BLM uses authority to implement online oil, gas lease sales

The US Bureau of Land Management is using congressional authority to conduct federal onshore oil and gas lease sales online. It is acting under a provision in the 2015 National Defense Authorization Act, which amended the 1920 Mineral Leasing Act (MLA) to allow online lease sales, BLM said. Prior to that amendment, the MLA authorized federal onshore lease sales only by oral auctions, it said.

The change is effective immediately, BLM said in an Aug. 31 Federal Register notice. It was not subject to federal regulatory notice and comment requirements because it solely related agency procedures and simply restated the relevant statutory authority.

The rule does not change the eligibility requirements to participate in a lease sale or the competitive auction style BLM employs, it said. Leases still will be awarded to the highest bidder based on a sequential and ascending bid auction system.

BLM said it conducted a pilot online lease sale in Colorado in 2009 after Congress—recognizing the costs associated with holding in-person lease sales and the opportunities for increased efficiency provided by an internet-based system—directed the US Interior secretary to conduct such a pilot.

Based on the pilot’s results, BLM said it estimates that internet-based auctions could increase aggregate lease sale revenue by about $2 million/year. It also said it believes that online sales have the potential to generate greater competition by making participation easier, which possibly could increase bonus bids.

BLM said its Eastern States Office will hold the first auction under this new authority on Sept. 20 when it offers 14 parcels encompassing 4,398 acres of federal mineral estate in Kentucky and Mississippi. The agency is evaluating other opportunities to hold online sales, it said.

A number of national environmental organizations and local groups opposed to oil and gas leasing on federally managed land staged protests outside some BLM sales in 2015 and threatened to show up at others.

The agency’s Utah state office postponed a Nov. 17 lease sale one day before it was to have been held “to allow the time needed to better accommodate the high level of public interest in attending the sale,” it said in an announcement in which it also apologized for the short notice (OGJ Online, Nov. 16, 2015).

Less than a month later, BLM’s Eastern States Office postponed its next scheduled lease sale on Dec. 10 just 3 days before it was to take place (OGJ Online, Dec. 7, 2015). Environmental activists who had planned to protest what they termed a “fossil fuel auction” outside the Washington, DC, lease sale immediately declared a victory.

In Denver, Kathleen Sgamma, Western Energy Alliance vice-president for government and public affairs, applauded BLM’s move to take advantage of well-established technology. “Transitioning auctions from in-person to online will enable [it] to meet its obligations under existing law, reduce administrative costs, and eliminate disruptions from keep-it-in-the-ground protesters,” she said.

Sgamma said the MLA requires quarterly sales in all states with federal oil and gas resources, but added that BLM has failed to meet this requirement several times in the last few years. “We sympathize with the pressure BLM is often under from protestors overwhelming available facilities, disrupting sales, and threatening the safety of staff,” she said.

“Online auctions also have cost-savings benefits as venues and security personnel do not have to be enlisted to handle unruly crowds,” Sgamma stated. “The public will still have the opportunity to participate at multiple points in the leasing process, but the actual sale will use up-to-date technology that has been around for more than a decade since eBay became ubiquitous.”

Contact Nick Snow at nicks@pennwell.com.

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