Big Oil’s lobbying representative in Washington,
D.C.—the American Petroleum Institute, whose annual budget
exceeds $112 million—recently said that they “will
spend what’s necessary” to reform the industry’s
battered public image. So they’ve hired the same PR firm that
developed the “Got Milk?” campaign.
One of the reasons the oil industry can afford its new public
relations spending spree is the fleecing it’s pulled on the
American taxpayer with the active help of the Bush administration.
A recent Inspector General audit of the U.S. Department of the
Interior’s Minerals Management Service concludes that oil
companies are pumping oil from federal land without paying adequate
royalties to taxpayers for the privilege. The report cites
widespread cronyism, ethical breaches, decimated auditing staff and
overreliance on information provided by Big Oil as culprits in the
oil industry giveaway. Meanwhile the Justice Department
unexpectedly announced the welcome news that it has initiated
criminal investigations into the Interior Department's oversight
of oil companies.
The United States is the world’s third largest oil
producer—extracting more oil every day than Iran, Kuwait and
Qatar combined—and one-third of that American-made oil is
tapped on federal land. With oil prices above $60 per barrel,
we’re talking about billions of dollars worth of oil that
companies like ExxonMobil are removing from public property without
paying the government fair compensation. No wonder the big five oil
companies—Exxon, ChevronTexaco, ConocoPhillips, BP and
Shell—have posted $93 billion in profits in just the first
nine months of this year.
The investigation found that the Bush administration relies heavily
upon data supplied by the oil industry—which the government
then fails to independently verify—in order to calculate the
value of royalties owed. Since George W. Bush has been president,
the number of auditors on staff has been cut nearly 16 percent,
leaving fewer watchdogs to examine claims made by oil companies. As
a result, the agency relies less on auditors and more on a widely
ridiculed computer program to conduct the examination.
This explains why a chunk of the paltry revenues generated by the
royalty-counting agency isn’t coming from audits, but from
lawsuits filed by disgruntled government inspectors under the
Federal Civil False Claims Act. This statute allows private
citizens—in this case, government employees handcuffed by
their politically appointed bosses from doing their jobs—to
recover royalty underpayments from the oil companies through the
courts. In 2006, one out of every five dollars collected through
audits or compliance review were the result of employee-initiated
litigation and not through official government initiative.
Department of Interior employees have to go around their
politically appointed bosses in order to force oil companies to pay
their fair share of royalties to taxpayers.
So how did the Bush administration deal with these criticisms? It
appointed David T. Deal head of a new advisory panel to review
complaints about the royalty program. And Mr. Deal’s
qualifications? From 1975 to 2003, he served as General Counsel to
the American Petroleum Institute. We’d call that putting the
fox in charge of the henhouse.
This type of cronyism unfortunately has been a habit under
Bush’s watch. J. Steven Griles was Deputy Secretary at the
Interior Department from July 2001 until he resigned in December
2004 under the swirl of allegations that he inappropriately did
favors for disgraced lobbyist Jack Abramoff. So what better job for
an Abramoff associate than to become a lobbyist. Upon leaving the
government, Griles became a partner in the Republican firm
Lundquist, Nethercutt & Griles, where he counts the American
Petroleum Institute among his clients.
Interior’s Inspector General, Earl E. Devaney, told the House
of Representatives in September:
I have watched a number of high-level Interior
officials leave the Department under the cloud of [Inspector
General] investigations into bad judgment and misconduct. Absent
criminal charges, however, they are sent off in usual fashion, with
a party paying tribute to their good service; wishing them well, to
spend more time with their family or seek new opportunities in the
private sector. This charade does not go unnoticed by the career
public servants, many of whom have been witnesses in our
investigations. What are these civil servants to think? If those at
the top are not held accountable, why should those at lower levels
not feel empowered to challenge the call for
accountability?
The new congressional leadership taking over in January has an
opportunity to fix the culture of corruption that has left oil
companies free to drill on the public’s land without giving
the American public fair compensation.
But the old guard couldn’t resist a last giveaway to Big Oil.
On December 8, the eve of the end of the so-called lame duck
session littered with 47 fired and retired lawmakers, the House of
Representatives voted 207 to 205 to reject an amendment that would
have corrected a separate, looming oil royalty fiasco. A decade
ago, the Department of Interior offered big royalty breaks on some
new oil and natural gas leases. But the government forgot to put a
“ceiling” on the contracts that would have limited or
revoked the royalty break if oil climbed to a sufficiently high
price. At the time that the contracts were negotiated, a barrel of
oil was in the $15 range. Now that it’s over $60 and the
companies are ready to pump out the oil, they stand to gain record
profits while the American taxpayer stands to lose $10 billion over
the life of these leases.
The failed amendment would have required oil companies receiving
this billion-dollar break to renegotiate their sweetheart deals in
order to win new leases. Recently fired or retired lawmakers cast
the deciding votes that defeated the recovery proposal, which was
contained in an amendment to H.R. 6111. A net of 17 lame-duck
lawmakers voted to continue allowing oil companies to enjoy their
multibillion-dollar royalty break.
Nancy Pelosi has already said that holding oil companies
accountable will be a centerpiece of her first 100 days as Speaker.
At a time when our federal budget, our environment and our
pocketbooks need it most, let’s hope the new management will
finally end Big Oil’s free ride.
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