The Project On Government Oversight (POGO) Blog

Oil and Gas Industry Loses Latest Round in Battle with SEC

By MIA STEINLE

In an attempt to combat corruption in resource-rich developing countries, two years ago Congress ordered U.S. corporations to disclose payments they make to foreign governments for the extraction of oil, gas, and minerals.

As supporters of the law saw it, the lack of transparency had allowed corruption to flourish and an elite few to profit from natural resources that should have benefited entire nations.

But the extractive industries protested that the requirements would damage their business, and they sued to block the rule that the Securities and Exchange Commission wrote to implement Congress’s mandate.

This week, the SEC stood its ground and refused to put the rule on hold while industry groups challenge the agency in court.

Facing Scrutiny, Oil and Gas Industry Yet Again Resorts to Ad Hominen Attacks, Tantrums

By DEMONI NEWMAN

The energy industry is out for blood once again. Over a decade ago, it went after POGO for revealing that the largest oil companies were underpaying royalties to the government. And now it appears they've found a new target.

The New York Times is under fire this week for publishing a series of stories criticizing the natural gas industry, the U.S. Energy Information Administration (EIA), and the political momentum natural gas has enjoyed for the past few years. In particular, the NYT’s June 25 story and June 26 story, both by Ian Urbina, have provoked a full-on attack from the powerful industry.

Urbina uncovered documents that raise doubts about the viability of natural gas. The documents are mostly internal EIA emails, sent to the Times by whistleblowers on the condition of anonymity. They expose an over-reliance by the EIA on industry information for reports, experts’ skepticism of the economic sustainability of shale gas, and an “overly rosy” representation of shale gas in EIA publications.

Some of the more provocative quotes from internal emails include calling the shale industry “set up for failure,” and a “gold rush wherein a few folks have developed ‘monster’ wells, so everyone assumes that all the wells will be ‘monsters.’” Other emails released by the Times refer to shale oil ventures as “inherently unprofitable” and “giant Ponzi schemes.” One email from a retired oil and gas company geologist said, “And now these corporate giants are having an Enron moment.”

So the industry is fighting back. CNN Money reported on June 29 that multiple energy giants are attacking the Times. In a blog post titled “Don’t Facts Matter Anymore?” Ken Cohen, ExxonMobil’s Vice President of Public and Government Affairs, wrote, “you really have to wonder why The New York Times is campaigning against cleaner-burning, domestically produced natural gas,” and calls the research for the Times piece, “little more than anonymous sourcing, two-year-old emails and analysis unsupported by fact.” The CNN Money piece goes on to list other companies similarly “firing back” at the Times.

Crime of the Century? Judge Approves $3.4 Billion Settlement for More Than 100 Years' Worth of Bungled Royalty Payments to Native Americans

By MANDY SMITHBERGER

After 15 years of fighting, a judge has approved a $3.4 billion settlement for activist Elouise Cobell and others who joined in her class action suit to recoup billions of dollars owed to Native Americans in mineral royalties, grazing fees, and other revenues that were mishandled or lost over the course of more than 100 years. A quick recap of the case from our 2008 blog post:

The origins of the case date back to 1887, when the federal government divided up millions of acres of reservation land and parceled it out to individual Native Americans. According to that 1887 law, known as the Dawes Act, the Indians were not considered capable of actual ownership. Thus the land was put into trusts for the individual Indians, with the U.S. government acting as trustee. Proceeds of the oil and mineral leasing rights were supposed to be paid into the Indian trusts, but the government accounting system was sloppy from the beginning, and it only got worse over the next 100 years.

Cobell's own story is almost mythic. At the age of 30, she became treasurer of the Blackfoot Nation, and immediately discovered the accounts were in total chaos. When she sought answers from the Interior Department's Bureau of Indian Affairs, they either insulted or ignored her. After more than a decade of banging her head into bureaucratic walls, she found an official who lent her a sympathetic ear, and introduced her to a banking lawyer named Dennis Gingold, known for his hard-charging style. He couldn't believe the kind of run-around Cobell had been getting.

In addition to depriving Native Americans of their fair share, the government’s defending the stewardship of the program by the Office of the Special Trustee (OST), an agency within the Interior Department which was “created to improve the accountability and management of Indian funds held in trust by the federal government,” resulted in collateral waste and abuse. Robbie Levine, then the Chief of the Information Office of the Bureau of Land Management (which approves and supervises leases on Indian lands), received her first negative job rating after she came forward about security weaknesses and was threatened with removal by her bosses before she took the stand in the case.

Oil and Gas Royalty Underpayments: Anadarko and Kerr-Mcgee Pay $17 million to Resolve Allegations

By MANDY SMITHBERGER

Read more about the case here. For more history of oil and gas companies shortchanging taxpayers billions for oil and gas royalties, go here.

Mandy Smithberger is a POGO investigator.

Image by Helen Slottje via Flickr user arimoore, used under Creative Commons License.

Gusher: Taxpayer Costs for Oil Spill May Not be Over

By MANDY SMITHBERGER

The Interior Department's reorganization of its oil and gas agencies may jeopardize the agency's ability to effectively manage revenue collection and meet its oil and gas oversight and government responsibility, according to Congress's watchdog.

The Government Accountability Office (GAO) testified for the House Oversight and Government Reform Committee's hearing on the Deepwater Horizon oil spill cleanup this morning that even before the spill, Interior collected lower levels of oil and gas revenue in the U.S. Gulf of Mexico than "all but 11 of 104 oil and gas resource owners" (during higher gas prices, no less). And although it's a worthwhile effort, the post-spill reorganization--which appropriately separates the auditing and leasing functions out of the agency formerly known as the Minerals Management Service (MMS)--only increases the risk of taxpayers losing out on their fair share because of the administrative burden it represents. The GAO also raised concerns that problems with recruitment and turnover for oversight positions made it more difficult to ensure royalty payment accuracy.

Program risk in this area can be costly. Not only do oil and gas royalty revenues--$9 billion in total for fiscal year 2009--make up one of the largest sources of revenue for the federal government after taxes, but many states count on these royalties to be able to provide state-level services.

As of December 2010 the Interior department failed to implement many GAO recommendations to improve oil and gas management. The agency's failure to improve in this area landed it on the GAO's "high risk list" this year.

Mandy Smithberger is POGO Investigator.

Image: Vince O'Sullivan