The Interior Department's oil and gas lotteries are under fire again, barely a year after the department allowed the system to resume operation with its "weaknesses" corrected.
According to a House Appropriations Committee investigation, Interior is losing millions through the noncompetitive leasing system. New allegations have surfaced that "external interests" are allowed to interfere with the process.
Interior's inspector general is investigating allegations that Bureau of Land Management Director Robert F. Burford interceded to get two Wyoming tracts under lease by lottery, despite evidence that both contained high potential for oil and should have been leased competitively.
According to the Appropriations study, the U.S. attorney's office in Wyoming also is looking into the allegations, which were called to Interior's attention by Rep. Sidney R. Yates (D-Ill.), chairman of the Appropriations subcommittee on the interior.
In one case, investigators reported, Burford interceded "on the part of a personal friend" last November to get the department to release a Wyoming tract won in an August lottery. The department has since put a hold on 92 tracts won in that lottery -- which generated about $4 million in filing fees -- after a separate House investigation estimated their worth at $70 million to $90 million.
The second case involved another Wyoming tract that had been deleted from the October lottery list because a nearby producing well suggested that it had high petroleum potential. According to committee investigators, the SECO Energy Corp. had requested that the tract be included in the lottery, and it was restored to the list a few days after the BLM state director met with Burford in Washington.
When the computerized lottery was held, SECO won out over 404 other entrants for the tract.
In testimony last month before Yates' subcommittee, the BLM's Wyoming director, Hillary Oden, denied that pressure from Washington was involved in reinstating the tract. The land had initially been removed from the lottery, he said, because officials in his office had "mistakenly identified a dry hole as a producing well."
Burford also denied ordering the tract put back in the lottery, and he expressed some frustration at the subcommittee's line of inquiry.
"I do not like to be questioned every so often about so-called irregularities," he said.
But the Appropriations study, which has not been released publicly, suggests that Congress has not finished asking questions about the oil and gas lottery.
In the past 25 years, the BLM has leased millions of acres of federal land under the lottery system, a sort of long-shot leasing scheme that is supposed to be limited to lands with no known reserves of oil and natural gas. Under current rules, a lottery entrant puts up $75 plus $1 an acre for a given tract. If the entrant loses, the $1-an-acre rental fee is refundable.
Critics of the lottery have long complained that it is a magnet for corruption, and investigations have borne out the complaint.
In October 1983, Interior shut down the lottery system for the second time in three years after an internal probe found that thousands of acres of high-potential tracts were leased by lottery instead of by competitive bid. The result was that lottery winners were paying little for land that could have been leased for millions of dollars.
Moreover, the system spawned a host of independent "filing services," some of which lured thousands of unsophisticated investors into the lotteries, for a fee, with promises of riches.
In February 1984, then-secretary of the interior William P. Clark reopened the lottery after taking "corrective measures" to discourage unscrupulous promoters and assure that lottery tracts contained no known petroleum reserves.
But according to the House investigators, the problems have not been corrected. The study examined 23 tracts leased in two lotteries last year for a total of $271,650 and concluded that they would have brought $2.14 million had they been leased competitively.
The government's losses could go higher, the report said, because the royalty rate for oil and gas produced on lottery lands is 12.5 percent. On lands leased competitively, the royalty is 16.67 percent.
PARK SERVICE, LAST ROUND . . . Interior Secretary Donald Hodel, searching for a new director of the National Park Service, has narrowed the list to four candidates. Widely regarded as the front-runner is William Penn Mott, head of the Oakland Zoo and parks director in California under then-governor Ronald Reagan.
Also on the list is Manus (Jack) Fish, director of the National Capitol Region and the choice of former secretary Clark for the job. Charles Odegaard, a regional parks director in Omaha, also made the second cut, as did John Whittaker, a former interior undersecretary in the Nixon and Ford administrations who is now living in Nova Scotia.