We did the math — and it’s not too late to change course
In August 2022, Congress overhauled the system for leasing oil and gas on America’s public lands when it passed the Inflation Reduction Act (IRA). Many of the updates were long overdue and intended to restore balance to a system that had been rigged in favor of the oil industry for more than a century.
After the IRA passed, the Bureau of Land Management (BLM), which is part of the Interior Department, issued internal guidance laying out how it would lease public lands for oil and gas drilling under the new law. That guidance, which took the form of a series of Instruction Memoranda, was well intentioned and took a very responsible approach to oil and gas leasing.
Unfortunately, the BLM is not following its own guidance. It has proposed lease sales covering an order of magnitude more acreage than is required under the law. In 2023, the agency is proposing to offer leases on hundreds of thousands of acres of public lands that were nominated anonymously and in areas that it knows will likely never produce oil, even though the agency maintains broad discretion over the leasing program and is not required to offer up this land for lease.
Right now, the BLM is considering leasing more than 282,000 acres of public land in the second quarter of this year alone. A new analysis from the Center for Western Priorities finds that this is at least 261,000 acres more than the new law requires, and many of the acres being considered contravene the agency’s own guidance for lease sales.
This process of scoping hundreds of thousands of acres more than is necessary is a waste of Interior Department resources, staff time, and unnecessarily complicates the selection process that goes into each lease sale. While it’s appropriate to consider a somewhat larger number of acres than the agency intends to ultimately lease, by making the evaluation process cover an order of magnitude more land than the law and BLM guidance requires, the agency is opening the upcoming lease sales to potential errors and abuse, and continuing to repeat the mistakes of the past century.
Fortunately, it is not too late for the Interior department to change course and bring the upcoming lease sales in line with the letter and intent of the IRA. Here’s how.
1) Follow your own guidance and follow the law
What’s in the IRA
The Inflation Reduction Act says that in order for Interior to issue final rights-of-way for wind or solar projects on public land, BLM must also hold lease sales for oil and gas. Specifically, in order to issue a wind or solar right-of-way, BLM must have held an oil and gas lease sale in the past 120 days and have offered for lease at least 50 percent of the total acres nominated in the prior 12 months or two million acres, whichever is smaller. Since companies have only nominated a few hundred thousand acres in the past year, the 50 percent number is the relevant metric right now.
Because the IRA now requires oil and gas companies to pay $5 per acre to nominate land for leasing, it effectively ended the long-standing practice that let speculators anonymously submit nominations. (Previously, it cost nothing to nominate public land for oil and gas leasing.)
In the five years before the IRA, anonymous nominations made up at least 60 percent of all nominations. With BLM no longer accepting nominations submitted anonymously, we can expect the number of valid lease nominations to stay below pre-IRA levels.
How BLM says it will implement the IRA
In November 2022, BLM issued a series of Instruction Memoranda with guidance for implementing the IRA and addressing some of the deficiencies in the leasing system identified in the Interior Department’s 2021 report to President Biden.
IM 2023–006 outlines how BLM will calculate the 50 percent acreage requirement. It removes from consideration acres that are tied up in litigation, duplicate, already leased, unable to be processed, or withdrawn. Notably, it does not require anonymously nominated acres to be withdrawn from upcoming sales even though the IRA ended anonymous nominations.
In light of the new $5 per acre fee required by the IRA, BLM could and should have required companies to re-nominate all previously-nominated acres in order for them to be considered for leasing after the passage of the IRA. IM 2023–008 suggests the agency should close out all anonymous nominations that were submitted more than three years ago. Unfortunately, the agency is not following this guidance in its plans for the upcoming lease sales.
The IMs also instruct state offices to prioritize lands with certain characteristics when considering which nominated acres to offer in lease sales, such as areas that are close to existing oil and gas infrastructure and have high potential for future production, while avoiding lands that overlap with wildlife habitat, migration corridors, cultural sites, and recreation. This is good guidance — if it’s followed and used to inform decisions regarding which parcels are offered for leasing and which are deferred.
2) Your own guidance gets you to 50 percent
The second quarter lease sales are scheduled to be held in May and June 2023. That means the Interior Department must look at acres nominated for leasing beginning in June 2022 to come up with 50 percent of the acreage the agency must have offered for lease over the past year in order to issue a right-of-way (ROW) for wind or solar on June 30, 2023. The final number won’t be known until the day the ROW is issued, but by backdating to June 1, 2022, BLM can safely give itself a margin of error and not risk coming in under the 50 percent mark.
The math is straightforward:
- From June 1, 2022, through August 16, 2022 (the date the IRA was signed), companies nominated approximately 85,760 acres for oil and gas leasing.
- 19,840 of those acres were nominated anonymously and should not be considered eligible for leasing post-IRA, but because DOI’s current guidance includes those acres in calculating the 50 percent floor, they are included in these calculations.
- From August 17, 2022, through January 31, 2023 (post-IRA), companies nominated 107,520 acres for oil and gas leasing. This comes out to an average of 21,120 acres nominated per month.¹
- Projecting out at this rate from February 1 through June 30, 2023 (five months), BLM can expect companies to nominate an additional 105,600 acres for leasing.
