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The Bureau of Land Management (BLM) looms large as a land manager in the American West. Total surface acreage maintained by the BLM in my home state of New Mexico comes to 13.5 million acres. That’s more than twice the size of the state of Maryland or nearly as much land as the entire state of West Virginia.
Under the Obama Administration the BLM has become far more difficult for the oil and gas industries to deal with. An indicator is that since 2009, oil production on federal lands is down by 6 percent and natural gas production is down 28 percent. At the same time, oil production on non-federal lands is up by 61 percent and gas production on non-federal lands is up by 31 percent.
Unfortunately, a slew of new and proposed regulations will only make things more challenging. Combined with lower prices, these regulations could bring oil and gas drilling on BLM lands to a halt. This may be the goal of many in the Obama Administration. It is certainly the desired outcome of many of the President’s activist environmentalist supporters.
Proposed changes to Onshore Order No. 3 would dramatically alter the metering of production on federal leases, most likely forcing industry to install new meters on thousands of wells.
These changes may slightly improve the accuracy of royalty payments, but the increased cost of compliance will lead to the premature abandonment of wells that cannot be economically updated. Significant revenue losses will be traded for minuscule changes to the accuracy of royalty accounting. A few years ago (when this same change was debated and then abandoned by BLM), New Mexico’s State Land Office conservatively estimated that the state could lose $1 trillion in revenue over a decade under this regulation.
Another costly new BLM regulation expected to be formally proposed in the near future will address venting and flaring. The rule, submitted to the Office of Management and Budget for review in September, aims to reduce the amount of methane released into the environment.
A recent report from the Environmental Defense Fund (EDF) claims that $330 million worth of natural gas is “lost” on federal lands due to “excessive” venting and flaring. But like much of what passes for “energy analysis,” this figure is calculated by comparing estimates in two different time periods. In the meantime, the EDF conveniently ignores the increasing amount of actual data that gradually shows reductions in methane emissions by industry action.
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This new venting and flaring rule is expected to require the twice yearly inspection of all gas-producing wells with special, costly cameras. In northwest New Mexico alone, where there are over 20,000 active wells, the annual cost would be over $24 million a year not including administrative costs.
Ironically, the BLM’s own slow permitting process is a leading cause of flaring. When permits for rights of way for gathering systems are delayed, natural gas flaring times are often extended. This is a case of a bureaucracy-induced problem that has greatly impacted the industry in recent years.
Another proposed BLM rule involves “fracking” on federal and Native lands. The BLM rules would require oil and gas companies to reveal the chemicals they inject, to meet construction standards in drilling wells and to safely dispose of produced water. This all sounds great, but “fracking” regulation has traditionally been done at the state level.
According to Obama’s own EPA, states have been doing a good job. The EPA has never definitively identified a case where the fracking process itself resulted in water contamination.
Colorado Attorney General Cynthia Coffman in April joined North Dakota, Utah and Wyoming in arguing that the feds overreached and intruded into an area where state rules control.
Said Coffman, “It makes no sense that there would be two sets of regulations — one from the state and another conflicting one from the federal government that would apply to the same activity — especially when the state of Colorado has been responsibly regulating oil and gas in our state for decades.”
U.S. District Court of Wyoming Judge Scott Skavdahl agreed with Coffman. In late September he issued a preliminary injunction blocking federal land managers from regulating fracking on public lands until the legal case is resolved.
These are just three of the Obama Administration’s major new regulations being imposed on the oil and gas industries. Other regulations impacting Indian lands as well as mining rules relating to streams on BLM lands are in the works.
These costly regulations will reduce tax revenues and jobs on lands managed by the federal government with negligible positive impact on the environment.