Focus on Federal Oil and Gas

Oil is a naturally slimy resource, but what is going on when federal reserves are leased from oil and natural gas companies might rival the viscosity of the most slippery lubricant known to man.

In the United States, landowners often lease the mineral rights of their properties. One of the reasons to do this is to allow oil and natural gas companies to remove rich deposits of these natural resources to be refined for energy consumption.

In exchange to access to these reserves, oil and gas companies pay royalties to the landowners. The owners retain the mineral rights and receive handsome royalty incomes. Much of the land explored for natural resources is federally owned. This should mean that the American people are the landowners.

In these cases it is the United States department of the Interior who receives the royalties. Recently, several branches of the Interior Department have come under scrutiny for holding hands with the very companies with which they do business on behalf of the American people.

Beyond fraternizing with these oil and natural gas companies, it has been reported that employees have been accepting gifts, hotel accommodations, travel, and more from the oil and natural gas companies. Since many of these officials set the terms of the lease agreements, these presents could easily be seen as bribery. The term we used in the headline was "Lease for grease."

Congress has recently introduced legislation that would effectively end "Lease for grease."

The chairman of the House Energy and Natural Resources committee, Nick Rahall of West Virginia, wants to create a new federal agency that would consolidate energy programs and have oversight on the leasing of mineral rights along with enforcement and protection of the government's royalties.

The bill is supposed to address "Lease for grease" by requiring all involved employees be certified and forced to comply with rules of ethics and standards. Those found to be taking "grease" would lose their certification. The bill also empowers the agency to use necessary pressure on oil and gas companies to produce lease agreements quickly and the bill includes a process for improving royalty collections.

Some in Congress wonder if the creation of a new federal agency is really necessary. To them it would make more sense to pass most of the measures in this bill and apply them to the agencies currently responsible under the Department of the Interior.

If the bill passes, it will have no effect on private landowners who reach their own agreements with oil and gas companies.
Resources:
Federal Trade Commission - Oil and Gas Industry Initiatives

Committee on Natural Resources - Responsible Federal Oil and Gas Lease Act of 2008