Gateway to Think Tanks
来源类型 | REPORT |
规范类型 | 报告 |
Backroom Deals | |
Kate Kelly; Jenny Rowland-Shea; Nicole Gentile | |
发表日期 | 2019-05-23 |
出版年 | 2019 |
语种 | 英语 |
概述 | Noncompetitive leasing—the bargain bin of the federal onshore oil and gas program—is wasteful, unnecessary, and largely shielded from public scrutiny. |
摘要 | Introduction and summaryLast year, the Bureau of Land Management (BLM) held a massive oil and gas lease sale, putting more than 300,000 acres of public lands in Nevada up for auction.1 The sale was largely in response to a request to lease the land from an anonymous individual, a routine way onshore oil and gas leasing is kicked off for the federal government. On the day of the lease sale, however, that anonymous individual did not show up to bid—nor did anyone else, for that matter. The BLM did not sell an acre of land, not even for the minimum bid of $2. The sale raised eyebrows. Sen. Catherine Cortez Masto (D-NV) admonished the BLM for attempting to sell off public lands with “little to no potential for drilling.”2 The head of an oil and gas industry association blamed “a bad actor” for the failed auction, hinting that the nomination was from someone trying to make the BLM or the industry look bad.3 A little more than a month later, however, the BLM updated an obscure database to reflect that several parcels had been purchased after the auction by a handful of small, private oil and gas companies and speculators.4 The BLM sold the leases through its noncompetitive leasing process, whereby parcels unsold at auction are available for purchase for two years. The $2 per acre bonus bid requirement is completely waived for these parcels, so lessees simply have to pay an administrative fee, and a $1.50 per acre rental fee, making noncompetitive leasing the bargain bin of the oil and gas world.5 The newly issued leases raise more questions. Did one of the companies nominate the parcels, knowing that it was likely the company could purchase a lease for next to nothing after the failed auction? Could the companies have colluded, agreeing on the front end not to participate in the auction so they could reap the savings later? And given the area’s low oil and gas potential and the companies’ poor track records for energy development, what do they intend to do with the public lands for which they now own 10-year leases? It’s a curious case that lays bare some of the inherent flaws in the BLM’s onshore leasing program. Oil and gas companies are able to legally stockpile public land at low prices, often without public scrutiny. This is especially true of the BLM’s noncompetitive leasing program, a scheme that few people know exists, let alone understand. However, the Center for American Progress determined that nearly one-quarter of all acres leased by the BLM in the past 10 years have been through the noncompetitive leasing process.6 In addition to comprising a surprisingly large percentage of the BLM’s leasing portfolio in terms of land, the authors found that leases sold noncompetitively generate little revenue and rarely end up in production. Instead, the public lands largely sit idle for the duration of a lease’s 10-year term—or longer, due to routine lease extensions—or the BLM terminates the lease when the lessee fails to pay rent. In other words, the BLM is wasting taxpayer resources to run an over-the-counter oil and gas leasing program that does not actually produce oil and gas. At a minimum, these findings point to a wasteful and unnecessary leasing program that siphons away the BLM’s limited resources and shortchanges taxpayers. But the findings may also provide evidence of an underground business model in which companies buy cheap leases—not with the intent to develop oil and gas but in order to resell the parcels at profit or to pad their balance sheets with unexplored subsurface reserves. The companies or individuals that engage in this speculating and stockpiling are not in keeping with the intent of the Mineral Leasing Act, and such activity should be considered in violation of BLM regulations, which require lessees to “exercise reasonable diligence in developing and producing” oil and gas.7 This report seeks to answer some basic questions about this hidden leasing process:
