America’s Public Lands Giveaway
Oil and gas companies are paying bargain rates to acquire and sit on millions of acres
[VISIT THE STORY MAP BY CLICKING HERE]
Across the American West, millions of acres of public lands are currently leased for oil and gas drilling. For decades, private companies have taken advantage of an outdated system that is tilted in favor of the oil and gas industry and against taxpayers. These oil and gas companies drive the process to lease the public’s land, pay extremely low bid rates, and leave millions of idle leased acres off limits to other uses.
While this is happening, the general public is often left in the dark. The federal government’s system for tracking key oil and gas development information on public lands is inadequate and onerous. The Wilderness Society and the Center for Western Priorities conducted a first-of-its-kind geospatial analysis to shine a light on the outdated leasing process. Using a newly developed tool, the analysis mapped all federal oil and gas leases, identifying instances where public lands leases were sold for bargain prices.
Oil and gas leases currently lock up 22.1 million acres of public lands across ten Western states — Arizona, California, Colorado, Idaho, Montana, New Mexico, Nevada, Oregon, Utah, and Wyoming. These leases are often purchased at sweetheart prices as part of an outdated federal leasing process.
Since 1987, when Congress passed the last major amendment to the Mineral Leasing Act to establish the current oil and gas leasing process, 30 percent of all public lands and minerals actively leased for oil and gas were sold for just $2.00 per acre or less — totaling 3.7 million acres.
Public lands leased for oil and gas development
Such low cost leases shortchange taxpayers and incentivize speculation on public lands with little or no potential for oil and gas development. Compared to leases that sold for more than $2.00 per acre, low cost leases have significantly higher rates of termination. According to the analysis, 57.2 percent of all acres leased since 1987 — covering 38.4 million acres — have been leased for $2.00 or less. More than 90 percent of those leases are no longer active.
Royalties from energy development are an important source of revenue for Western states and American taxpayers, but oil and gas companies frequently sit on undeveloped public land leases with little consequence. According to the analysis, nearly half (47.1 percent) of the 22.1 million actively leased acres are currently sitting idle, generating only $1.50 per acre for taxpayers annually and preventing those lands from being actively managed for conservation and recreation.
While 90 percent of public lands managed by the Bureau of Land Management (BLM) are available for oil and gas development, only 10 percent are prioritized for other uses, like outdoor recreation, wildlife management, and conservation. Since 2017, the Trump administration has offered over 24.5 million acres nationwide to the oil and gas industry at auction. Simultaneously, this administration has eliminated protections for more than 13.5 million acres of public lands once protected by mineral withdrawals or as national monuments.
The industry’s footprint is excessive, locking up public lands and encroaching on national parks, imperiled wildlife habitat, and critical migration corridors.
The following series of maps takes a closer look at iconic landscapes under pressure from development, before taking a deeper dive into the current leasing system — a wildly outdated process that caters to the oil and gas industry at every step of the way.
Dinosaur National Monument
On the border between Colorado and Utah, oil and gas development directly abuts Dinosaur National Monument where incredible dinosaur fossils are still visible in the rocks. A number of the leases in the park’s vicinity were leased for the minimum bid of just $2.00 per acre. A greater number of nearby leases were sold noncompetitively, giving oil and gas companies an even better deal. If a lease fails to sell at auction, it’s still available for sale for two years. Interested companies only have to pay the first year’s rental rate of $1.50 per acre and a small administrative fee.
Sage-grouse habitat
Across the West, development is squeezing wildlife into smaller, more fragmented pockets of land and threatening populations of once-prolific species. The sage-grouse highlights this trend. The chicken-sized bird serves as an “indicator species,” predicting the health of other plant and animal species across the Western sagebrush ecosystem.
Development, particularly during recent oil and gas drilling booms, has caused populations of the bird to plummet by an estimated 30 percent since 1985. After years of hard-fought negotiations, the Obama administration, Western governors from both political parties, ranchers, and conservationists agreed on a series of landmark plans that would protect the sage-grouse while still allowing for new development.
