Bullying Oil Producers

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Department of Interior officials seem to take sadistic pleasure in badgering oil companies. The latest example involves a new agency created to levy untold millions of dollars in fines if companies don’t kowtow to the new bureaucracy. The agency’s head gave the tasteless warning: “If they cut corners they could end up paying enough to quickly take care of the federal deficit.”

The oil industry now pays $37 million a day in royalties. That’s over $13 billion a year for our near empty U.S. Treasury and other state and special accounts. The comment about collecting royalties enough to pay off the federal deficit might have been said in jest. But petroleum officials aren’t laughing. Allison Nyholm, a royalty expert and policy adviser at the American Petroleum Institute told me: “We want a positive approach, not an adversarial process. There’s a lot of discretion in how fines are imposed. It’s really in the best interest of the companies to expedite payments.”

The sadistic jokester at Interior is Gregory J. Gould, new director of the new Office of Natural Resources Revenue (ONRR). It is one of three agencies that will replace the Minerals Management Service (MMS), which was blamed for being too chummy with the energy industry in its royalty collection operation. The new ONRR will collect and disburse energy-produced revenue from federal and American Indian lands onshore and from the U.S. Outer Continental Shelf offshore.

In announcing the new agency, Interior Secretary Ken Salazar called it “a major step in our overall reorganization.” Just to make sure there’s enough bureaucracy, three agencies will replace one.

The Office of Natural Resources Revenue opened its Denver office Oct. 1 where it will use new computer facilities to assure that government gets what it’s owed, Director Gould commented. Energy royalties are collected like income taxes. Companies self-report what they owe.

In the past, a few companies have cheated—just as some taxpayers do. The big oil companies have federal auditors at oil companies to check correct counting. But to be sure government gets every dime owed, Gould has hired 19 more auditors, bring the total to 164. Previously, only the big companies faced audits. The total ONNR employees will number 600.

The distain for oil companies, of course, comes from the top. Obama has made clear he can’t stand profit-making, especially by oil companies. It’s a case of trickle-down hate. It dripped down to Interior Secretary Ken Salazar during the Gulf oil spill  last spring. That’s when Salazar promised that the Administration would “keep its boot on the throat” of energy giant British Petroleum until the oil gusher stopped and the spill was cleaned up.

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  • bubba4

    It's like you're coming to the defense of your poor helpless baby. Oil companies pay royalities to take "our" oil. Do you want to give it to them for free?

    They managed to make the largest profits in history over the last couple of years…billions and billions a quarter PROFIT…so they can't complain too much.

    FPM just tries to learn no lessons from reality doesn't it. The Gulf Oil disaster was BP's fault…but "we" (the government) allowed it to happen because we weren't paying attention (decent oversight , regulations, inspections, etc). Now here comes Tait to tell us the lesson to gather from this is we need less regulation. We need to stop pestering those captains of industry…those princes of the free market.

    It's just an indefensible position…it's absolute insanity.

    • Raymond in DC

      Computer giant Apple has also made "billions and billions" in profit over the last year. Since when is success a crime and profits the wages of sin?

      • bubba4

        Doesn Apple dig up its ipod and ipads from public land? No. They have nothing to do with each other.

        Who said success is a crime? No one. This is just an easy way to dodge the obvious.

  • groovimus

    Bubba is OK with his brothers-in-arms over in Beijing taking oil from the continental shelf without paying the US government. All they have to do is pay Castro what they think will get him to go along, give him a little of the, then they horizontally drill and suck out the resource that U.S. producers are not allowed to drill for because of the moratorium. Face it Bubba, you don't like productive people unless they are Chinese or Cuban. You think that the US government should be able to have committees on every rig who can somehow review every detailed decision, and have all this detailed knowledge of petroleum exploration that gives them the magical power to INSURE that no major will ever happen, by actually directing the onboard crews. Truly magical thinking on your part.

    • bubba4

      Bubba is OK with his brothers-in-arms over in Beijing taking oil from the continental shelf without paying the US government.

      Really? Where did you pick up that little tidbit? Setting aside for a second you believe whatever nonsense you want to, I don't care if the company is British or Chinese, they need to pay for taking the public resource.

      Your post is a strawman. Our choices aren't just 1)Do nothing 2) smother business. That's what's called a false dichotomy. Thanks for gracing us with your dishonesty.