The bidding began unceremoniously at the suggested $2 per acre, the pop of a firecracker as heavy artillery moved within range.

The target: a parcel of 901.2 net acres in Eddy County, N.M., about 30 miles southeast of Carlsbad Caverns.

Less than nine minutes later, a second bid sucked the air—or whatever equivalent fills the internet—out of the online auction room: $30,000 per acre.

The parcel, on federal lands just across the Texas border from Loving County, Texas, and near WPX Energy’s Stateline area, was part of 142 tracts in Eddy and Lea counties, N.M., offered by the Bureau of Land Management (BLM) on Sept. 5 and Sept. 6.

The action, 17 minutes in, swiftly went into WTF&D (what the F&D) mode. The price doubled to $65,000 per acre. Two hours later, bids kept climbing: $67,000, $85,000 and $95,000 per acre. The winning bid, by a single dollar, a record-breaking $95,001 per acre.

BLM’s online auction, run with efficiency and precision by EnergyNet, easily surpassed old records. The largest bid for a federal parcel in New Mexico—$76.7 million—was easily crushed. It now stands at $102.1 million.

Over two days, operators or their proxies bid $972.5 million for 50,797 acres. BLM documents estimate the land could ultimately generate 342 MMbbl of oil and 1.4 Tcf of natural gas.

A great deal of money has been piled on the table. But will operators see years of profits or stare into the federal abyss?

U.S. Department of Interior Secretary Ryan Zinke, the cowboy-hat wearing former U.S. Navy Seal, took a peculiar victory lap, proclaiming, “They said it couldn’t be done.”

“Critics of the administration’s American Energy Dominance policy often falsely claim there is little to no interest in federal oil and gas leases,” Zinke said in a news release. “Today they are eating their words.”

“They” are apparently the protestors who used to show up at onshore auctions dressed as dolphins.

Yet in some ways, the BLM auction occurred despite leadership at the top. President Donald Trump has lagged on providing the Senate with people to fill top posts within the Interior Department. After 19 months, it still lacks nominees for its chief attorney, U.S. Fish and Wildlife Service director and the head of the BLM.

That may be a problem for an agency that can’t keep track of how many producing or orphaned wells it oversees, as one example. And addressing problems requires clout.

BLM’s $1.4-billion budget and 10,000 employees instead are under the direction of career civil servants rather than a presidential appointee.

The New Mexico auction was a function of E&P demand. Operators formally expressed interest. BLM conducted due diligence and then put the leases up for auction.

The bids thrown down in New Mexico clearly demonstrate how much value E&Ps see in that part of the Permian. Top bids were garish, even by this basin’s standards. The top 10 winning bids start at $63,000 per acre.

Seaport Global Securities analysts noted that initial reports of $82,000 per acre bids surpassed any valuation seen for Permian acreage in either the A&D or M&A markets.

Along the Texas-New Mexico border, where companies such as WPX Energy Inc., Matador Resources Co. and Cimarex Energy Co. operate, bidding was most intense. Top bidder Federal Abstract Co., a Santa Fe, N.M., firm that bids for companies wishing to remain anonymous, acquired about 9,749 net acres for $387.4 million. Federal also posted two bids of $95,001 per acre—a staggering $146.5 million for 1,541 net acres.

A subsidiary of Marathon Oil Corp. was also in the game, spending $103.4 million on 1,799.2 net acres. Three of the tracts it purchased were tightly bundled near where the Pecos River begins to widen, as it curves south and empties into Texas. Seaport analysts noted that the company acquired lease terms with a 10-year, 12.5% royalty rate agreement—about half of the typical 25% rate in the Permian.

A grand auction that, but one that won’t obscure BLM’s shortcomings forever.

Just one example: A review of federal oil and gas leases found that 7% were suspended, some for more than 30 years, according to a June report by the Government Accountability Office. Merely learning why a lease is suspended can be difficult since records aren’t digital. At one BLM field office, suspensions are tracked using handwritten notes.

Of the 2,750 suspended leases, nearly all are in oil and gas country. They span 2.9 million acres across Colorado, Montana, New Mexico, Utah and Wyoming. A full-time BLM director will probably want to look into that.

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