Mr. Erik Milito - The House Committee on Natural Resources ...

January 2012
In May 2010, BLM suspended 61 leases that were issued in Montana (U.S. DOI, 2010).
In December 2010, the DOI announced a new “Wild Lands” policy, a new federal lands categorization
that critics contend will force land managers to treat the lands as de facto wilderness (U.S. DOI, 2010).
After Congress inserted a rider that prohibited the Wild Lands policy from proceeding in the current fiscal
year, the DOI was forced to withdraw the plan, though the practical availability of these lands for energy
production still remains uncertain.
In March 2011, BLM placed new bureaucratic barriers in the way of commercial oil-shale development as
part of a settlement with environmental groups (Proctor, 2011). This new rulemaking will make it difficult, if
not impossible, to turn R&D oil shale leases into a commercial oil shale production program, at the point
in time technological advancement allows.
In June 2011, the head of the Environmental Protection Agency was reported saying that, at the end a
2-year study on hydraulic fracturing, EPA would promulgate new federal restrictions on hydraulic fracturing
(Travers, 2011). Currently, hydraulic fracturing is regulated by the States, and many States have added new
regulatory requirements to the practice in recent years. Still, new federal regulatory restrictions surrounding
the practice of hydraulic fracturing, and the inevitable barrage of anti-development litigation such rules
would invite, is of widespread concern, since hydraulic fracturing is the key to accessing billions of barrels
of oil and trillions of cubic feet of natural gas in “unconventional” oil and gas plays across the western U.S.
Various departments and agencies are considering new hydraulic rules and regulations.
In May of 2010 the DOI issued a policy that would require redundant environmental reviews in drilling
locations where a review had already recently been conducted. In years past, an expedited procedure
would have minimized additional reviews for already analyzed drilling locations- ultimately allowing
operators to move forward in a more timely fashion. In August of 2011, a judge ruled against the
government’s new policy, stating that western oil and gas companies had been harmed, and placed
a nationwide injunction against the new redundant requirements promulgated by DOI earlier in 2011
(Western Energy Alliance vs. Ken Salazar et al.).
On a practical level, the current regulatory environment has not only resulted in fewer leases being issued by the BLM,
but when leases are issued, these new restrictions make it more difficult, expensive and time-consuming to translate
those leases into actual drilling permits, new drilling activity, and eventual production. Some have attempted to deflect
blame for a decline in new federal production by attributing it to energy companies that have not developed existing
federal oil and gas leases. But according to one industry survey, more than 50% of all federal lands that have been
leased but not produced are hindered by post-leasing, pre-permitting, pre-drilling administrative processes
(Western Energy Alliance, 2011).
Taken together, these recent policy decisions seem to have created an atmosphere which directly hinders future oil
and natural gas production on federal land. Increased regulatory uncertainty – while harmful to business in general –
is detrimental to an industry that depends on long-term investments for developing resources and technology necessary
for energy production.
Beyond just the impact on domestic energy production, this regulatory environment has the potential to encourage energy
producers to invest more of their resources in foreign nations and foreign energy reserves.
17