Rockies producers cite DOI for not issuing leases

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, May 2 –The US Department of the Interior allegedly violated the Mineral Leasing Act by not issuing onshore leases within 60 days of being paid for the tracts, the Western Energy Alliance and six Rocky Mountain oil and gas producers said in a brief filed on Apr. 29 in US District Court for Wyoming.

The brief was the latest move in a lawsuit filed by the six producers and the Denver-based trade association formerly known as the Independent Petroleum Association of Mountain States.

They said the lawsuit concerns federal leases that the US Bureau of Land Management has failed to issue dating back to 2005. DOI had no comment on the litigation, a spokeswoman told OGJ on May 2.

“Unlike those opposed to domestic energy development, western oil and gas producers are mostly small businesses [that] have no interest in litigation,” said Kathleen Sgamma, WEA’s government and public affairs director. “But after years of repeated attempts to convince DOI to comply with federal law, we are left with no choice.

Despite the economy, economy, rising energy prices, and unrest in the Middle East, Sgamma said, “This administration continues to discourage the development of American energy by failing to issue oil and gas leases that have been won and paid for by American companies.”

The six producers are Baseline Minerals Inc., Double Deuce Land & Minerals Inc., Nerd Gas Co. LLC, Wold Oil Properties Inc., Laramie Energy II LLC, and Samson Resources Co.

The brief names US Interior Secretary Ken Salazar, BLM Director Robert V. Abbey, BLM Wyoming State Director Don Simpson, and BLM Utah State Director Juan Palma as respondents.

Tracts purchased

The brief said the producers purchased tracts at 10 competitive lease sales held by Wyoming’s BLM office from August 2008 to August 2010 and Utah’s BLM office from November 2005 to August 2006. It said that the BLM state offices determined the offerings conformed with the underlying Federal Land Policy Management Act and National Environmental Policy Act.

Baseline, Double Deuce, Nerd, and Wold were the highest qualified bidders for the leases involved in the suit, while Samson and Laramie have contractual interests in some of the tracts, the brief said.

BLM collected from Baseline more than $1.3 million for Wyoming leases and $544,932 for Utah leases it was awarded in the sales. The agency also collected $61,682 for Nerd and $86,752 from Wold for Wyoming leases, the filing said.

The companies have not receive3d all of their leases in Wyoming and have not received any of their leases in Utah, the brief said, adding that BLM also holds millions of dollars collected from other producers for leases sold but not issued.

The money was placed in a noninterest bearing suspense account administered by the agency. None of the bonuses or first-year rental payments will be deposited in federal or state treasuries until the leases are issued, the filing said. It noted that the Government Accountability Office estimated that BLM held $84 million for unissued Wyoming leases and $10 million for unissued Utah leases in such accounts as of May 2010.

The brief said that while Salazar has recognized the need to comply with the Mineral Leasing Act’s leasing issuance timeframes, he “has condoned and directed BLM’s practice of issuing leases well after the 60-day timeline.” It said that Wyoming’s BLM office began to resolve its protests from the sales in July 2010 and has since issued some leases and deferred others for further review, leaving 9 awarded leases unissued. “In Utah, no lease has been issued following the 4-year period following the Utah lease sales.”

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