The companies behind the curtain

 

Ever since the Bureau of Land Management announced more than a year ago that some 30,000 acres surrounding the towns of Colorado's North Fork Valley like a necklace had been nominated for oil and gas development, wild rumors have flown about who did the nominating. (Nominating leases prompts the BLM to review whether the parcels are suitable for development and, usually, put them up for auction.) No small number of folks here in HCN's home base suspected Bill Koch, who owns a coal mine up-valley as well as a small gas company, and has become an object of scorn for many locals for attempting to swap some land with the feds that would make his ranch more private but eliminate one public access point to the Ragged Mountains. He did it out of spite, some griped, since local opposition has so far thwarted his land swap. At least one person got it in their head that one of the local environmental groups that has led the fight against the leases had, in fact, nominated them in a ploy to boost fundraising.

Colorado's North Fork Valley

It started to seem like no conspiracy theory was too hair-brained to be swapped in street-corner conversation. These rumors flourished, in part, because the BLM has since 1995 kept the identity of nominators under wraps until after lease auctions. The logic behind the policy was that by the time a company nominates a lease, they've spent a lot of time and money investigating its geology and commercial potential. Their knowledge of that lease's value is proprietary information, which is exempt from public disclosure under the Freedom of Information Act. If their identity is released, that might tip off competitors, putting the nominator at a disadvantage. The agency also theorized that the policy would foster competition by keeping companies in the dark about others' intentions, preventing them from colluding before the sale to suppress auction prices. (It looks like this theory didn't hold up in practice.)

Citizens for a Healthy Community (CHC), a Paonia, Colo.-based environmental group whose raison d'etre is fighting the North Fork leases, believed the public had a right to know who wanted to drill in its backyard, and sued the BLM when it turned down a Freedom of Information Act request to disclose the nominators. They won. In February, U.S. District Court Judge Richard Matsch ruled that BLM's practice of keeping nominators' names confidential to protect their competitive interests "runs directly contrary to the purpose of the public sale process," which is to earn the public a good price for its minerals. This week, the nominators' identities were revealed.

It turned out to be kind of a let down: Most of the parcels were nominated by Baseline Minerals, a "lease broker," or oil and gas middleman, whose clients -- who would do the actual drilling -- are still unknown.

Knowing the names of the companies could help communities better participate in the leasing process and gauge the potential impacts of development, says Kyle Tisdel, CHC's attorney from the Western Environmental Law Center, since some companies have better safety and environmental records than others. Even though the BLM doesn't consider individual operators' records when doing environmental analyses ahead of oil and gas development, Tisdel says, "that type of anecdotal information could nevertheless help tell the story of why a particular area is worth protecting and fighting for." In other words, it can be useful in the court of public opinion -- and maybe even in real court. "It's helpful to be able to tell a compelling story to a judge," he says.

CHC believes the case is precedent setting -- that BLM will have to honor any similar FOIA requests in the future. Indeed, there's little in Matsch's ruling to indicate it applies only to these particular leases. The government declined to appeal the ruling, which could be an indication of a waning commitment to the confidentiality policy. Officially, though, the BLM says "it's too soon to say" whether they'll automatically comply with future FOIA filings, scrap the policy altogether, or keep it in place unchanged (and undoubtedly land back in court).

Matsch's decision was a win for transparency, in principle. Perhaps just as importantly, it affirmed that BLM's first priority is to protect the public's right to get the highest price for its minerals, not developers' business interests. But even if the BLM does dispense with the confidentiality policy, it's unlikely to shake up the leasing process in a big way -- for industry or concerned citizens.

"It does not matter to us (if our name is known)," Joe Thames, president of Baseline Minerals told me. "We do not drill the wells. The anonymity factor comes into play if our client does not want to be revealed as working in a particular area. All of these companies have different personalities. Some are a little more paranoid than others." If a company is particularly adept at a drilling technique it believes will unlock reserves in a new area, Thames explained, they might be especially keen to keep their interest in that area secret. But they don't necessarily need the BLM to help them do that. "At the end of the day, if a company wants its identity to be kept a secret for a period of time, you could have guys like me running in there and all of that info will be made public and still nobody knows who we're representing. We're required to keep our clients secret 'til they decide they want to be revealed."

And not all companies see secrecy in the nomination process as integral to their success. Take Gunnison Energy, Bill Koch's gas company, which nominated a couple leases in the North Fork lot and said so before the court ordered the BLM to reveal their identity. "Gunnison Energy has a policy of transparency and generally sees no harm in disclosing what leases we nominate," the company's president, Brad Robinson, told me via email.

"A lot of our companies are like, 'We use brokers anyway, it doesn't matter to us,'" says David Ludlam, executive director of the Colorado Oil and Gas Association's West Slope chapter, a trade group. Asked to comment on the idea that communities would gain something from being able to review the records of companies interested in drilling in their backyards ahead of lease sales, Ludlam responded: "If a community gains a certain level of ease because they subscribe to one company's standards over another, that's fine. But a company's culture is less important (in terms of evaluating potential environmental impact than) the federal regulatory processes that are in place that hold all operators to the same standard."

Cally Carswell is HCN's assistant editor.

Photo courtesy Flickr user scottpartee, licensed under Creative Commons.

Malcolm McMichael
Malcolm McMichael
Apr 23, 2013 02:51 PM
Interesting. I wonder how Tim DeChristopher was substantively different from a broker in the auction. Inasmuch as he offered up the money to pay off the bids, I don't see how that's much different than brokering - wherein the buyer does not intend to develop, and lacks the capacity to do so.

The difference I suppose is the gap between getting 21 months for a felony and getting 20% commission