Is This True? About Undeveloped O&G Leases..

As we’ve seen before, there’s a major talking point out there about the “9000 leases not currently in production on federal lands.” There’s a story about that from last week in E&E Daily.

Pelosi twice mentioned that Democrats are eager to find ways to increase domestic energy production on federal land by noting there are more than 9,000 unused leases. She suggested options could include a “use it or lose it” policy for leaseholders or charging them for failing to pursue active energy exploration.

Cracking down on used energy leases on federal land also has the crucial support of Senate Energy and Natural Resources Chair Joe Manchin (D-W.Va.). He said energy companies should not be able to hold on to federal leases indefinitely that can otherwise quickly be permitted for production.

“The fees are too low. You can hold a lease fee for almost nothing from the federal government; you can’t do that in the private sector,” Manchin told reporters yesterday. “It’s not a penalty [to increase federal leasing fees], just make them comparable in the marketplace.”

Asked specifically about a “use it or lose it” policy, Manchin said he would first need to look at the specific proposal, but he has in the past been skeptical of that approach.

This is all understandable.. (except for the part about being “quickly” permitted..) but what about this?

“I don’t know if that’s the right solution or not,” Sen. Martin Heinrich (D-N.M.) told reporters. “But we do have a problem with both unused leases that could be produced and unused leases that were leased completely speculatively, where we don’t think there’s any resource.”

If a company hangs on to a lease without a profitable reserve of oil and gas, Heinrich said, “that’s taking other resources and other uses off the table in those areas in a way that’s not really fair to the rest of the community.”

I’m agnostic about the details of right-sizing royalties, lease-holding and so on, but it seems to me that other uses (recreation, grazing, and so on) are not “taken off the table” by the existence of a lease. In fact, based on observations, they seem to be able to coexist with producing leases. But perhaps others know more?

Or perhaps it sounds plausible, but Rep. Heinrich hasn’t checked into the details of how this works?

And here’s a story by Bobby Magill that also touches on the difficulty of permitting renewable energy projects (from March 15).

Expediting renewable energy permitting on federal land is also no quick fix for energy supply problems, Jensen said.

Most renewables projects take years to permit because of court challenges and lengthy environmental reviews, he said.

“The fastest way to free up new domestic resources is for the administration to go to bat aggressively for the major energy infrastructure projects that are now hung up in court,” including the Mountain Valley Pipeline in Virginia and Cardinal-Hickory Creek electric transmission line in Wisconsin, Jensen said.

Jensen said he’ll be watching whether the Interior Department hires new staff and consultants to help expedite federal infrastructure permitting.

The Interior Department and other regulatory agencies have staffing shortages, making it more difficult for developers to push a project through the regulatory and permitting process, Jensen said.

The Bureau of Land Management and the Bureau of Ocean Energy Management plan to use funding in the fiscal 2022 spending bill Congress passed last week to hire new workers who will “accelerate” renewable energy projects, Interior Department spokesman Tyler Cherry said.

The bill gives the land bureau $1.28 billion for its operations for fiscal 2022, but it doesn’t earmark funding specifically for renewable energy projects. The same is true for BOEM’s $206.7 million appropriation, which is to be used on any oil, gas, minerals or other marine energy projects.

“Even the most environmentally benign proposals from the private sector have struggled to get attention due to lack of institutional capacity,” Jensen said. “The bipartisan infrastructure bill and new bipartisan budget agreement should begin helping with the human resource problem, but there is a lot of catching up to do.”

But if the problem is court challenges, hiring more people may not be all it takes to speed up the time until construction.

12 thoughts on “Is This True? About Undeveloped O&G Leases..”

  1. This mega solar power project in Oregon is apparently on private land – six square miles in eastern Oregon. Lots of BLM and USFS land in the area.

    “It will be the largest solar facility in the Pacific Northwest and one of the largest in the country by output, with more than 1.7 million solar panels generating at least 400 megawatts of energy at a time – enough to power more than 76,000 homes, according to documents the company submitted to the Oregon Department of Energy.”

