Johnnie Burton is director of Interior Department’s Minerals Management Service. On Thursday,the Senate Energy Committee will hold a hearing on unpaid royalties by oil and gas companies.
WASHINGTON, Jan. 15 — Johnnie M. Burton, who runs the Interior Department’s troubled program to collect royalties on oil and gas pumped on public lands, is under attack and out of sight.
As director of the Minerals Management Service, Ms. Burton has faced widespread complaints from Congress for months that her agency is mismanaged, unaccountable and on the verge of losing billions of dollars owed by oil and gas companies that drill in the Gulf of Mexico.
On Thursday, the Interior Department’s inspector general is expected to tell the Senate Energy Committee that Ms. Burton either ignored or remained unacceptably blind to a leasing blunder that will, if left unchanged, let oil companies escape as much as $10 billion in royalties over the next five years.
The Senate hearing comes amid rising bipartisan anger about potentially huge losses to taxpayers that have prompted an investigation by the Justice Department into the agency’s multibillion dollar “royalty in kind” program.
Yet Ms. Burton — a diminutive Algerian-born former French teacher and state official from Wyoming — will not be testifying. In her place will be an assistant secretary of the Interior, C. Stephen Allred, who joined the department less than four months ago.
Ms. Burton declined requests for an interview. In response to questions, Lucy Querques Denett, associate director of Minerals Management Service, praised Ms. Burton’s record in an e-mail statement.
“Her direction to staff has always been to perform our mission in conformance with the laws and regulations,” Ms. Denett said. “She has also clearly impressed upon us that we are responsible for collecting every penny due and owed the American public.”
Senior Interior officials have kept Ms. Burton out of public view, and many colleagues assume she will soon leave the agency.
It is quite a reversal of fortune for an official who won praise from Congress in her first three years for her expertise in arcane issues about oil and gas accounting.
Ms. Burton, 67, arrived in the United States as a refugee in 1962, after fleeing from Algeria during its war for independence from France. She moved to Wyoming after meeting and marrying a geologist from the state. After working initially as a French teacher, she teamed up with her husband in a small oil exploration business and later started an oil industry news service for the Rocky Mountain region.
A staunch Republican, Ms. Burton served six years in the Wyoming state legislature. When voters elected a Republican governor, Ms. Burton became director of the state’s Department of Revenue for six years. Because Wyoming’s state revenue comes almost entirely from energy and mining, Ms. Burton became well-versed in many of the same issues posed in collecting federal royalties on oil and gas.
“She always tried to be perfect at everything she did,” said Thomas Strook, a retired oilman and Republican legislator in Wyoming who was close friends with Ms. Burton during her time there.
Ms. Burton lost her job in Wyoming in 2002, after voters ousted the Republican governor, Jim Geringer. While she knew Vice President Dick Cheney, who also comes from Wyoming, acquaintances say it was her ties to state political leaders and her experience with energy taxation that won her the job at Interior.
In recent months, Republicans and Democrats alike have castigated Ms. Burton for only belatedly acknowledging a leasing blunder created by the Clinton administration in the 1990s that is likely to cost the government about $10 billion over the next five years and then insisting that there was little the government could do to fix the problem.
In July, Republicans the House Government Reform Committee accused her agency of stonewalling their investigation. In September, they accused Ms. Burton of going too far in making concessions to oil companies. That same month, the Interior Department’s chief independent investigator declared that “short of crime, anything goes at the highest levels of the Department of the Interior.”
Democratic lawmakers, now in control of Congressional oversight committees, have vowed to step up their own investigations and overhaul the entire program.
But Ms. Burton has hardly been acting on her own.
Under President Bush, the Interior Department’s top ranks were filled with people with close ties to industry. Most prominent were Gale A. Norton, a strong advocate of domestic drilling who recently stepped down as Interior secretary and subsequently joined Shell Oil, and G. Steven Griles, a former industry lobbyist who became deputy secretary and now faces a possible indictment on charges of lying about his dealings with the disgraced lobbyist Jack Abramoff.
In November, Interior officials announced that a new task force of outside experts would evaluate the royalty program. Officials named David T. Deal, a longtime lawyer for the American Petroleum Institute, to head the panel.
