Year’s first oil and gas lease stands apart

Low number of parcels, prices show changing dynamics of oil and gas development in Cowboy State

CASPER — The Bureau of Land Management Wyoming State Office this month completed its first oil and gas lease sale of 2024 — and the results stand in stark contrast to previous lease sales, calling attention to the changing dynamics around oil and gas development in Wyoming.

The sale stood out, on the one hand, because of the relatively low number of parcels offered.

With fewer than 13,000 acres up for lease, it was amongst the agency’s smallest lease offering under the Biden administration and dwarfed in comparison to the acreage commonly offered by the previous administration.

But even as the auctioned acreage was comparatively minimal, the March lease saw more than 90% of the parcels snapped up, a significant jump in the bidding percentage over previous lease sales.

For instance, the BLM’s three lease sales in 2023 offered a total of 229,552 acres, yet only 55% of the available lands were bid on.

Some attribute 2023’s low lease activity to the recently hiked federal mineral royalty rate, which was lifted for the first time in a century from 12.5% 16.67%.

Additionally, Wyoming’s oil industry advocates say, the unaggressive year may reflect uncertainty in the regulatory environment, as operators wait for the codification of new rules and the outcomes of ongoing litigation.

“Some of our operators may just be in a waiting pattern to figure out where the regulatory state falls on things like air emissions, water quality, all sorts of things that could impact the industry,” said Ryan McConnaughey, vice president of the Petroleum Association of Wyoming.

Others believe the comparatively low bid rates of 2023 indicate a different reality: that the industry appetite for Wyoming’s federal lands is diminishing.

The point was made by the conservation group Center for Western Priorities, in a data analysis that showed that in addition to the low percentage of BLM parcel bids in 2023 in Wyoming, the available tracts saw little competition, which they believe reflects tepid industry interest.

“Almost 80 percent of the acres BLM offered didn’t sell at all or sold for the minimum bid. This shows how little overall interest there is in new competitive leasing in Wyoming,” the organization stated.

The analysis also reveals that there is lopsided interest in available lands, with the majority of lease revenue coming from a limited number of tracts; the statistical average bid was $874 per acre, but the median bid was just $21.

“That gap between the average and median shows that the revenue is heavily skewed by a small handful of parcels that oil and gas companies find valuable, while the vast majority of public land leased by drillers has negligible value,” the organization states, adding that the low number of nominated parcels is further evidence of diminished interest, as the BLM is required to auction at least half of the nominated acreage.

But industry advocates in Wyoming contest that logic.

Ryan McConnaughey of PAW explained that one of the state’s most productive wells was drilled in the Powder River Basin as recently as 2022 and questions if the feds may be tying up parcel nominations through administrative processes.

“Maybe for this sale nominations are down, but we’re still seeing a backlog of expressions of interest pending before the BLM that had never been acted on, or are in deferred status. I think the BLM can use their opaque, bureaucratic process to pick and choose which leases they want to give,” he said. “I think this lease sale shows that there is still strong interest in Wyoming oil and gas reserves even with the increasingly strong headwinds that we see from the Biden administration.”

This story was published on March 14, 2024.