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Most Federal Oil, Gas Leases Unproductive

Source:  Copyright 2004, Associated Press
Date:  June 1, 2004
Byline:  DAVID PACE, Associated Press Writer
Original URL: Status DEAD


WASHINGTON - Nearly three-fourths of the 40 million acres of public land currently leased for oil and gas development in the continental United States isn't producing any oil or gas, federal records show, even as the Bush administration pushes to open more environmentally sensitive public lands for oil and gas development.

An Associated Press computer analysis of Bureau of Land Management (news - web sites) records found that 80 percent of federal lands leased for oil and gas production in Wyoming are producing no oil or gas. Neither are 83 percent of the leased acres in Montana, 77 percent in Utah, 71 percent in Colorado, 36 percent in New Mexico and 99 percent in Nevada.

How much exploration has occurred on the nearly 30 million acres of non-producing public land leases is difficult to say. BLM officials could provide no details on the number of exploratory wells drilled on those leases, despite repeated requests for that information over the past two months.

But with so much public land already available for exploration, environmental groups and local landowners are questioning why the Bush administration is pushing to lease still more federal land to the oil and gas industry, particularly in areas that the groups and some lawmakers want protected as federal wilderness areas.

"The aggressive leasing of public land pushed by the Bush administration is a land grab, pure and simple, giving industry more and more control over public land while costing taxpayers millions of dollars," said Peter Morton, a resource economist with the Wilderness Society.

Morton said the leases, which companies can lock up for 10 years with annual rents of only $2 to $3 an acre, are an economic boon to some companies because they count as assets that can make debt refinancing easier while also attracting potential investors.

The Energy Task Force headed by Vice President Dick Cheney asked the BLM three years ago to find ways to open new federal lands to oil and gas leasing and to speed up the approval of drilling permits. To meet increased demand for natural gas, the task force said drilling on federal land will have to double by 2020.

Interior Secretary Gale Norton agreed in settling a lawsuit with the state of Utah last year to halt all reviews of public lands in the West for new wilderness protection and to withdraw that protected status from some 3 million acres in Utah.

That decision, which conservation groups have asked a federal appeals court to overturn, cleared the way for oil and gas leasing in millions more acres of potential wilderness in Colorado, Utah, Arizona and New Mexico.

In Colorado last month, some of the 70 parcels BLM offered for oil and gas leasing were in an area proposed for wilderness designation in legislation introduced by Rep. Diana DeGette, D-Colo. Several other parcels in the proposed wilderness area were withdrawn from the lease sale at the last minute. In neighboring Utah, the BLM has sold 26 oil and gas leases since November in areas eligible for wilderness designation.

"These are incredible, beautiful and remote lands that have proven wilderness values," DeGette said when she introduced her wilderness bill. "However, they are now open to the full force of the draconian Bush energy policy, which proposes to open up thousands of our public lands to oil and gas development."

Since Cheney's task force handed down its recommendations, the BLM has completed a study of impediments to oil and gas exploration and development, speeded up approvals of drilling permits and begun expedited updates of land use plans in 21 areas, almost half of which hold out the potential for more oil and gas development.

Tom Lonnie, the BLM's assistant director for minerals, realty and resource protection, said the government can protect environmentally sensitive areas that are leased for oil and gas exploration by including restrictions in the lease agreement.

But Lonnie said the administration has no control over when and where exploratory drilling occurs on federal leases.

"A lot of these areas where existing leases are being held onto may have low potential for production, based on industry analysis now," he said. "The industry is out there drilling the wells and doing the exploration, not us."

Even as more land is opened for leasing, it's questionable whether the industry has the resources to explore it. The Cheney task force concluded that very few new onshore oil drilling rigs have been built since the mid-1980s, because of price volatility in the oil field supply and service sectors.

And the percentage of wells drilled in the United States since 2000 that are considered exploratory has declined slightly, when compared with the previous four years, according to data compiled by the Energy Information Administration.

A recent Wilderness Society study found that BLM has approved more than 25,000 drilling permits for public lands over the past decade, but the industry had drilled only about 19,000 new wells during that period.

"Even without additional leasing, if the current inventory of non-producing leases were placed into production, the scale of drilling on public lands would increase dramatically, as would the degradation of lands where drilling is wholly inappropriate," the report concluded.

For oil companies, vast holdings of federal oil and gas leases, even if undeveloped, show up in their financial records as assets that help attract investors.

"Absolutely," said Mark Burford, director of investor relations for Tom Brown Inc., a Denver-based independent oil company. Tom Brown has more than 850,000 acres of federal land under lease, but just 22 percent is listed as producing, according to BLM records.

"In our investor presentations, we talk about the very large inventory of drilling locations on our acres that are prospective, and a lot of that would still be undeveloped," Burford said. "But based on our knowledge of the producing areas and the formations, that acreage is very prospective and very likely to work out as far as becoming producing."

Tom Brown is one of a half dozen large oil companies that in recent years have exceeded the federal limit on the number of leased acres they can control in any one state. BLM officials acknowledged that they have granted repeated extensions for the companies to comply with the law, instead of exercising their legal right to cancel leases of companies in violation of the law.

Those six companies — Tom Brown, Encana Oil and Gas, Anadarko, BP Amoco, Devon Energy and Marathon Oil — together controlled 3.9 million acres of federal oil and gas leases in March, according to BLM records. Just 1.2 million acres, or 30.8 percent of the total, is actually producing oil and gas.

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