The Bureau of Land Management (BLM), an agency within the Department of the Interior responsible for managing onshore federal oil and gas resources, held a three-day auction for oil and gas leases on federal land in Utah on September 9-11. Through the sale, the BLM made 144 parcels covering over 180,00 acres of federal land available to private companies for oil and gas exploration and development. Only a fraction of those parcels received bids, however, and those that did generated little revenue for taxpayers, on average
The BLM conducts oil and gas lease sales through competitive bidding in an attempt to achieve the highest return for taxpayers, the owners of US federal lands and their resources. But under current policy set back in 1987, the agency can accept a minimum bid of just $2 per acre for federal lands. Of the 63 parcels sold in the September Utah sale, 33 parcels – 52 percent – were leased for the minimum bid of $2 per acre. The large portion of parcels selling for the legal minimum means the outdated lease terms had a significant effect on revenue. Had the minimum bid and federal rental rate been indexed to inflation since they were set in 1987, taxpayers would’ve earned $200,000 more from the sale.
There have been a total of 18 federal oil and gas lease sales in Utah in the last decade that have sold 10 or more parcels. Only one of those before this week’s sale sold more than 50 percent of parcels for the $2/acre legal minimum – last year’s September sale. It’s not a coincidence these are also the two sales with the most acreage offered in the last decade.
While the last 34 sales in the state since 2009 offered about 46,000 acres for lease on average, this and last September’s sale offered over triple that average, and the industry response has not been commensurate. With this administration’s approach of making as much land as possible available for lease, more parcels with little development potential can be snagged by speculators, and there’s less competition for each parcel in general. We explore this issue in-depth in our profile of the federal oil and gas program in Utah.