WASHINGTON - Federal Minerals Management Service Director Johnnie Burton should have taken action when she first heard of billion-dollar errors with oil and gas drilling leases, but career staffers deserve most of the blame for the problems, the Interior Department's inspector general said Tuesday.

"It's a mess, and anybody in a leadership position is at some level responsible for a mess that occurs on their watch, but this particular mess started before Johnnie Burton was in office, and she was not well served by career staff that were involved," Inspector General Earl Devaney said in an exclusive interview.

"My critique of her is that when she did hear about it in 2004, she didn't take a more overt action on it," he said. "But that doesn't mean I've lost faith in her honesty and integrity."

Deep-water leases signed in 1998 and 1999 during the Clinton administration omitted a clause triggering royalty payments if energy prices rose over a certain amount. Officials say they raised the matter with Burton in early 2004, although she does not remember being told until late 2005 or early 2006, the inspector general found.

The error has already cost the government about $1 billion in revenue and if not fixed could cost $10 billion.

Devaney's report said the mishandling of the leases stemmed from a "shockingly cavalier management approach." But he said those remarks weren't meant to disparage Burton, a former Wyoming Department of Revenue director and state legislator from Natrona County.

"I would include her in those remarks, but they certainly were not meant to suggest she was the only person those remarks were meant to include," he said.

His report also said the problems were a "jaw-dropping example of bureaucratic bungling." Devaney said both Burton and the two previous MMS directors were ill served by some career staff members.

"The bureaucratic bungling, quite frankly, was not on the part of political appointees," he said. "She and other political appointees are actually victims of that lousy bungling of the bureaucracy below them."

Nonetheless, upon hearing of the problem in 2004, Burton should have called a meeting with the department's solicitor or the Justice Department to see if anything could be done about the problem, he said.

"Although the career staff did not go way out of their way to indicate to her this was a major problem, I would in honesty say she should have dealt with it in a more robust way," Devaney said.

"The fact that kind of meeting didn't occur on an issue with such profound financial consequences is part of the story, but not the whole story," he added. "This is sort of a shocking story here of a number of mistakes over a long period of time, and she plays a role in it, but not a particularly starring role."

At a recent hearing, Sen. Ron Wyden, D-Ore., asked why Burton wasn't moved to another position, given Devaney's findings.

"I understand where Sen. Wyden is coming from, and I assume he's adopting the 'buck stops here' approach," Devaney said. "I really would leave that kind of thing to the secretary and assistant secretary to think about. My view is she's done a good job up till now."

In the past, Devaney has found Burton to be "forthright and responsible" about his office's findings, he said. For instance, he found in 2003 that some MMS employees had simply made up some reports.

"When I told her about it, she took very swift, appropriation action on that," he said. "That has not been the case with some others in the department. I've never had a reason to question her integrity."

Devaney said the issue will probably arise again when he testifies in mid-February before the House committee that oversees Interior. He is also conducting other investigations, some of them criminal, into the MMS royalties program and will probably testify on those in the future also, he said.

The inspector general found that MMS officials made a conscious decision to omit the language from the leases, but that the choice was simply a mistake and was not malicious. Officials decided to leave out the language in the mistaken belief that another regulation, the Royalty Relief Act, automatically covered it.

Burton testified before a House committee in September that she first learned about the issue in late 2005 or early 2006. But a former associate director said he was sure he had briefed Burton on the issue in 2004, the inspector general's report said.

Burton said that if she was informed then, she "may have simply dismissed the fact as a non-issue since she knew the application of price thresholds was discretionary," the report said. "She said she did not remember putting a great deal of thought into the matter. She speculated that she was probably told of the mistake in conjunction with being informed that (the solicitor's office) had opined that nothing could be legally done to remedy the issue."

Rep. Darrell Issa, R-Calif., who last year chaired the subcommittee that investigated the leases and heard Burton's testimony, suggested Burton should resign if she learned of the problems earlier than she told Congress. Burton defended herself in a letter to the editor of the Casper Star-Tribune.

"I am now being held responsible for not remembering a passing mention of an issue in 2004, and for not doing anything to remedy a mistake made by the Clinton administration when, in fact, I wrote every company in June 2006 asking them if we could agree to an amendment to their leases," Burton wrote.

"Unfortunately, only six of them agreed to an amendment," she added. "I cannot force anyone to change a valid lease signed by a representative of the U.S. government eight years after the fact, or had I acted in 2004, five years after the fact."