NASA Admits It Gave Jet Fuel Discounts To Google Execs' Company

An anonymous reader writes "In a letter to Senator Grassley of the Senate Judiciary Committee, NASA 'admits the agency was selling jet fuel at below market rates to H2-11, a company owned by the founders of Google.' The agency has since raised its rates to reflect market prices but has informed the Senator that it would be impossible for NASA to recoup the money that tax payers have paid in order to subsidize Google's jet fuel discounts."

Comments

Not a subsidy?

[Dominare]

Maybe I'm a simpleton, but the one page letter linked to seems to suggest fairly explicitly that NASA was selling the fuel at "full cost" not at any kind of loss, and therefore the claim in the article that tax payers are somehow out of pocket is a load of crap. Please do correct me if I'm wrong.

Re:Not a subsidy?

[lgftsa]

I *think* that the meaning of the quoted words "full cost" is that NASA was selling to H2-11 at NASA's cost price. This would be less than "market rate" because NASA does not collect tax on the fuel.

The customary difference between cost and market would be tax, handling and profit margin, none of which were added by NASA.

Re:Not a subsidy?

[erice]

Right. It looks like NASA was simply selling fuel based on their own cost. They may have long term contracts and/or just not buy fuel all that often so it is possible for that on any given day, their costs are askew with average retail rates. Now I guess they will hire someone to monitor retail fuel prices every day to make sure they don't undercharge startups resident at Moffett Field when they occasionally buy fuel. Maybe this will make a little bit more money for Federal Government. Maybe the extra revenue will be lost in the extra overhead.

Re:Not a subsidy?

[Arethan]

Sounds like the taxing agencies that got stiffed on the previous sales should contact H2-11 to collect the back taxes owed. Problem solved. No story here. Stop sensationalizing nothingness; it's lame.

Re:Not a subsidy?

[Charliemopps]

It wasn't even remotely Google. It's a different company entirely.

Re:Not a subsidy?

[msauve]

Sounds to me like either NASA gets a good deal for bulk or long term contracts, and sold off what they didn't need at "full cost," which would seem to be a wash.

The market (I'd assume they mean the immediate "spot") price can be expected to be higher because there's no contractual commitment, and the volume is less.

I don't see any problem - the gov't didn't subsidize anyone, and Google found a cost-saving source for jet fuel. It's not clear what the submitter thinks would be fair, but it seems that they think the gov't should be in the market to make a profie or the fuel companies should make even more profit?

Re:Not a subsidy?

[Anonymous Coward]

It wasn't even remotely Google.

You're interrupting Slashdot's regularly scheduled Scroogling.

Now Dice won't get all that lovely Microsoft payola. Let the 'Softies have their two minutes of hate, you fascist.

Re:Not a subsidy?

[sumdumass]

Its a little deeper then this. This letter is confirmation on an audit by some inspector. NASA leases several of the google jets for earth science related tasks and NASA was only allowed to sell them fuel to the extent of covering those missions.

What ended up happening is that H2 11 purchased fuel for private flights under the same account that had nothing to do with NASA or the government so the selling of that fuel was against the contract (possible law too). So the audit came out, someone asked about it, NASA confirmed it and said they didn't have any way to address it previously but do now.

http://oig.nasa.gov/Special-Re...

Now I didn't read the audit enough to see whether or not anyone explicitly made it clear that only fuel used for government services could be purchased under the contract. I'm going to assume it was an oversight or misunderstanding and the proper accounts weren't changed over when fueling. Pilots probably don't give one rats ass about the cost of fuel for someone else's aircraft they have to fly. They certainly wouldn't be privileged to the contracts NASA and H2 11 were part of and likely just gave the account name or number or charge card they were given for the government usages. I used to work for a company that operated heavy equipment and off road use fuel was tax free also. We had two fuel cards for when they were on site, one for the trucks and one for the equipment to keep tax credits separate and drivers often used the same card for everything. When asked why they thought they had a second fuel card for, they said in case they needed to get fuel at a stop the first one wasn't accepted at. Either management lacked something, the drivers and operators lacked something, or the fact that they could fuel the equipment in the yard and rarely needed to get more on site (outside what was brought with them), allowed them to forget what they were told once a long time ago.

