Federal Offshore Oil and Gas Leasing Reform Act of 1987
| Jurisdiction | United States,Federal |
| Citation | Vol. 17 No. 9 Pg. 1765 |
| Pages | 1765 |
| Publication year | 1988 |
1988, September, Pg. 1765. Federal Offshore Oil and Gas Leasing Reform Act of 1987
Column Editor's Note: Due to the timeliness of the following article, Part II of Jan G. Laitos' article, "Assault on the Citadel: Water Quality Laws and the Exercise of Water Rights," will appear in the October issue instead of this issue as originally scheduled.
The Federal Onshore Oil and Gas Leasing Reform Act of 1987 ("Reform Act") was signed into law December 22, 1987, as Title V, Subtitle B of the Omnibus Budget Reconciliation Act of 1987.(fn1) The Reform Act significantly amends the Mineral Leasing Act of 1920 ("Mineral Leasing Act"),(fn2) which authorizes the leasing of oil and gas and certain other minerals in onshore public domain lands. Under the provisions of the Mineral Leasing Act for Acquired Lands,(fn3) the provisions of the Reform Act also apply to leasing of acquired lands. This article briefly summarizes the significant provisions of the Reform Act and the implementing regulations recently issued by the Bureau of Land Management ("BLM").(fn4)
The Reform Act was the result of an effort by Senator Bumpers and others in Congress over a period of years to address three major concerns with the Mineral Leasing Act. First, there was concern that because the majority of federal oil and gas leases were issued non-competitively rather than through the competitive system that was applicable to lands located in a known geological structure ("KGS"), the United States was not receiving a fair return from leases of its oil and gas lands.(fn5) Concern existed both from errors and uncertainties in the KGS determination process(fn6) and from the belief that any technical determination, even if perfectly made, would not achieve as fair a return as a more general competitive process.
Second, environmental groups were concerned that the pre-leasing environmental assessment procedures of the BLM and the U.S. Forest Service did not adequately protect wildlife and other environmental values. Third, there was concern about the potential for fraud and abuse in the noncompetitive system, especially the simultaneous filing lottery system, by filing services misrepresenting to the public the value of tracts to be offered and a filer's chances of winning a tract.(fn7) The Reform Act provisions respond in a number of ways to these concerns.
Section 5102(a) of the Reform Act significantly expands the scope of the competitive system by requiring generally that all public domain and acquired lands available for leasing first be offered for leasing at competitive lease sales with oral bidding.(fn8) Lands are not available for noncompetitive leasing until they have first been offered for competitive leasing. The Reform Act thus dispenses with the troublesome KGS concept, together with the similar "favorable petroleum geological province" concept applicable in Alaska. Leases will be awarded to the highest qualified bidder bidding not less than the national minimum acceptable bid of $2 per acre, which minimum may be raised by the Secretary of the Interior by regulation two years after passage of the Reform Act.(fn9) The concept of linking minimum bids to the economic value of the land has thus been deleted.
The Reform Act allowed test sales to be held in order to evaluate sales procedures.(fn10) After trying both a nomination procedure and a direct sale procedure, the BLM selected a direct sale procedure in the final regulations.(fn11) This procedure involves the issuance by the BLM of a Notice of Competitive Lease Sale describing the lands available for bidding at the lease sale, without obtaining formal nominations from private parties of lands in which there is interest. Lands described in the Notice would not be available for noncompetitive leasing until after the sale is held.
The selection of lands to be put up for competitive sale is thus left with the BLM, although the comments to the
Competitive lease sales are to be held at least quarterly for each state where lands are available, and the BLM has decided that the specific bidding procedures will be left to the discretion of the individual BLM state offices.(fn14) The winning bidder must submit, by the close of business on the day of the sale, the minimum bonus bid of $2 per acre, the first year's rental and an administrative fee of $75 per parcel, with the balance of the bonus bid due within ten working days after the last day of the auction.(fn15)
Lands for which no acceptable bid is received will be available for noncompetitive leasing for a period of two years after the last day of the competitive sale, with a lease to be issued to the first qualified responsible applicant upon payment of a nonrefundable filing fee of $75.(fn16) At the end of this two-year period, if such lands have not been leased or a lease offer is not pending, they must go through the competitive sale process again before being available for noncompetitive leasing.(fn17)
Although the Reform Act did not specifically abolish the simultaneous filing lottery, the BLM has concluded that Congress intended to end the lottery. The final regulations thus delete the old lottery provisions, leaving a modified over-the-counter procedure as the non-competitive leasing system.
The regulations allow for the filing after January 2, 1989, of noncompetitive lease offers on lands that have not been through the competitive sale, with certain limitations. Upon filing of...
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