Oil mergers push companies over limit

WASHINGTON – A single New Mexico family and a dozen big oil companies, including one once headed by Commerce Secretary Don Evans, control one-quarter of all federal lands leased for oil and gas development in the continental United States despite a law intended to prevent such concentration, federal records show.

Since 1997, mainly as a result of mergers and acquisitions, six companies have exceeded the legal limit of 246,080 acres in lease holdings on public lands in states other than Alaska. But the Bureau of Land Management, in charge of enforcing the 1920 law, has chosen to extend compliance deadlines for years.

An Associated Press computer analysis found the Interior Department agency has permitted companies it knew were in violation of the law in Wyoming to continue to acquire thousands of acres of oil and gas leases in that state. The BLM has given the companies additional years to comply.

“They should not be purchasing leases,” said Tom Lonnie, the BLM’s assistant director for minerals, realty and resource protection.

Before acquiring a lease, a company must certify that its holdings do not exceed the legal limit.

The government can cancel leases held by companies that exceed the cap. Agency officials acknowledge they never have done that nor have they denied a company’s request for more time to comply.

Companies in violation of the state limit as a result of a merger or acquisition have 180 days to comply.

“We try to work with them instead of hitting them with a hammer,” said Bob Bennett, the bureau’s Wyoming state director.

When Anadarko Petroleum of Houston asked for a two-year extension to get back into compliance after a 2000 merger with Union Pacific Resources put it over the limit in Wyoming, the bureau said yes. That was the case, too, for a 2002 request by Encana Oil and Gas of Canada.

In the first 15 months of Anadarko’s extension, the company acquired 70 new leases in Wyoming totaling more than 100,000 acres. A year after granting Encana the extension, the bureau allowed Encana to acquire two new leases totaling more than 2,000 acres in the state.

Anadarko relinquished 50 of its leases to meet a deadline this April 30 to get back under the acreage cap, Lonnie said. Encana has until October to comply. Four other companies that had gone over the cap in Wyoming since 1997 are now in compliance.

Bureau officials say they have to rely on companies to provide accurate accounts of their holdings because the agency’s computerized records do not track transfers of lease operating rights or the ownership of divided shares of leases.

The lax enforcement coincides with the Bush administration’s push to open new public lands for oil and gas development. In March, bureau records showed 40 million acres of federal lands were under lease in the continental United States. That is 5.3 million more acres than when President Bush took office.

Companies and individuals that dominate federal oil and gas leasing have been major financial supporters of Bush and the Republican Party. Since 1999, the top 25 owners of federal oil and gas leases have directed 86 percent of their $8.2 million in political donations to the GOP.

Individuals and companies affiliated with the Yates family of Artesia, N.M., which is by far the biggest lease holder, have given $276,926 to GOP parties and candidates since 1999, and just $11,400 to Democrats.

Three sons of Martin Yates Jr., one of New Mexico’s oil pioneers, created Yates Petroleum and a number of other companies involved in the oil leases. A fourth son, Harvey E. Yates, also holds leases through his own oil company.

Vice President Dick Cheney visited Artesia in March to raise money for a GOP congressional candidate backed by the Yates brothers. A month earlier, he was in Albuquerque for a presidential campaign fund-raiser that took in more than $200,000.

Denver-based Tom Brown Inc. was over the acreage limit in Wyoming from 1997 to 2000, while current Commerce Secretary Evans was the company’s chief executive.

As Bush’s campaign chairman, Evans raised millions of dollars from the oil industry for the winning 2000 campaign. When he resigned at Tom Brown before joining the Cabinet in 2001, Evans received a retirement package worth more than $5 million.

Encana, which the government says has exceeded the acreage limit since 2002, announced plans last month to acquire Tom Brown. The merger would join two of the top three federal oil and gas lease owners.

Environmental groups contend the administration is rewarding its financial backers by ignoring the acreage law while pushing more public lands into development.

“It’s clear from the data that there is no reason for the Bush administration to issue leases on America’s last remaining wild public lands, other than as a favor to their most generous political patrons,” said Dave Alberswerth, public lands director for the Wilderness Society.

Lonnie, the BLM’s assistant director, said administration officials have left enforcement of the acreage law to bureau officials in the states. He said agency officials are following the same policies they used in the Clinton administration.

Enforcement efforts consist mainly of annual record title checks by bureau officials in each state, Lonnie said. Companies near the limit are asked to produce a record of their holdings for review. But Lonnie said no attempt is made to verify that the record is complete unless there is reason to believe something has been omitted.

Congress limited oil and gas lease ownership in 1920 amid concerns that a few companies would monopolize mineral rights on public lands by cornering leases they did not intend to exploit. But changes in the law over the years and new interpretations have allowed companies to amass far more than the current 246,080-acre limit per state.

Legislation pending in Congress would remove any producing lease from that cap.

The top 25 of the more than 10,000 owners of oil and gas leases, for example, now control more than one-third of all leased acres and 37 percent of the acres in leases actually producing oil and gas, the AP analysis found.

The Yates family, through nearly three dozen companies, individuals and trusts operating out of the same building in Artesia, controls 2.7 million acres of oil and gas leases on public lands. That includes more than 1 million acres in Wyoming, more than 800,000 acres in New Mexico and more than 500,000 in Nevada.

“We pay very close attention to that acreage limitation and are in compliance with it all the time,” said Randy Patterson, vice president for exploration at Yates Petroleum.

A dozen companies with Yates family members as officers show up in BLM lease owner records, all with the same address. When the General Accounting Office, the investigative arm of Congress, questioned the arrangement in 1994, the bureau’s chief lawyer ruled the law does not require that lease holdings of affiliated companies or individuals be counted together.

The acreage limit applies to individuals and their share of leases held by corporations in which they own more than 10 percent. When the bureau last audited individual holdings in the Yates family businesses eight years ago in Wyoming, it found no violations of the acreage cap.

Large public corporations cannot take advantage of the law the way the Yates family does because their subsidiaries are considered part of the company and their combined lease holdings must be below the state acreage limit.

Both big oil companies and independent operators have another way to amass lease holdings in excess of the state limit. They can enter into agreements with other companies, approved by the government, to develop the oil or gas on several adjoining leases as a unit under fairly strict controls. In return, they get to exclude that acreage from the cap.

Tom Brown, for example, owns 378,790 acres of oil and gas leases on public lands in Colorado, but more than 260,000 acres are excluded from the cap because of such agreements. Encana owns more than 400,000 acres of leases in Colorado, but only 155,715 are counted against the acreage limit.

In all, Encana controlled more than 1 million acres of federal oil and gas leases in March; Tom Brown controlled 856,887 acres.

Other companies that have been in violation of the acreage cap in recent years, all in Wyoming, are BP Amoco, Devon Energy Corp., and Marathon Oil. The combined public land oil and gas leases of those companies in March were 645,969 acres by Devon, 446,615 by BP Amoco, and 358,611 by Marathon.