Report says oil and gas moratorium effect minimal
August 5, 2021
CASPER — The Biden administration’s pause on federal drilling leases alarmed the oil and gas industry. But a new report argues that its economic impacts will be negligible — even for Wyoming.
Decades of stockpiled leases will enable the industry to continue operating normally through the duration of the freeze, according to an analysis published this week by the Conservation Economics Institute.
During a Zoom call introducing the report on Wednesday, institute director Evan Hjerpe described the pause as an opportunity to reform an uneconomical program without harming communities.
“The federal oil and gas leasing program is woefully inefficient and outdated,” Hjerpe said. “Royalty rates, bonding, minimum lease bids and non-competitive leasing are all outdated and are all very inadequate. This results in heavy subsidies to oil and gas producers, results in pollution and results in a very poor return on investment for U.S. taxpayers.”
But the Petroleum Association of Wyoming challenged the report’s conclusions, contending that its authors are not only advocating for leasing reform, but want to stop current drilling as well.
The report suggests that approximately 16,500 jobs — 4% of total employment in Wyoming — would be at risk if all federal oil and gas production ceased. The Petroleum Association disagrees.
“We’re glad to see anti-energy groups like the authors of this study confirm that ‘oil and gas production on federal lands has played a significant role in Wyoming’s economic development’ even though the report purposely undercounts oil and gas related employment,” Ryan McConnaughey, the Petroleum Association’s communications director, wrote in an email to the Star-Tribune.
President Joe Biden’s Jan. 27 executive order suspending new leases for oil and gas drilling on federal land came as part of a broader effort by his administration to address the causes of climate change.
A federal judge ruled in June that the order was an overreach of executive power and required the government to resume quarterly lease sales — but, to the industry’s dismay, did not dictate how many leases must be offered at those auctions.
The Biden administration is expected to publish a review of federal leasing that introduces program reforms by the end of the summer. The next federal lease sale will likely be held in September.
Federal lands make up a significant share of oil and gas leases in all five of the Intermountain West states — Colorado, Montana, New Mexico, Utah and Wyoming — analyzed in the report.
But because 48% of Wyoming is federal land, the state depends especially heavily on federal leases to facilitate drilling. In 2019, close to 50% of oil and more than 80% of gas produced in Wyoming came from federal lands.
In recent years, Wyoming has also been the region’s biggest buyer of federal drilling leases, the report found.
Between 2016 and 2020, Hjerpe said, over 2,500 leases were sold in Wyoming — more than the other four states combined. Wyoming’s purchases made up over 5 million of the 7.7 million federal acres leased for drilling in the Intermountain West during the last five years.
According to the report, all of those stockpiled Wyoming leases amount to an estimated 67 years of oil and gas drilling opportunities on federal lands in the state — and that number doesn’t account for the additional leases that will be purchased when the program resumes.
“Despite having ample protected areas that draw numerous visitors, and other public lands available for motorized and mechanized recreation, Wyoming has struggled to retain residents and attract migrants,” the report says.
With an average out-migration of 0.5% over the last several decades, Wyoming has fared worse than other Western states. According to the report, drilling may be partly to blame.
“We found a statistical relationship that oil-and-gas-dependent counties are inversely associated with migration rates,” Hjerpe said. “In short, oil and gas dependent counties repel migrants over the long term. What we also found was the direct opposite for protected public lands and conservation.”