Western Officials Support O&G Permit Streamlining, Categorical Exclusion Legislation
Officials from New Mexico and Utah told the House Subcommittee on Energy and Mineral Resources Wednesday that proposed legislation designed to streamline oil and gas permitting in their states, including shifting more responsibility to state regulators from the Bureau of Land Management, would boost their states’ economies without reducing environmental protections.
The committee heard testimony on draft legislation from Rep. John Curtis (R-Utah) and Rep. Steve Pearce (R-N.M.) concerning permitting cost recovery for protests of oil and gas lease sales, expanding categorical exclusions to waive National Environmental Policy Act reviews to streamline permitting, and waiving the requirement for federal permits for non-federal surface leases where subsurface mineral estate is less than 50 percent is federally owned.
New Mexico Gov. Susana Martinez (R) told Chairman Paul Gosar (R-Ariz.) and the committee that every day her state loses $2 million in tax revenue due to the mounting applications for permit to drill (APD) backlogs at BLM, and the federal government sees $3.5 million in lost revenue each day as well.
“But these applications aren’t just waiting a single day,” Martinez told the committee, noting that her state’s permitting period is a fraction of the length at the federal level, leading to enormous delays and large permitting backlogs at the New Mexico BLM offices. “The average approval time for BLM permits in New Mexico is 250 days, compared to just 10 days for the New Mexico Energy, Minerals and Natural Resources Department to approve those same permits. This has created a backlog of more than 800 BLM applications.”
Martinez estimates the permitting delays add up to a $713 million loss for her state, in addition to a $1.3 billion loss for the federal government.
“A large share of our state’s oil and gas royalties support our public school system, and at a time when we’re fighting to turn around struggling schools and ensure that our school campuses are safe and secure, we shouldn’t be letting a single dollar slip away,” Martinez said, adding that many of New Mexico’s critical infrastructure and key services, including law enforcement and infrastructure construction, are jeopardized by the lost revenue.
“The Bureau of Land Management’s (BLM) inability to timely permit energy activities has cost New Mexico thousands of jobs and hundreds of millions of dollars in revenue,” said Pearce, a sponsor of two of the proposed bills, in a statement. “When it takes BLM 250 days to process a permit, the State loses out on needed revenues that support over 30% of the State’s budget, funding schools, police departments, road redevelopment, and community hospitals.”
Martinez said oil and gas production accounts for more than $11.3 billion to New Mexico’s economy and is responsible for more than 100,000 jobs out of a population of 2.1 million people.
“Five of my western governor peers and I have presented four proposals to the Department of Interior that would ensure the timelier handling of regular, run-of-the-mill applications for drilling permits,” Martinez said, in a letter she and the governors of Alaska, Idaho, North Dakota, Oklahoma, and Utah sent earlier this year. “The draft legislation before the committee today contains many of the same principles as our proposals, with one common objective: cut the duplicative and bureaucratic federal red tape that is hampering energy production across the West.”
Ken McQueen, Cabinet Secretary for New Mexico’s Energy, Minerals and Natural Resources Department, who told Western Wire in March that the oil boom in his state is “no surprise,” framed his testimony in relation to the influence federal management has in dictating how much and how fast New Mexico can grow its economy through increased production.
“In New Mexico the federal government owns 35% of the state’s acreage, most of which is managed by the Bureau of Land Management (BLM). Oil and gas production in New Mexico is disproportionately produced on those federal lands,” McQueen said. He pointed to 57 percent of the state’s oil and 65 percent of natural gas production coming from the federal mineral estate.
“Today the Permian Basin is one of the most active plays in the world, in fact, 45% (477 rigs) of the entire US rig fleet is working in the Permian Basin. The Basin stretches across two states—25% of the basin falling in New Mexico and the remainder in Texas. Texas was blessed, not just with a larger portion of the basin, but also with no federal lands,” McQueen said. The absence of federal lands on the Texas side makes New Mexico a riskier proposition. “This all works to New Mexico’s disadvantage. In Texas you can have a permit and a rig on location quicker than you can fill out the paperwork to drill a well on federal acreage in New Mexico,” McQueen added.
McQueen dismissed repeated queries about un-drilled permits held by New Mexico oil and gas companies, telling the committee that as companies learn more information about site, they may reevaluate the opportunity or to decide to approach the lease differently. Moreover, companies need flexibility and inventory given the cyclical nature of the industry.
“It’s important to provide as many permits as possible while oil prices are high, as they are today. That way, when we move into the next slowdown, having a larger inventory of wells drilled and more production on-line will help buoy the state through the down cycle,” McQueen said, pointing to the dropoff in drilling and production in 2015 and 2016.
“[W]e are here today encouraging you to examine and address process inefficiencies that will help put states like New Mexico, with a heavy BLM presence, on a more level playing field with states like Texas, who still do not know what BLM stands for,” he said.
McQueen attributed the the lost state and federal revenue Martinez detailed earlier in the hearing entirely to a lack of efficiency in approving permits at BLM.
