Lee Zurik Investigation: Federal angle to 'Dirty Deeds'?

Portraits of Govs. James Noe, Huey Long and O.K. Allen
Portraits of Govs. James Noe, Huey Long and O.K. Allen

Louisiana's U.S. senators have spent years pleading to Congress that Louisiana deserves a fair share of federal oil and gas royalties.  They probably never knew that some of their campaign contributors were likely receiving a royalty share off a Gulf Coast lease.

Federal documents we dug up show descendants of three former governors may be profiting from a federal oil lease.

"That's a whole new ball game," says independent researcher Keith Cressionnie.

In May, we laid out a series of stories that showed descendants of three former governors -- Huey Long, O.K. Allen and James Noe -- continue to make money off state oil leases questionably obtained in the 1930's.

Here's what happened.  The governors would assign the oil leases to W.T. Burton.  Burton would send some of the rights to Texaco, keep a portion of the royalties and assign the rest to the Win or Lose Corporation, a company owned by Long, Allen and Noe.  So essentially the governors would assign the leases to Burton, and Burton would give part of that lease back to the governors.   Those leases and the rights to the royalties have been passed down from generation to generation...

The leases have no expiration date.  Since 1936, the governors and their descendants have made more than $400 million.  Calculated in today's money, that's more than $1.2 billion.

We laid out that scheme with the help of Cressionnie and fellow researcher Norman Billiot, who have spent part of the last 30 years researching the three governors' plan.

We have only told you about state oil leases, leases handed out and monitored by the state of Louisiana.  Now there's more.

"It is a fraud beyond frauds, it's corruption beyond corruption," says Billiot.

Federal records show that same group likely has interest in a federal lease, three miles off the coast of Louisiana.

"I don't think the federal government really knows," says Cressionnie, "I think they should get involved and really look into this."

In 1953, the federal government passed the Submerged Lands Act, which gave the federal government ownership of submerged lands three miles off a state's coastline.  That impacted Louisiana State Lease 340, the largest lease that the descendants of Win or Lose had a stake in.

Under an agreement with the U.S. Department of Interior, those leases outside of three miles would transfer over to the federal government, along with the terms of the state deal.  So, in this instance, part of State Lease 340 became a federal lease, OCS 310, and under the arrangement, heirs to the three governors kept their interest in the lease.

It just so happens that, while the federal government brokered this deal, Senator Russell Long, an up-and-comer in Congress, was profiting off the state lease and eventually a federal lease, too.

"To be honest with you, I think Russell Long had a lot to do with this," says Cressionnie, "he had power beyond power."

This helps show the peculiarity of what has happened.  We got a list of every oil lease in the Gulf of Mexico.  We found leases with just three acres but the majority of leases averaged about 5,700 acres.  And then the outlier, federal lease OCS 310, the lease descendants of the three governors likely still have interest in.  It's almost 115,000 acres, roughly 20 times the average oil lease.

There's one caveat to this story.  While the terms of the state lease transferred over to the federal lease, no one would confirm if the descendants still have rights to federal royalties or if they sold them off.

We emailed one descendant, William Shaddock, and asked if he still had an interest in the federal lease.  He opened our email but he didn't respond.

We also sent an email to Hilcorp, a company drilling on that lease, to see if they pay royalties to the descendants.  They said they would check but never got back to us.

The federal government won't talk either.  The Bureau of Ocean Energy and Management declined our request for an on camera interview.

So while Louisiana's senators fight for Louisiana to get its fair share of drilling royalties, descendants of the three former governors likely were profiting off a federal lease.   We already know they made hundreds of millions off 10 state leases.

The government says it's hard to calculate the total of this federal lease.  They only gave us data since 1984.  But, doing the math, in the past 28 years the descendants of the three governors could have made almost $333 million off the federal lease -- putting that into today's dollars, $479 million.

The federal government receives 12.5% of the royalties off OCS 310.  If the descendants of the three governors do have a share, it's coming from the portion assigned to the companies doing the drilling, not the government.

"That scheme that Huey Long had with Win or Lose is as bad as Bernie Madoff in recent years," says Cressionnie.  When we ask him if he thinks U.S. Attorney Jim Letten should get involved in probing the lease, he responds, "Absolutely."

While the Bureau of Ocean Energy Management wouldn't provide an on camera interview, they did answer some of our questions by email and provided us with documentation for this story.  The legality of the state leases is currently under investigation by the state attorney general.  The State Mineral Board has asked the AG to give a report by the end of this year.