Today's Article
Big Oil is drilling on
public land--and at
our expense.
public land--and at
our expense.
The American Spark
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Is Bush Administration Allowing Big Oil to Scam Us?
By Cliff Montgomery
According to an Oct. 30th article in the New York Times, "the Interior Department has dropped claims that the Chevron
Corporation systematically underpaid the government for natural gas produced in the Gulf of Mexico."
The Times added the "decision...could allow energy companies to avoid paying hundreds of millions of dollars in
royalties [to the United States government]."
It should be reiterated here that Big Oil has long had a cozy relationship with the modern Republican Party. On top of
that, the Bush family fortune was of course made in oil; and in the 1990s, Vice-President Dick Cheney was CEO of oil and
energy giant Halliburton.
Companies are required by law to pay the United States government a royalty of 12 percent to 16 percent of any sales of
natural gas extracted from government land in the Mexican Gulf. But the administration has allowed "the definition of 'sales'
[to become] as convoluted as a Rubik’s Cube," said the Times article.
In the Chevron case, auditors in the Minerals Management Service were addressing an issue that had bedeviled royalty
enforcement for decades: How does the government ensure collection of these dues when companies sell natural gas to
businesses they partly own?
The agency had first ordered Chevron to pay $6 million in additional royalties, but could have sought tens of millions more
had it prevailed. The decision also sets a precedent which could make it easier for oil and gas companies to lower the
stated value of what they pump each year from federal property--and thus their payments to all of us.
Interior officials said on Friday that they had no choice but to drop their order to Chevron, "because a department appeals
board had ruled against auditors in a separate case," according to the Times.
In a written statement, the department’s Minerals Management Service claimed it would have been useless to fight
Chevron.
“It is not in the public interest to spend federal dollars pursuing claims that have little or no chance of success,” the agency
said. “M.M.S. lost a contested and controversial issue” before the appeals board. “Had we simply wanted to capitulate to
‘big oil,’ the agency would not have issued the order in the first place.”
The problem with the administration's logic? State governments and private landowners have challenged Chevron over
essentially the same practices--and have successfully reached settlements in which the company paid $70 million in
additional royalties.
Chevron said in a written statement that it “endeavors to calculate and pay its oil and gas royalties correctly,” and added
that the Interior Department had agreed.
In other words, for the slick oil big shots with the big campaign contributions, the law has been reduced to their whim.
The agency notified Chevron of its decision in a confidential letter on Aug. 3rd. The Times recently obtained the letter
under the Freedom of Information Act (FISA).
The lack of passion to pursue justice in this case has renewed criticism that the Bush Administration simply will not confront
oil and gas companies who find ways to rob the American public.
“The government is giving up without a fight,” said Richard T. Dorman, a lawyer representing private citizens suing
Chevron over its federal royalty payments.
“If this decision is left standing, it would result in the loss of tens of millions, if not hundreds of millions, of dollars in royalties
owed by other companies.”
That is one Pandora's Box we don't need opened.
Last year, businesses producing natural gas paid $5.15 billion in government royalties. But some on Capitol Hill say
the Bush Administration has long gone out of its way to keep from collecting these payments.
As the Interior Department sweetens incentives for exploration and works to open government-protected wilderness areas
for drilling, it also has cut back on full-scale audits of oil and gas companies which ensure the corporations are paying
their full share.
In February, Bush's Interior Department declared that oil companies could escape more than $7 billion in payments
because of mistakes in leases signed in the 1990s. In addition, four government auditors last month publicly accused the
Interior Department of blocking their efforts to recover more than $30 million from the Shell Oil Corporation, the Kerr-
McGee Corporation and other major companies.
“This latest revelation proves that the Bush Administration is incapable of preventing big oil companies from cheating
taxpayers,” said Representative Edward J. Markey (D-MA), a senior Democrat on the House Committee on Resources.
