NGI The Weekly Gas Market Report / NGI All News Access

IPAA Official Calls Utah Auctions 'Troubling Trend'

The Bureau of Land Management (BLM) Utah state office's decision to put a hold on oil and natural gas lease parcels that producers won last Tuesday in a quarterly auction -- the second botched auction in the last six months -- is a "troubling trend" in the state, said an official with the Independent Petroleum Association of America (IPAA) last week.

Dan Naatz, IPAA's vice president of federal resources and political affairs, said he found it illogical that BLM moved forward with the Utah auction when it knew it wouldn't be able to hand out leases for oil and gas development until two protests were resolved. "If they knew about the protests, they shouldn't have gone forward with the sale...[This] would seem logical to me," he said.

"All of this takes time. All of this takes money" from producers, Naatz noted. "The frustration level for producers is high...There is little confidence in the agency moving forward."

The IPAA, which represents independent producers, "had hoped that they [BLM] would have a better process in place," Naatz said. The producer group is "certainly concerned," and plans to "reach out to the Interior Department on the broader issue of the need for surety." The Obama administration needs to "take action to make it simpler for our members to produce oil and natural gas," he said.

"While we appreciate the need to address all protests to proposed lease sales, the deviation from the set procedures by accepting the late protests does not promote confidence that the Obama administration is committed to an orderly and predictable lease sale process that allows development of energy resources that belong to the American people," said Jack Gerard, president of the American Petroleum Institute (API). API noted that the protests against the sale were filed at the last minute.

"This apparent policy of delaying oil and natural gas development -- which flies in the face of public sentiment that favors greater access to domestic oil and natural gas resources -- serves as a disincentive to companies [that] are willing to spend billions of dollars in America to hire American workers to produce American fuel for the American consumer," he said.

Leases have been withheld from producers in two separate Utah auctions -- one in December and one last Tuesday. The Obama administration overturned the results of the December auction, saying many of the parcels were near treasured landscapes, such as national monuments (see NGI, Feb. 9). Interior currently is mulling whether it should reissue any of the leases on 77 parcels that were auctioned in December and later withdrawn by the agency (see NGI, June 15).

And the BLM said the leases for 31 parcels, for which producers paid $1.3 million last Tuesday, would be delayed for two months or more until two protests are resolved. Megan Crandall, a spokeswoman for BLM's Utah office, told NGI that last week's lease sale had not been "suspended" but rather the results were put on hold until additional reviews could be conducted.

BLM won't conduct an environmental assessment or redo the extensive environmental impact statements because those already have been completed, she said. Instead, federal officials will review the protests and see if there are any additional issues that need to be addressed. Bidders still were required to pay for the leases they purchased.

"It's not unusual to withdraw the results or delay awarding the leases if there are protests. This is actually one of the first lease sales BLM has conducted in seven years that hadn't been heavily protested," Crandall said.

Kathleen Sgamma, director of government affairs for the Independent Petroleum Association of Mountain States, agreed that BLM's decision to delay issuing the leases was standard operating procedure when there are protests. "It's a pretty normal procedure for there to be protests. It usually takes a couple of months for BLM to clear the protests on any given lease," she said.

Asked why BLM didn't wait to resolve the protests before holding the Utah lease sale, Sgamma said there would never be a lease sale if that procedure were followed.

She noted that all of the oil and gas lease sales last year in the Intermountain West, which includes Utah, were protested. So producers have become accustomed to the protests, according to Sgamma. "As a nation, however, we should be alarmed that there are groups that protest every lease sale."

Protests were filed by two environmental groups, the Denver-based Center for Native Ecosystems and the Theodore Roosevelt Conservation Partnership (TRCP). However, the protests were filed with BLM after the official comment period had ended, said Crandall.

TRCP spokesman Joe Webster told NGI that his group had followed BLM's procedures for lease protests, which is to submit a protest at least 15 days prior to the auction. TRCP determined that additional planning was needed to ensure that "impacts to big game and sage grouse would be minimized," he said.

"The BLM originally concluded that our protest was filed late and then today [last Tuesday] realized that they made a mistake," Webster said. "It is a BLM error that is resulting in the suspended leases. They had our protest 15 days prior...and could have had this all determined on time if they would have followed standard operating procedures.

"We support responsible energy development," said Webster. "We protested these parcels because the BLM hadn't done enough to minimize impacts during the development stage. Protesting is the only mechanism we have to comment on lease sales."

In another agency development, the Western Environmental Law Center (WELC) on behalf of the Montana Wilderness Association has filed a lawsuit in federal court in Montana over a BLM management plan that would allow recreational boating, oil and natural gas development, transmission lines and pipelines and airstrips in a national monument in the north-central part of the state.

The lawsuit filed in U.S. District Court for the District of Montana alleges that BLM has violated the laws protecting the Upper Missouri River Breaks National Monument in Montana. The national monument, which was established in 2001, has remained largely intact since Lewis and Clark traveled through it in 1805, the WELC said. It includes the 149-mile Upper Missouri National Wild and Scenic River, six wilderness study areas and segments of the Lewis & Clark and Nez Perce National Historic Trails.

"The BLM's new resource management plan for the monument is supposed to protect and preserve the unique values of the areas. Instead the BLM's plan calls for the area to be managed like any other public lands with motorized access throughout the monument, motorboats along the entire 149-mile river corridor, oil and gas development, utility corridors and airstrips for planes and helicopters," said WELC attorney Matthew Bishop.

©Copyright 2009 Intelligence Press Inc. All rights reserved. The preceding news report may not be republished or redistributed, in whole or in part, in any form, without prior written consent of Intelligence Press, Inc.