The Wyoming office with federal oversight of public lands has scheduled an auction for oil and gas leases in June that will be one of the smallest seen in the Cowboy State in years.
The auction puts Wyoming on track to have its lightest load of lease sales since at least 2009.
“We continue to have grave concerns about both the number of parcels and overall acreage offered for oil and gas leasing in Wyoming,” said Ryan McConnaughey, a vice president with the Petroleum Association of Wyoming.
Wyoming’s Bureau of Land Management office has historically topped the list of biggest Western states involved in oil and gas leasing on public lands.
However, that dominant position for the Cowboy State could be getting rocked by new federal land policies in the United States.
Two years ago amid the pandemic, the Western U.S. leased a total of 128,500 acres of BLM land, once considered the historic low in the U.S.
One trade group is now forecasting that the remaining six months could lead to a dip of 60% to less than 50,000 acres under lease for all of 2024.
“Wyoming is the 80-pound gorilla when it comes to oil and gas leasing,” said Aaron Weiss, deputy director of the Center for Western Priorities in Denver, who came up with the calculation. “They’re just going to be a much smaller gorilla now.”
The drop in oil and gas leasing in Wyoming is a sign of the Biden administration’s push to lower dependency in the United States on oil and gas and move forward with incentives for clean energy alternatives with wind turbines and solar farms.
Impact Of Inflation Reduction Act
The U.S. Bureau of Land Management’s June 27 auction in Wyoming is for 18 oil and gas parcels totaling 10,155.3 acres. That’s down about 1,600 acres from the BLM’s quarterly Wyoming auction held in March.
Auctions in September and December on Wyoming public lands are still planned in 2024.
The BLM’s last oil and gas lease auction in March was the first indication of the government’s push away from oil and gas, as it was the first to embrace new rules for bidding on oil and gas leases.
Driving the trend is the 2-year-old federal law, called the Inflation Reduction Act, that has effectively reduced the total number of acres offered in auctions to better match demand with supply.
The federal law made significant changes in promoting clean energy power at the expense of carbon-based fuels.
In the area of oil and gas leasing reforms, the federal law boosted royalty rates, the minimum bids for oil leasing and the rental rates for oil leases if oil companies didn’t drill on their leased land.
In previous auctions, BLM offered more acreage than what the industry drilled on, allowing industry to assemble huge portfolios, a trend widely criticized by Weiss.
“This is just a reflection of the system getting fixed,” Weiss told Cowboy State Daily.
“Before, the oil and gas industry could nominate anything without putting money up front,” he said. “It created a system where the companies could pad their books by nominating hundreds of thousands of acres of land for cheap.”
The smaller energy lease sales held by BLM are more in keeping with what the agency should be doing, rather than allowing the energy industry to assemble huge swaths of land for free without making a downpayment, Weiss observed.
“Now we’re seeing what the new normal looks like,” Weiss said. “They’re not just nominating everything. They’re only nominating parcels that are likely to produce oil and gas in a profitable way.”
BLM Falls Short
The petroleum group’s McConnaughey believes the industry is getting squeezed out in Wyoming.
“With just over 10,000 acres proposed for (the second quarter) and less than 200 acres offered in (third quarter), the Biden administration is doing its level best to squeeze out the industry,” McConnaughey said.
The BLM seems to be ignoring the strides the oil and gas industry has made with drilling, he said.
“It’s remarkable given how far innovation in this industry has come in reducing impacts while producing greater quantities of a product the world is clamoring for,” McConnaughey said. “Nowhere are industry strides toward sustainable production more visible than on federal lands.”
BLM is creating more unnecessary red tape for the industry, he said.
“Non-federal production opportunities continue to grow apace, resulting in record domestic oil production, but the BLM can't seem to connect the dots between lagging interest on federal lands and the onslaught of higher fees, red tape and increased delays that are the unfortunate hallmark of federal production,” he said. “We continue to have grave concerns about both the number of parcels and overall acreage offered for oil and gas leasing in Wyoming.
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 coming years.
The main reason for declining natural gas production in Wyoming is the lack of new gas wells being drilled.
The WSGS and WOGCC report paints a different picture for oil.
More than 95 million barrels of oil were expected to be produced in Wyoming in 2023, according to the joint report.
This will be about 3 million more barrels than was produced in 2022 and is on trend with gradually increasing U.S. crude oil production.
The one difference is that nationally, oil production now exceeds pre-pandemic volumes, whereas Wyoming’s production growth has not yet surpassed its 2019 high.
Pat Maio can be reached at pat@cowboystatedaily.com.
