How High Will the Upcoming Oil Scandals Go?

by emptywheel

Back when I was reflecting on why Gayle Norton resigned her position as Interior Secretary, I thought she might be resigning just three steps ahead of the Abramoff investigations. She still might. But now I think it just as likely that she resigned just before the Inspector General started investigating how her Interior Department gave away our country's wealth to the oil companies.

The Justice Department is investigating whether  the director of a multibillion-dollar oil-trading program at the Interior Department has been paid as a consultant for oil companies hoping for contracts.

The director of the program and three subordinates, all based in Denver, have been transferred to different jobs and have been ordered to cease all contacts with the oil industry until the investigation is completed some time next spring, according to officials involved.

This appears to have been the scam: Some time ago, the Interior Department introduced a "royalties in kind" program, which allowed oil companies to pay for the privilege of drilling for oil on our land in kind--in oil and gas--rather than in cold hard cash. The gimmick is that it was supposed to facilitate accounting. Up until recently (don't worry--I'm going to figure out these dates), the oil went into the Strategic Petroleum Reserve (SPR).* But the SPR apparently is all filled up now, so recently the US government started contracting with companies to sell the oil on the "open market." But, as these things are bound to happen in the BushCo world, we didn't take open bids for the contracts to sell the oil. We apparently just gave companies with ties to a bunch of Interior Department employees in Denver the contracts, which of course meant we got less money than we otherwise would have.

This scam, of course, comes on top of a bunch of other scams that mean we get less for our oil than we should.

Those investigations are focused on allegations that the agency ordered its own auditors to abandon claims of cheating by large oil companies; that the agency’s arcane rules for calculating sales value and royalties make it easier for companies to understate their obligations; and that the agency’s basic sources of data are riddled with inaccuracies and are unreliable.

(Are you beginning to think "Enron accounting"? Because I am.)

Now, it appears that this particular scam post-dates Norton's March resignation. So there's no reason, really, to think that Norton is involved in the latest scam. Except for the fact that it is all taking place in Colorado, her stomping grounds. The folks in charge of the "royalties in kind" program, working out of Denver, have apparently also been "consulting" with companies with which they have "potentially improper social ties." You know--you rub my back, I steal from taxpayers to benefit you?

In any case, I suspect this one may get big. You think maybe Shell will grow uncomfortable with their new back-scratcher general counsel?

How appropriate--this Administration will begin with an oil scandal. And it looks like it will end with one, too.

*There is, of course, a scam here too. BushCo was filling the SPR at a time of record oil prices, much to the chagrin of observers (I used to think Bush was right to do so, because we really are going to need the SPR when Saudi Arabia, Iran, and Venezuela withdraw their oil from the market because of our fiddling--but now I suspect there were motives of greed, and not security). Which meant that the oil companies were paying us in a currency that was worth much more than puny little greenbacks.

Comments

[smiley]

Saudi Arabia and Israel own our foreign policy. Shell and Halliburton own our energy policy and armed forces. Goldman Sachs owns our monetary policy. Pfizer owns our Medicare policy, and Weyerhauser and Monsanto own our agriculture and forestry policies. Clear Channel and GE own our broadcast media infrastructure.

But somehow, we still pretend on the surface that all of these natural resources and approaches to government belong to the people.

Wouldn't it be much better for everyone concerned if we just sold all of it outright to the highest bidder? If it's all going to belong to corporations anyway, I think we should at least stop being hypocritical about it. We could have a big auction, and use the proceeds to buy a nice parting gift for the American dream.

[Dismayed]

NO. It would be much better if we kicked the asses of the people who have done this - then drive the damn corporations out of our polictical system. I, for one, am sick of these elitist fuckers who have highjacked us. Petty sarcasm doesn't do it for me, I want some heads on plates, and I'll vote for the people who bring them to me.

[kvenlander]

Well well well... I wonder if the volumes are big enough to affect oil prices. Up to now, energy experts have said that there is no mechanism by which the administration could meddle with gasoline prices pre-election.

Of course, having an agreement with the oil companies to fill up the SPR during the highest price spike in 20 years probably gives you some leverage to ask favors too.

[MarkC]

smiley's right, but can you imagine the amount of work involved in the semantic shift to news about corporate actions rather than the daily schedule of the figurehead-in-chief? to covering resource grabs rather than policy posturing and press releases? to linking policy to corporate interest rather than national interest? no, no, no. far easier to maintain the status quo and report on what our country might look were it still running according to the principles exposited in 1940's movies and civics classes. Never mind that, even in the 1940's, it often didn't work that way.

