Strange things are afoot at the Bureau of Land Management (BLM), an agency housed within the Department of the Interior tasked with managing the nation’s vast swaths of publicly held land.
The main character in this mystery is a not a person, but a proposed pipeline intended to bring water from remote aquifers in the Mojave desert to drought-stricken southern California. Named the Cadiz project, it’s a privately owned venture that has been in regulatory limbo for over a decade—the work of the buzzsaw that is Senator Dianne Feinstein, who has pulled out all the stops to kill it. (You can read my earlier story on that here.)
Feinstein has used her clout on the Appropriations Committee to successfully insert a policy rider into law each and every year to specifically delay or deny the ability of the Cadiz project to move forward, running roughshod over her state’s House delegation (including Democrats), many of whom want the project to go forward.
The debate is over whether or not a proposed water pipeline within the right-of-way of a railroad that crosses over public lands “furthers a railroad purpose” and whether it has to get BLM approval. In the past, BLM pre-approval was not needed. Because of Feinstein’s urging, BLM withdrew a longstanding regulatory opinion and replaced it with one that “requires a fact specific case-by-case inquiry” for right-of-way use on BLM lands.
Despite this setback, Cadiz pushed forward and sought determination from BLM under the revised regulatory opinion.
And here’s where it gets fishy.
As the Wall Street Journal reported, a BLM employee routinely shared inside information about the Cadiz project’s future prospects with an investor at Whetstone Capital, a Kansas City firm that often short-sells publicly traded entities as part of its investment portfolio. That investor, Thomas McGannon, runs Whetstone’s investment research efforts. He exchanged a number of emails and phone calls with Erik Pignata, a realty specialist for BLM in California.
McGannon had a Freedom of Information Act Request (FOIA) pending with BLM, but repeatedly and persistently fished for more information from Pignata while it was being processed. Pignata is not a FOIA officer.
It appears, per WSJ’s reporting, that McGannon’s fishing expidition was successful:
Shortly after BLM’s adverse ruling, the value of Cadiz stock dropped by more than half. Advance knowledge of the decision would benefit… a short-selling investor.
Did it pay for McGannon and Whetstone? It’s not clear, as McGannon told the Journal:
Congress has now gotten involved. In a letter dated August 4, 2016 to BLM Director Neil Kornze, the House Oversight and Government Reform Committee requested that BLM provide “any documents and communications to or from” any BLM employee relating to Whetstone, the withdrawal of the regulatory opinion, the Cadiz project, and BLM’s review of whether the proposed pipeline fulfills a railroad purpose. The committee also requested a transcribed interview with Mr. Pignata, but it’s unclear whether the interview would be conducted under oath.
The letter’s deadline requested BLM comply by August 18, and a committee spokesman tells THE WEEKLY STANDARD that the committee has “not received the documents we requested.”
Presently, the Cadiz project remains in regulatory limbo, subject to Feinstein’s rider and BLM’s adverse ruling. House members are pushing language to reverse BLM’s re-interpretation of the 141-year old law pertaining to rights-of-way for railroads on public lands. If successful in passing any such language, they’ll still have to get past a steadfastly opposed Feinstein in the Senate.
But it will be interesting to see what the committee finds as it delves into the rabbit hole of BLM and its internal dealings. Assuming, that is, the Obama-run BLM complies in the waning days of his presidency.
