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BLM's Onshore Overhaul Likely to Stall Energy Development

Natural gas and oil drilling shouldn't be "anywhere and everywhere," Interior Secretary Ken Salazar said last Wednesday as he launched an ambitious reform of the Bureau of Land Management (BLM) to improve onshore land, water and habitat protections and to reduce a sharp increase in protests and litigation. However, the changes, officials admitted, are likely to stall new onshore development plans across the country.

Salazar, who helmed a conference call with reporters to discuss the reform plan, reiterated his support for all kinds of energy development, including gas and oil production. He said the new policies were evidence, however, that producers' influence on federal leasing decisions was not as strong as it had been in the previous administration.

"The difference is that under the prior administration, the oil and gas industry were essentially the kings of the world," Salazar said. "Whatever they wanted to happen essentially happened. This department was essentially a handmaiden of the oil and gas industry...We have brought that to an end."

The Bush "administration's 'anywhere, anyhow' policy on oil and gas development ran afoul of communities, carved up the landscape and fueled costly conflicts that created uncertainty for investors and industry," Salazar said. "We need a fresh look -- from inside the federal government and from outside -- at how we can better manage Americans' energy resources..."

The reform plan came the same week that BLM announced it has scheduled 31 renewable energy projects (14 solar, seven wind, three geothermal and seven electric transmission) for fast-track environmental and public review (see related story).

Of the onshore overhaul, Salazar said the "new guidance BLM is issuing for field managers will help bring clarity, consistency and public engagement to the onshore oil and gas leasing process while balancing the many resource values that the Bureau of Land Management is entrusted with protecting on behalf of the American people. In addition, with the help of our new Energy Reform Team, we will improve the department's internal operations to better manage publicly owned energy resources and the revenues they produce."

Many of the new reforms will follow recommendations issued last year by an interdisciplinary review team that studied, among other things, the controversial December 2008 BLM lease sale in Utah (see NGI, Oct. 12, 2009; Dec. 22, 2008).

Quarterly lease sales for BLM-managed lands still would be conducted by the state offices, but processing times would be extended to accommodate the review of lease sale parcels, BLM Director Bob Abbey told reporters. Under the reformed gas and oil drilling policy, BLM would provide:

Also of concern to Interior officials is the sharp rise in protests and litigation it has to deal with over leases, said Salazar.

"In 1998 a little over 1% of BLM oil and gas leases were protested," he said. "Ten years later, in 2008, 40% of BLM's leases were protested. The court battles over oil and gas leases are not only costing us millions, it's tieing up resources...Almost nobody is happy with the status quo."

Although processing and reviewing lease sales would take time on the front end, Abbey said the increased opportunity for public participation and a more thorough environmental review process and documentation would help reduce the number of protests filed and enhance BLM's ability to resolve protests prior to lease sales.

"The new approach can help restore certainty and predictability to a system currently burdened by constant legal challenges and protests," said Abbey. "It will also support the BLM's multiple-use mission, which requires management of the public lands to provide opportunities for activities such as recreation, conservation, and energy development -- both conventional and renewable."

BLM also plans to issue guidance on the use of categorical exclusions, or CXs, established by the Energy Policy Act of 2005, which allow BLM to approve some energy development activities based on existing environmental or planning analysis.

Under the new policy, and in accordance with White House Council on Environmental Quality guidelines, BLM would not use these CXs in cases involving "extraordinary circumstances," such as impacts to protected species, historic or cultural resources, or human health and safety.

Salazar on Wednesday also issued a Secretarial Order to establish the Energy Reform Team within the Office of the Assistant Secretary for Land and Minerals Management (LMM) that would identify and oversee implementation of energy reforms.

"The creation of the new team focuses on our important stewardship responsibility in the management of the nation's energy resources," said LMM Assistant Secretary Wilma Lewis. "Through its work, the team will promote efficiency and effectiveness in the development of renewable and conventional energy resources, so that we can be properly accountable to the American public."

The new oil and gas leasing guidance and CX guidance are to be implemented once BLM has completed final internal reviews, Salazar said.

Sen. Jeff Bingaman (D-NM), who chairs the Energy and Natural Resources Committee, said he was "particularly pleased" with Interior's plan to address the "serious problems" in the implementation of Section 390 of the Energy Policy Act of 2005, which was intended to streamline the process of environmental review for certain kinds of energy projects on public lands.

