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Shale Production Putting Federal Lands Output in the Shade

U.S. natural gas production from federal lands has declined substantially in recent years as producers have pursued shale gas plays, which typically are on non-federal lands. Meanwhile, the federal lands share of the nation's crude oil production has also fallen as producers are drawn to more favorable geology and leasing practices on non-federal lands.

Those are the findings of a new report from the Congressional Research Service (CRS) titled "U.S. Crude Oil and Natural Gas Production in Federal and Non-Federal Areas."

Overall U.S. natural gas production has climbed by about 4 Tcf (19%) since fiscal 2009, while production from federal lands (onshore and offshore) fell by about 28%, according to CRS. "Natural gas production on non-federal lands grew by 33% over the same time period," CRS said. "The big shale plays are primarily on non-federal lands and are attracting a significant portion of investment for natural gas development."

When it comes to production of crude oil, output from federal lands has fluctuated during the last five fiscal years, CRS said, but output has "increased dramatically" on non-federal lands.

"Non-federal crude oil production has been rapidly increasing in the past few years, partly due to favorable geology and the relative ease of leasing from private parties, rising by 2.1 million b/d between fiscal 2009-2013, causing the federal share of total U.S. crude oil production to fall by nearly 11%," CRS said.

According to the U.S. Department of the Interior, crude oil production on federal lands was consistently less than 20% of total U.S. production until the late 1990s, CRS said. "Annual production then surged on federal lands (primarily offshore), rising to over 30% in the early 2000s and reaching a high point of about 36% in fiscal 2010.

"As a result of recent production increases on non-federal lands, the question is raised whether non-federal lands might regain a more dominant position of roughly 80-85% of total U.S. crude oil production."

Still, there are 5.3 billion bbl of proved oil reserves on federal onshore acreage and another 5.6 billion bbl of proved reserves offshore, nearly all of that in the Gulf of Mexico, CRS said. Combined onshore and offshore federal crude reserves equal about 43% of all U.S. crude reserves, CRS said.

"Crude oil production on federal lands, particularly offshore, is likely to continue to make a significant contribution to the U.S. energy supply picture and could remain consistently higher than previous decades, but it could still fall as a percent of total U.S. production if production on non-federal lands continues to rise at a faster rate," CRS said.

"But having more lands accessible may not translate into higher levels of production on federal lands as industry seeks out the most promising prospects and higher returns on more accessible non-federal lands."

It's not so much that the federal lands production glass is half-empty, but rather that the non-federal lands glass is overflowing with production from shale plays, which are generally not on federal lands.

That sentiment is consistent with remarks made last summer in Houston by the Energy Information Administration's Deputy Administrator Howard Gruenspecht.

"One thing to note is there's not that much overlap between shale plays and federal lands..." he said. "Federal lands are concentrated in the West; shale plays are not concentrated in the West…

“There's very little federal land in the Eagle Ford [Shale of South Texas]. There's some federal land in some of the other plays. There's some federal land, I think, in the Haynesville. There's some federal land in the Marcellus, but it's, all in all, very little overlap [see Shale Daily, Aug. 16, 2013]."

The U.S. House Energy and Commerce Committee had a decidedly partisan take on the non-partisan CRS report. "...America's energy boom is occurring in spite of the president's policies, not because of them," it said, adding that the CRS data reflects "the increasingly hostile regulatory environment energy producers are confronted with to drill on federal lands."

Energy and Power Subcommittee Vice Chairman Steve Scalise (R-LA) said, "The shale gas revolution on non-federal lands has transformed our economy and propelled America into the position of a global energy superpower. But we cannot become complacent with this progress. America can secure energy independence by developing all of our energy resources on both federal and non-federal lands."

The conservation-oriented Western Values Project, which espouses moderation when it comes to energy development and claims to be a foil to energy "industry lobbyists and their allies in government," has a "lands and energy dashboard" on its website where it applies its own analysis to recent data from the Bureau of Land Management (BLM).

"Whether or not it makes sense to drill an oil and gas well depends on two primary factors: economics and geology," Western Values says on its website.

"...[A]t the end of the day, oil and gas companies are simply following market conditions and geologic formations...If oil and gas companies can make money, then they are going to drill; if not, they won't. This is the most likely explanation for why drilling permits are declining on the public lands -- because companies are focusing their capital in more profitable shale plays that lie beneath state and private lands."

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