General Oil and Gas Leasing Instructions

Introduction

The Mineral Leasing Act of 1920, as amended, and the Mineral Leasing Act for Acquired Lands of 1947, as amended, give the Bureau of Land Management (BLM) responsibility for oil and gas leasing on about 570 million acres of BLM, national forest, and other Federal lands, as well as private lands where mineral rights have been retained by the Federal Government. The BLM works to assure that development of mineral resources is in the best interests of the Nation.

Regulations that govern the BLM's oil and gas leasing program may be found in Title 43, Groups 3000 and 3100, of the Code of Federal Regulations, a publication available in law libraries and most large public libraries.

Lands Available For Leasing

Public lands are available for oil and gas leasing only after they have been evaluated through the BLM's multiple-use planning process. In areas where development of oil and gas resources would conflict with the protection or management of other resources or public land uses, mitigating measures are identified and may appear on leases as either stipulations to uses or as restrictions on surface occupancy.

Lessee Qualifications and Limitations

Federal oil and gas leases may be obtained and held by any adult citizen of the United States. No lease may be acquired by a minor, but a lease may be issued to a legal guardian or trustee on behalf of a minor. Associations or citizens and corporations organized under the laws of the United States or of any State also qualify.

Aliens may hold interests in leases only by stock ownership in U.S. corporations holding leases and only if the laws of their country do not deny similar privileges to citizens of the United States. They may not hold a lease interest through units in a publicly traded limited partnership.

Types of Oil and Gas Leases

The BLM issues two types of leases for oil and gas exploration and development on lands owned or controlled by the Federal Government - competitive and noncompetitive.

Congress passed the Federal Onshore Oil and Gas Leasing Reform Act of 1987 to require that all public lands that are available for oil and gas leasing be offered first by competitive leasing. Noncompetitive oil and gas leases may be issued only after the lands have been offered competitively at an oral auction and not received a bid.

The maximum competitive lease size is 2,560 acres in the lower 48 States and 5,760 acres in Alaska. The maximum noncompetitive lease size in all States is 10,240 acres.

Since passage of the Energy Policy Act of 1992, (10/24/92), both competitive and noncompetitive leases are issued for a 10-year period. Both types of leases continue for as long thereafter as oil or gas is produced in paying quantities.

Lease Terms And Conditions

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.

Subject to special restrictions, the leases are granted on the condition that the lessee will have to obtain BLM approval before conducting any surface-disturbing activities. The oil and gas lease conveys the right to develop those resources on the leased land. The lessee or his/her operator cannot build a house on the land, cultivate the land, or remove any minerals other than oil and gas from the leased land.

Submitting
Expression of Interest (EOI)

An Expression of Interest (EOI) is an informal nomination to request that certain lands be included in an oil and gas competitive lease sale. This request must be made in writing. No filing fee or rental is required with an EOI. We are required to post the Notice of Competitive Sale 90 days prior to the sale. The oil and gas plats also must be noted prior to the sale. This is a very complicated and lengthy process. Please keep this in mind when making future plans regarding a federal oil and gas lease.

NOTE: Per Washington Office Instruction Memorandum No. 2014-004, effective 10/01/2013, The BLM will publish EOI submissions received on or after January 1, 2014, on the website of the BLM state office where the nominated parcel is located. EOI submitters who consider their name and address confidential should not include that information in their EOI. The BLM no longer requires submitters of EOIs to provide their name or address. Submitters may still provide this information for contact purposes; however, the BLM will make this information available to the public.

When submitting an informal Expression of Interest (EOI) that certain lands to be offered in an oil and gas competitive lease auction and that the EOI includes split estate lands—private surface/Federal minerals—must provide, with the EOI, the name and address of the current private surface owner(s). Whenever a split estate parcel is included in an oil and gas Notice of Competitive Lease Sale, the Bureau of Land Management (BLM) will send a courtesy letter to the surface owner(s). The letter will provide the surface owner notice of the scheduled auction as well as information about the BLM’s regulations and procedures for Federal oil and gas leasing and development on split estate lands.

