As part of a torrent of executive orders, President Joe Biden paused the approval of leases for oil and gas exploration on federal lands until a review of all Trump-era approvals can be completed. Nevada is not known as an oil-producing state, and rightfully so. On average, since the mid-1990s, roughly 600,000 barrels of oil a year come from the Silver State. With such small production, a pause in issuing leases may not have a significant impact on the state budget or economy, as approved leases continue to operate, but a collective area larger than Rhode Island is currently tied up with unproductive leases in Nevada, nearly 900,000 acres.
For Russell Kuhlman, executive director of the Nevada Wildlife Federation, the cessation of granting fruitless oil and gas leases would be a win for better land stewardship.
“I think going back all the way to 1953 there’s only been 67 active leases out of 22,000 here in Nevada. And as of last year, 97 percent of the almost million acres that have been leased for oil and gas production here in Nevada are laying idle and don’t have any oil derricks and are not producing really any oil. And that’s why I’m excited for this review process the Biden Administration is going through because I really think it’s going to highlight the fact that the BLM, the Bureau of Land Management here in Nevada does take up considerable time going through these oil and gas leasing processes, and that requires staff or requires resources that they are very limited on.
“And those BLM staffers are having to go through this almost useless process of oil and gas leasing here in the state when their time I feel could be better spent improving the habitat, improving public access for recreation users, off-road vehicle users, birdwatchers, hunters, fishermen,” Kuhlman said by phone.
As of this writing, crude oil is trading for roughly $53.00 a barrel on the world’s major markets.
As required by the Mineral Leasing Act, BLM Nevada holds oil and gas lease sales on a quarterly basis. Parcels are offered for lease “on a rotating schedule among District Offices to allow each office sufficient time to conduct environmental analysis.”
The federal government collects a variety of possible fees for oil or gas production on federal land. When oil is produced in “paying quantities” a 12.5 percent fee is typically collected for onshore operations. Some lease holders pay by the acre between $1.50 and $2.00 an acre. Offshore oil production pays an 18.75 percent royalty.
Half of the federal royalties from oil and gas development go to the State of Nevada. The state imposes a commerce tax on mining, quarrying, and oil and gas extraction of .051 percent.
The Nevada Division of Minerals is the state’s regulatory authority for all oil and gas wells drilled in the state. “Oil and gas wells drilled within Nevada, on either private or federally managed lands, must be permitted by the Nevada Division of Minerals.”
There are currently five registered oil producers in Nevada. We spoke with the state’s smallest, Tom and Patsy Tomera. The Tomeras are ranchers near Carlin. Patsy said they bought the land the well is on so they wouldn’t have “to contend with oil company truck traffic as much as make money.”
Tom explained that he pulls roughly 250 barrels of crude oil a year and takes it to the Foreland Corporation Eagle Springs Refinery in Ely, Nevada. According to the Nevada Petroleum and Geothermal Society, most of the refinery’s output is used in asphalt, diesel fuel and a variety of petroleum products.
The bulk of Nevada’s oil production has always been limited to a handful of wells.
By law, any U.S. citizen or corporation can bid on oil and gas leases. Kuhlman sees the pause and evaluation of leasing regulations as an opportunity to enhance and codify the qualifications needed to bid on oil and gas leases.
“I think it’s important to point out that it doesn’t necessarily even have to be an oil or gas company to lease land, from the BLM for oil and gas production here in Nevada. I know the last round of leasing sales that were actually taking place here, most of those were bought by a private citizen that had zero ties, or experience in energy development, and actually had more of a background in handbags and jewelry and was based in California.
“So I think that’s something that will hopefully be fixed here moving forward and that someone that does lease land for energy development, at least has a background or the capacity and resources to utilize it and not just tie up and waste the time of both the federal agencies and the American taxpayer.”
Purple dots mark the locations of some of the state’s most productive oil wells in the interactive map below. Nevada oil wells are largely concentrated in the Railroad Valley.
Kuhlman said he believes a review of oil and gas permits issued across the nation under the Trump Administration will uncover some sites that should not be developed. In Nevada, Kuhlman hopes a review of oil and gas leasing policy will, to some degree, refocus the BLM’s work issuing dead-end oil and gas leases toward conservation efforts.
“So that’s really why I’m excited about this, this pause on oil and gas leasing here in our state. As you mentioned, there is virtually zero production, both oil and gas. So I think it’s a great opportunity for the BLM here in Nevada to really shift their their priorities back to habitat improvement and improving overall land use for for all American citizens and not just prioritizing what the oil and gas companies want here in the state, which is essentially buying leases to make their books look good. Even though they have zero plans on developing any of the leases they have in the state.”
Brian Bahouth is the editor of the Sierra Nevada Ally and a career public media journalist. Support his work in the Ally.