IPAA Details Importance of Responsible Federal Development Ahead of DOI Forum

IPAA Details Importance of Responsible Federal Development Ahead of DOI Forum

IPAA and members look to coordinate and cooperate with regulators to find innovative solutions that address climate issues, management of methane and protect and reclaim federal lands 

WASHINGTON, D.C. – In advance of the Thursday, March 25 Department of Interior virtual forum regarding the federal oil and gas program, the Independent Petroleum Association of America (IPAA) submitted a written statement to inform the department’s interim report that the agency said will be released early summer with findings from their comprehensive review. The statement describes the important role of federal lands development to local economies and America’s energy portfolio, details member companies’ efforts and commitment to reduce emissions and support mitigation programs and work with federal and state partners, notes support for the existing multiple use mandate” established by congress, argues against raising the onshore royalty rate, and lists multiple reasons producers possess undeveloped leases.    

Excerpts from the statement submitted by IPAA President & CEO Barry Russell:  

IPAA and our members are extremely concerned about efforts by the Biden Administration to alter the foundational elements of the Department of Interior’s oil and natural gas leasing program for onshore and offshore federal lands. Federal lands and waters together accounted for 22 percent of total U.S. oil production and 12 percent of U.S. natural gas production in 2019, according to the Energy Information Administration. ..Production of oil and natural gas from these areas are an important part of the nation’s energy portfolio and will be key to ensuring the United States remains a key player in the worldwide energy picture. 

Oil and natural gas producers on federal lands continue to meet the new challenges facing the industry. Due to the production of clean, efficient natural gas, the United States continues to be a world leader in reducing emissions that contribute to climate change. IPAA and our members are committed to reducing methane emissions and are also supportive of climate mitigation programs such as carbon capture and sequestration programs that hold the potential to significantly reduce CO2 emissions in the atmosphere Our member companies continually strive to reduce the footprint on federal, state, tribal and private lands and work closely with our federal and state partners to deliver oil and natural gas to the nation in an efficient and environmentally sound fashion. 

The Mineral Leasing Act and the Outer Continental Shelf Lands Act prescribe the necessary and proper rules and regulations to allow oil and natural gas producers to operate on federal lands… The multiple use mandate makes it clear that mineral production on federal lands is one of many uses for federal lands, including recreation, agriculture, among other uses for the American people. However, it is clear that mineral production is a key aspect of the “multiple use mandate” established by Congress and cannot be halted at the whim of the President or the regulatory agencies. 

One issue sure to be highlighted at the forum is that of the royalty rate for federal onshore producers. Some have argued that the current rate of 12.5% is too low: however, as noted below, raising the royalty rate will not necessarily generate increased revenue to the federal treasury and to states for oil and natural gas production. There are many factors that play into a company’s decision on whether and where to bid and lease for mineral extraction on federal lands… the most impactful are the regulatory costs associated with a project... Adjusting the royalty rate in isolation without taking other critical factors into account will undoubtedly have an impact on a company’s decision to develop federal resources or not. 

“Earlier this month, Governor Michelle Lujan Grisham (D-NM) sent a letter to President Biden asking him to consider the important impacts oil and natural gas production has on federal lands has in her state. In the letter, Governor Lujan Grisham says the following: 

“These revenues fund public schools, infrastructure projects, and a range of other priorities, including environmental initiatives. An analysis conducted by our state Department of Finance and Administration shows that New Mexico stands to lose approximately $709 million between fiscal years 2021-2025 if there’s a relatively modest 10 percent decline in production…” 

“Many anti-development groups believe that domestic oil and natural gas producers should not be issued new federal land leases until current ones are developed… 

“Undeveloped leases could be the result of numerous issues, such as: 

  • Regulatory and permitting delays associated with exploring and producing on those leases; 
  • Litigation from anti-development groups; 
  • The strategy to lease multiple blocks of adjoining acreage to efficiently explore promising natural gas and oil prospects should one prospect prove successful (a “one-at-a-time” approach); 
  • The continuous need to raise capital to develop the prospects (i.e., once a block is leased, development does not occur until the producer shows his potential financiers the lease and its potential.) 
  • After further study, the area could be determined to be non-productive and thus would not be developed... 

“Responsible development of federal lands in the West and in federal offshore waters with a regulatory program designed to protect the environment and public is achievable. IPAA and our members look to coordinate and cooperate with federal and state regulators to find innovative solutions that address climate issues, management of methane and protect and reclaim federal lands…” 

About the Independent Petroleum Association of America
The Independent Petroleum Association of America (IPAA) is a national upstream trade association representing thousands of independent oil and natural gas producers and service companies across the United States. Independent producers develop 91 percent of the nation’s oil and natural gas wells. These companies account for 83 percent of America’s oil production, 90 percent of its natural gas and natural gas liquids (NGL) production, and support over 4.5 million American jobs. Learn more about IPAA by visiting www.ipaa.org and following @IPAAaccess on Twitter.