“The public has been systematically fleeced out of royalties that these companies owe for the privilege of drilling for oil and
gas on lands belonging to all of us.”
By Cliff Montgomery
According to an Oct. 30th article in the New York Times, "the Interior Department has dropped claims that the Chevron
Corporation systematically underpaid the government for natural gas produced in the Gulf of Mexico."
The Times added the "decision...could allow energy companies to avoid paying hundreds of millions of dollars in
royalties [to the United States government]."
It should be reiterated here that Big Oil has long had a cozy relationship with the modern Republican Party. On top of
that, the Bush family fortune was of course made in oil; and in the 1990s, Vice-President Dick Cheney was CEO of oil and
energy giant Halliburton.
Companies are required by law to pay the United States government a royalty of 12 percent to 16 percent of any sales of
natural gas extracted from government land in the Mexican Gulf. But the administration has allowed "the definition of 'sales'
[to become] as convoluted as a Rubik’s Cube," said the Times article.
In the Chevron case, auditors in the Minerals Management Service were addressing an issue that had bedeviled royalty
enforcement for decades: How does the government ensure collection of these dues when companies sell natural gas to
businesses they partly own?
The agency had first ordered Chevron to pay $6 million in additional royalties, but could have sought tens of millions more
had it prevailed. The decision also sets a precedent which could make it easier for oil and gas companies to lower the
stated value of what they pump each year from federal property--and thus their payments to all of us.
Interior officials said on Friday that they had no choice but to drop their order to Chevron, "because a department appeals
board had ruled against auditors in a separate case," according to the Times.
In a written statement, the department’s Minerals Management Service claimed it would have been useless to fight
Chevron.
“It is not in the public interest to spend federal dollars pursuing claims that have little or no chance of success,” the agency
said. “M.M.S. lost a contested and controversial issue” before the appeals board. “Had we simply wanted to capitulate to
‘big oil,’ the agency would not have issued the order in the first place.”
The problem with the administration's logic? State governments and private landowners have challenged Chevron over
essentially the same practices--and have successfully reached settlements in which the company paid $70 million in
additional royalties.
Chevron said in a written statement that it “endeavors to calculate and pay its oil and gas royalties correctly,” and added
that the Interior Department had agreed.
In other words, for the slick oil big shots with the big campaign contributions, the law has been reduced to their whim.
The agency notified Chevron of its decision in a confidential letter on Aug. 3rd. The Times recently obtained the letter
under the Freedom of Information Act (FISA).
The lack of passion to pursue justice in this case has renewed criticism that the Bush Administration simply will not confront
oil and gas companies who find ways to rob the American public.
“The government is giving up without a fight,” said Richard T. Dorman, a lawyer representing private citizens suing
Chevron over its federal royalty payments.
“If this decision is left standing, it would result in the loss of tens of millions, if not hundreds of millions, of dollars in royalties
owed by other companies.”
That is one Pandora's Box we don't need opened.
Last year, businesses producing natural gas paid $5.15 billion in government royalties. But some on Capitol Hill say
the Bush Administration has long gone out of its way to keep from collecting these payments.
As the Interior Department sweetens incentives for exploration and works to open government-protected wilderness areas
for drilling, it also has cut back on full-scale audits of oil and gas companies which ensure the corporations are paying
their full share.
In February, Bush's Interior Department declared that oil companies could escape more than $7 billion in payments
because of mistakes in leases signed in the 1990s. In addition, four government auditors last month publicly accused the
Interior Department of blocking their efforts to recover more than $30 million from the Shell Oil Corporation, the Kerr-
McGee Corporation and other major companies.
“This latest revelation proves that the Bush Administration is incapable of preventing big oil companies from cheating
taxpayers,” said Representative Edward J. Markey (D-MA), a senior Democrat on the House Committee on Resources.
“The public has been systematically fleeced out of royalties that these companies owe for the privilege of drilling for oil and
gas on lands belonging to all of us.”