What’s the long-term effect of the Biden administration’s federal moratorium on new oil and gas leases?
Mineral ownership in North Dakota is 85 percent private and 9 percent federal, of which about 4 percent are Indian lands and the rest are state.
While the moratorium does not restrict energy activities on lands the federal government holds in trust for Native American tribes, split estates mean that more private minerals than federal are affected by the moratorium, according to a suit filed by Attorney General Wayne Stenehjem filed last week in District Court.
These split estates arose in large part during the Great Depression, when many small, private tracts of land went through foreclosure. While surface rights were eventually sold back to the state and the private sector, the federal government often retained the mineral rights. This has resulted in a tightly woven checkerboard of private and federal mineral interests that are all mixed up together across the state.
Meanwhile, every spacing unit with federal minerals, no matter how small, has to go through the BLM’s leasing sale before it can be developed. Stenehjem estimates that at least 30 percent of all spacing units in the state are touched by at least some federal minerals.
BLM’s cancelled March lease sale was to have included six parcels for sale in North Dakota, and June’s sale included three. The amount of federal mineral acres in those tracts of land are sparse, Stenehjem said, but affect a much larger number of private minerals.
Looking at just one tract, 143 privately owned mineral acres on 1,280 privately owned surface acres were blocked from development, eliminating two wells economic at $55 WTI from producing an estimated 700,000 barrels of oil with a value of at least $38.5 million. That in turn would have generated $3.85 million in oil tax revenue, $378,000 in federal royalties of which North Dakota’s share would be $181,000, $393,000 in private royalties, and $380,000 in lost state sales taxes.
The two sales combined have 693 federal acres, Stenehjem said, but will block development of 2,000 acres of private minerals and 480 acres of state minerals. This will block overall production of 11,350,000 barrels of oil which would have meant $62.425 million in oil tax revenues, as well as $24.25 million in private royalties, exceeding $82 million in losses for the two sales.
The loss for Nort Dakota from all tracts of federal mineral acres in the BLM queue for North Dakota to date — about a year’s worth — means losses exceeding $4.77 billion in tax revenues for the state as well as the loss of $1.2 billion in private royalties.
Meanwhile, a spatial inquiry by the Department of Mineral Resources estimates there are 3,443 undrilled wells in spacing units that penetrate federal minerals, 2,902 that penetrate BIA Trust minerals, and that the total number of wells potentially affected is 6,345.
Both of these analyses make it clear that the impact of the federal moratorium to North Dakota’s oil and gas interests is substantial, and will affect large numbers of people. That impact will grow the longer the moratorium is in place.