“It’s a cartel,” says a former senior API director who spoke with Hayride on the background. “Al Capone is in Hell laughing … wishing he had this. I am a voting member of API,” he added.

So, what is API, what are they doing and why should the average person even care?

“The American Petroleum Institute (API) is the only national trade association representing all facets of the oil and natural gas industry, which supports 10.3 million U.S. jobs and nearly 8 percent of the U.S. economy. API’s more than 625 members include large integrated companies, as well as exploration and production, refining, marketing, pipeline, and marine businesses, and service and supply firms,” according to API’s website.

In reality, API is a monopoly, and monopolies are never good for the marketplace, no matter what form they take. Monopolies always look beneficial at first blush, until they stop acquiring market share and start gouging consumers. Just look at the ghost towns cropping up thanks to Amazon, or the diabetes victims who are now paying an arm and a leg for life-saving insulin.

In the case of the API monopoly, it is the primary international standards-writing body or ISO for the entire energy sector, which is a double-edged sword. Under normal circumstances, an ISO sets an industry’s pace and serves as a bellwether. But for the unscrupulous, it’s a bottomless money pit.

API reported total revenue of $216,253,104 in 2015, an astonishingly large sum for a nonprofit. The explanation? API is running a pay-to-play scam, killing viable companies in the name of promoting safety, quality, or compliance with industry standards. In keeping with “pay-to-play” concerns, here’s a long list of predatory fees API charges oil companies just to remain operational.

When did a trade association acquire the power to shut down companies? Shutting down companies is traditionally the domain of government, not ISOs.

API charges individual companies with membership upwards of $30,000 in annual fees. Multiply that figure by the total number of API-certified companies (now exceeding 4,000), and API reaps a staggering windfall of $122 million, an amount not including the prohibitive cost of API audits.

When API performs its combined Q1 and ISO 9001 audit, along with the monogram certification, which in theory should only be performed once a year, it costs the industry substantial funds and loss of project time.

API audits can take up to six months to complete (during which time companies are not allowed to conduct business). Auditors often charge companies $400-1,000 per day, while consistently failing to conduct a proper audit — part of a conspicuously dramatic increase in “re-audits.”

Re-audits surged from just 97 in 2008, to 322 re-audits in 2013, according to API’s status report.

When re-audits were challenged by one voting member, attorneys requested a copy of API’s code of ethics. Emails obtained for this report reveal that API — a tax-exempt corporation — refused to comply with the request, which it is required to do by law. In one email, a representative of API brashly stated,

“API has internal policies that address the standards of conduct for API employees.

…
All API employees are required to annually affirm in writing that they comply with these policies. These documents are for internal use only and we do not provide copies to third parties.”

It should be clear to any casual observer that “the emperor has no clothes.” So, why aren’t there armies of whistleblowers crying foul? One word: retirement.

The API insider consulted for this story is a cautionary tale. “Auditors at API lie, and staff back them up. I had to hire a man to go to every individual audit, in Canada and in the United States. I was kicked out … because I dared challenge API,” he told The Hayride.

The truth is, silence will not protect the industry from retaliation by API. Getting on a crocodile’s back hoping to be eaten last merely delays the inevitable.

Moreover, consistency is never the mark of stupidity. Once is an accident, twice is suspicious, and three times is a pattern. “If they were merely making mistakes, occasionally they would make a mistake in our favor,” Truman administration Secretary of Defense James Forrestal once famously quipped.

API makes the same lucrative mistakes all too often, usually under the auspices of its “monogram” program, which technically must only be completed by licensed companies once every three years.

“How about auditors coming in and saying, ‘My interpretation is the only right one.’ And if they want to, they can come back again and again and again,” the former API higher-up explained

In essence, API auditors are presumably instructed to find issues, costing the industry substantial funds. API charges for these audits and re-audits. For every audit conducted by API, 7.5 “findings” (i.e., punitive citations for supposed safety violations) are logged.

Basic arithmetic and common sense reveal that API’s fail rate for first audits is impossible, a classic red flag for fraud and impropriety.

In all the audits conducted by API, we are asked to believe that no company ever passes inspection.

What is more likely: that the biggest oil companies in the world are unable to meet basic industry standards, or that API’s parasitic auditors have a profit-motive to falsify audit reports?

API even charges members $1,000 dollars to consider appeals alleging improper conduct by auditors. “Clients must pay a $1000 US Dollar filing fee. … The fee is non-refundable unless API reverses its original determination or decision as a result of the appeal review process,” its website states under “Appealing Licensing and Certification Decisions.”

So, how did things get this bad? For one thing, leadership is not accountable to anyone or anything outside of API. The absence of any accountability creates a vacuum, while also perpetuating an echo chamber. “Mission creep”  is arguably the culprit at API, fueled by the absence of other ISOs and absolutely zero competition for the Q1 and Q2 programs.

API is so nose-blind to its own stink, that its recently released “API Monogram 2020” proposes, “Increased audit frequency.”

Translation: it’s not working, so let’s do even more of what does not work. The only solution is sunlight.

Industry leaders should immediately launch an independent investigation of API and its senior management, while creating competitive alternatives to API certification programs.