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The leasing process for onshore oil and gas

Bureau of Land Management (BLM) field offices award leases on designated lands for oil and gas resources. Leases are auctioned live and open to the public. Before the live auction, the BLM field office estimates the fair market value for the natural resources in question.

Before a lease

BLM field offices draft Resource Management Plans (RMPs) to guide leasing decisions on federal lands, including which lands are open to oil and gas leasing.

Any interested individual or corporation can file an informal request (Expression of Interest) with the BLM for certain lands to be offered for lease.

BLM also accepts noncompetitive presale offers. Noncompetitive offers require a formal process where the interested party must submit a filing fee, first-year rent, and a lease form stating they are qualified to hold a lease.

BLM state office must:

  • Perform an initial review of nominated lands to determine if the lands are available.
  • Create an initial list of parcels, consolidating requests into lease units.
  • Send parcel lists to BLM field offices or to the surface management agency (SMA), as appropriate. SMAs must approve the lease and provide stipulations.

Lease sale

BLM field offices award leases during live lease auctions open to the public. Before the live auction, the BLM field office estimates the fair market value for the natural resources in question.

BLM state office must:

  • Offer land by competitive leasing. Only after no bids have been received can the BLM issue a noncompetitive lease.
  • Conduct oral or web-based lease auctions every quarter when parcels are eligible and available.
  • Issue a Notice of Competitive Lease Sale at least 45 days before the auction.
  • Award the lease to the highest bidder.

Bidders must:

  • Register and participate in the auction or have someone represent them.
  • Complete the bid form certifying the applicant is a U.S. citizen over the age of 18, an association of citizens, or a corporation.

The highest qualified bidder must submit a lease bid form and pay a nonrefundable filing fee, the first year’s rent ($1.50 per acre), and the $2 per-acre bonus.

Under a lease

BLM awards oil and gas leases for a term of 10 years and beyond, as long as production continues in paying quantities.

The lease holder must:

  • File a permit application and exploration plan with the BLM field office.
  • Get BLM approval and submit a bond of at least $10,000 before starting any surface-disturbing activities.
  • Submit a Transfer of Operating Rights form to BLM when subleasing.

BLM field office must:

  • Perform a NEPA analysis before awarding a permit to drill.
  • Perform inspections to enforce lease terms and monitor health, safety, and environmental concerns.

End of a lease

Leases expire at the end of the primary term or when the lease is no longer capable of production.

The lease holder must:

  • Relinquish the lease in writing and submit to the proper BLM state office.
  • Pay rent on time. If rent isn’t paid on time, the lease will automatically terminate.
  • Plug abandoned wells and perform any other work required by the BLM (such as land reclamation).

BLM state office may:

  • Extend a lease past its primary term if drilling operations are in progress.
  • Extend a lease beyond the primary term when the lease contains a well capable of producing in paying quantities.
  • Cancel lease if company fails to comply with lease terms.