FLASHBACK: Repealing Regulations Could Double U.S. Fuel Supply

This article originally ran on August 13, 2001

Like a miser, the U.S. government is sitting on vast quantities of oil and natural gas that it won’t let anyone touch.

Congress has ordered a study, yet unfinished, to determine the full extent of U.S. fossil fuel reserves locked up by federal regulations. The preliminary indication is that about one-third of all gas and oil on federal property has been put off-limits to development.

In 1995, the United States Geological Survey (USGS) estimated there were untapped reserves of over one quadrillion cubic feet of natural gas and 112 billion barrels of oil (BBO) lying beneath all U.S. land territories and state-owned waters (federally owned waters were not included in the survey).

In 1998, the USGS reported that between 106.4 and 299.2 trillion cubic feet (TCF) of natural gas reserves and 4.6 to 13.4 BBO reserves lay beneath federally owned lands alone. The government also estimated that “undiscovered resources” of up to 88 BBO and 468 TCF lay beneath federal waters in the Atlantic, Pacific and Gulf of Mexico.

That means the federal government may be sitting on nearly 770 TCF of natural gas-enough to supply the entire nation for 30 years-and over 100 BBO, enough for 10 years.

How much of that is available for drilling and development and how much is locked up by regulations? That is not an easy question to answer.

The federal bureaucracy is a hodgepodge of overlapping agencies, which collectively have numerous means, direct and indirect, to lock up oil and gas on the 630 million acres controlled by the federal government (27.7% of all U.S. territory).

To start with, all National Parks are off-limits to any sort of drilling or mining. That takes 83 million acres off the table.

National Forests, which are supposed to function as timber reserves, take up 192 million acres. Oil and gas found here is subject to several restrictions on development.

First, individual forest chiefs, when drawing up their forest management plans, can rule that unique habitats or logging opportunities are more valuable than the underground oil and gas reserves and prohibit drilling in all or part of their forest.

An individual forest chief could also ban any motorized equipment from the forest-thus preventing any exploration or drilling.

Congress can also lock up a National Forest, or part of a National Forest, by declaring it a “wilderness” area. That puts it off-limits to all mechanized equipment.

The President, as the country learned with Bill Clinton, can unilaterally convert National Forest land into a “national monument,” which also would prevent drilling and mining.

President Clinton issued a much-contested rule against new roads in National Forests, which, if it goes into effect, would lock up at least 58.5 million acres (31%) of national forest land, making it impossible to develop for oil or gas. President Bush has blocked the rule temporarily.

Jeffrey Eppink, vice president of Advanced Resources International, an energy consulting firm, testified in Congress that the areas affected by the roadless rule alone probably hold at least 11.3 TCF of gas and 550 million barrels of oil, and maybe as much as twice that.

In the Beaverhead National Forest in Montana, for example, oil and gas leasing is legally prohibited on 25% of the land. Another one-fifth of the forest, though not directly off-limits to drilling, has a “No Surface Occupancy” rule, meaning you may extract oil from beneath it, but you may not set up drilling machinery on top of it.

Yet, another 35% of the land is governed by other restrictions, principally seasonal bans on drilling designed to protect migratory birds and the mating habitats of endangered species.

On 19% of the land, “standard terms” leases can be issued to energy companies, but even there institutional hurdles can sometimes prevent any drilling. After obtaining a lease, an oil company still must apply for a permit to drill, and that process can be thorny. The Environmental Protection Agency can intervene, or the Endangered Species Act can be invoked-possibly, even by a single federal judge acting at the urging of an environmentalist group.

Litigation or ad hoc restrictions on individual leases can increase the cost of drilling to the point where it becomes unprofitable.

The Bureau of Land Management (BLM) controls even more land than the Forest Service-a whopping 264 million acres. BLM officials estimate that 22 million of these acres have been legally “withdrawn” from oil or gas drilling-mostly by wilderness or monument designations.

Additionally, BLM field offices create land-use plans, akin to forest-management plans. These plans can contain provisions that directly or indirectly ban drilling, or make drilling cost-prohibitive. According to the Gas Research Institute, it costs between $60,000 and $250,000 to complete environmental impact statements for large lease areas.

When it comes to offshore resources, the Mineral Management Service of the Interior Department is the primary federal steward. States control the waters within a few miles of their shore, but the next hundred miles beyond that are federal waters. The Outer Continental Shelf (OCS), as the land is called beneath the shallow ocean water, is 80% off-limits to oil and gas drilling. The Pacific, Atlantic and Eastern Gulf of Mexico are all under moratoria. The National Petroleum Council, a government-chartered advisory agency, estimates that 76 TCF and 16.4 BBO is under lock and key in the OCS.

The House voted in June to overturn a Clinton Administration plan that would open up one part of the Eastern Gulf (click here for related story), and no one in official Washington has publicly called for opening up the Atlantic or the Pacific for drilling.

Luckily, experts estimate that two-thirds of the untapped OCS gas and oil are in the Central and Western Gulf, where drilling is generally allowed. One-third of the country’s offshore oil, however, lies uselessly buried.

Those who favor expanded offshore drilling point to Canada to make their case. Off Nova Scotia, Canada has pumped 12 TCF and 2 BBO, while the U.S. hasn’t gotten a drop off the coast of Maine, leaving New Englanders dependant on Canada for expensive winter heat.

Last year, Congress passed a bill requiring the Departments of Interior, Energy and Agriculture to inventory U.S. oil and gas resources and the restrictions on their access. As a model, they are using a study of the Greater Green River Basin conducted by Advanced Resources, International (ARI). (The basin is in Southern Wyoming and Northern Colorado.)

ARI found that of 116.8 TCF of gas in the basin, 34.5 TCF were legally completely off-limits, while another 44.9 TCF was available with restrictions. Nearly half of the restricted gas lies under lands that are off limits for six months or more.

Seasonal restrictions sometimes only slow down or delay drilling, but sometimes they can entirely block it. Gas that is 14,000 feet under the surface, for example, requires at least six months of drilling. If the territorial habitats of the Sage Grouse keep a company from drilling for half the year, it basically prevents drilling altogether. Two major gas veins in the Green River Basin lie deeper than 14,000 feet.

Although a definitive answer awaits the completion of the government survey, existing studies indicate that between one-third and one-half of natural gas reserves in the United States are currently off-limits to development. Experts suspect that the same is true of landlocked oil. One-third of the offshore oil and gas is out of reach.

On May 18, President Bush issued an Executive Order requiring federal agencies to issue Energy Impact Statements, similar to Environmental Impact Statements, showing the effect any action would have on the U.S. energy supply.