A key component of those sage-grouse plans involved protecting critical habitat to allow populations to rebound. Within the plans, priority habitat management areas were one of the most critical designations, identified by high sage-grouse population densities and large expanses of undisturbed public land, ideal for preserving breeding habitat and landscape connectivity.
However, the Trump administration has since significantly weakened the sage-grouse conservation plans to allow more oil and gas development. In their overhaul of the Obama-era plans, the administration reduced protections for nearly 9 million acres and opened critical habitat to drilling.
Red Desert-to-Hoback migration corridor
Big game species like elk, pronghorn, and mule deer traverse hundreds of miles between their summer and winter ranges each year, navigating by instinct and memory.
The oil and gas leasing process has failed to safeguard the West’s wildlife. Nearly one-quarter of Western oil and gas leases offered since the start of the Trump administration lie in big game migration corridors or priority areas.
The Oil and Gas Leasing Process
In 1987, Congress passed legislation to modernize the federal government’s oil and gas leasing system, which was first outlined a century ago in the Mineral Leasing Act of 1920. This analysis shows that those changes were ultimately inadequate. The modern era of oil and gas leasing on public lands is characterized by a system tilted towards the oil and gas industry. Private companies drive the leasing process, pay extremely low rates to taxpayers, and are not held accountable for the long-term impacts of development. Let’s break it down step-by-step.
1. Companies nominate public lands to be leased for drilling
More than 750 million acres of taxpayer-owned oil and gas mineral rights — mostly lying under public lands — are overseen by the Bureau of Land Management. The process to lease those lands for oil and gas drilling is driven by private oil and gas companies who nominate parcels to be sold at auction, oftentimes anonymously. The BLM does not consider the likelihood of a lease entering production during the vetting process.
2. Leases are sold competitively at auction starting at a minimum of $2.00 per acre
By law, the BLM offers all oil and gas leases through a competitive auction system. Public lands are sold for as low as $2.00 per acre, the minimum bid required. This amount has not been increased in decades. According to the analysis, 13.1 million acres of oil and gas leases have been sold for the minimum bid since 1987.
3. If leases fail to sell at auction, they’re available for purchase noncompetitively for just $1.50 per acre
If public lands fail to sell at auction, they’re still available to purchase noncompetitively starting the very next day (and for up to two years following). Unsold acres go for a nominal administrative fee and the first year’s rent of just $1.50 per acre — the bid requirement is entirely waived. According to the analysis, over 25.3 million acres of public lands were purchased noncompetitively since 1987.
4. Companies can sit on leases for 10 years or longer before drilling, paying just $1.50 per acre annually to keep them idle
As of February 2020, over 22.1 million acres of public lands were leased by oil and gas companies in the West. Of those acres, 10.4 million, or approximately half, sit idle.
Oil and gas companies frequently stockpile leases but fail to produce on them. It costs only $1.50 per acre annually (and $2.00 per acre annually after five years) to sit on public land leases, a small cost for not generating any oil and gas. The existence of these non-producing leases limits the BLM’s ability to manage the land for other uses, such as conservation and recreation.
5. If a company fails to pay the annual fees, the lease is terminated
If oil and gas companies pay annual rental fees, they have up to 10 years to develop a lease before it expires. Even if the lease is still sitting idle at the end of the 10-year term, the Bureau of Land Management regularly grants lease extensions which can last for decades. If companies don’t pay the annual fees, the leases are simply terminated with no additional penalties.
6. Companies pay extremely low, outdated royalty rates on oil and gas produced
Oil and gas companies are required to pay royalties to taxpayers for oil and gas extracted from public lands. Federal royalty rates are set at 12.5 percent, a rate that was first established a century ago. In contrast, states across the West charge companies between 16.67 percent and 25 percent for the ability to produce oil and gas on state-owned lands.
