Myron Landgraf has been around for 81 years, too long to be surprised by anything. But when he made $540,000 the first time he entered a lottery run by the federal government -- it came as close to surprising him as anything could.
Landgraf, a tool-and-die maker in Hanover, N.H., paid $10 to the Interior Department's Bureau of Land Management in March to enter the lottery for oil and gas rights on a 2,240-acre tract of land in Wyoming.
He won -- and paid his annual $2,240 fee for the oil and gas rights on the tract. Then the oil companies trooped to his door, with offers to buy his lease. He finally sold it for $540,000, plus royalties of 6 percent if oil is found.
Since the lottery was started in 1960, the bureau has leased individuals the drilling rights for more than 50 million acres of federal land, earning more than $40 million in filing fees for the government, and tens of millions more in land rents and royalties later on.
Every other month, the agency posts lists of hundreds of tracts, ranging from 40 to 10,000 acres, and invites people to pay $10 to enter up to one card per tract. Once the winner is chosen and pays the annual $1 per acre rent, he or she owns the oil and gas rights to the property for as long as it produces oil or gas, or for 10 years if nothing is found.
The catch is that there may be no oil or gas under the land and no one may want to buy the lease. Prime drilling areas are leased to the oil companies through a competitive bidding system; the lottery is held for land with no known reserves.
Drilling never begins on 90 percent of the tracts in the lottery, according to bureau officials; many of the tracts already have been leased several times, but went back into the pool when no one found oil after 10 years.
What bureau officials don't say is that even if the tract is never drilled, the winner may still make a small fortune. Before oil companies begin drilling on a likely site, they often try to buy up the surrounding land, so that if they find oil they will have all the potential producing area.
That's what happened in Landgraf's case. His tract was in a region where the oil companies thought oil might be found. They couldn't pass up the chance to get drilling rights on land that might prove to have tremendous oil reserves in a few year's time.
A lottery regular, Denver physician Donald Egan, files cards for 300 to 400 tracts in every lottery and hires two geologists full time to scout parcels that will be available in the future. Egan said he typically wins one tract in every drawing, and in eight years of participating he has made "more than" several hundred thousand dollars. Just how much more he won't say.
"It really is a pretty profitable investment," Egan said. "There are some people in the Rocky Mountain area who have literally made tens of millions of dollars over the last 10 to 20 years in the lottery."
The lottery is supposed to be fair to everyone, but sometimes it hasn't been. Last year, then Interior Secretary Cecil D. Andrus suspended the lottery for two months after finding apparent "large-scale fraud."
"People were abusing the system-- multiple filings and so on," said David E. Behler, a member of a task force that still is investigating the lottery. "They were becoming millionaires. People were filing under fictitious names, under their neighbors' names. They were stuffing the ballot box."
Subsequent reforms required the person's own address on each card rather than just an agent's, and prescribed a 60-day waiting period before leases could be sold to oil companies, so that winners would have time to shop for the best deal. The rules also require that cards be signed by hand and not churned out by automatic signature machines.
The task force has won the convictions of three small oil companies and 10 individuals, said Jack R. Anderson, the special agent-in-charge for the task force. Those who pleaded guilty admitted filing more than one card for some valuable tracts, either by fabricating names or by submitting names of friends as a front for their own entries.