Federal and state governments and American Indian tribes are losing hundreds of millions of dollars in oil and gas royalties a year because companies regularly underreport what they take from public and Indian lands they lease.
In addition, security is so lax at many leased sites that large quantities of oil and gas are regularly stolen.
Those are two findings of a U.S. commission that will soon recommend major changes in the way the Interior Department administers oil and gas leases, and in the penalties that can be invoked against companies that violate the leasing rules.
David Linowes, chairman of the Commission on Fiscal Accountability of the Nation's Energy Resources, set up last July 27, says that the system is in "terrible disarray" and that the oil industry "won't even recognize that there's a problem."
Linowes expects to issue a final report by the end of January.
Testimony from the General Accounting Office has indicated that governments and Indian tribes are losing as much as 10 percent of their rightful royalties. That was estimated to be $650 million this year.
One difficulty, Linowes said, appears to be that Interior's U. S. Geological Survey, the administering agency, has historically not questioned production reports submitted by oil companies.
"They have some of the finest scientists in the world," he said. "They do an outstanding job of looking after our natural resources. But this is a fiscal responsibility they're not really trained for. What's happened is that you have a billion dollar business being run by scientists with not more than a dozen people with any training in accounting. And for the most part, they've been hired in the past several months."
Testimony has indicated that in the past there has been no attempt by the agency to match the documentation from the removal of oil or gas with the final sales slips the companies submit for royalty purposes. Examination of the documentation by the commission produced evidence of major underpayments.
Company officials testified uniformly that the discrepancies were due to errors, but Linowes said, "I haven't seen one overpayment. If mistakes are being made, and they're solely mistakes, there should be an occasional instance of an overpayment."
On site security, Linowes said, "We have no handle on how much is being stolen, but we've been told that as soon as it gets dark, the trucks begin running through the oil fields like it's mid-town city," he said. "If they see the feds coming, they shut off the valve and get onto a state road where federal law enforcement authorities have no jurisdiction . They find the cracks."
USGS has 47 inspectors to police 18,000 lease sites.
H. P. Walter, a member of the USGS quality assurance team, testified this week that "the job is impossible. I don't think the U.S. Army could do it. There are thousands of these things . . . There's no way in God's world that any task force of any reasonable size can do any more than show the flag.
"We have a very valuable commodity just out there lying on the ground. It's like putting a $5,000 bill on the ground and putting a rock on top of it," he said. "There's nothing in the world to keep a crook from driving up and stealing that oil . . . . There are crooks in every business, and in this one the payoff is great."