Re:Not a subsidy?

[Guspaz]

The NASA letter states clearly that fuel sold at government-owned civil airports is not taxable. There are no back taxes owed.

Re:Not a subsidy?

[sumdumass]

It doesn't appear to be. It seems that it is a complete misunderstanding by the fuel company. From the audit,

"We found that a misunderstanding between Ames and DLA-Energy personnel rather than intentional misconduct led to H211 enjoying the discounted fuel rate for flights that had no NASA-related mission. From September 2007 until August 2013, H211 purchased fuel at Moffett from DLA-Energy either directly or through NASA for both its personal (non-NASA related) flights and NASA science flights at a rate intended only for government agencies and their contractors. Even though Ames officials accurately reported to DLA-Energy the nature of the Centerâ(TM)s agreement with H211, DLA-Energy misunderstood that H211 was drawing fuel for both private and NASA-related missions."

The audit also says that the h211 company has flown over 200 missions for NASA at no cost to NASA and as a result of the misunderstanding, H211 paid between 3.3 and 5.3 million less than market rate for fuel in the time frame because of it. It's a pretty interesting read once you start into it.

Re:Not a subsidy?

[elbonia]

You don't seem able to follow simple facts. The fact of the matter is that these are private jets bought by executives, who happen to work for Google, with their own private money and for their own private needs. That makes it have nothing to do with the Google corporation. Not a single penny from Google Inc. went to this company. You're clearly the mook on this one.

Re:Not a subsidy?

[peppepz]

In fact, arguably it's not NASA that got ripped. It's the federal government that lost money, between $3.3 million and $5.3 million according to TFA, in taxes that would be collected from that fuel, had Google execs bought it like everyone else does.

Basically what is happening here is poor people paying to let the richest people on Earth fly they own private jets. But the company that is benefiting from that is only in personal union with Google, so "don't be evil" doesn't apply here. IANAL.

Re:Not a subsidy?

[camperdave]

NASA's Moffett field is only a ten minute from Google Headquarters. H2-11 is paying $108,000+ a month to rent hangar space at the airport PLUS NASA gets to use the aircraft for science missions. That's $1.3million per year plus an obligation to fly science missions for NASA. When they're fuelling up at Moffett, they pay full price for the only fuel available: non-taxed government fuel. I don't see the problem. Any other civilian organization could have organized similar arrangements. This isn't any sort of "billionaires only" club. Essentially it's no different than civilian workers eating government chow at Federal cafeterias.

Re:Not a subsidy?

[nomadic]

Eh, I was ready to be outraged but after glancing through the OIG report it doesn't look that bad. Apparently the Google dudes paid a market rate for the hangar space, and let NASA use one of their planes for free (that would otherwise cost thousands of dollars per flight hour). I would suspect that even taking into account the discounted fuel NASA came out ahead.

Re:Not a subsidy?

[peppepz]

They got the subsidized fuel price, by mistake, even for private flights unrelated to NASA.

Re:Not a subsidy?

[nomadic]

Right, I'm saying that as a taxpayer I'm not going to get angry over that mistake because in the end NASA got a good deal.

Re:Not a subsidy?

[afidel]

So the net effect is that the fuel company that screwed up the instructions is out the ~$4.3m in markup they could have made selling the fuel to H211 as a private company, sounds like a complete non-issue to me, if you screw up the paperwork and lose out on potential income too bad. Why this is any kind of an investigation is beyond me, the government is out $0, they got free use of the plane over 200 times, and they got rental income for hanger space that most likely would have been empty if H211's plane wasn't parked there. In fact the government is out money for the audit (or out auditor time which is the same thing since I'm sure there's plenty of actual waste or malfeasance they could have been uncovering).

Re:Not a subsidy?

[chaboud]

A number of public and private entities use the field. H211 (and others) typically do two things:

1. They pay fees to NASA for the storage and operation of their aircraft at this airfield.
2. They agree to allow NASA to install equipment in these aircraft and afford NASA the use of these aircraft for experiments.

