Elroy agreed to take the assignment, and soon he and Ballen were talking back and forth about Elroy’s plans to lead the fieldwork out in Indian Country. One of the first items of business was dealing with the oil companies.
* * *
In the beginning, Ballen decided that his primary target would be the biggest oil companies—the majors, as they were called—such as Exxon and Mobil. The Arizona Republic articles insinuated that these firms were the prime offenders of oil theft. Ballen approached the companies with the same prosecutorial zeal he’d applied to witnesses of the Iran-Contra affair. He sent them a series of subpoenas demanding that they hand over documents that would otherwise be confidential and closely held; documents that showed exactly how the firms bought and sold the oil that was drilled on Indian reservations.
With his subpoenas, Ballen was able to breach the wall of corporate secrecy that reporters at the Arizona Republic could never penetrate. He used the full authority of the federal government to compel them to turn over the records that would show, in black and white, what they were doing.
Not surprisingly, the phone calls started coming in soon after. And the callers were not happy. Ballen began to get inquiries from the top lawyers for the oil companies; the highly paid Washington insiders who represented Exxon, Mobil, or Phillips. The attorneys told Ballen that the subpoenas were onerous and complying with them would require untold hours of labor and expense. Why was he casting such a wide net? What was he looking for? Ballen didn’t back off, and eventually the boxes of documents started arriving at the Hart Senate Office Building. Ballen’s team began digging through them and compiling numbers.
Ballen’s team did not find what it expected. The picture that developed, in fact, was downright shocking. It was also deflating. The companies, it turned out, were not stealing at all. Their own records proved it.
The large oil purchaser Kerr-McGee, for example, was actually taking away less oil than it paid for in the state of Oklahoma for the years 1986, 1987, and 1988. The company was short every year, to use the industry term. During that same period, Conoco was also short for one year, and the other two years, it was long, or over, by only a tiny margin. Conoco took 351 extra barrels in 1986 and 375 barrels in 1988. The overage was tiny, negligible. The same pattern held for Sun Oil.
It appeared that the Arizona Republic had gotten its facts wrong. But as his team was compiling the records, Ballen kept getting phone calls from top oil company lawyers. And they told him there was more to the story than he was seeing. They informed him, in confidence, what was really going on, and their admissions would never be made public over the ensuing years.
“Everyone operating on Indian territory told us one thing and one thing only: ‘We’re not stealing oil, but we’ll tell you who is: Koch Industries,’ ” Ballen recalled. “And they all told me that Koch was taking one to three percent. And I said, ‘Why don’t you do something about it?’ And first of all, they said, ‘It’s just more trouble than it’s worth to fight with them.’ ”
The oil companies also pointed out another compelling reason: Koch Industries had too much market power to be trifled with. It was risky to make the company mad. The oil wells in question were hardly the best wells. They were scattered across the countryside and were hardly gushers. The wells barely broke even for the producers, and Koch Oil was the only firm willing to take the oil and ship it, and the producers like Exxon and Mobil didn’t want to aggravate Koch Oil more than they had to.
And the oil companies said something else. If Ballen’s team was willing to look into the matter, he could count on the oil majors for help. This was a highly unlikely alliance. Oil companies held a unique role in the American economy in 1988 and that role made them politically toxic. They were both a villain and an indispensable part of life. Everybody depended on the oil companies, but nobody seemed to like them. This wasn’t a new thing—one of the first major US oil companies was also one of America’s most hated firms. The Standard Oil Company was operated by John D. Rockefeller, the most famous of the robber barons of the late 1800s. Rockefeller amassed a fortune by cleverly using a network of secret “trusts,” or shell companies, to build an unrivaled monopoly in the oil business. Rockefeller controlled supplies, put competitors out of business, and cut secret sweetheart deals with railroads. His business became the poster child for the “antitrust” movement, which was aimed squarely at breaking up the kind of opaque and powerful business enterprises that he’d spent his life creating. The government eventually split Standard Oil into multiple competing firms.
But all the bad blood over Rockefeller seemed to have dissipated by the 1960s. At that time, the United States was the nation of the oil gusher. America was the biggest oil producer and seemed to have a limitless supply of the geological treasure. Oil was the primary energy source of America’s industrial economy, and it became the raw material of its economic growth. Dark crude oil was an embodiment of America’s special place in the world and its unrivaled economic supremacy. During this era, the United States developed a deep dependency on its oil companies. The well-being of the economy itself and the price of oil became intertwined. Ten of the eleven recessions after World War II were preceded by a spike in oil prices. This dependence, predictably, created deep resentments. Public sentiment turned against the oil industry decisively in the 1970s, but this time it wasn’t necessarily the fault of a robber baron like Rockefeller.
This time the villain was the public demand itself, coupled with an unprecedented exercise of power by oil-producing nations in the Persian Gulf. Demand for oil in the United States had quietly surpassed the level of available supplies, leaving the nation reliant on imports to make up the difference. In 1973, a cartel called the Organization of Petroleum Exporting Countries, or OPEC, imposed an embargo that unleashed unprecedented chaos in oil markets. By the time the whole mess had settled in 1974, oil prices had risen from $3 a barrel to $12 a barrel.
Oil prices would fall again during the 1980s, but the psychological wound never healed. Americans knew that their economy was now held hostage by oil. The stability of the 1950s and 1960s was gone. Oil prices could spike overnight, a concept that no one had ever really thought of before. The concept of oil price spikes would soon become embedded in Americans’ vocabulary, and with it a new way of seeing oil companies. These firms were now seen as predatory. The well-being of oil companies and the American people were at odds by 1988. Oil companies embodied the opposite ideal of the old maxim, which claimed that “what was good for our country was good for General Motors, and vice versa.” Instead, what was good for oil companies came at the expense of everyone else.
Most people suspected that the oil companies were screwing them in one way or another, so it only made sense that oil companies would be the central target of Ken Ballen’s investigation. This was a message that was delivered to Ballen in no uncertain terms by Senator Daniel Inouye of Hawaii, who was chairman of the Senate Indian Affairs Committee and a friend of Senator DeConcini’s. As chairman of the committee, Inouye had authority over the special investigative team that DeConcini had put together. Inouye therefore had some measure of authority over Ballen, and he made it clear to Ballen that the investigation was meant to uncover wrongdoing on behalf of the oil majors like Exxon or Mobil. Instead, Ballen found himself working with the oil majors in order to entrap Koch Industries, which no one had ever heard of. It was a politically risky move, in Ballen’s eyes, but that’s where the evidence in the case was leading him.