At the end of June, the Bureau of Land Management (BLM) held the first quarterly auctions for oil and gas leases on federal lands in the Biden Administration. Across all sales, 162 parcels containing 128,510 acres of federal lands were offered for sale in seven states—Wyoming, Montana, North Dakota, Oklahoma, New Mexico, Nevada, and Colorado.

In total, the Bureau of Land Management auctioned off 113 parcels covering 71,251 acres of federal lands for companies to develop oil and gas. The lease sales generated $22.3 million in total revenue, $22.1 million of which was from bonus bids.

In general, the sales highlighted some of the potential benefits of the temporary changes the BLM made to its leasing approach, as well as some areas still in need of reform. For all parcels offered the sales, the BLM included a royalty rate of 18.75% that’s more in line with what states offer compared to the statutory minimum rate of 12.5% set in 1920. In addition, the BLM chose to offer comparatively few acres for lease, in stark contrast with prior years when an overabundance of available acres coincided with reduced bid revenue.

The results of the lease sale appear to preliminarily indicate that a higher royalty rate will not lead to reduced bid revenue. In five of the six states with significant leasing history (Oklahoma has limited leasing and is excluded), bidding rates were up. This tracks with states that charge higher royalty rates, but additional lease sales will offer more information on any possible impacts.

The auctions, however, also demonstrate the need for long-term leasing reform. The royalty rate included for the parcels was specific to these sales. To prevent royalty losses in the future, the higher 18.75% rate that matches the rate for offshore parcels needs to be permanently established by statute.

In addition, the $2/acre minimum bid rate set in 1987 continues to cost taxpayers. Of the 67,600 acres leased in Wyoming through the auction, 45% received the minimum bid of only $2/acre. Parcels can be uncompetitive because existing production in the surrounding area is dominated by a single company, but that shouldn’t mean taxpayers are not compensated for its fair value. For example, the one parcel sold in Oklahoma was known to border leases with existing production, which increases the parcel’s value. But the company who already holds the surrounding leases was able to acquire it for the $2/acre minimum. That’s not the “fair market value” taxpayers are supposed to receive for use of federal land and its resources.

Wyoming

In Wyoming, 122 parcels covering 119,565 acres of federal lands were offered for oil and gas leasing. But only 81 parcels covering 67,627 acres, or 57% of total acres offered, were bid on, which is low compared to the 2016-2020 Wyoming state average of 89%. Average bid per acre of $191 however, is higher than the 2016-2020 state average of $170/acre. In addition, 64% of acres were leased for a bid of $10 or less and 45% of acres were leased for the $2 minimum bid amount.

Montana

The BLM Montana Office put up 8 parcels spanning 2,834 acres for sale in Montana, and 15 parcels with 572 acres for sale in North Dakota. Four parcels covering 945 acres were sold in Montana, generating $72,081 in bonus bid revenue, or $76 per acre on average, which is higher than the 2016-2020 state average of $25 per acre. All parcels offered in North Dakota got bid on, generating a total of $7.3 million in bonus bids. The average bid of $12,719 per acre in North Dakota was significantly higher than the 2016-2020 state average of $125 per acre.

New Mexico

The BLM New Mexico Office offered 5 parcels covering 521 acres for sale in New Mexico, and 1 parcel covering 15 acres for sale in Oklahoma. All parcels were sold. The only parcel offered in Oklahoma received just the legal minimum amount, or $2 per acre. Parcels offered in New Mexico received total bonus bids of $630,501, or an average of $1,211 per acre, which is lower than the 2016-2020 state average of $4,735 per acre.

Nevada

In Nevada, 5 parcels covering 2,560 acres were offered and 4 parcels covering 1,280 acres were sold. The sale generated total bonus bids of $52,080, or an average of $40.69 per acre, higher than the 2016-2020 state average of $4 per acre.

Colorado

In Colorado, of the 6 parcels covering 2,444 acres offered, 3 parcels covering 291 acres were sold. One parcel was sold for $1.2 million while the other two parcels received $3 and $4 per acre bids. Total bids add up to more than $1.2 million, or an average of $4,132 per acre, which is significantly higher than the 2016-2020 state average of $47 per acre.

Complete results reported in the tables below:

Table 1: Acres Offered and Sold

Table 2: Total Bids and Average Bids per Acre