Rockies exploration and production (E&P) companies intend to work more closely with the Bureau of Land Management (BLM) to remove uncertainty surrounding oil and gas leasing activity in many areas in the region, an official with the Denver-based Western Energy Alliance (WEA) told NGI last week.

The decision to work closely with the BLM followed a report issued last week by Denver-based WEA indicating that with the exception of North Dakota, oil and gas leasing activity in the Rockies states has declined markedly since 2008. The WEA is a trade association representing more than 400 exploration and production (E&P) companies.

WEA’s Kathleen Sgamma, government and public affairs director, told NGI that BLM is simply not leasing in certain large areas, such as the Big Horn Basin in Montana, while new resource management plans are still being developed. Those plans often take years to develop, and in the meantime E&P companies are being deprived of new business opportunities and the states involved are losing hundreds of millions of dollars in revenue, she said.

“What BLM is supposed to do is manage the lands according to the resource plans that are currently active until such a time when the plan is updated,” Sgamma said. “Right now in several areas across the region they are undergoing plan updates while putting everything else on hold in those areas. They should not be putting vast areas on hold and stopping productive uses of public lands and job creation, energy development and other things because they are updating a plan.”

BLM expressly is not supposed to be holding up leasing under the Federal Land, Policy and Management Act (FLPMA), she said, noting that at least hundreds of thousands of acres “up to millions of acres” being held up. “This is not right for the American economy, and it is not the way [BLM ] is supposed to be managing the lands, according to their own statute, FLPMA,” Sgamma said.

According to Sgamma, the industry in the Rockies is still optimistic as outlined in WEA’s white paper, “Blueprint for Western Energy Prosperity,” which was issued in July (see NGI, July 13). “In that report, we have several policy recommendations, and one is for an entire overhaul of the onshore oil and gas program. We’re looking at a multi-year process of working with BLM to streamline processes from leasing to environmental analysis to permitting more efficient and increase certainty for companies.”

WEA is now putting together a plan for working with BLM over several years, Sgamma said.

Filing a lawsuit against BLM to speed things up is not an option, she said. “It is fairly difficult to sue the government to get it to do something. You can usually challenge the government once an agency has made a decision, but in this case, [BLM] is not making a decision. We represent companies that are trying to make money, create jobs and energy. They are not in the business of suing.”

WEA does not have a wealth of statistics on the number of oil and gas plays that are being held up or the money and jobs that have been lost. Sgamma acknowledged that some lack of gas drilling now is due to supply and demand and price factors, but the producers still want the lease sale for future development.

WEA has no region-wide statistics, but Sgamma quoted recent numbers from Wyoming where delays due to environmental analyses prevented 30,600 jobs from being created on an annual basis for every year BLM delays those projects. This is based on a study of six projects in Wyoming that have been delayed for more than six years now, she said. “They estimated about 1,600 new wells that have not been drilled every year over this recent period, and $157 million in revenues does not go to the state.”

The WEA found that lease parcels offered on federal lands have declined 70%, acreage by 81% and revenue by 44% over the past three federal fiscal years. There are a “few bright spots” — principally related to the Bakken formation in North Dakota and Montana, and the Niobrara in Wyoming. “North Dakota leasing, while surpassing 2008 only by 416 acres, garnered $104 million in revenue, up 112%,” WEA said. In Montana, lease acreage offered dropped 58%, but revenue was up 119%.

In Wyoming, WEA said BLM had its most profitable sale ever, generating $49 million in August. Despite this, overall 2011 revenues were down 33%. At a time in which the federal government is trying to slash deficits, the producers are urging the government to offer more lease sales on federal lands.

“The Bakken and Niobrara formation are contributing lease revenues that help to reduce government deficits today while holding the promise of future development and production,” said Sgamma. “High-value lease sales in these areas indicate industry interest and the potential for significant new government revenue.”

Sgamma said that now that BLM has worked through a new set of leasing policies, WEA is hoping the upcoming 2012 fiscal year will see a lot more acreage offered for lease. She argued that if BLM can more closely align with the E&P industry it could result in greater job creation and economic stimulus throughout the West.

Declines in leasing in recent years have meant jobs and revenue opportunities have been lost in the Rockies, according to WEA. Colorado BLM offered a “shockingly low” four parcels this year; Utah offered 17, the group said.

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