Lee Zurik Investigation: Mineral Board member didn't know about 'Dirty Deeds'

Published: May. 4, 2012 at 12:21 AM CDT|Updated: May. 15, 2012 at 8:06 PM CDT
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A single state oil lease has made descendants of Huey Long and friends hundreds of millions of dollars.

We showed you the details of that story in part one of our special investigation: A governor assigned an oil lease, then had part of the lease assigned back to him, earning royalties off the state contract.

If a governor did today what was done in 1936 and got interest in a contract he awarded, he would likely go to prison.

It begs the question -- if it's something illegal now, then why wouldn't the state have recourse to reclaim the people's property, the people's money?

We brought that to the State Mineral Board, the panel that oversees state leases.

"How familiar are you with the Win or Lose Corporation?" we ask Board member Tom Arnold.

"Not familiar with it at all, until this week," Arnold replies.

Tom Arnold has been on the State Mineral Board longer than anyone else -- 16 years, dating back three governors to the Mike Foster administration.  But someone with so much Mineral Board experience has little to no knowledge of the Win or Lose Corporation and the beginnings of State Lease 340.

"Do you know how that lease came about?" we ask Arnold.

"I assume it was a lease sale," he says, but he acknowledges he didn't know what happened in the case.

Louisiana awarded State Lease 340 in 1936.  The governor at the time, James Noe, signed a contract with W.T. Burton, who gave a large portion of the lease to the Texas Company.  Burton then kept some of the royalties from the lease for himself and assigned the rest to the Win or Lose Corporation.   Governor Noe and the family and friends of Huey Long made up that company.   So essentially, Noe's approval allowed his own company to make money off the lease.

Keith Cressionnie has spent 30 years researching Win or Lose.  He says few people know that the descendants of Huey Long and James Noe still benefit from the lease to this day.

By our calculations, the lease has paid Long, Noe, Burton and their heirs about $273 million since 1936.  We recalculated that number, putting it in today's dollars -- and off this one lease, Long and descendants have made $811 million.

"That's a great thievery to this state," Cressionnie contends.

So we ran down the details we've uncovered on State Lease 340 for the Mineral Board's Tom Arnold, telling him how Noe essentially benefited from a contract he awarded to Burton.

"That's not right," says Arnold.  "And their heirs still benefiting?"

When we confirm it, he simply responds, "That's different.  Did not know that."

Neither did a former Mineral Board member.  We reached Jim McNamara by phone.  He spent six years on the Mineral Board in the late 1980's through the mid 1990's.  When we told McNamara the history of State Lease 340, he responded, "Wow," and said that never came up in a meeting.

McNamara did say that, in the 90's, the state worked on a global settlement with Texaco about underpaying royalties, a separate issue from this.  They never talked about the beginnings of Lease 340 or about voiding the lease.  But McNamara did say, "The Longs were interested in everything we did."

When we ask Arnold if he believes taxpayers will be outraged when hearing about the lease, he tells us, "Sure.  And they should be."

Arnold says it's time for the Mineral Board to investigate.  We ask if there is any recourse for the state, and Arnold tells us, "Going back, no.  Going forward, there could possibly be."

At next Wednesday's board meeting, he'll ask the Attorney General's office to review the lease.

"If a lease should be null in void, back in 1936, maybe the Attorney General should look at it and see what our options are," Arnold says.

Top Five La. Royalty Allocations by Lease in 2011

RankLease NumberRoyalty AllocatedParishYear AwardedRetained Acres
119266        30,939,232.97 Iberia2007            1,436.260
200195        23,627,184.83 Plaquemines, St. Bernard1928         56,339.000
317990        19,261,146.15 Plaquemines2003               205.000
400340        19,224,320.90 Iberia, St. Mary, Vermilion1936       137,899.327
500192        13,793,011.46 Lafourche, Plaquemines1928         29,927.000

State Lease 340 is the fourth most productive lease in the state -- productive for Louisiana in terms of royalties, but also productive for 200 or so heirs, still reaping the benefits from a questionable deal from 1936.

Obviously some powerful people are still making money off this lease.  When we ask Arnold whether that could get in the way of state action, he tells us, "It might.  The Attorney General, he's been fair and honest with us all the way through, no reason why he wouldn't be that way.  And Governor Jindal has been very proactive on the Mineral Board."

All Mineral Board members are appointed by the governor.  To see a list, click here.

Also, while one former lawmaker criticizes the state over the years for never taking formal action against the heirs, the state has claimed back a large portion of the land.  The original lease for SL 340 covered 500,000 acres.   The lease now covers 78,454 acres, but remains extremely profitable for the state and royalty owners.