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Bullying Oil Producers

Posted By Tait Trussell On November 3, 2010 @ 12:35 am In FrontPage | 5 Comments

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.

In the period during which Salazar had imposed a moratorium on drilling in the Gulf of Mexico, the Interior Secretary continued his brazen talk. “We will only lift the moratorium when I, as Secretary of Interior, am comfortable that we have significantly reduced those risks. So the moratorium dragged on–hurting jobs, drilling, and tourism.

The Obama’s Administration’s six-month moratorium on exploratory drilling in the Gulf  “would produce economic loses within the Gulf region and throughout the nation,” according to a study by Louisiana State University economist and professor of finance Joseph Mason in August. The study explored how the moratorium affected the economies of Louisiana, Texas, Alabama, and Mississippi, as well as its effect on the country as a whole.

But wait. The Obama Administration can’t let the nation forget how awful oil companies are and the damage they can do. Obama signed an executive order last month establishing a Gulf Coast Ecosystem Restoration Task Force “to coordinate efforts to implement restoration programs and projects in the Gulf Coast Region. No limits were provided as to expense or length of time the Task Force will be in operation.

The President named Lisa Jackson, the Environmental Protection Agency’s Administrator as chair of the task force—partly for old time’s sake– “ because she’s a New Orleans native.”

And (according to an EPA press release) “due to her considerable involvement in the Obama Administration’s immediate response efforts following the BP Deepwater Horizon oil spill and her knowledge and extensive experience in environmental issues—factors that will be central in spurring actions that will be central to help to restore the region’s ecosystem while providing important support for the economy.

Obama’s executive order stated: “To effectively address the damage caused by the BP Deepwater Horizon oil spill, address the longstanding ecological decline, and begin moving toward a more resilient Gulf Coast ecosystem, ecosystem restoration is needed. Ecosystem restoration will support economic vitality, enhance human health and safety, protect infrastructure, enable communities to better withstand impact from storms and climate change [Let’s never forget climate change], sustain safe seafood and clean water, provide recreational and cultural opportunities, protect and preserve sites that are of cultural and historical significance, and contribute to the overall resilience of our four coastal communities and Nation.”

The task force will include a “senior official” from all the departments and agencies of the federal government as well as the Gulf states and tribal officials. Within one year, “the Task Force shall prepare a strategy that proposes a Gulf Coast ecosystem restoration agenda.” The Task Force will have “such administrative services, funds, facilities, staff, and other support services as may be necessary….”

In other words, another Obama attempt to transform the world as he wants to see it. After all, it’s necessary because it was all the fault of bad old destructive Big Oil.


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