Warren Harding

Dubois — How is a more than a century old oil scandal relevant today? Let us count the ways.

In March, 1921, Warren G. Harding, was sworn in as our twenty-ninth President. A former U.S. Senator from Ohio and a former small town newspaper publisher, Harding was little known outside his home state. Still, he had a number of characteristics that made him attractive as a candidate.

Compared to the Democratic incumbent, Woodrow Wilson, once a Princeton jurisprudence professor and later Princeton’s president, Harding had a down-home, folksy quality that came across very effectively in his barnstorming speeches. And as his friend, campaign manager, and ultimately attorney general, Harry M. Daugherty noted the first time he and Harding met, the robust, handsome Ohioan “looked like a president.”

To put it kindly, Harding’s wasn’t one of the shining minds of his generation. As Republican political boss Boies Penrose warned Harding’s managers during his campaign, “Keep Warren at home … somebody’s sure to ask him a question, and Warren is just the kind of damn fool who will try to answer.” But Harding was a “go along to get along guy,” meaning that in the Senate he had a reputation of doing pretty much what the powers-that- be wanted. It was this quality, more than any other, that made him attractive to Big Oil.

Prior to Harding’s election, the oil concerns had been coveting three major Naval oil reserves that had been set aside in case of a national emergency — Teapot above Casper, Wyoming and the Elk Hills and Buena Vista fields in California. Though this is rarely mentioned in accounts of the Teapot affair, the oil crowd also lusted after the Wyoming Salt Creek field. Though not a naval oil reserve, Salt Creek was adjacent to Teapot and held roughly as much oil as all the naval fields put together.

Harry Ford Sinclair
Harry Ford Sinclair

While Wilson was president he would not let the oil crowd anywhere near the reserves. Harding had no such scruples, especially after two oil men, Jack Hamon, the Oil King of Oklahoma, and Harry Ford Sinclair, head of Sinclair Oil, between them bought Harding the Republican nomination and then paid for most of his campaign. Sinclair went so far as to pay off the entire Republican National Committee (RNC) debt.

Before Harding was ensconced in the White House, the challenge confronting Sinclair (Hamon had been murdered by his long-term mistress) was to add a compliant Secretary of Interior to what would become known as Harding’s “oil cabinet.”

Enter Albert Bacon Fall, a Stetson-wearing, cheroot-chomping, sixgun-carrying New Mexico Senator who had a huge ranch in New Mexico and a proportionately meager bank account.

Challenge number two for Sinclair and friends: Remove the oil reserves from the Navy Department and put them under Interior, that is under Fall.

Albert Fall
Albert Fall

Rarely denied, Fall wrestled the reserves away from Navy with surprising ease and secretly leased Teapot to Sinclair and the Elk Hills and Buena Vista fields to another oil man Californian, Edward Doheny. They, in turn, made Fall well financially with payoffs of about $400,000, a considerable sum in 1921. As a bonus, Sinclair threw in some prize livestock he had shipped down to Fall’s ranch, Three Rivers.

So how does the Teapot crew compare to Bush-Cheney administration, in which both the President and the Vice President, of course, came from the energy sector?
Well, the oil and gas industry didn’t buy “W” the 2000 and 2004 elections, but it certainly picked up a major share of the tab.

According, to the Center for Responsive Politics, a Washington D.C. group that keeps track of such things, the oil and gas industry spent $440 million between 1998 and 2004 on lobbying and campaign contributions, 70 percent of which went to the Republicans. Since 2000, oil and gas contributed $66.7 million to the RNC, the National Republican Congressional Committee (NRCC) and other Republican affiliated organizations. In 2004, oil and gas contributed in excess of $20 million to the GOP, more than 4 times what it gave the Democrats. By the way, almost $1 million of that came from Exxon, according to the center.

Secrecy was one of the hallmarks of the of the Harding Administration’s energy policy. Fall moved behind the scenes to divest the Navy Department of the reserves. Several Naval officers who resisted and threatened to speak out were reassigned to distant parts of the world. Then, in doling out the leases to Sinclair and Doheny, Fall did so behind closed doors, ordering his subordinates to keep mum about these dealings and excluding other oil companies from bidding.