7. Even with safeguards in place, companies can abandon oil and gas wells, leaving taxpayers with the reclamation bill
Companies are required to put up a bond — or insurance — to cover a portion of the cleanup costs of a well. Current bonding requirements are woefully inadequate to cover those costs, and because the U.S. government has not updated bonding levels in over 50 years, the problem is only getting worse.
When Congress established the modern leasing system in 1987, they set a nationwide minimum bid — a floor of $2.00 per acre paid at auction in addition to the first year’s rent — and developed the current practice of first offering leases through a competitive auction, then offering unsold leases noncompetitively. (Previously, public lands were offered either competitively or noncompetitively depending on whether they were known to contain oil or gas.) The intent of this system was to harness market forces to dictate lease prices while still allowing for some amount of exploration on unproven land. The next section explores how these efforts opened the door for speculation and failed to generate a fair return for taxpayers.
What happens to low-cost leases?
There are major problems with the federal government’s oil and gas leasing system. First, Congress has not updated the rates it set in 1987. The minimum bid and the annual rental rate no longer set an appropriate floor for the value of our public lands. Second, with the advancement of modern technology, few lands remain unexplored, eliminating the need to incentivize speculative exploration with low-cost leases. Yet the BLM continues the practice of leasing millions of acres of public lands for the minimum bid and noncompetitively. As a result, minimum bid leases and noncompetitive leases often sit idle and are ultimately terminated, tying up public lands that rarely produce royalty-generating oil and gas, shortchanging taxpayers, and limiting other uses like outdoor recreation and wildlife conservation.
In numerous instances, the BLM has declined to manage lands for other uses due to existing but undeveloped oil and gas leases. For example, in its land use plan for Wyoming’s greater Bighorn Basin region, the BLM opted not to protect numerous “Lands with Wilderness Characteristics” due to existing but undeveloped oil and gas leases. Similarly, in the official planning decision for its Price field office in Utah, the agency evaluated an option to “emphasize protection of wildlife habitats, natural resources, ecosystems and landscapes,” but opted against it out of concern that imposing restrictive protections “could severely and unnecessarily limit development of and access to existing oil and gas leases…”
Since 1987, more than 38.4 million acres have been leased at the minimum bid or noncompetitively. These leases expire or are terminated at a higher rate than leases purchased competitively, and many lapse without ever producing oil and gas.
The rate at which leases expire or terminate is a direct reflection of their potential to produce oil and gas. By law, a lease that is producing may be extended beyond its standard 10-year term. Conversely, non-producing leases typically may not be extended; and even before the end of their 10-year term, leases that are unlikely to produce are often terminated because the lessee simply stops paying rent.
Low-cost noncompetitive and minimum bid leases expire or terminate at higher rates than leases issued competitively for more than the minimum bid. Of all the above-minimum bid leases issued since 1987, about a quarter, or 28.7 percent, are still active. In contrast, 14.1 percent of minimum bid leases and just 7.4 percent of noncompetitive leases are active. These numbers show that noncompetitive leases are the least likely to produce oil and gas, minimum bid leases are the second least likely, and above-minimum bid leases are the most likely to enter production.
Because the BLM considers oil and gas leases, even if they are undeveloped, an impediment to managing for wildlife conservation, wilderness protection, or outdoor recreation, low-cost leases tie up public lands during the years they sit idle.
What is at risk?
In the last two years, the Trump administration has offered 2.7 million acres that failed to sell at auction in Western states. Leases for each and every one of those acres are still available for purchase on an over-the-counter basis for just $1.50 per acre (the first year’s rent) and a small administrative fee. Explore the map below to see which public lands are still on the table for oil and gas companies to lease for bargain prices.
Conclusion
The federal government’s oil and gas leasing system sits on a 100-year old foundation, hasn’t been updated in more than 30 years, and is desperately in need of reform. Currently, the leasing system locks up huge amounts of the West’s public lands, frequently at bargain prices. Of the 22.1 million acres currently leased, half sit idle, generating only a $1.50 per acre annual return for taxpayers.
