This article originally appeared in RS 1076 from April 16, 2009. This issue and the rest of the Rolling Stone archives are available via Rolling Stone Plus, Rolling Stone’s premium subscription plan. If you are already a subscriber, you can click here to see the full issue. Not a member? Click here to learn more about Rolling Stone Plus.
As top officials in the Obama administration settle into their new offices, they are just now beginning to uncover some of the worst abuses committed by their predecessors. And of all the corruption that characterized the Bush years, none is more shocking – and more responsible for lasting damage – than the pervasive scandals and cronyism at the federal agency charged with managing one-fifth of America’s land.
Under Bush, the Interior Department became a lawless bureaucracy that actively worked to enrich the nation’s most powerful energy interests. Top-level officials secretly allowed oil companies to keep billions in royalties owed to taxpayers, opened up 26 million acres of federal land to oil and gas drilling, denied wilderness protection to another 220 million acres, rewrote scientific reports to eliminate safeguards for endangered species, and even snorted coke and had sex with the very oil interests they were supposed to be regulating. “It was Dodge City,” says Sen. Ron Wyden, a Democrat from Oregon who chairs the Senate Energy Subcommittee on Public Lands and Forests.
But unlike some Democrats in Washington who insist that it’s time to “turn the page” on past misdeeds, newly appointed Interior Secretary Ken Salazar is already showing a determination to hold the Bush administration accountable for its wrongdoing. Sporting his signature Stetson, the secretary casts himself as the man in the white hat – a new sheriff in town, come to restore law and order. In his first two months in office, Salazar has done more than simply reverse many of the Bush administration’s worst moves, including the authorization of gas drilling within sight of Utah’s national parks. He and his top deputy, Tom Strickland – both of whom served as attorney general of Colorado – have also initiated a top-to-bottom investigation of what Salazar calls the “blatant and criminal conflicts of interest and self-dealing” that took place in Interior.
“We’ve got to make sure this mess gets cleaned up,” Salazar tells Rolling Stone, revealing that he has already referred evidence of wrongdoing to the Justice Department for possible prosecution. According to the secretary, he’s looking at “criminal behavior that extended to the very highest levels. The ‘anything goes’ era is over.”
During the Bush era, the scandals over America’s wilderness areas were centered at the Mineral Management Service, the Denver office that serves as Interior’s collection agency. The government auctions off the right to drill on public lands, and taxpayers are supposed to receive a cut of any profits that energy firms make on the oil and gas they extract. Last year, MMS collected more than $23 billion in royalties from drilling – second in revenues only to the IRS. “The oil companies were basically running MMS during the Bush years,” says Bobby Maxwell, a top auditor for the service who was forced out of his job in 2005, despite having recovered more than $500 million in unpaid royalties during his career.
Maxwell and other auditors sensed the change in direction as soon as Bush took office: Collections of unpaid royalties from oil and gas companies plunged from $300 million a year to less than $50 million. “The focus changed,” says Maxwell. “It was ‘Quit doing detailed audits. Stop getting records from oil companies.’ ” The push was no longer to collect money owed to taxpayers for drilling on public land – it was to provide what the Bush administration euphemistically called “royalty relief” to big energy firms.
MMS not only slashed audits by 22 percent, it even prohibited auditors from recouping money in cases involving clear evidence of fraud. In what would become the costliest scandal, it also looked the other way when it learned that, because of a massive bureaucratic fuck-up, it had failed to collect billions in royalties for deep-water drilling in the Gulf of Mexico. Instead, the Bush administration fought to let oil companies keep the money, and a judge appointed by Bush recently overturned royalty collections on 75 percent of all oil produced in the Gulf. Should the ruling stand, taxpayers will forfeit as much as $53 billion owed by Big Oil.
As another favor to oil and gas companies, MMS also set up an office called “Royalty in Kind,” allowing drilling interests to pay the government not in cash but in petroleum products. The RIK office would then sell those products on the open market, bringing in some $4 billion a year. But since the office owned no pipelines or refineries, it was forced to extend lucrative contracts to the oil companies to transport and process the oil – taking another costly bite out of the revenue owed to taxpayers.
