Is oil and gas leasing returning to Utah?

The Bureau of Land Management plans to offer 32,000 acres in the first Utah auction since President Joe Biden took office, but in places not known for energy potential

(Trent Nelson | The Salt Lake Tribune) The Three Rivers field west of the Ouray National Wildlife Refuge, pictured on Nov. 17, 2021, is among Utah’s most productive oil and gas fields. After a hiatus lasting more than two years, the federal government announced plans to resume leasing public land in Utah for development. This photograph was taken on a flight chartered by LightHawk.

No public land in Utah has been auctioned for oil and gas development since President Joe Biden was sworn in nearly two years ago while his administration re-evaluated the oft-criticized federal leasing program.

Now the first lands in Nevada and Utah are to be offered next year under revised rules that substantially increase the cost for those looking to buy, hold and develop oil and gas leases on public land.

Last week, the Interior Department released a list of 18 parcels covering nearly 32,000 acres in Sanpete and Wayne counties, triggering an environmental review that is expected to be released in March. The Bureau of Land Management would take bids on these parcels at its online quarterly auction in September.

Nothing is being offered near Utah’s oil and gas producing regions in eastern Utah, but rather in areas that have not seen much drilling in the past.

The plots are a largely contiguous 27,000-acre block in the Sevier Mountains northwest of Gunnison and a 5,000-acre block outside Loa in the Fishlake National Forest, about five miles west of Capitol Reef National Park. These lands were anonymously “nominated” for leasing by industry representatives who were presumably interested in their potential.

Under new leasing rules outlined in the Inflation Reduction Act, the minimum bid has been raised from $2 to $10 per acre and the production royalty was increased from 12.5% to 16.67%. Annual rents were doubled to $3 per acre for the first two years; $5 for the third through eighth years; and $15 thereafter. This means the cost of acquiring and maintaining federal oil and gas leases in Utah and other Western states will be substantially greater, potentially dampening participation in future auctions, especially by speculators who lack the means and expertise to drill on a federal lease.

Speculative bidding has been rampant at past Utah auctions to the detriment of U.S. taxpayers, according to critics. The new rules now slam the door on the once-common practice of offering leases that don’t sell at auction for $1.50 an acre over the counter.

Despite the tougher rules, the proposed Utah sale drew a yellow card from environmental groups that argue the Department of Interior [DOI] should do more to overhaul the “antiquated” federal leasing program through a comprehensive rule-making process before offering any more public land for development.

Critics insist the BLM should require developers to cover reclamation costs upfront, avoid wholesale leasing of areas with minimal potential and make the leasing process more transparent to allow the public meaningful participation.

“Continued leasing under the existing program without more common sense reforms that build on the improvements in the Inflation Reduction Act threatens to impede opportunities for recreation that could otherwise benefit regional economic development,” said Jason Keith, Public Land Solutions managing director.” Our public lands, local outdoor recreation businesses, and communities across the West need DOI to act swiftly and enact much-needed reforms to put the public’s interests first.”

But others, such as the industry association Western Energy Alliance, argue the public’s interest would be better served by increased leasing, since that would result in increased oil and gas production which in turn would reduce prices and create jobs.

Soon after taking office, Biden paused the federal leasing program and has been slow to restart it in the face of pressure to confront the climate crisis.

Under Biden’s watch, the BLM has twice scheduled auctions in Utah only to cancel them. Both were to offer parcels in the Uinta Basin, Utah’s main oil and gas-producing region. None of those previously offered parcels nor any others in the basin will be on the table at next year’s auction, raising questions about how serious the agency is to resume leasing in Utah.

Offering lands for lease is not the same as authorizing development. First, a credible company needs to obtain the lease and then decide it is worth drilling, which must undergo further analysis by the BLM before any ground work can begin.

In the same announcement, Interior identified 65,000 acres it plans to offer for lease in Nevada, a state with nearly zero oil and gas activity.

The public has until Dec. 21 to submit comments on the proposed sales and environmental assessments will be released in March, opening another round of public comment. If the sales are approved, the parcels would go under the hammer at the September online auction.

The BLM recently unveiled plans to offer 260,000 acres next year in New Mexico and Wyoming, the West’s biggest oil and gas producers.

The offerings are in accordance with provisions in the Inflation Reduction Act obligating the BLM to offer leases on at least 2 million acres for onshore energy development and 60 million acres offshore. That provision was included to win support from pro-energy Democratic lawmakers for the bill, which is largely aimed at confronting climate change and reducing the emissions causing it.

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