March 24, 2020 / 10:20 AM / 16 days ago

U.S. drilling lease sales draw few bids during oil market meltdown

(Reuters) - Oil and gas lease sales offered by the Trump administration in three Western states on Tuesday drew few bids as a crash in energy prices tamped down interest among drillers.

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

The Bureau of Land Management (BLM) received bids on just 40% of the 193,584 acres (78,300 hectares) offered for leasing via online auctions in Wyoming, Nevada and Montana, bringing in total high bids of about $3.3 million, according to results on online marketplace EnergyNet.

Wyoming, which held the largest sale of 105 parcels covering 118,292 acres (47,871 hectares), accounted for 99% of the bid total. Wyoming is 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.

Yet even there, bidding was sparse. Parcels covering just 72,000 acres received bids,and 40% of that acreage sold for the minimum price of $2 an acre. The average price of $46 an acre was less than half the average price which exceeded $100 per acre in a federal lease sales held in Wyoming last year.

In Nevada, BLM received bids on less than 2% of the 70,110 acres (28,372 hectares) offered, in a sale that brought in less than $2,500 total. In Montana, eight parcels covering 5,180 acres (2,100 hectares) received an average price per acre of about $5.

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 $24 a barrel.

Taxpayer advocacy groups had urged the Trump administration to delay the sales to ensure better return to federal coffers.

“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 and Conservatives for Responsible Stewardship 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,” he said. “Oil and gas lease sales and royalties continue to propel America’s economy and support good-paying energy sector jobs,” he added.

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

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 $2 an acre.

Reporting by Nichola Groom in Los Angeles; Editing by Peter Cooney, Sandra Maler and David Gregorio

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