Oil industry to profit from online leasing

Yesterday, the Bureau of Land Management (BLM) held the first in a series of online oil and gas lease sales. The move to online sales has become a cause célèbre of the oil and gas industry, and represents just the latest maneuver in a years-long campaign to reduce transparency and public involvement in the leasing of public lands for oil and gas development. Another factor motivating the industry has received less scrutiny, however: the fact that the industry has a major financial stake in internet-based leasing. In fact, according to a new analysis from Western Values Project, the industry could collect at least $33 million in commissions from the new online leasing system over the next decade, private profit that comes at the expense of federal tax revenue.

This all started in 2014 when Congress passed a defense spending bill. A provision buried in that bill directs BLM to begin holding online oil and gas lease sales. Conveniently, EnergyNet, a company with close ties to industry trade groups which had lobbied hard for the provision, received the contract to conduct the online sales. Under that contract, EnergyNet is authorized to charge a 1.5% “buyer’s premium” on the winning bid for each lease. In effect, the arrangement allows a private company to act as a type of broker for the sale of public lands.

In order to assess how much EnergyNet stands to benefit from auctioning publicly-owned oil and gas resources online, Western Values Project examined the total bids collected by BLM at in-person auctions over the past ten years. We then determined how much EnergyNet would have collected in commissions had those auctions proceeded under the new online system. The numbers are impressive and far exceed the $2 million in additional annual revenues that BLM estimates online leasing will generate for the public (All bid data from BLM State Offices at this link):


And just how handsomely could industry profit from – what boils down to – administering a website? Quite handsomely, judging by EnergyNet’s financial records. In 2015, the company reported $6.4 million in total revenue, $3.3 million of which derived from internet auctions. Thus, by moving auctions for publicly-owned oil and gas resources to the internet, EnergyNet’s total revenues could very well jump by over 50 percent (and double for internet auctions).

Putting aside the significant transparency issues surrounding the new online leasing system, American taxpayers should ask themselves just whose interests are being served here. Industry already makes billions in profits from drilling on our public lands (and frequently sticks taxpayers with the bill for cleaning up the mess). Online lease sales appear to be just another attempt by industry to wring even more money from our public lands at the expense of taxpayers.

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