    “Farmers and ranchers said the solar installation would displace animals like deer and elk and rodents onto nearby crop fields, and that the facility will create issues with dust and heat plumes, according to documents from a contested case hearing. They also took issue with land designated for agriculture being used for non-agricultural purposes.”

  2. With respect to uses “taken off the table,” DOI said this in a report last year:

    “When land is under contract for potential oil and gas activity, the shared public lands cannot be managed for other purposes, such as conservation or recreation.” at pdf p.5.

    I think the key language in that sentence is “cannot be managed.” I take this to mean that once a given parcel is under lease, BLM cannot then revise the relevant land management plan to impose a restrictive designation, such as nonmotorized recreation, that would make the lease commercially non-viable. But I don’t think the mere existence of an undeveloped lease prevents people from carrying out whatever rec or other activities (e.g. grazing) that the LRMP authorizes in that area.

    • Thanks, Rich! That language is explanatory (how Rep. Heinrich perhaps got that idea).. but to me that language (from the 2021 report) is not as clear as it could be.

      Seemingly in contradiction, on this BLM webpage it says:
      “Land with oil and gas leases are available for other multiple-use purposes. After oil and gas development is complete, the BLM requires reclamation of the land to return all land to multiple-use.”

      I wonder how the authors of the 2021 report came up with that formulation?

  3. This is not a field in which I can claim any expertise, but I fail to see how action on this issue dovetails with the 4 April United Nations warning that we are “firmly on track toward an unlivable world” resulting from continuing use of fossil fuels which, along with “clearing large swaths of forest for agriculture undermine the massive curbs in [greenhouse gas] emissions needed to meet the Paris [climate accord global warming] goal” to keep our planet livable.

  4. One other important point in this ongoing discussion is the misunderstanding about the difference between leases and approved APDs. There are over 9,000 approved APDs not being used. A lease can be held onto for 10 years without development while an approved APD is good for 2 years without drilling. There are over 26 million acres of federal land currently under lease.

    • THANK YOU! That is an important distinction! And having APDs approved means the oil companies have nothing but greed stopping them from drilling!

      • Karen, that’s your point of view. I don’t really understand the greater econosystem, but I do think there are other factors than greed… like…

        The views of shareholders- as some institutions have divested from fossil fuels, others have come in- perhaps with different desires- like making money..
        The fact that the Biden admin has been sending negative signals to domestic producers
        The practicalities of getting equipment around. And so on …

        Frankly, having watched the signals by the Biden Admin, I wouldn’t invest here either. So I don’t think I can criticize them for not rushing drilling rigs in..

          • Mike, thanks for the link to the Forbes article..
            Not to be pedantic, but this is what Karen said..
            “And having APDs approved means the oil companies have nothing but greed stopping them from drilling!”
            The article lists all kinds of other reasons.. and I didn’t see any mention of the word “greed” in the article, perhaps that’s because the audience of Forbes?

            • Sharon, maybe “greed” is a strong interpretation of this in the article: “Investors have demanded that producers maintain capital discipline and grow volumes modestly. Returns have taken priority over growth….” Many of us can remember the Republican mantra during G.W. Bush’s two terms in response to the U.S. being dependent on Middle East oil, “Drill, baby, Drill!” If I remember correctly, domestic oil and gas production began growing during W’s second term and continued through Obama’s two terms. The price of oil dropped significantly as U.S. production ramped up causing some of the smaller companies to go belly up while larger oil and gas companies had to absorb some big loses. Now they are making up for it. Actually, more than making up for it. Is this greed? That is personal opinion. The price of gas at the pump will settle down some eventually, but I think the oil and gas industry as a whole has a checkered past (I provided you links in another thread) and that leads a lot of people to think the worst.

              • Interesting that the Forbes article says nothing like “The fastest way to free up new domestic resources is for the administration to go to bat aggressively for the major energy infrastructure projects that are now hung up in court,” including the Mountain Valley Pipeline (on national forest land). Thanks. (And I don’t understand what the administration could do to be more “aggressive” in court.)


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