Bloomberg News

Oil Output on U.S. Land Lagging Amid Boom, Report Finds

March 05, 2013

Oil and gas production in federal areas is lagging behind the boom on private lands, a report by non-partisan congressional researchers found, bolstering complaints made by Republicans and energy-industry lobbyists.

The Congressional Research Service cited Department of Interior data showing a decline in oil output on federal lands and waters from 2009 through 2012, while production on private lands jumped more than 31 percent over that same period. Statistics for natural gas production showed a similar trend.

“A web of red tape and a backlog of delayed permits are blocking important energy production opportunities on federal lands,” Representative Ed Whitfield, a Kentucky Republican, said today in a statement as the Energy and Commerce Committee released the report. “Where the states have been in charge, we have seen energy development boom in a safe and responsible way, but under federal control we have seen a sharp decline.”

President Barack Obama has set a target of reducing U.S. oil imports by a third by 2025 through more domestic oil production and increased use of natural gas and renewables. Net imports of crude and petroleum products accounted for 45 percent of the nation’s oil consumption in 2011, according to the U.S. Energy Information Administration.

The Interior Department said it has worked to reduce a backlog of pending permits, and reports dramatic increases in deepwater drilling. An agency report in 2012 found only 24 percent of U.S. acres under lease were producing, according to the congressional document.

Record Highs

“Domestic oil and gas production has grown each year the president has been in office, with domestic oil production currently higher than any time in nearly a decade and natural gas production at its highest level ever,” Jessica Kershaw, a spokeswoman for the Interior Department, said in an e-mail. In the last fiscal year, energy payments generated more than $12 billion in revenue for the Treasury, up $1 billion from a year earlier, she said.

The spread of hydraulic fracturing and horizontal drilling is boosting oil and gas drilling in shale formations, leading U.S. crude production to its highest levels in two decades, according to the EIA. Increases in Texas and North Dakota drove the increase, it said.

Fracking, in which millions of gallons of water are mixed with sand and chemicals and shot underground to break apart underground formations, is also responsible for natural gas gains. U.S. gas production rose by 4 trillion cubic feet, or 20 percent, since 2007, while production on federal lands fell by about 33 percent, the research report said.

‘Gas Plays’

In part, that’s a result of geography. “The big shale gas plays are primarily on non-federal lands and are attracting a significant portion of investment for natural gas development,” it said.

Permitting delays also play a role. It took longer for oil companies to get their applications for permits to drill approved by the Bureau of Land Management in 2011 than it did in 2006, but that’s because it took industry longer to fill out the application, according to the report.

The congressional report, dated Feb. 28, concludes that speeding up permitting could boost production on federal lands.

Still, “the regulatory framework for developing resources on federal lands will likely remain more involved and time- consuming than that on private land,” the research service concluded. Also “having more lands accessible may not translate into higher levels of production on federal lands, as industry seeks out the most promising prospects and highest returns.”

To contact the reporter on this story: Mark Drajem in Washington at mdrajem@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net


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