The Western Energy Alliance, which represents more than 400 natural gas and oil operators as well as six producers, has filed a lawsuit to force the Interior Department’s Bureau of Land Management (BLM) to award 118 leases in Utah and Wyoming that are worth an estimated $4.5 million.

The lawsuit, filed Monday in U.S. District Court in Wyoming, seeks a declaratory judgment about whether the government may lawfully delay issuing a lease while continuing to hold the highest bidder’s money for an indefinite period (No. 10 CV0226F). The case was assigned to District Judge Nancy D. Freudenthal, who is married to Wyoming Gov. Dave Freudenthal.

Under federal law, the highest bidders in a BLM auction are to be awarded leases within 60 days of a lease sale. BLM and its state offices, the lawsuit alleges, “hold over $100 million of lease payments paid by Western Energy members…”

The lease payments allegedly are held by the government “in an unproductive capacity for months and years with no certainty as to when either the leases will be issued or the lease payments refunded. This policy and practice of retaining plaintiffs’ capital in an unproductive, noninterest-bearing account for an uncertain period is having a current and existing impact on the budgets, development plans and ongoing operations of federal lease bidders…”

Western Energy, formerly known as the Independent Petroleum Association of Mountain States, was joined in the lawsuit by Baseline Minerals Inc., Double Deuce Land & Minerals Inc., Nerd Gas Co. LLC, Wold Oil Properties Inc., Laramie Energy II LLC and Samson Resources Co.

The plaintiffs acknowledged that Interior may withdraw a parcel and not offer it at a competitive lease sale if there is a protest, but “once the parcel is put up for sale at a competitive lease auction and the government accepts the qualified higher bidder’s lease bonus payment and first year rental payment, the Mineral Leasing Act mandates that the leases ‘shall’ be issued within 60 days thereafter.”

For example, the lawsuit cited leases awarded to several of the producers, including Baseline, which participated in several BLM auctions between November 2005 and August 2010. Baseline said it paid more than $2.8 million for 73 separate leases over the five-year period, but BLM to date has not issued any of the leases.

“The uncertainty created by [Interior’s] policy and practice is currently affecting the decisions of bidders at lease auctions,” the lawsuit stated. “Bidders, including members of Western Energy and the other named plaintiffs, are uncertain about their rights and obligations and how long their investment capital in the form of their federal lease bids will be held by the government. This uncertainty is having a current and existing impact on their decisions about whether to bid and how much to bid at federal competitive lease sales.”

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