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BLM Says Unused Oil, NatGas Permits to Drill on Federal Lands at Record High

The Bureau of Land Management approved 4,228 permits last year to drill for oil and natural gas, 10% more year/year, bringing the total number of approved -- but unused -- permits to a record 7,500. Federal officials acknowledged that low commodity prices negatively impacted drilling activity.

The Interior agency on Monday issued fiscal year 2015 (FY2015) statistics for permitting, leasing and drilling activity on federal and tribal lands where permits are required. BLM said it issued 3,508 federal permits and 720 tribal permits last year. Including approved permits already issued that do not require further review or approval, operators now hold an estimated 6,100 unused federal land permits and 1,400 for tribal lands.

"As in prior years, the number of drilling permits that were processed far exceeded the number of wells that were actually drilled," BLM said. "In FY2015, industry drilled 1,620 wells on federal lands, which is less than half the number of drilling permits that the BLM approved during the period.  In total, the oil and gas industry now holds nearly four years' worth of ready-to-use permits, when measured at current drilling rates."

On lands where BLM permits are required, production increased 10% from FY2014 and was 108% higher than in 2008, BLM estimated. "This compares to an 88% increase in oil production nationally over the same period," based on data from the Office of Natural Resources Revenue and the Energy Information Administration.

Production from federal and tribal onshore leases accounted for 11% of the produced U.S. natural gas and 7% of the produced oil BLM said.

Since President Obama took office, BLM has instituted "common sense reforms that promote responsible oil and gas development while protecting places that are too special to develop," Director Neil Kornze said. "The BLM has done this while providing significant opportunities to develop energy resources in a responsible way through our leasing, permitting, and inspection activities."

During FY2015, BLM offered more than four million acres at 23 lease sale auctions but "industry bid on just 15% of the acres offered." In total, 810,000 acres were leased, both competitively and noncompetitively.

At the end of FY2015, 32.1 million acres of public land were under lease, an area the size of Alabama, but only 12.8 million acres were producing, an increase of 70,000 acres from FY2014.

"This activity came from 23,770 producing oil and gas leases and approximately 100,000 wells both increases from the previous year," BLM said.

Officials acknowledged that "broad market trends," i.e. a significant decline in oil and gas prices from 2014 to 2015, impacted drilling activity. The New York Mercantile Exchange during FY2015 saw its average natural gas price fall 28% while the price of oil slumped 43%.

Price declines also contributed to changes in activities on BLM-managed lands. The number of total acres leased (both competitively and noncompetitively) declined to 810,000 from 1.2 million in FY2014.

"Also, as a result of increased public interest, the number of lease sale parcels protested increased in 2015 -- from 321 to 630 -- after five years of declines, but still well below the high of 1,475 parcels protested in 2009," officials said.

"At the same time, we are working to modernize the program through online permitting, more rigorous bonding assessments and smarter, more effective regulations," Kornze said. For example, BLM has ongoing cradle-to-grave management responsibilities for the nearly 100,000 wells it oversees. And for a second year in a row, it completed 100% of its "high-priority production inspections, despite not having a dedicated funding for this critical workload."

To address funding, BLM's budget request to Congress repeated a call to grant it authority to charge "modest fees to fulfill its important inspection and enforcement responsibilities. A similar authority already exists for ensuring effective offshore oil and gas inspections."

The onshore oil and gas program spent $138 million in appropriated funds during FY2015, while generating more than $2.1 billion in royalties, $30 million in rental payments and $112 million in bonus bids. The funds generated are split between the U.S. Treasury and the states where the development occurred.

Work also continues to modernize the oil and gas program.

"These efforts have taken the form of proposed and final regulations to update rules that are more than 30 years old," officials noted. Progress also was in landscape-scale planning for oil and gas development with the completion of six master leasing plans (MLP) during FY2015 in Wyoming and Colorado, and a draft MLP for Moab, UT. The MLPs are designed to increase transparency, public involvement and address resource conflicts.

In addition, BLM also is preparing to launch an automated online permitting system with a pilot lease sale scheduled later this year.

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