Last fall, a citizens group that had received $1.2 million in a settlement with Mobil Oil Co. shared part of the money with two government whistle-blowers who had first revealed royalty underpayments for oil pumped from public lands.

That move by the Project on Government Oversight (POGO) has ratcheted up a long-standing controversy over royalties to the federal government and has become a new sticking point in the debate over an Interior Department proposal that would force the industry to pay more for extracting crude oil on federal property.

A House committee recently began investigating POGO's payment to the whistle-blowers, and three senators have asked Interior to suspend the oil valuation rulemaking -- already subject to considerable political wrangling -- until a separate Justice Department probe of the payments is completed.

The House Resources Committee, led by Rep. Don Young (R-Alaska), voted earlier this month to subpoena documents from the watchdog group and investigate whether its $350,000 payments to Robert Berman, a former Interior Department employee, and Robert Speir, of the Energy Department, were an attempt to influence the rulemaking process.

The watchdog group claims the congressional moves are retribution and an effort to intimidate POGO in its challenges to more than a dozen oil companies for royalty underpayments. An estimated $2 billion in royalty shortfalls is reportedly at stake in POGO and government lawsuits against oil companies.

"Congress is essentially using its power to intimidate and threaten public interest groups and whistle-blowers, while it's assisting the industry," Danielle Brian, executive director of POGO, said yesterday. She said the protests over the two $350,000 payments have become a way to distract attention from underpayments and to prolong the Clinton administration's effort to revise the royalty payment formula, close loopholes and ensure full payment for crude oil extracted on public lands.

But Young has suggested the $700,000 could be payoffs for inside information and questioned whether "a message will be sent to federal bureaucrats that they are free to sell their government actions to the highest bidder." His committee is investigating whether the payments to Berman and Speir influenced Interior's development of its oil valuation rule.

The Interior Department has told members of Congress that the two men were not involved in drafting the rule, which was first published in January 1997, nor have they participated in revisions. But separately, the Justice Department has written to Young that it advised attorneys for POGO that the payments should not be made and said a criminal investigation of the payments is ongoing.

POGO has alleged that oil companies defrauded the government in royalty payments for oil drilled and produced on public lands. It brought its lawsuits under a federal statute that permits private organizations to sue on behalf of the government and share in the proceeds. When POGO received its $1.2 million portion of the Mobil settlement, it decided to share with Berman and Speir, whom it called "courageous individuals . . . who had already been trying to fix this problem from within the bureaucracy for over ten years." POGO's Brian said the group saw it as "the right thing to do."

But some members of Congress sympathetic to the oil industry are protesting the payments to Berman and Speir.

Sen. Frank H. Murkowski (R-Alaska), chairman of the Energy and Natural Resources Committee, joined by Sens. Pete V. Domenici (R-N.M.) and Don Nickles (R-Okla.), asked Interior Secretary Bruce Babbitt to suspend the rulemaking until the POGO controversy is resolved. They asserted that the proposed rule "imposes a backdoor tax increase on domestic energy producers. Such cost increases our dependence on imported oil, which threatens our national security."