BLM Utah Posts List of Proposed Parcels for Geothermal Lease Sale and Quarterly Oil and Gas Lease Sale

Contact: Mary Wilson, 801-539-4020 or Kent Hoffman, 801-539-4063
°  December 2008 Oil & Gas Lease Sale Info 
°  December 2008 Geothermal Lease Sale Info 

Salt Lake City—November 4, 2008—Bureau of Land Management Utah posted the proposed list of parcels for the geothermal lease sale and quarterly oil and gas lease sale scheduled for Friday, Dec. 19 in Salt Lake City.  The list includes 47 proposed geothermal parcels totaling 146,339 acres.  The 241 proposed oil and gas parcels totaling 359,450 acres initiates a 30-day public protest period on oil and gas parcels.

The 47 proposed parcels for geothermal leasing are located in Iron, Millard and Juab Counties; and the 241 proposed parcels for oil and gas leasing are located in five BLM Utah field offices—Fillmore, Moab, Price, Richfield and Vernal.

This is the first time since June 2007 that BLM Utah has offered geothermal lease parcels for sale.  Utah currently has two geothermal electrical generation power plants located in the central and southwestern portions of the state.  BLM Utah and the State of Utah are working together to identify viable renewable energy zones in Utah. 

None of these parcels are located in federally designated Wilderness Areas or Wilderness Study Areas (WSAs) because these areas are off-limits to new leasing by law.  BLM Utah offers parcels consistent with the Resource Management Plans (RMPs) and after rigorous environmental review.

Through its land use planning process, BLM Utah selected certain lands to be managed for their wilderness characteristics.  These protected lands are referred to as BLM natural areas.  BLM Utah’s recently completed RMPs for five field offices provide administrative protection for these natural areas—a few of which are available for leasing under the most stringent restrictions.

Where these natural areas or other lands in the vicinity of national parks or monuments are available for leasing, stringent lease stipulations are applied to protect the scenic values, recreation resources, wildlife and natural areas.

In order to protect, preserve and maintain natural areas, some lands located in the White River area may be leased with a “no surface occupancy” stipulation, a strict leasing constraint that prohibits surface disturbance on all or part of the lease.  Development may occur beneath leases restricted by this constraint using directional drilling.  Other lands that have no surface occupancy stipulations include parcels with Greater sage-grouse leks and high use recreation areas such as Pelican Lake.

In some cases, additional conditions, such as controlled surface use stipulations, are applied to protect resources.  For example, a controlled surface use stipulation is applied to lands surrounding Dinosaur National Monument to protect high quality visual resources and as seen from key observation points within the Monument.  Additionally, these lands have strict light and sound stipulations to minimize light and sound pollution associated with oil and gas development near the Monument.  These types of lease stipulations allow for oil and gas development while providing protection for wildlife habitats, sensitive soils, and high quality visual resources.

Thorough analysis of potential lease parcels during the recently completed RMP process ensures that the nation can produce its vital energy resources in an environmentally responsible way.

BACKGROUND

What process determines which lands are made available for oil and gas leasing?

The Mineral Leasing Act of 1920, which authorizes oil and gas leasing on BLM lands, requires each BLM state office to conduct oil and gas lease sales at least quarterly.  The next BLM Utah quarterly oil and gas lease sale is scheduled for December 19, 2008, in Salt Lake City and will also include the sale of geothermal parcels.

BLM Utah conducts thorough environmental analysis prior to offering lands for oil and gas leasing.  Using an in-depth evaluation process associated with resource management planning, BLM Utah determines what lands may be made available for oil and gas leasing.  Through the RMP process, BLM lands are placed into one of four leasing categories:

• Open to oil and gas leasing with standard stipulations
• Open to oil and gas leasing with open with minor constraints
• Open to oil and gas leasing with major constraints
• Closed to oil and gas leasing

BLM Utah conducts quarterly oil and gas lease sales based on nominations received from industry. The process typically proceeds as follows:

1. Industry-nominated lands are closely reviewed to determine if they are eligible and available for oil and gas leasing, consistent with the existing Resource Management Plan (RMP) and in compliance with the National Environmental Policy Act (NEPA).

2. Land is then delineated into lease parcels not to exceed the maximum allowable acreage of 2,560 acres each. The acreage is computed and special protective stipulations are incorporated based on the existing RMP.  A preliminary list of lands is created for internal review.

3. Field offices review this list to further ensure that the lands offered are consistent with the land use plan and in compliance with the NEPA and other resource protection acts such as the National Historic Preservation Act and the Endangered Species Act.

