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Bloomberg: Minerals Management Head Burton to Retire This Month (Update1)

By Jim Efstathiou Jr.

(Bloomberg) — Johnnie Burton, the top U.S. official overseeing Gulf of Mexico oil and gas drilling, will retire effective at the end of this month, Interior Secretary Dirk Kempthorne said.

“I respect your decision to return to your family and to the West we both love,” Kempthorne wrote in a letter accepting Burton’s resignation, according to a release from the department.

Burton served as director of the Minerals Management Service during the disclosure of an error that may allow oil and natural gas driller to avoid more than $10 billion in government fees. While the mistake occurred before President George W. Bush appointed her in 2002, an investigation revealed that Burton failed to take swift action.

“There’s been a lot of criticism and second guessing of the agency during this period,” Kim Harb, director of policy and government affairs at the National Ocean Industries Association, said last month. “She’s been tough when she needs to be tough. The industry doesn’t always agree with her.”

Harb, a former Interior Department attorney, said Burton deserves praise for managing the agency through Hurricane Katrina, which devastated the Gulf Coast in September 2005, shutting down much of the oil and gas production in the Gulf of Mexico managed by the government.

“That was during a period where the majority of her employees were personally affected by the storm,” Harb said. “She has led the agency though a really difficult period.”

Expanded Drilling

The Minerals Management Service employs about 1,700 people in 20 cities with over 1.76 billion offshore acres under its control. The agency collected $12.8 billion in royalties in 2006.

Burton was in charged during the development of a plan to expand oil and natural gas drilling on 48 million acres in the Gulf of Mexico, off the coast of Virginia and in parts of Alaska including Bristol Bay. The recommendation furthers a Bush initiative to increase domestic supplies of oil and gas.

Still, she may be remembered for drilling leases issued in 1998 and 1998 by the agency that omitted price thresholds that would require royalty payments when oil and gas prices rise. Burton told Congress in September she first learned about the mistake in early 2006.

She was confronted with evidence that her employees told her about the leases in 2004 and that she failed to take action, the inspector general said in a report.

No Role

Controversy over the faulty leases, “did not play a role in the decision” to retire, and Kempthorne did not seek her resignation, said Interior Department spokesman Chris Paolino. “This was just her decision. She’s put in five full years as the director.”

The Minerals Management Service has also come under criticism during Burton’s tenure for its inability to verify that oil and gas producers are paying full royalties. The Interior Department’s Office of Inspector General in December said the agency relies too heavily on company-reported information in determining whether proper royalties are paid.

“MMS has long been the brunt of a lot of criticism, and to a large extent it is because it is very hard to calculate, according to any formula, the royalties and taxes on crude oil,” former Senator Bennett Johnston, a Democrat from Louisiana, said last month. “Without trying to defend everything that MMS has done, it is like being an umpire in a football game. It’s just very hard to make everyone happy.”

Royalty Act

Johnston chaired the Senate energy committee when the 1995 Deep Water Royalty Relief Act was written. The law sets up the system of fees in the offshore leases meant to cut royalties when energy prices were low to foster U.S. offshore production, and increase them when prices rose.

Once the mistake in 1998 and 1999 leases became public last year, Burton tried to persuade companies to voluntarily agree to pay fees. That job was later passed to Stephen Allred, head of the Interior Department’s land and minerals division.

In December, six companies including Royal Dutch Shell Plc, BP Plc, ConocoPhillips and Marathon Oil Corp. said they would pay royalties for production from Oct. 1, 2006, forward. Several other producers, including Chevron Corp., have declined to accept similar terms.

Burton was born in Birkadem, Algeria, in 1939. She immigrated to the U.S. in 1963 and taught French in New York’s Wantagh school district for two years.

Burton earned an undergraduate degree from the University of Wyoming in 1974 and served as deputy director of revenue for Wyoming from 1995 to 2002.

To contact the reporter on this story: Tina Seeley in Washington at [email protected] .

Last Updated: May 7, 2007 18:23 EDT

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