Instead of negotiating tough deals with the oil companies, officials in the royalties office indulged in what an internal investigation later termed “a culture of substance abuse and promiscuity.” A third of RIK staff members, the investigation found, accepted illicit gifts from the industry. Others “used cocaine and marijuana, and had sexual relations with oil and gas company representatives.” One pair of government-employees-gone-wild, celebrated among oilmen as the “MMS Chicks,” partied hard during corporate snowboarding trips – one got so drunk at a ski resort that Shell had to put her up for the night in its “Dutchman Haus” chalet – and repeatedly had sex with representatives for Chevron and Shell. The “Chicks” did not recuse themselves from negotiations with the companies. Worse, they allowed Chevron and other firms to revise the terms of 118 contracts that had already been finalized – favors to the industry that cost taxpayers $4.4 million.
“They were literally and figuratively in bed with the oil industry,” says Maxwell.
The director of the Royalty in Kind office, Greg Smith, was apparently too busy worrying about where his next line of coke was coming from to rein in his underlings. According to Interior’s inspector general, Smith regularly bought cocaine from a subordinate, offering her a $250 “performance award” as a reward for provisioning him with quality “office supplies.” When Smith wasn’t high – or pressuring women on his staff for blow jobs, as the inspector general found he did repeatedly – he was busy accepting payments from an oil-services consulting firm in return for insider information about the RIK program.
When the inspector general sent his findings to the Justice Department, however, the Bush administration suddenly went soft on drugs, declining to prosecute Smith. It also failed to charge Lucy Dennet, a former associate director of MMS, whom the inspector general said “manipulated the contracting process” to steer $1.1 million in government business to a company run by two outgoing MMS agents, both of whom have pleaded guilty to felony violations of conflict of interest. Many Interior insiders believe that both Dennet and Smith are prime candidates for prosecution under Salazar. Speaking to Rolling Stone, the secretary refused to speculate about which former officials are now in legal jeopardy, but says that his investigation extends beyond the corruption at MMS to the entire department. “I am being cautious as a former prosecutor,” he says. “I can’t tell you everything I know.”
Even by Washington standards, the level of corruption at MMS was mind-boggling – far worse than the notorious bribe-for-drilling scandal that defined the administration of Warren G. Harding. “The previous low point for the Interior Department was the Teapot Dome scandal of the 1920s,” says Jeff Ruch, executive director of a federal watchdog group called Public Employees for Environmental Responsibility. “Right now we’ve got Teapot Dome cubed.”
Danielle Brian, executive director of the Project on Government Oversight, goes even further. “Given the billions of dollars at stake and the number of people involved,” she said, “this is easily the worst instance of government misconduct we have ever seen.”
The coke-and-sex-crazed atmosphere at MMS may have been the most flagrant scandal at Interior during the Bush years, but it was far from the only one. “The place was like a vending machine,” says Sen. Wyden. “The special interests could line up, and out would come the policies they were interested in.” Insiders and government watchdogs say four other abuses typified the Bush approach to public resources:
More Drilling The Bush administration’s determination to open the West to drilling verged on the pathological. Between 2001 and 2007, government figures show, Interior leased five percent of its entire holdings to energy firms for development. In its frenzy to bring new wells online, the Interior Department relied on “volunteers” paid by oil and gas companies to help rubber-stamp new drilling permits. In the end, the permits actually outstripped the capacity of oil and gas companies to keep up: Less than half of the acreage auctioned off under Bush is in production. For all of the violence done to the Western landscape in the past eight years – a toll visible to anyone on a cross-country flight looking down on the thousands of new wells that pockmark the Rockies – the oil companies can drill another 15 million acres without having to apply for a single new lease. And taxpayers will be left to handle the toxic aftermath: Under rules formalized by Bush, cleanup of oil and gas drilling is now purely voluntary.
More Favors Oil and gas lobbyists had a direct pipeline into Interior, thanks to Steven Griles. In 2001, Griles left a lucrative lobbying practice to become deputy secretary of the department – but he never ceased his lobbying. His partner continued to pay him $284,000 a year, and former clients regularly called on him to grease the regulatory skids for them. “Steven Griles was an all-purpose fixer,” says Ruch, the director of PEER. “Whatever a lobbyist would call him up and complain about, he’d fix.” This was especially true for disgraced GOP lobbyist Jack Abramoff, whom federal prosecutors say enjoyed “secret, unique, sustained and unfettered access” to Griles. The deal was simple: Abramoff steered more than $500,000 to a pro-Bush group run by one of Griles’ girlfriends; Griles did favors for Abramoff’s clients. Griles – one of the few Interior officials to be punished – was sentenced to 10 months in federal prison for committing perjury about the extent of his dealings with Abramoff.
