Elko County gas, oil lease sale heralds first use of fracking in Nevada

It’s too soon to call it a boom, but federal regulators had no trouble Tuesday selling off 29 new oil and gas leases in Elko County, not far from what could be Nevada’s first fracking site.

It took the U.S. Bureau of Land Management about an hour to auction parcels totaling almost 36,000 acres . The oil and gas leases sold for $1.27 million to six different companies.

The auction drew the highest BLM bid — $152 per acre — for a Nevada oil and gas lease since June 2008.

“It was pretty busy. There was a lot of attention,” said Lorenzo Trimble, geologist for the BLM in Nevada. “It’s definitely looking like a little bit of a boom right now in terms of leasing interest.”

Parcels snapped up Tuesday are in the same part of the state where Houston-based Noble Energy Inc. is pursuing plans to drill for oil and natural gas across 40,000 public and private acres near Wells, 400 miles north of Las Vegas.

That project would mark the first use in Nevada of hydraulic fracturing, or fracking, which uses pressurized fluid to smash oil and gas from previously untapped shale deposits.

The BLM is conducting an environmental review of Noble’s proposal to drill as many as 20 exploratory wells more than a mile deep on public land in northeastern Nevada. The energy giant hopes to secure the permits and start drilling by year’s end.

Company officials told investment analysts in December they have secured leases in Elko County totaling 350,000 acres and plan to spend $130 million over four years on its shale play there.

Noble estimates the deposit could produce as much as 50,000 barrels of oil per day, enough to match Nevada’s entire 2012 output in about one week.

Something like that certainly could trigger a boom, Trimble said. “I think if we see Noble hit some oil up there, we’ll see interest pick up. We’re waiting for drilling results right now.”

The leases sold Tuesday are for a period of 10 years. Once a lease is producing, a royalty of 12.5 percent is charged.

Half of the bid and rental receipts go to the state of Nevada.

Six parcels totaling almost 10,000 acres went unsold during the auction. They will be offered for noncompetitive sale starting Wednesday, which could allow someone to pick them up for the minimum bid of about $1.50 an acre, Trimble said.

Alan Coyner, administrator for the state Division of Minerals, said fewer than 1,000 wells have been drilled in Nevada. About 70 are in production, churning out modest amounts of low-grade petroleum generally used for tar or asphalt.

Since a high of 4 million barrels in 1990, oil production in Nevada has dropped to fewer than 400,000 barrels a year, less than what is pumped every day from North Dakota’s heavily fracked shale.

In March 2012, oil and gas leases for 42 parcels in the bureau’s Elko District sold for almost $1.8 million.

Contact reporter Henry Brean at hbrean@reviewjournal.com or 702-383-0350.