Any EOI including split estate lands that is submitted in the future, or now pending with a BLM State Office, that does not provide the name and address of the surface owner(s) will not be processed by the BLM and such lands will not be placed on a list of lands included in a Notice of Competitive Lease Sale until the required information is provided.

Submit a written request (letter format) with the following information to:
          Bureau of Land Management
          Attn: Branch of Minerals
          440 West 200 South, Suite 500
          Salt Lake City, Utah 84101-1345

Show the Township, Range, Section, County, Acreage, describe by aliquot part (NENW) if applicable, please verify that the U.S. owns the minerals to lease and separate your parcels by Public Domain lands and Acquired lands.

If the area is shaded on the Oil and Gas (OG) Plat, check the acquired Historical Indexes and check who the Surface Management Agency (SMA) is. (i.e. Forest Service, Corps of Engineers, etc.) and note this on your letter. Note: Consent from the SMA has to be received prior to listing on a Competitive lease sale. You can access the officially recognized og plats here.

Submit your EOI's per parcel with no more than the maximum acreage of 2,560.00 acres and no limit on the minimum acreage.

Check if your parcel has been listed on a prior Competitive Lease Sale and if no bids were received you may file a Noncompetitive application up to 2 years after the parcel was listed. You can find a list of available lands to lease noncompetitive here.

Check the Oil and Gas Lease Sale schedule for timeframes and deadlines to submit your EOI's.

If your area is described by metes and bounds, please provide a description with your letter. NOTE: By providing the above information you will be helping us to expedite the listing of your parcels on a Competitive List.

Sale parcels will normally be configured as requested; however, BLM reserves the right to adjust the parcel size as needed.

Prior to submitting your EOI, please review BLM public records to make certain that the lands are available for leasing. Examples of lands not available for leasing are:

   • Lands included in an active oil and gas lease
   • Lands with non-Federally owned minerals
   • Lands within incorporated cities and towns
   • Lands withdrawn from mineral leasing
   • Lands located in designated or proposed wilderness study areas
   • Lands within an Indian Reservation
   • Lands with pending mineral entry applications
   • Lands with patented mining claims
   • Lands offered for sale within the last two years

When reviewing the public records, you may wish to check with BLM to determine if:

   • Expired leases have been extended beyond their expiration date by
      either diligently drilling wells, unit approval, or voluntary unit
      termination
   • Terminated leases are in the process of being reinstated

If you are requesting the entire township without identifying the available lands, the nomination will not be accepted and will be returned.

Question or comments should be forwarded to Justin Abernathy, 440 West 200 South, Suite 500, Salt Lake City Utah 84101.

Competitive Leasing Process

Oral auctions of all oil and gas leases are conducted by BLM State Offices not less than quarterly when parcels are available. A Notice of Competitive Lease Sale, which lists lease parcels and applicable stipulations to be offered at the auction, will be published by each BLM State Office at least 45 days before the auction is held.

BLM Utah will no longer send out oil and gas sale booklets. You may request a copy from the Utah State Office's public room at (801) 539-4001, come in to the public room located at 440 West 200 South, Suite 500, Salt Lake City, Utah, or access the sale information from web page at: http://www.blm.gov/ut/st/en/prog/energy/oil_and_gas/oil_and_gas_lease.html.

All auctions are conducted with oral bidding. Bidders must attend the auction to obtain a competitive lease or provide for someone to represent them. No sealed or mailed bids are accepted.

On the day of the auction, the successful bidder must submit a properly executed lease bid form, which constitutes a legally binding lease offer, and pay a share of the sale costs ($155.00 per lease); the first year's advance rental ($1.50 per acre or fraction thereof); and not less than the $2-per-acre minimum bonus bid. The balance of the bonus bid must be received within 10 working days of the auction. Those bidders who fail to submit the balance of the bonus on time will forfeit their entire deposit money.

