Unpaid oil fees for Western Indians may prove hefty
East Glacier, Mont.
A $763,605 check presented by Standard Oil of Indiana (Amoco) to the Wind River Indian reservation in Wyoming late last month, to compensate it for alleged thefts of oil from Indian lands, may turn out to be one of a string of payments energy companies will make to Indian tribes.
Far from representing an isolated instance of "accounting error," the Amoco "scheme" is viewed as just part of a pattern of unpaid royalties for oil from Indian lands.
By some accounts, unpaid royalties and outright theft from oil fields--practices that have become increasingly lucrative along with the jump in energy prices--have cost Indian tribes hundreds of millions of dollars.
From a single incident last year when a US Geological Survey (USGS) employee on the Wind River reservation stopped a truck filled with purloined oil, the issue has developed into a widespread controversy. USGS, the branch of the Interior Department charged with overseeing oil production on Indian and federal lands, is now under fire for its role in the case.
The matter has attracted heavy press attention and been the subject of congressional hearings. Most recently, Interior Secretary James Watt appointed a five-member panel to ascertain how common oil theft really is. The panel has scheduled its first hearings for late August in Washington.
In recent years Indians have become sophisticated at negotiating advantageous deals for the development of their energy resources. Gradually they have weaned themselves away from their dependence on Interior's Bureau of Indian Affairs and the USGS.
Now, they are turning their attention to abuses in energy production on their property, to discover on their own how much theft has occurred and how much in unpaid royalties has gone unnoticed. Since the Wind River investigation last year, inquiries have spread to other reservations including the Blackfeet in Montana, the Uintah-Ouray in Utah, the Osage in Oklahoma, the Jicarilla Apache in New Mexico, and the Navajo of Arizona, New Mexico, and Utah. Such investigations may lead not only to payment of hefty sums in delinquent royalties, but to wholesale renegotiation of leases.
Chuck Thomas is the former USGS employee credited with uncovering evidence of practices long suspected but never proved. In June 1980, Mr. Thomas, while inspecting oil leases on the Wind River reservation, pulled over a truck driver for a junk oil reclaimer about 15 miles from an isolated lease. Although the truck held 166 barrels of oil from the property, the driver could not produce the required authorization. He had been caught in a scam of unreported oil production.
Thomas, who now works for the Blackfeet trying to unearth evidence of similar schemes on their Montana reservation, offered praise for the local sheriff and FBI investigators who stuck with the case. Their efforts, he said in an interview in his new home here in East Glacier, led to convictions of the president of a local oil reclaiming operation and his accomplices in the oil field.
Oil theft is now the subject of criminal investigations in a number of states including Texas, Oklahoma, and New Mexico. But a brief jail term of the kind meted out in the Wyoming case acts as little deterrent to such lucrative crimes where the risk of capture is so small, Thomas says.
In his work as oil rig repairman and government inspector, Thomas has identified 100 ways to steal oil. With the cooperation of oil company employees , anyone with a truck can drive up to a mismanaged rig where junked oil is left in pits rather than tanks and scoop up the oil, cart it away, and leave without a trace. Another method involves leaving oil tank valves unlocked, ready to be tapped.
Whatever the mode of theft, oil on which the landowner should receive a royalty is never counted. But several truckloads, each containing 200 barrels of oil, can bring an easy $50,000 to the thieves.
Thomas, who is half eastern Cherokee, readily points out that he receives 5 percent of any money the tribe can recoup from his investigation. Only someone with such a stake in unearthing "accounting errors" would take the time to pore over jumbled government records and to spy on oil thieves, he says. But as a token of their appreciation of Thomas's work, the Blackfeet have inducted him into the tribe, naming him Chief Night Rider in recognition of his nocturnal searches for oil thieves on the prairies of the reservation.
To complement his investigation, the tribal council is considering the purchase of computers that could track lease production figures and bring suspicious developments to their attention. Without such an independent accounting procedure, the Blackfeet doubt they will ever know how much they should be receiving in oil and gas revenue.
Last year, their oil and gas revenue totaled around $3 million for the estimated 6,000 people on the reservation.
The Backfeet play host to about twoscore oil companies, including such major ones as Phillips Petroleum, Union 76, Texaco, Conoco, and Amoco.
The Senate's Select Committee on Indian Affairs, which has also been examining the issue, is drafting a report with recommendations for reform at USGS. Some coordination of oil production figures among USGS, the Department of Energy, and the Interstate Commerce Commission is under consideration. But an aide to Sen. Thomas Melcher, the Montana Democrat who has taken the initiative on the matter, is concerned that this committee lacks the resources to conduct the kind of inquiry that could assess the extent of abuse and find a way to correct it.
So-called, accounting errors," Thomas believes, have cost the Indians on the Wind River reservation royalties on more than 2 million barrels of oil.