|January 09, 2018|
The Private Company Selling Off America's Public Lands
|When Texas oilman Bill Britain started the auction site EnergyNet in October 1999, it wasn't exactly a state-of-the-art operation. Its homepage used a generic design template, an add-on to the Virtual Auctioneer software Britain bought from a Dallas firm. Like hordes of other entrepreneurs at the time, Britain hoped to bring the billion-dollar auctioneering model of eBay to an industry where he had a toehold. A decade and a half after graduating from West Point, Britain had started J-Brex Co., an Amarillo-based energy company, and had oil wells scattered all over Texas. If there was one thing he knew well, it was how to buy and sell drilling leases.|
Britain boasted of "changing the way the oil and gas industry did business." He pitched his auctions as "ON LINE REAL TIME," but the technology was hardly game-changing---bidders were notified by email when they were outbid---and his timing, at the apex of the dot-com bubble, was terrible. "It burst almost the moment we got started," Britain recently told Forbes.
Despite such inauspicious beginnings, by 2012 EnergyNet had become one of the industry's biggest auction sites for oil and gas leases, even if overall sales on the platform were relatively modest. But over the next couple years, Britain began inking exclusive contracts to host lease auctions of public lands, including with state land agencies and, most notably, in 2015 with the Bureau of Land Management.
The platform took off. Less than a year into the Trump administration, transactions have risen to $1.25 billion. About half the transactions through the first three quarters of 2017, or about $600 million, were leases of public lands.
EnergyNet typically earns a 2 percent commission with state agencies; federal land commissions are set at 1.5 percent. By October of 2017, EnergyNet had earned an estimated $9 million auctioning off America's public lands, based on an Outside analysis. Once fourth-quarter transactions are finalized, earnings could potentially rise to $15 million or more. (EnergyNet, a private company, doesn't disclose profits.)
Donald Trump campaigned on the promise to unleash America's estimated $50 trillion in untapped shale, oil, and natural gas reserves---a vision now being executed by Interior Secretary Ryan Zinke. Once-protected national monuments, like Bears Ears and Grand Staircase-Escalante, are now vulnerable to drilling. And Britain's once-obscure auction site provides the platform through which this massive opening of federal lands for energy extraction will happen---all without the pesky problem of public protests.
So how did a private company become the biggest seller of America's public lands?
In 2003, the dot-com bust behind him, Britain caught his first big fish: Chevron. The oil company, based in San Ramon, California, sold 220,000 acres on EnergyNet for $120 million---$40 million more than Chevron had expected. The transaction gave him a solid case study to convince other oil companies to give his site a shot. Britain had also set his sights on a bigger prize: America's public lands auctions. At the time, a Reagan administration mandate required the BLM to conduct its auctions live and to host them in the vicinity of any parcel on offer. The stipulations rendered EnergyNet, an online platform, unusable.
In 2004, Britain began a lobbying campaign to dismantle the provision. At first, his efforts had little effect. Then, in December 2008, climate activist Tim DeChristopher disrupted a live auction at a BLM office in Utah. He was arrested after posing as an energy company representative and submitting bids worth $1.8 million for leases he couldn't pay. (He was later sentenced to two years in prison.)
As prosecutors built their case against DeChristopher, his act of civil disobedience may have inadvertently boosted Britain's sales pitch to the BLM. "There is growing concern that lease auctions may become a forum for future protests due to the publicity of the Utah incident," wrote Robert Abbey, director of the agency under President Obama, in a 2009 report to Mary Kendall, acting inspector general at the Department of the Interior. Whether circumstantial or merely coincidental, nine months after DeChristopher's protest, Britain got his shot to prove EnergyNet's capabilities in an online pilot.
Abbey still didn't have the authority to put all federal auctions online, but EnergyNet, along with its team of lobbyists, kept up the pressure. Britain made regular treks to the Capitol, offering testimony before various committees. On two occasions during the Obama era, he managed to get bills introduced that were designed to gut the live-auction rules. Neither became law.
In 2014, however, six days before Christmas, Britain received an early gift. His allies in Congress tucked the language he'd long sought---a provision explicitly granting the BLM the power to conduct federal oil and gas lease auctions online---into the Pentagon's annual budget. Nine months later, in September 2015, EnergyNet landed an exclusive contract to host every online lease auction for the BLM.
Small-government advocates touted the symbolic one-cent cost of the contract, but the terms were hardly free. EnergyNet had negotiated a generous five-year deal. Commissions were set at 1.5 percent for every lease sale---a cut that can mean significant profit for EnergyNet during boom times. For example, in mid-December 2017, in two online auctions for lease rights on 2,140 acres of public land in New Mexico, EnergyNet earned half a million dollars on the combined sale of $30.4 million.
"Oh, that's ridiculous," said Jim Odle, an auctioneer based in Brush, Colorado, when told of EnergyNet's take. For 22 years, he ran live auctions for the BLM in Wyoming and Colorado. "They are getting paid awful good," he said. "We didn't charge anywhere near that kind of money." Odle earned a flat rate of $250 in the early years and $1,500 for his last BLM auction in Wyoming in 2017.
