“Accountability” in the 1980s

The Linowes Commission had strongly recommended that the energy industry be brought to heel by vigorous federal oversight that would include independent audits, internal controls, site security standards, and strong sanctions for failure to pay royalties fully and on time. “Accountability,” the commission said, must be the watchword.

Minerals Management Service began its life as the bringer of accountability with an annual budget of $298 million, 1,639 employees, and a mandate to manage federal leases and royalties both onshore and off.

In January 1983, a year after the new agency was born, Congress passed the Federal Oil and Gas Royalty Management Act, a piece of legislation intended to correct the “archaic and inadequate” system of accounting for oil and gas royalties due from leases on federal and Indian lands. Besides admonishing Secretary Watt to “aggressively carry out his trust responsibility,” the act noted that “it is essential that the Secretary initiate procedures to improve methods of accounting” for royalty payments. Among other things, the new law gave federal auditors and their agents some police powers, and added a provision allowing citizens to sue recalcitrant mineral companies and force them to pay up, for a share of the take.

The Minerals Management Service started collecting oil and gas royalties, but contrary to Watt’s prediction, theft, fraud and gross underpayment continued unabated, and pretty soon another blue-ribbon panel was convened to look into the matter.

The 1989 report of the Committee on Investigations of the Senate Select Committee on Indian Affairs noted that fraud, corruption and mismanagement of Indian natural resources had not significantly lessened during the 1980s. As a result, tribes had lost many more millions of dollars in revenue from their non-renewable natural resource base.

The Senate committee observed that while simple “smash-and-grab” theft–stealing entire tanks of crude oil by force–was rare, “sophisticated and premeditated theft by mismeasurement and fraudulently reporting the amount of oil purchased has been has been the practice for many years.” Chief among the victims were the Arapaho and Shoshone tribes of Wyoming’s Wind River Reservation.