BLM proposes new fees for oil and gas wells

2014-07-24T07:44:00Z BLM proposes new fees for oil and gas wellsBy BENJAMIN STORROW Casper Star-Tribune The Billings Gazette

CASPER, Wyo. — The U.S. Bureau of Land Management is requesting authority from Congress to levy new inspection fees on oil and gas wells drilled on federal lands, in a bid to address the large number of uninspected wells in Wyoming and throughout the country.

The request is not new. BLM submitted similar proposals in each of the last two budget cycles. But the stakes are higher following a series of unflattering reports that showed a department struggling to keep up with inspections amid growing domestic energy production.

The issue is especially important in Wyoming. The Cowboy State leads the country in energy production on federal land — and uninspected federal wells. A recent report by the Associated Press found 632 wells flagged for potential environmental or health hazards went uninspected in Wyoming between 2009 and 2012. Colorado, with 244 uninspected high risk wells, was second.

BLM Director Neil Kornze, in a speech last week to the Rocky Mountain Law Foundation in Vail, Colo., called the department’s inspection program “lagging” and said the bureau needed to do better.

“We are now seeking to fund inspections through a fee system that will allow us to be much more responsive to the needs of industry and, importantly, to meet the foundational safety and accounting responsibilities of our oil and gas program,” he said.

The proposal faces a potentially steep climb in Washington. Wyoming’s congressional delegation expressed wariness about the request, saying they worried it could drive oil and gas companies from federal land.

“If that happens, Wyoming would likely lose more jobs and revenue than any other state,” said Laura Mengelkamp, a spokeswoman for Republican U.S. Sen. John Barrasso.

A spokesman for Rep. Cynthia Lummis, a Republican, said the bureau needed to “look within” to address its budget problems.

Kathleen Sgamma, vice president of government and public affairs at the Western Energy Alliance, an industry group, was even more outspoken in opposition. BLM has transferred resources toward administering renewable energy projects and conducting redundant environmental assessments, she said.

“You have the BLM director turning around and saying he needs more money out of the oil and gas industry to do his job after he made those management decisions,” Sgamma said.

Oil and gas companies already pay permitting fees, she noted. Raising fees further creates a burden on an industry that already contributes around $54 in tax revenue for every dollar spent by BLM administering its oil and gas program, Sgamma argued.

A May report by the Government Accountability Office, the congressional watchdog authority, said BLM does not track information on new and existing wells. The GAO recommended field offices adopt a consistent data management system for tracking federal wells.

The AP investigation, which was based on BLM data, found the bureau failed to inspected 1,400 of the 3,486 high-risk wells drilled on federal lands between 2009 and 2012. High-risk wells are those deemed to have potential environmental or health concerns.

Johnson County has the highest concentration of uninspected federal wells in the country, accounting for 249 of the 632 wells that went unmonitored in Wyoming. Campbell, Natrona and Sublette counties followed with 161, 149 and 36 uninsepcted wells, respectively.

Those numbers show BLM cannot enforce its existing rules, yet alone keep up with advancements in drilling technology, said Amy Mall, senior policy analyst at the Natural Resource Defense Council, an environmental group.

She dismissed concerns that inspection fees would drive energy companies from federal land, noting similar fees have been levied on offshore drilling operations without adverse impact on the industry.

Energy companies are already paying a discounted price for drilling on federal lands compared to what states and private landowners expect, she said.

The federal royalty rate paid by oil and gas companies is 12.5 percent. In Texas, the rate is 25 percent on state lands while North Dakota collects 18.75 percent. Wyoming’s royalty rate is 16.6 percent.

“They can afford what they are charged now, and afford a little more to ensure proper inspections and that they are complying with the law,” Mall said. “The laws are there for a reason, but they are not meaningful unless they are enforced.”

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