Watching Government: A bigger role for states

Sept. 18, 2017
It's no secret that onshore oil and gas producers would like to see states play a bigger part in producing deposits on federally managed land.

It's no secret that onshore oil and gas producers would like to see states play a bigger part in producing deposits on federally managed land.

Two officials from associations in producing states explained why when a US House Natural Resources subcommittee held a hearing on Sept. 6 to discuss three bills that each aim to do just that in its own way.

One would allow states to collect their own federal mineral royalties, saving them about $40 million/year in federal collection fees. A second would require the Interior Secretary to develop and publish a quadrennial federal onshore energy production strategy. A third, meanwhile, would let states control the exploration, development, and production of oil and gas on federal land within their boundaries.

"I, as well as the industry I represent, understand that regulation is an important and essential part of the social license to operate. Bad actors need not apply because they will not be defended," Anthony J. Ferate, vice-president of regulatory affairs at the Oklahoma Independent Petroleum Association, told the Energy and Mineral Resources Subcommittee at its hearing on the bills.

"But when regulation is used as a curb to industry rather than an assurance of safe operation, the government takes on the role of market influencer as opposed to allowing free markets to operate as they should," Ferate said.

Ferate, who previously served on the Oklahoma Corporation Commission, said regulatory authority is best when it is designed to address issues specific to each state. "The federal government's one-size-fits-all approach ignores the local and regional differences among operations in different parts of the country and different areas that make state regulation more adaptive and effective," he said.

Paul Ulrich, who chairs the Petroleum Association of Wyoming, warned that declines in production on federal land are expected to increase as US production grows overall.

Delays and limited access

"Extremely long permitting or project approval times, limited access to federal lands, and market conditions are all causes. If the trend of production declines on federal lands is to be reversed, significant short-term and long-term efforts to make federal land development more competitive are required," he said.

A third witness from the Interstate Oil & Gas Compact Commission, which is comprised of state regulators, explained that each state brings tools to its regulatory task that can't be duplicated elsewhere.

"Accompanying these tools are the important elements of determination and ingenuity that result in state oil and gas programs serving as the world's laboratories for regulatory innovation," IOGCC Executive Director Mike Smith said.

It's by no means certain how far these measures will move. They nevertheless put some interesting ideas on the table.