The Bureau of Land Management (BLM) generated $1.1 billion from oil and gas lease sales in calendar year 2018, nearly tripling what had been the agency’s previous record high of $408 billion in 2008. Bonus bids from the 28 oil and gas lease sales totaled $1,151,109,064 based on preliminary figures. A bonus bid is a one-time payment in exchange for exclusive access to explore for hydrocarbons on a parcel and grants an exclusive lease for a set period of time. A total of 1,412 parcels, covering almost 1.5 million acres, were leased. The lease sales generated nearly as much revenue as the BLM’s $1.1 billion budget for 2018.
In 2017, oil and gas lease sales generated $358 million. They supported 284,000 jobs in fiscal year 2017, contributing $59.6 billion in output to the U.S. economy. In 2019, the BLM is scheduled to hold 28 oil and gas lease sales.
By statute, the BLM is required to offer quarterly oil and gas leases sales of available federal lands. BLM state offices therefore conduct lease sales quarterly when parcels are available for lease. These lease sales represent parcels that have cleared environmental review and received public comment. The BLM issues leases for a 10-year period. The leases are a contract to explore and develop any potential oil and gas. The leases may earn an extension if the lessee establishes production, otherwise the government earns annual rent payments from them. Additionally, if oil and gas are produced, a percentage royalty payment is paid to the Treasury. Americans not only receive the benefit of more secure and affordable energy, U.S. taxpayers get paid handsomely for the right to explore and produce those hydrocarbons.
State Lease Sales
New Mexico had the largest lease sale of 2018, generating approximately $972 million in bonus bids for 142 parcels, generating about 88 percent of all BLM’s revenue from lease sales in 2018. The two-day lease sale, held in September, also brought in more revenue than all BLM oil and gas lease sales in 2017 combined and broke all previous records. Forty-eight percent of lease sale revenue goes to the state while the rest goes to the U.S. Treasury. The state also receives half of the revenue from royalties if oil and gas is developed on the lease. New Mexico is currently running a significant budget surplus due in large part to increased oil and gas production on and off federal lands.
New Mexico’s boom was due to its oil and gas resources in the Permian Basin. In December of 2018, the U.S. Geological Survey (USGS) released new estimates for technically recoverable resources in the Permian, announcing that the findings are the “largest continuous oil and gas assessments ever released.” According to the USGS, the Wolfcamp Shale and overlying Bone Spring Formation in the Delaware Basin portion of Texas and New Mexico’s Permian Basin contain an estimated mean of 46.3 billion barrels of oil, 281 trillion cubic feet of natural gas, and 20 billion barrels of natural gas liquids. These results demonstrate the impact that improved technologies such as hydraulic fracturing and horizontal and directional drilling have had on increasing the estimates of undiscovered, technically recoverable continuous resources.
Undiscovered resources are those that are estimated to exist based on geologic knowledge and already established production, while technically recoverable resources are those that can be produced using currently available technology and industry practices. Whether or not it is profitable to produce these resources has not been evaluated, but is generally a decision made by a lessee based upon current markets and prices.
Conclusion
President Trump’s energy dominance approach is working. According to Acting Secretary of the Interior Bernhardt, “Responsible production of domestic energy keeps energy prices low for American families and businesses, reduces our dependence on foreign oil, creates American jobs, and generates billions of dollars in revenue to the Federal Treasury.”
