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Kingston, NY - U.S. Rep. Maurice Hinchey (D-NY), who led a coalition of House members earlier this year in an effort to force energy companies to stop cheating the federal government out of user fees they owe for oil and gas taken from public lands, today harshly criticized the U.S. Department of Interior's decision to drop its royalty claims against the Chevron Corporation. Chevron had appealed the department's determination that it owed $6 million in additional royalties for natural gas and oil taken from federally-owned lands. Instead of fighting the appeal, which could have yielded the $6 million underpayment and potentially hundreds of millions of dollars more, the agency's Minerals Management Service (MMS) stated that pursuing claims against Chevron would "have little or no success."
"This situation is completely absurd. Interior Department officials seem to be saying that they have a crystal ball to tell them that they'll lose this case, even though cases like this are being successfully prosecuted elsewhere on behalf of states, Native American tribes and the public," Hinchey said. "I think the truth is that administration officials aren't afraid that they will lose these types of cases, they're afraid that they'll win, which would put a dent in the outrageous profits of their friends in the oil and gas industries.
"It shouldn't come as any surprise that the Bush administration is not interested in making an oil company pay back the fees it owes the American people for extracting resources from our precious public lands. This is just one more example of how deeply the Bush administration is in the pocket of oil and gas companies," Hinchey added. "The Bush Interior Department has failed to conduct meaningful oversight of royalty payments by scaling back its audits, ignoring or refusing to consider evidence that's been offered to the agency from other underpayment cases, and by helping to shield the oil and gas industries' misdeeds by keeping most information about royalty valuation and collections secret."
At issue is Chevron's tangled relationship with its subsidiary, Dynergy. As The New York Times reported today, in calculating values on which royalties are owed for resources extracted from federal lands, oil and gas companies are allowed to deduct the cost of processing the fuel. The Interior Department successfully charged Chevron, which owns a 26 percent interest in its primary fuel processor, Dynergy, with inflating those fuel processing costs, thereby reducing the amount of the user fees owed to the federal government. The $6 million underpayment ordered by the Interior Department in this case was based on an extremely limited audit and was considered to be the tip of the iceberg. However, when Chevron appealed the decision, the Interior Department caved in to the corporation and decided that the case was no longer winnable, failing to collect any part of the underpayment from Chevron.
"Oil and gas companies are already enjoying record profits at the expense of American taxpayers and now we learn that the Bush administration is simply giving up on going after an oil company which blatantly cheated on millions of dollars in payments owed to the federal government," Hinchey said. "The precedent that the Chevron case sets is awful. Energy companies will now be much more likely to underreport and cheat on user fee payments since they know the Interior Department will simply look the other way. The Interior Department is quite possibly the most corrupt agency in the entire Bush administration, actively working on the behalf of big oil companies and against the interests of the American people. This fight to force the administration to collect what the oil and gas industries owe us, and to make the royalty process a completely transparent one, is far from over. My colleagues and I will be directly calling on the Interior Department to reverse its decision in the Chevron case and will be exploring legislative options to force the Interior Department to do its job and fight for the American people, not the oil and gas companies."
In May 2006, Hinchey successfully offered a joint amendment with eight other Democratic House members that would help close a loophole that has allowed energy companies to evade $10 - $20 billion in royalty payments. The amendment was added to the Interior Appropriations bill, which is still awaiting consideration by the Senate.
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