It would seem casual jokes around the water cooler aren't so casual anymore: oil companies really aren't paying their billions in taxes, and the federal government may be involved in letting them get away with it. Recent New York Times reporting reveals that the Interior Department's program to collect money from oil and gas companies that drill on federal lands has been a dismal failure. The corporations owe billions, yet very little of it is actually being turned over.
One former auditor at the agency, Randall Little, went so far as to say these companies are getting a "free ride," and "the taxpayers ought to be outraged."
Sure, we all joked about it -- the fraud of it all -- but a lot of us still held out the secret hope that maybe, just maybe, we weren't being lied to. Maybe gas prices were skyrocketing because there really was a crippling loss of revenue and a shortage of supply. According to the most recent report, however, prepared by the department's chief independent investigator, there were "profound failure[s]" within the Interior Department, resulting in years of unpaid taxes being conveniently ignored. In 2006, officials admitted the government might lose $10 billion from one mistake alone, a legal blunder with oil and gas leases that had been ignored for six years. Ethical failures, management failures, and failures to protect those who would, or did, reveal the fraud, are apparent.
Texas is a state that could be particularly affected by such "mistakes." Most of Texas' major taxes are either associated with the general economy or with industries like oil and gas production, according to Susan Combs, the Texas Comptroller of Public Accounts. Such monies could be used to dig Texas out of the worst healthcare and environmental crises in the nation -- and many blame the latter, at least in part, on oil. While more and more Massachusetts residents, for instance, are getting insured under new laws providing subsidized health insurance coverage, more than twenty-five percent of the Texas population is going without health insurance, the worst rate in the country. Many officials cite the lack of adequate funding.
Although Texas ranks number one in crude oil reserves, it also ranked number one in 1999 for the amount of cancer-causing chemicals in the air and water, in the number of hazardous-waste incinerators, in the total toxic releases into the environment, and in carbon dioxide and mercury emissions, according to the 1999 November/December issue of Sierra magazine. In 2000, most Texans lived in areas that failed federal ozone standards, and Houston -- considered the nation's oil- and petrochemical-industry capital -- actually beat Los Angeles that year in air pollution levels. Dallas and Austin didn't fare much better on environmental evaluations. But government cleanup and health subsidy plans are often funded by tax dollars -- dollars, according to recent reports, that aren't being rightfully paid.
Headed by the Interior Department's inspector general, Earl E. Devaney, the year-long investigation was the end result of four persistent auditors at the agency who claimed senior officials blocked them from collecting millions owed by more than two dozen oil companies. Though the auditors were either fired or demoted for their efforts, they continued to pursue the issue, including filing their own lawsuits against the agency under the False Claims Act -- a provision that allows private citizens to sue corporations they believe have committed fraud against the government.
Auditor Bobby L. Maxwell sued Andarko Petroleum, claiming the oil company had cheated the government of more than $7 million. He lost his job a week after the trial went public; Interior officials called his release a "reorganization." The jury ruled in his favor, but the judge reversed the decision on technical grounds and, oddly, concluded that Maxwell was not entitled to use the False Claims Act. Devaney's report confirmed that Maxwell was ordered to drop the issue by his superiors, though Devaney chalked it up to a simple disagreement about the case's merits. The official directly in charge of reviewing Maxwell's work said the choice to not collect was made by "a senior-level MRM [Minerals Revenue Management, part of the U.S. Department of the Interior's Minerals Management Service] official" who did not provide "documentation to support his decision." Those statements were eliminated from the official's final report.
Randall Little and Lanis Morris, also agency auditors, filed lawsuits after claiming a senior official had refused to collect $1.5 million owed by an oil company. The official responded by claiming that ordering the company to calculate what it owed would be a hardship, but that the Interior Department itself could not get its own systems to run the figures, either. Little and Morris were fired from their positions at the Minerals Management Service.
"How do you define hardship, just because they have a lot of money," asked Lucy Querques Denett, the agency's associate director, when questioned by investigators.
While Devaney told a Congressional hearing, "short of a crime, anything goes at the highest levels of the Department of the Interior," he did not actually accuse the Department of conscious wrongdoing, either in its failure to collect tax dollars or in the treatment of its employees. He attributed the discrepancies to "disagreements," miscommunications, and technological failures.
Randall Luthi, director of the Minerals Management Service, claimed the auditors' lawsuits were the result of "the auditors' lack of knowledge, or the fact that they simply disagreed with management guidance and decision," and that his statement was supported by Devaney's report. Luthi went on to say the auditors did not follow proper procedure when they elected not to share their suspicions with superiors.
Devaney's report fell short of accusing the agency or the oil companies of blatant crimes, but it did pointedly criticize the Mineral Management Service's failures to collect money owed. Devaney suggested the agency and the oil companies were just a little too friendly, and that whistle-blowers had valid reasons to fear reporting their suspicions.
If all this seems just a little too convenient to you, you're not the only one. Many of us would respond to Denett's question with, "Well, actually, not having a lot of money would be a hardship. What's their excuse?" If the poorest among us have to file taxes, and if even the poorest among us -- those barely feeding their families -- have to either face jail or cough up money they don't have when back taxes are owed, it seems more than just a little suspiciously unjust for the Interior Department to flat-out refuse to demand large oil companies' rightfully-owed money, let alone not to threaten legal repercussions. Billions of dollars that could help remedy the very real hardships faced by today's citizens -- lack of healthcare, poor educational standards, and environmentally disastrous living conditions -- are simply disappearing. The only event that would be worse in this situation is if America's basic commitment to justice was injured as well.
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