After 15-month leasing pause, BLM offers just one small parcel in Utah for oil and gas

Interior Secretary Haaland announces reforms to the federal leasing program, upsetting both industry and environmentalists.

(Trent Nelson | The Salt Lake Tribune) Horseshoe Bend, south of Vernal, on Wednesday, Nov. 17, 2021. The area is near the one lease the BLM said would go on sale on Monday. Overflight provided by LightHawk.

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The Biden administration is to resume oil and gas leasing this summer on public lands in Western states under a reformed program unveiled last week by the Interior Department.

On Monday, the Bureau of Land Management posted lists of parcels to be available for sale at the June 28 online auctions, totaling 144,000 acres, satisfying a successful lawsuit brought by the oil and gas industry. For Utah, the acreage to be offered is nearly non-existent: a single 160-acre parcel.

The BLM’s lease auctions are usually held quarterly, but none has been held for any state since December 2020 while Interior Secretary Deb Haaland has studied reforming the federal oil and gas program. Critics have long complained the process promotes speculation and the interests of the fossil fuel industry at the expense of the climate and U.S. taxpayers.

“How we manage our public lands and waters says everything about what we value as a nation. For too long, the federal oil and gas leasing programs have prioritized the wants of extractive industries above local communities, the natural environment, the impact on our air and water, the needs of Tribal Nations, and, moreover, other uses of our shared public lands,” Haaland said Friday when she announced the reforms. “Today, we begin to reset how and what we consider to be the highest and best use of Americans’ resources for the benefit of all current and future generations.”

Stepped-up leasing will not likely dampen soaring gasoline and diesel prices since it won’t have much impact on oil production in the near term, observers say. The industry already holds about 26 million federal acres under lease. Half of the leases remain undeveloped, indicating the industry already has plenty to work with as it ramps up drilling to take advantage of the current surge in global energy prices.

Less than half the 3 million acres under lease in Utah are in production, according to BLM statistics.

The reforms were largely crafted in response to a report Interior issued in November.

“Industry suggests that the significant surplus of leases and permits is necessary for a successful business model, but this speculative approach contributes to unbalanced land management,” the November report said. “When land is under contract for potential oil and gas activity, the shared public lands cannot be managed for other purposes, such as conservation or recreation.”

Haaland’s reset means a 50% hike in the royalties rates the industry pays on oil and gas production off federal leases bringing it to 18.75%. The report also recommended increasing the minimum per-acre bid and annual rental beyond $1.50 an acre.

Oil and gas companies fumed that the reforms would only complicate development on public lands and slow energy production at a time of skyrocketing energy prices.

Environmentalists, however, counter that the industry holds leases on enough oil and gas deposits, issued with abandon under Trump’s “American energy dominance” agenda, to keep it busy for years. Groups see Biden’s tolerance for oil and gas exploration and production on public land as a disappointing back peddle to the president’s pledge to combat climate change.

Although the reforms call for greater scientific and public engagement in the leasing process, environmentalists condemned the federal government’s decision to resume opening public lands to produce the fossil energy blamed for climate change.

“By offering leases now, BLM is simply propping up speculative leasing and foreclosing other uses of these public lands,” said Steve Bloch, legal director for the Southern Utah Wilderness Alliance. “It’s an open secret that there is little connection between lands offered for lease, the number of wells drilled, or the price of gas at the pump. We know that without quickly transitioning away from fossil fuels, the intermountain west and in particular the Colorado Plateau will bear the brunt of a hotter, drier and more unpredictable climate.”

In December, the BLM released a list of six parcels in Utah spanning 6,645 acres that it planned to lease. Four were on the Green River near the Horseshoe Bend oil and gas field 10 miles south of Vernal. This is an area with a long history of past drilling.

On Monday, the BLM reposted the environmental assessment, but with a different decision. In what is probably the slimmest lease auction in BLM history, the agency will offer just a single tiny parcel, amounting to a quarter-section near Horseshoe Bend.

Even the original offering hardly registers compared with Utah’s Trump-era sales, when tens, even hundreds of thousands of acres were offered at a single auction. Many if not most parcels garnered only the minimum $2-an-acre bid or no bid at all.

While environmental groups decried the federal government’s resumption of leasing, the industry was equally perplexed with the slim offerings Interior is making available after such a long pause. Of the 733,000 acres nominated for leasing, the BLM plans to offer just 144,000 acres.

“While we’re glad to see BLM is finally going to announce a sale, the extreme reduction of acreage by 80%, after a year and a quarter without a single sale, is unwarranted and does nothing to show that the administration takes high energy prices seriously,” said Kathleen Sgamma, president of the Western Energy Alliance. “This administration has decided to make leasing and production a political football, and Americans are paying the price at the pump.

She contends the Biden administration leasing moratorium was illegal and the reforms announced Friday will impede oil production and keep gasoline prices high. Sgamma singled out the new royalty, which she characterized as a “tax.”

“Raising the royalty rate 50% increases the costs of production on federal lands, which already carry a higher cost than nonfederal lands,” she said. “This increased tax will have the effect of any other tax increase — you get less of what’s taxed, in this case, federal oil and natural gas.”

The new 18.75% rate is more in line with market rates, according to Interior, although it is more than the 16.67% charged by Utah land managers. Interior estimated it would have collected an additional $12.4 billion between 2010 and 2019 had the new royalty been in place, rather than the old 12.5% rate.

While leasing has been under a hiatus since Joe Biden was sworn in as president, the BLM has been processing drilling permit applications at a rate that far outpaced President Donald Trump’s first year in office. As of Feb. 28, the industry held 486 approved permits to drill on Utah’s public lands, with another 126 in the pipeline.