Special state oil, gas lease auction nets $42 million, close to record set in May

Special lease auction approaches new Wyo. record

CHEYENNE, Wyo. — An unprecedented special state oil and gas lease auction to handle a rush to drill for oil in eastern Wyoming has grossed a near-record $42 million.

The Office of State Lands and Investments held Friday’s auction in response to demand from oil companies to snap up leasing rights. Figures released Monday showed bids for the right to drill on state land ranged as high as $3,200 an acre.

That’s comparable to the high prices paid in May at a regular state lease auction that grossed a record $45.6 million for Wyoming.

Friday’s special sale was Wyoming’s second highest-grossing sale on record.

“Those who’ve wanted to be involved in this play have been out there. They’re grabbing up as much acreage as they can,” Harold Kemp, head of state minerals leasing, said Monday.

The oil rush began earlier this year with unusually productive wells just south of the Wyoming line in Colorado. The wells tapped the deep Niobrara formation underlying northern Colorado, western Nebraska and eastern Wyoming.

The Niobrara is geologically similar to the Bakken formation in North Dakota, where a recent oil boom has resulted from horizontal drilling and other newer technologies.

The special sale in Wyoming could be a high point in the recent speculation because nearly all state leases in southeast Wyoming have been bought up, Kemp said.

Even so, most of the region hasn’t been tested with drilling into the Niobrara.

“I certainly hope it is as good as what everyone thinks it is. If it is, that will be good for them, because they won’t have spent all that money for nothing,” said Bruce Hinchey, president of the Petroleum Association of Wyoming.

He added that producers seem to feel confident about being able to produce large amounts of oil.

The biggest spender at the auction by far was Big Bear Oil & Gas, based in Pleasanton, Texas. The company paid $1.9 million each for two leases at a rate of $3,000 an acre.

In all, Big Bear bought 29 leases, including six for $1 million or more.

Oil speculation also has been breaking records at state lease sales in Nebraska and Colorado. A recent Colorado sale grossed $12.7 million. One in Nebraska topped $1.9 million, nearly four times the previous record.

Wyoming also had a record $32.3 million federal lease sale in May.