The Oil Industry's Public Lands Stockpile
Oil and gas companies are sitting on millions of acres of idle leases that they've acquired through a rigged system | February 2021
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 For decades, private companies have taken advantage of an outdated system that is tilted in favor of the oil and gas industry and against taxpayers.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 rates to taxpayers, and leave millions of idle leased acres off limits to other uses. It is time for this broken system to be modernized.
The oil industry is currently sitting on 9.9 million acres of idle leases in the West—47.4 percent of all leases in the region—that are available to drill even during the Biden administration's temporary leasing pause. The leasing pause is designed to provide time to evaluate the federal oil and gas leasing system. It is clear that the leasing pause will not devastate the oil and gas industry, as the industry has stockpiled enough leases and approved drilling permits to continue drilling for years. This stockpile is more than sufficient to tide the industry over until our broken federal land leasing system is evaluated and modernized.
This analysis updates part of an earlier geospatial analysis and storymap created in collaboration with The Wilderness Society: " America's Public Lands Giveaway ," which examined instances of public land leases sold for bargain prices.
Public lands sit idle while leased for oil and gas development
Oil and gas leases currently lock up 20.9 million acres of public lands across ten Western states—Arizona, California, Colorado, Idaho, Montana, New Mexico, Nevada, Oregon, Utah, and Wyoming. The substantial footprint of the oil and gas industry on the Western landscape is only 6% smaller than it was in February 2020, prior to the COVID-19 pandemic and subsequent collapse of the over-leveraged industry. These leases held by the industry are often purchased at sweetheart prices as part of an outdated federal leasing process and then allowed to lie idle for decades.
Public lands leased for oil and gas development
As of January 2021, the oil and gas industry is leasing 20.9 million acres of national public lands in the West.
In other terms, the oil and gas industry holds an area of public land in the West that is the size of South Carolina.
In January of 2021, President Biden ordered a pause on new federal oil and gas leases while the Interior Department evaluates the impact of America’s public lands drilling program on our climate, communities, and taxpayers. President Biden's order does not ban new drilling or prevent oil companies from using their existing leases or drilling permits. This commonsense first step begins a long-overdue process of reform for the broken, century-old leasing system.
In response to President Biden's announcement, the oil industry launched a campaign to convince the public that a leasing pause would mean the end of oil drilling and cost thousands of jobs. However, the industry is conveniently overlooking an element of the broken system that they've taken advantage of for decades: the ability to cheaply acquire oil and gas leases and permits and then sit on them for decades with few consequences. This has resulted in a massive industry stockpile that locks up the land.
According to analysis of Bureau of Land Management (BLM) data, nearly half (47.4 percent) of the 20.9 million actively leased acres in the West 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.
Data as of January 2021
Federal oil and gas leases sitting idle
As of January 2021, nearly half (47.4 percent) of the oil and gas industry's public land leases are sitting idle. These idle leases cover 9.9 million acres of national public lands in the West.
That translates to an area of public land larger than Maryland and Delaware put together that is leased by the oil and gas industry in the West, but sitting idle, locked up, and producing little to no benefit for taxpayers.
In addition to millions of acres of idle leases that could be drilled, the oil and gas industry has nearly 7,600 approved, but unused, drilling permits on hand, over 90 percent of which are in the West.
While the industry may be fearmongering about the temporary federal leasing pause in public, they are internally aware that their public lands stockpile of leases and permits is more than adequate to tide them over for years to come. In a call with shareholders, ConocoPhillips chairman and CEO Ryan Lance was unequivocal about the company’s ability to navigate a permitting pause: “[We have] the flexibility, the diversity and the depth of low cost of supply and low-GHG resource to manage through this issue without materially impacting our plans.” In another instance, David Harris, Executive Vice President of Exploration and Production at Devon Energy Corp, said , "We have a deep inventory of approved federal drilling permits in hand that essentially cover all of our desired activity over the next presidential term."
The federal leasing pause is not a serious threat to the oil and gas industry. Rather, the industry is doing everything in their power to prevent the broken system from being fixed. Currently, the federal oil and gas leasing system is dramatically tilted in favor of the industry.
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 offered over 26.1 million acres nationwide to the oil and gas industry at auction. Simultaneously, the past administration 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 and locked up from proactive management by idle leases, 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, resulting in millions of idle leased acres held for dollars on the acre.
The leased landscape
Recreation in Moab, Utah
Moab, Utah has a strong local economy driven by the thriving outdoor recreation industry .
However, the broken oil and gas leasing system has allowed development to threaten the local economy. In 2020, the BLM proposed oil and gas leases that overlapped with the famous Slickrock Trail, a popular Moab recreation destination.
Although the leases were ultimately pulled after widespread public outrage , there remain thousands of acres of idle leases across the recreation-rich landscape that surrounds Moab, locking up the landscape from being managed for increased recreation and hurting the local community economy.
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.
All of the leases directly adjacent to Dinosaur are currently sitting idle. Each year, oil and gas companies tie up public lands next door to the park, paying only a small rental fee—$1.50 per acre.
Wyoming Habitat Conflicts
Across the West, development is squeezing wildlife into smaller, more fragmented pockets of land and threatening populations of once-prolific species. In Wyoming, sage-grouse and mule deer are key species that highlight this trend.
The sage-grouse serves as an "indicator species," predicting the health of other plant and animal species across the Western sagebrush ecosystem. However, development, particularly during recent oil and gas drilling booms, has caused populations of the bird to plummet by an estimated 30 percent since 1985 . Following extensive negotiations, sage-grouse conservation plans were established that involved protecting and managing critical habitat to allow populations to rebound. These plans have since been weakened.
Mule deer, on the other hand, are a prime example of migratory big game species that must traverse hundreds of miles between their summer and winter ranges each year, navigating by instinct and memory. For such big game species, habitat connectivity and well-managed habitat are essential to their survival. Following extensive research, Wyoming has designated and recognized mule deer movement corridors.
Oil and gas leasing in southwestern Wyoming has encroached on both sage-grouse priority habitat management areas (one of the most critical designations under the sage-grouse plans) as well as mule deer migration corridors, threatening wildlife populations. Even when undeveloped, thousands of acres of idle leases prevent the land from being proactively managed for wildlife survival.
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. Those changes were ultimately inadequate, as shown by prior analysis . 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.
This broken process illustrates the need for President Biden's temporary leasing pause.
Let's break it down step-by-step.
Turning public lands into private oil and gas leases
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.
Minimum bid data as of January 2020, from America's Public Lands Giveaway in collaboration with The Wilderness Society
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. Analysis finds that over 1.5 million acres of currently authorized public land leases were leased 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 January 2021, over 20.9 million acres of public lands were leased by oil and gas companies in the West. Of those acres, 9.9 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.
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.
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…”
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 .
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 20.9 million acres currently leased, half sit idle, generating only a $1.50 per acre annual return for taxpayers.
President Biden's oil and gas leasing pause is necessary to evaluate and overhaul the oil and gas leasing system to give taxpayers a fair share and ensure that we can conserve our natural heritage alongside energy development. The oil and gas industry’s current public lands stockpile is more than sufficient to tide them over until the broken system is modernized. During that time, companies will also have time to continue to diversify their holdings and activities.
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
This analysis is based off of publicly available data from the Bureau of Land Management.
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.”
