An oil contracts auction is so important, so very essential to the continuing smooth functioning of the world's most profitable industry, that it must be protected from any kind of disruption or underhand dealing, even to the extent of jail sentences.
At least that is the case if you are an opponent of the United States' "drill, baby, drill' policies. In 2008, in its dying days, the Bush administration had a last hurrah for their friends in the oil industry. They held an auction of drilling rights, many of them on protected land, and protesters were outside the federal building in Salt Lake City.
Tim DeChristopher, then a 27-year-old economics graduate, decided to go into the auction and make a speech denouncing it. But he was mistaken for a bidder and given a paddle "Bidder 70" - and so he bid.
DeChristopher was charged with two criminal offences, tried and has now been sentenced to two years’ imprisonment. This is in spite of the fact that the Obama administration later overruled most of the contracts sold in the auction. Only two of the parcels of land DeChristopher bid for can be legally sold, and with the help of supporters he recently offered to pay the $166,000. But the government refused to accept the money, and the plots will now be auctioned again.
But oil contract auctions are less sacrosanct when the global oil corporations themselves are making the bids. They can rob a whole country blind and get away with it, as the following story illustrates.
In 2009, Iraq auctioned off two oilfields, representing 60% of the country's oil deposits, and awarded a 20-year operating contract to BP and its partner company CNPC. The contracting process was “the most transparent ever”, according to the Iraqi oil minister but many commentators couldn't see how the figures stacked up to be profitable and many companies didn't bid.
But after being awarded the contract, it appears BP/CNPC was able to secretly renegotiate the terms, achieving more profit at the expense of the Iraqi government and people. A report from Platform, based on leaked documents, shows that all the major risks have now been transferred from BP/CNPC on to the Iraqi taxpayer.
If any constraints are placed on production, because of an OPEC decision for example, or because infrastructure isn't completed, the Iraqi government will pay BP/CNPC as much for not producing oil as to produce it. In the published contract these risks were to be shared.
A key anti-corruption clause has also changed. In the published contract, Iraqi government officials would have to approve any spending over $50 million. In the secret contract, the figure has risen to $100m, undermining the Iraqi's chance of getting value for money.
And finally BP/CNPC are not to be held liable for any geological damage to Iraq’s oil reservoirs as a result of producing oil too quickly or inefficiently. Given BP's record in the Gulf of Mexico and at its operating plant in Texas, the Iraqis must be crazy to accept this clause.
But BP/CNPC will get away with it, just as they have got away with recklessly damaging the environment, the livelihoods of thousands of people and the health of their own employees in incident after incident. No BP executive has been charged with a criminal offence, none of their board members will spend two minutes in jail, never mind two years.
The US government wants DeChristopher to be made an example of, and in a memo to the court stated: “To be sure, a federal prison term here will deter others from entering a path of criminal behaviour.”
But in his address to the court De Christopher said the opposite is the case: "The closer we get to that point where it’s too late, the less people have to lose by fighting back. The power of the Justice Department is based on its ability to take things away from people. The more that people feel that they have nothing to lose, the more that power begins to shrivel."