Finally, when the deals were done, Fall got out of town, taking the train back to New Mexico. Eventually, however, word got out when Wyoming oil men heard rumors about the leases and complained to Wyoming Senator John Kendrick, a Democrat, that they’d been kept out of the process. Ultimately, Fall conceded he had given out the leases, but contended he’d done so in the interests of national security (he claimed the fields were being siphoned off by drillers adjacent to the reserves.)

VP Dick Cheney
VP Dick Cheney

Fall was a chatterbox compared to Dick Cheney, who ten days after taking office established a secret energy task force, refusing to divulge who was part of that task force, what was discussed, or what action plan, if any, was drawn up. It wasn’t until 2005, when a former White House official leaked a document to The Washington Post that we learned the names and companies that participated. No surprise here. The list comprised the usual suspects: Jim Rouse, VP of ExxonMobil and a major Bush campaign contributor; the late Ken Lay of Enron; four executives from British Petroleum; three from Sinclair Oil; and three from ConocoPhillips.

Also included were representatives of various energy trade associations, such as Red Cavaney, the now-retired CEO and president of the American Petroleum Institute; energy think tanks and even some environmentalists such as Howard Ris of the Union of Concerned Scientists.(By the way, a week before the list became public, the CEOs of Exxon-Mobil and ConocoPhillips told Congress under oath that they had not participated in the task force.)

So what was the big secret? Why not make the list of attendees, the agenda, and the conclusion available to the American public or the General Account Office (GAO) which sued unsuccessfully (Walker v. Cheney) to find out what the task force was up to. Critics of the Administration’s energy policies, such as Eric Schaeffer, who was chief of regulatory enforcement for the Environmental Protection Agency, charged that the task force’s goal was first to benefit its GOP cronies in the oil and gas business, and second — by a wide margin — to accommodate you and me.

George Bush
George Bush

A look at the Bush-Cheney energy record would seem to substantiate that. In eight years, the Administration has showered tax breaks on the energy industry, come out in support of offshore drilling and drilling, in the Artic National Wildlife Refuge, opened up national forests to drilling and repealed Clinton’s Roadless Rule so that oil, mining and lumber interests could access said forests. Take note, by the way, that while a federal judge in California reinstated the Roadless Rule, U.S. District Judge Clarence Brimmer in Wyoming overturned the Clinton ban last month (August 2008).

As in the Harding Administration, no arm of the federal government was more helpful to energy interests than the Department of the Interior. A September 10, 2008 redacted (meaning many of the good parts have been left out) memo– the results of an ongoing investigation — to Interior Secretary Dirk Kempthorne from Earl E. Devany, the DOI’s inspector general, gives us an insight into just how cozy the relationship between oil and gas and the DOI has been these past years. Here are some highlights from the investigation that took more than two years:

  • Employees at the DOI’s Minerals Management Service office in Denver, including the former head of the division, Gregory W. Smith, engaged in secret sex and drug abuse with oil company employees and accepted thousand of dollars in gifts while handling billions of dollars worth of energy contracts.
  • In addition to accepting the sex, drugs, and gifts, the employees are accused of rigging contracts, improperly helping oil company workers fix problems with their contracts, and working part-time as private oil consultants.
  • The Mineral Management Service is responsible for collecting and disbursing royalties from oil companies of more than $8 billion per year (in 2007 the figure was $11 billion) in revenues from Federal offshore mineral leases and from onshore mineral leases on Federal and Indian lands. As a result of corruption in the service and its incestuous relationship with Big Oil, however, billions of dollars in tax payer’s money has not been collected, the investigation charges.
  • Investigators found that oil companies have frequently won favorable access to sales contracts and have been allowed to submit bids after deadlines, tilting deals to their financial benefit without explanation and little or no government scrutiny. This benefited the oil and gas companies at the expense of the government and, yes, the taxpayer.

There’s more, much more, but in deference to the late Albert Bacon Fall, who was imprisoned and died a broken man, let’s at least acknowledge that the old rogue was well ahead of his time.

The author, Laton McCartney
The author, Laton McCartney

Editor’s note: Laton McCartney is author of The Teapot Dome Scandal: How big Oil bought the Harding white House and Tried to Steal the Country (Random House 2007). Raised in Wyoming and Colorado, McCartney splits his time between homes in Dubois and New York City.

Read More About The Teapot Dome Scandal here.