In exchange for this, they get cheap fuel, but not below NASA's cost. Sure, they're not paying the normal taxes on this fuel because federal regulations prohibit the taxation of fuel sold from government owned airfields, and federal regulations allow for private operations to use NASA facilities under contract with NASA.

NASA has hangars, fuel storage/delivery facilities, a short supply of aircraft for research, and no money. Private entities have aircraft, no place to park them near their bases of operation, and money.

Would it piss you off if frequent government contractor Lockheed Martin operated private aircraft out of Moffett? Oh! Wait! They do! Would you be pissed if the highly publicized and technologically interesting solar plane venture Solar Impulse parked their plane in one of the hangars and threw parties around it while in the Bay Area? Oh! Wait! They did!

People need to chill out about this. This is no big deal. Either change the laws creating this condition or kick private entities out of Moffett, an idiotic action that would likely result in the financial collapse of an already under-funded operation of NASA.

But, yes, I'm willing to grant your first statement... you are simple minded.

Good old NASA...

[rmdingler]

helping out the little guy!

Recouping the money is probably impossible

[grahamsaa]

But I'm much more interested in hearing about the rationale for offering this deal. Did NASA get anything in return? Did H2-11 request a subsidy? Was this a simple accounting error or due to corruption. The "what" here is far less interesting to me than the "why".

They sold it at cost?

[ZorinLynx]

From what I read, it looks like they sold the fuel at "full cost", rather than "market rate".

Does this mean they sold the fuel at the same cost NASA paid for it? If so, what's the big deal? NASA is a government agency, not a business. They don't have to sell fuel at a profit.

It's not like they were giving it away or losing money on it!

Re:They sold it at cost?

[JakartaDean]

You have the mentality of a peasant. Whatever the nobles do, it must be OK because they would never take advantage of their position at your expense. They're so much more deserving then you.

Let's use a car analogy: suppose that you buy gas at the same station that Google execs do. They get charged the rate that the gas costs at the refinery, and you pay retail. Their gas is 25% cheaper (made up value) then yours. You have to pay for shipping costs, infrastructure costs for the service station (electricity, upkeep), the salaries of everyone involved between the refinery and the pump, etc. All that stuff has to be paid for to get the gas to the pump, so you are subsidizing their gas.

Except it's not a private company selling the gas, it's government services paid for by your taxes.

+5 Insightful? I could see +5 Vituperative, but your post lacks both insight and manners. Rather than calling him a peasant, why didn't you spend time reading the linked letter and article widely cited above? NASA says, for example, "While we concluded that the fuel arrangement between Ames and H211 did not result in an economic loss to NASA or DLA-Energy..." The cost H211 paid was the fully loaded cost. Go look that up in an management accounting text. There were no government services paid for by anyone's taxes. The price they paid was below market rates -- at the time the deal was signed all fuel was provided by DoD and sold at subsidized price (DoD craft) or fully loaded cost (non-DoD craft, including the H211 craft that NASA sometimes used). Here's a flash for you: sometimes these craft just flew in the air, so they didn't have the option of going to another "gas station" down the road -- Moffet Field was the only game in town for NASA, and was often convenient for H211 folks. Cost recovery is the default option for charges at most airports, and managers are very good at calculating fully loaded costs.

The problem is that H211 was getting a better deal than other craft at other airports in the area, not that the government or taxpayer was losing money. Given how much NASA was saving by having easy access to H211's aircraft, everyone was winning. However, NASA decided it looked bad, so to avoid any allegations of impropriety (like yours), it was in the government's interest to collect market rates and pass the profit on to the Treasury, so they've been doing that since September 2013. Mr. Schmidt's compensation is irrelevant.

Free Google Jet Fuel Give-out for SF Poor Kids!

[PolygamousRanchKid]

In an attempt to spin this correctly, Google announced that it will be giving out free jet fuel for SF area slum kids to sniff!

Re:Why

[CrimsonAvenger]

Hmm, from TFA, it seems that they're required, when they sell this sort of stuff (surplus to needs fuel, in this case) to sell it at cost.

Since "cost" is below "retail" (pretty much by definition), and since the government doesn't pay fuel taxes (to itself or any State government), "cost" works out to be quite a bit below "retail".

