Measures to Better Safeguard Competitive Oil and Gas Lease Auctions
UNITED STATES DEPARTMENT OF THE INTERIOR
BUREAU OF LAND MANAGEMENT
WASHINGTON, D.C. 20240
http://www.blm.gov
April 9, 2010
In Reply Refer To:
3100 (300) P
EMS TRASNMISSION 04/13/2010
Instruction Memorandum No. 2010-099
Expires: 09/30/2011
To: All State Directors
From: Assistant Director, Minerals and Realty Management
Subject: Measures to Better Safeguard Competitive Oil and Gas Lease Auctions
DD: 5/17/2010
Program Area: Oil and gas leasing.
Purpose: This Instruction Memorandum (IM) provides guidance and formally implements measures to better safeguard Bureau of Land Management (BLM) competitive oil and gas lease auctions from bidding activity that is disruptive and contrary to the public’s interest.
Policy/Action: No later than May 17, 2010, after the issuance of this IM, please provide the Washington Office Division of Fluid Minerals (WO-310) with a list of any party that has outstanding debts of minimum monies owed the day of sale from any oil and gas lease auctions. For all future sales, please forward a list of any party that fails to pay monies owed the day of sale. WO-310 will compile and distribute a list to you to help prevent non responsible persons or companies from registering at future lease auctions. Additional guidance for oil and gas lease auctions is below.
Preparation for a lease auction:
- Modify your Notices of Competitive Oil and Gas Lease Sale to include the language found on Attachment 1, New Language for Certain Sections of the Notice of Competitive Oil and Gas Lease Sale. Additional language and citations have been added to describe the criminal penalties for making false, fictitious, or fraudulent statements in the context of a lease auction, and for participating in or organizing a scheme to defeat the mineral leasing regulations.
- Before the auction, modify by addendum any Notices for future sales that have already been posted at the time this IM is issued.
Day of sale:
- Modify your Bidder Registration Forms to include the language shown on Attachment 2, Enhanced Bidder Registration Form. Additional language and citations have been added to describe the criminal penalties for making false, fictitious, or fraudulent statements in the context of a lease auction, and for participating in or organizing a scheme to defeat the mineral leasing regulations.
Require a valid government-issued photo ID:
- At the time of bidder registration, require valid government-issued photo identification (ID) to verify the identity of the registering bidder. A valid government-issued photo ID is one that is issued by a Federal, state, or local government agency. It can be in the form of a driver’s license, identification card, passport, or military ID card. Note the type of ID provided on the bidder registration form. Do not note any private information, such as a driver’s license number. There is no requirement to collect personal information of this nature to register as a bidder. Anyone unable or unwilling to provide a valid photo ID may not register as a bidder.
Parties excluded from bidding at an oil and gas lease auction:
The Mineral Leasing Act provides that leases may be issued only to a “responsible qualified bidder” (30 U.S.C. 226(b)(1)(A)). Any bidder who has not paid the minimum monies owed on the day of sale is not a “responsible qualified bidder,” and is therefore to be barred from registering for any oil and gas lease auction until the debt to the United States is settled. Any bidder who does not timely pay the minimum monies owed for a total of three sales is to be permanently barred from registering for any oil and gas lease auction at any BLM office.
- Do not accept a bidder registration form from any person, company, or agent representing any person or company that has an outstanding balance with the United States for any minimum monies owed the day of sale from any oil and gas lease auction. If proof of payment is presented at the time of registration, the bidder will be deemed qualified to register to bid at the sale, provided that the bidder has not been permanently barred. The bidder will be required to complete the Enhance Bidder Registration form and certify that he/she does not owe any monies to the United States. A copy of the proof of payment must be attached to this form.
- Do not accept a bidder registration form from any person, company, or agent representing any party that has defaulted on payment of the minimum monies owed on the day of sale at three sales. A party that defaults at three sales is permanently barred from bidder registration.
- After every oil and gas lease sale, WO-310 will compile and distribute a list of all parties known to be ineligible to participate at any sale due to outstanding minimum monies owed from the day of a previous sale, and all parties known to be permanently barred from bidding at any sale.
