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Federal oil lease sale planned for early 2022 in North Dakota, Montana after yearlong pause

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Little Missouri National Grassland Oil Well

An oil well operates on federal land within the Little Missouri National Grassland, which includes much of the Badlands in western North Dakota.

Oil and gas leasing on federal lands is expected to resume early this year in North Dakota and Montana after the Biden administration halted the process nationwide almost one year ago.

The federal Bureau of Land Management is planning a lease sale for the first quarter of 2022 with 6,850 federally owned mineral acres up for grabs in western North Dakota and eastern Montana. The agency has not yet announced a date, nor has it finalized details of the sale.

Oil and gas companies will bid to secure federal leases during the event, and those that are successful will have a 10-year window to obtain a federal permit allowing them to drill.

President Joe Biden halted the leasing process upon taking office last January when he issued an executive order announcing a review of the program “to restore balance on America’s public lands and waters to benefit current and future generations.” While that now-concluded review took place, oil- and gas-producing states including North Dakota and Montana sued to try to force leasing to continue.

They scored an early victory in June 2021 when a court order required the federal government to resume the sales. The ruling came in a lawsuit joined by a number of states, including Montana.

North Dakota filed a separate legal challenge, and a hearing is scheduled for Jan. 12 at the federal courthouse in Bismarck.

“We have every reason to believe they will continue to hold those lease sales as they’re directed to” by federal law, said Lynn Helms, director of the North Dakota Department of Mineral Resources. “But we’re going to continue with our court case to make sure that happens.”

Several environmental groups have intervened in North Dakota’s suit, seeking to protect public land. They are the Center for Biological Diversity, the Dakota Resource Council, the Sierra Club and the Western Organization of Resource Councils.

Oil and gas facilities on federal land within North Dakota already bump up against pristine areas such as the Badlands, said Todd Leake, who chairs the North Dakota chapter of the Sierra Club.

“These are inappropriate places for oil and gas to be developed in North Dakota,” he said. “A lot of them are in the floodplain of the Missouri River and next to Theodore Roosevelt National Park.”

The U.S. Interior Department oversees the Bureau of Land Management and recently wrapped up its review of the leasing program. It recommends that the federal government raise royalty rates. Helms said that issue came up when he worked on a royalty policy committee convened by the previous Trump administration.

“There was a lot of talk about the need to adjust royalty rates on federal lands and also to adjust lease terms to be more in-line with what the states are doing,” he said. “There’s a great disparity there.”

Oil producers pay a 12.5% royalty rate on federal lands, whereas they generally pay a higher rate for the development of private and state-owned lands. The rates on state lands in North Dakota and Montana range from 16.67% to 18.75%. Some federal royalty money is disbursed back to the states where oil and gas production occurred, and the rest goes into a variety of federal funds, including a reclamation fund that supports irrigation and hydropower projects.

The results of the federal leasing review drew a mix of reactions from groups following the issue. Oil industry supporters criticized the Biden administration's suggestions because they say the recommendations would hamper domestic energy production. Some environmentalists support the proposed reforms, while others say the report ought to have taken a stronger stance on climate change considerations.

Lease sale details

The acreage the federal government has identified for the upcoming lease sale is contained within 29 parcels in North Dakota and Montana.

Fifteen of the parcels are in western North Dakota and 14 are in Montana. Most of the acreage the BLM is planning to lease, 6,300 acres, falls in the Montana counties of Fallon, Powder River, Richland and Roosevelt.

Oil producers have not drilled many new oil wells in Montana in recent years. Instead, they have focused more on the Bakken and Three Forks formations centered in western North Dakota, where 600 acres would be available for lease under the bureau’s plans in Williams, McKenzie and Mountrail counties. Many of the parcels are along Lake Sakakawea.

The bureau is wading through public comments on the upcoming lease sale and has done an environmental review. It has not yet signed off on any final plans for the event.

Helms said the U.S. Army Corps of Engineers and the U.S. Forest Service recently made updates to their oil and gas plans for North Dakota, clearing the way for more oil development on lands they manage.

“We should see some very big lease sales in North Dakota in 2022 and 2023,” he said.

Reach Amy R. Sisk at 701-250-8252 or amy.sisk@bismarcktribune.com.

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