“Bust” isn’t a word the oil and gas industry throws around lightly, but bust could readily describe Wednesday’s oil and gas lease sale.
The Bureau of Land Management offered just 159 acres in the sale, which netted $27,593.80 after two 40-acre lots, one in Crook County and another in Fremont County, getting no bids.
With Wyoming’s dependance on federal oil and gas production, lease sales that net basically nothing spark worry among industry officials of a bust waiting to happen.
Kirkwood Oil and Gas Landman Steve Degenfelder told Cowboy State Daily on Thursday his company didn’t bother bidding on the properties because of the sale’s small size.
“Forty acres doesn’t make a difference to exploration when you’re trying to put together 20,000 or 50,000 acres,” he said. “Hard to say why the two tracts didn’t receive a bid.”
One possible explanation, Degenfedler suggested, is that the tracts weren’t nominated by industry.
“BLM does put up some themselves,” he said. “No professional experience usually results in putting up tracts that no oil and gas company thinks are prospective.
“If they were nominated by a company, it could have been many years ago. Maybe the company has moved on to another state where they can deploy their capital more easily.”
‘Expressions Of Interest’
Bureau of Land Management officials told Cowboy State Daily by email that most of the mineral acres it offers for lease come from “expressions of interest” by industry, implying that industry is just not nominating many properties.
But Degenfelder has told Cowboy State Daily the picture is a bit more complex than the government agency is letting on.
Kirkwood alone has nominated about 1 million acres that it was keen on seeing in oil and gas lease sales, about half of which are in Wyoming. So far none of the 500,000 acres Kirkwood has filed expressions of interest in for Wyoming have been offered by the Bureau of Land Management.
Kirkwood isn’t alone.
“As of about a year ago, I believe there were about 2 million acres of expressions of interest that were received (from industry), but that have not been offered,” Degenfelder said.
That’s a figure Ryan McConaughey with Wyoming Petroleum Association confirmed. Those acres are now subject to some changes introduced by the Inflation Reduction Act, however. That has triggered reconsideration of whether the parcels will be offered at all.
Those 2 million nominated acres don’t include about 604,783 acres of land originally proposed for sale, and then deferred for one reason or another.
That brings the total number of mineral acres resting in bureaucratic limbo to about 2.6 million.
BLM Says Deferrals Are Being Evaluated
Bureau of Land Management spokesperson Allegra Keenoo told Cowboy State Daily on Monday that it’s completing a tally of formal expressions of interest (EOI) and their status, as well as a tally of deferred parcels and, when appropriate, whether industry is still interested in them.
Deferred parcels in June 2022 totaled 440,583 acres. There were 124,072 acres in June of 2023, 28,168 in September of 2023, 4,298 acres in December 2023, 12,974 acres in March 2024, and 1,095 acres for June 2024.
There were no deferred acres in the September 2024 sale, but the December 2024 sale with 6,762 acres proposed already has 401 deferred acres.
Degenfelder told Cowboy State Daily that Kirkland has been told by BLM officials that there’s no real process for bringing deferred acres back.
But the BLM told Cowboy State Daily there is a process — albeit a time-consuming one that depends on the individual specifics of each and every parcel, meaning there’s no “one size fits all” process that can expedite the reconsideration.
“There is a reconsideration process that is currently in place cycling a backlog of deferred acreages/EOI parcels back through the leasing process and ultimately to sale, if the original submitter of the EOI is still interested,” Keenoo said. “But if something is likely to be deferred again, it is not rolled back into the next sale until the original reason for deferral has changed. This backlog is currently being worked on for nominations three years or older.”
The deferrals will remain in the system for future sale system if they have only been deferred once, Keenoo added.
Among reasons a parcel might not be reconsidered would be if there is active coal leasing,” Keenoo said.
Tip Of The Spear In War On Oil And Gas
Oil and gas lease sales ultimately are the biggest leading indicator for where oil and gas production in Wyoming is headed, and right now, that trend line is hovering right above the zero mark, with a December sale that just barely notches 4,000 acres.
New federal oil and gas leases are particularly important in Wyoming, where 70 % of the resource is federal. They are the starting point for most of the state’s new oil and gas wells, once existing oil and gas leases are played out.
But it’s not just puny sales affecting Wyoming’s oil and gas leasing picture, Degenfelder said. It’s the sum of many shots the Biden administration is taking that are aimed at increasing the cost of developing new oil and gas wells.
“The Inflation Reduction Act has also raised the minimum bid to $10 an acre. That might not sound like a lot to some, but to exploration plays, it’s a lot,” he said. “Most of these exploration plays are exploration plays because nobody believes there’s oil and gas there.”
The combined effects of the new normal for oil and gas leasing in Wyoming won’t be seen for years, Degenfelder said, but will eventually quash the prospecting ability of exploration companies like Kirkland. Down the line, that will also quash the volume of oil and gas produced in Wyoming, which provides millions in tax revenue to support schools, roads, and other services Wyoming citizens enjoy.
“This is a direct attack on new exploration, and really that’s it,” he said. “It’s an attack on Kirkwood. But, as a state citizen of Wyoming, it’s an attack on Wyoming, which gets half of the bonuses that are bid on these sales. That has gone to almost zero.”
Renée Jean can be reached at renee@cowboystatedaily.com.