Additional opening remarks at an oil and gas lease auction:
Include additional opening remarks at all auctions to remind registered bidders that, as explained in the language contained in the sale notice and bidder registration form:
- All registrants casting a bid must act with a good-faith intention to obtain a lease.
- A winning bid is a binding commitment to accept a lease.
- All bidders must act with a good-faith intention to pay all monies owed the day of sale, and understand both that a winning bid is a debt owed to the United States, and that the United States will pursue collection actions if the monies are not paid.
- Knowingly and willfully making any false, fictitious, or fraudulent statements or representations regarding the bidder’s qualifications, bidder registration and intent to bid, acceptance of a lease, or payment of monies owed are criminal offenses.
After the sale:
- Any bids for which monies due are not paid within the required timeframes—whether minimum monies due on the day of the sale, or the balance of monies due 10 working days after the sale—are to be rejected by formal decision, and any monies paid the day of sale forfeited according to the applicable regulations. The bidder loses the right to a lease if the bidder fails to pay the required monies within the required timeframe. This default is not curable.
- Once the bid is rejected by formal decision, the adjudication staff must notify the collections staff to transfer the forfeited monies to the appropriate account.
- If a bidder did not pay the minimum monies owed the day of sale, take the following actions. This nonpayment includes situations where a bidder’s check does not clear due to insufficient funds and any credit card transactions that cannot be completed.
- Notify WO-310 of the names, addresses, and phone numbers of any parties who have an outstanding balance for any monies due the day of the sale, as well as the sale date for which the monies are owed.
- Whenever any monies due the day of the sale are not received, ensure that a bill is promptly generated in the BLM Collection and Billing System (CBS) in accordance with CBS standards and procedures, using the following:
Commodity: Oil & Gas
Subject: Competitive
Action: Lease Bid Forfeiture
- The bill is issued to the lessee as indicated on the bidder registration form or BLM Form 3000-2, Competitive Oil and Gas or Geothermal Resources Lease Bid.
- The CBS collection process ordinarily allows up to three demand letters to be sent to collect a bill. However, for this particular action only, one demand letter is to be sent. If the bill is not paid after the first demand letter, the matter is to be referred to the Department of the Treasury for collection.
Timeframe: This IM is effective immediately.
Budget Impact: None.
Background: Bad-faith bids received by the Utah State Office at the December 2008 lease auction prompted the BLM and the Office of the Inspector General to analyze a variety of options to better safeguard BLM oil and gas lease auctions from future bid actions made in protest of the BLM’s oil and gas leasing program.
While we encourage, welcome, and appreciate citizen interest and involvement in the management and use of public lands and resources, opposition to the offering of certain parcels does not justify bidding by a party unwilling to honor the bid. It is not in the public interest for bad-faith bidders to distort or disrupt the auction-market process mandated by Congress to ensure fair-market-value pricing of oil and gas leases and the right to fair auctions for those prepared to make timely payment of their bids. The BLM has a responsibility to ensure, as best it can, that the sale of leases is conducted fairly and in accordance with all applicable laws, rules, and regulations.
The policy and procedures outlined in this IM are those actions that the BLM can take administratively, without new rulemaking, and without significant administrative, manpower, or budget impacts. Most of these actions are already in place in your offices through the informal efforts of the WO-310, the Office of the Solicitor, and your oil and gas leasing staff. Your staff’s efforts to react quickly to the events in Utah in December 2008 and to better protect oil and gas lease auctions in your offices are appreciated.
Manual/Handbook Sections Affected: These procedures will be incorporated into the BLM manuals and handbooks.
Coordination: This IM was developed in coordination with the Office of the Solicitor, the National Operations Center (OC-621), and various state offices.
Contact: If there are any questions concerning this IM, please contact me, or your staff may contact Steve Salzman, Division Chief, Division of Fluid Minerals, at 202-912-7143 or by email at steve_salzman@blm.gov; or Robyn Shoop, Senior Mineral Leasing Specialist, at 202-912-7157, or by email at robyn_shoop@blm.gov.
Signed by: Authenticated by:
Michael Nedd Robert M. Williams
Assistant Director Division of IRM Governance,WO-560
Minerals and Realty Management
2 Attachments
1 – New Language for Certain Sections of the Notice of Competitive Oil and Gas Lease Sale (2 pp)