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Interest slows in mineral leases on Oklahoma's public school land

Few companies want to explore what's under Oklahoma's public school land because of continued low natural gas prices, state officials are told. Interest has dropped off from nearly 350 tracts of land in January 2011 to less than 30 for a mineral lease auction set for November.
BY MICHAEL MCNUTT Published: September 14, 2012

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.

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