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April 24, 2014

Oil and Gas Production on Federal Lands Still a Disappointment

April 24, 2014
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According to a new report from the Congressional Research Service, since 2009 oil production on federal lands is down by 6 percent and natural gas production on federal lands is down 28 percent. This is particularly striking because since 2009 overall oil production on non-federal land is up by 61 percent and natural gas production on non-federal land is up by 33 percent.

In 2010, 36 percent of our nation’s oil production took place on federal lands. Due to Obama Administration policies, by 2013, only 23 percent of our nation’s oil production took place on federal lands. Production on non-Federal lands, in contrast, is skyrocketing as hydraulic fracturing and horizontal drilling have increased production dramatically. Oil production on non-Federal lands increased by 21 percent in fiscal year 2013 from fiscal year 2012 levels—an increase of almost one million barrels per day.[i]

Likewise, natural gas production on Federal lands has been steadily declining, while natural gas production on non-Federal lands has been steadily increasing. In fiscal year 2013, natural gas production on non-Federal lands increased by 3 percent—654 billion cubic feet—and natural gas production on Federal lands declined by 9 percent—392 billion cubic feet.

Data from Fiscal Year 2009

Looking at data farther back provides an even more dramatic indication that Obama Administration policies are hurting oil and gas production on Federal lands, while oil and gas production on non-Federal lands is skyrocketing. According to a report by the non-partisan Congressional Research Service, oil production on federal lands fell 6 percent between fiscal years 2009 and 2013 while over the same time period, oil production increased by 61 percent on state and private lands. As a result of these large increases in production, crude oil production on state and private lands increased by 2.1 million barrels per day over the 4 year period, an amount which is more than each of the following oil producing nations — Algeria, Libya, Qatar, or Norway– produced in 2012.

Screen Shot 2014-04-22 at 2.44.22 PM

Likewise, natural gas production on federal lands decreased by 28 percent between fiscal year 2009 and fiscal year 2013, while natural gas production on non-federal lands increased by 33 percent over the same time period.

Screen Shot 2014-04-22 at 2.46.58 PM

Source: CRS, http://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/20140410CRS-US-crude-oil-natural-gas-production-federal-non-federal-areas.pdf

Obama Administration Policies

The Obama Administration has increased the time it takes to obtain a permit to drill on Federal lands, driving oil and gas companies to private and state lands on which to make their investments. After a company has obtained a lease, it must also obtain an application for permits to drill (APD) for each oil and gas well. Despite the Energy Policy Act of 2005 providing a new improved timeline for review, it took  an average of 307 days to approve or deny an APD in 2011, 89 days more than the 218 days it took in 2006, which is 41 percent more time. In its budget justifications, the Bureau of Land Management indicated that overall processing times per APD have increased because of the complexity of the process, a process they themselves control.

Since fiscal year 2011, the Bureau of Land Management has improved the time it takes to process a permit. But, the average time during the Obama Administration is still 18 percent longer than the time it took to process a federal permit to drill during the 5 preceding fiscal years. (See chart below.)

Avg-Number-of-Days-for-BLM-to-Process

In contrast, the process on private and state lands is relatively quick. State agencies process drilling permits on private lands, with some states approving permits within 10 business days. On private lands, states allow some surface management issues to be negotiated between the oil producer and the individual land/mineral owner. To see the success of hydraulic fracturing and shale oil development on non-Federal lands, one only needs to look at North Dakota, the second-largest oil producing state in the nation behind Texas. North Dakota has an unemployment rate of just 2.6 percent, compared to 6.7 percent for the nation. Most of the land in North Dakota is not controlled by the Federal government.[ii]

Besides taking an enormously long time to process permits, the number of leases on federal lands is down dramatically under the Obama Administration as the chart below shows. The average number of onshore leases that the Bureau of Land Management issued during the Obama Administration is more than 50 percent less than the average number issued by the Clinton Administration and over a third less than those issued by the Bush Administration. In fiscal year 2013, 2,278 fewer leases were issued compared to fiscal year 2006 (1,468 leases in FY 2013 compared to 3,746 in FY 2006).

Avg-Number-of-BLM-Leases

There are numerous benefits to opening Federal lands to oil and gas development. An IER study shows that opening  federal lands and waters to exploration and production would increase federal tax revenue by $24 billion over the next seven years and $86 billion annually thereafter while State and local governments would receive $10.3 billion in annual state and local tax revenue over the next seven years and $35.5 billion annually thereafter.  Over 37 years, federal and state and local tax revenues would increase to $2.7 trillion in federal revenues and $1.1 trillion in state and local revenues.

Further, the economy would benefit by $127 billion annually for the next seven years, and $450 billion annually in the long run. Most impressively, the opening of federal lands could have a cumulative increase in economic activity of up to $14.4 trillion over a period of 37 years. And the ripple effect of that boom would be 552,000 in job gains annually over the next 7 years with annual wage increases of up to $32 billion and an increase of 1.9 million jobs annually in the long run with annual wage increases of $115 billion.[iii]

Conclusion

Oil and natural gas production on private and state lands is skyrocketing, while production on Federal lands is in decline and has been throughout the Obama Administration years. The Obama Administration is offering less land for lease and taking longer to process permits to drill. As a result of the red tape, oil and natural gas producers are turning to private and state lands to make their investments. As Rep. Ed Whitfield (R-Ky.), chairman of the energy and power subcommittee, said: “While President Obama has been anxious to take credit for increased oil and gas production, the only areas he is responsible for is on federal lands — the only areas where oil and gas production is actually decreasing.”[iv]


[i] Congressional Research Service, U.S. Crude Oil and Natural Gas Production in Federal and Non-Federal Areas, April 10, 2014,  http://energycommerce.house.gov/sites/republicans.energycommerce.house.gov/files/20140410CRS-US-crude-oil-natural-gas-production-federal-non-federal-areas.pdf

[ii] Forbes, Obama Stymies Oil and Natural Gas Production on federal Lands, April 17, 2014, http://www.forbes.com/sites/chrisprandoni/2014/04/17/obama-stymies-oil-and-natural-gas-production-on-federal-lands/

[iii] Institute for Energy Research, Economic Effects of Immediately Opening Federal Lands to Oil and Gas Leasing: A Response to the Congressional Budget Office, February 2013, http://instituteforenergyresearch.org/wp-content/uploads/2013/02/IER_Mason_Report_NoEMB.pdf

[iv] The Hill, Oil, gas production drops on federal property, April 16, 2014, http://thehill.com/blogs/e2-wire/e2-wire/203696-oil-gas-production-drops-on-federal-land#.U0_fw4EmdHk.twitter#ixzz2zEn1LGID


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