A $4 billion federal oil and gas lease sale Wednesday in the Permian Basin in New Mexico and Texas was the largest onshore lease sale in US history in terms of revenue generated, more than quadrupling the previous record, the Interior Department said.
Rising oil prices due to the Iran war, high demand for oil and natural gas, and the Trump administration’s agenda prioritizing fossil fuels development on federal land encouraged companies to spend more than ever on federal oil and gas leases, according to energy analysts.
The Bureau of Land Management’s previous national record for revenue generated in an oil and gas lease sale was set in a 2018 New Mexico auction, which generated just over $972 million in total receipts, Interior said in an email. The bureau’s most recent previous oil and gas lease sale for New Mexico, held in January before the Iran war broke out, generated $327 million in total revenue.
Wednesday’s lease sale also broke a record for the highest bid for a single lease.
Lea County is home to BLM Director Steve Pearce, who owned an oil field services company there before serving in Congress. He was confirmed by the Senate to his current role on Monday.
‘Best of the Best’
The industry’s knowledge of where oil and gas is in the Permian Basin, the oil- and gas-friendly regulatory environment in New Mexico and under the Trump administration, and high fuel demand made this “the perfect setup” for such a high-netting lease sale, said Frank Maisano, senior principal at Bracewell LLP in Washington.
New Mexico state regulators have supported oil and gas leasing on state land in the Permian Basin for many years.
“This is like the best of the best,” he said. “There’s a huge demand for natural gas right now. That’s not going away.”
Bob McNally, president of Rapidan Energy Group, said the US is seeing a wave of investor interest in North American hydrocarbons. That’s because the previous consensus that oil and gas consumption has peaked has shifted to expectations of demand growth after 2030, McNally said.
The Iran war has also toppled an assumption in the energy industry that the US would guarantee the free flow of energy from the Persian Gulf, and now there’s a possible permanent security risk there, he said.
“Connect those two points, and America’s oil and gas basins and infrastructure are worth a lot more than one year ago,” McNally said.
The sale is a “clear signal” of operator confidence, said Missi Currier, president and CEO of the New Mexico Oil and Gas Association.
“When access is available and the regulatory environment is stable, industry invests,” she said. “Yesterday proved that.”
Billions for Leases
The BLM on Wednesday sold 73 leases in New Mexico’s Permian and San Juan basins, and one in Texas, totaling 33,530 acres in the two states.
Devon spent $2.6 billion for its leases in the Delaware Basin, part of the larger Permian Basin, the most productive oil field in the US.
“This BLM lease sale presented a rare and compelling opportunity to add high-quality, contiguous federal acreage at scale in the core of the Delaware Basin,” Clay Gaspar, Devon’s president and CEO, said in a statement.
Federal Abstract Co., which bids on behalf of other companies in federal oil and gas lease sales to ensure their anonymity, spent $1.14 billion on leases in the sale. The company declined to comment due to a nondisclosure agreement.
Several environmental groups, including the Western Environmental Law Center and the Wilderness Society, filed formal protests to the sale. Their protests cited the sale’s contributions to climate change and water pollution, and possible National Environmental Policy Act violations.
“The lease sale reflects the Trump administration’s fixation on fossil fuels over the protection of people and place and domestic response to the debacle the administration created in the Middle East,” said Erik Schlenker-Goodrich, executive director of the Western Environmental Law Center. The sale “demonstrates that the Trump administration is turning the U.S. into a backwater petrostate.”
The sale benefits the US Treasury, but the public should ask what the Trump administration will use the money for, he said.
The Wilderness Society is evaluating “all options to hold this administration accountable” for the lease sale, said Kim Stevens, director of climate policy advocacy for the organization.
“Oil and gas companies already have a stranglehold on national public lands and how they’re managed,” she said.
Learn more about Bloomberg Law or Log In to keep reading:
See Breaking News in Context
Bloomberg Law provides trusted coverage of current events enhanced with legal analysis.
Already a subscriber?
Log in to keep reading or access research tools and resources.