A Week of Weak Federal Oil & Gas Lease Auctions

A Week of Weak Federal Oil & Gas Lease AuctionsFour lease sales for the right to develop oil and gas on federal land in eight states disappoint

Energy & Natural Resources,  | Analysis
Sep 29, 2020  | 5 min read | Print Article

Last week, the Bureau of Land Management held four auctions for leases to develop oil and gas on federal lands in eight states, with mixed results. Interest from oil and gas companies was higher than it has been in recent sales, but bid amounts in the auctions for pieces of federal land, or ‘parcels,’ were down in most cases. Overall, the four leases sales underscored the need for reforming leasing policies like the minimum bid amount and leasing strategy as the Department of the Interior resumes a more normal leasing schedule in the last quarter of 2020.

In total, the Bureau of Land Management (BLM) auctioned off leases for 116 parcels covering 93,000 acres of federal land in the four sales in eight states.

COLORADO (9/24):

Three-quarters of the acres leased last week were in Colorado. In the Colorado sale, 55 parcels stretching across 69,700 acres were offered and leased. For those parcels, companies bid a total of $1,527,600, or just $22 per acre, on average. That level of bidding is higher than the most recent sales in Colorado, but well below the historical average of $122 per acre received over last five years. Further, 9,300 acres sold in the sale received the minimum legal bid of $2 per acre, and a full third of all acres leased received bids of $10 per acre or less.

EASTERN STATES (9/24):

In another of the lease sales, the BLM Eastern States office auctioned off 15 leases covering 1,600 acres in four states: Alabama, Louisiana, Michigan, and Mississippi. The two parcels on offer in Louisiana attracted high bids, as did two others in Mississippi and one in Alabama. But the remaining 10 parcels, or two-thirds of all available, were sold for the minimum bid of $2 per acre that was last adjusted in 1987.

MONTANA, NORTH DAKOTA (9/22):

Results were similarly poor in the lease sale offering parcels in Montana and North Dakota. In that auction, leases for all 38 parcels covering 17,300 acres were sold, but bidding levels were low.

Montana – Of the 11,700 acres constituting 12 parcels in Montana, nearly 80 percent sold for $10 per acre or less.

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North Dakota – In North Dakota, federal oil and gas leases have often garnered high bids in recent BLM auctions. The average bid in sales from 2015 to 2019 was $1,458 per acre. But last week, North Dakota parcels received an average bid per acre that was 96 percent lower at just $57.

WYOMING (9/24):

In the last sale, the BLM sold leases for eight parcels covering 4,400 acres in Wyoming. Originally, the BLM Wyoming Office planned to put 155 leases granting development rights to 182,000 acres up for auction. But in the weeks leading up to the sale, the agency had to pull the majority of the auction as well as an entire separate auction that had been delayed from the summer to comply with a federal court’s ruling. The smaller auction was a marked shift from recent years in which the BLM has offered up increasingly more acres for lease and seen bidding levels drop. In 2019, the BLM offered 1.6 million acres for lease in Wyoming, a seven-fold increase from the amount offered in 2016.

In the sale for leases in Wyoming last week, however, the limited auction attracted bids of $306 per acre on average, the third highest in the state over the last six years. The results suggest the BLM could gain higher returns for taxpayers by leasing more strategically and concentrating competition, rather than opening up as much of the federal mineral estate as possible for lease, as it has over the last few years.

Complete results are reported below:

 

Results from Four BLM O&G Lease Sales on Sept. 22-24, 2020

Offered Sold   2015-2019 Sale compared to 2015-2019 average.
BLM Office State Parcels Acres Parcels Acres Avg. Bid/Acre Avg. Bid/Acre
Colorado CO 55 69,726 55 69,726 $21.91 $121.77 -84.2%
Eastern States AL 2 160 2 160 $76.66 $55.81 -75.8%
LA 2 486 2 486 $740.20 $195.18 +837.5%
MI 1 80 1 80 $2.00 $66.18 -67.8%
MS 10 886 10 886 $14.28 $23.54 +35.7%
Wyoming WY 8 4,427 8 4,427 $305.68 $162.86 +79.9%
Montana MT 12 11,713 12 11,713 $20.14 $82.74 -22.3%
ND 26 5,589 26 5,589 $57.12 $1,457.85 -85.0%
Total 116 93,068 116 93,068

 

 

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