Energy Fraud

The Department of Energy (DOE) can be traced back to the Manhattan Project to develop the atomic bomb during World War II.   It became a stand-alone department of the federal government in 1977 with a mission to maintain effective nuclear deterrence while reducing the threat of nuclear proliferation and also  oversee our nation’s vast energy supplies.  In the 21st Century, the DOE is also tasked with leading many federal initiatives to develop clean energy as part of government wide efforts to combat climate change.

The DOE’s budget is more than $50 billion and includes contracts with private entities to help it fulfill its mission.

The DOE’s energy contracting involves its primary nuclear deterrence and non-proliferation role. It also includes contracts to manage the rights to develop energy and minerals found on public lands.  The federal government also spends billions of dollars each year in research grants and other incentives for the development of new and renewable energy resources.  With billions of dollars at stake, private companies contracting with the DOE have in the past – and may in the future – defraud the government in a variety of ways.

Energy Management/Service Contracting Fraud

The Department of Energy (DOE) is charged with advancing the national, economic, and energy security of the United States; promoting scientific and technological innovation in support of that mission; and ensuring the environmental cleanup of the national nuclear weapons complex.  To carry out its mission, the DOE oversees the National Nuclear Security Administration’s Stockpile Stewardship and Management Plan.  Each year Congress provides billions in the DOE’s budget to ensure our Nation’s legacy of nuclear waste from the production of weapons during the Cold War are processed, secured, and safely disposed of in a timely manner.  As with every government contract, the contractor is required to certify compliance with numerous regulations and laws, contract terms and provide honest cost reporting to the government.  These contracts, like other government contracts, are vulnerable to schemes to overcharge the government or knowingly fail to comply with the terms of the contract.  The DOE relies on whistleblowers filing qui tam lawsuits under the False Claim Act to expose these frauds.

Types of Energy Fraud

Oil, Gas and Coal Lease Royalty Fraud

The federal government manages millions of acres in national parks and forest lands.  While part of that management involves overseeing the millions of visitors to these spaces each year, these public lands also contain valuable reserves of minerals and energy sources like coal, natural gas and oil.  Private companies frequently enter leases with the government for the right to mine or drill those resources which are scattered around the country.  In exchange, they agree to pay royalties to the government for whatever they extract from the public lands.  In 2019, revenues from oil and natural gas leases on onshore federal lands totaled $4.202 billion.

Some companies have been accused of misrepresenting or falsifying how much they owe the government in royalties to increase their own profit margins under these already lucrative lease arrangements.  When private companies who agree to pay royalties in exchange for drilling and mining rights fail to pay the government what it is due, it can be a fraud on the government.  Under the False Claims Act, a person or company that engages in these practices can be liable if it “knowingly conceals or knowingly and improperly avoids or decreases an obligation to pay or transmit money or property to the Government.” (31 USC § 3729(a)(1)(G))

Research Grant Fraud

The Department of Energy sponsors billions in research grants each year, including to support the development of new and renewable energy resources.

Common forms of research grant fraud typically include misrepresenting facts in the application process to secure the grant; misrepresenting research results and data; over-charging for costs and other expenses, including wages and time reported; using grant money for work outside the grant terms; and misrepresenting conflicts of interest by the investigators.  These kinds of fraud squander important federal funding and waste precious time and resources necessary to study critical scientific questions related to our need for fuels in a modern technology-driven society.  Whistleblowers play an important role in exposing these frauds and assuring research the government seeks to sponsor has the integrity we all expect for our future decision-making.