Audits and Bounty Hunters

In the mid-1980s, state Auditor Jim Griffith and state Senator Tom Stroock (R-Natrona County)^xvi began looking at state and federal royalties as a means of bolstering Wyoming revenue. Stroock, then Senate chairman of the Joint Appropriations Committee, had been in the oil business in Casper more than 30 years by this time, and had a good idea of how things worked.

“Jim Griffith and Tom Stroock had the foresight to look into mineral reporting at public lands, and later on, we initiated a joint federal-state audit,” recalled Rich Ryan, an auditor who worked under Griffith, the first state official in the nation to audit mineral production. Ryan told WyoFile that the two men were particularly interested in the federal leases because the state got “vastly greater” revenues from its 50 percent share of federal royalties than from the state’s 100 percent of state royalties, because the feds held “seven to eight times the acreage” owned by the state.

“Fifty million dollars was collected in the first two years of the [joint audit] program,” he said.

But the results could have been better. By the end of the decade, some state officials were concerned that Wyoming did not have enough auditors on staff to do the job, and Washington wasn’t coming to the rescue. Mike McCune, a senior examiner with Wyoming Department of Revenue and Taxation, observed in a 1988 report that “unfortunately” for Wyoming, taxes on mineral extraction were not being fully collected, so that “enormous amounts of precious minerals have been removed over the years at great benefit to mineral development companies, but at little or no benefit to the citizens of Wyoming.” Lost revenues reached “billions of dollars. And the losses continue,” he wrote.

McCune suggested that hiring 100 new state auditors “would be just a start, and every one of them could recover many times their cost for the citizens of this state.”^xvii

The state didn’t hire more auditors and the data used to compute a corporation’s tax liability continued to be unreliable. The feds were no help. Astoundingly, after all the investigations, the new Minerals Management Service agency still ran the federal royalties program on the “honor system” that had caused so much waste and fraud in the bad old days. Minerals Management let the energy companies tell the state and Management Service how much gas or oil they’d taken from a field—word of honor! —and pay royalties accordingly. Nobody sent auditors out into the field to see if producers were telling the truth.