Drilled, Baby, Drilled: The strange battle to keep Big Oil from cheating

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"By law and by lease terms, they have to move that oil to shore at cost," Little says, "and this was costing the government an extra $10 million a year."

In a phone conference with Edler and other RIK personnel, Little demanded to know why the contract had been altered. Edler said she'd made the change because Shell requested it. Little was dumbfounded.

"They acted like these companies were their clients," he says. "They were totally in awe of these people, with all their money and power."

Maxwell and Little's immediate supervisor, Joel Arnold, supported his efforts to investigate the Shell leases. But the RIK division wasn't cooperative, and then Maxwell was gone. Undeterred, in the fall of 2005 Little fired off an e-mail to Shell questioning subsea "gathering" deductions totaling $3.2 million. Shell agreed to pay back slightly over $1 million and disputed the rest. "I wrote them back and said, 'Since you've admitted those [deductions] are wrong, here's a whole bunch more,'" Little recalls.

Shell executives responded to the letter by requesting a meeting with Lonnie Kimball, who was Arnold's boss and the manager in charge of offshore royalty-compliance efforts. Arnold and Little weren't invited. Shortly after that meeting, Little says, he and Arnold were taken off the Shell inquiry, which Kimball would later characterize as "a desk review and not an audit."

Kimball also formally rescinded Little's e-mail seeking additional payments from Shell. The manager would later tell investigators that the Oklahoma City auditors had "been aggressive in making claims against industry without all of the facts." He also said that "Bobby Maxwell was responsible for this culture."

Little and Arnold responded by filing a False Claims Act lawsuit against Shell, claiming that the company improperly took more than $19 million in deductions on the RIK leases over a four-year period. "Our job was to find the discrepancies and bring the money back into the coffers of the United States," Little says. "If you're being stopped internally, you need to go externally."

Shortly after they filed the case, Arnold and Little were reassigned to other duties. MMS officials said the move was made to avoid any potential "conflict of interest" in their work; the auditors considered it retaliation. Little was sent to a Bureau of Land Management office in Moore, Oklahoma, where he was put to work on a project involving abandoned wells, supervised by an employee who was considerably his junior in age and pay grade. (Arnold, who is still employed at MMS, declined through his attorney to be interviewed for this story.)

That Maxwell, Arnold and Little were publicly pursuing their claims in defiance of MMS management made for embarrassing news stories — and prompted Salazar's predecessor as Secretary of the Interior, Dirk Kempthorne, to request an investigation by the inspector general's office. But Devaney's probe into the matter seemed to be focused on whether the auditors "followed proper procedure" or used work time and privileged documents to prepare their lawsuits. Their claims that Big Oil was ripping off taxpayers for tens, possibly hundreds of millions of dollars — with help inside MMS — appeared to be a secondary consideration. Devaney's final report was masterfully inconclusive on numerous points, including the retaliation issue, citing "poor communication" and "a complex, and sometimes confusing, array of facts."

One reason for the confusion was that the interviews with the auditors had opened up fresh avenues of embarrassment well beyond the original scope of the report. Little remembers being grilled by an investigator who found it hard to believe that the RIK group was blithely signing off on costly contract amendments requested by the oil companies. At one point the investigator asked if he thought RIK employees were "in bed" with the people they were regulating.

Little replied that, from what he'd heard, "being in bed together" might literally be the truth. It was said that RIK people took trips with oil executives and partied with them, he explained. That tidbit, coupled with information from other sources, eventually led to an investigation of the RIK program itself, an office of sixty people responsible for collecting close to $4 billion a year in federal revenues.

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Alan Prendergast has been writing for Westword for over thirty years. He teaches journalism at Colorado College; his stories about the justice system, historic crimes, high-security prisons and death by misadventure have won numerous awards and appeared in a wide range of magazines and anthologies.
Contact: Alan Prendergast