By Carol D. Leonnig
Washington Post Staff Writer
Wednesday, April 7, 2004; Page A07

A court-appointed investigator has resigned from his job probing the federal government's management of hundreds of millions of dollars owed Native Americans, and charged that the Department of the Interior blocked his work in a bid to conceal its deals to enrich energy companies and cheat American Indians.

In his resignation letter, made public yesterday, Special Master Alan L. Balaran said the Bush administration worked to thwart him beginning last summer after he uncovered a two-decades-old practice by Interior officials of negotiating leases with oil and gas companies that gave Indian landowners a small fraction of the royalties that private landowners received in similar deals. Balaran accused the Department of Justice and the Interior Department of trying repeatedly to have him removed from the case "to prevent any further investigation" of the lopsided deals.

"A full investigation into these matters might well result in energy companies being forced to repay significant sums to individual Indians," Balaran wrote to the judge overseeing a multibillion-dollar lawsuit by Native Americans against the Interior Department. "Interior could not let this happen. . . . Billions of dollars are at stake."

Interior officials released a statement yesterday calling Balaran's charges "preposterous" and "based entirely on innuendo, supposition and baseless speculation -- just the sorts of things to which a competent judicial officer would give no credence."

Justice Department officials declined to comment.

In August 2003, Balaran reported that the Interior Department's chief appraiser in New Mexico had repeatedly negotiated for energy companies to pay Indians less than market value for the use of their land and that he destroyed evidence of his longstanding practice. In the case of one San Juan basin pipeline, the appraiser arranged for a gas company to pay $4.50 a yard to run pipeline across Indian-owned lands that Interior managed, while the same energy company paid private landowners $104 a yard for running the same pipe on their adjoining land.

Soon after his report, Balaran said Justice Department officials ordered him to leave an Interior Department repository in Dallas where he planned to review gas and oil audit files.

"The reason for this dramatic shift in policy is obvious," Balaran wrote of the government's action. "The consequences of [my] findings could cost the very companies with which senior Interior officials maintain close ties millions of dollars."

Balaran noted that the agency's inspector general concluded last month that Deputy Interior Secretary J. Steven Griles had repeated dealings with energy and mining industry clients of his former lobbying firm after assuming his post. As a condition of his confirmation for the deputy job, Griles had agreed to avoid such dealings for as many as six years.

Balaran praised U.S. District Judge Royce C. Lamberth, who is overseeing the Indian trust case, as "courageous." Lamberth said in a court order yesterday that he accepted Balaran's resignation "with profound regret."