The Bureau of Land Management's (BLM) permitting and leasing policies for oil and natural gas operators came under microscopic review Tuesday by lawmakers on the House Natural Resources subcommittee.
Under intense questioning, mostly by western lawmakers, BLM Director Robert Abbey said his agency will stand behind existing oil and gas leases that have been issued on federal lands to private companies "unless there's a court ruling [ordering it do otherwise] or a decision [is issued by another surface managing agency] that would overturn those leases."
The BLM director was asked by Rep. Paul Broun (R-GA) whether his agency intended to "protect the private property rights of those who hold federal oil and gas leases that have been signed and issued."
"We routinely defend those actions in court," Abbey replied during a hearing of the Subcommittee on National Parks, Forest and Public Lands on the BLM's proposed budget for fiscal year (FY) 2012.
Abbey acknowledged that "there are occasions when the [U.S.] Forest Service or other surface managing agencies may determine that the leasing of those [public] lands [is] not appropriate." The Forest Service regulates oil and gas operations on National Forest System lands.
Since the BLM leases the federal oil and gas resources underlying the national forests, shouldn't it notify the Forest Service that the Department of Interior will not cancel those federal leases?, Abbey was asked.
"I would not notify the Forest Service of that fact. I would defer to the Forest Service to make that decision," he told the subcommittee.
Asked if BLM had any plans to cancel oil and gas leases that have been issued, "I'm not aware of any at this point in time," Abbey said.
"Director Abbey, I am extremely concerned about the policies and actions of the Bureau of Land Management that actively discourage investment in drilling for oil and gas on federal lands," said Rep. Mike Coffman (R-CO). As a member of the Colorado delegation, he noted that he was particularly interested in the "timely development" of the Roan Plateau in the western part of the state.
The BLM identified certain areas of the Roan Plateau that were appropriate for leasing when it carried out its land use planning, Abbey said. He noted that the agency's decision is being litigated, and "we have been unsuccessful in reaching a settlement" with parties challenging the decision.
Given that the agency's decision on the Roan Plateau was a final record of decision, Abbey conceded that it could move forward with leasing "if we chose to do so."
But "I don't think it serves anyone well for us to go forward, issue leases and then have a court of law come back and say those leases were issued illegally," he told the House panel.
Coffman also assailed the BLM's wild lands order, which he said provides the agency with the "unilateral ability to strip away the property rights and make any capital that has been invested worthless." Under the order, the BLM can administratively designate appropriate areas with wilderness characteristics under its jurisdiction as "wild lands" and manage them to protect their wilderness values. The "wild lands" would differ from the already established "wilderness areas" in that they would be designated by an administrative fiat and could be changed administratively (see Daily GPI, Dec. 27, 2010).
"Why would an oil and gas operator invest in federal lands when there is no longer [any] certainty with respect to the leases the company has owned for years?" Coffman asked.
"There is quite a bit of incentive for the oil and gas industry to continue to pursue leases on public lands. Many of the companies are making all-time profits as a result of leasing [and] developing public lands," Abbey said. He noted that the wild lands policy does not affect existing leases and that no public lands have been designated as wild lands as a result of the order.
In addition, he said the BLM has implemented oil and gas leasing reforms to provide "greater certainty" to the industry that the lands being offered for leasing are "likely to be developed in a more timely manner."
When it comes to oil and gas permitting, there are two schools of thought: one is why isn't the federal government issuing more permits to producers; and the second is there are plenty of permits being issued; the problem is they're not being used by producers, said Rep. John Sarbanes (D-MD).
Abbey reported that the BLM has issued leases for 41.2 million acres of public lands, but only 12.2 million acres are under production. As part of its FY 2012 budget, the BLM has proposed a $4/acre diligence fee on all new leases to encourage the industry to develop leases in a "timely manner."
Sarbanes asked Abbey why less than one-third of the acreage was being developed. "From our perspective, a lot is driven by the market. If the market's low, you're not going to see a lot of activities on those areas that have been leased. If the market as we see it today [is] very high, then you're going to start seeing actions relative to applications for permits to drill being filed with the Bureau of Land Management."
The protests involving permitting should not be directed "towards the government, saying why don't you issue more permits; they should be turning it towards the industry, saying why won't you produce the permits you already have," Sarbanes said.
But under questioning by Rep. Scott Tipton (R-CO) Abbey admitted that the agency has a backlog of applications for permits, and that leases were almost useless to producers without permits.
"There's a big difference between leases and permitting. We aren't able to produce unless a permit is actually issued. Is that correct?" Tipton asked Abbey.
"That is true," he responded.
BLM's budget for FY 2012 proposes an increase of $13 million for processing of oil and gas applications for permits to drill, according to Abbey. It also proposes to shift the cost of oil and gas inspections from discretionary appropriations to industry fees for an expected savings of $38 million. In addition, it calls for a hike in the onshore royalty rate.
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