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Exposing Corruption and Preventing Abuse of Power

Meet the Oil-Friendly Federal Panel that Could Give Drillers a Sweetheart Deal

Secretary of the Interior Ryan Zinke's newly-reestablished Royalty Policy Committee meets for the first time in Washington, DC, October 4, 2017. (Photo: Taxpayers for Common Sense)

On Wednesday, a federal panel will convene in Houston to consider slashing the share of revenues that federal and state government receive from drilling and mining on federal lands and in the Gulf of Mexico.

The dollars at stake are significant. For instance, in 2011, companies made $98.6 billion from production on federal leases and paid the federal government $10.5 billion in royalties.

The oil, gas and mining industry has six voting seats out of 20 on the panel, known as the Royalty Policy Committee, and they predictably advocate for paying the public less. But industry’s voice on the committee is supposed to be balanced with perspectives from state and tribal governments — Native American tribes also receive a share — and civil society and academia.

Yet some of those non-industry representatives have substantial ties to the energy sector, leading some to wonder if the fix is in. Materials released by the Royalty Policy Committee in advance of its meeting this week show that it intends to present and possibly vote on sweeping proposals to reduce the oil industry’s offshore royalty rates.

“This isn’t about increasing taxpayer returns, it’s about looting public resources, opening up more of everything for drilling, charging the industry less, and pretending it’s all coming from outside experts,” Congressman Raúl M. Grijalva of Arizona, the ranking Democrat on the U.S. House Natural Resources Committee, told the Washington Post on Monday.

Take “civil society” member Daniel Rusz, who consults for the mining industry and, until 2008, was director of sales finance for coal company Massey Energy. President Trump’s appointee at the Interior Department’s Bureau of Safety and Environmental Enforcement is Scott Angelle. He is one of the committee’s additional eight non-voting members and signaled in a speech to a state oil and gas association last fall that he wanted lower royalty rates.

Some members of the royalty committee have such extensive connections that critics question whether they are essentially de facto subsidiaries of powerful drilling and mining interests.

Perhaps no one illustrates this better than Texas’ member, Drew Darby, a Republican state representative from San Angelo and a reliable friend of the oil and gas industry during his 11-year legislative career. The chair of the Texas House Energy Resource Committee since 2015, the oil and gas industry has showered him with campaign contributions. From 2013 to 2016, Darby received $174,251 from the industry, according to a 2017 report by Texas for Public Justice, an ethics watchdog. Among the 150 Texas House members, he was the seventh-highest recipient of industry campaign cash during that time (the average House member received $37,816). Not bad considering he has faced no opponents in his last four general elections.

Since Darby was publicly named by Interior Secretary Ryan Zinke to the Royalty Policy Committee in September, oil and gas companies have continued to pump funds into his coffers. These companies or related trade associations have contributed at least $13,500 to him since the fall, according to his latest campaign disclosure filed with the Texas Ethics Commission.

“This isn’t about increasing taxpayer returns, it’s about looting public resources, opening up more of everything for drilling, charging the industry less, and pretending it’s all coming from outside experts.”

Anadarko Petroleum Corp. sent him $2,500 in November. Anadarko executive Estella Alvarado also sits on the Royalty Policy Committee with Darby. BP and Koch Industries separately gave him $2,000 each in November. Exxon sent him $1,000 three days before Thanksgiving and Chevron gave him a $1,500 check in December. Chevron executive Greg Morby is an alternate member on the committee. A few weeks before Christmas, Concho Resources gave Darby $2,500. Concho executive Gabrielle Gerholt is also an alternate. And on and on.

Darby did not return a request for comment.

In the recent past, Darby hasn’t shied away from using his official power in ways that benefit his petro patrons. Darby has sponsored a slew of pro-oil and gas industry bills. Last year, Texas Oil and Gas Association awarded him their Legislative Champion Award.

Even in generally pro-petroleum Texas, some of his bills have been controversial. After a majority of voters in Denton voted in 2014 to outlaw the use of hydraulic fracturing, or fracking, for natural gas, Darby authored legislation that made it illegal for local governments in Texas to enact anti-fracking ordinances. His bill became law in 2015.

Last year, his biggest legislative accomplishment related to the industry was reauthorizing Texas’s inaptly named Railroad Commission. The agency is the state’s lead regulator of oil and gas producers (locomotives have not been part of its mandate for decades). During a periodic review of government agencies, a non-partisan legislative staff group that studied the Railroad Commission found that “gas monitoring and enforcement need improvements to effectively ensure public safety and environmental protection,” among other findings and recommendations for reform.

Politicians overruled the staff and rejected most of their recommendations. Instead, Darby and five other lawmakers co-authored a bill to reauthorize the Railroad Commission for another dozen years with only minor tweaks.

“This is a very modest bill that barely counts as reform,” Cyrus Reed, director of the Sierra Club’s Lone Star Chapter said in a statement. It wasn’t just environmentalists who wanted a stronger bill. Laura Buchanan of the Texas Land and Minerals Association testified that her group wanted “online complaint tracking,” according to reporting by the Fort Worth Weekly.

Reed said Darby and outgoing Texas House Speaker Joe Straus kept out amendments that would have led to tougher oversight of the oil and gas industry.

Darby’s ties go beyond campaign support from oil and gas companies. Darby’s financial disclosures show he owns part of Kachina Pipeline, a natural gas distributor, and receives income from LeClair Operating, an Abilene-based oil company. According to a Texas Tribune ethics analysis, “Darby has filed legislation that could affect his career and financial interests” including legislation on “petroleum transport.”

Now Darby’s interests and influence collide not just at the state level but nationally in his perch on the Royalty Policy Committee.

“This is a very modest bill that barely counts as reform.”

The views of Texas, a leading energy producer, are important. That’s likely the main reason why Darby sits on the Royalty Policy Committee. But industry’s views are only one perspective from Texas that he could bring to the table.

While environmental activists have been critical of the state’s environmental regulation and enforcement, some good government advocates commend some of its oil-and-gas-related public policies on the fiscal side.

The Denver-based Center for Western Priorities has recommended that the federal government take a cue from Texas and charge higher royalties for oil and gas production on federal lands. Texas has long charged royalty fees of 20 to 25 percentfor production on state-owned land. Yet, on federal lands, the U.S. government only imposes a 12.5-percent royalty rate (there are loopholes, too). Rocky Mountain states also charge higher rates, such as 16.67 percent and 18.75 percent, in Wyoming and North Dakota, respectively.

A higher federal rate could generate more revenue for the public, some of which would be shared with state and tribal governments and could boost funding for cash-strapped schools and other money-starved public goods.

Darby didn’t respond to questions on whether he supports increasing royalty rates or other ways to increase federal revenue from drilling or mining on public land.

On Wednesday, Darby has a choice in Houston: He can be a stealth representative for industry or he could showcase Texas’ long-standing higher royalty rates as a model for the rest of the nation.