Remittances associated with the leasing process may be made by personal check, cashier's check, certified check, or money order, made out to Department of the Interior-BLM. VISA or MasterCard may also be used. Cash is not accepted.

The following changes will take place regarding credit card usage at the BLM Utah oil and gas auctions, effective June 30, 2012.

  • Individual transactions will  be limited to $49,999.99. This limit has been lowered from the current amount of $99,999.99 and now applies only to credit card transactions.
  • You may not split the individual transactions greater than $49,999.99 into two or more transactions over one or multiple days.
  • We will not accept multiple cards from the same company for one transaction, but will accept a card from different companies limiting each transaction to no more than $49,999.99.
  • You may pay for your oil and gas lease parcel using credit cards or personal or cashier's check. Cash is not accpeted.
  • If you would like to utilize Automated Clearing House (ACH) payments or Fed Wire payments for the balance bonus payment, the instructions are attached to the Information Bulletin OC-2012-025. Please contact our Accounting Office at (801) 539-4006.

Non-Competitive Leasing Process 

Non-competitive leases may be issued only for parcels that have been offered competitively and failed to receive a bid.

The lands in expired, terminated, relinquished, or canceled leases will not be available for non-competitive leasing until they have been offered competitively in a Sale Notice for an auction and failed to receive a bid. A non-competitive presale offer may be filed on such lands if the prior lease expired or terminated or was relinquished or canceled at least 1 year before the presale offer is submitted to the proper BLM State Office.

Following an auction, all the lands that were offered competitively but received no bids will be available for non-competitive lease issuance for 2 years, beginning the first business day following the last day of the auction, as specified in the Sale Notice.

For non-competitive leasing, each offer must be submitted on a separate lease offer form. From the first business day following the auction through the last day of the same month, lands must be identified only by the parcel identification number as specified in the Sale Notice. Thereafter, and until the end of the 2 years of non-competitive availability, offers must use legal land descriptions and are not limited to the parcel configurations offered at the auction.

Offers must be made on a BLM-approved form. They must include payment of a $405.00 non-refundable filing fee and the first year's advance rental of $1.50 per acre.

All non-competitive lease offers filed on the first business day following the auction will be considered as having been filed simultaneously. The priority among any multiple offers received on this day for the same parcel will be determined by drawings open to the public. Offers received on subsequent days will receive priority according to the time of filing; for example, an offer filed at 10:15 a.m. will have priority over an offer filed at 10:16 a.m.

Non-Competitive Officer (NCO) to Lease - (Presale)

A non-competitive offer (presale) is a formal nomination for lands to be included in an oil and gas competitive oral auction. The offeror receives priority as of the time and date the offer is filed in the proper BLM office. If no bid is received at the oral auction, the non-competitive lease shall be issued, all else being regular, to the applicant. A non-competitive offer must be made on Form 3100-11, Offer to Lease and Lease for Oil and Gas (6/88 or later edition). Copies of Form 3100-11 shall be exact reproductions on 1 page of both sides of the official approved form, without additions, omissions, or other changes, or advertising. You must submit at least one original plus two copies. They must be typewritten or printed in ink and manually signed in ink and dated by offeror or offeror's authorized agent. The offer must include a $405.00 filing fee, first years advance rental of $1.50 per acre or fraction thereof. Remember to round up your acreage 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.

Non-Competitive Offer to Lease - 2 Year Window Lands - (Postsale)

A non-competitive offer on 2 year window lands is a noncompetitive offer on lands that have been through a competitive sale and receive no bids at the sale or at the day after drawing. An NCO must be made on Form 3100-11, Offer to Lease and Lease for Oil and Gas (6/88 or later edition). Copies of Form 3100-11 shall be exact reproductions on 1 page of both sides of the official approved form, without additions, omissions, or other changes, or advertising. You must submit at least one original plus two copies. They must be typewritten or printed in ink and manually signed in ink and dated by offeror or offeror's authorized agent. The offer must include a $405.00 filing fee, first years advance rental of $1.50 per acre rounded up to the nearest whole acre. Executing the lease form signifies agreement to standard lease stipulations and/or any additional stipulations posted to lands on a competitive sale notice. The offeror receives priority as of the time and date the offer is filed in the proper BLM office.