"The Government Accountability Office, which reviewed this matter at my request, found last September that the Department of the Interior's policy on Section 390 was confused and inconsistent and its practice frequently violated the law," Bingaman said. By reviewing the policy, Interior would "return to practices that are consistent with Section 390 as Congress actually passed it and that will lead to the best outcome for energy development and the environment."

House Natural Resources Committee Chairman Nick J. Rahall (D-WJ) echoed Bingaman's enthusiasm for the changes and said Interior's "common sense proposals...are a step in the right direction and move us closer to balancing the scale after a decade in which oil and gas companies had free rein to run roughshod on America's public lands."

Industry groups -- and at least one House Democrat -- blasted the plans.

"In what has become increasingly familiar double-talk from this administration, Interior Secretary Salazar today again spoke of the importance of domestic oil and natural gas, while making it more difficult to produce American oil and gas, put more Americans back to work and help restore our nation's economy," said American Petroleum Institute President Jack Gerard. "Under the guise of offering certainty for investors, Interior Secretary Salazar has taken steps to further delay and limit American energy resources for all Americans."

The Independent Petroleum Association of America, the Independent Petroleum Association of Mountain States and other groups also alleged that the plans would stall development of energy resources.

"Adding layers of additional and unnecessary bureaucratic red tape to the federal oil and gas leasing process will result in less homegrown energy for American families, seniors and small businesses," said Consumer Energy Alliance President David Holt. "At the same time, erecting these needless roadblocks for safely producing American energy will not only lead to more expensive and less stable prices for struggling consumers, but it will also deepen our nation's dependence on foreign and often unfriendly regions of the world to meet our growing demands and to keep our economy moving."

Institute of Energy Research President Thomas J. Pyle claimed that the Obama administration had "done more to ensure producers do less" than any other administration in history.

"Over the course of a single year we've seen the Interior secretary block common sense exploration through a number of creative means -- from executing a pocket veto on a sensible plan to produce offshore to outright rescinding existing lease contracts in Utah," said Pyle. "But while the means and methods have changed, the loser continues to be the American taxpayer. In 2008 the Interior Department collected 10 times the amount of revenue from lease sales than it did in 2009. Thanks to today's announcement, that number has nowhere to go but down in 2010."

Oklahoma Democrat Rep. Dan Boren called the reform plans "job killing," and said he was offended by Salazar's "kings of the world" rhetoric that was used to describe natural gas and oil producers. Boren said the comments were "beyond the pale when thousands of Oklahomans and people from other energy-producing states are losing their jobs due to the recession. It's the type of rhetoric that only serves to add insult to injury -- like he's just trying to pile-on their misery."

The energy industry, said Boren, "is overwhelmingly made up of independent producers that drill 90% of the wells in the U.S. They are the mom and pop outfits that run a handful of wells, the young entrepreneur seeking to expand his operation, or the regional company that employs hundreds or even thousands of people in communities across the nation.

"And quite frankly, they consider this brand of rancor as a slap in the face and a direct attack on their pride in having helped build this country's economy and powering its future," Boren said. "When did this [Obama] administration completely divorce itself of the direct correlation between the 'industry' itself and the millions of American jobs that it provides? These are small businesses. These are sorely needed, well-paying American jobs."

Some of Interior's policy reforms would "circumvent law" approved under the Energy Policy Act of 2005, which passed Congress with the support of both Salazar and then-Sen. Obama, Boren noted.

"Natural gas is without question the cleanest, most affordable American fuel we have," Boren's letter stated. "Thanks to new technologies, we can produce it in abundance if provided the access, but the benefits reach far beyond the tangible commodity. Its greatest contribution undoubtedly comes in the form of jobs -- high-paying, stable, American jobs. Currently, millions of Americans are employed by the oil and gas industry, earning, on average, $45 an hour -- over $93,000 a year -- or double the national average estimate of jobs created by so-called 'green investment.'

"Moreover, the revenue you are impeding from oil and gas leasing is the largest contributor to the national treasury after income tax. To stifle the growth of this industry in the midst of record-setting national deficit and unemployment levels is not only outrageous, but irresponsible."

Boren asked Salazar to "reconsider these policy initiatives and reevaluate the harmful rhetoric you continue to use when discussing our nation's energy industry and the millions of hard-working Americans it employs. Instead, respect the legacy of those who laid the foundation of our nation's prosperity and work with the American energy industry on policies that will complement our national objectives, while preserving these critical jobs."

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