Wyoming oil and gas lease sale sees few bids as industry fears bust

In the Wednesday sale, the Bureau of Land Management offered four lots in total covering a little more than 159 acres in the top oil-producing state. Only two of the lots that stretched just under 80 acres received bids for a total of $27,600, sparking concerns over a bust.

This is significantly lower than the Wyoming lease sale held in June, which netted $5,012,502 for 15 lots that covered more than 8,500 acres.

While Republicans have urged the Biden administration to hold more frequent lease sales to shore up national energy security, some in the industry now say many lots offered are not even worth bidding on.

Kirkwood Oil and Gas Landman Steve Degenfelder told Cowboy State Daily this week that his company decided against bidding on the sale over the lots’ sizes.

“Forty acres doesn’t make a difference to exploration when you’re trying to put together 20,000 or 50,000 acres,” Degenfelder said.

Degenfelder explained it wasn’t clear if the rumors of land had been nominated by BLM or an oil and gas company within the industry. If it had been by a company, he suggested that it could have been “many years ago.” A spokesperson for BLM Wyoming insisted on this E&E News the leases involved in the sale were “completely driven by public nominations.”

Others have predicted that the low lease sale is the result of regulations issued by the Biden administration, indicating there may be an emerging trend.

“Without question, the low sale is a symptom of a great problem,” Pete Obermueller, president of the Petroleum Association of Wyoming, told the Washington Examiner in an email.

He claimed that while the industry in Wyoming has nominated “millions of high value, high potential acreage” in the state for lease sales, those lots have not been offered. Obermueller further alleged that BLM has deferred over 600,000 acres worth of lease sales, leaving them stuck in a “regulatory purgatory.”

“Instead, in this sale and most sales under the Biden Administration, they offer a patchwork of non-contiguous acres that make horizontal drilling nearly impossible,” Obermueller said.

Like many other oil-producing states, Wyoming heavily relies on horizontal wells that stretch anywhere from a few feet to several miles. This often can result in companies needing to purchase and combine several leases for one well project. Obermueller explained that for Wyoming, 78% of the state’s oil and gas resources have a “federal nexus,” meaning they are subject to federal permissions.

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

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

In order to hold a lease sale, BLM first accepts nominations for plots of land to be auctioned. These nominations can be from any member of the public as well as the agency itself. Before these lands can be included in the sale, they must be checked to ensure compliance with regulations such as protections for wildlife habitats, through the National Environmental 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 offered in a sale no sooner than 270 days after the end of the nomination period, which occurs in the first two months of each quarter, according to E&E News. During the temporary pause implemented by the Biden administration, this process was disrupted.

Some have also reportedly pointed to the 2022 Inflation Reduction Act for causing more disruptions despite including several requirements that the government offer new leases for oil and gas on federal property. The climate law also made it more expensive to drill on public lands by raising the royalty fee, which hadn’t changed since 1920, from 12.5% ​​to 16.67%. Additionally, it raised the minimum auction bid from $2 per acre to $10.

As the demand for energy only continues to grow within the United States and worldwide, Obermueller claimed these hurdles will “choke” oil and gas production in the country, causing higher prices and less reliability.

Top energy trade organizations and oil groups have also voiced concerns over the recent low lease sale.

“This is yet another likely consequence of the Biden administration’s record of delaying and canceling quarterly lease sales, reducing acreage available for lease, and discouraging development of American oil and natural gas,” said Scott Lauermann, a spokesman for the American Petroleum Institute.

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

“Not only have they limited what would open to new fossil fuel development, but they’ve instituted a myriad of fee and rate increases, including a new that speculators must pay to nominate land for leasing,” she continued. “The result is that the Biden-Harris administration has issued the fewest federal leases of any administration on record.”

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Bradbury warned that without major change, the trend of low sale leases may continue, “to the detriment of western states and local economies that rely on funding from these activities.”

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