NGI The Weekly Gas Market Report / NGI All News Access

Condensate Rustlers Rounded Up in East Texas

Lawmen in East Texas last week arrested more than a dozen people accused of stealing or conspiring to steal condensate from gas drilling operations in the area in a large-scale conspiracy. More arrests are expected as the investigation continues, officials said.

Fifteen were charged by a Panola County grand jury for alleged participation in the crime ring. The grand jury returned 65 felony indictments. In Rusk County a grand jury indicted two others. The thefts are first-degree felonies. The investigation began about 18 months ago.

Spanning seven Texas counties, the investigation is among the largest oilfield theft cases to date, said Panola County District Attorney Danny Buck Davidson. The investigation found thieves had stolen several million dollars in product over roughly two years. Theft in the oilpatch also has been prevalent in North Texas, where criminals often steal the commodity and sell it for profit, the DA's office said.

Two of the initial 17 indicted were involved with buying the stolen condensate, or natural gas liquids (NGL), Davidson said. The case broke following a tip to law enforcement elicited by a reward from Devon Energy. That gave investigators information they were able to use to trap one of the participants, according to Tom Taylor, a Devon accountant who is a former Internal Revenue Service agent with the criminal investigation division.

That person "decided it would be better for him to tell what he knew than to go spend a long time in the penitentiary," Davidson said.

Those arrested are "all going to be getting attorneys, and we're going to be talking to attorneys and there's some of them that I need some more information from that will allow me to go forward with [arresting] some other folks," Davidson told NGI. He said as many as another 17 or so could be rounded up.

"It's a real big case for me," Davidson said. "It's important to our county. Our county's got lots of oil and gas stuff. These barrels of distillate were selling for about $186 a barrel back when you were paying $4.25 for gasoline."

A law enforcement task force with representatives from Panola, Shelby, Nacogdoches, Rusk, Harrison, Smith and Gregg counties composed of Texas Rangers, local sheriffs and local district attorneys' investigators conducted the investigation. They were assisted by corporate security departments at Devon and other natural gas companies operating in the area that were victims of the thefts.

"Oilfield theft affects more than natural gas companies," said Devon's Kent Chrisman, director of global security. "It also affects landowners, royalty owners and taxpayers."

To steal the condensate the thieves, after being tipped on which storage tanks to target, drove tanker trucks up to the facilities and pumped the condensate from the tanks. "We just noticed that as the price of oil and gas was climbing that all of a sudden, correspondingly, there was a spike in theft of that product," Taylor told NGI.

Taylor said in reviewing incident reports from the field he saw that thefts were occurring in contiguous counties and that the occurrences formed something of a pattern, which made him suspicious that there was organized theft going on. Similar thefts at some of Devon's peer companies convinced Taylor that there was a crime ring afoot.

Whether a company has a corporate security department or not, Taylor said it's important for operators to establish a relationship with law enforcement in the area of its operations. Devon has held workshops to educate law enforcement officers about the ways of the oilpatch and what constitutes suspicious activity.

Devon's neighborhood watch program for the energy patch is referred to as the Wise Eyes program as it came out of Wise County, TX, where the company has extensive operations, he said. Signs are posted at company facilities with a number to call to report suspicious activity.

It's also a good idea for competing operators to compare notes on losses in the field in order to discover any patterns. "If we had done that earlier, we probably would have been on to this [theft ring] earlier," Taylor noted. When discrepancies are found in reports from the field, it's important for the company to follow up and investigate right away, Taylor said.

He also recommends installing low-cost infrared surveillance cameras at field operations and carefully screening the backgrounds of employees and contractors. (There were no Devon employees involved in the theft ring, and none have been fingered by those confessing to crimes, Taylor noted.)

Drug screening is also important, as drugs often go along with theft, and Taylor suspects that is the case in the condensate thefts.

Taylor noted that there are 17 now defendants and probably more. Some of them will eventually be back on the street looking for work, possibly in the oilpatch, making the screening of employees and contractors even more important.

"It's just incumbent on these companies to look into these backgrounds and what they've been doing. This is their trade, saltwater hauling and trucking," Taylor said.

©Copyright 2009 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.

ISSN © 2577-9877 | ISSN © 1532-1266
Comments powered by Disqus