As Biden launches oil drilling review, leaseholders say idle land part
of doing business
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 [March 25, 2021]
By Nichola Groom
(Reuters) - A billionaire investor from
Colorado, an entrepreneur from Texas, and a pair of prospectors looking
to strike it rich in Nevada. They are among the top holders of idle oil
and gas leases on U.S. federal lands, according to a Reuters review of
government data.
Such companies and individuals that have stockpiled vast amounts of
public drilling acreage in recent years are now on the hot seat as the
administration of President Joe Biden on Thursday launches a formal
review of the leasing program to weigh taxpayer value against
environmental costs.
Biden froze new drilling lease auctions as one of his first moves in the
White House to pave the way for the review, triggering a backlash from
the oil and gas industry, which warned it would cost jobs and hurt the
economy.
But a chief complaint of Biden’s administration is that half the 26
million acres currently under lease are not producing, generating little
for public coffers, while the rest is contributing to climate change.
According to the Reuters review of Bureau of Land Management leasing
data, the top five holders of non-producing leases control about 1.5
million acres of federal land, an area slightly smaller than the state
of Delaware.
The biggest among them is Kirkwood Oil & Gas, a 50-year-old Rocky
Mountain exploration company that holds nearly half a million
non-producing acres, according to the data.
That is part of the business model, according to Steve Degenfelder, the
company's land manager, likening exploration to "a high-stakes game of
Battleship," the strategic guessing game.
“The last thing you want to do is identify a good drilling target, and
then you don't own the lease on it," he said. "So the leasing starts
way, way before anybody even thinks of drilling a well."
He said Kirkwood's business revolves around exploring for oil prospects
and then only selling them to drillers once there are enough contiguous
leases over the same deposit to package together – something that can
take years.
The second biggest holder of idle leases is an enterprise run by
business partners Stephen Smith and Larry Moyer, residents of Colorado,
who are betting on a future drilling boom in the unlikely state of
Nevada. They have 300,000 non-producing acres, mostly in Nevada.
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A piece of land that has a federal drilling lease issued for oil and
gas development is seen in Mecosta County, Michigan, U.S., March 20,
2021. Picture taken March 20, 2021. REUTERS/Emily Elconin/File Photo
"It's got very complex geology," Smith said.
The third is Anschutz Exploration Co, part of the business empire of
Denver-based billionaire Philip Anschutz, which has around 275,000
non-producing acres.
Joe DeDominic, president of Anschutz Exploration, said it is hard
for an exploration company to identify and test petroleum deposits
when federal, state and private land auctions in the West tend to
sell only small parcels at a time.
“It can take upwards of a decade or more to put all those rights
together to justify spending the money and resources to test your
theory," he said.
Most of Anschutz’s acreage is in the Powder River Basin in Wyoming,
a state with more than a third of the 13.9 million acres of
non-producing federal land, according to BLM.
The Department of Interior declined to comment for this story.
The federal leasing program has not reformed royalty rates or
minimum bids for decades, which critics say has depressed taxpayer
returns and made it easy for speculators to amass large amounts of
acreage on the cheap.
Former President Donald Trump sought to maximize oil and gas
production on federal lands by leasing 26 million acres over four
years at a time of depressed industry demand.
Other major holders of non-producing acreage include Liberty
Petroleum, a New York-based firm with 270,000 acres, and Texas
entrepreneur Avinash Ahuja, who holds more than 210,000
non-producing acres. Neither could be reached for comment.
(Reporting by Nichola Groom; Editing by Leslie Adler)
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