Independents tell US House subcommittee about federal lease delays

Representatives of the oil and gas industry described federal leasing delays, which they consider unnecessary, on onshore public lands during an Aug. 2 US House Energy and Commerce subcommittee hearing.

Policies enacted after US President Barack Obama took office have made it harder for producers to operate on federal lands, said Kathleen Sgamma, government affairs director for the Western Energy Alliance of Denver, a regional association of independents.

“Producers struggle to navigate additional bureaucratic barriers on federal lands, while many avoid federal lands at all costs because it’s just too difficult to realize any return on investment within a reasonable time frame,” Sgamma said.

Federal officials suggested market forces could play as big a role as policies in keeping US onshore oil and gas production on public lands from growing as fast as production on private and state acreage.

But Sgamma said policy changes made during 2010 added leasing analysis layers to an already complex system. Consequently, the US Bureau of Land Management offered 81% less acreage in fiscal 2011 than in fiscal 2008, she said in written testimony prepared for the hearing.

Delay examples given

Stewart Petroleum of Engelwood, Colo., spent nearly 4 years trying to get a nine-well project in eastern Utah approved. Eventually, Steward Petroleum moved its operations to private land in Kansas, Sgamma said.

She also cited other examples of what she called burdensome federal processes and delays created by environmental groups.

Ewing Exploration of Sugarland, Tex., started an oil exploration project in the Wyoming’s Bighorn basin in 2005.

“Initial exploratory work determined that adjacent federal acreage was necessary to fully develop the resource,” Sgamma said. “Continued delays by BLM in bringing leases to auction while it conducts additional analysis in the area have isolated Ewing’s initial $3.5 million investment and prevented domestic oil resources from being developed.”

In another example, Sgamma said Impact Energy Resources LLC of Denver lost Utah tracts awarded during a November 2008 BLM lease sale because US Interior Secretary Ken Salazar declared the results invalid in early 2009.

Impact Energy, a small Denver upstream independent, learned the US Forest Service wanted to withdraw leases in Wyoming that the company acquired in 2006.

WEA persuaded USFS to revoke that decision, but “bureaucratic inertia means that those leases continue to languish without production,” Sgamma said. “This small business has suffered over $500,000 in legal fees and lost business because of these ill-advised decisions.”

WillSource’s experience

Reed F. Williams, cofounder and president of WillSource Enterprise LLC in Denver, told the subcommittee that associates acquired seven leases from BLM in the White River National Forest in 1996.

“Over the years, WillSource and its private investors have invested approximately $10 million” in the Divide Creek Offset project, he said in his written testimony.

Williams said an environmental impact statement existed, but the USFS required WillSource to complete a redundant environmental assessment (EA) that took nearly 2 years to complete.

Two wells subsequently were drilled. WillSource and the USFS agreed it would be in the forest’s best interest if WillSource waited to hook up the two wells until a third party’s planned pipeline was constructed.

WillSource agreed to wait for a third-party pipeline instead of building a duplicate line. After waiting 5 years, the pipeline and processing facility are built. But the USFS now wants WillSource to get another EA, Williams said.

When the USFS asked WillSource to move a well pad to avoid steep drainage issues, WillSource worked with forest rangers and BLM staff members to pick another site, Williams said.

Then, WillSource was informed of new EA requirements including new forest road design and maintenance rules, and the USFS permit for a road to reach the site was withdrawn until the new EA is completed, Williams said.

USFS-related issues prevented WillSource from fulfilling BLM’s development obligations, Williams said. Environmental groups are asking BLM to revoke several WillSource leases because development times need to be extended, he said.

“If federal procedures actually make it impossible for WillSource to fulfill the various requirements of the different federal entities, and WillSource loses its investment in this public lands project because of it, this case exemplifies why oil and gas activity on federal lands is decreasing,” he said.

EIA: Many factors involved

Alaska and North Dakota regulators told the subcommittee that states are moving quickly to reform and improve their operations. They urged the federal government to do the same.

Leasing and production policies on federal and Indian tribal lands are only one of many factors, US Energy Information Administration Administrator Adam Sieminski told the subcommittee.

Increased gas production from shale, found largely outside federal lands, has contributed to lower gas prices and lessened the relative attractiveness of conventional gas resources—including those on federal and Indian lands, Sieminski said in written testimony.

Michael D. Nedd, BLM assistant director for minerals and realty management, said that, unlike private landowners, the US Department of the Interior agency must manage its holdings for multiple uses. It also must meet requirements under the National Environmental Policy Act and other federal statutes.

Scale is another factor, he continued. “On public lands in the western United States, industry may propose one well or a large-scale development which may lead to thousands of wells,” Nedd said in his written testimony. “If BLM approves a proposed large-scale development, marked increases in production may occur in that area.”

Mary Wagner, USFS associate chief, said that the US Department of Agriculture agency acreage hosts nearly 20,000 wells in 19 states, nearly 75% are on split estates with privately held subsurface minerals, primarily in the eastern US.

Most of those wells produce low volumes, are typically 2,000-3,000 ft deep, and occupy less than 1 acre of surface, she told the subcommittee.

National forests in the East also have significant shale gas potential, she added.

Most current oil and gas production is in the West, primarily in the Bakken formation on the Dakota Prairie National Grassland in North Dakota and the San Juan Basin of northwestern New Mexico in the Carson National Forest, Wagner said.

