Oil Companies Steal $10 Billion

U.S. oil companies "flagrantly and deliberately violated" U.S. pricing regulations from 1973-1981, and as a result, "consumers were overcharged by over $10 billion," '' Representative Albert Gore (D-Tenn) declared in Congress on June 17. This represents, said Gore, "the largest conspiracy, in monetary terms, ever perpetrated against the American people."

The companies involved - which include Mobil (see MM, April 1981) and other top firms in the country - may never be prosecuted because of the Reagan Administration's actions "designed to prevent the enforcement of the law," said Representative John Dingell (D-MI), at a hearing of the House subcommittee on oversight and investigations on June 4.

"Companies and individuals in this oil industry who have illegally taken billions of dollars from the American people are going to get off," said Dingell, "because leads are not being pursued, experienced people are being driven away from the program, and I think it is outrageous."

Oil companies pulled off their alleged massive heist by lying about the kind of oil they were producing, transporting, and refining, Gore and Dingell say. By so doing, the companies were able to reap tremendous benefits from the Department of Energy's (DOE) price control system in effect from 1973-1981.

The price control system set different prices for different kinds of oil produced in the U.S. and then attempted to equalize the cost of oil to U.S. refiners through a so-called "entitlements" procedure. Under DOE's system, a company refining cheap, domestic oil was supposed to pay money into an "entitlements" pot, whereas a company refining higher priced domestic oil or expensive foreign oil was allowed to take money out of the "entitlements" pot. In this manner, DOE hoped that no unfair advantage would accrue to any company fortunate enough to have access to cheap oil.

According to investigations by the Department of Energy, however, U.S. oil companies did not abide by these regulations. Companies producing, transporting, and refining the cheap oil would simply claim that they had expensive oil. Instead of paying money into the DOE's system, as they should have, the companies took money out of it.

This scheme was "commonplace apparently all over the country," Gore said at a hearing of the House subcommittee on April 19. It had the "effect of illegally raising the price to the consumer of oil" and "simultaneously eliciting money from the entitlement pool. "

Currently, however, the Reagan Administration shows no signs of wanting to pursue these cases, Gore, Dingell and a number of DOE lawyers say.

The Reagan Administration has cut back on funding for enforcement, decentralized the investigation, removed competent attorneys and replaced them with inexperienced ones, and made damaging statements to the press and groups of oil men, said Jack Wuerker, a senior enforcement attorney with DOE's Office of Special Investigation, at the subcommittee's June 4 meeting.

"You have substantially jeopardized the ability of the U.S. Government to prosecute alleged criminal violations and recover overcharges," Gore told Rayburn Hanzlik, the Reagan-appointed administrator of DOE's Economic Regulatory Administration, which has responsibility for the investigations.

Gore, Dingell, and DOE lawyers were particularly upset at Hanzlik's May 3 decision to remove from the day-to-day investigation the six attorneys in the Office of Special Investigations with the most experience in the field.

"In my opinion," testified Wuerker, "this reorganization is the latest step in a fraud upon the American people of the first magnitude which certain officials have attempted to justify with what are, at best, half-truths, and which will cost Americans the opportunity to recover billions of dollars of overcharges." Hanzlik's actions result, said Wuerker, in "rewarding those individuals who have "thumbed their collective noses at these laws with both the opportunity to retain personal fortunes derived from their illegal conduct and freedom from criminal liability."

Not confident that DOE would pursue the oil companies, Gore on June 17 announced that he was "introducing legislation which would establish a special prosecutor to investigate and litigate violations of the oil pricing regulations." Speaking before the House of Representatives, Gore explained that "the Department of Energy appears to be on the verge of - in effect - granting amnesty to law violators in the oil industry. This legislation will be needed if we are to bring these white collar criminals to justice."