I'm reading through Kevin Gambrell's testimony in the Cobell trial, and it's really fascinating. I've argued for years that the lessees are terrified that Congress and/or the Courts will turn to them in order to determine how much money should have ended up in Trust coffers, as it will show they underpaid their leases for years, just as they did on federal non-Indian land. But Gambrell offers up a third way to help in the accounting, which could be particularly helpful in those cases where the original documents just happened to be destroyed by the US Government. From the transcript: (Q's are Cobell attorneys, A's are from Gambrell.)
Q. When you discussed, in response to the judge's question, how the unitization works, was allocation an important issue?
A. Allocation is extremely critical in unit allocation. It is the essence of getting payment correctly to individual Indian owners, tribes, states, federal programs, and private landowners. Without it, you cannot allocate monies properly.
Q. Could you explain how the allocation process works?
A. Allocation process goes all the way back to the lease instrument. In order to get money correctly to an individual, you have to understand every aspect of the lease instrument in terms of: Is it unitized, does it commingle, what is the size of the property, what type of production comes off that property; to, when it goes through the system, is it a correct royalty rate, is it going to the correct owners, is there probate backing up those owners? And when you do that, you have to look at source documents, and you have to do third party verification.
Q. What do you mean, first of all, by source documents?
A. Well, for example, if you look at an allocation to an individual Indian, in order to get to that allocation, I have to go all the way back to the unit agreement. And I have to look at an exhibit called Exhibit B within the unit agreement, that talks about the complete breakdown of every ownership type within that unit, because I may have 30 percent owned by federal, 20 percent by Navajo Tribal, 30 percent by Navajo allotted, and maybe 20 percent by private landowner. I have to go all the way back to that document as a primary source to get to the payment to the individual Indian. And then I have to go to the royalty rate, and then I have to go to the probates and look at probates, gift deeds, living wills, et cetera, in order to get to the complete payment out to the allottee.
1 Q. That sounds like a cumbersome process. Is it?
A. It's very complex. If you were to look at this type of system in a private landowner's case, oil and gas industry hires land people, they pay them very well, in the $200,000 range, to go back and do this title research to find out who gets paid, how much they get paid, how do you allocate, et cetera. It also requires, in the private sector, a legal
opinion from an attorney that's certified, that says that the title in the allocations are certified correct, and the division of interest will pay out correctly. It requires an extensive amount of work. It requires very high level land people and attorneys to do this type of work.
Q. Is that what you did at the FIMO office when you were running the FIMO office?
A. Repeat that.
Q. Is that what you did at the FIMO office when you were running the FIMO office?
A. Yes, that was part of what I did, and my staff did.
Q. Do you have any knowledge as to whether or not this was done by MMS or anyone else outside of the FIMO office with regard to individual Indian mineral or oil and gas lands?
A. No, I'm not. We were in a unique position. We had every agency within our office, so we looked at everything from the lease agreement itself, the BLM-approved communitization
A. We brought it to the attention of MMS many times, and asked that MMS make corrections on the reports, in which case often they did.
Q. If you didn't rely on the MMS database, what did you rely on?
A. We relied on our own internal databases that we developed with companies, and we relied on companies' reports directly going to us.
Q. So is it correct, then, that you relied on third party information?
A. We relied on third party and primary source data.
Q. Are third party documents important to determining accuracy with regard to mineral and oil and gas leases?
A. Absolutely.
THE COURT: Would you call that a leading question?
MR. GINGOLD: I apologize, Your Honor.
BY MR. GINGOLD:
Q. Why would you need to rely on third party data?
A. We rely on third party databases because we don't always trust what an operator tells us. We have companies that produce oil. They tell us one thing on their inventory and what they sold; and then we go to a transporter, and we find that the information is different, that they picked up more oil than the4 company reported. And so we do rely on run tickets from trucking transportation companies, and gas pipeline companies that transport gas, to verify production.
Q. What is a run ticket?
A. Run ticket?
Q. Yeah, what is it?
MR. KIRSCHMAN: Your Honor, objection. Outside the scope of this case. This is asset management. This is talking about what private companies do. This is not about a historical accounting.
THE COURT: Well --
MR. GINGOLD: Your Honor, may I?
THE COURT: No, we touched on this yesterday. I don't want to overdo this. I mean, you're right that this is, going forward, an asset management more than it is historical accounting, but frankly, it helps for me to kind of fill in the picture of what is known and what is not known, and what can be verified and what can't be verified. So a reasonable amount of this, I'm going to allow. Go ahead.
MR. KIRSCHMAN: Thank you, Your Honor.
BY MR. GINGOLD:
Q. What is a run ticket, Mr. Gambrell?
A. A run ticket is a statement that is often signed by a transporter and an operator when oil leaves a tank. What they do is, they measure the oil in the tank when it's full, and then it fills up the truck, and then they measure the tank when the truck is filled. And between the full measurement before the truck filled up and the truck measurement after the truck fills up is the quantity of oil that leaves the lease.
Q. And how is that related to the income produced from oil and gas or mineral leases?
A. Anything to do with income depends on the volumes that are sold off the lease. You cannot determine the monies going to individual Indians if you do not know what was sold.