US House panel hears more support for offshore than onshore energy policy moves

A US House Natural Resources Committee subcommittee heard more support for offshore than onshore policy reform proposals at a Nov. 7 hearing as two of the four witnesses differed on whether to transfer federal onshore oil and gas responsibilities to agencies in producing states. Two others who testified before the Energy and Minerals Subcommittee called for expanded federal offshore leasing beyond the central and western Gulf of Mexico.

The hearing, which originally was scheduled to consider two discussion drafts, also looked at a bill that Majority Whip Steve Scalise (R-La.) and three cosponsors introduced on Nov. 3 that would largely reform federal onshore and offshore energy resource management policies (OGJ Online, Nov. 6, 2017). The measure and eight others were scheduled for markup by the full committee on Nov. 8.

“This legislation will reduce delays in operators’ abilities to conduct oil and gas production in North Dakota,” said Lynn D. Helms, who directs the state’s Industrial Commission’s Department of Mineral Resources.

“In my observation, operators applying for drilling permits generally wait approximately 9 months for approval of an application for permit to drill from [the US Bureau of Land Management]. Operators wait less than 20 days for state approval of an application to drill in North Dakota. By imposing additional permitting requirements, BLM duplicates, frustrates, and interferes with North Dakota’s regulatory role and authority,” Helms said.

Ray Brady, who testified on behalf of the Public Lands Foundation (PLF)—a national organization with more than 700 members composed mainly of retired BLM employees—said the onshore discussion draft, “while perhaps well intentioned, creates far more problems than it solves, and we would not support the proposed bill.”

Split-estate management problems

It also would segregate management of the public lands for BLM and its mandate under the 1976 Federal Lands Policy Management Act (FLPMA) by eliminating the public engagement process directed by FLPMA and the National Environmental Policy Act, Brady said.

Brady said, “It would foster the rapid growth of complex and confusing split estate management scenarios throughout the West. This would be compounded by individual state constitutions that for the most part in the western US do not share the same mission as BLM-managed public lands.”

North Dakota already has what probably is the most complex system of split-estate resources in the country, Helms noted. Unlike many western states with large blocks of unified federal surface and mineral interest ownership, North Dakota’s surface and mineral estates were at one time more than 97% private and state-owned as a result of the railroad and homestead acts of the late 1800s, he said.

“However, during the depression and drought years of the 1930s, numerous small tracts in North Dakota went through foreclosure,” Helms said. “The federal government—through the Federal Land Bank and Bankhead Jones Act—foreclosed on many farms, taking ownership of both the mineral and surface estates. Many of those surface estates were later sold to private parties, but the federal government retained some or all the mineral estates. This resulted in a very large number of small, federally owned mineral estate tracts, without corresponding federal surface estates, scattered throughout western North Dakota.”

The state’s unique land ownership history has made typical oil and gas spacing units there consist of a combination of federal, state, and private mineral ownership, Helms said. “Even in circumstances where the federal mineral ownership is small relative to other mineral ownership interests within the spacing unit, operators of wells that develop private and state minerals within the communitized spacing unit are subjected to federal permitting, waste minimization plan, gas capture, gas venting, and production restriction rules and requirements,” he said.

“Federal permit applications require 101 elements, 50 of which are for surface management with 37 also required by North Dakota. Of the 51 elements that apply to downhole well bore construction, North Dakota requires 47 as part of the state drilling permit and the other four through sundry notices,” Helms said. “Delegating the permitting of all downhole permit elements to states like North Dakota will allow BLM to focus its limited state office resources on efficient and effective management of the federal surface estate.”

BLM’s delegation authority

Brady said BLM already has regulations in place for the delegation of authority and cooperative agreements for oil and gas inspection and enforcement activities and provisions for reimbursement of costs to states related to oil and gas operations on federal lands under provisions of the 1982 Federal Oil and Gas Royalty Management Act.

“These regulations provide a process for a state to submit a petition for delegation to the BLM director for oil and gas inspection and enforcement activities within that state,” Brady said. “It is our understanding that no state has a current approved delegation of authority or cooperative agreement under these provisions. We would encourage any state to work in partnership with BLM to pursue a delegation of authority or cooperative agreement for oil and gas inspection and enforcement activities under the existing regulations.”

Brady also expressed concern with the onshore discussion draft’s provision that would waive NEPA for permitting actions on nonfederal split-estate land and for permit actions in preferred oil and gas leasing areas.

“Sufficient existing authorities already exist to streamline the NEPA process for oil and gas permitting activities, including tiered NEPA documents, categorical exclusions, and determinations of NEPA adequacy (DNA). In addition, BLM has already initiated a review of initiatives that may further streamline the BLM planning and NEPA procedures,” he said. “The secretary of the Interior recently issued Sec. Order 3358 that established an executive committee for expedited permitting to identify best practices and reforms that will improve the permitting process, which would include NEPA procedures.”

Brady said PLF believes the public lands surface and mineral estate should continue to be unified and on equal footing to facilitate the needs of the American public now and into the future and to meet FLPMA’s intent and purpose. “In addition, we believe emphasizing a shared responsibility through partnership opportunities with state, tribal, and federal agencies, and continued efforts to improve the NEPA process and other aspects of the oil and gas program within BLM would better serve everyone in the end,” he said.

Expanding offshore leasing

Other witnesses noted that expanding federal offshore oil and gas leasing onto parts of the US Outer Continental Shelf that are currently off-limits would benefit the US and especially coastal states.

“In terms of the offshore arena, the Gulf of Mexico since 2009 has seen increasing production, in large part because of investment decisions made prior to 2010 to develop deepwater offshore fields,” said Eric Smith, associate energy institute director at Tulane University in New Orleans. This delayed reaction is a well-known feature of developing deepwater oil and gas fields, he noted. “Unfortunately, it follows that the paucity of new offshore developments since 2010 will necessarily result in a decline in production starting as soon as 2020, if new incentives and priorities regarding offshore production are not developed soon,” he said.

“By providing enhanced access to oil and gas resources and by establishing equitable revenue-sharing structures, we can create more of the high-paying jobs associated with upstream development as well as midstream and downstream infrastructure,” Smith said. “In addition, this incremental activity can also provide sorely needed new funds to both the federal treasury and to coastal states and coastal communities within those states. Louisiana’s experience is that, whether it’s a blue-color or a white-collar job, the oil and gas industry pays almost 100% more than comparable nonoil and gas jobs.”

Consumer Energy Alliance Pres. David Holt said, “With 94% of federal waters currently inaccessible, expanding opportunities to access these resources—in regions like the Gulf of Mexico, Alaska, and the Atlantic—would provide great benefits to these regions, generate significant economic impacts for families and small businesses across the US, and can be done safely. Nationally, expanded access to areas currently unavailable could create more than 893,000 jobs, $450 billion in new private-sector spending, $550 billion in increased economic activity nationwide, and more than $395 billion in increased government revenues.”

Greater access to US offshore resources could ensure a stable, steady supply of American energy, while helping to reduce reliance on imports from foreign, and sometimes hostile governments, Holt said. “It should be noted, however, that worldwide, deepwater oil and gas production is becoming an increasingly important element of the global energy portfolio,” he said. “The US needs to remain the technical leader. However, increasing research investments in the North Sea countries and Brazil, coupled with decreasing research and development investments in the US, are causing the balance to shift.”

Contact Nick Snow at [email protected].