“Since Bush was elected, there has been a clear agenda to promote oil and gas development wherever and however they can,” said Erich Pica, a policy analyst at Friends of the Earth, an environmental policy group. “Time and again, you have seen the administration and its political appointees side with the oil and gas companies.”
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In 2004, when the Interior Department offered lucrative new royalty incentives to gas producers that drill very deep wells in shallow waters, the final arrangement was negotiated above Ms. Burton’s level, in negotiations between top aides to Interior Secretary Norton and White House budget officials, according to current and former administration officials.
But if Ms. Burton has been less a decision maker than a loyal soldier, her responsibility for the leasing program has left her in the line of fire. Lawmakers express outrage over how Ms. Burton and other top officials glossed over the error that occurred when the Interior Department signed 1,100 offshore leases in 1998 and 1999 that let deepwater drillers escape royalties regardless of how high oil and gas prices might climb.
The incentives were supposed to stop if oil prices climbed above a “threshold price” of $34 a barrel, but leasing officials omitted the escape clause for two years.
Though midlevel officials spotted their mistake in 2000, Interior officials never mentioned the mistake in public and never tried to fix the leases until 2006.
Ms. Burton’s first reaction was to blame the Clinton administration, saying she did not learn about the problem until early 2006. With anger boiling over in Congress, Ms. Burton announced in June that she would try to persuade oil companies to renegotiate voluntarily.
But the Interior Department’s inspector general is expected to report this week that Ms. Burton either knew or should have known about the problem as early as 2004.
The timing is important, because energy prices were much lower in 2004 and many lawmakers contend that the government might have been able to renegotiate the leases without acrimony if it had moved earlier.
Ms. Burton told the House Government Reform Committee last September that she first learned about the problem in early 2006. But investigators say that Thomas Readinger, then associate director of the Minerals Management Service, confirmed to oil companies in 2004 that the escape clause was indeed missing.
Officials involved in the issue said that Earl E. Devaney, the Interior Department’s inspector general, found no evidence that Ms. Burton lied in her testimony. But they note that Mr. Readinger was one of Ms. Burton’s top deputies and contend that she had little excuse for not knowing about the issue.
“If she didn’t know about it, she should have known about it,” said Representative Darrell Issa, a California Republican who headed several hearings on the matter.
In response to questions, the Minerals Management Service said in a statement on Friday that Mr. Readinger routinely discussed issues with oil companies without involving Ms. Burton.
“His contacts with industry were routine and in most instances did not rise to the level of the director,” the agency said. “As associate director one of his functions was to provide industry with factual information, not decisions.”
On Thursday, House Democrats hope to pass a bill that would pressure companies to change the leases. Companies that refuse to give up the loophole would either be prohibited from acquiring any additional federal leases or would have to pay a “conservation fee” of $9 for each barrel they produce.
Ms. Burton, and the Bush administration in general, have opposed the measure and said it undermined the “sanctity of contracts.” But lawmakers in both parties say the measure is all but certain to pass with strong bipartisan support.
Ms. Burton faces other problems. On Tuesday, a federal jury in Denver will hear allegations by a top former auditor at the Minerals Management Service that the Kerr-McGee Corporation cheated the government out of at least $12 million in royalties — and that senior agency officials in Washington ordered him to drop the case.
The allegations are part of a lawsuit by Bobby L. Maxwell, a former auditing supervisor in Denver, who is now suing as a private citizen under a law that rewards whistle blowers for recovering money from companies that defraud the government.
Kerr-McGee has steadfastly denied any wrongdoing, and the Minerals Management Service has insisted that Mr. Maxwell’s case has no merit.
But a federal judge has refused to dismiss the allegations, and a jury could reach a verdict by early February. If Mr. Maxwell wins, Kerr-McGee could be required to pay more than $50 million in back royalties and penalties. Ms. Burton would face pressure to explain why her agency swept aside Mr. Maxwell’s findings.
Ms. Burton’s agency is also the target of two criminal investigations by the Justice Department. One of them concerns allegations that the director and three other employees in the agency’s “royalty in kind” program had consulting arrangements with companies seeking contracts to resell government oil.
Investigators hope to finish that inquiry by next spring. But that will hardly be the end. At least three separate House and Senate committees have investigations that are still in their infancy.
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