(John Kemp is a Reuters market analyst. The views expressed are his own)
By John Kemp
LONDON, April 22 (Reuters) - The White House likes to claim a share of the credit for the drilling revolution that has transformed North America’s energy production and security.
Except the revolution has largely taken place on private rather than public land, and energy producers feel frustrated about the numerous obstacles and long delays in obtaining permission to drill in areas directly controlled by the administration.
“Crude oil production has grown each year President Barack Obama has been in office to its highest level in 17 years,” the Council of Economic Advisors wrote back in the summer of 2013. “Over the past four years, domestic oil supply growth has accounted for over one-third of global oil production growth.”
“Government-funded research supplemented private industry’s work to develop the technology that sparked the boom,” the council explained (“Reducing America’s dependence on foreign oil”, Aug. 29, 2013).
The theme has often been taken up by the president himself to underline his commitment to an “all of the above” approach that embraces fossil fuels such as oil and gas, renewables like solar and wind as well as measures to reduce wasteful energy consumption while increasing efficiency.
“We are drilling,” the president told an audience in Maryland in 2012. “Under my administration, America is producing more oil today than at any time in the last eight years. We’ve quadrupled the number of operating oil rigs to a record high.”
The president assured his listeners that “my administration has opened millions of acres of land in 23 different states for oil and gas exploration”.
“So do not tell me that we’re not drilling. We’re drilling all over this country.”
Dismissing complaints that regulations make it hard to obtain permission to drill, the president joked: “I guess there are a few spots where we’re not drilling. We’re not drilling in the National Mall. We’re not drilling at your house. I guess we could try to have, like, 200 oil rigs in the middle of the Chesapeake Bay.”
Oil production on federally owned and managed lands, where the U.S. government has most influence on the outcome, has fallen since 2009, bucking the nationwide trend, according to a report by the nonpartisan Congressional Research Service (CRS).
All the increase in oil and gas production has come from land in private or state ownership, where the federal government plays a minor role (“U.S. crude oil and natural gas production in federal and non-federal areas”, April 10, 2014).
U.S. oil production has climbed almost 40 percent from 5.233 million barrels per day in 2009 to 7.235 million barrels per day in 2013, the CRS explains.
But while daily output from non-federal lands has risen 60 percent to 5.576 million barrels, production in federal areas has actually fallen 6 percent to 1.658 million.
Production from federal onshore areas has risen almost 80,000 barrels per day (28 percent) but the increase has been slower than on private and state lands, and more than offset by reduced output in offshore areas.
The share of oil produced in federal areas has fallen from 34 percent in 2009 to just 23 percent in 2013.
“Claims that very recent federal policies have had a significant role in the increase in domestic oil production are therefore deeply misleading,” Senator Lisa Murkowski, the top Republican on the Senate Energy and Natural Resources Committee, said in a report last year.
“About 96 percent of the increase in domestic oil production is attributable to growth on state and private land. Indeed, the overall domestic increase is in spite of federal policies that stymie production,” she complained (“Energy 2020: A vision for America’s energy future”, February 2013).
It is taking longer and longer for would-be drillers to obtain the necessary permission to bore oil and gas wells on federally managed lands.
The average time taken to process an application for permit to drill (APD) had risen to 307 days in 2011, from 218 days in 2006.
The federal government’s Bureau of Land Management has almost halved the time it takes to process an APD, from 127 days to 71. But the amount of time it takes the industry to complete the APD has soared from 91 days to 236, as the requirements become more onerous.
State regulators in some states, such as North Dakota, process drilling permits far more quickly, in days or weeks.
Like many other representatives and senators from energy-producing parts of the western United States, where federal lands are concentrated, most but not all of them Republicans, Murkowski called for an expedited permitting process to speed up drilling.
But for the rest of this administration, the obstacles and delays to drilling on federal lands look set to get worse rather than better.
The U.S. Department of the Interior, which has lead responsibility, shows little sign of responding to complaints about delays.
It faces conflicting pressure from environmentalists, worried about pollution, landscape blight and greenhouse emissions, and oil and gas producers, anxious to be allowed access to resources.
Under the Obama administration, the department has prioritised environmental concerns. Conservationists such as the Sierra Club and the Natural Resources Defense Council have been among the administration’s staunchest supporters.
The Interior Department recently issued a 32-page landscape mitigation plan to accommodate both infrastructure development and conservation needs on the lands it controls (“Strategy for improving the mitigation policies and practices of the Department of the Interior”, April 10, 2014).
In theory, it is meant to be part of an attempt to strike a better and more effective balance between the need to promote development while preserving important wilderness areas and protecting habitats.
In practice, the strategy, like much of the work coming from the department in recent years, is long on theory and short on ideas for practical improvements.
“Given the inherent and sometimes difficult conflicts associated with the department’s responsibilities for both managing development and conserving the natural and cultural resources of the nation’s lands and waters, effective mitigation of the impacts of development is critical,” the strategy acknowledges.
It promotes the idea of a “landscape-scale” approach to solving the problem, but fails to come up with any specific ideas for how to achieve that goal.
“Rigid bureaucratic procedures are now straining to accommodate escalating expectations for federal lands at the same time that the resilience of those lands is being increasingly compromised,” the strategy admits.
Balancing the competing demands on federal lands from mineral developers, farmers, conservationists and local communities has long proved a thorny problem for Interior.
Most disputes can be traced back decades. Under the current administration, however, the conflicts have been resolved by making it exceptionally difficult to drill on federal lands.
Many oil and gas developers have given up trying. APD applications have actually been falling in recent years as exploration and production companies turn their attention to resources that are easier to access.
In contrast to fossil fuels, Interior has encouraged the development of wind farms and solar installations in federal areas.
Under a regulation approved in 2013, infrastructure such as transmission lines and roads associated with renewable energy is now treated separately, and more favourably, than comparable developments linked to mining and fossil energy, in a move specifically intended to encourage renewable energy development on public lands.
Extensive solar developments have also received more favourable treatment under a “roadmap for utility-scale solar development on public lands” approved in 2012.
Under the current administration, the playing field has been deliberately tilted in favour of renewables such as wind and solar and against fossil fuels like gas and oil.
That is consistent with the administration’s stated climate-change goals, though it hardly constitutes the “all of the above” approach professed by the White House.
But despite industry complaints, the bias against oil and gas development on public lands looks set to remain in place at least until the administration’s term ends in January 2017. (Editing by Dale Hudson)