The public faces a barrage of newspapers, telephone and direct
mail advertisements promising quick wealth and fortune through
"too good to be true" opportunities.
Perhaps you have been among those invited to take advantage of
such opportunity by entering a drawing for oil gas leases on
federal lands. The ad says: write for details or send a check to
cover the cost of filing fee and other services, and have your
name entered in the drawing.
It is really possible to strike it rich? How slim are the odds
and what are the risks?
The purpose of this report is to acquaint you with the procedures
involved regarding oil and gas leasing form the Government.
TYPES OF LEASES
Lands that are not within any known geologic structure of a
producing oil and gas field, commonly known as "wildcat" lands,
are subject to leasing to the first qualified person making
application for a lease. Such lease is termed non competitive
since the applicant is entitled to the lease without competiting
LOCATION OF TRACTS
Many tracts offered for non competitive leasing are in the
Western States where most of the public land is located. These
are the states of Alaska, California, Arizona, Colorado, Idaho,
Montana, Nevada, New Mexico, Utah, and Wyoming. Occasionally, a
few tracts in Washington and Oregon are offered.
Tracts in the Midwest and East are also put up for non
competitive leasing. The tracts are primary in Alabama, Arkansas,
Florida, Louisiana, Michigan, Mississippi and Ohio.
HOW THE DRAWINGS WORK
Each State Office of the Bureau of Land Management prepares and
posts a list of lands within its jurisdiction that are available
for releasing. These tracts range in size form 40 acres up to a
maximum of 10,240 acres. These list a may be viewed in the State
Offices or obtained from the State Offices by mail for a small
charge, usually $5 to $10 per list.
If any lands are available for releasing, the Bureau of Land
Management State Office posts its list on the first day of
business for the months of February, April, June, August,
October, and December. Applications are accepted until the close
of business on the 15th working day after the list is posted. If
more than one application is received for a given tract, a
drawing is held to decide who will get the lease. All application
for simultaneous oil and gas leases must be submitted to the
Wyoming State Office, which maintains a central computerized
QUALIFICATIONS AND LIMITATIONS
Federal oil and gas leases may be obtained and held by any
citizen of the United States; however, no lease may be acquired
by a minor, but it may be issued to a legal guardian or trustee
in behalf of the minor. Associations of citizens and corporations
under the laws of the United States or of the State also qualify.
Aliens may not hold any interest in leases. They may, however,
own or control stock in a corporation holding leases, if the laws
of their country do not deny similar privileges to citizens of
the United States.
No person, association, or corporation may hold, own or control
oil and gas leases for than 246,080 acres in any one State.
HOW TO FILE
Applications may be filed on any of the parcels shown on the list
posted in the BLM State Office. The parcel applied for must be
identified by the number shown on the list.
Each offer to lease must be submitted on a official Automated
Simultaneous Oil and Gas Lease Application (forms 3112-6), The
applications must be fully completed and personally signed in ink
by the applicant, or anyone authorized to sign on behalf of the
applicant, during the filing period.
Each part B application form must be accompanied by a non
refundable $75 filing fee for each parcel, and the first year's
rental of $1 per acre or fraction thereof.
Each applicant must contain the actual business or residential
address of the applicant. Addresses of third parties filing on
behalf of the applicant are not permitted.
An applicant may file, or have an interest in, only one
application for any one parcel; however, an applicant may file,
or have an interest in, one application each for as many
different parcels as he or she wishes.
After the close of the filing period on the 25th working day
after the list is posted, a computer-generated random selection
is conducted at the Wyoming State Office. Because of the heavy
volume of applicants that must be processed, selection does not
occur until the following month.
One applicant is randomly selected for each numbered parcel. If
the applicant selected is unacceptable or rejected, a reselection
will be made by computer from the remaining applications. Each
applicant is notified of the results of his application in the
random selection. The advance rental will be refunded to
CHOOSING A PARCEL
It should be remembered that these lands have been leased
previously and are not known to contain deposits of oil or gas.
Neither the Bureau of Land Management nor any other Federal
agency can make any recommendation concerning the potential value
of any parcel offered for non competitive leasing.
Most applicants use a "Filing Service" to select parcels. Some
service charge a fee to evaluate parcels on the basis of
geological and marketing data; others offer maps and information
about the activities of oil companies operating in the area where
the various parcels are located. A third type of filing service
charges a fee for selecting a parcel from the list posted by the
Bureau and assisting the applicant in filing application.
Neither BLM, nor any other Federal agency, endorses any filing
service. None are in any way with the Federal Government.
Be wary of filing services that paint an overly optimistic
picture of your chances of winning and making money. Consider
these firms may file for hundreds and even thousands of clients
on a limited number of parcels, and the more interest these firms
can generate in drawings, the more applications will be filed on
each parcel, and the less chance each individual will have of
obtaining a lease.
The names of firms or individuals that specialize as filing
services may be located through business or professional
associations, through oil and gas trade publications or chambers
of commerce. They sometimes are listed under the heading "Federal
Leasing Services" in the yellow pages of telephone directories.
Anyone considering the use of a filing services should carefully
examine what services are offered and how big
a premium is being charged beyond the required $75 filing fee and
the advance rental that must be paid to BLM for each filing.
Possible source of information on a filing service are the Better
Business Bureau in the area where the firm is located and the
State, county or local consumer protection agency.
LEASE TERM AND CONDITIONS
The lease grants the lessee the right to explore and drill for,
extract, remove and dispose of oil and gas deposits, except
helium, that may be found in leased lands. Such leases are issued
for a period of 10 years and so long thereafter as oil and gas
are produced in paying quantities. The lessee cannot build a
house on the land, cultivate the land, or remove any minerals
other than oil and gas from the leased land.
Before any drilling operation can commence, the lessee or his
operator must furnish a bond to assure compliance with all the
lease terms, including protection of the environment.
WHAT IS THE LEASE WORTH
The value of oil and gas leases varies greatly. None of the
tracts offered has known potential for oil and gas production. In
certain cases, non competitive leases have brought substantial
profit to the winners. Generally, however, these leases average
only a few dollars per acre if resold.
SELLING OR ASSIGNING A LEASE
Many people who acquire an oil and gas lease through the leasing
system do not intend to drill for oil or gas. Often the motive
for entering the drawing is to sell the lease to an oil company
for a profit.
If the lease is located in an area which may be attractive to
industry, interested buyers may make an offer.
A willing buyer may offer a lump sum for a lease. In some cases,
the original lessee can negotiate to retain a royalty interest in
any future production from the lease.
Any person who considers entering the oil and has drawing should
keep certain facts in mind:
* The land offered for leasing was formerly included in oil and
gas leases that expired, terminated, or were relinquished or
* The land involved is not recognized as being within a know
geological structure of a producing oil or gas field.
* Your offer to lease is strictly a gamble. Since a very
large percentage of the tracts won are never drilled on, your
parcel may not have any potential for oil and gas even if you win
* the more desirable parcels may attract hundreds, even thousands
WHAT TO DO NEXT TO PARTICIPATE
After carefully reading this report, if you wish to participate
in the drawings of your own, here is how to proceed:
Select the geographical area that interest
Locate the BLM State Office that is responsible for the area you
have selected. Write that state for information. The State Office
will send you application forms and tell you how much it will
cost you to receive by mail the list from which you must select
your tracts for the drawing.