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Despite Industry Apathy, BLM Planning Oil/Gas Lease Sale in Nevada

Despite little industry interest in the past, the Nevada Bureau of Land Management (BLM) is planning to make up to 900,000 acres available in an oil and natural gas lease sale scheduled for March.

BLM's Nevada operations have modest success with four auctions this year, including one held last Tuesday involving 17 parcels across 32,923 acres and 11 bidders. Bids were placed for just two parcels totaling 3,932 acres. Total receipts from the sale were $14,095.

A September sale involving 300,000 acres and eight bidders drew no competitive bids, but did sell 32 noncompetitive leases covering about 30,000 acres, providing $40,000 in revenues. Similar quarterly sales last March and June netted $152,000 and $201,000, respectively, but less than a third of the total acres offered in each sale drew bids.

"Everything is industry driven," said Branch Chief Kemba Anderson, who specializes in fluid minerals and noted it is too early to gauge the potential industry interest in the upcoming auction. The acreage included in the March sale is a "mix," according to Anderson, who noted that some areas have had past drilling from exploration and production (E&P) companies, such as Houston-based Noble Energy Corp.

Anderson identified areas covered by the BLM’s Elko, NV, office, where Noble drilled in 2016 when global prices were much lower, and the Railroad Valley area in central Nevada where there have been wells drilled since the 1950s.

Representatives at several BLM field offices in Nevada have indicated there is little oil and gas activity in their areas and the lease sales are struggling. They note that large portions of the vast federal land holdings in the state nevertheless keep getting nominated for lease sales.

"I remain concerned that someone is nominating millions of acres in Nevada over the last few years that companies simply don't have an interest in acquiring," said Kathleen Sgamma, president of the Denver-based Western Energy Alliance (WEA), alleging that there are "bad actors" misusing the federal leasing system and wasting BLM's time and resources.

"In the main western producing states, generally the acreage nominated and offered for sale gets bid upon because there's an actual interest in acquiring the leases before nominations are made. With these irresponsible nominations, Nevada continues to be an outlier."

Sgamma told NGI’s Shale Daily that WEA has informally shared these views with BLM officials.

Separate BLM field offices with acreage in the upcoming sale, scheduled for March 26-28, have issued public comment notices, noting that the federal agency is complying with a preliminary injunction from the U.S. District Court for the District of Idaho that requires longer comment periods on environmental assessments dealing with parcels intersecting priority and general habitat management areas for the Greater Sage Grouse.

According to BLM's website, none of this year’s lease sales have involved areas intersecting with protective habitat for the ground-dwelling birds. However, Anderson noted that the majority of the parcels involved in the March sale have some sage grouse habitat.

Historically, BLM lease sales in Nevada over the past five years have been both contentious and successful, netting more than $1 million in proceeds in 2013 from an unconventional play on public lands in the northeastern corner of the state. Anderson also said there have been sales in the state involving more than one million acres, the last one being in 2005.

More recently, BLM's Reno office held an oil and gas lease sale in two northern counties, and the market spoke louder than chanting protesters from the national "Keep It in the Ground" campaign, which wants to end leasing on public and tribal lands, generating $63,181 in proceeds from selling 16 parcels covering more than 19,000 acres. A total of 39 parcels and 50,000 acres were offered in the 2016 auction.

 

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