It’s premature to determine the impact of the Energy Policy Act of 2005 (EPAct) on oil and gas development in the Rocky Mountain region, but experts told a Senate Energy & Natural Resources Committee hearing Tuesday they believe that at least one provision shows the promise of increasing the nation’s supply of gas and oil while also improving environmental oversight. Several panelists, however, had their doubts.
EPAct set aside $20 million/year in funding for seven interagency pilot project offices that will act as one-stop shops for permitting, monitoring and enforcement. Last year, the federal agencies that oversee land use and oil and gas development in the West signed a memorandum of understanding to implement the seven pilot project offices, which BLM Director Kathleen Clarke, and U.S. Fish and Wildlife Service Director H. Dale Hall said were being set up as “laboratories for efficiency and environmental protection.”
“The results of our analysis from last fall indicate that the benefits from the pilot program could be significant for the nation given the modest investment,” said Jeffrey Eppink, senior vice president for Advanced Resources International (ARI), which was asked by the secretary of the Interior Department last year to conduct an analysis of the impacts of processing outstanding applications for drilling permits (APD) from the new pilot offices.
At the time of ARI’s analysis at the end of last year, the number of APDs in process in the pilot offices stood at 3,100. But after the impact of Hurricanes Katrina and Rita on Gulf of Mexico gas production and gas prices, the number of APDs in process jumped nearly 50% to 4,500 by May, said Eppink.
“The major effect of the assumed activities [at the pilot offices] is to accelerate production, moving it earlier in time to capture most benefits within 15 years,” he said. ARI’s analysis shows that production could rise by more than 1 Bcfe/year, proved reserves could jump by 11,800 Bcfe over five years, the federal share of royalties could rise by $2.1 billion, 14,000 jobs per year could be added to the economy and there would be a net economic improvement of $20.5 billion, just from the interagency work being done at the seven pilot offices.
“The costs of the initiatives are very low, less than 1 cent/Mcf of added reserves, which is negligible compared to current natural gas prices of about $6/Mcf,” said Eppink. And without increased APD processing, it is unlikely that the increased backlog would be worked off as new APDs are generated, he said.
“Although the results I have presented are robust, implementation of the pilot project will likely present challenges, including issues of hiring of APD-knowledgeable [Bureau of Land Management] BLM staff, rig availability, the politics of land access and possible pipeline constraints,” he added.
Regarding the hiring of staff, Clarke and Hall told the panel that about 99 staff positions so far out of 105 positions planned in the new pilot project offices have been filled with engineers, natural resource specialists and other experts.
They also said the offices, which are located in Miles City, MT, Buffalo, WY, Rawlins, WY, Vernal, UT, Glenwood Springs, CO, Farmington, NM, and Carlsbad, NM, already have made some significant “innovations.” For example, the Carlsbad, NM, office initiated a “pilot block survey” to identify cultural resources in the area, advanced drilling technologies and environmental best management practices. Other achievements were cited regarding work done on the Jonah Field and Pinedale areas of Wyoming.
“The pilot project will further enhance our ability to respond to the demand for oil and natural gas while meeting the other goals of our multiple-use mandate,” said Clarke and Hill in their joint testimony. “In the 10 months that have elapsed since the enactment of the EPAct, we have made substantial progress in our ongoing efforts to respond to this demand.”
Duane Zavadil, vice president of government and regulatory affairs for Bill Barrett Corp., said gas producers believe the most important step the pilot program will make will be examining the permitting process to see where efficiency gains are possible. “A comprehensive look at the current process to identify where the bottlenecks occur will help this committee determine potential legislative action and oversight opportunities,” Zavadil told the committee. “Without examining the permitting process and making changes to improve efficiency, BLM will likely continue to fall behind in permit approvals even as the agency’s role will grow more important in meeting the nation’s energy needs.”
However, Zavadil and Mary Flanderka of the Wyoming governor’s office don’t see the pilot projects as a cure-all. Both cited shortcomings in BLM’s resource management planning (RPM). “Three of the four BLM time-sensitive [RPM] projects identified in a June 2004 priority list of Wyoming BLM land use planning projects are yet to be finalized — two years after their deadlines,” said Flanderka.
“The completion of RPMs is important for reasons other than just permitting; there is a need to address thresholds of protection for other important resources,” she said, adding that the current RPMs also are outdated. “At the time of printing the current RPMs, the current level of development had never been anticipated and new technology and science have since created additional opportunities for development.”
Flanderka said that “throwing money and personnel at a problem” such as creating these new pilot project offices, “does not necessarily make permitting go faster.” She cited high turnover rates at BLM’s existing field offices, and a need for more focus on improving efficiencies. Furthermore, even as new personnel and funding are thrown at these pilot project offices, the demand for drilling permits is increasing, she noted. The Wyoming BLM processed 2,900 APDs in 2005 and is expecting 4,500-5,000 APDs in 2006.
Meanwhile, EPAct directed “very little attention” to other important areas, such as the development of best management practices and the need for enforcement, said Flanderka. “Moving ahead quickly on any project is dangerous if there is no monitoring to make sure that the project is being done correctly. BLM energy development in Wyoming is headed in exactly this direction due to a focus on permits above all else and a lack of funding,” she said. “Without assurance that development is proceeding appropriately, additional permits could be processed with faulty information, leading to serious environmental problems — which could in turn lead to court injunctions.”
Tom Reed of Trout Unlimited painted a bleak picture of the impact of the drilling surge on the environment in the West. “We only have one chance to develop our lands for gas and oil responsibly and all indications show that expedited leasing, rushed approvals for applications to drill and a lack of resources for meaningful studies, monitoring and enforcement are spoiling that chance,” he told the committee.
Reed warned that monitoring is severely lacking in Wyoming’s Powder River Basin where 60,000 wells are planned. He said that so far BLM also has not funded or initiated a National Academy of Sciences study required by EPAct to examine the impact of Powder River drilling on water quality. Reed urged Congress to press BLM to get the study started.
“The fact is that after 11 months [following implementation of EPAct] it is difficult to determine the effects on fish, wildlife and water resources from the acceleration of development.”
Regardless of the government “streamlining” undertaken by EPAct, recent studies show that increased oil and gas drilling over the last several years has been having a negative impact on wildlife. Reed cited preliminary results of an ongoing mule deer study in the Upper Green River Basin of Wyoming that show that mule deer in the area have declined 46% since 2002.
“A complete and sound understanding, through research and continued monitoring of the impacts to our fish, wildlife, lands, waters and air is only prudent before jumping head-first into lease obligations and expedited development,” he said.
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