Federal Oil and Gas Leasing and Development in the Eastern States

The energy and mineral resources program is one of BLM-Eastern States' largest programs. We manage about 40 million acres of mineral estate, including substantial leasing for oil and gas. We work effectively with partners in industry and conservation organizations to oversee environmentally sound fluid and solid mineral development to help sustain a healthy economy. Currently, we administer 3,600 leases for oil and gas exploration covering about 2 million acres, in 15 of the 31 Eastern States.
 
The Federal government does not develop oil and gas itself, but instead, leases development rights to private industry.  Leasing demand is a function of market conditions and national energy consumption.  Leasing is guided by the Mineral Leasing Act of 1920, and each BLM state office is required to hold lease sales at least four times per year.
 
Leasing is an open, public process that is fairly long start to finish.  Land use plans are the basis for all decisions BLM makes concerning public lands and minerals, and that’s where the leasing process starts.  A land use plan, often called a resource management plan or RMP for short, includes an environmental impact statement and normally takes anywhere from two to four years to complete.  During that time, the public has numerous opportunities to weigh in on the decisions that will result.  Other Federal surface-managing agencies, such as the Forest Service, make leasing decisions through a similar land use planning process.
 
Among other things, the plans let the public know where leasing will be considered and where leasing will not be allowed.  They may also note concerns that need to be addressed through leasing stipulations that restrict activity in some way.  They often also provide mitigation measures that can reduce impacts from oil and gas development.
 
An important part of a BLM plan is some forecasting we do.  Called the reasonably foreseeable development scenario or RFD, this part of the plan predicts the level of development that could take place during the life of the plan.  Once the decision is signed and the land use plan or amendment is approved, a program is established to systematically track and compare the projections made in the selected alternative to actual activity.  If at some point in the future it becomes evident that the impacts predicted as a result of the RFD will be significantly exceeded, an updated environmental analysis would be completed. 

Industry nominates the areas of Federal minerals it wants to lease.  When we at BLM receive the nominations, we first make sure that the area nominated is open to leasing through a land use plan and that the land use plan still passes muster with the National Environmental Policy Act (NEPA).  If the answers are both yes, then we create lease parcels covering the nominated areas.  Also, while BLM provides technical assistance to Indian tribes and Indian mineral owners, BLM does not lease Indian minerals.  Leasing of Indian minerals is handled by the Bureau of Indian Affairs (BIA).  Further information on leasing Indian oil and gas minerals may be found at http://energy.usgs.gov/aboutus.html

Then we determine what stipulations should be placed on each parcel.  Stipulations restrict activity on the surface, the time the activity can take place, or both.  For example, if an area covers winter range for wildlife, a “timing” stipulation can ban activity during the winter.  If an area has important surface features that need to be preserved, a “no-surface-occupancy” stipulation can prevent any use of the surface and force a company to drill directionally from another location.  

When this work is completed, we build a sale list featuring all the parcels we will offer.  This list is posted at our office in Springfield, Virginia, on the internet at least 90 days before the sale, and it’s also sent to those requesting it. 

Finally, leases are offered for sale at auction.  Typically, more leases are offered than are actually purchased.  The money collected from the auction is split with each state in which the lands are located.  Lessees pay an annual rental on the lease until it expires or until oil or gas is produced when the annual rental is replaced by a royalty (normally 12.5 percent of the sales price).  The rental fees and royalties are also split with the states.
 
Just because a company acquires a lease, doesn’t mean that it can begin drilling any time or anywhere on the lease.  First a leaseholder must file an application for permit to drill, or APD.  The APD tells BLM virtually everything about a proposed well, where it's planned, when the company wants to drill, details about how the drilling will be done and the environmental safeguards that will be used, how equipment will be moved on and off the site, and so on.  We analyze the APD and prepare an environmental document specific to the proposal that determines if, when and how drilling may be approved.  In addition to stipulations that were originally placed on the lease, we may add further restrictions and environmental protections to the APD in the form of conditions of approval.
 
If a company makes it through the process and drills a successful well (one that is commercially viable), it may wish to further develop its lease through additional wells.  The company would have to submit a plan of development that lays out the scope of its development proposal and contains an APD for each new planned well.  If the level of development outlined in such plans could result in cumulative impacts that have not been analyzed, a comprehensive environmental study will be completed before decisions are made for long term development activity.  This study would also follow all NEPA requirements.  The results of the study may alter the proposal and/or add mitigation or protective requirements.
 
Throughout development, BLM monitors oil and gas operations, and our inspection totals continue to exceed our required quotas.  Our monitoring continues throughout the life of a well and does not stop until a well is properly plugged and the site has been reclaimed. 
 
Oil and gas development began in the Eastern States in the early 1900s and has been part of the our culture ever since.  Leasing remains a market-driven activity and has been fairly consistent over recent years.  But despite how many leases may have been issued in any one year, it’s important to remember that leases don't last forever.  Unless a lease is actually producing, it will expire after 10 years just as hundreds do annually.
 
And finally, every barrel of oil or cubic foot of gas produced domestically is one less than we have to import.  BLM is charged with overseeing responsible energy development from the publicly-owned resources.  We take this duty seriously as part of our mandate as the nation’s stewards of the public lands.