US kicks off new drilling lease sales despite oil market slump

US kicks off new drilling lease sales despite oil market slump

The Trump administration moved ahead with oil and gas lease sales in four Western states on Tuesday, bucking criticism from taxpayer advocates who say the auctions should be postponed because of a meltdown in energy prices.

FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland
FILE PHOTO: Pump jacks operate in front of a drilling rig in an oil field in Midland, Texas U.S. August 22, 2018. Picture taken August 22, 2018. REUTERS/Nick Oxford/File Photo

REUTERS: The Trump administration moved ahead with oil and gas lease sales in four Western states on Tuesday, bucking criticism from taxpayer advocates who say the auctions should be postponed because of a meltdown in energy prices.

The Bureau of Land Management (BLM) is offering more than 210,000 acres (85,000 hectares) for leasing via online auctions in Wyoming, Nevada and Montana on Tuesday, and Colorado on Thursday.

The largest sale is for 105 parcels covering 118,292 acres (47,871 hectares) in Wyoming, the top U.S. state for gas production on federal lands and the second-biggest for oil production, according to the U.S. Energy Information Administration.

In Nevada, BLM is offering 45 parcels covering 70,110 acres (28,372 hectares) and in Montana it auctioned eight parcels covering 5,180 acres (2,100 hectares). All eight parcels had sold in Montana by mid-morning on Tuesday, three for the minimum price of US$2 an acre (0.4 hectare) and four others for under US$10 an acre. The highest price was US$102-an-acre for a parcel in Richland County, according to online marketplace EnergyNet.

In Colorado, BLM will offer 20 parcels on 18,960 acres (7,670 hectares).

Drilling on federal lands is a crucial part of President Donald Trump's "energy dominance" agenda to maximize domestic production of fossil fuels. But the industry is in crisis as countries including the United States take unprecedented steps to contain the coronavirus pandemic that has curbed demand for products such as gasoline and jet fuel.

U.S. oil prices have dropped roughly half since the middle of February to about US$24 a barrel.

Last week, the United States held an auction for oil and gas leases in the Gulf of Mexico that generated the lowest total of high bids for any domestic offshore auction since 2016. Earlier this month, BLM held a lease sale in Utah that received mostly minimum bids of US$2 an acre.

"In this environment, it is impossible for the American taxpayer to expect anywhere near a fair return on oil and gas leases," Taxpayers for Common Sense, a federal budget watchdog organization, and Conservatives for Responsible Stewardship, a non-profit conservation group, said in a joint statement last week.

In a statement, BLM spokesman Derrick Henry said the agency was not postponing lease sales.

"Using an all-of-the-above approach to energy development, we are helping to meet our nation's growing energy needs by facilitating development and letting free market forces work after the resource is extracted by companies who sell these commodities. Oil and gas lease sales and royalties continue to propel America's economy and support good-paying energy sector jobs."

(Reporting by Nichola Groom in Los Angeles; Editing by Peter Cooney and Sandra Maler)

Source: Reuters

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