This week, the Bureau of Land Management held three auctions for leases to develop oil and gas on federal lands in four states: North Dakota, Wyoming, Louisiana, and Michigan. These sales highlight the need to reform federal onshore oil and gas leasing policies, including raising the onshore royalty rate, updating oil and gas bonding requirements, and prioritizing leasing land with high potential for oil and gas development.  

In total, the Bureau of Land Management (BLM) offered 134 parcels covering about 132,815 acres of federal land for oil and gas development. Combined, BLM sold 85 parcels containing 74,950 acres. 

North Dakota (6/27): 

In North Dakota, 14 parcels covering 5,672 acres of federal land, were offered at auction for oil and gas leasing. All 14 parcels were bid on. North Dakota leases had an average winning bid of $2,646/acre.  

Wyoming (6/28 – 6/29): 

In Wyoming, 116 parcels encompassing 127,015 acres of federal lands were offered for sale. Only 67 parcels containing 69,149 acres, or just over half of the acres offered, were sold. On average, the winning bid for these leases was $211/acre. More than two thirds of all acres sold, 47,253 acres, were sold at the minimum bid of $10/acre. 

Louisiana and Michigan (6/29): 

Of the 3 parcels covering 88.8 acres of federal land in Louisiana at auction, all were sold, at an average of $1,918/acre. On the same day as Louisiana’s sale, an oil and gas lease sale was held in Michigan. There was 1 parcel for sale, covering 40 acres of land. It was sold at $14/acre. 

This week’s sales included new reforms which were recently implemented within the Inflation Reduction Act (IRA). These include: 

• A federal onshore royalty rate of 16.67% (raised from 12.5%) 
• Rental rates of $3/acre for the first 2 years, $5/acre for years 3-8, and no less than $15/acre for years 9-10 (raised from $1.50/acre for years 1-5 and $2/acre for years 5-9) 

• Minimum bid of $10/acre (raised from $2/acre) 
• End to noncompetitive leasing 

These reforms are an essential step in modernizing onshore federal oil and gas leasing. However, there is more to be done. The results of the sales this week and the sale in New Mexico in May also suggest that the updated royalty rate of 16.67% did not reduce the competitiveness of bids. While the new 16.67% royalty rate is an improvement from the century-old rate of 12.5%, it is still lower than what the Department of the Interior (DOI) charges in federal waters (18.75%) and what many states charge. DOI previously included a 18.75% royalty rate in their June 2022 onshore lease sales, with results also preliminarily suggesting that a higher royalty rate of 18.75% will not lead to reduced bid revenue.  

Additionally, all of the leases sold this week carry outdated bonding requirements. Oil and gas bonds are meant to ensure that cleanup is paid for by the operator when drilling ceases, but current bonding requirements are insufficient to cover the high costs of reclamation. Without bonding reform, taxpayers will continue to be stuck with the liabilities of cleanups and plugging wells.