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 of Land Management’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 Trump administration’s oil- and gas-friendly regulatory environment, 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.
“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.
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 non-disclosure 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 groups didn’t immediately respond to a request for comment about whether they’ll challenge the sale in court.
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