Continued low natural gas prices are resulting in less interest from energy companies for participating in mineral lease auctions on land set aside to benefit public schools, Oklahoma officials were told Thursday.
As recently as January 2011, the Commissioners of the Land Office were asked to auction mineral leases on 340 tracts of school land, Harry Birdwell, secretary of the Commissioners of the Land Office, told the panel, which consists of several state officials.
That auction brought in $13.6 million, he said. That compares with only 58 tracts leased during an auction in May, which brought in $3.5 million.
A mineral lease auction scheduled for November so far has only 25 tracts that are being sought, he said. In November 2011, mineral leases on about 125 tracts were sold.
“Natural gas prices have reduced demand in certain areas of the state for new leases,” Birdwell said. “In certain areas of the state, that will probably continue until the price recovers. ... People will just not pay high lease bonuses when the price of gas is $3 or less (per thousand cubic feet).”
Birdwell said his office has been preparing for the anticipated slowdown in mineral leases. The agency was able to get legislation passed in 2010 that allows it to distribute earnings over a five-year average to level out revenue from mineral lease payments to public schools, which can use the money for operating costs. The mineral lease payments give oil and natural gas companies the right to explore what is underground.
The agency, coming off record earnings last year, put $25 million in a revolving fund to supplement this year's earnings.
“We'll have some funds that we can fill in the gaps,” he said.
The agency this fiscal year plans to distribute at least $93 million to public schools, the same amount distributed in the 2011 fiscal year, Birdwell said.
Schools, colleges and universities got a record amount of money last fiscal year from the Commissioners of the Land Office. They received $140.6 million, surpassing the fiscal year 2011 amount by $16.5 million or 13 percent. The amount was the highest since the agency's inception before statehood.
But earnings so far this fiscal year, which started July 1, came in at $13.3 million, compared with $40.9 million for the same time period a year ago, Birdwell said. August earnings were $6.2 million compared with $11.6 million for the same month last year.
The agency was created to manage lands granted to the state to benefit public education. It earns money from surface land leases, investments and mineral leases.