Saturday, 18 December 2010

Industry Group, BLM Spar Over Decline of Oil and Gas Leases

Industry Group, BLM Spar Over Decline of Oil and Gas Leases - New York Times

An industry report last week showing a 79 percent decrease in oil and gas leases issued on public lands has ignited a debate over whether the Obama administration's leasing policies are stifling job creation and energy production.

The Western Energy Alliance -- representing more than 400 oil and gas companies in the Rocky Mountain states -- said its data show a dramatic decline in the use of public lands for oil and gas development and a corresponding dip in government revenue.

"This trend, if continued, will result in a decline in energy development with a resulting loss of jobs, and less revenue for federal and state treasuries at a time when Americans are very concerned about out of control deficits and spending," said Spencer Kimball, the group's manager of government affairs.

The Bureau of Land Management in fiscal 2010 issued 79 percent fewer leases in Colorado, Montana, New Mexico, North Dakota, Utah and Wyoming than in fiscal 2005, the Denver-based group found.

The alliance also found leasing revenue on public lands dropped 46 percent over the same period, and overall onshore royalties slid 33 percent over the past two years. Both revenue streams are roughly split between states and the federal government.

BLM responded by saying oil and gas leasing is market-driven and linked to price and energy consumption, rejecting industry claims that its leasing program had led to the decline.

"In response to falling oil and natural gas prices, oil and natural gas development companies have scaled back energy development and leasing activities," the agency said in a posting on its website, "a downward trend that is reflected in decreased leasing nationally, not just on federally-managed lands."

BLM presented a graph suggesting leasing and permits have generally followed the price of oil and natural gas over two decades.

Dave Alberswerth, the Wilderness Society's senior policy adviser on energy issues, said agency data show that although BLM issued 4,487 permits to drill in fiscal 2009, the permit recipients drilled 3,267 new wells, leaving 1,220 permits unused for the year.

"Though the industry complains about administration policies restricting 'access' to federal lands for oil and gas development, they didn't use anywhere near the number of drilling permits issued by the BLM in the last fiscal year," Alberswerth said. "It's a classic price-demand sort of relationship."

He added that the alliance "is selecting the facts that fit their arguments."

Declining demand for leases

The recent decline in natural gas prices, in fact, has caused a corresponding decline in the number of acres that industry asked BLM to offer for lease, according to a Greenwire analysis of government data last spring (Greenwire, April 1).

"Regardless of decreased commodity prices and reduced industry activity, the BLM continues to offer industry-nominated parcels for auction, and has even seen an increase in generated revenues for American taxpayers," BLM said.

The agency held 29 onshore lease sales in 2010 covering 3.2 million acres in the West and Alaska that netted more than $213 million -- a 57-percent increase over 2009, according to BLM, which has scheduled 36 lease sales in 2011.

To hammer home its point, BLM quoted a Greenwire article that quotes Kathleen Sgamma, the alliance's government affairs director, stating, "Drilling is down because of the economy. I don't think anyone denies that."

But Jon Haubert, spokesman for the alliance, said this week that BLM had failed to include the second half of Sgamma's statement: "As the economy recovers, these [BLM] policies will affect companies two or three years out and slow the recovery of the West."

"I have to admit, we are a little surprised they came out swinging directly at us," Haubert said in an e-mail, "I guess it's pretty apparent we struck a nerve."

While the alliance's energy "dashboard" stops short of blaming Interior Department policies for the leasing decline, the group has criticized the agency for reforms it says have sent a chilling message to oil and gas firms.

The group earlier this year blasted Interior's oil and gas leasing reforms, as well as decisions to analyze the greenhouse gas impacts of leasing and withdraw several dozen oil and gas leases sold in Utah a year ago.

The group also has two pending lawsuits in the U.S. District Court in Wyoming challenging BLM's failure to issue leases within 60 days of their sale, as required by law, and the agency's restricted use of categorical exclusions used to bypass environmental reviews.

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