Charles Thomas had his suspicions right from the beginning, although he knew the odds were against his proving anything. He was, after all, the sole federal inspector responsible for policing 2.5 million desolate acres of oil wells, out on the dusty flats of the Wind River Indian Reservation in central Wyoming.
Then one day last June, he got lucky. He stopped a truck for inspection and found that, although it was loaded with oil, the driver did not have the required "run ticket" giving him the authority to remove oil from the reservation.
Since then, the 47-year-old petroleum engineering technician has emerged as the energetic lone ranger who launched a whole posse of federal investigators in hot pursuit of a slippery, modern brand of Wild West outlaw big-time oil rustlers.
Now, it seems, Thomas' sleuthing at Wind River may have revealed only the tip of a multimillion-dolllar "hot oil" operation. Investigators from the FBI and the Interior Department's inspector general's office have worked since last summer to assemble evidence of oil thefts, not only from Indian lands but also from federally owned lands in seven western states, according to officials in charge of the investigation.
A grand jury in Cheyenne has been hearing evidence gathered by the task force. The criminal investigation is expected to continue, and the scope of the crimes may not be known for some time, officials said.
So far in the tangled frontier whodunit, while there is definite evidence that oil has been stolen, it is unclear who is doing the stealing. Among those considered potential targets of investigators are employees of oil companies, reclaimers, refineries, pipeline operators and others connected with oilfield operations, according to sources.
Investigators are checking out, among other things, the possibility that federal employees may have taken kickbacks or bribes for not blowing the whistle on the rustlers, according to informed sources.
At center stage now is the mineral-rich Wind River reservation, a forbidding, treeless basin at the foot of the Rocky Mountains southeast of Yellowstone National Park. Here, the Shoshone and Arapaho Indian tribes jointly own 2.5 million acres, with about 500 oil wells scattered over them.
Members of the Wind River tribes receive royalties based on a share, generally one-sixth, of the oil. The rest of the oil profits go to companies that hold mineral leases on the land.
The Wind River tribes claim that massive amounts of oil have been stolen before the petroleum passed through the meters required by federal law to keep track of the amount of royalties owed to them.
Once again, it seems, Indians are cast as the underdogs. But this time, rather than waiting for government dispensation, as one activist tribal official put it, "We're taking things into our own hands. This time we'd like to wear the white hats."
The Shoshone, with growing support from the Arapaho, recently set up a special commission to investigate the thefts. They brought in some of their own legal heavy artillery from Washington -- the law firm of Rogovin, Stern & Huge, working in association with former Supreme Court justice Abe Fortas. And they hired the services of a major accounting firm, Touche Ross.
Even before Charles Thomas' alert in June, the tribes had had an earlier warning that they were being robbed from John McCandish King, a sometime Denver oilman. King served time for stock fraud a few years ago after he became involved with the ill-fated financial complex founded by Bernard Cornfield, he was attempting to partially atone by using his financial expertise on behalf of the Indians. "I came across huge discrepancies," he said.
Based on his analysis, King wrote to the heads of the Wind River tribes, warning them of his suspicions that perhaps 30 percent of their oil was being stolen and laying out his figures comparing, among other things, the gross production reported for tax purposes with spot checks of wells.
He estimated that the tribes might have lost more than $16 million in the last 20 years.
King's figures indicated that, during a four-year period when the price of oil had increased by as much as 600 percent, from $8 to as high as $48 a barrel, the annual royalties paid to the Wind River tribes had climbed from roughly $3.6 million to $4.3 million.
Federal officials and attorneys on all sides have declined to confirm or rebut King's figures.
In any case, tribal leaders for a year or more apparently took no action on King's warnings. Though some younger tribal members support King, at a recent general tribal meeting, the Indians voted to divorce themselves from all involvement with the high-rolling financier. "Because of his record . . . They didn't want anybody with his character to be involved," said Matthew Noseep, a Shoshone official who is serving on the specially appointed oil theft commission.
The Indians have no such doubts over the crucial role played by U.S. Geological Survey inspector Thomas. In November, he resigned from the survey and now works for the Wind River tribes as a troubleshooter in the oilfields.
Until he came along, by all accounts, the government had relied mainly on the oil companies to police their own wells.
Officials blame that on the fact that the Geological Survey is so understaffed. The agency has 36,865 onshore wells to monitor in the continental United States and 47 inspectors to do it.
Thomas found a whole series of violations, including illegal or questionable equipment such as meter bypasses, over almost the entire reservation, he said recently.
Last fall, Thomas took members of the tribes and a reporter for The Rocky Mountain Journal through the oilfields, he said, and showed them illegal equipment and methods used to steal oil. The Journal, a small business weekly, first broke the news of the investigation in late October.
After the Geological Survey received word of the investigation, last August, according to agency officials, it immediately focused all available manpower on an inspection of oilfield equipment, starting with the Wind River reservation.
Some of the 29 lease holders, including some major and smaller independent oil companies, have been out in the fields busily removing or altering meter bypasses and any other illegal or faulty equipment found, according to tribal officials and their attorneys. Mitchell Rogovin, the attorney heading the investigation for the Wind River tribes, said he and his clients took a helicopter over the reservation and photographed the equipment before and after.
Oil companies have traditionally allowed for a certain amount of theft from their sprawling production fields, according to industry specialists, but the recent price explosion has inspired the thieves to new heights of imagination and effort.
Among the various methods of stealing oil reportedly under investigation are:
Simple pipes attached to oil storage tanks to allow the rustlers to drain off oil and haul it away before it goes through the meter.
Diversion of oil from a lease where royalty payments are high to a lease where royalty fees to the Indians are lower, with the thieves keeping the difference.
The draining of clean oil into overflow pits for sale to reclaiming operators who are supposed to handle only dirty oil. This avoids the meters and cheats the Indians out of royalties.
Government pricing policy, which currently distinguishes between "new oil" and "old oil", provides an incentive for this kind of theft, government specialists acknowledged. As one industry insider described it, "A man whose lease produces 100 barrels a day of old oil has to sell his goods for say, $700. A man on the other side of the fence line selling an equal amount, out of the same formation, gets $4,000 for his, because it's new oil. Now that's making everybody unhappy."
Federal policy, however, allows reclaimers to sell any oil they recapture at the higher rate -- the new-oil rate, officials explained. This encourages unethical operators to drain off clean old oil into the pits where it can become, in effect, much more valuable "dirty" new oil.
For the same reasons, oil companies have considerable incentive to "steal" from themselves, either before or after the oil has been metered and the Indians given their due. This is largely a matter of paperwork, a federal energy official explained, getting old oil "recertified" as new.