State Mineral and Energy Board

November mineral lease sale brings $3.5 million

The state Mineral Board on Wednesday collected more than $3.5 million at its lease sale for November, showing interest in leasing Louisiana mineral rights for energy production is still strong, though spending on leases in the Haynesville Shale natural gas area has slowed as companies prepare to develop what they've already leased, as reported by state Mineral Board Secretary Marjorie McKeithen.

The major Haynesville Shale area lease buys began in June 2008, with collections for the four lease sales held between June and October each ranking in the top six collection days on record, ranging from about $35 million to more than $93 million.

For the three years prior to that spike in leasing collections, the average lease sale day collection for the state was a little more than $3 million, with 14 monthly lease sale collections out of 36 between June 2005 and May 2008 meeting or exceeding that amount. That places Wednesday's sale roughly in the top third of lease sale collections in the three years prior to the Haynesville Shale spike, though oil and gas prices have continued to fall in recent months.

"Even with the economic concerns facing the country and prices for oil and gas coming down from the highs we saw earlier this year, the energy industry is still showing a strong commitment to developing the natural resources of the state of Louisiana," said state Department of Natural Resources Secretary Scott Angelle. "As they are committed to continued exploration, so we at the Department of Natural Resources are committed to encouraging that development in a manner that attracts their business while protecting the interests of the state's natural resources and its citizens."

Closer study of the data from the November sale shows that leasing activity in areas outside the Haynesville Shale zone closely tracks typical lease sale history from recent years. In a typical lease sale, excluding the recent run in the Haynesville Shale area, about two thirds of nominated tracts do not receive bids. In the past 12 months, approximately 62 percent of tracts nominated did not receive bids. In the previous five years, the range of nominated tracts not receiving bids ran from about 60 percent to about 66 percent.

For the November 2008 lease sale, the percentage of nominated tracts that did not receive bids was about 74 percent, a figure heavily skewed by the Haynesville Shale area tracts being offered for sale by local governments. Of 55 Haynesville Shale area tracts up for sale by local governments, only three received bids, meaning about 95 percent of those nominated tracts did not receive bids. The majority of the nominated tracts that were not bid on required a minimum bid of $27,500 per acre at a time in the market when oil and gas prices have fallen.

For the rest of the state, including state-owned lands in the Haynesville Shale area, 38 out of 100 nominated tracts received bids, meaning about 62 percent of nominated tracts did not receive bids, more in line with the long-standing trend.

 "It's common practice in the oil and gas industry for exploration companies to nominate more tracts than they actually intend to bid on in order to camouflage their prospects in a competitive environment," McKeithen said.

For the past three November lease sales prior to Wednesday's sale, the average collection has been about $2.4 million. For the first five months of 2008 prior to the first major Haynesville Shale area sale in June, the average lease sale day collection was slightly less than $2 million.

"The mineral lease activity in the state in the summer and fall were a huge boost to the state's economy and to the people of Louisiana, especially in the northwest, and the record numbers we were seeing for leases have come down as companies prepare to drill on the lands they have already leased, but that should not take away from a strong lease sale by the standards of what we have seen over the course of many years," Angelle said.

For the fiscal year that began in July, the total collected by the Mineral Board is 189.7 million.

CLASSIFICATION	NOMINATED TRACTS	NOMINATED ACREAGE	LEASES AWARDED	NO. OF ACRES	AMOUNT OF CASH PAYMENTS
Lease Sale November 13, 2008
State Offshore Leases	1	1,120.64	1	1.120.640	$308,176.000
State Onshore Leases	91	90,823.58	31	6,049.646	$2,722,748.740
State Dedicated Leases	4	5,648.41	3	804.780	$298,286.820
School Indemnity Lands	0	0.000	0	0.000	$0.00
State Agency Leases	72	8,146.48	4	336.068	$203,626.520
Total Sales	168	105,739.110	39	8,311.134	$3,532,838.080
NOTE: The totals for this sale do not reflect any options that may be exercised or revisions to acreage and cash amounts that may take place after this sale date which may cause these totals to change. NOTE: Due to Hurricane Gustav, the September Sale was postponed and is now included in the October sale.
2008-2009 Fiscal Year
State Offshore Leases	60	83,633.530	27	10,922.440	$5,669,129.39
State Onshore Leases	380	260,445.020	179	38,849.757	$127,562,537.84
State Dedicated Leases	65	102,448.980	8	2,265.560	$1,115,658.62
School Indemnity Lands	1	0.560	1	0.560	$15,400.00
State Agency Leases	168	18,358.593	29	2,701.121	$55,368,719.42
Total Year to Date	674	464,886.683	244	54,739.438	$189,731,445.27
NOTE: The Fiscal Year totals include this sale totals and also options exercised and revisions to acreage and cash amounts that may have taken place from the date of the last sale to this state lease sale.