U.S. DEPARTMENT OF THE INTERIORBUREAU OF LAND MANAGEMENT
Competitive Leasing Process
Noncompetitive Leasing Process
Citizens and corporations of the United States may acquire and hold federal leases or interest therein. A lease may be issued to a legal guardian or trustee on behalf of a minor. Leases or interests therein may be acquired and held by aliens only through stock ownership, holding or control in a present or potential lessee that is incorporated under the laws of the United States, provided their country affords U.S. citizens the same rights and privileges. However, they cannot hold lease interest through units in a publicly traded limited partnership.
The lease grants the lessee the right to explore and drill for, extract, remove and dispose of oil and gas deposits, except helium, that may be found in the leased lands. Prior to conducting any surface-disturbing activities, the lessee will have to obtain BLM's approval.
An oil and gas lease conveys to the lessee the right to develop resources on the leased lands. The lessee nor the operator cannot build a house on the land, cultivate the land, or remove any minerals other than oil and gas from the leased land.
Annual rental rates for both competitive and noncompetitive leases are $1.50 per acre or fraction thereof in the first 5 years and $2.00 per acre or fraction thereof each year thereafter. All filing fees, requests for approval of transfers (Assignments) and all first-year rentals and bonus bids shall be made payable to the Department of the Interior - Bureau of Land Management. Payments should be mailed to BLM/Eastern States, 7450 Boston Boulevard, Attn: Accounts Section, Springfield, VA 22153.
All second-year and subsequent rentals must be received on or before the lease anniversary date. Remittance shall be made payable to the Department of the Interior - Office of Natural Resources Revenue and mailed to this address:
Office of Natural Resources Revenue
Royalty Management Program
PO Box 25627
Denver, CO 80225-0627
All rentals and royalties on producing leases, communitized leases in producing well units, unitized leases in producing unit areas, leases on which compensatory royalty is payable and all payments under subsurface storage agreements and easements for directional drilling shall be paid to Office of Natural Resources Revenue. Royalty on production is 12.5 percent for both competitive and noncompetitive leases.
On Class II reinstated noncompetitive leases, the annual rental rate will increase to $5.00 per acre or fraction thereof and/or royalty payable at the rate of 16-2/3 percent. On Class II reinstated competitive leases, the annual rental rate will increase to $10 per acre or fraction thereof and/or royalty payable at a rate not less than 16-2/3 percent (plus an additional 2 percentage-point increase added for each succeeding reinstatement).
Oil and gas leases expire at the end of their 10-year term for competitive or noncompetitive leases. However, the primary lease term is extended if: (1) diligent drilling operations is in progress, (2) the lease contains a well capable of producing oil or gas in paying quantities, or (3) the lease is receiving or is entitled to receive an allocation of production under the terms of an approved communitization agreement or unit agreement.
Leases without a producible well automatically terminates if the lessee fails to make full and timely payments of the annual rental. The rental must be received by the Office of Natural Resources Revenue (ONRR) on or before the anniversary date of the lease. The automatic termination is prescribed by law and cannot be waived.
However, terminated leases may be reinstated under a Class I reinstatement if the following conditions are met:
Leases are reinstated under a Class II reinstatement if the following conditions are met:
A lessee may relinquish his/her lease in whole or in part by filing a written relinquishment request with the proper BLM State Office. A relinquishment takes effect on the date it is filed. However, if the lease is producing, the lessee must plug any abandoned well, perform other work as may be required by the BLM to place the leasehold in proper condition for abandonment. The lease account must be in good standing. If the lessee fails to perform the necessary work, the lessee's bond will be used to do so and the lessee will be prohibited from leasing any additional Federal lands.
Under the Reform Act, which significantly changed the BLM's oil and gas leasing program procedures, lands cannot be leased until they are first offered competitively at an oral auction. An interested party can request that specific lands be offered competitively by filing an expression of interest (EOI) or a noncompetitive "presale" lease offer on Form 3100-11, most current version, entitled, "Offer To Lease And Lease For Oil and Gas". Federal Regulations governing oil and gas leasing can be found under Title 43, Groups 3000 and 3100, of the Code of Federal Regulations.
The Competitive Oil and Gas Lease Sale Notices will contain lands from a variety of sources, for example:
Notices of the Competitive Oil and Gas Lease Sales, list parcels to be offered at the auction and are published at least 90 days before an auction is held. Sale Notices can be purchased for a nominal fee. Lease stipulations applicable to each parcel are specified in the Sale Notice. Auctions are held quarterly at Eastern States and are conducted by oral bidding only. No sealed or mailed bids are accepted.
Bidders or his/her representative must attend the auction in order to obtain a competitive lease. At the time of bidder registration, require valid government-issued photo identification (ID) to verify the identity of the registering bidder. A valid government-issued photo ID is one that is issued by a Federal, state, or local government agency. It can be in the form of a driver’s license, identification card, passport, or military ID card.
Parties excluded from bidding at an oil and gas lease auction: The Mineral Leasing Act provides that leases may be issued only to a “responsible qualified bidder” (30 U.S.C. 226(b)(1)(A)). Any bidder who has not paid the minimum monies owed on the day of sale is not a “responsible qualified bidder,” and is therefore to be barred from registering for any oil and gas lease auction until the debt to the United States is settled. Any bidder who does not timely pay the minimum monies owed for a total of three sales is to be permanently barred from registering for any oil and gas lease auction at any BLM office.
On the day of the auction, the successful bidder must submit: (1) a properly executed lease bid form (Form 3000-2), which constitutes a legally binding lease offer, (2) pay a bonus bid deposit of at least $2 per acre or fraction thereof, (3) the total amount of the first year's rental, and (4) pay an administrative fee of $150 per parcel.
The offeror or his authorized agent must complete Form 3100-11, either typewritten or printed in ink, and manually sign and date them. Submit one original plus two copies, include a $390 filing fee and the first year's advance rental of $1.50 per acre or portion thereof (acreage should be rounded up when calculating rental). Executing the lease form signifies agreement to standard lease stipulations and/or any additional stipulations posted to lands on a competitive sale notice. A noncompetitive offer is not kept confidential.
On the first business day following the competitive oral auction, lands that have been offered competitively and received no bids shall be available for leasing noncompetitively for two (2) years.