Oil and gas companies have long grumbled that the Bureau of Land Management should allow more leases for energy development, and in the first sale of 2017, the agency appeared to deliver.
Revenue-dry Wyoming made about $63 million in an oil and gas lease sale Tuesday in Cheyenne, where delighted industry folks flocked for a chance to bid and an opportunity to drill.
About half of the $129.3 million collected by the BLM goes to the state. The total acres sold equals more than half of all leases in 2015.
Industry contends that fewer leases resulted from a political strategy designed to slow down industry. They hope February’s sale of tracts in the High Plains District represents a change. BLM officials say delayed, deferred and canceled leases result from a number of issues, from sage grouse to the recently completed resource management plans — about an eight-year process.
BLM is required to hold quarterly sales for oil and gas drilling on public land. Though last year a sale was canceled because of weather, the leases intended for that sale were later put up for bid, according to the BLM.
The leasing process begins with industry petitioning tracts of land to go up for bid. Federal regulators put each of those parcels through an environmental assessment to gauge the possible impact on water, land and wildlife before adding the land to a lease sale.
Of the 335 parcels of land nominated and reviewed for Tuesday’s sale, 285 went up for bid. Most of the deferred parcels — about 63,000 acres — were put off for sage grouse.
Two nominated parcels were within an incorporated town. Two were deemed unavailable for leasing under the BLM’s resource management plan for that region, and two were either in conflict with coal leasing or in need of joint approval with the U.S. Forest Service, said Bradford Purdy, spokesman for the BLM’s High Plains District.
Purdy said he couldn’t comment on a political change but did say the Buffalo Field Office, which manages the Powder River Basin region, had been creating a resource management plan that delayed leasing. The large and complicated management plans, which were developed across the west, can take almost a decade to complete.
About 20 percent of Tuesday’s parcels had been deferred from previous sales.
“I think one of the points of pride is [the field offices] are able to process a large number of [petitions for leases],” Purdy said. “From BLM’s perspective, those are the two answers. We had a lot of [interest] in this area for this lease sale. Also we had an area up there that had been going through some land use plan amendments.”
Federal lands make up about 50 percent of Wyoming. While anglers, hikers and outdoorsmen celebrate the public access offered by federal lands, the rules governing public land slow industry development.
Wyoming players have complained that the BLM has held out, delayed or canceled requested areas for lease to the detriment of the oil and gas industry and the state coffers.
“When the BLM field offices choose to withhold federal leases — see 2015 and 2016 under Obama — Wyoming citizens suffer on one, revenue generation and two, new projects queued up for exploration,” said Cary Brus, senior vice president for Nerd Gas.
Slower or more onerous leasing and drilling permitting for any reason makes Wyoming less competitive with other states, where a deal with a homeowner is all it takes to get under the ground, said Tom Swanson, a longtime Wyoming oil and gas independent.
“If the feds will not lease the lands for whatever reason, even if they just don’t want to, we don’t have any place to explore,” he said.
There have been fewer acres put up for lease by the BLM in recent years. In 2008, the year Barack Obama was inaugurated, 807,846 BLM acres were leased for oil and gas operations in Wyoming. The following fiscal year, 2009, that number fell to 110,344. Every year since the leases have involved fewer than 500,000 acres, except in 2011 when the BLM leased over 1 million acres in Wyoming.
Oddly, new industry interests in acres for lease have also decreased in that time period. In calendar year 2008, inquiries were put in for 1.7 million acres in the state. That number fell by more than half the following year to 595,704 acres.
A surprising aspect of Tuesday’s sale was how much some companies were willing to pay. The highest bid for a single parcel Tuesday was more than $18 million. The highest bid for an acre was $16,500.
“They are essentially paying as if that ground is producing,” said Swanson. “That is what they do in all of these resource plays.”
Resource plays are known quantities, where there is a higher guarantee of profitability.
Despite the recent slough of prices, rigs in the Permian Basin in West Texas and the Marcellus shale play in Pennsylvania appear to have left the bust behind. Acres there are going for two or three times Wyoming’s highest acre.
However, those high bidders aren’t out exploring new plays — they are paying for what they expect to get, Swanson said.
Smaller Wyoming explorationists are looking for a deal, Swanson said. And though the small guys don’t grab the high numbers, they were at Tuesday’s sale looking for a good bet.
“Exploratory holes will always be drilled because of the return,” Swanson said. “If you pay $10,000 an acre to buy a lease versus someone that pays $20, and they both find oil, who is going to make the most?”
Wyoming is scheduled to have three more lease sales this year, but Tuesday was the last to take place in person. From now on the bidding wars will take place online.