From the first day following the end of a competitive process until the end of that same month, the only acceptable description for a noncompetitive lease offer for the lands covered by that competitive process shall be the parcel number on the Notice of Competitive Lease Sale List of Lands. Each offer shall contain only a single parcel.

Offers filed after the parcel integrity period and during the remainder of the 2 year window can contain a maximum of 10,240 acres and a minimum of 640 acres as specified in 43 CFR 3110.3-3.

Withdrawal of Offer in Whole or in Part:

A postsale lease offer may be withdrawn by the offeror if the request to withdraw the offer is received by the proper BLM office after 60 days from the date of filing of the offer and prior to lease issuance. If a postsale offer is withdrawn after 60 days from the date of filing, the lands would continue to be available for noncompetitive leasing for the remainder of the 2 year period.

If a public domain mineral offer is partially withdrawn, the lands retained in the offer must total (in the lower 48 states) 640 acres, or one full section, or include all available lands within a section where there are no contiguous lands available.

A presale offer may be withdrawn by the offeror at any time prior to issuance of the noncompetitive lease. Any filing made after the end of the month in which a sale is held may not be filed by the parcel number, but shall be filed by the legal land description. An offer filed after the end of the parcel integrity period may include all or a portion of a parcel or may include a combination of parcels and shall be filed in accordance with 43 CFR 31103-3 with respect to minimum lease offer size. Offers filed from the first day following the end of the competitive sale until the end of that same month (parcel integrity period) must be made for the entire parcel included in the sale notice and must describe the lands by that single parcel number appearing in the sale notice.

Rentals

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 each year thereafter. After the lease is issued, rentals must be received at the Department of the Interior's Office of Natural Resources Revenue (ONRR), P.O. Box 25627, Denver, CO 80225-0627, on or before the lease anniversary date to prevent statutorily required automatic termination of the lease. This requires mailing of the annual rental at least a week or 10 days in advance of the lease anniversary date to ensure timely receipt by the ONRR. Rental inquiries can be made to ONRR at 1-800-525-8327.

Royalties

Royalty on production is 12.5 percent for both competitive and non-competitive leases.

Bonding

Before any surface-disturbing activities related to drilling can begin, the lessee or his/her operator must furnish a bond in the amount of at least $10,000 to ensure compliance with all the lease terms, including protection of the environment. With the consent of the surety and principal, the operator may use the bond of another party such as the lessee. Each time there is a new operator, that operator must notify the BLM that he/she is the responsible operator, giving the particulars of the bond under which he/she will operate.

Acceptable instruments of bonding are surety bonds, or personal bonds accompanied by negotiable Treasury securities, cashier's check, certified check, certificate of deposit, or irrevocable letter of credit.

The BLM may require an increase in the bond amount any time conditions warrant such an increase.

Assigning A Lease

Some people who acquire an oil and gas lease will assign the lease to another party. The value of oil and gas leases varies greatly. None of the parcels offered has been evaluated by the BLM for oil and gas potential prior to the competitive auction or to being made available for noncompetitive leasing. All of the lands included in noncompetitive leases have been offered at auction and received no bids.  The cost for Record Title Assignments and Transfer of Operating Rights are $90.00 per lease.

Leases may be transferred by assignment or sublease. The transfer must be submitted to the BLM for approval within 90 days from the date of execution by the transferor. The rights of any transferee will not be recognized by the Government, and the transferor will remain responsible for the lease, until the transfer has been approved by the BLM. An assignment either of a separate zone or deposit or part of a legal subdivision will not be approved. An assignment of less than 640 acres outside of Alaska or of less than 2,560 acres within Alaska will be approved by the BLM only if the assignment constitutes the entire lease or is demonstrated to further the development of oil and gas.