Less Wildlife Julie MacDonald, a deputy assistant secretary at Interior, routinely overruled the department’s biologists, limiting the amount of “critical habitat” protected from drilling and other development. Federal judges overturned several of her decisions as “arbitrary and capricious,” and among federal scientists her name became synonymous with political interference. “It became a verb for us: getting MacDonalded,” said one staffer with the U.S. Fish and Wildlife Service. When the inspector general reviewed 20 listings for endangered species in which MacDonald played a role, he found that she had “potentially jeopardized” 13 of them – a track record that “cast doubt on nearly every [endangered species] decision issued during her tenure.” Her decisions frequently benefited private interests, including her own: Her ruling that the Sacramento splittail fish is not an endangered species protected her family farm in California – an operation that clears as much as $1 million a year.
Decaying Parks By the time Bush left office, the National Park Service was stuck with a backlog of up to $14 billion in deferred maintenance. The marquee attraction at Dinosaur National Monument – a rock face of exposed Jurassic fossils – remains off-limits because the visitor center is unsafe, and inadequate storage facilities threaten to damage artifacts from the Battle of Little Big Horn. Because of the lack of funds, the government was unable to buy land surrounding Valley Forge and Zion National Park, putting the property at risk for “detrimental development.” Worst of all, the administration’s failure to create a grazing plan at Yellowstone Park to accommodate the plains buffalo – the animal that graces the Interior Department’s seal – contributed to the deaths of more than 1,100 bison last year. It was the greatest buffalo slaughter since the species was driven to near extinction by hunters in the late 1800s.
As Obama’s man at Interior, Salazar has wasted no time in creating real change. In his first weeks on the job, the secretary delighted critics on the left by canceling 77 oil and gas leases that Bush had authorized near Utah’s national parks, including ones that would have put oil derricks within eyesight of both Arches and Dinosaur. Salazar also delayed Bush’s timeline for opening the Eastern seaboard and California coast to drilling – terming it “a headlong rush of the worst kind.” And he shelved Bush’s plan for oil-shale mining in the Rockies, announcing instead an aggressive initiative to develop renewable-energy installations on federal lands.
The new administration, Salazar tells Rolling Stone, is seeking to recoup the billions in federal revenue lost to “royalty relief” by implementing a new excise tax on drilling profits in the Gulf. And he pledges a thorough review of Interior’s royalty policies – for both onshore and offshore drilling – to ensure the American people receive a “fair market return” in exchange for natural resources. “We are pursuing a 21st-century land and water conservation effort that will hopefully surpass what Teddy Roosevelt did for this country almost 100 years ago,” Salazar says.
But in other areas, critics say, the Interior secretary has betrayed his allegiances as a longtime rancher and conservative Democrat. After a brief review of one of Bush’s most controversial decisions, Salazar concurred with the previous administration’s call to remove the gray wolf from endangered-species status. “We all expected more from the Obama administration,” said Rodger Schlickeisen, president for Defenders of Wildlife. “All the reasons why this plan was a bad idea when the Bush administration proposed it still stand today. If this rule is allowed, nearly two-thirds of the wolves in the northern Rockies could be killed.”
While environmentalists plan to sue to block the decision, which they believe was based on “MacDonalded” science, Salazar’s decision has won praise from conservative Democrats who forged a crucial part of Obama’s electoral coalition in Western states. Salazar, for his part, is unapologetic. “I’m not here to please the environmental community,” he says. “From my point of view it was a science-based decision.”
In another disturbing move, Salazar placed an additional 1.2 million acres of Western land on the auction block, inviting oil and gas companies to bid on drilling leases. And in his opening address at Interior, he preached the virtues of far-fetched technologies like “clean coal” and “carbon capture and sequestration,” emphasizing that “oil and gas and coal resources are very much a part of the equation for our energy future.”
While few question Salazar’s determination to stamp out the criminal legacy of the Bush administration, longtime observers wonder whether the Colorado rancher has the gumption to truly overhaul a department that – even under Democratic administrations – has long catered to profit-seekers over the public interest. “Salazar is the Old West – that’s what the cowboy boots and bolo ties are all about,” says Phil Doe, a former top regulator at Interior. “His friends are the people who have run the system for so long. The boot-and-buckle boys – they understand each other. How is he going to make a break from these people? I don’t think he can. I don’t think he knows how.”
This article originally appeared in RS 1076 from April 16, 2009. This issue and the rest of the Rolling Stone archives are available via All Access, Rolling Stone’s premium subscription plan. If you are already a subscriber, you can click here to see the full issue. Not a member? Click here to learn more about All Access.