The report also explores how the noncompetitive leasing process hurts taxpayers by giving away public lands at a lower rate and locking them up indefinitely so that they cannot be managed for other purposes, including conservation and outdoor recreation. The report highlights the authors’ challenges in researching noncompetitive leasing due to the program’s lack of transparency and the BLM’s inconsistent records. Finally, the report offers recommendations to bring accountability to the BLM’s oil and gas program to ensure better stewardship of America’s public lands. A vestige of the past: The unnecessary noncompetitive leasing programThe Bureau of Land Management manages the subsurface rights on approximately 700 million acres of federal, state, tribal, and private lands, or the equivalent of 1 out of every 3 acres in the country.8 The Mineral Leasing Act of 1920 governs the onshore oil and gas program, providing a general framework for how leases are sold, renewed, canceled, and even what royalty rates the BLM can charge companies when the leases produce oil and gas.9 For more than 60 years, the Mineral Leasing Act required that lands with “known” oil and gas deposits be leased through a competitive process, but it allowed for all other lands to be leased noncompetitively. Under this regime, 93 percent of all lands were leased noncompetitively—often through a lottery system, whereby the BLM chose a company’s winning bid at random.10 Over the years, the noncompetitive program was roundly criticized “for encouraging fraud, misleading the public, and generating insufficient revenues.”11 In one egregious example from 1983, the BLM opted to sell leases in Wyoming noncompetitively, even though there were data available revealing that the area had high oil and gas potential.12 The BLM collected $1.2 million in fees for 14 leases, and the winner immediately turned around and resold the leases closer to market value for $50 million to $100 million.13 In response to the program’s mismanagement, Congress passed a major amendment to the Mineral Leasing Act in 1987 that required the BLM to offer all lands competitively, not just those with known oil and gas reserves.14 More competition, it reasoned, would better ensure taxpayers received a fair, market-based return for private industry’s use of public lands. A path remains, however, that allows the BLM to continue to cheaply sell vast areas of public lands on a noncompetitive basis: Any acres left unsold after a competitive auction are available for purchase the very next day on a first come, first served basis. These parcels sit on the shelf, available for purchase, for a period of two years, after which the land again could be nominated for oil and gas leasing. What’s more, the statutory minimum bid requirement of $2 per acre is waived for these parcels; a company simply must pay a nominal administrative fee and the first month’s rent of $1.50 per acre.15 ![]() In practice, this backdoor leasing process allows for any individual to walk into the BLM office and—for about the price of a pack of gum per acre—own a 10-year lease on America’s public lands.16 One can imagine scenarios in which this secondary leasing process might be justified: if lease sales are such a rare occurrence that years pass before companies can bid on parcels; if it is difficult to nominate parcels for auction in response to more favorable market conditions or technological advances that change a company’s investment calculations; or if the government needs to incentivize leasing to meet the nation’s energy needs. But none of these scenarios are applicable. The BLM has, for the duration of its existence, run an industry-first leasing system where anyone—at any time, for free—can anonymously nominate a parcel of land and kick the leasing process into gear. Outside of the BLM’s cursory environmental review of a parcel’s nomination, there are few parameters on what public land the oil and gas industry can access or when. (see the “No money?” text box below) The Trump administration has put this already flawed leasing process on steroids, requiring BLM state offices to include nearly all nominated parcels in statewide quarterly lease sales, slashing opportunity for public comment, and reducing internal review of nominations before they go up for auction.17 The BLM is offering for lease more acres, more often, and it is doing so at a time when the oil and gas industry is sitting on a glut of unused leases.18 In fact, there are currently nearly 26 million acres under lease to oil and gas companies—an area larger than the state of Indiana—but half of those acres are idle.19 The practice of noncompetitive leasing appears to be a vestige of the past, providing another avenue for the oil and gas industry to buy cheap leases when it already enjoys near-unfettered access to public lands and owns more leases than it knows what to do with. The cheap leases particularly benefit companies looking to inflate their value by stockpiling undeveloped reserves, as well as those that operate in the margins—buying leases on a speculative basis in order to sell them later for profit or to attract investors to unproved opportunities. No money? No name? You, too, can nominate a parcelBLM state offices hold oil and gas lease sales four