The Denver-based Western Energy Alliance (WEA) and six companies have filed a lawsuit against the U.S. Bureau of Land Management (BLM), arguing that BLM has failed to issue mineral leases to the top qualified bidders at competitive lease sales within 60 days of the date that leases are paid for.
Under the Mineral Leasing Act, as amended by the Federal Onshore Oil and Gas Leasing Reform Act of 1987, BLM is directed to issue leases within 60 days following payment by a successful bidder of the remainder of the bonus bid, if any, and the annual rental for the first lease year.
The six companies involved in the lawsuit, filed in U.S. District Court in Wyoming, include Baseline Minerals, Double Deuce Land & Minerals, Nerd Gas, Wold Oil Properties, Laramie Energy II and Samson Resources. Four companies, Baseline, Double Deuce, Nerd and Wold, bid on 118 leases in sales in Wyoming and Utah from 2005 to the present; to date, no leases have been issued.
The companies are seeking the issuance of these leases, and seek declaration as to whether the government may lawfully delay issuance of a lease after the 60-day period from when the government accepts the highest qualifying bidder's lease bonus bid amount and first year lease rental payment, while holding the highest bidder's money indefinitely.
The companies paid approximately $4.5 million for these separate leases and complied with all statutory, regulatory and BLM requirements, and their purchased lease parcels were not administratively or technically defective. The companies said they also paid promptly in full for their parcels sold at competitive lease auctions, and BLM accepted such payments.
Laramie and Samson have contractual rights relating to some of the leases; other leases also have not been issued on a timely basis to companies that are members of WEA.
While BLM has recognized that issuing competitive leases within the 60-day period to the winning bidder is mandatory, and that protests must be resolved before the issuance of a lease, the defendants in the lawsuit, which include Department of the Interior (DOI) Secretary Ken Salazar, have adopted a practice and policy of not complying with this express mandate of Congress.
"The Secretary has approved and directed the policy of not issuing leases for protested parcels to the highest qualified bidders at competitive lease sales within the 60-day deadline specified in the Mineral Leasing Act and has made this policy part of his recent form of onshore oil and gas leasing," WEA and the companies said in the lawsuit. Salazar acknowledged in May that, as part of planned reforms for the onshore oil and gas leasing process, that the issuance of protested leases may be "held up".
"While the Secretary may withdraw a parcel and not offer it at a competitive lease sale on the basis of a protest, once the parcel is put up for sale at a competitive lease auction and the government accepts the qualified high bidder's lease bonus payment and first year rental payment, the Mineral Leasing Act mandates that the leases "shall" be issued within 60 days thereafter," the plaintiffs said.
The U.S. Government Accountability Office (GAO), in its study of lease sales between 2007-2009 in four states, including Wyoming and Utah, found that 74 percent of competitively sold lease parcels were protested and that "a majority of leases [some 91 percent] for protested parcels were issued after the 60-day window specified in the Mineral Leasing Act."
In Wyoming and Utah, the GAO found that BLM failed to issue leases for protested parcels within the 60-day period more than 91 percent of the time in Utah and "up to almost 100 percent in Wyoming", according to the GAO report "Onshore Oil and Gas, BLM's Management of Public Protests to its Lease Sales Needs Improvement". The GAO further reported that, according to BLM officials, as of May 2010, the agency was holding more than $84 million in industry payments for unissued leases in Wyoming and more than $10 million in Utah.
Don Simpson, director of the BLM Wyoming State Office, and Juan Palma, director of the BLM Utah State Office, also have been named as defendants in the lawsuit.
WEA, formerly the Independent Petroleum Association of Mountain States, represents over 400 member companies committed to developing oil and gas resources on public lands in Wyoming, Utah and the Intermountain West.
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