Nevada’s Oil Speculation Rush Fades as Interest Drops, Fees Rise

This week’s federal oil and gas lease sale of just four parcels of land in Nevada shows that an Obama and Trump-era rush by drillers to lease land in a state with little oil has ended for now, even as it has inspired anti-speculation legislation in Congress.

No land in Nevada has been nominated for oil and gas leasing since 2022, the most recent federal data show, and just 4,700 acres are up for bid on Tuesday when the Interior Department’s Bureau of Land Management holds the first oil and gas lease sale in Nevada in more than a year.

Nevada, which has no major oil fields and little proven production potential, was the Wild West for oil and gas leasing through the Obama and Trump administrations. It was a rush that was the basis for legislation now before Congress that would bar the Interior Department from leasing lands with little or no proven oil and gas potential.

Speculators say $5 per-acre leasing nomination fees imposed by the Inflation Reduction Act have ended leasing speculation for now.

Before the climate law was passed last year, anyone could nominate federal land to be included in an oil and gas sale—anonymously and for free. The law also ended noncompetitive oil and gas leasing, the practice of offering drillers the rights to land that received no bids in a competitive lease sale.

“You’re not going to spend $5 per-acre to nominate acreage. It doesn’t guarantee you anything. Who’s going to do that?” said Bill Ehni, a Carson City, Nev., geologist who was one of the last people to nominate Nevada federal lands for leasing, BLM records show.

Between 2009 and 2018, speculators nominated the equivalent of more land than the federal government owns in Nevada—58 million acres. About 3.7 million acres were actually leased, but the land bureau only permitted 41 wells for drilling. By comparison, in oil-rich Wyoming during the same period, 3.9 million acres were leased and 12,212 oil and gas wells were permitted to drill, BLM data show.

All those land nominations with so few resulting leased acres strained the BLM’s resources and staff as they spent time processing excessive land nominations, with little public benefit, the Government Accountability Office said in a 2021 report.

The last parcels nominated for leasing in Nevada were submitted to the BLM in May 2022, according to the bureau’s National Fluids Lease Sale System data. Bureau officials did not respond to multiple requests for comment and confirmation that its data are current and correct.

“Bulk” leasing nominations in Nevada from a few people were getting out of hand, and the new fees imposed by the climate law will prevent people from nominating excessive acreage because “it just gets too costly too quickly,” said Kathleen Sgamma, president of the Western Energy Alliance, which represents oil and gas companies operating on federal land.

More Protections Needed

But members of Nevada’s congressional delegation say the climate law’s restrictions alone aren’t enough to halt speculative leasing once and for all.

BLM oil and gas leasing regulations proposed July 20, if finalized, would require the agency to focus leasing in areas with proven oil and gas potential, avoiding areas that don’t. But legislation is needed to ensure a future administration doesn’t reverse those regulations, Sen. Catherine Cortez Masto (D-Nev.) said in a statement.

Cortez Masto introduced the End Speculative Oil and Gas Leasing Act of 2023 (S. 1622) in May, which would codify some of the proposed new regulations and require the land bureau to analyze the oil and gas production potential for federal land before including it in a lease sale.

A companion bill in the House (H.R. 3377) is sponsored by Rep. Susie Lee (D-Nev.). The legislation is now in committee and has uncertain prospects in that chamber.

Speculative leasing wastes BLM staff time and allows “millions of acres of iconic landscapes and resources to go neglected and unprotected while idle leases are left to gather dust,” Lee said in an email.

Preventing New Discoveries?

Speculators and the oil industry say the legislation will prohibit companies from discovering new oil fields.

“Politicians that are enacting these types of restrictions on leasing don’t understand the sequence of events,” Ehni said. “The only way to explore for oil and gas is to get a lease first.”

Drillers can’t discover new oil deposits without a lease, and you can’t explore for oil in new areas without being able to nominate lands for leasing in regions that have never been drilled, Ehni said. Often, drilling on those leases yields no oil at all.

The legislation is sponsored by lawmakers opposed to the oil industry, and it’s designed to prevent new oil fields from being developed, Sgamma said.

“It takes a while to crack the geologic code in new areas, and that wildcatting is usually done by small companies that initially can’t afford a high cost of entry,” Sgamma said. “If that cost of entry isn’t low at first, the area might not get explored.”

For Allen Matzke, the Biden administration’s refusal to hold quarterly oil and gas lease sales as part of its climate change agenda was enough to kill drillers’ interest in nominating land for leasing.

Matzke and Ehni are partners in SAM Oil LLC, which explores for oil in Nevada and Utah. Matzke was the second to last person to nominate Nevada land for oil leasing, according to BLM records.

The BLM held quarterly lease sales in each Western state prior to the Biden administration, but that ended in 2021 when the White House issued a leasing moratorium, which has since been lifted. Now, after courts and the climate law mandated that leasing resume, the bureau has held lease sales roughly annually in Nevada and other states.

“Nobody’s nominating anything because they’re not having any lease sales,” Matzke said. “The administration doesn’t want any oil and gas activity on federal lands, and they’re doing everything they can to stop it.”