The Bureau of Land Management (BLM) has scheduled an auction for oil and gas leases in June that will be one of the smallest seen in Wyoming since at least 2009. The June 27 auction is for 18 oil and gas parcels totaling 10,155.3 acres–down about 1,600 acres from the BLM’s quarterly Wyoming auction held in March. The March auction was the first indication of the Biden administration’s push away from oil and gas drilling on federal lands, as it embraced new rules for bidding on oil and gas leases. A federal law, the Democrat-passed Inflation Reduction Act of 2022, raised royalty rates (to 16.67 percent), and also raised the minimum bids for oil leasing on federal lands and the rental rates for oil leases if oil companies do not drill on their leased land. With just over 10,000 acres proposed for the second quarter and around 200 acres offered in the third quarter, the Biden administration is doing its best to reduce the future productivity of the U.S. oil and gas industry. This is consistent with Biden’s promise to end fossil fuels, which supply over 80 percent of U.S. energy.
The industry has concerns over both the number of parcels and the overall acreage being offered by President Biden’s Department of Interior. Two years ago, during the pandemic, the BLM leased a total of 128,500 acres in the Western United States. At that time, it was considered a historic low. A trade group is now forecasting that the remaining six months could lead to a drop of 60 percent in BLM land leased to less than 50,000 acres for all of 2024. Since oil and gas deposits take years to develop and bring to market, this means lean days in the years to come.
Natural gas production in Wyoming has been steadily decreasing since 2009, the height of the coalbed methane boom, according to a joint report published in January by the Wyoming State Geological Survey (WSGS) and Wyoming Oil and Gas Conservation Commission (WOGCC). Wyoming’s trend of declining natural gas production is expected to continue, despite forecasts of increased production nationwide in the future. The main reason for declining natural gas production in Wyoming is the lack of new gas wells being drilled.
For oil, the joint report found more than 95 million barrels of oil were expected to be produced in Wyoming in 2023–about 3 million more barrels than was produced in 2022. Nationally, oil production now exceeds pre-pandemic volumes, but Wyoming’s oil production growth has not yet surpassed its 2019 high. Lease sales are important to the states as fifty percent of onshore lease revenue goes to the state in which the lease is located (except in the case of Alaska, where 90 percent of the royalties are to go back to the state).
Biden’s Track Record on Oil and Gas lease Sales
BLM under the Department of the Interior (DOI) is responsible for leasing oil and gas for development throughout the federal onshore mineral estate. Taxpayers own 2.47 billion acres of subsurface mineral estate, including energy resources, an area larger than the land mass of the total nation. Under the Mineral Leasing Act of 1920, the Secretary of the Interior is required to hold leases sales at least quarterly in every state where unleased lands are available. The leases go to the highest bidder who offers at least a “national minimum acceptable bid” per acre. The highest bidder who is awarded a lease is also required to pay rent until oil and gas production starts, at which point the lessee will start paying a royalty.
Leasing is the first step in the process to develop Federal oil and gas resources. Before development operations can begin, an operator must submit an application for permit to drill detailing development plans. The BLM reviews applications for permits to drill, posts them for public review, conducts an environmental analysis and coordinates with State partners and stakeholders.
In January 2021, President Biden signed an executive order freezing all new oil and gas leasing on federal lands. In June 2021, a federal court issued an injunction ordering the administration to halt its moratorium on new lease sales that Biden had ordered during his first week as president. About a year later, in June 2022, the BLM held its first lease sales since President Biden assumed office after repeated delays. The Biden administration has held the fewest outer continental shelf (OCS) sales in the history of the program and leased fewer acres than any President since WWII.
The Institute for Energy Research has identified 200 ways that the Biden administration and its Democrat friends in Congress have made it harder to produce oil and gas in the United States. Since that blog was posted, the Biden administration has proposed removal of 13 million acres from the National Petroleum Reserve—Alaska, finalized policies that increase the cost of producing oil and gas on federal land initiated by the Democrat-passed Inflation Reduction Act, and cut the amount of land to be leased for oil and gas development in a New Mexico auction by over 3000 acres. The Inflation Reduction Act increased the minimum bid to $10 per acre; rent to $3 per acre for the first 2 years, $5 per acre for year 3 to 8, and then no less than $15 per acre for year 9 to 10; and lifted the onshore royalty rate to 16.67 percent.
Conclusion
The Biden administration actions regarding oil and natural gas development on federal lands harm national security, reduce jobs, and raise prices for oil and gasoline for American consumers. With global oil demand increasing, global oil production slowing, and geopolitical tensions high, it is a dangerously vulnerable time to put restrictions on domestic oil and gas production, but Biden is working to gain votes from people unfamiliar with energy facts for this November and doing what he can to demonstrate he is serious about his campaign pledge to end oil and gas production.
