WASHINGTON, DC, Nov. 2 -- The Bureau of Land Management has experienced a sharp increase in demand for Rocky Mountain natural gas drilling permits, and the Interior Department agency expects it to continue, its director told a US Senate subcommittee.
"BLM now expects to receive 9,200 new permit applications in [fiscal] 2006. In contrast, last winter when BLM prepared the 2006 President's Budget Request, we anticipated receiving only 6,700 new permits," Kathleen Clarke told the Senate Interior, Environment, and Related Agencies Appropriations Subcommittee on Oct. 25.
The agency estimates it will receive a further 10,000 drilling permit applications in fiscal 2007, she continued. "This demand is being driven by natural gas prices, which have roughly doubled in the last 12 months," she said.
Clarke said an additional $2 million in discretionary funding from Congress will help the agency respond to increasing drilling permit demand during fiscal 2006.
"BLM has also made adjustments within the existing budget to address demand," she said. "For example, in 2005, BLM identified and reprogrammed an additional $2.5 million to the oil and gas program to respond to the demand for additional [drilling permit applications]."
The Energy Policy Act of 2005, which Congress passed and President Bush signed into law this past summer, also provides BLM with important tools to handle drilling permit applications in the Rockies, according to Clarke.
The day she testified, the Interior and Agriculture Departments, Environmental Protection Agency, and US Army Corps of Engineers signed a memorandum of understanding to establish pilot programs in seven BLM offices to streamline permit application processing.
"The BLM is working with other federal agencies and with state partners, to develop the most effective and efficient permitting process for each of the seven pilot offices, where currently 70% of the applications are processed," said Clarke.
She said the new law established the BLM Permit Processing Improvement Fund and provided that the federal share of all mineral rental revenue would be deposited there to support coordination and processing of oil and gas use authorizations in the pilot project offices in Rawlins and Buffalo, Wyo.; Miles City, Mont.; Farmington and Carlsbad, NM; Vernal, Utah; and the Glenwood Springs-Grand Junction office in Colorado.
A projected $19 million in fiscal 2006 rental revenue will help these offices do a better job of keeping up with drilling permit application requests, support permit processing arrangements with other federal agencies and with states, and help meet the resulting higher inspection and monitoring workload, according to Clarke.
"BLM managers, along with our partner agencies, are also engaged in intensive planning and recruitment efforts, which will ensure staff and support are in place to meet the growing demand for [drilling permit applications] at these offices," she said.
The agency recently issued a nationwide job opening notice to recruit petroleum engineering technicians and natural resources specialists for these seven pilot offices, Clarke added.
The agency expects to receive 2,500 new requests for drilling permit applications in fiscal 2006 in other BLM offices, 29% more than it received during fiscal 2004, she told the subcommittee.
Language in the new energy law prevents implementation of proposed drilling permit application cost recovery efforts until fiscal 2015, said Clarke, so she has asked her staff to identify opportunities to direct more base funding to these offices.
"I also anticipate the need to propose a reprogramming of some of BLM's base funding. My staff is currently evaluating allocations to the state offices and will have a recommendation regarding this potential reprogramming to me soon," she said.
Additional funding and management will allow the BLM not only to respond to additional drilling permit requests but also "to substantially reduce" by the end of fiscal 2006 the inventory of applications pending for more than 60 days to 1,226, a level that would be half the number outstanding at the end of fiscal 2005, Clarke said.
Reducing that backlog is vital, a representative of area producers told the subcommittee in separate testimony. "As of Sept. 17, 2005, there were more than 3,700 permits pending at BLM in the Intermountain West," said Logan Magruder, vice-president for membership at the Independent Petroleum Association of Mountain States in Denver.
Magruder, who is also Berry Petroleum Co.'s senior vice-president for the Rocky Mountains and Midcontinent, said approximately 70% of these permits "have been pending for more than 35 days, even though they're considered complete by the agency."
He said that while the permitting process, "including unnecessary and duplicative predrilling studies and unnecessary permit restrictions," is the backlog's main cause, "the resource agencies are stretched too thin and need more people with proper training. That means adequately funding the agency."
Magruder, who also testified on behalf of six other oil and gas associations, said an analysis performed for the Domestic Petroleum Council shows that adequately funding BLM operations to process backlogged drilling permit applications could lead to as much as 105 bcf of additional gas supplies in the first year alone and higher production increases in later years.
"That's enough gas to supply 1.25 million additional households in the first year alone," he indicated.
Magruder said the energy pilot program authorized by the Energy Policy Act of 2005 will benefit consumers "if BLM takes this opportunity to comprehensively review the process for approving permits."
He recommended that BLM examine current production levels on the federal land under its jurisdiction, compare it with projected future energy needs, and determine how much more gas will be needed to satisfy this demand.
"After the agencies understand their role, then they can begin planning for that level of natural gas production in terms of process and manpower needed to reach this goal. The result should be a program ready to fulfill the permitting needs of the agency," Magruder said.
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