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Thursday, March 7, 2013

U.S. Crude Oil and Natural Gas Production in Federal and Non-Federal Areas



Marc Humphries
Specialist in Energy Policy

In 2012, oil prices ranged from $80 to $110 per barrel (West Texas Intermediate spot price) and remain high in early 2013. Congress is faced with proposals designed to increase domestic energy supply, enhance security, and/or amend the requirements of environmental statutes. A key question in this discussion is how much oil and gas is produced each year and how much of that comes from federal and non-federal areas. On non-federal lands, there were modest fluctuations in oil production from fiscal years (FY) 2008-2010, then a significant increase from FY2010 to FY2012 increasing total U.S. oil production by about 1.1 million barrels per day over FY2007 production levels. All of the increase from FY2007 to FY2012 took place on non-federal lands, and the federal share of total U.S. crude oil production fell by about seven percentage points.

Natural gas prices, on the other hand, have remained low for the past several years, allowing gas to become much more competitive with coal for power generation. The shale gas boom has resulted in rising supplies of natural gas. Overall, U.S. natural gas production rose by four trillion cubic feet (tcf) or 20% since 2007, while production on federal lands (onshore and offshore) fell by about 33% and production on non-federal lands grew by 40%. The big shale gas plays are primarily on non-federal lands and are attracting a significant portion of investment for natural gas development.

The number of producing acres may or may not be a function of how many acres are leased, and the amount of acres leased may or may not correlate to the amount of production, but in recent years, some members of Congress have proposed a $4/acre lease fee for non-producing leases. This proposal grew out of the efforts to open more public land and water (offshore) for oil and gas drilling and development when gasoline prices spiked in 2006-2008. Some in Congress noted that there were many leases they believed were not being developed in a timely fashion, while at the same time, others in Congress were pushing for greater access to areas off-limits (such as the Arctic National Wildlife Refuge (ANWR) and areas under a leasing moratoria offshore). Higher rents for offshore leases were imposed by the Secretary of the Interior in 2009 to discourage holding unused leases and to move more leases into production if possible.

Another major issue that the 113
th Congress may seek to address is streamlining the processing of applications for permits to drill (APDs). Some members contend that this would be one way to help boost energy production on federal lands. After a lease has been obtained, either competitively or non-competitively, an application for a permit to drill (APD) must be approved for each oil and gas well. Despite the new timeline for review (under the Energy Policy Act of 2005, P.L. 109-58), it took an average of 307 days for all parties to process (approve or deny) an APD in 2011, up from an average of 218 days in 2006. The difference, however, is that in 2006 it took the BLM an average of 127 days to process an APD, while in 2011 it took BLM 71 days. In 2006, the industry took an average of 91 days to complete an APD, but in 2011, industry took 236 days. The BLM stated in its FY2012 and FY2013 budget justifications that overall processing times per APD have increased because of the complexity of the process.


Date of Report: Febrary 28, 2013
Number of Pages: 13
Order Number: R42432
Price: $29.95

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