The Minerals Management Bureau is responsible for leasing, permitting, and managing approximately 5,145 oil and gas, metalliferous and non-metalliferous, coal, and sand and gravel agreements on 2 million acres of the available 6.1 million acres of school trust lands and approximately 5,650 acres of other state-owned land throughout Montana.
The mineral leasing program is responsible for reviewing and processing all mineral lease and permit applications; advertising, competitively bidding, and issuing new leases; reviewing and approving lease assignments; and collecting, verifying, and posting lease rentals and production royalties.
Oil and Gas Leasing
The program is responsible for the leasing and monitoring of 4,997 oil and gas leases, 621 of which are currently productive. The number of oil and gas leases managed is up 3.2 percent, while the number of currently producing leases increased by .65 percent, compared to FY 2009. Activities related to existing leases include collecting, verifying, and posting rental, royalty, delay drilling, and shut-in payments; reviewing and approving assignments and tracking working interest ownership; reviewing and preparing for approval of communitization agreements and unit operating agreements; and coordinating with field offices the review and approval of all proposed physical operations on state leases. In addition, four oral auctions of new oil and gas leases are prepared and conducted each year.
In FY 2010, nearly 1.6 million barrels of oil, 5.3 million MCF (thousand cubic feet) of natural gas and 1.3 million gallons of condensate were produced.
Other Mineral Leasing
The program also administers a wide variety of leases, including metalliferous and non-metalliferous leases, coal leases, gravel permits, and land use licenses for non-mechanized prospecting. In FY 2010, 2.7 million tons of coal was mined, which is a 52.2 percent increase in production over FY 2009. The average price per ton increased 1 percent from FY 2009 to $12.09 per ton. Coal Royalties decreased 36.4% compared to FY 2009. The volume mined can vary significantly from year to year, as mining activity moves onto or off state trust land within the normal sequence of mining operations. Royalties and rentals are also collected for minerals such as bentonite, clay, gold and associated minerals, peat, and shale.
Royalty Auditing and Accounting
The royalty audit program provides additional revenues as a result of programmatic audits. The program identifies royalty under- and over-reporting, rectifies discrepancies, and raising the level of voluntary compliance. Most audits have a single payor and involve multiple leases.
In FY 2010 the program closed six audits and collected more than $667,000 in additional royalties and interest.
Minerals Management Bureau continues its efforts to clarify title to the beds and islands of navigable rivers. The state owns, pursuant to statute, those lands below the low-water mark, islands and their accretions formed in the riverbeds after statehood, and abandoned channels formed by avulsion. Because two navigable rivers in Montana flow through areas with major oil and gas resources, the department has conducted numerous riverbed studies to determine and document state ownership of land. This process allows the state to take a progressive position in issues involving substantial royalty dollars.
In FY 2010, the program managed 34,706 acres of leased riverbed and island tracts. These tracts provided the state with $1,287,652 in oil and gas revenues while generating an additional $595 from other mineral leasing activity. This same ownership review process is also becoming increasingly important in areas where surface development and/or use encounters beds, islands, and abandoned channels of navigable rivers. The department continues to work with state, Federal, and private entities whenever ownership issues arise.
Fourteen unleased tracts within the Otter Creek Coal prospect were leased in March 2010. ArchCoal submitted a bonus bid of 15 cents per ton, which generated an up-front bonus payment of $85.9 million.
Signal Peak Coal Lease
On September 17, 2012, the Land Board voted to approve the coal lease applicaton from Signal Peak Energy, LLC for Section 16, Township 6N, Range 27E for a bonus bid of $0.30 per ton at 10% royalty.