Given the agency's stated concern over the DeChristopher incident, critics suggest that the BLM's shift to EnergyNet was motivated by the desire to neutralize protests. Former agency director Neil Kornze defended his decision to move to online auctions and told me, "We were trying to modernize our energy program." He cited the rampant technological challenges at the BLM, where even getting email systems working sometimes proved difficult. "At times, it was a duct-tape operation," he says. "Folks were doing the duty of two or three jobs, and then to ask them to balance First Amendment rights with operating an oil and gas lease program wasn't an easy thing."
Even so, Kornze admitted the agency was concerned with security. "We were having a fair number of conversations at the senior level about how do we get through these events that have never been big public attention-getters and have them be safe and productive while fulfilling our federal mandate," he told me.
Indeed, to buy the modernization argument requires one to ignore the political climate at the time the decision was made. In late 2015, protests at live auctions became an embarrassing circus for the BLM. The previous year, Wild Earth Guardians, an environmental group based in Santa Fe, New Mexico, hired activist Tim Ream to jump-start a national campaign to end the extraction of fossil fuels on public lands, a long-standing demand of indigenous climate activists.
To build the movement, Ream met with DeChristopher, who'd been released from jail the year before. "I knew if he endorsed the idea, I might get an entire segment of climate activists to back it," Ream says. Other groups quickly joined in, and the rallying cry of "keep it in the ground" gained broad support. So did one of the fledgling movement's main tactics of disrupting BLM auctions with direct action. The campaign kicked off in mid-September 2015 with the delivery of a petition to Obama that was signed by 450 environmental groups, including many indigenous leaders. The demand was unequivocal: End all new drilling on public lands.
Protests began almost immediately, at an auction in Cheyenne, Wyoming, in early November, with a dozen protesters outside BLM's offices. From then onward, every auction was met with growing crowds. In February 2016, about a hundred people showed up at a BLM auction in Salt Lake City, with some holding pictures of their grandkids. Police escorted them out. (At the same auction, a conservationist in Utah put $2,500 on a credit card, buying the right to drill for oil and natural gas on 1,120 acres of federal lands near her residence. Terry Tempest Williams even started an energy company, Tempest Exploration Company LLC, to legitimize the purchase.) Then, in May, in Lakewood, Colorado, more than 200 protesters showed up at a Holiday Inn and set up a human blockade, ultimately penetrated by police, to stop bidders from entering the auction room.
Unbeknownst to the activists, the BLM and EnergyNet had already inked their deal before protests began. It wasn't until September when Kornze at last went public with the EnergyNet contract. Changes came swiftly. That year, there were 20 live auctions and five online. In 2017, only two live auctions were scheduled, with the remaining 26 hosted by EnergyNet.
"They put them online because we were building a movement," says Ream, who now works as the program director at KS Wild, a land conservation group based in Ashland, Oregon. "It really silenced the only avenue people had for disruptive action. Our only position of leverage was injecting ourselves in a process where we weren't welcome. Once that was closed up, it really deflated the movement, and it dried up shortly after."
Jeremy Nichols of Wild Earth Guardians said the group is exploring a legal challenge to online lease sales. Of former BLM director Kornze, Nichols said, "He's got a lot of making up to do. They meant well, but I think they've created a monster. They've fundamentally denied the public a chance to be present. We are not letting this go."
Nada Culver, director of the BLM policy group at the Wilderness Society, criticized the agency's selective commitment to modernization. While auctions have moved online, conservation groups that want to file an administrative protest on a sale still have to fax it to the BLM---and to a line that's often busy. "They won't accept it by email, and they won't accept it by hand delivery," Culver said. "You can't even ride your horse to the BLM office and drop it off."
Not everyone agrees that the BLM's decision was about curbing public dissent. James Skillen, an associate professor of environmental studies at Calvin College and author of The Nation's Largest Landlord, an extensive history of the BLM, said the protests, and the associated security costs, were probably a factor but unlikely the driving motivation. "The BLM just swims in the water of conflict and protest," Skillen said. "If it's not environmentalists, it's militia members with guns in Nevada. I have a hard time thinking the agency said, 'These protests are bad. We can sweep them under the rug by putting them online.'"
With nearly every oil and gas lease auction now hosted by EnergyNet---and the volume likely to increase under the Trump administration---activists are struggling with how to put up a fight. I asked DeChristopher, who graduated from Harvard Divinity School this spring and has since co-founded the Climate Disobedience Center, what's next for Keep It in the Ground. "Folks will have to get creative," he told me. "If they can't find a way to disrupt the actual auction process---if companies go into drill and mine---they will be subject to a huge amount of disruption and likely outright sabotage, because that's what happens when you remove the democratic process. People will resort to whatever tactics they have to use."
As part of its contract with the BLM, EnergyNet must promote auctions it hosts, a stipulation that, in theory, should raise awareness of upcoming sales and allow protesters to at least mobilize opposition online. The company, however, has only 112 followers on Facebook and a mere 42 on Twitter. Its last tweet promoted an auction of state lands in Wyoming scheduled for October 18, 2016.
When I reached out to EnergyNet, Britain said he didn't have time to talk. He had a board meeting to prepare for, so we set an interview for two days later. He canceled the next morning. "We are accomplishing the work which our agencies require," Britain wrote in an email. "Any information you need would have to come from the agencies themselves."
Repeated requests to the BLM for interviews with officials about the auction program, however, were declined.