Drilling leaves fed lands because state, private acres are cheaper, says BLM chief

Posted: Mar 15, 2012

Written by

PHIL TAYLOR, Greenwire
Bakken drilling

Energy firms face fewer costs and regulatory obstacles when drilling on state and private lands than they do on public lands, where oil production fell last year, a top Obama administration official said today.

Bureau of Land Management Director Bob Abbey said drilling in North Dakota's oil-rich Bakken deposit and other shale gas formations is also more economically promising than other plays under his agency's 250 million-acre estate.

The migration of drill rigs to nonfederal tracts in recent years is an economic decision, not because of Obama administration policies, he said.

"No doubt the aggressive development of shale gas and shale oil has led to a shift to private lands in the east and the south where there is less federal mineral estate," Abbey told a panel of Senate appropriators this morning. "Much of the easy plays are located right now on private mineral estate."

He said drilling on private and state lands is also exempt from federal regulations such as the National Environmental Policy Act and tribal and endangered species consultations that BLM by law must enforce on public lands. That means permitting times are often shorter elsewhere.

But he noted that industry holds more than 7,000 permits to drill on public lands that have not yet been used and that the administration has taken steps to increase certainty in the leasing stage.

"We inherited an onshore oil and gas program that was on the verge of collapse," Abbey said, noting that roughly half of all lease parcels were protested when the Obama administration came into office. BLM's oil and gas leasing reforms have cut protests down to about 35 percent, providing more certainty to industry, he said.

In addition, the pace of permitting for offshore oil and gas permits has increased significantly over the past year, said James Watson, director of the Bureau of Safety and Environmental Enforcement.

From March to September last year, the agency took nearly 100 days to approve new deepwater well permits. But since September, the time has been cut to 62 days, he said.

The permitting debate comes in an election year in which the Obama administration has stressed that oil production nationwide is at an eight-year high and imports of foreign crude have fallen from 57 percent to 45 percent in the past four years.

At the same time, gasoline prices -- which have little correlation to domestic production -- continue to rise, threatening both the president's re-election and the nation's economic recovery.

But Sen. Lisa Murkowski (R-Alaska) today said the administration should be forthright about whether the increase in domestic production is occurring on federal tracts.

Oil production fell by 14 percent in fiscal 2011 below the previous year on federal lands and waters, according to statistics provided last month by the Interior Department. Natural gas production fell 11 percent over the same period (Greenwire, Feb. 27).

The dip in production occurred mostly in the Gulf of Mexico, where a moratorium on deepwater drilling stunted exploration for much of 2010 in the aftermath of the Deepwater Horizon disaster.

Onshore oil production increased by 4 percent in 2011, with natural gas production falling by the same amount, according to the Interior statistics.

However, Abbey today said that onshore oil production was down last year and that natural gas production on federal lands was at its highest point in decades. Interior Secretary Ken Salazar at a White House briefing this week likewise said production of natural gas from federal lands in 2011 was "one of the best years we've had in the last decade."

Murkowski, who is ranking member of the Interior, Environment and Related Agencies Appropriations Subcommittee, pressed Abbey and others to address the data discrepancy.

"We've got a situation where either the data from DOI is wrong or it has not been communicated adequately or appropriately to the secretary," she said. "Are we seeing an increase in production on public lands and offshore, or not?"

Abbey, while conceding a drop in oil production on BLM lands last year, said he was bullish about the future of both oil and natural gas.

"With the price of oil and the economy, I think they will continue to have an interest in drilling wherever such a source of oil exists," he told reporters after the hearing. "The natural gas production was the second highest in many, many decades off federal minerals."

Interior today said it tracks both sales-year data, which represents the year in which the oil or gas was sold, and accounting-year data, which is the year in which the federal government received the money.

Accounting-year data never change, whereas sales-year data change, or increase, often.

Sales-year data, which Interior said are more accurate, show onshore oil production on federal tracts was up by 4 percent in 2011, while natural gas production was down by the same amount.

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