Big Oil Gets Big Break, By Mistake

CBS: Error Means Oil Companies Are Exempt From Paying Royalties

(CBS)  This story was written by CBS News correspondent Sharyl Attkisson.

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When a giant new oil field was discovered recently in the Gulf of Mexico — possibly the biggest domestic field unearthed in 30 years — it was good news for America's energy front. It should have been great news for taxpayers, too. That's because under leases with the U.S. Interior Department, oil companies typically agree to pay taxpayers generous royalties on their finds — after all, the oil companies drill in public waters.

But members of Congress are raising questions as to whether taxpayers will get their due from all of the oil brought up in the new field, due to a costly mistake in some leases that actually exempts oil companies from paying royalties.

A federal inquiry has been trying to get to the bottom of just who gave big oil this big break. It happened eight years ago: Leases issued for deep-water drilling in the Gulf in 1998 and 1999 released oil companies from paying the royalties even if the price of oil escalated to incredible heights, as they have in recent months.

Congress and the Interior Department Inspector General have been trying to dissect the blunder with their own investigations. CBS News has obtained the Inspector General's findings in advance of his appearance on Wednesday before the House Government Reform Committee.

Specifically, Inspector General Earl Devaney's prepared remarks say that the best he can tell, after interviewing dozens of witnesses and examining 11,000 e-mails, the royalty snafu was simply the result of "bureaucratic bungling...(and the) stove-piping of various responsibilities."

But in the bigger picture, he faults an entire culture within the Interior Department, whereby he says mistakes are too often overlooked and there's a lack of accountability.

"Short of a crime, anything goes at the highest levels of the Department of the Interior," Devaney's prepared testimony says. "Ethics failures on the part of senior Department officials — taking the form of appearances of impropriety, favoritism and bias — have been routinely dismissed with a promise 'not to do it again.'"

Devaney goes on to say, "I have watched a number of high-level Interior officials leave the Department under the cloud of ... investigations into bad judgment and misconduct. Absent criminal charges, however, they are sent off in the usual fashion, with a party paying tribute to their good service."

As far as the lost royalty payments, Chevron, one of the companies drilling in the newly-discovered Gulf areas, says it believes only some of the new oil fields could be exempt. Chevron promises it's working with Interior Department officials on a "mutually satisfactory resolution."

A bill is pending in Congress that would force exempted oil companies to pay up the royalties or face stiff financial penalties. If the losses aren't recouped, experts believe it could cost taxpayers hundreds of millions, perhaps billions, of dollars over the lives of the leases in question.

[mjv2944]

well the good ole boys in the oil industry win and we lose and if you think that it was all a mistake you are a fool. big oil wins again at our expense.

[random_radar]

Buy oil company stock--it will reverse your outlook on profiteering in big oil.

[sharncedar]

Ha hah hah LOL

"Buy oil company stock--it will reverse your outlook on profiteering in big oil."

I would except they will rotary fasten the stockholders too, if you've noticed, just the CEO's and the polits they bribe walk away with anything.

[gordonost]

Whoa there! If Big Oil was to have given up tons of money to the government for the drilling/production rights Washington would manage all that money no better than they manage our money now, and the cost (tax) would have been passed on to the consumer (us)!

So the lessor of the two evils is to hope for lower energy cost.

[nothappyatall]

Oh sure, a big "mistake", follow the money trail and see who pocketed a nice fat check for the "accidental oversight"

"A bill is pending in Congress that would force exempted oil companies to pay up the royalties or face stiff financial penalties."

In other words, they want to use the US courts to breach legal contracts to get royalties the contracts were signed, sealed and delivered as exempted from paying.
Interesting legal precedent that could set! Imagine how thatwould work, anyone who doesn't like their contract can go and force getting a new one because the finances changed.

Your lease on your apartment still has 5 years to go at $350 a month? sorry, I now want $2,000 month
because $350 is not fair, so I go to court to force the change.

"If the losses aren't recouped, experts believe it could cost taxpayers hundreds of millions, perhaps billions, of dollars over the lives of the leases in question. "

BS, this will not COST us money, there is no money taxes or royalties from oil sitting a mile under rock at the bottom of the ocean, it is a case of money we won't GET, not that we will pay out as a cost.
Besides, typical of all businesses, they simply tack all those costs onto the price, so they would get the money back in the end anyway. We charge them $1 a barrel royalties, they simply raise the price that much, so why bother?

[ndg1979]

Why does that inbred newster even bother to open his slack jaw? Sure, here he makes some sense, but I wonder if he even read the legislation under which this payoff to big oil was written? I know I didn't.

Here is some real news for you newster and to everyone else in this country.

"NEARLY ALL YOUR ELECTED REPRESENTATIVES BARELY EVEN READ MOST OF THE BILLS THAT THEY VOTE ON!"

This exact phrase has even been spoken by these same politicians that you seem to hate so much.

This bill is for roads - fine, I vote yes. This one for education - go for it. Yet, mixed into every piece of legislation is money for things completely unrelated. Under education could be a couple mil for a study of fruit flies in India. Under health care could be $750,000 to videotape the monsoon season in Arizona. Unless you read it you will never know and to try to follow a paper trail in Washington is like trying to find Jimmy Hoffa.

Someone out there knows who the author of that bill was, but we'll never know. So until real politicians that will do real work come along, you will just have to accept it. Someone pocketed a nice little bonus, and if your mad because of it - either vote every politician out of office and run yourself or just stop acting jealous that the little bonus didn't come your way.

[clestes-2009]

By mistake?? Are you kidding? Not with this administration. Cheney was paid under the table to allow "this mistake" to happen while Rep still hold a majority in Congress.

Just something else to investigate when the Dem take over.

[nynative1340]

'bureauratic bungling', 'lack of accountability', 'ethics failures'??? Sounds like cover up for 'stupidity.' But it's more likely a cover up for an intentional greedy act. Something very typical of CEOs and our 'public servants.'

[jgousse]

Clestes,

http://www.ipl.org/div/potus/

Please see here, what administration are you blaming?

[clestes-2009]

Bush's who is the anti environmental president in the last 50 years.

This guy is all for big oil and nothing for the common man or wildlife.

[dashamazon]

I know that this happened during the Clinton administration and have been trying to find out who the members of the Interior Department were at that time. Any suggestions as to where I might find this info?

thanks,

dash