Contact Nick Snow at

Related Articles

Shell cuts $15 billion in spending for 2015-17

01/30/2015 Royal Dutch Shell PLC has curtailed more than $15 billion in potential spending over the next 3 years, but is not “not overreacting to current low ...

Victoria extends drilling, fracing ban

01/30/2015 The new Victorian Labor government of premier Daniel Andrews has extended the coal seam gas (CSG) exploration and hydraulic fracturing ban in the s...

Chevron’s $35 billion capital budget down 13% from last year

01/30/2015 Chevron Corp. will allocate $35 billion in its capital and exploratory investment program for 2015, including $4 billion of planned expenditures by...

US Senate passes bill approving Keystone XL pipeline project

01/30/2015 The US Senate has passed a bill approving construction of the proposed Keystone XL crude oil pipeline by a 62-36 vote after 3 weeks of debate. Nine...

Oxy cuts capital budget by a third

01/30/2015 In the midst of falling oil prices, Occidental Petroleum Corp., Houston, expects to reduce its total capital spending for 2015 to $5.8 billion from...

MARKET WATCH: NYMEX natural gas prices drop after storage report

01/30/2015 US natural gas closed at its lowest price in more than 2 years on the New York market Jan. 29 following the government’s weekly gas storage report,...

Pennsylvania governor reinstates state forest drilling moratorium

01/29/2015 Pennsylvania Gov. Tom Wolf (D) signed an executive order fully reinstating a 2010 moratorium on new oil and gas leases in state forests and parks. ...

PwC: Low oil prices might drive surge in restructuring in 2015

01/29/2015 Mergers and acquisitions (M&A) in the oil and gas industry hit 10-year highs in terms of deal value and volume in 2014, according to a report f...

DOE could meet 45-day LNG export decision deadline, Senate panel told

01/29/2015 The US Department of Energy would have no trouble meeting a 45-day deadline to reach a national interest determination for proposed LNG export faci...
White Papers

Pipeline Integrity: Best Practices to Prevent, Detect, and Mitigate Commodity Releases

Commodity releases can have catastrophic consequences, so ensuring pipeline integrity is crucial for p...
Sponsored by

AVEVA’s Digital Asset Approach - Defining a new era of collaboration in capital projects and asset operations

There is constant, intensive change in the capital projects and asset life cycle management. New chall...
Sponsored by

Transforming the Oil and Gas Industry with EPPM

With budgets in the billions, timelines spanning years, and life cycles extending over decades, oil an...
Sponsored by

Asset Decommissioning in Oil & Gas: Transforming Business

Asset intensive organizations like Oil and Gas have their own industry specific challenges when it com...
Sponsored by

Squeezing the Green: How to Cut Petroleum Downstream Costs and Optimize Processing Efficiencies with Enterprise Project Portfolio Management Solutions

As the downstream petroleum industry grapples with change in every sector and at every level, includin...
Sponsored by

7 Steps to Improve Oil & Gas Asset Decommissioning

Global competition and volatile markets are creating a challenging business climate for project based ...
Sponsored by

The impact of aging infrastructure in process manufacturing industries

Process manufacturing companies in the oil and gas, utilities, chemicals and natural resource industri...
Sponsored by

What is System Level Thermo-Fluid Analysis?

This paper will explain some of the fundamentals of System Level Thermo-Fluid Analysis and demonstrate...
Available Webcasts

The Alternative Fuel Movement: Four Need-to-Know Excise Tax Complexities

When Thu, Jun 4, 2015

Discussion on how to approach, and ultimately embrace, the alternative fuel market by pulling back the veil on excise tax complexities. Taxes may be an aggravating part of daily operations, but their accuracy is crucial in your path towards business success.


On Demand

Prevention, Detection and Mitigation of pipeline leaks in the modern world

Thu, Apr 30, 2015

Preventing, detecting and mitigating leaks or commodity releases from pipelines are a top priority for all pipeline companies. This presentation will look at various aspects related to preventing, detecting and mitigating pipeline commodity releases from a generic and conceptual point of view, while at the same time look at the variety of offerings available from Schneider Electric to meet some of the requirements associated with pipeline integrity management. 


Global LNG: Adjusting to New Realities

Fri, Mar 20, 2015

Oil & Gas Journal’s March 20, 2015, webcast will look at how global LNG trade will be affected over the next 12-24 months by falling crude oil prices and changing patterns and pressures of demand. Will US LNG production play a role in balancing markets? Or will it add to a growing global oversupply of LNG for markets remote from easier natural gas supply? Will new buyers with marginal credit, smaller requirements, or great need for flexibility begin to look attractive to suppliers? How will high-cost, mega-projects in Australia respond to new construction cost trends?


US Midstream at a Crossroads

Fri, Mar 6, 2015

Oil & Gas Journal’s Mar. 6, 2015, webcast will focus on US midstream companies at an inflection point in their development in response to more than 6 years shale oil and gas production growth. Major infrastructure—gas plants, gathering systems, and takeaway pipelines—have been built. Major fractionation hubs have expanded. Given the radically changed pricing environment since mid-2014, where do processors go from here? What is the fate of large projects caught in mid-development? How to producers and processors cooperate to ensure a sustainable and profitable future? This event will serve to set the discussion table for the annual GPA Convention in San Antonio, Apr. 13-16, 2015.

This event is sponsored by Leidos Engineering.


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!


Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected