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NASA Admits It Gave Jet Fuel Discounts To Google Execs' Company 126

Posted by timothy
from the only-tax-money-after-all dept.
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."
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NASA Admits It Gave Jet Fuel Discounts To Google Execs' Company

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  • Not a subsidy? (Score:5, Interesting)

    by Dominare (856385) on Friday March 07, 2014 @09:56PM (#46432623)

    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? (Score:4, Informative)

      by lgftsa (617184) on Friday March 07, 2014 @10:10PM (#46432681)

      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? (Score:5, Insightful)

        by Arethan (223197) on Friday March 07, 2014 @10:19PM (#46432729) Journal

        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? (Score:4, Informative)

          by Guspaz (556486) on Friday March 07, 2014 @11:48PM (#46433011)

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

          • by Anonymous Coward

            Maybe I'm simple minded, but they sold it to a private company. Just because they use a "government owned" civil airport shouldn't lead to h2-11 not paying the taxes. If it was a government owned entity, at which point they would probably get discounted fuel [I assume to push a project thru faster]I would see your point.

            Not you, but its how they wrote up the rules [or I guess the tax code} for "government-owned civil airports", which is just stupid.

            • Re:Not a subsidy? (Score:5, Informative)

              by chaboud (231590) on Saturday March 08, 2014 @04:59AM (#46433657) Homepage Journal

              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.

              • by Wootery (1087023)

                People need to chill out about this

                you are simple minded

                It was already unnecessary to be an asshole about it, but you made it ironic as well.

          • Perhaps in the future I should get my groceries at a government-owned supermarket then.

      • by msauve (701917)
        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 t
        • If only Jet Fuel were like selling bags of sand.
        • '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.'
          Won't somebody think of the oil companies!

      • by peragrin (659227)

        You are also forgetting volume discounts.

        I bet NASA doesn't pay the same price for jet fuel as a small private jet does.

        So you get volume discount, taxes, handling and profit margins.

        So in reality NASA didn't make money from the endeavor but didn't lose it either.

    • Re:Not a subsidy? (Score:5, Insightful)

      by erice (13380) on Friday March 07, 2014 @10:13PM (#46432701) Homepage

      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? (Score:5, Informative)

        by sumdumass (711423) on Friday March 07, 2014 @11:16PM (#46432911) Journal

        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... [nasa.gov]

        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.

        • A case of Co-Mingling funds?
          • Re:Not a subsidy? (Score:5, Informative)

            by sumdumass (711423) on Saturday March 08, 2014 @12:18AM (#46433089) Journal

            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.

            • by afidel (530433)

              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 w

              • 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).

                To be fair, uncovering non-malfeasance is probably a not-too-unfrequent side-effect of uncovering real malfeasance.

    • You missed the next part:

      Further, in accordance with Federal law, NASA does not collect state and local fuel taxes as such taxes are not payable for fuel sold at civil airports owned by the United States.

      The federal government is immune from state and local taxes, therefore fuel sold on a federally-owned airport meant for use by federal agencies is exempt from state and local taxes. The problem is that Google brought and used some of this below-market-price fuel and thus skipped the state and local fuel taxes.

      • Re:Not a subsidy? (Score:4, Informative)

        by Charliemopps (1157495) on Friday March 07, 2014 @10:30PM (#46432771)

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

        • Re: (Score:2, Funny)

          by fche (36607)

          Rumack, Randy: [together] It's an entirely different kind of flying.

        • Re: (Score:2, Interesting)

          by 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.

    • by peppepz (1311345)
      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.

      • by nomadic (141991)
        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.
        • by peppepz (1311345)
          They got the subsidized fuel price, by mistake, even for private flights unrelated to NASA.
          • by nomadic (141991)
            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.
    • by Anonymous Coward

      If someone gets a discount via the government that no one else recives, that's subsidizing. It's the main reason some companies succeed and some don't... Walmart comes to mind. Tax free government funds your building and utilities for a decade to move to town, that kind of stuff... It's good to be American for some!

    • by hey! (33014)

      The subsidy is the "opportunity cost" of selling something at below market rates. If NASA sells a thousand gallons at $5.00 gallon when the market cost is $10.00, that's effectively a $5000 subsidy, even though the cash is flowing *into* NASA rather than out.

      The situation is complicated, though, by the fact that the Google execs are allowing NASA to use their planes for research. It may well be that overall the relationship is a win-win, but this kind of complicated and cozy relationship between a govern

  • by rmdingler (1955220) on Friday March 07, 2014 @09:56PM (#46432625)
    helping out the little guy!
  • by grahamsaa (1287732) on Friday March 07, 2014 @09:57PM (#46432633)
    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".
    • by sumdumass (711423)

      My guess would be that it was just there and they needed fuel one day. When H2-11 discovered how much cheaper it was, they probably needed fuel quite often. It's not uncommon for airports to supply fuel services for crafts not controlled explicitly for them.

