Johnnie Burton, director of the Minerals Management Service since 2002 resigned May 7, 2007 after an Interior Inspector General report of December 2006. During her tenure, she reduced audits and depended on self-reporting by energy companies resulting in underreporting and underpayment of royalties.
The first auditor Bobby Maxwell who noticed a problem had his job eliminated. Maxwell then entered a False Claims Act lawsuit against one of the offenders Kerr-McGee. In January 2007, a jury in federal court awarded Maxwell and the government $7.5 million (with up to another $15.2 million in penalties) but the trial judge signaled that he would throw out the verdict because he did not think that Maxwell qualified as a whistleblower under the statute. At this point, Maxwell’s attorney tried to get Justice Department backing for the lawsuit, a tactic which would have markedly improved the suit’s chances. The US Attorney for Colorado Troy Eid (see item 380) agreed to join the suit but said that his entry into the case was denied by main Justice for political reasons. Alberto Gonzales was the Attorney General at the time. On March 30, 2007, federal judge Phillip Figa made good on his threat and dismissed the case. However, on September 10, 2008, a federal appeals court re-instated Maxwell’s suit.
Additionally, Burton failed to review leases. Only 9% have been since 2000. In a particularly egregious case, approximately 1100 bungled oil and gas leases for the Gulf of Mexico dating from 1998-1999 which failed to tie royalties to changes in oil and gas prices were left unexamined for years and then not promptly addressed and renegotiated once they were known. The GAO estimates that $1 billion in royalty payments has been lost on these leases and that another $6.4 billion to $9.8 billion could go uncollected over their lifetime.