“These revenues are not deferred because of substantive FLPMA, NEPA, or other objections, rather these revenues are deferred solely because of process inefficiencies. The proposals before the sub-committee eliminate process inefficiencies,” McQueen said. “Process for the sake of process should not be allowed to frustrate the multiple-use and economic development mandates.”
“Waiting a year for a permit is an economic development poison-pill,” McQueen concluded.
John Baza, Director of Utah’s Division of Oil, Gas and Mining, agreed with McQueen’s analysis, telling the committee “there may be some ‘missed opportunities’ for valuable yet reasonable mineral resource development on federal lands if lengthy permit processing times” aren’t improved.
“There needs to be an element of risk potential included in the federal drilling analysis and approval process. If wells are to be drilled in lower risk areas that have already been analyzed for environmental impact or in well-established areas of drilling and production, then let’s find a more streamlined path to resource development than what exists today,” Baza said.
Baza described the parallel tracks facing Utah producers applying for permits on BLM mineral lease or state, tribal, and private land.
“Companies doing business in Utah often feel that this [permitting process] is redundant, requiring separate drilling permit approvals from both the BLM and OGM [Oil, Gas and Mining] for wells drilled on federal land in Utah,” Baza said. His agency typically approves applications within 30 to 90 days, while BLM approvals in Utah can last between 12 and 18 months.
“And lest you think the BLM process is more robust, that’s simply not true,” Baza said. “I assure you that the OGM process that has been in existence in one form or another since the year 1955, is focused on achieving responsible development with due regard to public health and safety and protection of the environment, and has met those goals with remarkable consistency.”
Baza invited critics of state primacy on permitting to compare wells completed on both federal and state leases.
“In fact, I would challenge anyone to compare wells drilled on federal leases adjacent to those drilled on state or private leases to find any notable differences in operational conditions, land use impacts, or potential for environmental impact from those wells,” Baza said.
Katharine MacGregor, Deputy Assistant Secretary for Land and Minerals Management at the Interior Department, said the bills proposed would help with permitting efficiency and boost the efforts undertaken by Interior Secretary Ryan Zinke to reduce APD backlogs.
“Collectively, public lands power millions of homes and businesses, support approximately 200,000 jobs nationwide, and in FY 2017 generated approximately $2.2 billion in federal revenues,” MacGregor said. BLM oil and gas lease sales, mandated under federal law, have increased 30 percent from 2016 to 2017, and funds generated the sales have increased 87 percent, to $360 million in bids and other revenues, with nearly $350 million generated in Western states alone—New Mexico, Wyoming, Utah, Colorado, Montana, and Nevada.
BLM has 26 million surface acres currently under lease, MacGregor said, and 94,000 active wells on 24,000 producing leases.
MacGregor said BLM approved 3,293 APDs in calendar year 2017 on federal and Indian lands, generating $30.5 million in processing fees alone. APD processing times have fallen to 113 days on average, with 50 of those days attributable to BLM agency input, down from more than 257 days on average in FY 2016, but still above the statutorily required 30 days. Zinke made permitting a high priority in his first year at Interior, including reducing the federal permit backlog through reductions in review period length.
“We hope to further improve this figure,” MacGregor noted. “We appreciate the subcommittee’s efforts to find reasonable solutions to expedite leasing and permitting on federal lands.”
MacGregor emphasized support for Pearce’s bill clarifying categorical exclusions to streamline oil and gas permitting efforts.
“CXs [categorical exclusions] can be an effective tool for reducing delays and costs associated with permitting, especially in instances where operators are improving or streamlining their operations and have minimal environmental impact to their existing footprint,” MacGregor said, and work to reduce duplicative environmental analyses. “The department notes that a CX is not an exemption or a waiver of NEPA review but instead is a tool within the NEPA review process. In many cases it is likely that NEPA analysis on a DOI project has occurred at least twice, providing both sufficient environmental analysis and multiple opportunities for public engagement.”
MacGregor said implying NEPA could be avoided with categorical exclusions was “not true.” Permitted under the 2005 Energy Policy Act, categorical exclusions allow the Interior Department to waive NEPA review for projects under certain circumstances.
To help further clarify categorical exclusions, MacGregor said Interior would have new documents available after the hearing to assist BLM in making those determinations.
“The department is working on instruction memoranda and guidance within the Bureau of Land Management to further direct and help assist our field directors on the front lines understand the use of statutory categorical exclusions that are tools that have already been provided to us by the United States Congress to help expedite a lot of these processes,” MacGregor said.
MacGregor said cost recovery for processing protests is critical, as the number of lease parcels protested has skyrocketed from 17 percent in FY 2012 to 88 percent by FY 2017. Many BLM state offices are receiving protests on every parcel offered, with protests often hundreds of pages long, and delays in revenue sharing lasting months, as in the case of New Mexico, which saw nearly $70 million in lease sale revenues from 2016 tied up by activist protests, threatening the state’s budget.
“The protest requires significant BLM staff time, and in many cases provide little to no tangible environmental benefits,” MacGregor said. “The uptick in protests seem aimed at disrupting the lease sale, which is not the intent of the protest period.”