First oil & gas lease sale nets over $14M in state

CASPER — The Bureau of Land Management’s first oil and gas lease sale in over a year netted roughly $14.7 million in Wyoming — about $1.8 million more than last year’s sale. Wyoming will receive 48% — roughly $7 million — of that revenue.

While Gov. Mark Gordon applauded the lease sale in a Monday statement, he noted that it represents “not even a quarter of a loaf.”

“The fact that our producers participated to the degree they did is a credit to the Wyoming oil and gas industry,” Gordon said in the statement. “Their efforts mean Wyoming will continue to provide energy for the Nation, even though they do so with increasing pressure from Washington, DC, to give up.”

Federal law requires the Bureau of Land Management to hold lease sales each year on a quarterly basis.

But in 2021, President Joe Biden signed an executive order to pause these sales as part of his plan to address climate change by making the environmental review process for sales more stringent.

Biden’s order quickly drew legal push back. The state of Wyoming, the Western Energy Alliance and the Petroleum Association of Wyoming challenged the order in court, but a federal judge ruled that the Biden administration had legally postponed sales scheduled for the first quarter of 2021.

A federal district court in Louisiana, however, ruled that the Biden administration couldn’t pause lease sales and forced the administration to resume sales in 2022.

Environmental groups, frustrated that the administration hadn’t made significant changes to the program, have also turned to courts; last week’s oil and gas lease sale comes amid a lawsuit against Wyoming’s June 2022 sale brought by Earthjustice on behalf of multiple environmental groups. The state of Wyoming joined the case in support of the lease sale.

The sale, plaintiffs argue, violated the 1970 National Environmental Policy Act, which directs the federal government to “create and maintain conditions under which man and nature can exist in productive harmony, and fulfill the social, economic, and other requirements of present and future generations of Americans.”

The policy doesn’t mention climate change, though many of environmental groups’ legal wins against oil and gas lease sales result from judges ruling that climate change must be considered under the measure.

Other lawsuits both challenging and supporting quarterly oil and gas lease sales in Wyoming are ongoing.

Biden’s sweeping Inflation Reduction Act increased the mandatory bid, rental cost and royalty rate on new federal leases.

Last week’s sale was the first impacted by these cost hikes.

Gordon noted in his statement that the increased fees will result in more revenue for the state, but at a cost to consumers and the oil and gas industry.

Wyoming’s oil and gas industry has also warned that the cost increases could have a chilling effect on new development in Wyoming, though it’s hard to tell at this point how those increased prices will impact the industry.

“This lease sale goes to show that there’s still strong interest in in the proven reserves in Wyoming, but we still have concerns about what the new regulations from the Inflation Reduction Act will have on that exploratory drilling,” Ryan McConnaughey, vice president of the Petroleum Association of Wyoming, said.

While the oil and gas industry frowns upon the cost hikes in the Inflation Reduction Act, Shannon Anderson, staff attorney for the Powder River Basin Resource Council, noted that the measure makes the Bureau of Land Management’s ability to grant permits and right of ways to renewable energy projects contingent on the agency’s continuation of quarterly oil and gas lease sales.

Environmental groups have also argued that the oil and gas industry will still bid on the parcels it wants despite the higher costs.

Both the Petroleum Association of Wyoming and the Powder River Basin Resource Council are involved in litigation concerning Wyoming’s oil and gas industry.

More than 250,000 acres were originally proposed for last week’s sale, Gordon’s statement said. But that was reduced to about 127,000 acres, or 116 parcels, according to the Bureau of Land Management.

Many of the originally proposed parcels were thrown out (the technical term is “deferred”) for a variety of environmental protection reasons, Anderson said.

In total, 67 parcels covering about 69,000 acres were sold. Another 49 parcels didn’t receive any bids.

Wyoming’s oil and gas industry hasn’t regained the number of drilling rigs or employees it had in 2019, according to Gordon’s statement.

The number of rigs in 2023 has hovered around 20 — a little more than half the number in 2019. Gas production continues to decline.

The Bureau of Land Management plans to hold two more quarterly lease sales this year.