Oil and gas lease sales in Wyoming have received few offers as the industry fears a collapse

During Wednesday’s auction, the Bureau of Land Management offered a total of four parcels of just over 159 acres in the top oil-producing state. Only two of the parcels, which are just under 80 acres in size, received bids for a total of $27,600, raising concerns about bankruptcy.

That’s significantly less than the Wyoming lease sale in June, which netted $5,012,502 for 15 parcels of more than 8,500 acres.

While Republicans have urged the Biden administration to hold more lease sales to improve the nation’s energy security, some industry officials now say many of the lots on offer are not even worth bidding on.

said Steve Degenfelder, Landman of Kirkwood Oil and Gas Cowboy State Daily this week that his company had decided not to bid on the various-sized plots.

“Forty acres doesn’t make a difference in exploration if you’re trying to harvest 20,000 or 50,000 acres,” Degenfelder said.

Degenfelder explained that it was unclear whether the parcels were nominated by the BLM or an oil and gas company. If the company did it, he suggested it may have been “many years ago.” A BLM Wyoming spokesperson insisted on this E&E News the leases associated with the sale were “entirely driven by public nominations”.

Others predicted that low rental sales were a result of regulations issued by the Biden administration, which may indicate an emerging trend.

“Without a doubt, low sales are a symptom of a big problem,” said Pete Obermueller, president of the Petroleum Association of Wyoming. Washington Examiner in e-mail.

He argued that while the Wyoming industry had put forward “millions of high-value, high-potential land” in the state for lease sales, those parcels were not offered. Obermueller further alleged that the BLM has deferred land lease sales worth more than 600,000 acres, putting them in “regulatory purgatory.”

“Instead, in this sale and most sales under the Biden administration, they are offering a patchwork of noncontiguous acres that makes horizontal drilling almost impossible,” Obermueller said.

Like many other oil-producing states, Wyoming relies heavily on horizontal drilling that extends from a few feet to several miles. This may often result in the need to purchase and combine several leases into one well project. Obermueller explained that in Wyoming’s case, 78% of its oil and gas resources are “federal ties,” meaning they are subject to federal permits.

“If the BLM refuses to lease in a way that allows horizontal drilling, the benefits of the lease cannot be realized and Wyoming’s resources will be stranded,” he said.

Leasing regulations have been a point of contention throughout the Biden administration, as President Joe Biden halted new oil and gas leases on federal lands and waters early in his presidency. However, a federal judge blocked the pause in June 2021, preventing the administration from fulfilling its campaign promise.

In order to conduct a lease sale, the BLM first accepts applications for plots to be auctioned. These nominations can come from any member of the public, as well as the agency itself. Before the land can be included in the sale, it must be inspected for compliance with regulations such as wildlife habitat protection under the National Environmental Protection Policy Act. This process also includes a 30-day scoping period, a 30-day comment period, and a 30-day protest period.

Traditionally approved plots are then put on sale no earlier than 270 days after the end of the recruitment period, which falls in the first two months of each quarter – in accordance with Art. E&E News. During the Biden administration’s temporary pause, this process was disrupted.

Some also reportedly pointed out that the 2022 Inflation Reduction Act causes more disruption despite including several requirements for the government to offer new oil and gas leases on federal properties. The climate law also raised the cost of drilling on public lands, raising the royalty fee, which had not changed since 1920, from 12.5% ​​to 16.67%. Additionally, it raised the minimum auction price from $2 per acre to $10.

As energy demand continues to grow only in the United States and around the world, Obermueller said these obstacles will “clog” oil and gas production in the country, causing higher prices and lower reliability.

Major energy trading bodies and oil groups have also expressed concerns over recent low lease sales.

“This is another likely consequence of the Biden administration delaying and canceling quarterly lease sales, reducing the space available for leasing and discouraging the development of U.S. oil and natural gas,” said Scott Lauermann, a spokesman for the American Petroleum Institute.

“From day one, the Biden administration has consistently worked to increase the costs and uncertainties associated with drilling on federal lands,” said Anne Bradbury, CEO of the American Exploration and Production Council. Washington Examiner.

“Not only have they restricted the ability to develop new fossil fuels, but they have introduced countless fee and rate increases, including a new one that speculators must pay to designate land for lease,” she continued. “As a result, the Biden-Harris administration has issued the fewest federal leases of any administration in history.”

CLICK HERE TO READ MORE FROM THE WASHINGTON EXAMINER

Bradbury warned that without major changes, the trend of low lease sales could continue “to the detriment of Western states and local economies that rely on this activity for financing.”

BLM did not respond Washington Examiner’s request for comment.