Oil and gas leasing falls throughout West region

Dec 10 2010 - 8:19pm

CHEYENNE, Wyo. -- Environmental red tape has contributed to a 79 percent decrease in oil and gas leasing on public land in Rocky Mountain states, taking a toll on the region's economy, a petroleum industry group says.

Members of the Denver-based Western Energy Alliance are prepared to spend $3.9 billion to drill in the West, creating 16,000 jobs, said Kathleen Sgamma, the group's government affairs director.

Bureaucratic uncertainty is causing them to look elsewhere to invest, she said.

"They simply can't get the permits, they can't get their projects approved," Sgamma said Thursday.

An alliance report out this week documents the decline in numbers, though an environmentalist questioned the group's characterization of the federal permitting process as bogged down in bureaucratic mud.

"The oil and gas industry is like a baby with 10 lollipops. It can only put one in its mouth. But if you try and take one of the 10 away, it will cry and scream," said Erik Molvar, with the Biodiversity Conservation Alliance.

The U.S. Bureau of Land Management in seven states -- Colorado, the Dakotas, Montana, New Mexico, Utah and Wyoming -- issued 60 percent fewer parcels for lease and 70 percent less acreage for leasing in 2010 than in 2005, according to the report.

The result, the group said, has been a 46 percent decline in revenue from leasing, from $190 million to $102 million. Those are funds that go to the federal government as well as state governments struggling with budget deficits, Sgamma said.

Not only are fewer drilling leases being sold at BLM auctions, she said, but fewer leases are being issued to companies under much stricter environmental review since the Obama administration took office almost two years ago.

"There's already three layers of analysis in the leasing process. This administration has added in another couple other layers of analysis," Sgamma said. "We think it's probably time to scale back some of that redundant analysis and enable development to go through, to go forward, to create jobs in the West and economic activity."

Less drilling in the West has been the making of industry itself, Molvar said.

Companies have drilled to the point where they have created a natural gas glut that has driven down prices, Molvar said Friday. Economics, more than anything, has caused the leasing decline, he said.

"It's dishonest to suggest that the drop in leasing is being driven by some kind of government policy, or oversight by environmentalists, because it's the oil industry themselves that's requesting a lot less acreage to be leased," Molvar said.

Companies themselves nominate parcels of BLM land for oil and gas leasing. The Western Energy Alliance report shows the number of nominated parcels declining from around 3,000 in 2007 to 1,300 in 2010, Molvar noted.

"No wonder you're getting decreases," he said.

Sgamma said lease nominations "don't just go away" and there's a "huge backlog" of nominated leases before the BLM.

"What company in their right mind would continue to nominate over and over again when there's no progress being made?" she said.

Molvar said companies exercise their right to drill on just a small number of leases they acquire -- just 30 percent in Wyoming. He also said several large drilling projects, and thousands more wells, have been approved in recent years.

Sgamma said companies often don't drill on leases because exploration shows that the leases aren't viable. Focusing on high-profile projects with thousands of new wells, she said, overlooks the bigger picture of many small developers not getting permission to drill just a handful of wells.

The overall result, Sgamma said, is drilling in the West costs more, causing companies to look to gas plays on primarily private land in the East and South.

"Do we want to put the Western states at a disadvantage to the rest of the country? We don't believe that should be occurring," she said.

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