On March 12^th, the Bureau of Land Management (BLM), under the Department of the Interior (DOI), held an auction for oil and gas leases on federal land in North Dakota. The sale in North Dakota offered 6 parcels, totaling 2,336 acres, all of which received a bid and were sold. This was the second lease sale held by BLM in 2024, with the first occurring earlier in March in Wyoming.

All of the 2,336 acres were bid on, for an average bid of $1,032 per acre. The average bid per acre in today’s sale was lower than the 2023 average of $1,446 per acre, but is still eight times the average bid of $125.41 from 2016 to 2020. None of the parcels received the statutory minimum bid of $10/acre, with the lowest bid receiving a bid of $33/acre and the highest receiving $2,510/acre. While lower than last year’s average bid, the results of today’s sale demonstrate continued interest in high potential land.

In conjunction with the sale, TCS released a new report No Deal (For Taxpayers) in North Dakota which found that taxpayers in North Dakota lost out on $1.2 billion in potential revenue under the outdated 12.5% federal royalty rate which was in place from FY13 to FY22. Taxpayers also lost $4.2 million in potential revenue from outdated rental rates for federal leases in the same period. Further, taxpayers may be on the hook for as much as $433 million in potential well reclamation liability from currently producing wells on federal land in North Dakota.

Taxpayers in this most recent sale and last year’s sales benefited from the critical leasing reforms implemented in the Inflation Reduction Act (IRA), including:

• A federal onshore royalty rate of 16.67% (raised from 12.5%)
• Rental rates of $3/acre for the first 2 years, $5/acre for years 3-8, and no less than $15/acre for years 9-10 (raised from $1.50/acre for years 1-5 and $2/acre for years 5-9)
• Minimum bid of $10/acre (raised from $2/acre)

However more needs to be done to protect taxpayers. Last year, BLM leased more than 17,000 acres of federal land in North Dakota. These leases, and those issued in today’s sale, carry with them inadequate federal oil and gas bonding requirements that continue to leave taxpayers at risk of shouldering millions of dollars in potential reclamation costs.

The BLM recently proposed a new leasing rule that would codify the fiscal reforms made in the IRA and implement other needed changes, such as improving oil and gas bonding requirements. Additionally, the rule would help direct leasing to appropriate locations and increase processing fees, allowing the BLM to cover the cost of administering the federal oil and gas program. The proposed rule would help raise revenue, disincentivize speculative leasing that locks valuable land from other uses, and hold the oil and gas industry accountable for shouldering the costs of orphaned well reclamation.