The Interior Department Plays Patsy to The Oil and Gas Industry

In an earlier posting ("Vladimir Inspired By Hugo's Oil Drama. Should we be Watching?" 09.29.06) I cited the Interior Department's Inspector General Earl Devaney who accused top officials in his agency of fostering a culture of "managerial irresponsibility" that tolerated conflicts of interest. "Short of crime, anything goes at the Department of the Interior" Devaney exclaimed.

Rep.George Miller (D. California) was moved to comment "If things keep going like this we're going to need two sets of handcuffs; one for the oil companies and one for the bureaucrats". That was subsequent to the Interior department's announcement in mid September that they would not try to recover the more than a billion dollars lost to date as a result of flawed oil and gas leases it signed in the late 1990's. According to the Government Accountability Office, the investigative arm of Congress, losses could accrue to over $20 billion over the next decades.

One would think, given its performance in crafting the flawed oil leases, the Department would be doubly vigilant and aggressive in pursuing malfeasance in the oil patch. Yet if any one still doubts that the fix is in at the Interior Department, just read Edmund Andrews's damning story in the October 31st New York Times. Petitioning under the Freedom of Information Act -- apparently the only way to get to the truth -- Andrews learned that, four months ago, on August 3, "The Interior Department has dropped claims that the Chevron Corporation systematically underpaid the government for natural gas produced in the Gulf of Mexico, a decision that could allow energy companies to avoid paying hundreds of millions of dollars in royalties... The decision also sets a precedent that could make it easier for oil and gas companies to lower the value of what they pump each year from federal property and thus their payments to the government."

After charging that Chevron's accountants had been systematically stiffing the U.S. government for payments owed on gas taken from the Gulf of Mexico, Interior asked the energy giant for a $6 million back payment in royalties. But now it has stepped away from even that slim effort, claiming that it's useless to fight Chevron because a department appeals board previously shot down a separate yet similar case. This reasoning looks more like an industry friendly stretch in that state governments and private landowners were successful in winning $70 million more in royalties from Chevron in what is basically an analogous situation. So why did the federal government cave so easily?

As I have written (see my post, "The Oil/and Gas on Federal Lands Belong to Us!" 3.24.06), the energy lobby has spent hundreds of millions of dollars currying favor with the administration and members of Congress, which have subsequently allowed the companies to gain oil and gas drilling rights on federal lands for a mere pittance, pushing through super generous depletion allowances, favorable tax incentives and royalty relief giveaways. Meanwhile, the Interior Department has made things worse by letting the companies get away without proper audits. And foot-dragging by the administration has only compounded the calamity. According to the piece in the Times, "administration officials knew that dozens of companies had incorrectly claimed exemptions from royalties since 2003, but they waited until December 2005 to send letters demanding about $500 million in repayments." Given the Interior Department's management style many more billions in royalty payments could be lost to the U.S. Treasury.

Robert T. Dorman, a lawyer for private citizens suing Chevron accuses "The government is giving up without a fight," and he's right. It's outrageous that a crony-infested agency whose seeming willful incompetence and "managerial irresponsibility" have already been documented by government investigators. That our government allows them to continue their campaign to grease the way for the gas and oil companies' rape of our resources is mind boggling. After all, the money being lost is money owed on the natural resources underlying public lands, land that belongs not to the oil companies but is part of the national patrimony.