Slower returns at BLM lease sale

A coal-bed methane drill site on BLM-administered land.

The Bureau of Land Management brought in $10.8 million in Wyoming’s quarterly oil and gas lease sale held in December. 78% of the parcels offered, across 123,258 acres, received bids.

In Johnson County, participants snatched up leases on 18,399 acres for a total of $307,963.

Before the sale, the BLM acknowledged six protests lodged by 13 conservation groups but did not modify its lease offerings as a result.

It was the first Wyoming sale since an October federal court ruling blocked a set of BLM regulatory amendments, released earlier in the year, that diminished Greater Sage-Grouse protections in seven western states.

The ruling instructed the BLM to revert to its sage-grouse management plan from 2015. The change re-established stricter guidelines for analyzing habitat impacts and restored broader boundaries around critical breeding grounds, called leks, in protected core areas. In late December, the state of Wyoming joined the state of Idaho, the state of Utah and the Interior Department to appeal the ruling. The Wyoming Stock Growers Association and the Petroleum Association of Wyoming are also listed as intervenors in the appeal.

As a direct result, BLM offices in Nevada and Colorado canceled or significantly modified their own December lease offerings. In Wyoming, according to the BLM’s environmental analysis documents, the sale went off with few modifications – just nine of 169 parcels nominated for lease were not offered, due to concerns over conflicts with mule deer migration corridors or with pre-existing coal leases.

About half of the parcels offered in Wyoming’s sale underlie sage-grouse core areas – as did the sole parcel offered in the September sale. The December area includes a parcel of mineral rights that underlies about one third of Gov. Mark Gordon’s Merlin Ranch east of Buffalo.

In 2014, as sage-grouse faced a potential 2015 listing under the Endangered Species Act, Gordon and his wife Jennie were two of the state’s earliest adopters of a Candidate Conservation Agreement with Assurances with the U.S. Fish and Wildlife Service. Priscilla Welles of HIP Investments LLC Ranch was the county’s other initial program entrant.

The voluntary agreements allowed participant ranchers to continue normal operations if the bird was listed – provided they undertook actions to restore and maintain prime sage-grouse habitat on their land.

“We had heard the bird might be listed, so we tried to do anything we could on our place to make sure we’re in compliance,” Jennie Gordon told the Bulletin at the time.

Sage-grouse protections have been diminished for land atop federally owned minerals multiple times in recent years.

Under a 2017 instruction memorandum, currently facing litigation from several conservation groups, BLM officials are only required to prioritize leasing outside of core habitat if offices face a backlog in lease interest requests.

“In effect, the BLM does not need to lease and develop outside of habitat management areas before considering any leasing and development within habitat,” the memo reads.

At Wyoming’s latest Sage Grouse Implementation Team meeting, held Dec. 5, an agency representative confirmed that although a high percentage of core habitat was up for lease, the BLM did not have any outstanding non-core parcels nominated and was therefore in compliance with the directive.

"In this December lease sale, BLM is again offering tens of thousands of acres of public land for oil and gas development in some of Wyoming’s most important and sensitive wildlife habitat - at bargain basement prices,” said John Rader, a conservation advocate with the Wyoming Outdoor Council in a statement. “Almost all of the 160 parcels on the table are in designated sage grouse habitat, and dozens are located in mule deer crucial winter range. At a time when half the leases in Wyoming are sitting idle, BLM keeps tying up public lands, threatening our wildlife, and risking our access for more speculative leasing.”

At the end of the 2018 fiscal year, according to a BLM’s environmental assessment, about half of the 8 million acres under lease in Wyoming were producing. 

The sale also occurred against a backdrop of concerns about the health of the natural gas industry.

“Wyoming’s natural gas production has declined eight of the last nine years,” reads the latest report from the Consensus Revenue Estimating Group, released in October. “The natural gas futures markets signal continued low prices.”

According to an analysis of BLM data by the Center for Western Priorities, about 37% of the December leases went for just $2 an acre – the minimum required bid. That’s significantly higher than Wyoming’s average of 18%, measured since January 2017.

The CREG report holds more hope for the local oil industry, noting that “the optimism of Wyoming oil production, particularly in the Powder River Basin, is evident in the statements of publicly traded exploration and production companies operating in the region.”

“We're watching that oil play kind of creep up from the Four Corners area,” said County Commissioner Bill Novotny, referencing the meeting point of Johnson, Campbell, Natrona and Converse counties.

All of the Johnson County parcels brought in multiple bids, a sign, according to Petroleum Association of Wyoming President Pete Obermueller, of strong interest in the area.

Of the county’s two acreage groupings offered this quarter, the area directly east of Buffalo brought in just $7/acre, while leases further east, close to the Campbell County border, brought in up to $113/acre.

Those numbers indicate that local leasing is still somewhat speculative: Two parcels, one in Campbell County and one in Converse County, each garnered more than $3,000 per acre. 

About half of lease sale revenue returns to the state of Wyoming, as will a portion of royalties on any extracted minerals. Leases come with an initial term of 10 years, and can be extended as long as oil or gas is produced in paying quantities.

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