- In total, the number of acres nominated for the 13 month period ending June 30, 2023, will be around 298,880 acres. Note that this period is one month longer than required by the IRA, and it includes acres nominated non-anonymously and for free before the IRA, so this gives DOI plenty of room in case nominations in the final weeks before the lease sales are held come in higher than expected.
- Dividing that in half, the IRA mandates that in order to sign renewable ROWs in June 2023, BLM must have offered leases on at least 149,440 acres in the past year. (Again, this is half of a 13-month period, giving the agency plenty of room to meet the IRA’s requirements even if nominations increase.)
- On June 30, 2022, DOI offered 128,511 acres for lease in sales held across Wyoming, Colorado, Montana, and Nevada. This acreage counts toward the requirement of acres that BLM must offer in the 12 months before issuing wind or solar rights-of-way, assuming it holds the second quarter 2023 lease sales on or before June 29.
So what does this mean?
- Subtracting the total 2022 lease sales acreage from the roughly 150,000 acre floor required by the IRA shows the second quarter 2023 lease sales do not need to be larger than 21,000 acres in total across all states.
- This means in the second quarter alone, the Interior Department is proposing to lease 261,000 more acres of public land than is required by the IRA.
- Looking ahead, if oil and gas companies continue to nominate land at the current pace, BLM will never have to offer more than 35,000 acres for lease each quarter in order to keep approving wind and solar rights-of-way.
3) The IRA got rid of anonymous nominations, so you should stop offering that land for lease
In the draft environmental review for the second quarter lease sale in Wyoming, BLM says that if it deferred acres based on application of the evaluation criteria laid out in one of the recently issued IMs, the sale would shrink from approximately 251,000 to 171,000 acres. But even that number is unnecessarily large. 177,944 of the acres being considered for the Wyoming sale are on lands with low or no potential of ever producing oil, which is discouraged by BLM’s post-IRA guidance.
Additionally, across the Nevada and Utah sales that have been proposed for the third quarter of 2023, 35 of 53 parcels (66%), covering a total of nearly 68,000 acres, were nominated anonymously more than 3 years ago. Four parcels in Utah were nominated in March 2018, and 31 parcels in Nevada were submitted in February and March 2019. Many of the parcels that have been proposed for lease in North Dakota have an even more egregious problem — the majority were nominated ten years ago. 33 of the 51 parcels (65%), covering a total of more than 15,000 acres, were nominated anonymously more than three years ago, some even as far back as 2007.
Even considering these parcels for lease is in direct conflict with BLM’s own guidance on how to select public lands for leasing under the IRA.
These statistics confirm that a significant proportion of the parcels being considered for lease are speculative in nature, given that they were nominated anonymously and/or on lands with little to no drilling potential. They would likely never produce oil, and simply be tied up “on the books” to help oil and gas companies pad their holdings. This is precisely the scenario that Congress intended to minimize when it modernized the minimum lease bid, rental, and royalty rates on public lands with the IRA.
In other words, BLM could easily — and legally — scale back the acreage offered in the upcoming 2023 lease sales to bring them in line with the guidance in the Instruction Memoranda, and safely hit the IRA’s 50 percent requirement with room to spare.
Because the second quarter sales only need to be a total of 21,000 acres in order to comply with the IRA and allow for wind and solar ROWs to be issued, there’s absolutely no reason for BLM to move ahead with a lease sale that includes thousands of anonymously-nominated parcels or parcels that are on lands with low or no drilling potential.
The way forward
Under both the IRA and the Mineral Leasing Act, the Interior secretary has broad discretion to determine which lands are eligible and available for leasing. Given the industry’s relatively low interest in nominating acres post-IRA, the BLM’s proposed 2nd quarter lease sales are massively overshooting the amount of public land the agency must offer for leasing in order to advance wind and solar development. BLM should drastically shrink the second quarter lease sales, which would ensure the sales align with the letter and the spirit of the IRA, and bring Interior in line with President Biden’s goals for America’s energy transition.
Since a significant proportion of proposed parcels for the second quarter sales were nominated anonymously and/or contain lands with little to no drilling potential, removing those parcels from the upcoming sales provides an obvious and legal way for BLM to scale down the sales to align with the intent of the IRA and the agency’s own guidance.
It’s important to note that the current leasing process, even if it’s implemented perfectly, still poses a long-term threat to America’s public lands. The Instruction Memoranda represent guidance to agency staff as they plan lease sales. They are not binding rules, and they can be easily rewritten by future administrations. Even if the Interior Department follows its guidance to the letter for the remainder of President Biden’s first term, it’s safe to assume that a future administration that is beholden to the oil industry would quickly toss that guidance out the door.
This is one of the reasons why we warned that the Biden administration must codify its IRA implementation through the rulemaking process. In order to protect public lands into the next century, the agency should ensure that the process of selecting public lands for leasing will always protect critical habitat and cultural sites, prioritize public access and recreation, and never again contemplate offering oil and gas companies an order of magnitude more land than the law requires.
- This acreage estimate a) assumes each EOI is for a full PLSS section of 640 acres; and b) includes only EOIs that BLM considers “valid” according to the criteria laid out in IM 2023–006. Since some EOIs would result in leases of less than a full 640-acre section, the actual requirement under the IRA could be smaller.
- Average of September 2022 through January 2023.
Photo: David Korzillus, BLM