Republicans and Democrats promised further scrutiny of the Interior Department agency which last year handled $4.3 billion in royalty-in-kind payments from energy companies drilling on federal lands. Under the program oil companies give the government oil in lieu of cash and the MMS office in turn sells the oil on the open market.

Sen. Jeff Bingaman, D-N.M., chairman of the Senate Energy and Natural Resources Committee, said the IG report "raises very serious questions" about the royalty collection process, something especially troublesome "given the potential for expanded domestic drilling." He said some basic reforms in the royalty-in-kind program should be included in drilling legislation.

Wyden said the program should be suspended to "clean house" at the federal agency and "bring back the process of rigorous audits and accountability."

Rep. Nick Rahall, D-W.Va., chairman of the House Natural Resources Committee, announced a hearing next week on the investigaton. "This whole IG report reads like a script from a television miniseries and one that cannot air during family viewing time," he said.

But Republicans rejected suggestions that the scandal makes the need for more offshore oil and gas any less urgent.

House Democrats on Wednesday offered a broader drilling proposal than they had floated previously. It would lift all moratoria on drilling 100 miles from shore and allow energy development beyond 50 miles from the coast if a state agrees. Waters closer than 50 miles would continue to be protected.

The drilling measure is part of a broader energy package that also would roll back tax breaks for the largest oil companies and require them to pay additional royalties, with the money to be used to spur renewable energy programs and conservation.

House Majority Leader Steny Hoyer, D-Md., called it "a strong bill that will increase responsible drilling and invest in renewable energy" and said those criticizing it would "rather have a political issue."

But House Republican leader John Boehner, R-Ohio, accused the Democrats of "trying to pull a hoax on the American people." He said the plan would result "in little or no new American energy production" because states would share no royalties and have little financial incentives to allow drilling.

The Senate, meanwhile, is expected next week to take up several drilling proposals, including one that would open waters off the Atlantic from Virginia to Georgia and the eastern Gulf off Florida to drilling but keep the bans in place elsewhere. That plan also would allow for a 50-mile coastal buffer.

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