Loopholes and favors to fossil fuel firms are costing the nation billions in royalties.
Interior Secretary David Bernhardt in his Washington, D.C. office on May 9, 2019. The moose antlers are from an animal he hunted in Alaska. (Credit: Bonnie Jo Mount/The Washington Post/Getty Images)
By Naomi LaChance
In November 2019, two bureaus in the Department of Interior that oversee licensing and safety regulations for offshore drilling released a briefing proposing a major policy change to make it less expensive for companies to drill offshore oil wells in the Gulf of Mexico. Under their plan, the federal government would significantly reduce — and in some cases, eliminate — the royalty fees that companies pay the government for shallow water offshore oil wells.
With the Democratic primary season and Trump's impeachment dominating headlines, the national press seems to have barely noticed this giveaway to the oil and gas industry.
Interior Secretary David Bernhardt, who helped author the proposal, has a substantial record of working on behalf of fossil fuel interests in between stints in government under Republican presidents. (He was previously an Interior appointee during the second Bush administration, from 2001 to 2009.) Bernhardt has worked with so many companies, law firms, and lobbyists on behalf of the oil and gas industry, that for two years following his confirmation as President Trump's second Interior chief in April 2017, he carried around a little card reminding him of his various potential conflicts of interest.
For his first two years on the job, while Interior Secretary Bernhardt was prohibited from involvement in matters involving nearly two dozen former clients, he carried a small card printed with their names while on the job. (Credit: Salwan Georges/The Washington Post/Getty Images)
Scott Angelle, the director of the department's Bureau of Safety and Environmental Enforcement, or BSEE, who also worked on the proposal, also has intimate ties to the industry he is now tasked with regulating. Among them, he is a former board member of Sunoco, as well as the oil and gas industry group Southern States Energy Board, whose members include the American Petroleum Institute, BP, Chevron, ExxonMobil, Shell, and Koch Companies Public Sector, which is affiliated with Koch Industries.
Another author of the Gulf of Mexico royalty proposal, Bureau of Ocean Energy Management acting director Walter Cruickshank, spoke last year about offshore oil regulations at an industry event called the Offshore Technology Conference . He was the only speaker at the session, which was moderated by an executive from ExxonMobil, and sponsored by Exxon, Chevron, BP, Halliburton, Saudi Aramco, and Qatar Petroleum.
The proposed royalty change, according to BOEM, “would allow companies to earn appropriate rates of return” on their federal offshore drilling leases. But the risks of offshore drilling are huge for oil and gas industry workers, coastal communities, and marine life, while the continued extraction and use of fossil fuels is disastrous for efforts to reduce climate-heating greenhouse gas emissions.
This proposal is one of many ways in which the Interior Department has given favors to the fossil fuel industry while failing to address climate change, a problem that predates the Trump administration. According to the Government Accountability Office, the investigative arm of Congress, a loophole in royalty regulations has allowed oil and gas companies drilling in the Gulf of Mexico to avoid paying $18 billion in royalties since 1996. In 2018 alone, the government earned no royalties on about 22 percent of oil production in the Gulf of Mexico.
These are important numbers to keep in mind when the first question about every presidential candidate's climate plan is, "How are you going to pay for that?"
Working as an aide to Bush administration Interior Secretary Gale Norton, Bernhardt helped rewrite testimony Norton gave to Congress testimony on Arctic drilling, omitting warnings from government scientists and referring to a report funded by BP instead. (He later told the Senate, during his 2017 confirmation hearing, that he was not aware that the study was funded by BP and was “just learning about" the Arctic National Wildlife Refuge, even though Republicans have sought to open the refuge to drilling for decades.)
After the first Bush presidency, Bernhardt returned to lobbying firm Brownstein Hyatt Farber Schreck. There he represented a range of corporate clients with business before the Interior Department, including Halliburton, the Independent Petroleum Association of America, Cobalt International Energy, and the National Ocean Industries Association, or NOIA. From 2010 to 2014, Bernhardt lobbied for Cobalt International Energy on multiple bills to expand offshore drilling, including the “Putting the Gulf of Mexico Back to Work Act.”
He also defended NOIA in litigation brought by environmentalists involving offshore oil and gas leases awarded by the Obama administration after the Deepwater Horizon disaster.
Since taking over Trump's Interior, Bernhardt has been the subject of several ethics probes, including one conducted by the Interior Department’s inspector general that found he did not violate federal ethics regulations. But his clients seem to be doing good business with the agency. In 2017, the BSEE approved a permit for Eni Petroleum, one of the companies listed on Bernhardt’s recusal list, to drill for oil in the Arctic Ocean off Alaska's North Slope, the first company to gain such approval since 2015.
In 2019, during the government shutdown, Interior approved 53 drilling permits for companies represented on the NOIA board, which include executives from Halliburton, Chevron, Shell, ExxonMobil, and BP.
According to Nick Goodwin, an Interior Department spokesperson, Bernhardt "isn't involved in specific permits that companies bid on. Permits to drill a new well on the OCS [outer continental shelf — Ed.] are received, reviewed, and approved in one of BSEE's regional offices. Eni Petroleum's Application for Permit to Drill was received and reviewed by BSEE career staff engineers with the BSEE Alaska Region....[T]ransforming the Department's workplace culture to be ethically compliant is a top priority for the Secretary, and he has taken numerous actions to ensure the ethics program has the appropriate staff and resources to restore the integrity of the Department.”
BSEE's chief, Roger Angelle, has met multiple times with representatives of trade groups such as the American Petroleum Institute and NOIA, as well fossil fuel corporations with offshore drilling interests including Chevron, BP, and Shell, according to official calendars obtained by American Oversight, a government watchdog group.
Angelle's record of boosting the oil and gas industry goes back years. As interim lieutenant governor of Louisiana for six months in 2010 and 2011, he worked to allow new drilling permits in the Gulf of Mexico, meeting frequently with officials at the Interior Department. He received major campaign contributions from the oil and gas industry for his unsuccessful runs for both the governor's chair and Congress.
Three months after the Deepwater Horizon disaster, Angelle attacked the Obama administration's drilling moratorium in a speech before more than 10,000 people in Lafayette, Louisiana's Cajundome, saying the pause to evaluate safety regulations was "punishing innocent American workers to achieve some unrealistic political agenda.”
More recently, Angelle made the pace of shallow water drilling in the Gulf of Mexico sound like an urgent issue. “This has been a steep decline for a long time,” Angelle said in 2019 at a meeting of local Louisiana chambers of commerce. “If this were an EKG, you’d be looking for Chabert Medical Center to take care of you.”
Angelle promised the audience that federal royalty fees for most oil companies working in the Gulf of Mexico would drop steeply, from 18.75 percent to 8 percent.
According to Interior’s offshore drilling report, “Any royalty relief or other policy designed to incentivize the discovery and development of remaining [Gulf of Mexico] resources should be implemented before lessees and operators remove existing platforms and other infrastructure to avoid stranding assets of the United States of America.”
The plan appears to be working, if you're someone who's more concerned about stranding fossil fuel assets than preserving a livable planet. In January, the BSEE announced that in August 2019, oil production in the Gulf of Mexico had reached a record of over two million barrels per day. Angelle said of the milestone, "This is incredible news for the nation."
The Interior Department and Bureau of Safety and Environmental Enforcement has not responded to multiple requests for comment regarding Angelle.
“Since day one,” said Jayson O’Neill of the Western Values Project, “Secretary Bernhardt has operated as though Interior was his own personal lobby shop, doling out favors for his former clients with impunity. This offshore royalty rate reduction deal is short selling our shared resources and ripping off taxpayers.”