Oil and gas companies drilled fewer new wells on public lands in 2010 than in any other year over the past decade, leaving nearly two-thirds of their drilling permits unused, according to federal records obtained by Greenwire.
The Bureau of Land Management issued 4,090 drilling permits in fiscal 2010, but oil and gas operators drilled 1,480 new wells, using about 36 percent of permits issued.
BLM’s permitting data refute industry assertions that the Obama administration is blocking oil and gas development to protect Western landscapes and wildlife, said Dave Alberswerth of the Wilderness Society, a former Interior Department official in the Clinton administration.
“The downturn in drilling on public lands is purely a function of internal corporate decisions and declining natural gas prices, not [Interior Secretary Ken] Salazar’s oil and gas policies,” Alberswerth said.
But industry representatives say the numbers tell another story. Kathleen Sgamma, government affairs director for the Denver-based Western Energy Alliance, said the Obama administration’s regulations have discouraged new drilling in the West, where BLM controls some 250 million acres.
“We were surprised,” Sgamma said, “to see just how much the additional regulatory burden has discouraged drilling in the West.”
Companies used more permits in previous years. On average, they drilled new wells on roughly 75 percent of new permits issued over the last decade, according to permit records.
|Wells sparse, leases to spare|
|New wells drilled on federal lands in 2010 were the lowest of the decade, but industry used less than half of its permits, BLM data indicate.|
|Fiscal year||APDs||Wells spud|
The 1,480 new wells drilled in 2010 are less than half the average number of new wells begun on public land over the past 10 years, records show.
The BLM numbers come with caveats. Permits — known as “applications for permit to drill,” or APDs — are good for two years, so wells drilled in any given year may not correspond to APDs issued that year.
Operators postpone drilling some permitted wells until they can acquire enough APDs to support a viable business plan, Sgamma said.
“It’s important to note that operators don’t base their decision to drill just on getting an APD, but rather the cost to drill that well,” Sgamma said.
Sgamma’s group has criticized changes to BLM’s oil and gas program under the Obama administration that include leasing reforms, the withdrawal of leases issued under the George W. Bush administration and an out-of-court settlement requiring the agency to conduct reviews of likely greenhouse gas emissions from oil and gas development.
Taken together, the policies have scared away investment and sent drillers to nonfederal lands such as the Marcellus Shale in Pennsylvania and the Haynesville and Barnett shales in Louisiana and Texas, Sgamma said.
If prices were truly to blame for the downturn in drilling on federal lands, one would expect a similar decline in other parts of the country, Sgamma said.
“In the same commodity price environment, we’re seeing less activity in the West than in the rest of the country,” Sgamma said. Industry can endure lower prices, she added, but “if your regulatory costs are higher in one area of the country, then you just can’t make the economics of it work.”