Congress must modernize the oil and gas leasing system to give taxpayers a fair share and ensure that we can conserve our natural heritage alongside development. Key updates to the current leasing system should include:
• Identifying lands suitable for oil and gas leasing through comprehensive and inclusive planning processes, including robust public participation, instead of through industry nominations
• Ending the practice of leasing lands with little to no oil and gas potential
• Raising the national minimum bid from $2.00 per acre to at least $10.00 per acre, and establishing a process for periodic updates to account for inflation
• Eliminating noncompetitive leasing, instead allowing unsold parcels to be offered at a competitive auction in the future
• Raising the annual rental rate from $1.50 per acre to at least $3.00 per acre, and establishing a process for periodic updates to account for inflation
• Raising the royalty rate for onshore oil and gas to match the federal offshore rate and leading Western states
• Shortening the duration of the standard lease term and raising the bar for companies to have terminated leases reinstated
• Before issuing a lease, requiring lessees to demonstrate a capacity of exploring and producing oil and gas
Methodology and data definitions
To conduct this analysis, we collected publicly available data from the Bureau of Land Management’s oil and gas leasing database, called the Legacy Rehost System or LR2000. Although LR2000 is outdated and opaque, we were able to gather detailed records for all oil and gas leases by querying the database for the following: when the lease was acquired, whether the lease was sold competitively or noncompetitively, the bid amount if it was sold competitively, and the lease production status.
LR2000 also provides information on lease developers, actions taken over the course of the lease, and a Public Land Survey System (PLSS) description. Because the lease PLSS information amounts to a description of the parcel’s location as a subdivision of public lands into townships and sections, it is difficult to spatially map the data provided by LR2000.
The Wilderness Society developed a tool called the Federal Land Use and Transparency Tool (FLURTT) which provides the most recent spatial dataset of energy development by automating the aggregation of tabular data from the Bureau of Land Management’s LR2000 database and transforming that information into spatial data with the selection and manipulation of the Public Land Survey System so that the true location and boundaries of energy leases on public lands can be seen. With this spatial data, we were able to query energy data and any relevant history and actions associated with the energy leases.
There is potential for errors in this data due to due to potential formatting adjustments in LR2000’s own database that the tool’s script has not accounted for yet; or may include oversized boundaries due to incorrect PLSS legal land description formatting in the LR2000 database that may not translate to actual parcels
For any maps, summaries or visuals created using this report, The Wilderness Society asks that users agree that they will not rent, sell, share, disclose or use for commercial or other profit generating purposes the FLURTT dataset or products provided and will use the information provided only for purposes consistent with its status as either a 501(c)(3) organization, governmental entity or The Wilderness Society’s environmental partner as expressly disclosed to The Wilderness Society in writing.
For any products created using FLURRT data, the following language should be used in or directly below the map: “This map was created based on data aggregated and supplied by The Wilderness Society. Please be advised that there is potential for errors in this data due to due to potential formatting adjustments in LR2000’s own database that the tool’s script has not accounted for yet; or may include oversized boundaries due to incorrect PLSS legal land description formatting in the LR2000 database that may not translate to actual parcels.”
Lease location: In some cases, the leases generated from FLURTT did not represent the actual lease boundaries and instead scaled up to entire map sections or townships (subdivisions of the Public Land Survey System). In these cases, we approximated the lease shape within the appropriate area. Thus, the maps are are approximations at fine scale. However, the actual lease acres involved in the analysis were reported by LR2000 and not calculated using FLURTT.
Minimum bid identification: Approximately 3 percent of the lease files pulled from LR2000 did not have bid amounts or could not be translated by FLURTT. Although these leases were included in the total acreage leased, they were excluded from all analyses involving minimum bids.
Idle lease identification: Wells were considered to be idle unless they were coded as being in production. We considered leases producing if they were listed as “held by production — actual”, “held by production — allocated”, or “held by location in production unit” in LR2000.
For a detailed methodology and description of the analysis please click HERE.
This mapping analysis was originally released in September 2019.
