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Internet Leasing Pilot Project: 
Q’s and A’s

 

Q: What is the BLM announcing?

A: The BLM is announcing a pilot project to test the potential migration of its oil and gas lease sale process from traditional oral auctions to an online platform.

In the FY2008 Consolidated Appropriations Act, Congress directed the BLM to test Internet leasing as an alternative to the oral sales required by the Mineral Leasing Act. This pilot project examines the feasibility of conducting virtual auctions using the Internet, and will evaluate potential savings and benefits to the Federal government and lease sale participants from doing so. 

Q: Who is designing the system? 

A: Following a competitive bidding process, the BLM awarded the contract to develop an Internet lease auction system to Amarillo, Texas-based EnergyNet.com, Inc., who has been conducting internet oil and gas lease auctions since 1999.

Q: How will the system work? 

A: The system will be an interactive, online auction web site. Bidders will register on the site, be assigned a bidder number, and place bids on listed parcels.

Information about the parcels will be provided on the site in a format similar to the current Notice of Competitive Lease Sale, and will be available online for a minimum of 60 days prior to the beginning of the bidding period.

Bidders will be able to place both standard and optional proxy bids. Standard bids will advance the high bid of the auction directly to the value of the bid placed.

Auctions are scheduled to close at a specific date and time, which will be published at the onset of the sale. This will enable participants to plan their participation, place a single proxy bid, and monitor the auction’s progress remotely.

EnergyNet is designing a system that will ensure the security of bidding and payments by requiring bidders to sign a "commitment to pay," through use of the pay.gov electronic payment system. Upon receipt of payment the system will provide the appropriate completed forms, such as Form 3000-02, to the successful high bidder and the BLM.

Q: When will the system go into effect?

A: EnergyNet expects to make available a prototype of the BLM Internet leasing system by January 2009, and aims to have completed the system by June 2009.

The pilot sale is expected to be held by the BLM-Colorado State Office during the last quarter of Fiscal Year 2009 (July-September 2009). Concentrating the pilot offerings from one state will ease preparation, training and orientation for the pilot and save cost on the contract, and will minimize the time and cost for orienting and training sale participants and interested public.

The sale would be in addition to the regularly scheduled oral auctions held in the state that year. The Notice of Competitive Lease Sale for the parcels listed on the website will be distributed in hard copy.

BLM plans to hold an open house in which the system will be introduced to the public. EnergyNet will also provide telephone support during the auction, and the system will contain an online tutorial developed by the firm.

After the pilot, the BLM will then determine whether to recommend an amendment to the Mineral Leasing Act allowing for Internet lease auctions on a permanent basis. With that action, the BLM would consider incorporating the Internet lease auctions into its National Oil and Gas Lease Sale System (LSS).

Q: What benefits will moving to an Internet platform offer?

A: If the pilot is successful, the BLM believes oil and gas leasing will be opened up to a broader audience, and there could be significant cost savings for the BLM and the Treasury. It is expected that lease sale participants will enjoy some cost savings, too, as they will not have to travel to the site of the oral auction in order to participate.

Q: How will personal information be secured?

A: The pilot system complies with all aspects of NIST Special Publication 800-37 (Guide for the Security Certification & Accreditation of Federal Information Systems, May 2004) and NIST Special Publication 800-53 (Revision, Recommended Security Controls for Federal Information Systems, March 2006). The system also employs additional measures to enhance security such as an online credit card validation, automatic check against a pre-defined list of individuals forbidden from bidding, and a final manual check prior to account establishment.