The Biden administration netted just over $27,000 in a Wyoming oil and gas lease sale Wednesday.
That’s a bust, compared to historic norms for the oil-rich state, underscoring how Biden-era changes to leasing are colliding with moderate oil prices and dampened industry interest to reshape the federal oil patch.
“This is probably the new normal for oil and gas lease sales,” said Sarah Stellberg, a staff attorney with Advocates for the West, which often represents environmental groups.
The Biden administration has increased the cost of drilling, limited public lands open to new fossil fuel development and instituted a new fee that speculators must pay to nominate land for leasing. The aim was to cut down on public lands drilling — and the planet-warming emissions that come with it.
Peter Wold, the co-owner of Wyoming-based oil company Wold Oil Properties, said the changes have drastically affected company interest in new leasing. The Biden administration, he said, is trying to “indirectly stop fossil fuel production” with fees and regulatory requirements.
“It’s discouraging,” he said.
President Joe Biden entered office in 2021 promising to end new drilling on public lands. He immediately paused new federal oil and gas leasing, only for a federal judge to order the White House to resume lease sales later that year.
The administration pivoted to focus on new regulations and reductions in the size of oil auctions. The Inflation Reduction Act — which Democrats passed in 2022 — also included pro-oil mandates likely to drive continued oil sales on public lands.
The Biden administration offered nearly 300,000 acres of public lands for lease in 2023, compared to more than 11 million acres in 2017 — Trump’s first year in office and a high point for leasing over the last decade.
On Wednesday, the Interior Department’s Bureau of Land Management offered just four leases for sale in Wyoming. Developers only bought two. BLM also held a sale Tuesday in Colorado, offering one parcel for 120 acres. It sold for more than $300,000.
Chuck Mason, an energy expert at the University of Wyoming, said oil prices may have helped shape Wednesday’s sale. Wyoming’s Powder River Basin — where some of the leases were located — is more than 800 miles from Cushing, Oklahoma, where U.S. benchmark West Texas Intermediate is priced. The challenges of distance and limited pipeline access make it harder to break even or turn a profit for Wyoming oil.
West Texas Intermediate is hovering around $70 per barrel this week, which Mason said isn’t enough to drive a boom in Wyoming drilling.
“You could look past whatever sort of apparent hostility comes from the Biden administration,” he said. “You could look past the [geographic] isolation. You could look past the difficulty of getting stuff to market, if you could get a spot price of $100.”
A smaller-than-normal sale
BLM planned to lease just five nominated parcels Wednesday.
Several other parcels had been deferred earlier in the process, which means they could be offered at a future sale, according to BLM’s records. Of the five remaining, BLM eliminated one parcel because it determined that the area did not contain federal oil and gas.
Allegra Keenoo, a spokesperson for BLM Wyoming, said the leases in a sale and where they are located are “completely driven by public nominations.”
Land offered for oil leasing starts with oil and gas company nominations, called expressions of interest. For unclear reasons, EOIs have fallen dramatically in recent years for Wyoming, from a high of more than 2 million acres nominated in 2018, during the Trump administration, to just 30,000 acres in 2023, according to BLM’s records.
Pete Obermueller, president of the Petroleum Association of Wyoming, said the slowdown in interest is partly due to the Biden administration, which has “intentionally broken” the oil leasing program on federal lands.
Obermueller said BLM has deferred a significant amount of acreage nominated by operators with an unclear timeline for when, or if, those acres will be offered at a future sale.
“There are millions of high value oil and gas acres in Wyoming [that] companies have nominated and are willing to purchase right now that the BLM has shoved into leasing purgatory, ” he said in an email.
By PAW’s count, BLM has deferred about 62 percent of the lands requested for leasing by industry since 2021.
Obermueller said the parcels that BLM has offered for sale “are a patchwork of noncontiguous acres,” making it hard for companies to put together projects. That’s because new Wyoming drilling mostly relies on horizontal wells that extend for two miles or more, requiring a bundle of connected leases.
A spokesperson for the Interior Department did not respond to a request for comment Wednesday.
Oil interest and prices
The Biden administration’s changes to leasing regulations — and the nearly yearlong pause in leasing in 2021 — may partially explain the drop in newly offered leases in Wyoming.
BLM accepts nominations for lands to be auctioned in the first two months of every quarter. Those acres, if they don’t violate restrictions on leasing like protected animal habitats, then go through a public environmental review process required by the National Environmental Policy Act. They are offered for sale no sooner than roughly 270 days after the original nomination period ends.
But that process was interrupted in 2021, when the Biden administration paused all oil sales.
The agency’s normal routine was further complicated by the Inflation Reduction Act, which made significant changes to royalty rates, cleanup requirements for new leases and introduced the fee to nominate lands for sale. That was implemented in regulations this year.
BLM has been reviewing nominations that were in the system before the IRA rules were implemented, reaching out to nominees individually to ask if they were still interested in those leases being offered at sale, according to BLM documents.
Democrats’ 2022 climate law increased the minimum royalty rate for federal oil and gas production by 33 percent. It also increased the amount of a statewide environmental bond — money set aside or secured as insurance to cover clean-up costs if a company goes bankrupt — from $25,000 to $500,000, a twentyfold increase.
Wold, the Wyoming oilman, said the new economics of the federal oil patch in Wyoming could force more consolidation among companies to cover “exorbitant” new costs to drill.
But the slowdown in leasing could also be the result, at least in part, of competition in previous years for prime Wyoming drilling acreage, he acknowledged.
The state saw an increase in interest over the last decade in its prolific Powder River Basin, located in eastern Wyoming. Drillers increasingly found ways to use hydraulic fracturing and long horizontal wells to tap the basin’s tricky geology of tight shale.
As a result, demand for new oil drilling permits skyrocketed in the basin during the early years of the Trump administration, and interest for new leasing rights was high. Drilling confidence was also climbing at that time, because prices were rebounding out of a multiyear slump.
In 2020, the Trump administration approved a 5,000-well project in the basin, marking a turning point in its outlook, though that project was halted earlier this month by a federal judge over BLM’s analysis of potential environmental impacts.
The result of the recent oil rush is that today some of the best acreage for drilling in the Powder River Basin is already held by developers. Three of the leases in Wednesday’s sale were in the basin, but on its northern and southern edges.
“It’s hard for somebody to come in and put together a big leasehold position that would be in the sweet part of the basin,” Wold said.
Clarification: This story has been updated to clarify that a parcel was eliminated from the sale because it did not contain federal minerals.
