Delayed U.S. lease sale criticized by state official

Screenshot of Select Natural Resource Management Committee July 13, 2022 Zoom session.

CHEYENNE — A state official testified Wednesday to the Select Natural Resource Management Committee and criticized delays in the most recent federal oil and gas lease sale. It was the first in the state in a year and a half. 

“The bad news is the sale was 18 months late, was approximately 75% smaller than originally planned, had a huge number of state director deferrals, and offered many less-than-desirable leases,” testified Randall Luthi, who serves as chief energy advisor to Gov. Mark Gordon. “In summary, it was a long-awaited, but paltry sale.” 

He responded to an update from Bureau of Land Management Deputy State Director Duane Spencer, who oversees BLM land and minerals in Wyoming, on the lease sale held in an online auction on June 29. 

Luthi told committee members 122 parcels were for lease in the Powder River Basin, and BLM Wyoming received 81 bids totaling a net of approximately $13 million. Wyoming receives 49% of the proceeds from each lease sale, while the rest goes to the U.S. Department of Treasury, meaning the state will receive just over $6 million.

Luthi said the sale was good news but was arguably forced by litigation and considerably lower than in the past. The starting number of parcels was 400, which was trimmed by nearly 300, with many cuts related to sage grouse protection. 

The energy advisor came to work under Gov. Gordon close to three years ago, when the market was plummeting due to the Russian and Saudi Arabian effort to flood the market with oil and the COVID-19 pandemic. 

Despite the difficult circumstances, he told the Wyoming Tribune Eagle, the state managed to bring in between $50 million and $70 million in proceeds that year over four lease sales. This was lower than before, but he said it does not compare to the drastic decrease under President Joe Biden. 

“Oil prices are high. Demand is high,” Luthi said after the committee meeting. “Wyoming doesn’t have the same number of drilling rigs they did even three years ago, and it seems to me the factor that’s different is once again the federal government regulation.”

Wyoming regularly held four lease sales a year before the current administration. Then Biden signed an executive order during the first week of his presidency halting oil and gas leasing on federal lands and waters, in an effort to address climate change. 

According to Luthi, the federal government controls approximately 67% of Wyoming’s mineral estate, and nearly 50% of its surface. 

Gordon filed a lawsuit against the Biden administration in March, citing that its leasing moratorium “violates the National Environmental Policy Act, the Administrative Procedure Act, the Mineral Leasing Act and the Federal Land Policy Management Act.” Legislators at the committee said this was necessary. 

“I appreciate the governor’s offers, especially through litigation, to force the sale,” said Sen. Brian Boner, R-Douglas. “It’s abundantly clear that the only reason the sale did happen … was because of the litigation.” 

Although the U.S. Department of Interior announced this spring the administration would resume leasing, additional federal oil and gas program changes significantly impacted the state. 

The June sale implemented the recommendations made by the Department of Interior after it reviewed the program in November, including reforms such as six percentage-point increase in federal royalties, ensuring tribal consultation and taking climate change into account. 

Spencer said the federal government wants leasing near existing development and infrastructure to conserve public lands and functioning ecosystems and will prioritize avoiding important wildlife habitat migration corridors and sensitive cultural areas. Efforts to protect wildlife have led to their own round of litigation regarding sage grouse management, while Luthi said the responsibility should fall to the state. 

“The governor and state government stand ready to assist the federal government in analysis and legal support where we agree. We believe our sage grouse program works,” he said. “We know how to work with the industry to protect the bird and produce oil and gas, we just need the opportunity to do so.” 

Currently, the attorney general’s office is involved in more than 30 court cases related to Wyoming’s natural resources, many against the federal government. 

Luthi said this does not reflect a relationship between Wyoming and the Biden administration to address high energy prices, and it has led to uncertainty among oil and gas companies, especially as the rules change. 

“More production will come from Wyoming if we have a reliable federal partner committed to producing all forms of energy,” he said. “Unfortunately, I do not see that today.”

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