Analysis: Oil and gas leasing reforms end “drill baby drill” approach

By Bruce Pendery






LAST MONTH THE U.S. DEPARTMENT OF THE INTERIOR finalized reforms to its onshore oil and gas leasing program. The reforms will modify the way the Bureau of Land Management goes about leasing public lands for oil and natural gas development.

The federal Bureau of Land Management issued two “instruction memoranda” to finalize these reforms.

We are pleased with this new policy direction. We think these reforms were overdue, and they will help ensure a more balanced approach in the federal onshore oil and gas leasing program.

This new direction from Washington, D.C. clearly represents a departure from the “drill baby drill” philosophy that unfortunately characterized BLM oil and gas leasing decision-making for much of the last ten years.

“While [a BLM management plan] may designate land as ‘open’ to possible leasing, such a designation does not mandate leasing,” the new policy states. “Under applicable laws and policies, there is no presumed preference for oil and gas development over other uses.(Emphasis added.)

The new policies establish two new processes for leasing:

(1) There must now be careful review and public involvement on a parcel-specific basis. As a result, the public will have a better opportunity to help the BLM determine if greater levels of protection are needed, or whether the parcels should be withdrawn from sale.

(2) The BLM will now develop what are called “master leasing plans” for areas that are not currently substantially leased, but which might be subject to development, and which have important resource values that could create potential conflicts.

In addition, the BLM put in place another policy requiring prior compliance with the National Environmental Policy Act in some cases before a so-called “categorical exclusion” can be used.

Categorical exclusions are controversial tools that were created by Congress in 2005 as part of Bush-era energy legislation. These categorical exclusions, in effect, allow the BLM to bypass a thorough environmental review in order to fast-track energy development.

“The BLM reforms we are finalizing today establish a more orderly, open, and environmentally sound process for developing oil and gas resources on public lands” Interior Secretary Ken Salazar said in May. “The BP oil spill is a stark reminder of how we must continue to push ahead with the reforms we have been working on and which we know are needed.”

TWO MAJOR REFORMS

The BLM has established two major reforms that I’d like to discuss in this piece in some detail.

First: The BLM will put in place interdisciplinary parcel review teams to review potential lease parcels.

This group must deliberate as a team, and then make recommendations to the BLM state director for conditions that should be applied to a lease parcel.

This team’s recommendations can lead to such things as lease parcels being offered only with modified stipulations, or even deferred or withheld from sale.

Generally, the team will conduct site-specific lease parcel visits, especially if the area is not currently under development. Most BLM lands are not currently under development even if they have already been leased, so site-specific reviews will likely be the norm, especially initially.

There are also significant requirements for increased levels of internal and external coordination, and the BLM is now mandated to include more public participation in the process. Notably, site-specific compliance with the National Environmental Policy Act is now generally required for potential lease parcels.

This has at least one major implication for Wyoming. The BLM’s traditional practice—of insisting that no site-specific environmental analysis is possible until after a developer files an application for a drilling permit—no longer appears to be viable.

In the future a much more site-specific consideration of potential environmental impacts will be required prior to leasing.

According to the new policy, one consideration that should be taken into account when determining whether a lease parcel should be offered for lease is whether non-mineral values are greater than potential mineral development values.

More thorough, site-specific analysis of drilling proposals could help land managers better protect wildlife, such as Wyoming’s iconic sage-grouse. Photo by Scott Copeland.

The new direction requires that a determination of these relative values will not be dependent upon economic valuations of the competing resources.

Second: The BLM will be required, under some circumstances, to develop what the agency calls “master leasing plans.”

The BLM is now required to develop such a master plan if the following four criteria are met.

(1) A substantial portion of the area under consideration must not currently be leased.
(2) The federal government must own a majority interest in the minerals.
(3) Industry must have expressed interest and there is a moderate to high potential for the presence of oil and gas.
(4) There is a need for additional analysis to consider natural or cultural resource conflicts, impacts to air quality, impacts to specially designated areas such as wilderness, and impacts “on other specially designated areas.”

These new master plans will enable the BLM to evaluate optimal lease parcel configurations and development scenarios, provide for identification of resource conflicts and environmental impacts that would result from development, provide for mitigation, and consider new constraints on development, including the prohibition of surface occupancy and the closure of some areas to leasing.

FIXING ‘CATEGORICAL EXCLUSIONS’

Another sea change ushered in by the new policies involves the circumstances under which the federal government can use so-called categorical exclusions to fast-track energy development.

The problem: The 2005 Energy Policy Act established five situations where proposed oil and gas development can be “categorically excluded” from compliance with national environmental laws. The U.S. Government Accountability Office, the investigative arm of Congress, has found that categorical exclusions were abused and misused during the Bush administration in Wyoming (particularly in the Pinedale area) and elsewhere.

And for what it’s worth, a categorical exclusion was also used to approve the Deepwater Horizon drilling operation, which exploded in April and is still gushing tens of thousands of barrels of oil a day into the Gulf of Mexico.

The solution under the new rules: The new BLM policy makes clear that prior compliance with the National Environmental Policy Act must have occurred before two of the categorical exclusions can be utilized.

It also requires the BLM to conduct a review to determine if “extraordinary circumstances” might be present before any of the five categorical exclusions can be used; if extraordinary circumstances exist a categorical exclusion cannot be used.

WE ENCOURAGE YOU TO PARTICIPATE BEFORE AUGUST 16

BLM state directors have been instructed to develop an implementation plan and timeline for accomplishing the requirements of the new leasing policies.

The state offices must submit an implementation plan to the BLM’s Washington, D.C. office by August 16, 2010, and they are required to submit a post-implementation report to Washington by May 18, 2011.

All told, these leasing reforms will create significant opportunities for the public to become more engaged in oil and gas leasing decisions.

The public can engage in leasing decisions and the development of master leasing plans, and we encourage you to do so.

Your participation in these master plans and throughout the process could greatly improve environmental protections on federal lands.

In addition, we encourage you to submit recommendations to the BLM’s Wyoming state office for areas where master leasing plans are needed prior to the August 16 implementation plan report deadline.

It will be a great benefit if the BLM fully recognizes all the areas that need these master plans.

MORE REFORMS TO COME?

In conclusion, I think it’s important to note that while this oil and gas leasing reform effort is quite significant, even more reforms could follow.

In particular, we are hopeful the BLM will develop reforms regarding how oil and gas operations are conducted after the land is leased—including drilling and well maintenance and production activities.

These activities have very significant environmental impacts, too. We encourage people to contact BLM Director Bob Abbey and Secretary of the Interior Ken Salazar urging them to pursue reforms to the way the BLM oversees operations, after the drilling has been approved.

If you would like to read the full text of the leasing reform instructional memoranda, they can be found here.

Contact: Bruce Pendery, program director, Wyoming Outdoor Council, bruce@wyomingoutdoorcouncil.org

Posted in *All posts, Public Lands & Wildlife

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