AUSTIN — A continued surge of interest in West Texas exploration kept the average per acre bid high today at a regular Permanent School Fund oil and gas lease sale, Texas Land Commissioner Jerry Patterson announced today.
"The average bids today were the second highest we've ever seen for oil and gas leases on Permanent School Fund lands," Patterson said. "We came pretty close, in fact, to breaking the record we just set at our July lease sale. This is great news for the schoolchildren of Texas and for the West Texas oil patch."
The state's $23 billion Permanent School Fund - which helps pay for the state's share of public education - received more than $15 million at today's oil and gas lease sale, awarded by the School Land Board.
Despite the economic downturn, oil and gas revenue for the Permanent School Fund has been strong, Patterson said. The Permanent School Fund earned nearly $85 million from oil and gas bonus payments for fiscal year 2010, which ended in September. Bonus payments are what oil and gas companies pay the state for the right to explore and produce hydrocarbons on school fund lands. Oil and gas royalties - the state's percentage of the actual production - brought in another $256 million in 2010.
Strong competition for school fund mineral leases in the West Texas Wolfcamp and Bone Spring formations, as well as the South Texas Eagle Ford play, bumped up the average among the 48 bids to $1,083 per acre. T. Verne Dwyer was the most active bidder with a total of over $5.2 million paid for leases in West Texas. In the Eagle Ford Shale area, the average bonus for lands in DeWitt County was over $9,000.00 per acre.
Generally, exploration bonuses range from $200 to about $2,500 an acre depending on the location and geology.
In the quarterly lease sales held by the Texas General Land Office, oil and gas firms submit sealed bids for the right to drill for hydrocarbons on Permanent School Fund lands. The Permanent School Fund will also earn 20 to 25 percent royalties on any oil or gas produced on the leases.