WEA cites much fewer Rockies federal lease sales since 2008

Federal oil and gas leasing in the Rocky Mountains dropped significantly from fiscal 2008 during fiscal 2011, the Western Energy Alliance reported.

Federal oil and gas leasing in the Rocky Mountains dropped significantly from fiscal 2008 during fiscal 2011, the Western Energy Alliance reported. Lease parcels offered fell 70%, total acreage plunged 81%, and revenue declined 44% in the 12-month period ending Sept. 30, it said on Sept. 26. North Dakota was the only state in the region to show an increase because of the Bakken shale oil boom, it added.

The US Bureau of Land Management responded that what it considers a slight decline could be attributed to fewer expressions of interest by producers, increased efforts to resolve concerns before leases are offered, and a more measure leasing approach that has reduced the number of protests.

WEA said there were a few bright spots associated with not only the Bakken formation in North Dakota and Wyoming, but also with the Niobrara in Wyoming. North Dakota leasing, while surpassing 2008 by only 416 acres, generated $104 million, or 112% more, in revenue during 2011, while Montana acreage, though down 58%, produced 119% more in revenue, it indicated. BLM’s Wyoming state office had its most profitable sale in history in August, generating $49 million, although overall 2011 revenue was down 33% from 2008, it said.

Overall federal leasing in the Rockies was down despite these strong performances, WEA noted. Colorado’s BLM office offered only four parcels during the year, and Utah’s was close behind with just 17, it reported.

“The Bakken and Niobrara formations are contributing lease revenues that help to reduce government deficits today, while holding the promise of future development and production,” said Kathleen Sgamma, WEA government and public affairs director.

Hopes for more sales

“High-value lease sales in these areas indicate industry interest and the potential for significant new government revenue,” Sgamma said, adding, “Now that BLM has worked through its new leasing policies, we hope it will offer sufficient acreage in fiscal 2012 to more closely align with industry interest and enable companies to increase jobs and economic activity across the West.”

BLM said, however, that current and future lease sales are benefiting from reforms it has instituted since 2008. The percentage of onshore federal leases protested jumped from 1% in 1998 to nearly 50% in 2009, making BLM invest vast amounts of staff time and attention to defending time-consuming and costly lawsuits and revisiting the leasing process after receiving direction from the courts, it said in a Sept. 26 response.

Even with the reforms in place, the number of protests grew from 1,108 of 3,389 parcels offered in fiscal 2008 to 1,475 of 3,127 parcels offered in 2009 before declining to 665 protests of 1,636 parcels offered in 2010, it said. “As of Sept. 15, just 105 parcels had been protested out of 1,044 offered in fiscal 2011,” it said, adding, “Furthermore, in the first quarter, the Wyoming state office used the reforms to resolve many protested leases, releasing monies held in escrow due to these protests.”

It said leasing remains strong and follows the market demands and BLM has adjudicated past parcels sold but not leased due to protests and appeals; and that from existing leases it currently provides an inventory of 7,000 drilling permits issued and not-yet-drilled.

Twenty-three lease sales have been held so far in fiscal 2011, selling 932 parcels covering 674,481 acres and generating $181 million in bonus bid revenue, according to BLM. The figure includes $66 million received in a record lease sale for BLM Montana-Dakotas on July 12 in which all 32,181 acres offered were sold, making it the second most-successful onshore lease sale in the history of BLM’s oil and gas leasing program, it said. The sale involved Bakken play acreage and there were no protests, it added.

Contact Nick Snow at nicks@pennwell.com.

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