Feds Say They're Not Holding Up Rockies E&P

Abstract: There's no problem in leasing federal lands in the intermountain West, a new study says; however, the ease with which lawsuits can be leveled discourages capital spending.

Analysis: The U.S. government says "It ain't us" when it comes to naming the culprit involved in denying oil and gas producers access to federal lands in the intermountain West, a charge producers have been quick to make many times through the years.

Well, they can't make that charge stick so eloquently, anymore. However, the real culprit may continue to keep them at bay indefinitely until they start calling for specific solutions, rather than leveling blanket charges.

In a recent study by a federal interagency group whose members are from several cabinet-level departments, statisticians allow as how there are few or no restrictions to the leasing process on 64 percent of federally controlled acreage in the five main geological basins of the Rocky Mountain region. As far as "they" are concerned, any company can take leases within that federally controlled acreage without much hassle.

"They" includes the Department of Energy's Office of Fossil Energy and Energy Information Administration; the Department of the Interior's Bureau of Land Management (BLM) and U.S. Geological Survey; and the Department of Agriculture's U.S. Forest Service--all of whom participated in preparing the study.

But the preparers also caution that the study examines only the leasing restrictions, and not other barriers that producers might face in mounting any new exploration and production (E&P) in the Rockies region. Though they don't list other barriers, obvious inclusions would be preparing multiple Environmental Impact Studies and related reports, gaining physical access to the lands, conducting geophysical and geological exploration, bringing in drilling equipment, building storage and treatment facilities, laying gathering and transmission pipelines, and satisfying a whole passel of other state and local regulations and limitations.

Another key restriction to E&P almost anywhere in this country today also was not mentioned: the costly delay to development caused by lawsuits that are filed in practically every court in the land by environmental and other anti-industry groups whenever producers obtain leases on either public or private lands. Combating lawsuits has become an integral part of the cost of E&P in the U.S.

The study, ordered by Congress under a provision of the 2000 Energy Policy and Conservation Act (EPCA), signed into law by former President Bill Clinton, finds that the five basins, which encompass nearly 104 million acres of the interior West, hold an estimated 3.9 billion barrels of oil and some 139 trillion cubic feet of gas, both considered "technically recoverable. " The natural gas component includes both coalbed methane, which can be developed rather quickly, and conventional gas, which takes longer.

The formal title of the overall EPCA study is hefty: "Scientific Inventory of Onshore Federal Lands' Oil and Gas Resources and Reserves and the Extent and Nature of Restrictions or Impediments to Their Development." The contents can be downloaded from the BLM's website (www.doi.gov/epca/).

Additional EPCA inventories will gauge oil and gas reserves in areas beyond those in this first-phase study. Subsequent ones will cover other U.S. onshore areas. Still another, separate study will inventory the entire U.S. Outer Continental Shelf (OCS)--including but not limited to just the Gulf of Mexico OCS. That one should prove particularly appealing to producers.

Interestingly enough, the Rockies inventory points out that the federal government manages only a bit more than half (59 million) of the total (104 million) acreage in the study area. The rest is held by other public (state) and private interests, a large portion involving complicated land grants made in the 19th century.

Even study participants were surprised at that finding. When study results were announced earlier this month, Assistant Secretary of the Interior Rebecca Watson said it was "new information and somewhat unexpected." But Watson was quick to point out that only leasing restrictions were included.

The following are the Rockies study's five geological basins:

  • The Paradox-San Juan Basin (Colorado, New Mexico, and Utah)
  • The Uinta-Piceance Basin (Colorado and Utah)
  • The Greater Green River Basin (Colorado, Utah, and Wyoming)
  • The Powder River Basin (Montana and Wyoming)
  • The Montana Thrust Belt (Montana)

The total area available under what the study calls "standard" leasing stipulations includes 23.1 million acres (39 percent of the total study area). It holds an estimated 2.2 billion barrels of actual recoverable and undiscovered, technically recoverable oil reserves. It also holds 86.6 trillion cubic feet of recoverable and undiscovered, technically recoverable gas reserves.

