Resource Center

Navigating the New Federal Oil & Gas Leasing Landscape

Written by PakEnergy Team | Oct 21, 2024 2:15:38 PM
What You Should Know About The New Regulations

Inflation Reduction Act – August 16, 2022

FEDERAL LEASING CHANGES AT A GLANCE
$10/Acre

Minimum Bid

16.67%

Royalty Rate

$150,000

Minimum Lease Bond

$500,000

Minimum Statewide Bond

Bidding Requirements
  • New $10/acre minimum bid is now required
  • No more anonymous submissions with new non-refundable $5/acre filing fee
  • No more non-competitive leasing
Bonding Requirements
  • New minimum lease bond is now $150,000
  • Minimum statewide bond increased from $25,000 to $500,000
  • No more nationwide & unit operator bond
Rental & Royalty Rates
  • Remit bonus and first rental payment to BLM office where lease was signed; remit all subsequent payments to ONRR (Office of Natural Resources Revenue)
  • New 16.67% royalty rate, up from 12.5%
Rental Payments
  • $3/acre first 2 years
  • $5/acre year 3 to 8
  • $15/acre thereafter
Until Recently, Changes to Federal Leasing Requirements Have Been Slow
1920

Mineral Leasing Act (MLA) allowed leasing of federal lands for the first time at 20 year fixed terms with 10 year extension

1935

Amended MLA with 2 types of leases: simultaneous filing/10 year term and sealed competitive bids/5 year term

1960

The last bonding update prior to 2022’s IRA, fixing bond at $10,000 for 62 years

1987

Amended MLA by eliminating simultaneous filing, introducing 2 year oral competitive bidding/5 year term, and adding noncompetitive lease for first qualified offer/10 year term

1992

Both competitive leases and noncompetitive leases are set at 10 year terms

2022

Inflation Reduction Act eliminates noncompetitive leases and modernizes oil & gas leasing with appropriate rates for rental, royalties, and bonding, the last major legislation since 1920’s MLA

Missing a Rental Payment
  • Rental payments due on/before lease anniversary
  • Failing to file with ONRR automatically terminates lease
  • ONRR does not send payment notices, no grace periods
Class I Reinstatement
  • Lease reinstated with existing terms and rates
  • Must remit rental payment within 20 days of lease anniversary
  • Must show that failure to pay was justified or not due to lack of reasonable diligence
Reinstating a Lease
  • Leases can be reinstated, however only the Secretary of the Interior has the discretion to make a reinstatement decision.
  • Noncompetitive leases no longer qualify for reinstatement with the exception of leases under MLA Acquired Lands.
Class II Reinstatement
  • Add 4 points to prior lease royalty rate (no less than 20%) and increase rental to $20/acre
  • Must pay rentals and accrued royalties after 20 days and no longer than 2 years
  • Must show that failure to pay was justified or not due to lack of reasonable diligence

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DISCLAIMER: The information provided in this document does not, and is not intended to, constitute legal advice; instead, all information, content, and materials included in this presentation are for informational purposes only. Information contained may not constitute the most up-to-date legal or other information.

How PakEnergy Manages Risk

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