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Pared back federal oil and gas lease sale nets $13M

Federal officials reduced available oil and gas lease acres due to wildlife habitat concerns.

Pronghorn and drilling rigs on the Ultra Energy Field. (Tara Boucher/BLM/FlickrCC)

by Dustin Bleizeffer, WyoFile

Oil and natural gas developers offered up $13.2 million to lease the drilling and production rights to 53 federal parcels in Wyoming this month. 

One lease parcel in Converse County attracted seven different bidders during the auction before going to California-based Phoenix Capital Group Holdings, LLC, for $2.6 million compared to an average $250,000 per parcel, according to Wyoming Bureau of Land Management data.

The BLM originally considered 115 lease parcels for the third-quarter sale but pared down its offering to 81, withdrawing some areas to protect greater sage grouse habitat as well as crucial winter range for big game. Similarly, the agency originally considered 209 lease parcels for its second quarter lease sale in June but pared that sale down to 116 due to similar concerns and approved a total of only 67, earning $14.8 million.

“Those lost acres represent lost opportunities,” the Petroleum Association of Wyoming told the BLM in its written comments to the agency regarding the third-quarter sale. “It increases the potential for less effective development programs and will surely result in lost opportunities to generate economic activity and a fair return to the American public.”

Pronghorn in the snow. (John Fandek)

Federal officials failed to point to specific scientific analysis — particularly regarding greater sage grouse habitat — in withdrawing some acres nominated for lease sales, according to the association’s president Pete Obermueller.

“Their decisions to defer are not based on any data showing sage grouse habitat or populations are under pressure specifically from oil and gas development in those areas,” Obermueller told WyoFile.

“The BLM’s process for determining which parcels are offered has long been a source of frustration even before the Biden Administration,” he added. “Using unexplained and completely opaque decision-making, the BLM can and does offer parcels that no company nominated and often offers only fractions of parcels nominated by an interested company.”

Crucial habitat for big game appears to be another driver for limiting lease sales, especially in light of a deadly winter for pronghorn and mule deer. The Theodore Roosevelt Conservation Partnership, in its written comments, praised the BLM for reducing the number of parcels overlapping with crucial big game winter range from 19 (covering 9,511 acres) to seven (covering 3,270 acres) in the recent sale.

The BLM appears to have also removed a handful of parcels nominated for a fourth-quarter lease sale, both in priority sage grouse and big game winter habitats, according to an assessment by the Wyoming Outdoor Council.

Though the BLM is mandated to conduct quarterly sales each year, the Sept. 6 offering was only the second of three sales scheduled for the year. The first quarterly sale for 2023, as well as several in 2022 and 2021 were suspended due to a Biden administration moratorium, which was eventually overturned by the courts.

The BLM’s fourth quarter lease sale planned for December 2023 could include 47 lease parcels spanning 46,328 acres. (Wyoming BLM)

The Wyoming BLM will hold a fourth-quarter oil and gas lease sale in December, which tentatively includes 47 parcels spanning 46,000 acres.

Ongoing reforms

The sales this year also represent the first to include ongoing reforms to the federal onshore oil and gas leasing program that so far include higher minimum bid amounts, royalty and rental rates mandated by the 2022 Inflation Reduction Act.

Minimum bids have increased from $2 per acre to $10 per acre. Royalty rates have also increased, from 12.5% to 16.67%, while rental rates increased from a range of $1.50-$2 per acre to $3-$15 per acre. The IRA reforms also include, for the first time, a royalty on all vented or flared methane gas from federal lands — often a byproduct of oil and natural gas production.

More potential reforms are underway that would enhance protections for wildlife habitat and increase minimum bonding requirements to ensure oil and gas activities are properly cleaned up. 

“The BLM is making an effort to steer development away from important habitat,” Wyoming Outdoor Council Public Lands and Wildlife Advocate Meghan Riley said. “I’m hopeful the changes in the proposed Fluid Mineral Leases and Leasing Process rule will keep the agency on that trajectory.” 

More information regarding the federal Fluid Mineral Leases and Leasing Process is available at this website, and public comments can be submitted here. The public comment period closes Sept. 22.

This article was originally published by WyoFile and is republished here with permission. WyoFile is an independent nonprofit news organization focused on Wyoming people, places and policy.