times per year—and sometimes more frequently. What the agency offers at auction is largely determined by the private individuals and corporations who nominate public lands through what is called an expression of interest.20 To consider a nomination, the BLM simply requires a legal land description and map of the desired parcels. The BLM does not charge any fees to submit an expression of interest. Nor does the BLM require the submitter of an expression of interest to provide a name or address. Seventy-five percent of nominations are made anonymously, and in the state of Nevada, nearly every nomination—96 percent—has been made anonymously since 2017.21 Consequently, before dedicating staff time and taxpayer resources to review an expression of interest or hold a sale, the BLM conducts no screen for whether the submitter has the intent or ability to explore or develop the oil and gas resources. The free-for-all nature of the nomination process lends itself to abuse. An unscrupulous company or individual can easily and anonymously nominate parcels that they have no intention of bidding for in the competitive auction in order to buy it cheaply later. As-is, the system is rigged to allow for—and even encourage—speculation. To what end?: A day in the life of a noncompetitive leaseThe authors examined whether there are any notable trends in noncompetitive lease activity, as well as whether there is a discernible difference—outside of the method of sale—between leases sold competitively versus noncompetitively. To do so, CAP reviewed lease activity data in states where the Bureau of Land Management conducts leasing—other than Alaska, for which data are not readily available—and identified all noncompetitive leases issued from 2009 through 2018. The authors also reviewed the case files of 63 noncompetitive leases that the BLM Nevada State Office terminated in the past 10 years. Despite Congress’ intent in 1987 to minimize the acres of public land sold noncompetitively, the data show that the BLM is still leasing a high proportion of public lands through this manner. About one-quarter of acres leased in the past 10 years were issued noncompetitively, amounting to nearly 3 million acres across the West.22 ![]() The number of acres leased noncompetitively fluctuates every year but is on the rise again under the Trump administration. From 2017 to 2018, the acres sold noncompetitively more than doubled—from approximately 141,000 acres to nearly 379,000 acres—and the number of leases issued noncompetitively was higher in 2018 than it had been in any other year over the previous decade.23 This bump is due, in part, to the fact that the Trump administration is offering more land for lease and more of it—about 2 million acres since 2017—is unsold at auction and immediately available for noncompetitive leasing. Noncompetitive leasing happens in a number of Western states, but the practice is particularly active in Nevada, where more than 2 million acres have been sold in this manner since January 2009.24 One might expect there to be little competition for parcels in Nevada, given the state’s low mineral potential.25 By the same token, this explanation falls short of justifying why the BLM is going through the motions to effectively tie up vast amounts of public lands in Nevada and elsewhere with private companies that are unlikely to produce an economic return for taxpayers. CAP found two hallmark characteristics of noncompetitive leases that suggest the process is particularly wasteful: ![]()
The 63 case files of terminated leases reviewed at the Nevada BLM office provide further insight into what happens once companies buy leases noncompetitively. In every case, without exception, the BLM terminated the lease because the lessee simply stopped paying rent.30 An illustrative example: A company called American General Energy Exploration Corp. purchased 17 noncompetitive oil and gas leases from December 2014 to January 2016. Within two years, the BLM terminated every lease because the company failed to make the first rental payment owed after buying the parcel.31 The noncompetitive leasing program resembles a hamster wheel in which the BLM reviews parcel nominations; holds an auction; issues unsold oil and gas leases noncompetitively; terminates the leases when the companies fail to pay rent—and then repeats the cycle, often recycling the same parcels over again. Some may argue that these statistics and anecdotes prove there is no harm in noncompetitive leasing, as it rarely results in any damaging development to public lands and waters. But the harm, while perhaps less tangible, is no less relevant: The BLM is spending taxpayer money on an ineffective and unnecessary program. Furthermore, Americans are losing out on a fair return