So, NASA got rid of some fuel that was excess to their needs, got paid for it at exactly the rate that they paid for it (making it a wash in bookkeeping), and did it entirely in accordance with applicable law.

In other words, nothing to see here, move along.

Not just Google

[Todd Knarr]

It reads like it wasn't a subsidy to Google, it's that NASA sold fuel to all it's qualified partners at cost rather than at market rates. So the taxpayers didn't pay anything for a subsidy. NASA recouped what it paid for the fuel, it just didn't make a profit on the transaction. I don't see any compelling reason to require a government agency like NASA to turn a profit on it's deals, as long as it doesn't lose money on them either.

Re:Not just Google

[sumdumass]

It's deeper then that. The fuel at costs was supposed to be only for fuel used on the NASA missions the planes do. All the fuel for private flights were supposed to be purchased under a different account for market rates.

This letter is in response to an internal audit that disclosed all the fuel was being purchased at costs instead of separating them like they were supposed to be.

http://oig.nasa.gov/Special-Re...

priorities

[hilather]

Seriously. Google and other companies in silicon valley skip out on billions worth of taxes by funneling it through Ireland and this is what you want to focus on. Jet fuel?

Red Herring

[Above]

The issue here is that Google got to keep their jets at AMES at all, not that they got fuel subsidies. NASA sold them fuel the only way NASA knew how, and probably in full compliance with regulations. The issue is not with the fuel sales, but with Google being able to keep their jets their at all.

Anyone familiar with the area knows that AMES is much more convenient for a private plane of the size the Google Execs own than pretty much any other option. SFO, OAK, and SJC are all busy, and have various red-tape on them. Airports like SQL are too small for the google jets. Normally no non-NASA flights can be at AMES. There are no Apple Jets, no Cisco Jets, no Facebook Jets at this airport. Google attempted to get around this by offering free instrumentation on their jets to NASA.

This is the first step in calling bullshit. This should have never happened. A few instruments does not make it a NASA project. Google should have never been there in the first place. Someone gave them preferential treatment using the instruments as an excuse.

Re:Red Herring

[kqs]

From what I have heard, some years ago the government cut funding to NASA and told them "you need to have public/private partnerships to make money".

As part of this initiative, NASA leased part of AMES which they were not using to Google (for quite a lot of money), and did a deal where they could use planes for NASA science missions. Note that they didn't do this because they wanted to; they did this because the US govt told them to do this sort of thing.

So Google got preferential treatment by... renting excess space at market rates. A good deal for Google since it is close to their headquarters, and a good deal for NASA because they could continue doing science even when Congress cut their funding.

I suspect that if Apple, Cisco, and Facebook had wanted to pay the same market rates then they could have also leased space at AMES, though since that is a farther distance from their headquarters (especially with Bay Area traffic) it would be less tempting to them.

Re:Why

[sumdumass]

The fuel wasn't surplus. But the problem was altogether different.

An audit was conducted concerning Google's aircraft being stored that the ames facility. It turns out that they lease a hangar from NASA as market rates but also allow their aircraft to be used by NASA for Earth Science projects.

http://oig.nasa.gov/Special-Re...

In the course of this, the supplier of fuel for the site charges a market rate for everyone but NASA who gets charged a cost plus rate. NASA had them fueling the aircraft (which is more then just their jet) on the cost plus rate for the NASA projects but an oversight happened and they ended up being charged cost plus for everything including private non-government flights. The audit doesn't place blame or malice in it and writes it off as a misunderstanding. The letter in the article is confirmation that NASA was doing it, didn't have anything in place to detect it, cannot go back and fix it, but have that all taken care of now and the separate rates will be applied appropriately.

Re:Why

[WankersRevenge]

Considering Grassley investigated NASA last year about some viking photo, my guess this has little to do with governmental accounting, and more about someone in NASA pissing in his Cheerios.

Security Through Obscurity

[mlookaba]

That memo is a wonderful example of why exposing poor practices is difficult. The terminology is so dense that only those on the inside can truly understand it without a good deal of research. Most times people probably give up because they fear looking stupid for not knowing the lingo.