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Whistleblower: Govt Losing Billions to Oil & Gas Cos

The government is losing �billions of dollars� in oil and gas drilling fees, according to former Minerals Management Service (MMS) employee Kevin Gambrell, who will appear tonight on the PBS program NOW. Gambrell is one of several government and industry whistleblowers who have come forward in recent years to point out that MMS is turning a blind eye when oil and gas companies may be ripping off the government and Indians.

NOW helpfully posts an edited version of their interview with him, here is one section:

HINOJOSA: How much do you think that the American taxpayer is losing from your understanding of what oil companies are not paying in terms of their royalties?

GAMBRELL: I think the American taxpayers are losing billions of dollars.

HINOJOSA: How did they do it?

GAMBRELL: They would take deductions that they could not legally take. They would price their oil to gas using artificial pricing mechanisms that weren't true to the market. They would get bonuses, premiums and other considerations that were not visible to the royalty collectors ...

HINOJOSA: How easy is it for an oil or gas company to essentially underreport the royalties that are due?

GAMBRELL: It's easy ... In the past it was much easier ... I had an example probably three years ago where an oil and gas company was producing oil and gas from a well site and they never reported anything to the federal government. And I found out through a transporter that transports oil and gas that they had been producing. There was no way to really know that they were paying correctly until we've got the third party verification.

Last week, another whistleblower, former MMS auditor Bobby Maxwell reached a decisive point in his fraud litigation against Kerr-McGee when the court ruled that he had standing in the case. Maxwell�s case alleges Kerr-McGee shortchanged the government on $12 million in royalty underpayments. Now he simply needs to overcome a motion for summary judgment before the case can go to trial, according to his attorney. Like Gambrell, Maxwell was fired, and was concerned that MMS is failing to audit oil and gas companies to ensure the government is receiving its fair share of royalties. Documents shared with POGO recently showed that the MMS has indeed cut back on its auditing of companies, in fact, by almost in half.

In case you missed it, industry whistleblowers have come forward as well. Jack Grynberg an oil industry tycoon has a massive fraud suit against oil and gas companies and estimates they may owe as much as $35 billion in gas royalty underpayments. National Public Radio did an excellent story on Grynberg a few weeks back.

By: Beth Daley
Former Director of Investigations, POGO

At the time of publication, Beth Daley was the Director of Investigations for the Project On Government Oversight.

Authors: Beth Daley

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