BLM drilling permit bill attracts broad support at Senate hearing

Witnesses and committee members argued over the extent of oil and gas drilling permit delays at US Bureau of Land Management field offices. But they strongly supported a bill that would make permanent a pilot program enacted in 2005 to begin relieving the problem at a July 29 US Senate Energy and Natural Resources Committee hearing.

“For years, federal policies have put federal lands at a competitive disadvantage with the state lands and private lands. This is especially true when it comes to oil and natural gas production,” said Sen. John A. Barrasso (R-Wyo.), who cosponsored the June 5 measure with US Sen. Tom Udall (D-NM). “We should stop making it harder to produce energy on federal lands. S. 2440 is one way to do that,” he said.

Barrasso continued, “This bill will give local BLM offices the financial resources necessary to process oil and gas permits in a timely manner. It will also give BLM the ability to anticipate where permitting backlogs may develop in the future and take steps to prevent them from occurring.”

Program’s history

Asked if allowing the pilot program to expire in 2015 would affect the US Department of the Interior agency’s hiring, BLM Director Neil Kornze said, “The short answer is yes. With that authorization expiring, we aren’t able to offer certainty.”

Kornze noted in his written testimony that the pilot program was established under Section 365 of the 2005 Energy Policy Act (EPACT) in seven BLM field offices in Miles City, Mont.; Buffalo and Rawlins, Wyo.; Grand Junction/Glenwood Springs, Colo.; Vernal, Utah; and Farmington and Carlsbad, NM. US President Barrack Obama expanded the boundaries of two of the project offices—Miles City, to include the growing Bakken shale development, and Buffalo—in response to changing demand for federal oil and gas resource development on Dec. 26, 2013, Kornze said.

The provision also established the Permit Processing Improvement Fund, an account that has varied from $18 million to $25 million annually, to support the pilot project for 10 years. It also authorized the US Interior Secretary to transfer money when necessary from the fund to other federal agencies involved in permit coordination and processing to other federal agencies, including the US Forest Service, Bureau of Indian Affairs, Environmental Protection Agency, and Army Corps of Engineers, as well as the 5 states.

EPACT Section 365 prohibits BLM from establishing drilling permit fees to recover processing costs, although Congress has implemented permit fees through annual appropriations language since 2007, Kornze said. The White House’s proposed fiscal 2015 federal budget calls for repealing the prohibition, he added.

“The agencies involved in the pilot project have made significant progress in a number of areas,” he told the committee. “Additional resources, such as personnel devoted to processing oil and gas use authorizations, have enabled [them] to increase the pace of permitting and completing environmental reviews, particularly given the complex resource issues we face.”

Improved communications and program streamlining efforts have helped reduce time necessary for interagency consultations for many projects and permits, Kornze said. “The increased staffing in the pilot project offices has also allowed BLM to help new industry permitting specialists understand BLM’s requirements for obtaining an oil and gas use authorization,” he said.

Bill’s key provisions

S. 2440 would make the program permanent, extend it to BLM field offices in other states, and require the agency to report to Congress by Feb. 1 each year on the program’s allocation of funds and each field office’s oil and gas permit processing accomplishments.

It also would amend Section 35 of the Mineral Leasing Act to collect a $9,500 processing fee, indexed for inflation, for each new permit application. From fiscal 2016 through 2019, 15% of those collections would go to the offices which collected them to process leases, permits, and protests, and 85% would go into the agency’s permit processing improvement fund. That fund would receive all the fees from fiscal 2020 through 2026.

“BLM supports the expanded geographic scope provided by the bill, which will allow BLM to better allocate resources based on current permitting demands and new exploration and development of oil and gas fields and plays,” Kornze said. “This flexibility would be especially useful in the future for allocating funds to coordinate and process use authorizations in those offices where industry forecasts increased development of oil and gas resources and BLM offices had not previously been identified as project offices.”

Kornze said continuing the program also would allow other federal agencies and appropriate state government offices to devote staff to the increased workload in these areas, which BLM considers crucial to its continued success.

The bill’s proposed drilling permit processing fee would be $3,000 more than what Congress has authorized annually since 2007, and more closely reflects the actual cost of processing applications on the federal and Indian Trust mineral estate, he continued. BLM opposes the provision barring the Interior Secretary from implementing a rulemaking to increase fees, and would rather maintain the option to design a fee system which reflects varying costs associated with different drilling permit applications, Kornze said.

Others back bill

Three other witnesses expressed their support for S. 2440. It would improve funding, and let money flow to the BLM offices which need it most, said Kathleen Sgamma, vice-president, government and public affairs, Western Energy Alliance, Denver. “We think the bill needs to be put in place,” she said, adding, “Without that long-term ability to plan and provide assurance to employees coming on, BLM certainly could be hesitant about hiring when funding runs out in 2015.”

WEA members would be willing to accept the proposed higher drilling permit application fee because it would not increase over 10 years, except with inflation, she said. “We don’t believe new fees should be enacted, but are willing to support the ones in S. 2440.”

Scott M. Kidwell, government affairs director at Concho Resources Inc., said the Midland, Tex., independent, which has extensive Permian basin holdings, considers the bill “a balanced piece of legislation that brings appropriate modifications to the management of the drilling permit pilot program at a cost which industry can accept.”

Its proposed processing fee is a fair compromise with its guarantee that 75% of the fees generated would go to the office which collected them, Kidwell said in his written testimony. “That trade-off assures producers that they will see a direct benefit from paying the increased fee through having more BLM staff reviewers and a more responsive review process in the local BLM office for their projects,” he said. “In bringing more timeliness and predictability to getting their permit applications reviewed, the compromise also will provide greater incentive to invest in developments on federal lands.”

Directing resources back to states and field offices that will generate significant revenue for the federal government is sound fiscal policy, and also sound energy and environmental policy, said Mark A. Christensen, who chairs the Campbell County Board of Commissioners in northeastern Wyoming. Returning a portion of what’s collected will help generate more timely permits, which in turn will generate more royalties for the US Treasury at a time when nontax revenue is highly coveted, he said in his written testimony.

Site visits are critical to the process, Christensen said. “In Wyoming, these often require driving for several hours, often on gravel roads,” he told the committee. “When grouped together as they often are, these visits are long and remove the BLM employee from the office for days at a time. Those are days not spent doing the necessary analysis and work to ensure that permits are completed accurately…. Added staff capacity made possible by the bill before you today means more teams covering site visits, allowing for a much more efficient process.”

Contact Nick Snow at nicks@pennwell.com.

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