Oil leases on state land netted Montana $1.1 million in March. Those leases were approved Monday by the Montana Land Board.
The sale, which ran online from Feb. 22 to March 1, produced the highest prices for state land since the Bakken oil boom went bust in October 2014. The Land Board is comprised of the five elected statewide officials, all of whom are Republican.
“From what I understand this is the largest we’ve seen in eight years, which is impressive,” said Montana State Auditor Troy Downing.
Leases on acres in northeastern Montana west of the North Dakota border, namely Roosevelt County, sold for $110 to $285 an acre, the highest price in sale. Rosebud County in southeast Montana accounted for 13,862 of the 18,579 lease acres sold.
Half of the acres leased for $2 or less.
“The highest per-acre bid came out of northeastern Roosevelt County. This is right in my backyard, in the neighborhood of McCabe somewhere north of Danville,” said Montana Attorney General Austin Knudsen. “…This indicates to me as a guy who used to do oil and gas law in that neighborhood, we’re probably going to see more of this. I think the Bakken is going to take back off. We’re going to be seeing more of this $285 an acre.”
The state sales come as federal lease sales through the U.S. Bureau of Land Management have been paused for 15 months. That pause started with an executive order by President Joe Biden on Jan. 27, 2021, as the new administration reviewed climate impacts of fossil fuels from public lands.
What followed was a legal dispute in which 14 states with Republican governments, Montana included, sued the federal government. The Biden administration responded by not proceeding with sales until it retooled the way it considered climate change impacts related to fossil fuels extracted from federal land. The BLM announced March 18 that it intended to begin lease sales later this year. Oil and natural gas from federal land accounts for about 8% of all U.S. production, according to the BLM.
Oil prices have trended steadily upward following a first-quarter 2020 crash in demand triggered by early pandemic lockdowns. As consumer demand increased and outpaced global production, oil prices crept over $85 a barrel for the first time since Oct 2014, according to U.S. Energy Information Administration. The Russian invasion of Ukraine and ensuing sanctions against Russian oil then pushed the price over $100 a barrel for the first time in nearly eight years.
It remains to be seen whether a return to Bakken boom-era prices translates to an increase in oil production, particularly on the Montana side of the shale formation where drilling was less than a sure bet. The Baker Hughes drilling rig count for Montana has rarely ticked above one rig per month for several years and was at one again for March and February.
The Montana Board of Oil and Gas Conservation reports that state oil production has steadily declined from 29.6 million barrels a year in 2014 to 18.9 million barrels in 2020.
In North Dakota, a top regulator in February said oil companies are describing the Bakken as mature, and no longer the kind of oil play that will ramp up production quickly in response to high prices.
Oil producers last week told the Associated Press that a shortage in workers, coupled with banks leery of lending for new production following the bust of the Bakken boom, has made it hard for drillers to put the pedal to the metal.