Rustling oil a federal crime, even if it never leaves Texas
David Wayne Schroeder, motivated by drug addiction and handy with petroleum industry gear, was unloading stolen cargo in the middle of the night at an energy facility in the outlands of West Texas when a deputy sher- iff approached.
To make a quick getaway, Schroeder stole a parked car from the employee lot, but the deputy sheriff jumped on top of the vehicle. Schroeder hit the gas, and the deputy opened fire, shooting Schroeder, somehow, in the rear end.
Still, he managed to escape, only to be arrested hours later at a 7-11, court documents show.
“He’s battled some demons,” said his lawyer, Robert Leahey. “Sometimes they get the better of you, unfortunately.”
Remember Schroeder’s
name, law enforcement officials say. They hope his case will stand as a cautionary tale against the modern equivalent of cattle rustling in Texas: Oil theft.
Though he never left the state in the course of his criminal transaction, driving five stolen truckloads from storage tanks to an unwitting buyer within a three-mile stretch of Ward County, Schroeder pleaded guilty to a federal offense — interstate shipment of stolen goods. Using legal reasoning somewhat novel to oil field crime, prosecutors secured a sentence of 21 months in prison.
“We wanted to lay a marker that this is serious theft,” said Richard Durbin, acting U.S. attorney for the western district of Texas. “There is serious state and federal law enforcement in the oil field. It’s pretty wild and woolly out there.” $1 billion stolen a year
In remote counties where restless men can outnumber good intentions, oil field theft has followed the industry for a century from strike to strike. Though no reliable statistics exist, industry officials estimate their annual losses at roughly $1 billion. One trade group maintains an online database to gather reports of missing gear.
But for criminals with some know-how and access to a pump truck, the oil itself offers the greatest temptation. Liquid molecules can be difficult to trace. Selling it usually requires tricking legitimate buyers with fake receipts, known as run tickets. When it works, the thieves can get a full market price instead of settling for black market discounts.
“I used to work crudeoil theft cases when crude oil was $3 a barrel,” retired Texas Ranger Al Mitchell said in an interview at the height of the recent boom. “We’d have to let them steal two truckloads of oil before we could charge them with a felony.”
As petroleum prices began to soar in 2008, FBI officials formed a task force with county sheriffs in the Permian Basin. In South Texas, where new techniques for hydraulic fracturing drew tremendous industry activity to previously undeveloped fields, officials demonstrated deep frustration with the recurring arrest of thieves tampering with highly volatile liquid storage tanks.
After an explosion at a storage tank in 2012, for example, the Hidalgo County sheriff charged one man with felony murder for the death of his accomplice. The charges were later reduced, but only after sending a message via statewide headlines.
When drilling slowed, and prices fell from a peak above $100 a barrel last year to levels between $50 and $60, some industry officials observed a corresponding decline in criminal activity.
“Small thefts of materials and equipment,” said Jess Malone, a security adviser for Apache Corp. in the Permian Basin. “Our contractors are usually the victims, as they don’t safely store or put their equipment up at the end of the day.”
Still, industry and law enforcement officials remain committed to finding new ways to prosecute ambitious thieves in the vast expanses of oil country, where low populations and limited local police re- sources beckon criminal activity.
“It’s no different than a shoplifter in a store, eventually the price is paid for by the consumer in higher prices to cover the loss and higher security measures,” said Kenny Jordan, executive director of the Association of Energy Service Companies, a trade group.
Though the victims may generate little public sympathy, federal officials say, the integrity of energy infrastructure poses a legitimate national security concern. Petty thieves could expose vulnerabilities to terrorists. Thefts have been reported all over the country, especially in booming fields across Texas and North Dakota. Federal precedent
Seeking to claim jurisdiction in federal court, where cases move faster and produce more predictable results due to sentencing guidelines, prosecutors came across a vaguely worded section of penal code noting that shipped goods count as interstate commerce “at all points between the point of origin and the final destination.”
“At what point does oil from the ground become part of an interstate shipment?” said John Klassen, who prosecuted the case against Schroeder. “The minute it comes out of the ground, ultimately, it’s going into a pipeline.”
Legal experts vouch for his reasoning. University of Texas law professor Jennifer Laurin compared it to “wire fraud committed via the Internet, where jurisdiction is readily obtained simply by use of a communications device that is part of an integrated interstate system, even if you email your next door neighbor.”
Klassen expected a challenge. In court, he would likely have to demonstrate all possible pipeline routes taken by oil unloaded at the facility in West Texas, operated by a firm called Itero Energy. A defense lawyer could seek to steer the case back to state court as a matter of simple theft, but with the oil valued at $58,000, a third-degree felony theft conviction could result in a sentence of anywhere from two to 10 years.
On the night of his arrest, Nov. 30, 2013, Schroeder left a trail of evidence documenting his knowledge of the petroleum business. Phony paperwork, left overnight with Itero Energy, included receipts directing payment to a P.O. box set up in the name of a legitimate transport company.
According to a sworn statement by a deputy sheriff, Schroeder gave a full confession. His lawyer saw little advantage in challenging federal jurisdiction. He pleaded guilty in January.
Since then, federal prosecutors have been using the same statute to negotiate plea deals with several defendants in a much bigger case in the Eagle Ford Shale fields of South Texas, where court records describe a scheme involving company employees to steal $1.5 million worth of oil.
Schroeder will likely serve out his sentence in the federal prison system. Prosecutors say aspiring oil thieves can expect to join him.
“They’re just trying to police the industry,” his lawyer said. “And Mr. Schroeder got caught up in that.”