Another 15.2 million acres (25 percent of the total study area) are listed under those areas available for leasing with restrictions on oil and gas operations beyond the standard ones. In these areas, the added restrictions are based principally on seasonable occupancy (no transport movement during winter breakup). They hold an estimated 1.1 billion barrels of oil and 36 trillion cubic feet of gas.

Finally, some 21.1 million acres (36 percent of the total study area) are not available for leasing at all. These include those areas protected by Congress as wilderness or as national monuments or national forests, and some areas on which there are outright drilling moratoria. That acreage is said by the study to overlie reserves of about 500 million barrels of oil and 15.9 trillion cubic feet of gas.

The remainder of the acreage includes such areas as townships and other specific use areas, which would not be under consideration for development, in any case.

That a law enacted during the Clinton Administration should detail how much oil and gas exists beneath government lands in the Rockies is rather ironic, particularly since it supports the contention of his successor, George W. Bush, that to gain greater domestic energy self-reliance in a world where this country and its people are exceedingly vulnerable to word terrorism, the Rockies should be widely developed, along with the other areas heretofore denied, including the entire coastal offshore and the Alaska National Wildlife Refuge (ANWR).

But producers, though pleased that at least leasing limitations have been detailed and that estimated reserve numbers prove new Rockies development to be attractive, are still somewhat skeptical about the other, often far tougher, development restrictions involved.

Diemer True, chairman of the Independent Petroleum Association of America (IPAA), said that while a majority of the land should be available for responsible development, it might not be accessible--really accessible, that is.

"We must still recognize that regulatory barriers and bureaucracy often prevent development of these resources," said True when presented with the study's findings. He added that now that the industry knows it can lease specific lands in the five geological basins, the next step will be to make sure that happens. He didn't say how.

But True counted up a number of remaining impediments to E&P in the Rockies area. These include: federal agencies delaying permits while revising environmental impact statements; litigation on Resource Management Plans designed to delay access; and unreasonable permit requirements that prevent production.

"In some cases," he added, "oil and gas producers are paying the costs of Environmental Impact Statements--a cost that is supposed to be incurred by the government and can cost producers hundreds of thousands of dollars."

But ever the optimist, True also addressed those lands in the Rockies where drilling is currently verboten, asking that the reasons for such prohibition be examined, as well.

"On the lands that are not currently open, our policymakers and interested communities should determine if needed natural gas can be obtained while ensuring the protection of sensitive areas."

That more natural gas is needed, and needed badly to provide heating and electricity for Americans, is a given. The federal government itself reports that the U.S. currently uses about 23 trillion cubic feet of natural gas a year. The country produces about 19 trillion cubic feet (84 percent) of its annual natural gas demand and imports the remaining four trillion cubic feet (16 percent) from Canada. Meanwhile, natural gas demand is expected to rise to just under 34 trillion cubic feet per year by 2020--and that, too, is a figure the federal government considers likely.

Meanwhile, the Rockies area would be a serious source of both oil and gas. So would the entire OCS and ANWR. Perhaps the federal government doesn't hold sole responsibility for making it so tough for producers to actually lease and drill for oil and gas on these and other public lands. Also, while many coastal states are simply anti-oil, period, they can be persuaded that petroleum operations off their shores can be beneficial and not just polluting. And environmentalists aren't the lone stumbling block to producers kicking off E&P in the Rockies and elsewhere.

Perhaps the real offender is the result of empowerment by what may be only a small portion of the U.S. population: those who hold that petroleum should be abandoned as the nation's main energy source. They do have a fearsome weapon in their quiver: The class-action lawsuit. Such lawsuits, while permissible in our democratic society, can hold up development indefinitely. The problem is what are the people who constitute that democracy going to do if gasoline climbs to $4.50 or more a gallon, and if their natural gas and electricity bills go sky-high, as they did in 2000? You can bet they'll start by asking why oil companies didn't develop domestic reserves sooner.

Associate Editor: Robin Beckwith