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Kansas Company Accused of Stealing Oil

May 9, 1989

WASHINGTON (AP) _ Investigators told a special Senate committee today that a Wichita, Kan., company has been stealing oil from Indian lands for at least the last three years.

Documents subpoenaed from Koch Industries show that the company consistently ended the year with hundreds of thousands more barrels of oil than it pays for, investigators told a special panel of the Senate Select Committee on Indian Affairs.

A woman at Koch’s public relations office in Wichita said nobody was available immediately to comment on the testimony.

Although measurement difficulties make it normal for oil companies to pay for less oil than they actually take - even up to 12,000 barrels a year - Koch documents showed the firm ended 1986 with 803,874 excess barrels, 1987 with 671,144 excess barrels and 1988 with 474,281 more barrels than it paid for, witnesses said.

Chris Tucker, an independent oil and gas expert, said normal procedure is for oil companies to compensate for ″overages″ by shorting themselves in future purchases.

The volumes for the three years shown in the Koch documents were worth about $12.1 million, $11.9 million and $7.1 million, respectively.

Many of the Koch oil purchases were made on Indian lands with royalties from the oil due to Indian tribes or individual Indians.

Chuck Norman, an accountant for the special committee, said it is easy to steal from the Indians because nobody watches the purchasers, like Koch, take oil from the tanks at the well.

Furthermore, witnesses said, substantial confusion exists among federal agencies about who is supposed to police the taking of oil from Indian lands.

Tucker said Koch used various means to mismeasure oil. He showed a videotape he secretly made of a Koch employee taking oil at a Northern Ute Indian oil field in Utah. He said it showed that the employee did not follow all the procedures necessary to accurately measure the oil.

Under questioning, Norman said evidence was being gathered on other companies as well and would be turned over to authorities.

″We are not a grand jury,″ said Sen. Dennis DeConcini, D-Ariz., the panel’s chairman. ″We are attempting to zero in on the problem and how it happens.″

In an interview before the hearings began, DeConcini and Sen. John McCain, R-Ariz., said the committee’s findings will be turned over to the Justice Department which could seek indictments.

″This thing is a mammoth problem,″ said DeConcini. ″If we’d had another year we may have found more.″

He said investigators hid behind bushes in the oil fields and saw companies ″mismeasure″ the amount of oil they took from wells.

Many of the areas are so remote that no one supervises the action, he said.

The senators said none of the top seven oil corporations is involved, though the ones that are involved are multimillion-dollar operations. They are mostly independent, ″middle-level″ companies, they said.

Earl Ross, spokesman for the American Petroleum Institute, said none of the companies is a member of his organization, which is the largest oil trade association in the country.

But he said the institute supplied the committee with technical information on how to measure oil.

The hearings on oil companies this week and the Indian Health Service next week are the second segment of a series being conducted by the special panel.

In February, the panel investigated contracting fraud, organized crime and child abuse on Indian reservations and among those doing business with them.

The hearings on the health service are expected to reveal ″gross mismanagement,″ said the senators.

″It’s a tragedy of all tragedies,″ said DeConcini, saying the health service provided care at ″less than the norm for the nation.″

McCain said the goal of the committee is to determine how well the federal government is fulfilling its responsibility to the Indians.

″Our job is to review policies, programs and management so we can recommend changes so problems won’t happen again,″ he said.

DeConcini said he expected to have a report on all the committee’s findings by October.

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