Remarks on Receiving the Final Report of the Commission on Fiscal Accountability of the Nation's Energy Resources

January 21, 1982

Mr. Harper. Mr. President, we are here this morning to present the findings of your Commission of Fiscal Accountability of the Nation's Energy Resources that was established last July to investigate allegations of fraud in the payment of oil royalties and theft of oil from government and Indian lands. The Commission has now published its findings and recommendations, and Secretary Watt has already begun to follow up on some of the recommendations made by this Commission.

Mr. President, this is the kind of fraud and waste that we can stop by investigating problems that now exist and installing improved management systems that will prevent fraud and waste in the future.

I'd now like to introduce Dr. David Linowes, who chaired the Commission, and he'll give you some of the highlights of his report.

Dr. Linowes. Mr. President, first I want to thank you for permitting us to crowd into your already crowded day. But after 6 months of intensive investigations, the Commission had to conclude that the financial management of the Nation's energy resources had failed to do its job. As a result, hundreds of millions of dollars are being lost each year. We found that royalty collections actually are on an honor system. The companies tell us what they take from our wells. They tell us what the value is. We have no means of independently verifying those quantities. There are no internal controls. Only a handful of audits have ever been conducted. And site security is deficient. We found that theft was quite common throughout the country. And what very much disturbed us as a commission was that these and many other deficiencies were going on for 20 years; nothing had been done about it that was effective.

Well, to correct this state of affairs we made 60 recommendations, and they cover a very broad spectrum, of course. But they, I think, do come to grips with the essence of the problem. For example, we urge that there be criminal penalties for purchase of stolen oil and gas. We don't have that now. We recommend that there be cooperative arrangements with the Indian tribes in States, so they can help to monitor the lease sites and share in the auditing. We feel quite strongly that royalty management should be moved out of the present prestigious, scientifically oriented Geological Survey and set up in its own high-level office.

In short, we're convinced as a commission that this report here does provide a blueprint for effective financial management of our nation's energy resources. I think I might add -- on behalf of all of the Commissioners, I'm sure -- that participating in this work has been a very challenging opportunity for us to serve our nation and participate with you, join you in your attack on waste, fraud, and inefficiency in the Federal Government. As private citizens, we appreciate the opportunity.

The President. Well, Dr. Linowes, I know I'm speaking for Secretary Watt when I say -- and I guess for all of the American people -- there's no way to thank you and the members of the Commission here for what you've done. It's unconscionable that this could have been going on all these years. And now to have this report and to know that all of you served as citizens here, doing your duty for the country, I'm deeply grateful to you. And I know that the Secretary will follow through. And with this as a guideline, we will follow the recommendations that you have brought to us and correct this problem. And again, thank you.

Secretary Watt. Mr. President, in an effort to get ahead of your instructions, knowing that you had pushed to take all the actions necessary to save the taxpayers this 2, 3, 4, 600 million dollar loss each year, we started implementing these recommendations last week. There are 60 recommendations. Every one of the recommendations has been accepted; most of them have already been implemented. A few of them require legislative remedies. We will present a package to the Congress within a week or two of their meeting and ask for expeditious, quick work of Congress so that we can create the penalties that this Commission has recommended.

They have recommended, as Dr. Linowes said, that we pull out of the United States Geological Survey, the inspection group. We have done that as of January 19th, and we have created a Minerals Management Service that is now in effect. And we think that we have already started stemming the loss of funds -- the unbelievable loss of funds to the taxpayers -- that has been going on for these many years. And within the next weeks, we will have really cut that flow off and saved the taxpayers these moneys.

It's a tremendous example, unfortunately, of how the Department of the Interior has mismanaged a multimillion dollar problem for 20-plus years. And with the help of this Commission, an outstanding group of nationally recognized citizens, we have adopted every one of their recommendations. Not many government reports get acted on like that. This one hasn't been sitting around.

The President. Yes, I know. Most people are cynical and think reports like this go on a shelf someplace. Well, Jim, and all of you, I just have to say there are some days in this job that are better than others, and this is one of those better days. Thank you all.

Incidentally, you gentlemen will be meeting in the Press Room, I understand, for questions and answers that any of you may have. What is the time schedule on that?

Mr. Harper. Right after the completion of our meeting with you, Mr. President.

The President. Right after you all [referring to members of the press] get over there. [Laughter]

Reporter. Will you be coming out, too, Mr. President?

The President. They've got me booked for something else, but as you heard, I have just received the report. I have not yet read this book. But these are the gentlemen that would be able to answer the questions anyway.

Note: The exchange began at 11:35 a.m. in the Oval Office at the White House. Edwin L. Harper is Deputy Director of the Office of Management and Budget and Chairman of the President's Council on Integrity and Efficiency.