4. After this internal review, field offices make recommendations to the state office on which parcels to offer for lease. In some cases, they may even recommend withdrawing all or part of a parcel or placing additional stipulations on a lease to protect certain resources.  For example, parcels offered for lease near White River include stringent no surface occupancy stipulations to protect the area’s significant visual, plant, wildlife and recreation resources.

5.  Based on these field office recommendations, the state office prepares and posts a list of proposed lands available for oil and gas lease which initiates a 30-day public protest period.

7.  Prior to the lease sale, a preliminary review of any protests received determines which parcels will be offered for sale.

8.  The competitive lease sale is held.

9.  Protests are formally resolved; and

• Leases are issued; or 
• Received bid money is returned if the protest is granted.

What are the impacts of oil and gas leasing?

BLM’s oil and gas leasing program is a vital part of supplying our nation with reliable and affordable energy. The Rocky Mountain region holds the largest on-shore domestic oil and gas reserves in the lower 48 states, and energy from federally managed sources accounts for more than 30 percent of America’s energy production.

BLM Utah currently administers oil and gas leases on approximately 4.7 million acres of land. Most of the oil and gas leasing is concentrated in the vicinity of existing production in the Uintah/Piceance and Paradox/San Juan basins located in northeastern and southeastern Utah; however, recent interest in central Utah has increased leasing in these areas as well.  The number of acres leased in Utah peaked in 1984, when over 19.7 million acres of public lands and Federal subsurface mineral estate lands were under lease.  Today, that number is far lower.  Only 4.7 million acres in Utah are presently leased.

Less than one percent of public land in Utah receives actual surface disturbance from oil and gas development. All leases come with stipulations (general requirements) on oil and gas activities to protect the environment, and stipulations can also include specific restrictions, such as limits on seasons when drilling can occur. 

Once an operator proposes exploration or development on a BLM-issued lease, the Bureau carries out further site-specific environmental analysis and determines the site-specific need for various types of mitigating measures to limit impacts—including the establishment of any necessary buffer zones to prevent adversely affecting wildlife habitat and interim revegetation and final reclamation plans.

Why do some existing oil and gas leases remain undeveloped for a time?

Nationally, only 11.6 million acres of the 44 million acres under BLM lease are actually producing oil and gas, causing some groups to question why the BLM issues new leases when most existing leases (55 percent) are undeveloped.  Some groups also allege that the oil and gas industry is “stockpiling” leases, which cover a 10-year term.  These views are based on a misunderstanding of the leasing process, which is only the first step in a series of actions that may or may not lead to production. 

Once an operator has a lease, the operator will engage in geophysical exploration and geologic evaluations to determine which leases hold the most promise for development.  At that point, the operator will file an Application for Permit to Drill (APD) for the BLM to approve (or reject) because of the need for additional site-specific environmental impact analysis under several federal laws, including the National Environmental Policy Act (NEPA) of 1969.

Lease development is a business decision—one that involves numerous geological and financial factors—and it is the operator’s decision to make, not the BLM’s.  There are numerous practical reasons why an oil and gas operator might choose not develop a lease.  For example, the operator could determine that the available oil and gas resources are not technologically or economically recoverable.  In many cases, an operator may acquire new leases to have development alternatives in hand, both now and in the future, which is a market-based decision rather than an effort to “stockpile” leases. 

In the end, these are business decisions to be made by companies, which must still pay rent on leases ($1.50 an acre for five years and $2 an acre after that) even if they do not develop them.  Mineral rentals collected by the Federal government (from oil and gas leases, coal leases, and any other mineral leases where a rental is collected) totaled $65.2 million in Fiscal Year 2007.  An undeveloped oil and gas lease, as noted, expires after 10 years; if a lease begins producing a profitable quantity of oil and gas, rent stops and the operator starts paying royalties to the U.S. government.  The royalty rate is generally 12.5 percent of the market value of the produced oil or gas.

It should also be noted that the BLM requires operators to pursue “due diligence” in developing a lease to prevent drainage and waste of public oil and gas resources.  For example, the BLM may require a lessee to drill a well to prevent drainage by an adjacent private or state well.  If an operator were forced to “use or lose” an undeveloped lease in the absence of such drainage, the operator would most likely give up the lease because of geological or business reasons, which would reduce the Federal government’s oil and gas rental revenues.

In the most recently completed fiscal years, the BLM issued 3,392 new oil and gas leases in Fiscal Year 2007, as compared to 3,985 leases in FY 2006.  In FY 2007, the BLM approved 7,561 APDs, as compared to 7,745 APDs in FY 2006.  In terms of revenue, onshore oil and gas bonus bids, rentals, and royalty revenue totaled $3.2 billion in FY 2007.