How A Lease Expires Or Terminates

Oil and gas leases expire at the end of their primary term - the 10th year - unless diligent drilling operations are in progress on or for the benefit of the lease; the lease contains a well capable of producing oil or gas in paying quantities; or 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 terminate if the lessee fails to make full and timely payment of the annual rental. The rental must be received by the proper Federal office on or before the anniversary date of the lease. The automatic termination is specifically prescribed by law, is not the result of BLM action, and cannot be waived.

The owner of a lease also may surrender the lease in whole or in part by filing a written relinquishment with the proper BLM State Office having jurisdiction over the lands. A relinquishment takes effect on the date it is filed. However, 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, and bring his/her account into 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.

OIL AND GAS LEASING FREQUENTLY ASKED QUESTIONS

How soon will my Expression of Interest (EOI) come up on a sale?

If the minerals are BLM public domain lands the lands will be placed on the sale that is schedule for the District involved.  Sales are held one a year for each of the four Districts.

Why does it take so long?

BLM works anywhere from 9 to 10 months in advance of a sale. We stop accepting Expression of Interests (EOI) for inclusion in a sale approximately 11 months before the sale. EOI's filed after that date are moved into the next sale scheduled for that District Office. We are also required to post the Notice of Competitive Sale and have the plats notated 90 days prior to the sale.

 

What is the difference between and EOI and a Presale Noncompetitive Offer?

An EOI is an informal nomination for lands to appear on a competitive oil and gas auction. A presale noncompetitive offer is a formal nomination in which advanced rental is paid along with a filing fee. If no bid is received at the sale, the lease issues to the applicant for the $1.50 an acre rental with a $405.00 filing fee. At the present time, we are able to work EOI's and Presale's within the same timeframes.

 

What is the primary term on a federal oil and gas lease?

Noncompetitive leases have a primary term of 10 years. Competitive leases issued prior to the Energy Policy Act of October 24, 1992, have a primary term of 5 years. Section 2509 of this act changed the primary term of subsequently issued competitive leases to 10 years.

What is the effective date of my lease?

The effective date of a lease is the first day of the month after signature by the Authorized Officer.

After the Oil and Gas Auction, when I receive my lease, do I have to sign the back page of the lease form?

No. Your signature on the bid form at the sale signifies your acceptance of the lease terms on the back of the lease.

When is my rental due?

Rental is due to the Office of Natural Resources Revenue by the anniversary date which is the effective date of the lease. Rental is $1.50 an acre the first 5 years and increases the sixth year to $2.00 for the majority of leases.

What are the filing fees associated with oil and gas leases?

The fees for filing a Noncompetitive offer are a $405.00 filing fee and the rental of $1.50 an acre (remember to round up your acreage). If you are filing an Assignment of Record Title or Transfer of Operating Rights, there is a $90.00 filing fee for each lease you are filing.  Overriding Royalty is $10.00 per lease.

What form do I use for transfers?

Record Title Interest/Overriding Royalties use Form 3000-3 dated January 2010.  Transfer of Operating Rights/Overriding Royalties use Form 3000-3a dated January 2010. 

Can I copy the official form?

Yes. Copies must be EXACT reproductions on both sides of two pages of the official approved form, without additions, omissions, or other changes, or advertising. 

Can I use computer generated forms for transfers?

Yes. However, the Utah State Office will not review such formats for consistency with current Bureau forms. All parties will be bound by the language of the official form.

How do I file a mass assignment?

Use the current form. You must have 3 originally executed copies (both transferor and transferee sign 3 copies). Attach an exhibit to each original copy showing serial numbers, type and interest conveyed, and a description of the lands. We need one reproduced copy of the form and the appropriate page of the exhibit for each lease. There is a nonrefundable $90.00 filing fee per instrument per lease.