Conservationists are cheering the Biden administration’s 60-day pause on new energy development on public lands as a chance to overhaul an antiquated leasing program that has not been modified in decades. Oil and gas producers are not happy and they are warning of severe economic shocks from the decision announced Thursday.
“Bowing to the environmental left to fulfill a campaign promise and to prove his crew with climate change activists has real consequences for Westerners,” said Kathleen Sgamma with the Western Energy Alliance. “This is a sacrifice of real people’s livelihoods and it does nothing for climate change. If we don’t produce oil and natural gas in the West it gets produced somewhere else and if it comes from overseas, it has even more climate change impact.”
Oil and gas harvested from federal lands account for about a quarter of all U.S. annual production but it pays a lot of bills.
The Bureau of Land Management has about 26.3 million acres under lease to oil and gas producers right now, including 2.5 million acres in Colorado.
More than $8 billion in oil and gas royalty revenue — set at a rate of 12.5% in the 1920 Mineral Leasing Act — as well as fees from other natural resources were distributed in fiscal 2020 to states and counties, the Reclamation Fund and the U.S. Treasury. The Treasury then distributed $524 million to the Land and Water Conservation Fund. That conservation fund has received more than $20 billion in the last 50 years and last year’s Great American Outdoors Act directed $900 million on oil and gas royalties into the fund every year.
The Biden order suspending new leases and drilling on public land threatens the flow of oil and gas dollars for conservation. The order also could pinch Western economies that rely on the energy industry.
A study last month by University of Wyoming energy economic professor Timothy Considine estimated Colorado would lose $586 million a year between 2021 and 2025 with a moratorium on new leases on public land and $700 million a year in those five years under an outright ban on drilling. Considine’s study showed Colorado posting $59 million a year in oil and gas tax revenue every year through 2024 under a leasing moratorium and $73 million a year through 2024 under a drilling ban.
Across eight states, Considine showed tax revenue losses of $2 billion a year through 2024 under a drilling ban. By 2040, Considine concluded, the nation’s gross domestic product would decline by $670.5 billion and job losses would exceed 351,000 a year across those eight states.
The Ute Indian Tribe of Utah’s Uinta and Ouray reservations on Thursday asked the Interior Department’s Acting Secretary Scott de la Vega to exempt the tribes from the energy-development suspension.
“Your order is a direct attack on our economy, sovereignty, and our right to self-determination,” reads the letter sent to de la Vega.
Many conservationists hope that the temporary suspension of drilling and leasing Bureau of Land Management acres for oil and gas development kickstarts an overdue overhaul of natural resource management programs. And perhaps that reform includes an expansion of funding tools for conservation and public lands that rely less heavily on the country’s oil and gas production, said one Western economist.
The Great American Outdoors Act is supposed to direct up to $1.3 billion in fees collected from energy producers on BLM land toward maintenance backlogs on National Park Service and National Forest Service lands. In Colorado, 12 of the Park Service’s properties have $238.2 million in delayed projects, led by $78 million in Rocky Mountain National Park.
The Great American Outdoors Act, which Congress and the Trump administration approved last fall, also directed $900 million a year from offshore energy production to the permanently funded Land and Water Conservation Fund. And other proposals, like the Recovering America’s Wildlife Act, are vying for even more energy funding for conservation.
Last year, the Interior Department collected $113.7 million in revenue from oil, gas, coal and other natural resource extraction on federal lands in Colorado. In fiscal year 2019, the bureau issued 1,841 new leases, including 62 in Colorado, down from 105 the previous year and a high of 613 in 2001.
Oil and gas revenue collections in Colorado were down last year more than 50% from 2019, marking the lowest collection since at least 2003. Volatility in the energy market and declining revenues collected by the Interior Department — the $7.6 billion in natural resources revenue collected in 2020 was the third lowest since 2003 — creates rollercoasters of revenue, making it difficult to budget for conservation.
But even in a down market, that energy revenue easily reaches the $1.3 billion directed by the Great American Outdoors Act toward land protection, said Sgamma, who argues the president’s ban on oil and gas development violates the 1920 Mineral Leasing Act and will be denied by the courts when challenged.
“So the only threat right now to that conservation funding is from the Biden Administration, not from the market,” she said.
Tate Watkins is an economist with the Property and Environment Research Center, a Montana research group that explores market-based solutions to environmental problems. Last year he warned about marrying conservation funding to federal energy revenue. He thinks the pause in energy leases and drilling could be “a wake-up call” to start exploring other ways to fund conservation that rely less on oil and gas.
“There is so much messiness with the outdated systems with these programs. It’s an anachronistic funding system to take oil and gas money and say we are going to conserve some land with it,” said Watkins, whose “A Better Way to Fund Conservation and Recreation” report last fall suggested a user-based system mirroring hunting and fishing licenses to help support public lands.
“If recreationists and conservationists were bringing substantial resources to the table, they would have more political clout when it comes to public lands issues,” he said. “Maybe this pause in energy development could be a wake-up call to say, ‘Hey, let’s start thinking about these alternatives before we are eventually forced to find other funding in the next decade or two.’”
Ann Morgan, a 30-year BLM executive who served as the bureau’s Colorado state director from 1997 to 2002, said the pause is a good opportunity to hear from conservation groups as well as oil and gas companies and associations about reforming a program that has gone unchanged for decades despite consistent criticism and industry contributions to climate change.
Morgan would like to see the BLM revamp its land use regulations to identify places where oil and gas development is — and is not — appropriate.
“About 90% of BLM lands are open to oil and gas and anyone can anonymously ask for those lands to be put up for auction regardless of the values they might hold,” Morgan said. “The BLM should be in charge of deciding if, where and where oil and gas leasing should take place on public lands.”
Morgan thinks the Biden administration and the Interior Secretary nominee Deb Haaland will continue to tinker with the management of public lands and the natural resources industry on federal turf.
“There is no doubt that conservation and natural resource management in general is underfunded and we need to look at a wide array of funding. There is no one funding source to fit the bill,” she said. “I would expect a lot of these kinds of things to happen once the new secretary is in place and her priorities filter down to different agencies, including the BLM.”