Industry: Court Ruling BLM Illegally Halted Oil And Gas Lease Sales Is Too Late

A court ruling that chastises the Bureau of Land Management’s decision not to hold oil and gas lease sales in the third quarter of 2022 is an “important partial victory for Wyoming,” Gov. Mark Gordon said Friday, but some of Wyoming’s landmen in the oil and gas industry say it’s too little too late to matter much now.

“The time has come and gone,” Kirkwood Oil and Gas Landman Steve Degenfelder told Cowboy State Daily on Friday. “You can’t re-hold old lease sales that should have been held.”

Worse, the BLM has continued dragging its feet after the 2021 decision that said oil and gas lease sales must be held at least quarterly under the Mineral Leasing Act, Degenfelder said. That ruling said oil and gas lease sales can’t simply be suspended by an executive order without the due process that’s required by such federal statues as the Administrative Process Act.

What BLM has done since then is keep oil and gas lease sales at such a low level in Wyoming that it is effectively nothing, Degenfelder said, pointing to the latest oil and gas lease sale as a prime example.

That sale was a mere 80 acres. Meanwhile, oil and gas companies in Wyoming have filed expressions of interest on more than 4 million acres of potential oil and gas leases.

2021 A Lost Year

Federal oil and gas lease sales are an important precursor for oil and gas development. A drastic lack of sales portends a future dramatic bust when it comes to production.

Wyoming, meanwhile, received nearly $11 billion in revenue from the oil and gas industry, according to Petroleum Association of Wyoming figures. The Cowboy State depends hugely on the revenues from oil and gas for schools, roads and a variety of other services.

Gordon said he was disappointed the court’s New Year’s Eve ruling didn’t include the canceled lease sales in 2021.

“The court clearly found that the BLM’s decision to not have the third-quarter lease sale in 2022 was arbitrary and capricious,” Gordon said. “Unfortunately, the court did not rule the same way for the BLM’s failure to conduct lease sales in 2021.

“While it’s encouraging the court ruled in favor of the state for the BLM’s lack of sales in Q3 2022,” the governor continued, “it’s also baffling this thinking did not carry throughout the order to include 2021.”

What The Judge Said

In his ruling, Judge Scott W. Skavdahl says it was reasonable to postpone first-quarter 2021 sales because of pending lawsuits filed by environmentalists, which threatened to vacate a number of leases for various violations of federal statutes, including the National Environmental Policy Act.

While the Mineral Leasing Act does require quarterly oil and gas sales, the judge wrote, that mandate is only for legally available parcels. Postponing sales that might not be legal is therefore not a violation, the judge concluded in his order. 

“As the then-recent court decisions had called into question BLM’s compliance with statutory requirements covering a multitude of lease sales and issued leases in multiple states around the nation, BLM’s review was considering, among other things, how to ensure future leasing complied with governing laws to withstand judicial review,” the judge wrote. 

However, the BLM’s administrative record revealed no such reason for not holding the third quarter 2022 sales, the judge added, nor was there documentation of any other reasonable explanation.

“And as a lease sale covering a large number of parcels in Wyoming had occurred the prior quarter (Q2 2022), BLM’s systemic review of its leasing regime had obviously come to an end prior to Q3 2022,” the judge wrote. 

A post-decision explanation that the agency simply didn’t have the time to hold the sale won’t wash, the judge added, because there is nothing in the administrative record about that.

“BLM has offered no contemporary explanation for its decision to forego Q2 2022 lease sales, and the court cannot discern one from the administration record,” he said. “There are no contemporaneous emails or correspondence, internal or external, discussing the lack of agency resources, creating an inability to conduct a Q3 lease sale.”

No Real Remedies

The other substantial issue the judge raised is a lack of viable remedies for BLM’s failure to hold its third-quarter 2022 lease sales. 

Gordon said the state is examining its options for a forthcoming remedy briefing, but suggested the reality is real remedies won’t come from the courts, but from incoming president-elect Donald Trump’s administration.

“I am optimistic future federal oil and gas lease sales will be meaningful, contain sufficient acreage, and be consistently held as required,” Gordon said. “Wyoming citizens — and all Americans — have every reason to expect that President Trump will make good on his promise to issue a series of energy-focused executive orders favorable to energy producers and ultimately our nation.”

Pete Obermuller, president of Petroleum Association of Wyoming, meanwhile called for Congressional action.

“On the one hand, Judge Skavdahl agreed with us that cancelling lease sales in 2022 without explanation — like the Biden Administration did — is unlawful,” he said. “Unfortunately, he then agreed with the Biden administration’s tortured arguments that would allow the federal government to delay lease sales forever.”

The incoming Trump administration will be friendlier to oil and gas in the short term, Obermuller noted.

“However, what Wyoming’s felderal lands oil and gas operators need is a Congress willing to provide a clear and lasting direction on BLM’s authority to withhold leases for as long as it desires,” he said.

Degenfelder agrees.

“Going forward, I’m hoping the new secretary of the Interior will require BLM to hold quarterly sales at the same levels as were seen during the Trump and Obama administrations,” Degenfelder said. “They can start with the 606,000 acres of land that Wyoming state BLM has ‘deferred’ from lease sales during the Biden administration.

“Then they could start processing the 4-plus million acres that is on their website as expressions of interest requested by industry.”

About That New Secretary

The incoming Interior secretary who Degenfelder referred to is former North Dakota Gov. Doug Burgum, who has presided for eight years over the largest portion of the nation’s third largest oil and gas play, the Bakken, and has been a big oil and gas advocate. 

Among his favorite mottos while governor was “innovation over regulation.”

As applied to the oil and gas industry, that led Burgum to issue an eyebrow-raising challenge to the oil and gas industry in 2022, urging them to leverage the state’s unique geology so they could produce net zero or even net-negative barrels of oil. 

While it initially raised some hackles in the industry, Burgum was ultimately successful in selling the idea, pointing out that a world that wants to turn away from oil and gas, but can’t actually do so, will pay a premium for net-negative carbon barrels of oil. That would also help the industry access the Wall Street capital it needs to keep drilling.

The idea ultimately also touched off a cascade of more than $25 billion in global investmentinterest in North Dakota, including interest from Mitsubishi Power Americas, which saw the net zero oil and gas concept as a way to set up one of the largest, lowest cost producers of clean hydrogen fuel in North America, and sell that fuel at a premium as well.

Renée Jean can be reached at renee@cowboystatedaily.com.