[nihilist_t21]

Hey cool! Something I have first hand experience with as an oil and gas accountant.

The Federal Government, as you can imagine, controls vast amounts of mineral acreage and the nomination process is how these plots of mineral rights are brought up to auction. The auctions used to be done in person, but now they are done online at www.energynet.com.

Federal Oil and Gas leases are all standardized. Like the article states, the term is for 10 years. You pay an initial bonus consideration payment up front (whose price is determined by auction), and then afterwards you pay an annual rental payment. Any production on a Federal lease is subject to a 12.5% royalty rate, which generally is very cheap compared to a lease from a private mineral owner.

The article doesn't make the distinction very clear, but this is for the leasing of the mineral rights only; surface rights are separate and distinct and might not even be owned by the Federal Government. If a well was to be drilled, there would be a separate surface use agreement between the oil and gas company and the surface owner.

If anyone has any questions about the general process of Federal leasing I can try to answer them as best as I can!

[cddotdotslash]

Very interesting! How does this work from an average citizen's perspective? If I had a spare $10k, could I simply go bid on some parcels, and (assuming I won the auction), simply let it sit for 10 years, thereby denying other companies the ability to exploit it?

[philwelch]

Environmentalists do things like this sometimes for specifically that reason.

Another way of simply buying more environmental protection from the federal government is to purchase SO2 allowances at auction. The US government runs a “cap and trade” system for sulphur dioxide emissions where prospective SO2 emitters have to buy allowances at auction for the tonnage of SO2 they will emit. Environmentalists frequently buy a chunk of allowances and refuse to resell them, reducing emissions even more while raising costs for polluters.

[ChainOfFools]

Is this one of the strategies used by the Nature Conservancy?

[philwelch]

I don't know. The Acid Rain Retirement Fund is a nonprofit that primarily bids in the SO2 allowance market.

[0_gravitas]

I'm surprised they don't get eminent-domain'd, not that I think they should, but I feel like that would be a ripe target for something like that

[gruez]

But why would it be subject to eminent domain? The land still belongs to the federal government. I don't think you can seize a lease just because the government doesn't think you're making optimal use of it.

[gowld]

Yes it can.

en.wikipedia.org/wiki/Kelo_v._City_of_New_London

[abj]

Wow this is unbelievable. Thanks for the link.

"The case arose in the context of condemnation by the city of New London, Connecticut, of privately owned real property, so that it could be used as part of a "comprehensive redevelopment plan." However, the private developer was unable to obtain financing and abandoned the redevelopment project, leaving the land as an _undeveloped empty lot._"

[nihilist_t21]

Yes you could! These lease sales can get quite expensive if they're worth anything to oil and gas companies. My company has been party to auctions for clients that have stretched into seven figures alone. Other times, many leases don't see a single bid and you could snatch up acreage for next to nothing.

EDIT: As the article and some Google searching shows, apparently the BLM can deny a lease on the basis of lack of intent to drill (or at least they are trying). I did not know this was something they could attempt and I stand (potentially) corrected. A major effort to raise money to tie up Federal minerals would likely create enough noise to where the BLM might try to deny leases.

[cddotdotslash]

Well now I'm even more intrigued. Online petitions and donations for "green" movements can routinely generate hundreds of thousands in donations.

It doesn't seem like it would be difficult (for the right person) to 1) create a non-profit 2) collect donations designated for the preservation of land 3) bid on key parcels, or even just strategic parcels. Imagine a 10,000 acre parcel where every other acre is owned by a non-profit (if it works that way).

[nihilist_t21]

> Imagine a 10,000 acre parcel where every other acre is owned by a non-profit (if it works that way)

This starts to get complicated and varies state to state. You don't have to (and often won't) control 100% of the minerals under a well you want to drill. Sometimes you will have partner companies (hostile or friendly), mineral rights owners who refuse to lease, or mineral rights whose ownership is undetermined. So just because a non-profit had a chunk of minerals tied up, a company could petition to the State's board of oil and gas to have the non-participant "forced-pooled" and the well could be drilled. This process involves hearings, oil and gas attorneys, and your typical bureaucratic processes. That said, if the non-profit owned a large enough interest it could very well force the economics of the potential well into unprofitable zones, despite the fact the oil and gas company could force a well.