      • by sumdumass (711423)

        Correction, it appears that NASA was using their planes for "earth science" projects and was authorized to sell the fuel for the government work. What happened is that for some reason, all the fuel for the planes were purchased using this government discount so fuel for private flights not related to the government was purchased at the discounts.

      • by vakuona (788200)

        Aircraft are fuelled at airports. And aircraft typically only fuel enough to get them to their destination. So these planes would have to be fuelled at the airfield anyway. Now the question is whether NASA should have sold the fuel at full price and included taxes (which they can't do), whether they should ask H2-11 to provide their own fuel, which is probably a very inefficient way to run an airfield, or whether the government should change the law to ensure that government owned airfields are ableto sell

    • by Anonymous Coward

      Perhaps reading the article?

    • Did NASA get anything in return?

      Yes. And stuff.

  • by macraig (621737)

    Just WHY?

    • Re:Why (Score:5, Insightful)

      by CrimsonAvenger (580665) on Friday March 07, 2014 @10:06PM (#46432661)

      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.

      • Re:Why (Score:5, Informative)

        by sumdumass (711423) on Friday March 07, 2014 @11:50PM (#46433021) Journal

        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... [nasa.gov]

        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 (Score:5, Interesting)

        by WankersRevenge (452399) on Saturday March 08, 2014 @12:20AM (#46433099)
        Considering Grassley investigated NASA last year about some viking photo [npr.org], my guess this has little to do with governmental accounting, and more about someone in NASA pissing in his Cheerios.
  • by ZorinLynx (31751) on Friday March 07, 2014 @10:05PM (#46432653) Homepage

    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!

  • by PolygamousRanchKid (1290638) on Friday March 07, 2014 @10:05PM (#46432655)

    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!

    • by Anonymous Coward

      Could be worse. Years ago Google was giving out Chromium [wikipedia.org] 6 [wikipedia.org] for the kids to sniff. Fortunately they've stopped and are currently distributing Chromium 35, which is way better.

  • Not just Google (Score:5, Insightful)

    by Todd Knarr (15451) on Friday March 07, 2014 @10:22PM (#46432741) Homepage

    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.

    • by sumdumass (711423)

      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... [nasa.gov]

  • Really? (Score:1, Troll)

    by The Cat (19816)

    Corporate executives drinking deeply from the public well? Shocking.

  • priorities (Score:5, Insightful)

    by hilather (1079603) on Friday March 07, 2014 @10:35PM (#46432787)
    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 (Score:3, Insightful)

    by Above (100351) on Friday March 07, 2014 @11:14PM (#46432907)

    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 (Score:5, Informative)

      by kqs (1038910) on Saturday March 08, 2014 @12:12AM (#46433077)

      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.

    • The issue here is that Google got to keep their jets at AMES at all, not that they got fuel subsidies....... Google should have never been there in the first place

      Why? What's wrong with it? If the administrators at NASA are ok with it, I'm having trouble seeing why I should feel outrage.

      I feel mild outrage that I don't have a billion dollars, but I feel no jealousy that a couple of losers do have it.

  • Oh come on! (Score:2, Insightful)

    by sgt scrub (869860)

    H2-11 should be prohibited from refueling at NASA Ames. That way they can crash, die, and people can bitch about how NASA refused to help a brother out.

  • by Anonymous Coward

    If you come to my house and do some work I'm not going to charge you market rates on coffee... Maybe share the cost.

  • seriously (Score:2, Funny)

    by PortWineBoy (587071)
    Thank God that Google has never given anyone anything at below cost and has in no way benefited this country, Senator. /portwineboy@gmail.com
  • by Anonymous Coward

    10 years now in the south of USA using algae. Why is it more expensive?? Even Indian Technology makes a mockery out of this subject, by making it even cheaper: http://www.thehindu.com/sci-tech/energy-and-environment/new-process-to-make-bioaviation-fuel-cheaper/article5743796.ece
    All it takes to make fuel is a high pressure vessel, high temps, absence of air and right material to turn into fuel. (almost anything will work except metals)
    Junkyards in Canada have been making biodiesel since the 1990's out of gar

  • This was set in motion 2011. Searching for H2-11 (to see what it was) I came across how the jets were in the position to get the fuel, that "Google has no official relation with H211", and heck of a lot of information on this -in one link (dated Dec 11, 2011).

    "The Google leaders and their friends are not the only ones using the jets. NASA conducts flights on the planes with its own researchers and equipment to gain scientific data. That deal was part of the unusual agreement with NASA allowing the Google t

  • 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.
  • "We don't pay taxes. Only the little people pay taxes" -- Leona Helmsley

  • Google is just going to have to be a little bit more compliant when it comes to FISA orders, that's all.

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