The Minerals Management Service, an obscure agency in the Interior Department, collects more than $10 billion a year from companies that pump oil and gas from federal lands and federal waters in the Gulf of Mexico. To encourage drilling when oil prices were low, Congress waived many royalties for companies drilling in very deep water. But the ''royalty relief'' was supposed to stop if oil cost more than $34 a barrel, when deepwater drilling was assumed to be profitable.
A year ago, the minerals agency admitted what mid level officials had known for six years: that it had signed leases in 1998 and 1999 allowing oil companies drilling in the Gulf of Mexico to escape $7 billion to $10 billion in royalties over the next five years -- even if energy prices remain at record levels. The giveaway came from a mistake made under President Bill Clinton, but Bush administration senior officials ignored it as oil prices shot to new highs.
Last week, Interior's inspector general, Earl E. Devaney, called the agency's response ''shockingly cavalier'' and ''a jaw dropping example of bureaucratic bungling."
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