[lozaning]

"My straw reaches across the room, and I drink your milkshake"

The vast majority of my mining/drilling knowledge comes from There Will Be Blood, which if (big if) is accurate would mean this plan wouldn't work.

If some person with actual knowledge said this was a valid strategy I'd certainly be willing to donate though.

[elliekelly]

This feels like something Cards Against Humanity would do. I would definitely buy a deck of cards that comes with an acre of land that can’t be touched for ten years.

[floatingatoll]

I once suggested an idea like this to them. Their reply was, simply:

> Why do we have to do everything?

Custom-printed decks of cards are insanely cheap. You should take your idea and run with it!

[late2part]

Hey Elliekelly - I'll help you get it funded, either with individuals or via kickstarter.

[mtnGoat]

i read a there was groups working on this with a strategy to buy the cheap plots making it more difficult to access and mine on other plots.

[shkkmo]

> Yes you could!

That seems to be up for debate as the article discusses people who did exactly this and had their lease denied.

[nihilist_t21]

Interesting! A quick Google search shows the BLM did deny the lease stating their lack of intent to drill. I did not know they had the ability to do that. I am inclined to believe now that a big effort to tie up Federal minerals would make too much noise and fail.

[mushbino]

Is it possible to win the lease and just live on the land for 10 years?

[brewdad]

Considering you don't have surface rights, I doubt it. I do wonder if you could live in an underground bunker though?

[metrokoi]

Wouldn't you still have to have surface rights because you need an entrance to the bunker? The headline seems quite misleading then, a guy named Craig will only have control over the mineral rights of the land. Can oil companies drill without also having surface rights? Generally they need to build a structure to collect the oil.

[devilbunny]

The owner or lessee for mineral rights has the right to access them. So they can build structures, roads, etc. This is one reason why landowners typically work with mining/oil companies, because the company could just choose to put their well in your backyard if you won't work with them.

[nihilist_t21]

No these are leases for mineral rights, the surface rights are an entirely different issue.

[pontifier]

I looked into buying over a square mile of Utah desert just south of Duschesne a couple of years ago. I hiked all over it and it was beautiful. I found out that the mineral rights had been split off, and started to look into what that meant for me. It basically meant that I couldn't stop them from drilling. I had to let them enter, build roads, and drill basically as much as they wanted. (there were already survey markers for future roads and at least 4 drill sites). It also meant that I wouldn't be able to dig a hole more than 3 inches deep without their permission, and if I found anything, it belonged to them.

The price was very low but I decided against that headache.

[nihilist_t21]

I am quite familiar with Duchesne County from my work. But yes, the right of ingress and egress applies to holders of mineral rights. I am sure there are bad apples, but the clients I've worked with have been very accommodating to surface owners when it comes time to drill. They want everyone to be happy and to get compensated for what occurs.

I only have experience in the Western states, but this it is very frequent to find the the mineral rights have been long severed from the surface rights. Typically it is when the original patentee of the tract sells the surface they end up reserving the mineral rights.

[legitster]

What odds do any given leased acres actually have for getting produced on?

[nihilist_t21]

It GREATLY depends on the area. Just because someone nominated Federal acreage up for leasing doesn't mean there is anything worthwhile to drill on. That said, if a lease receives bids from different companies, you can assume there is some potential for economic recovery of hydrocarbons.

[mcv]

It sounds like these are just open auctions, aren't they? Couldn't a well-funded NGO just bid on these auctions in order to prevent drilling? It would of course take a lot of money to do what the government was supposed to do.

[nihilist_t21]

They are open auctions, yes, but it appears from the article that the BLM has taken steps in the past to cancel leases that have been purchased explicitly to prevent drilling from occurring.

Regardless of how you feel about that, you could make a point that the BLM and ONRR (Office of Natural Resources and Revenue, the department of the Feds who collects revenue from hydrocarbon production) have a fiduciary duty to seek the highest revenue from the mineral rights they own. Canceling leases which will never be drilled would follow this goal.

Now, any environmental damage being more than the revenue derived in the end is another point altogether...

[mcv]

Why would they have that duty? I'd prefer to make the point that they have a duty to manage the land the best they can, and that could include refusing drilling in cases where it is harmful. BLM is a government agency, isn't it? They have other concerns than mere profit. And even for companies, focusing only on profit above everything else is very harmful.