for the use of their resources, and the BLM’s hands are tied from actively managing the public lands for conservation, recreation, or other beneficial purposes. The BLM is already stretched thin, lacking adequate staff and resources to fulfill its complex multiple use mission on public lands, of which oil and gas development is a fraction. Devoting significant time to this program that, for all intents and purposes, appears to mainly benefit companies looking to pad their books or engage in speculative practices, takes away much-needed resources that the BLM could better use for public benefit elsewhere. Gaming the system: The winners and losers in noncompetitive leasingA review of the noncompetitive leasing program reveals a system in which the scales are tilted heavily in favor of the oil and gas industry and speculators, who risk next to nothing by exploiting the cheap leasing on public lands. The short- and long-term costs, instead, are borne by the BLM, which must devote some of its limited resources to administering the program; by the American taxpayers, who receive little in return for use of their public lands; and by the lands themselves, which are effectively off the table to be managed for other uses for which they may be better suited, such as recreation or renewable energy. Winners
A Taxpayers for Common Sense examination of Highlands’ leasing activity shows that this approach has worked on more than one occasion. In fiscal year 2018, the company bought leasing rights on more than 113,000 acres of public land in Montana for $187,000. Because the noncompetitive leases were not subject to a bonus bid, Taxpayers for Common Sense estimates that the American public lost out on $246,000 to $3.6 million in revenue that year—the range between the $2 per acre minimum bid requirement and the average bid in Montana that year of $32 per acre.34 Highlands is one of more than 300 companies or individuals that purchased leases noncompetitively during the 10-year period CAP reviewed. Notably, the largest oil and gas companies—Chevron, BP, Exxon Mobil, ConocoPhillips, and Anadarko—do not appear anywhere on the list. Instead, the companies that participate in this backdoor leasing exercise are primarily small, low-profile entities, and many of them have very high rates of terminated leases and portfolios that consist primarily of noncompetitive leases. Nearly half of the leases—accounting for more than 1.4 million acres—were purchased by just 10 companies during the 10-year window.35 Only three of the companies are publicly traded, and many of them have no identifiable websites or have websites that are outdated and skeletal. Liberty Petroleum Corp., for example, has purchased nearly 200,000 acres of public lands over the past 10 years but has not updated its website since 2013.36 For many companies, including Liberty, the addresses listed online do not match up with addresses used when buying the leases. ![]() Finding reliable information about many of the companies was difficult for the authors and raises questions about the BLM’s ability to determine whether the actors are capable of developing the parcels—“exercising reasonable diligence,” per BLM regulations—before the agency signs over the rights to develop public lands. In a previous report, CAP explored how cheap leases provide companies an opportunity to bolster their balance sheets superficially in order to boost their market valuation and attractiveness to shareholders and investors, thanks to a 2008 shift in U.S. Securities and Exchange Commission policy.37 Padding the books with undeveloped reserves to strengthen a company’s position in a merger or in negotiating terms of a loan may very well be a motivating factor behind some of the noncompetitive lease purchases. Losers
CAP calculates that companies are only paying, on average, $1.74 per acre leased noncompetitively to access the land, including bonus bids, rental fees, and administrative fees. This is compared with $344 for those acres leased through the regular auction process.38 Some may shrug off this revenue gap as merely a reflection of market value: Lands with higher development potential garner competitive bidding, and some lands with lower development potential receive no bids at auction. But this explanation ignores the possibility that the same low-potential land could be offer |
主题 | Energy and Environment |
URL | https://www.americanprogress.org/issues/green/reports/2019/05/23/470140/backroom-deals/ |
来源智库 | Center for American Progress (United States) |
资源类型 | 智库出版物 |
条目标识符 | http://119.78.100.153/handle/2XGU8XDN/437004 |
推荐引用方式 GB/T 7714 | Kate Kelly,Jenny Rowland-Shea,Nicole Gentile. Backroom Deals. 2019. |
条目包含的文件 | 条目无相关文件。 |
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