[Rayne]

There are some big gaps in that Enron timeline -- like the inception date of Raptor and other important offshore/offbook "vehicles" that Fastow set up and Skilling/Lay signed off.

The other big piece of this puzzle is the Energy Task Force; how did it fit into this picture? What was it that Lay understood (although we will never get it from him directly, convenient as his death was)?

I'd also like to know how the roughly $10 billion missing from the Indians' trust fund under the Bureau of Land Management fits as well, seeing as the monies missing were royalties from gas and oil concerns for the use of Native American lands (and John McCain in particular has some 'splainin' to do here).

With all these puzzle pieces waiting to be connected, there's a good chance that Norton's new gig is a method by which Shell buys some silence, or pays for Norton's legal fees...

[mainsailset]

Rayne's point is well taken. The Indians' Trust Fund has been set and reset on the back burner for way too long. Norton's shop was never a clean one.

Between pouring coins into the coffers of the Saudis with the fuel burned to keep Bush's war well greased, some of which was bound to be waylaid into UBL's pockets and this latest bit on our side of the pond no wonder Karen Hughes is having the DC pundits relabel Bush as a victim. He wants to lay claim to the word first before that 29% of supporters wake up and realize just who's been victimized here. It's be interesting to see if McCain jumps in on these hearings after he and Doorgan ran the hearings involving Griles & company.

[Brian Boru]

I have the FoxTrot cartoon clipped out and ready to hang on my office bulletin board Tuesday morning.
As regards this particular scandal: does it have the potential to be like the Cunningham etc. scandals in which various entities received earmarks and used part of the profits to finance the Repubs, which led (they hoped) to more earmarks ad infinitum?

[smiley]

Brian: I will bet you dollars-to-donuts that Shell Oil did not waste any money on contributions to Democrat PACs. Are corporations required to disclose political contributions? Sure would be interesting for shareholders to get their hands on the numbers for the companies implicated in the bribery and fraud that we're talking about here.

[emptywheel]

Rayne,

Which is another way of saying NOrton's resignation was still just a step ahead of the Abramoff scandal. I wouldn't be surprised one bit if these converged somewhere around Dick Cheney's head.

[Rayne]

Oh, I don't disagree with the idea that Norton left in advance of the waves that the Abramoff scandal is making...but was it the Abramoff scandal alone that made it imperative for Norton to exit, or a critical mass of other scandals that are all interrelated that made it difficult for her to stay? I tend to lean towards the critical mass; I would not be one bit surprised if both the investigations soon to be launched and the Plame civil suit do not flush out a few more folks "leaving to spend more time with their families" or "pursuing personal interests".

Most definitely, Cheney is the point of convergence. I feel strongly he is a player deeply involved in the current asymmetrical energy war in which we are now immersed. Why would the Sunni prince of Saudi Arabia "command" the presence of Cheney ostensibly to discuss Iraq, shortly after release of the ISG's findings? Cripes, Cheney is the very last person Americans should ever send on a diplomatic mission; why did they not ask for Bush family members, being as wound up with the Bushes as the House of Saud has been?

Whatever Cheney did in the course of the Energy Task Force meetings, he affected the overall market for oil, including OPEC and the holdings of the House of Saud. Cheney's actions/inactions post-Katrina also affected the market for fuel (remember his singular intervention into pipeline operations?). Even Cheney's rigidity in his doctrine towards American petroleum consumption must have some impact on the overall marketplace, at least at corporate level. It's also important to remember that Halliburton/KBR were first and foremost service providers to the oil industry, before they became universal service providers to the U.S. government.

I've not given up on the idea that Cheney had more than one reason for outing Plame, either. Wilson's dissent may simply have been the last straw, or ample justification for doing a two-fer: exposing Brewster-Jennings and removing any potential obstruction from intelligence it gathered that contradicted that of the DoD's in-house "secret squirrel" group, while intimidating Wilson into silence. Noting that there is an increasing volatility across Eurasia related to natural gas due to extortive efforts by Shi'a-friendly Russia, it is no surprise that Cheney is being called on the carpet by Sunni Sauds.

Need to stock up on the popcorn, any way you look at it, and soon.

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