United States Bureau of Land Management Energy and Minerals Technical Assistance Program

Begining with 1920 Minerals Leasing Act a fundamental change to the management of U.S. energy and minerals began. Most notable of these changes was the beginning of the process of closing some federal lands to open access. As the title of the law implies, land were to be leased. A broad framework for that leasing was established, and a framework for royalty provisions was introduced. Most of the subsequent changes to minerals laws in the U.S. were by amendment to this 1920 statute.

By the new 1920 Act process, lands were to be designated as "known mineral areas." Once this occurred, minerals within these boundaries were to be accessible only via a leasing process. Throughout the next several decades more than one leasing process materialized, through some further amendments to the base law and through administrative processes. These included:

• Preference Right Leasing
• Competitive Bidding for Designated Tracts

Under this system an interested party could apply for a permit to do exploration. They needed to specify the area, and this needed to comply with certain conditions regarding size of tract and location. The permit, once granted, would also stipulate various provisions of acceptable exploration practices, as well as limit the length of the permit/exploration period. Through the nearly 60 years that this leasing option has been available, it varied considerably, by mineral, and by location.

The key to this provision was the manner of granting a lease. This was a function of the success of the exploration venture. If successful, the exploration permittee would then provide documentation of that success, as part of an application for a lease, which would grant various rights related to commercial production.

This individual then could exercise his "preference", in that he has the first right to a lease. Should his exploration efforts not prove fruitful, or a lease not result, this same parcel could be available again for another individual.

The appeal of this process is that the exploratory burden continues with private risk takers. However, they no longer receive fee simple title to the property as a result of successful ventures. Instead, they have first priority for a lease. That lease will contain a variety of terms, ranging from a time limit on the rights granted to a number of requirements for operational compliance.

This Preference Right lease process served as a transition from the location programs conducted under the auspices of the General Mining Law of 1872 to the leasing laws emanating as a series of amendments to the 1920 Mineral Leasing Act. To repeat, this leasing process carried forward the primary themes of settlement and development, but with some changes which make the granting of property rights temporary and subject to various requirements.

Competitive Bidding for Designated Tracts.

The next step in the mineral development process saw the increased use of competitive bidding systems. Under the charge of the 1920 mineral Leasing Act "known mineral areas (KMAs)" were to be subject to competitive leasing Known leasing areas -- KLAs) . This required two arenas of substantial new expertise, identifying the extent of these known mineral deposits and development of the competitive bidding process.

The KLAs for certain minerals evolved fairly readily, as there was not concern with absolute precision. It was expected that these boundaries might change over time as more information became available. Nonetheless, for several decades mineral assessment and quantification was a signification responsibility of the U.S. Geological Survey, and as an extension of this responsibility they also conducted most mineral leasing and management functions. Those onshore functions were transferred to the BLM in 1983.

The leasing process went through several stages, involving both amendment to laws, and changes in the related regulatory structures. For various minerals, at various times, there have been:

• Lottery types systems where drawings determined "winners" of lease rights;
• Open, oral auctions of previously determined tracts, where the highest qualified bidder received the lease right;
• Sealed bid auctions where the highest bid was determined only after opening an envelope;
• Various forms of negotiated lease terms.

Additionally, at various times and for various minerals there may have been a requirement that the Federal agency responsible determine a so-called "minimum acceptable bid". In this instance a bid must not only be higher than that of any other bidder, but it must also be higher than the predetermined minimum bid, which may or may not be publicly known, depending on the mineral involved.

For coal there is also a differentiation between a new tract or a maintenance tract. In the latter case ongoing mines existed and new leases were needed to continue the mine expansion. While only the existing operator may be interested in this tract, a sealed bid, competitive process, including a sealed estimate of a required minimum fair market value bid, is used.

For much of this history oil and gas leasing featured significant concerns about reservoir management as part of the leasing process. Reservoir studies were conducted to determine the acceptable nature and pattern of various leasing and lottery systems, especially the latter. But, with the termination of these lottery systems in 1987, the need for reservoir studies declined. Oil and gas leasing then followed the familiar pattern whereby nominations of tracts by industry, coupled with environmental acceptability, determined which tracts were to be offered for lease.

The most active leasing program is the onshore oil and gas leasing program now administered by the BLM. Thousands of tracts are regularly offered in quarterly lease sales held throughout the western states where BLM has oil and gas resources. These sales may include tracts in new areas, infill tracts in areas of ongoing exploration and production, or tracts previously held but terminated or relinquished due to non production. Over the past 100 years many tracts have had several owners.

Lease management, like the management of all resources for which BLM has responsibility, requires coordination with all neighbors, customers, and other land and mineral resource managers. Thus, management of the world class potash reserves in New Mexico has always been closely coordinated with that state's agencies, as well as with local bodies. Similarly, this is true for phosphate in Idaho, and lead/zinc in Missouri. All of the states in the Federal Coal Leasing Regions have been party to various consultative processes in recent decades. Due to the split estate nature of ownership found throughout these regions, there are also various provisions for consultation with non federal surface owners over federal subsurface minerals rights.

Today, all of these various interests, which extend far beyond the original focus on settlement and economic development, are considered in a land use planning process. During this process, conflicts are resolved regarding the general configuration of resource use for BLM lands, and often surrounding and interspersed lands as well. These plans, and the accompanying Environmental Impact Statements, delineate the agreed to patterns of land uses and activities, and the manner in which they can be conducted which will be environmentally acceptable.

Each of the program sources accessible via links from the initial pages of this sites will provide additional information on the operation of these programs. As users prefer, both this tutorial and those materials will be modified and expanded through time.