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From the
AmericaS
105
M
ay
/J
une
2007
The failure of the mediation effort is a blow to the Bush
administration. The government already stands to lose $10 billion
in royalties deriving from a technical error on a number of oil leases
signed during the Clinton administration.
US government report on unpaid oil royalties is
a broad indictment of lapses in oversight
As vexed as it is, the developing battle over oil royalties as outlined
above is not as bad as it gets. An eight-month investigation by the
Department of the Interior concluded late last year found widespread
problems in the government’s own program for ensuring that
companies pay the royalties they owe on oil and gas pumped on
federal land and coastal waters. In a scathing report to Congress,
the department’s inspector general, Earl E Devaney, asserted
weaknesses in oversight that Interior officials acknowledge could
cost the American government billions over the next five years.
The report, delivered on December 6, refuted claims by top Interior
officials that the department is aggressively pursuing underpayments
and outright cheating by companies that drill on property owned by
the American public. It also supports complaints by critics, from
auditors within the agency to lawmakers of both the Republican
party of President George W Bush and the opposition Democratic
party, who say that enforcement has become superficial, inclined to
error, and overly deferential to oil companies.
These are among the inspector general’s findings on the monitoring
of oil leases:
›
Since 2000, the number of audits has declined by 22 per cent
and the number of auditors has been reduced by 15 per cent,
even though soaring energy prices have doubled the total amount of
money at stake, to about $10 billion a year
›
Although the Interior Department says it has ‘reviewed’ about 72
per cent of all revenues from federal leases, it actually examined
only 9 per cent of all properties and 20 per cent of all companies
›
The department’s ‘compliance review’ system, a computerised
form of fact-checking that has increasingly replaced audits,
essentially relies on the word of the oil companies being monitored.
Officials conducting such reviews do not ask companies to produce
their actual records
›
Government data is incomplete and often inaccurate, making it
almost impossible for enforcement officials to develop strategies
for selecting companies for special scrutiny.
The report is the result of an investigation that began in March 2006
in response to questions posed by the Senate Energy Committee
after Edmund L Andrews of the New York Times reported that
royalties for natural gas had climbed far more slowly than market
prices, and that both federal and state auditors were complaining
that the new system was inadequate.
Company news . . .
›
Ford Motor Co on March 2 signed a collective bargaining
agreement with the union representing its Russian employees,
thus averting a strike. The Detroit automaker agreed to raise wages
14 per cent to 20 per cent and to guarantee that jobs will not be lost
in outsourcing to subcontractors, according to Aleksei V Etmanov,
the union president. Russia has done very well by Ford, which made
60,000 of its Focus models there last year. It plans to produce 75,000
this year.
›
Tenaris, the Luxembourg-based global supplier of pipe for the oil
and gas industry, has agreed to buy Hydril Co (Houston, Texas)
for $2.16 billion to expand in valves and pressure control products.
The Hydril deal will be Tenaris’s second purchase in the US since
June 2006, when it bought OCTG maker Maverick Tube Corp
(Chesterfield, Missouri). Tenaris, which is controlled by the Argentine
conglomerate Techint, is paying a premium of about 17 per cent to
Hydril’s February 12 share price.
›
The Carlyle Group, the Washington DC-based global private
equity firm, announced that John Maneely Co, parent company
of Wheatland Tube Co and Atlas Tube Inc, has signed a definitive
agreement to acquire Sharon Tube Co (Sharon, Pennsylvania).
Sharon is to be integrated into the Wheatland Tube division of John
Maneely.
John Maneely was acquired by Carlyle in March 2006 and merged
with Atlas Tube, a Canadian manufacturer of structural tubing, in
December. The latest merger will make Carlyle the parent of the
largest North American maker of steel tubing, with sales in excess
of $2 billion, the companies say.
Dorothy Fabian
, features editor (USA)