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On Oil Spills and Government Spoils

June 16th, 2010 · No Comments · Capitalism, Corporations and Industry, Economics, Lobbying, Politics, Populism, Wall Street

This is about our country.We have been through the Second Age of the Moguls and it was worse than the first, if that is possible. In those days, there were no regulations, less than ten percent income tax, often as not ignored, and a country just beginning to feel the environmental weight of massive forests of oil derricks in places like Bakersfield and huge gashes in the earth in Pennsylvania, West Virginia and Kentucky. Now we are in a new Gilded Age, with the same symptoms.

In the first Gilded Age, the Rockefellers, Vanderbilts, Goulds and Harrimans viewed the country as a collection of their own private natural resources on which to build fortunes. It wasn’t quite as arrogant as one might think. Slavery was in their recent collective memory as vividly as we look back on the Reagan era. England, Russia, Germany and Austria had monarchs, emperors or czars. The “Sick Man of Europe” the aging Ottoman Empire still stretched from Tunis to Baghdad and from the Black Sea to the Indian Ocean.

People saw life differently. There were a scant number of experimental automobiles. Only a small percentage of homes were equipped with electric lights or a telephone. Rapid communications was by telegraph, and aircraft were little more than experimental motorized kites sailing for a few hundred yards and a hundred feet above the dunes at Kitty Hawk.

So it was not surprising that clever men, and it was only men in those days, discovered ways to edge out other men and take the pursuit of money to the limit. In common terms, that is in the equivalent of current 21st Century dollars, there were about 22 billionaires in 1900. By the mid-1970s there were still only 32. Today there are 132.

The concentration of wealth in 1900 has been estimated at about 45% in the hands of the top 1%. That happened because of the ability to scale up operations and find large and expanding domestic markets. By the beginning of the fourth quarter of the century, wealth in the hands of the top 1% would return to about 18% roughly equivalent to what it had been not long after the founding of the Republic. Today, the top 1% own between 35 and 40% of the country’s wealth. More significantly, that number is climbing, although compared to the year 1900 our manufacturing and heavy industry is negligible.

With concentrations of billionaires comes concentration of wealth and, following that, concentration of political power. That is where we are today. The Robber Barons of the oil and natural resource era, those who became rich by exploiting oil and gas and timber and minerals had no restrictions and no regulations. If some Congressman or Senator tried to initiate controls, they merely traveled to Washington and “bribed” a few politicians to switch to their side. They made no excuses and called a bribe a bribe.

The Reagan-Bush-Clinton-Bush era has seen a return to the continuous loosening of regulations on business and the extraction of natural resources. Now, this year, we have seen demonstrations of the nightmare to society that can occur when government neglects its function to oversee production on behalf of the people.

The Minerals Management Service, a sub-department of the Department of the Interior, has the job of overseeing and collecting royalties from the use of Federal and Native American lands. The cozy relationship between these people and the oil, gas and mining industries has been a source of considerable corruption.

Starting at the top, Gale Norton became the Secretary of the Interior under Bush in 2001. She was head of one of the largest anti-environment, pro-pollution, pro-wilderness exploitation lobbying and legal firms in the country. When she left the Interior, under investigation, she joined Shell Oil, one of the firms she had been regulating. As soon as she took over, she immediately rescinded the rules that forbade drilling or mining or timber cutting in the remaining one-third of the National Parks that were still off limits, the deep wilderness areas.

She directed that roads be allowed into these areas and even that Park Rangers be directed to assist oil drilling companies with whatever they needed to begin exploration in those formerly pristine areas.

In April of 2003, she worked out a “settlement” with Gov. Mike Leavitt, the pro-oil, pro-mining governor to allow total exploitation of Red Rocks Canyon National Park in Southern Utah, a wilderness area of some 3 million acres. Later in 2003, she ruled that mining claims on the public lands could go from a five-acre disposal area to an unlimited disposal area. In other words, mining companies were given the ability to spread toxic waste to unlimited areas in the national parks.

During the period that Norton was Interior Secretary, over 51,000 leases were granted for oil and gas drilling in the National Parks in the West. Over 45 million acres of public land that had been declared off limits was put back in the hands of the oil companies. In the Powder River Basin alone, over 1,500 companies are drilling for oil and gas on 3.5 million acres of government land.

Not only are literally billions of royalties owed to all U.S. taxpayers by these companies because of their corrupt, cozy relationship with the corrupt officials at MMS, but Western drilling has caused a great deal of water contamination.

Coal Bed Methane extraction produces a great deal of good natural gas but it does so at the expense of the water table. Drilling coal bed methane for natural gas can us as much as 70 gallons of water an hour. When you dig as many as 50,000 wells in an area…and there were more dug in the Powder River Basin, the result can be a great reduction in the water table, or in the case of some areas of Wyoming, individual private wells that dried up completely.

Steven J. Griles, Assistant Secretary to Norton had already been with the Interior Department under Reagan, working for Secretary James Watt. During that period he reduced the royalties on coal mined on federal lands from 8% to 5%. He made special deals for sale of federal lands to friends. He transacted the sale of one piece of land for $42,000. It was later sold for $37 million.

He then left and used his government experience to work for lobbying clients like Arch Coal, the American Mining Association and Occidental Petroleum. His second attempt at bankrupting the country came when he was appointed Deputy Secretary of the Interior Department under Secretary Norton.

Although he was later imprisoned for one year and eight months for obstructing a federal investigation, Griles helped the mining and oil companies as much as he could. One could be suspicious of this, since Griles publicly refused to recuse himself from any decisions involving his former lobbying clients. That was compounded by the fact that, during his time at Interior under Norton, he earned $1.1 million from those clients and awarded a $1.6 million contract to one of them.

Was he in violation of ethics rules? He clearly was. Did anyone in the Administration try to stop it? No. The Bush-Cheney Administration encouraged it. This is what happens when the entire government is in the hands of the Party that works for corporations instead of the People.

In just one aspect of the damage, Griles’ job included overseeing the collection of royalty revenues from mining and oil drilling on government land. In summary, the People lost at least $10 billion in revenues that the country was owed by a number of different organizations. That is just the amount that was proved to be owed but uncollected.

Royalty revenues from natural resources belonging to you, the taxpayer, are the second largest source of revenue for the federal government next to income taxes. One mistake, an inadvertent or deliberate mistake on contracts with oil companies created a loss of revenue since 1998 that amounts already to $1 billion and may go as high as $80 billion.

Other situations in which companies like Kerr-McGee and others have been sued in order for the government to get its royalties are not uncommon. Some companies have claimed “oversights” that resulted in $97 million dollars (one company) not being accounted for and paid.

Stephen Griles and his girlfriend and an executive of Phillips-Conoco jointly purchased a house together at a time when Griles was undersecretary, his girlfriend was with the Justice Department involved in environmental issues involving oil companies. In return, when he left the Department of the Interior, they helped him as they had before he joined the Interior Department. Others who worked for Griles had financial and sexual relationships with oil company executives and after leaving Interior many went to work for the companies that they were supposed to have been regulating. No wonder the country is going broke.

Griles went back to private industry after his prison term, becoming partner in a lobbying firm for….guess who….the mining, drilling and logging businesses.

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