First Biden Administration Onshore Lease Sales Bring In Nearly $22 Million
If there was any doubt that the U.S. oil and natural gas industry is interested in investing in increasing production on federal lands, it was laid to rest this week: Seventy percent of parcels offered received bids resulting in nearly $22 million during the first onshore sales to take place since early January 2021.
That money will be split down the middle between the U.S. Treasury and individual states meaning that Wyoming – which had the largest amount of acreage offered – will receive around $6.5 million and North Dakota – which had the highest bid per acre on one parcel: a whopping $52,001 – is looking to receive about $3.6 million.
These are important revenue dollars that help fund critical services and education in states. At the federal level continued leasing ensures funding remains for important conservation efforts, as the Western Energy Alliance recently explained:
“Under the Great American Outdoors Act (GAOA), our industry almost exclusively funds the $2.8 billion annually provided for infrastructure in national parks, wildlife refuges, and other public lands. GAOA established a new National Park and Public Lands Legacy Restoration Fund while permanently funding the popular Land and Water Conservation Fund. The former receives over 90 percent of its funding from onshore oil and natural gas production and the latter receives 100 percent from offshore production.”
High Bids Despite Continued Uncertainty
These high dollar sales occurred despite a 50 percent increase in royalty rates on the new leases, continued uncertainty over the federal regulatory environment and the Dept. of Interior’s continued delays on authorizing sales that took place in the fourth quarter of 2020 in some of these states.
As one oil and gas executive recently told the Federal Reserve Bank of Dallas:
“The highest uncertainties are no longer below ground (ultimate recoveries, initial production rates, gas–oil ratios, operating expenses), as we’ve gotten very good at forecasting, estimating and predicting those. No, the highest uncertainties now are all above ground (politics, windfall profits tax, surtaxes, leasing bans, product prices, inflation, supply times, material availabilities, contractor availabilities and capital availability).” (emphasis added)
Just imagine what this sale could have looked like with the remaining 80 percent of parcels offered and a clear view of the administration’s plan for future oil and natural gas development on U.S. lands and waters.