The federal government does not develop oil and gas itself, but instead, leases development rights to private industry. Leasing demand is a function of market conditions and national energy consumption. Leasing is guided by the Mineral Leasing Act of 1920, and each BLM state office is required to hold lease sales at least four times per year.

 

Leasing is an open, public process that is fairly long start to finish. Land use plans are the basis for all decisions BLM makes concerning public lands and minerals, and that’s where the leasing process starts. A land use plan, often called a resource management plan or RMP for short, includes an environmental impact statement and normally takes anywhere from two to four years to complete. During that time, the public has numerous opportunities to weigh in on the decisions that will result. Other federal surface-managing agencies, such as the Forest Service, make leasing decisions through a similar land use planning process.

 

Among other things, the plans let the public know where leasing will be considered and where leasing will not be allowed. They may also note concerns that need to be addressed through leasing stipulations that restrict activity in some way. They often also provide mitigation measures that can reduce impacts from oil and gas development.

 

An important part of a BLM plan is some forecasting we do. Called the reasonably foreseeable development scenario or RFD, this part of the plan predicts the level of development that could take place during the life of the plan. Once the decision is signed and the land use plan or amendment is approved, a program is established to systematically track and compare the projections made in the selected alternative to actual activity.  If at some point in the future it becomes evident that the impacts predicted as a result of the RFD will be significantly exceeded, an updated environmental analysis would be completed.

 

Industry nominates areas of federal minerals it wants to lease. (Click here for new Expression of Interest requirements.)  When we at BLM receive the nominations, we first make sure that the area nominated is open to leasing through a land use plan and that the land use plan still passes muster with the National Environmental Policy Act (NEPA). If the answers are both yes, then we create lease parcels covering the nominated areas. 

 

Then we determine what stipulations should be placed on each parcel. Stipulations restrict activity on the surface, the time the activity can take place, or both. For example, if an area covers winter range for wildlife, a “timing” stipulation can ban activity during the winter. If an area has important surface features that need to be preserved, a “no-surface-occupancy” stipulation can prevent any use of the surface and force a company to drill directionally from another location. During this phase we also share the proposed parcels and stipulations with the Montana Department of Fish, Wildlife and Parks so they can provide input as well.

 

When this work is completed, we build a sale list featuring all the parcels we will offer. This list is posted at our office in Billings, on the internet at least 45 days before the sale, and it’s also sent to those requesting it. 

 

Finally, leases are offered for sale at auction. Typically, more leases are offered than are actually purchased. The money collected from the auction is split with the state. Lessees pay an annual rental on the lease until it expires or until oil or gas is produced when the annual rental is replaced by a royalty (normally 12.5 percent of the sales price). The rental fees and royalties are also split with the state.

 

Just because a company acquires a lease, doesn’t mean that it can begin drilling any time or anywhere on the lease it pleases. First a leaseholder must file an application for permit to drill, or APD. The APD tells BLM virtually everything about a proposed well, where it planned, when the company wants to drill, details about how the drilling will be done and the environmental safeguards that will be used, how equipment will be moved on and off the site, and so on. We analyze the APD and prepare an environmental document specific to the proposal that determines if, when and how drilling may be approved. In addition to stipulations that were originally placed on the lease, we may add further restrictions and environmental protections to the APD in the form of conditions of approval.

 

If a company makes it through the process and drills a successful well (one that is commercially viable), it may wish to further develop its lease through additional wells. The company would have to submit a plan of development that lays out the scope of its development proposal and contains an APD for each new planned well. If the level of development outlined in such plans could result in cumulative impacts that have not been analyzed, a comprehensive environmental study will be completed before decisions are made for long term development activity. This study would also follow all NEPA requirements. The results of the study may alter the proposal and/or add mitigation or protective requirements.

 

Throughout development, BLM monitors oil and gas operations, and our inspection totals continue to exceed our required quotas. For example, from 2003 through 2007 we conducted some 8,600 drilling, production, plugging and environmental inspections. Our monitoring continues throughout the life of a well and does not stop until a well is properly plugged and the site has been reclaimed. 

 

Oil and gas development began in Montana in the early 1900s and has been part of the state’s culture ever since. The major areas of oil and gas production are north of Great Falls in the Cut Bank area, southern Blaine County, in the Sidney area, and near Baker. The state’s first oil well was completed in 1904 in what is now Glacier National Park. The well played out relatively quickly and is covered by Lake Sherburne today. The state’s first gas well was in 1912 in the Cedar Creek anticline in eastern Montana. The Cedar Creek field remains one of Montana’s largest producing natural gas fields today. More historic information is available at the Montana Board of Oil and Gas Conservation’s website.

 

From 2000 through 2007, BLM processed an average of 229 APDs per year for Montana. The range is from a high of 362 in 2005 to a low of 149 in 2001. During that same period (2000-2007) we issued an average of 270 leases per year ranging from a high of 404 in 2000 to a low of 190 in 2004. 

 

Leasing remains a market-driven activity and has been fairly consistent over recent years. From 1989 through 2007, we issued an average of 260 leases per year in Montana. Over that period the range was from a high in 1998 when 419 leases were issued to a low of 190 leases issued in 2004. 

 

But despite how many leases may have been issued in any one year, it’s important to remember that leases don’t last forever. Unless a lease is actually producing, it will expire after 10 years just as hundreds do annually.

 

And finally, just as Montana’s farmers cannot supply the nation’s total demand for wheat, Montana energy production fills only part of the national demand. However, every barrel of oil or cubic foot of gas produced domestically is one less than we have to import. BLM is charged with overseeing responsible energy development from the publicly-owned resources. We take this duty seriously as part of our mandate as the nation’s stewards of the public lands.

 

More details about BLM’s oil and gas program in Montana and the Dakotas can be found at http://www.blm.gov/mt/st/en/prog/energy/oil_and_gas.html.