House Hearing Highlights Importance of Oil and Gas Development on Public Lands
A House Committee on Natural Resources Subcommittee on Energy and Mineral Resources hearing held Thursday highlighted the tremendous importance of oil and gas development on federal lands, as well as what needs to be done to address issues currently limiting this development.
Witnesses from three states with substantial oil and gas development on federal lands — New Mexico, Utah and Colorado — noted that this production accounts for $1.56 billion in annual revenue. However, oil and gas production from public lands has decreased in recent years at the same time that production on private lands has skyrocketed, a trend that can be directly traced to an inefficient leasing process that typically takes more than 200 days. Throw in the fact that it can take years for a company to develop needed infrastructure once leases are approved, and it’s no wonder that 39 percent of BLM leases yield any actual drilling.
As the recent American Petroleum Institute (API) “State of American Energy” report notes, the contrast between recent production on federal lands vs. private lands is difficult to ignore:
“Between 2010 and 2015, the percentage of the nation’s crude oil produced on federal land decreased from 35.7 percent to 21.0 percent. And according to the Bureau of Land Management, the number of drilling permits issued on federally controlled onshore land dropped by 47 percent from 2008 to 2015. Further, federal data show crude oil production remained flat between 2010 and 2015 on federally controlled land, while natural gas production declined 27 percent.
“In contrast, on private and state lands, where drilling typically does not require federal approval, production increased 115 percent for crude and 66 percent for natural gas from 2008 to 2015. The stark difference between production on federal land and state and private land is not just due to ineffective and inefficient national energy policy; it’s also bad federal fiscal policy. If production on federal lands had grown at the same rate as overall U.S. production, from 2009 through 2015, total royalties would have been 31 percent higher, with an additional $20 billion in royalties collected by the federal government.”
These trends are most apparent in New Mexico. The Land of Enchantment ranks fifth overall in U.S. oil production and eighth overall in natural gas production. New Mexico also tops the U.S. in oil and gas production from federal lands, contributing $1.6 billion to New Mexico’s annual budget — a whopping 26 percent of its total budget, which funds for schools, hospitals and roads and employed more than 100,000 people. But those figures would be even more impressive if not policies that have stifled development on federal lands.
Case in point: Major acquisitions and purchases totaling $13 billion in the past year have led to a bona fide boom on the state’s private lands and oil production has dramatically increased on New Mexico non-federal lands. But federal land development remains stagnant, a trend New Mexico Oil and Gas Association (NMOGA) Executive Director Ryan Flynn attributed in written testimony to BLM inefficiencies,
“While the rest of New Mexico’s economy struggles to gain a foothold, the state’s oil and gas industry remains a bright spot… yet the state has not fully realized its resource development potential due to problems at the BLM.”
The core issue at hand is a incredibly slow permitting process. Flynn noted in his testimony that one permit application was pending for more than 18 years, and emphasized that the permitting process is inefficient, at best,
“In a state like New Mexico, where oil and gas revenue typically constitutes roughly one-third of the state’s budget, fixing BLM’s permitting issues will provide immediate economic benefits.
“Operators working through BLM’s Farmington Field Office (“FFO”), which regulates all production in New Mexico’s San Juan Basin, have seen drilling permit wait times approach the 500-day mark, with an average wait time of nearly one year for a standard application for a permit to drill (“APD”) without revisions. By contrast, New Mexico’s Oil Conservation Division, the state agency handling drilling permit, approves APDs in 10 days or less.
“The rights of way (“ROW”) process at the FFO is likewise inefficient, with operators waiting up to a year for approvals. By contrast, the state approves ROWs in 45 days or less.”
NMOGA estimates more than $1.4 million in federal royalty and more than $800,000 in state severance is deferred each day due to BLM’s administrative issues.
Dr. Laura Nelson, Energy Advisor at the Utah Governor’s Office of Energy Development, noted that the permitting process typically lasts more than 200 days in Utah as well. The process is supposed to last no more than 30 days. This issue has an significant adverse impact in Utah, according to Nelson, where an inordinate amount of land is federally owned. And consequently, counties that rely on oil and gas development have suffered,
“Unfortunately, in a public lands state with close to 70 percent of land federally owned, the ability to access and responsibly develop our natural resources is dramatically impeded by complex processes and lengthy timelines for leasing and permitting, resulting in a general reduction in leasing activity. The total number of active onshore oil and gas leases in the country has declined over recent decades, and that pattern has continued without interruption since 2008.”
“Our recommendation to resolve lengthy delays in leasing and permitting is that a process be established for delegating primacy to Utah, and to states generally, for the regulation of oil and gas operations on federally managed public lands.”
Thursday’s hearing highlights the fact that although the United States is experiencing a legitimate oil and natural gas revolution thanks to advances in hydraulic fracturing and horizontal drilling technologies, federal policies needlessly delaying production continue to limit America’s full energy development potential.