Government Policies Costing the West
posted on: May 06, 2010
According to a recent IPAMS survey, at least $3.9 billion of capital investment has been shifted from the Rockies to other regions in 2010 because of government policies. The survey was performed to understand which factors might be limiting the regional competitiveness of the natural gas and oil sector in the West. It helps to gauge the relative importance of economic conditions, commodity price, government policies, regulations, and fees on natural gas and oil development in the Rockies.
Activists and the Obama Administration maintain that federal land management decisions have had no impacts on development, pointing to commodity price as the singular explanation for a slowdown in activity. The Wilderness Society went so far as to publish a report entitled “Needed Policy Reforms Not Hindering Gas Production: It’s the economy” Click here to read their report.
The data collected in the IPAMS survey of 36 companies will be helpful as we speak to federal, state and local policymakers who are concerned about employment, economic growth and revenue. The survey provides a factual understanding of the financial impacts of government policies are having on exploration. Here are a few of the findings from IPAMS Survey on Regional Competitiveness:
- 74% of respondents downsized 2010 capital investment plans in the Rockies.
“BLM leasing and permitting is too unpredictable to risk stranding capital that can be placed in other areas.”
“The Federal APD (Application for Permit to Drill) process is way too expensive.”
- $1.1 billion of capital investment has been shifted out of the Rockies for 2010.
“At a time of depressed natural gas prices, it should be a good time for investment in the pricing cycle (buy low, hopefully sell high). We would be considering both buying undeveloped leasehold and existing production but forego these investments because of delays in obtaining APDs and increased costs and regulatory hassles.”
- $2.8 billion has not been invested in the Rockies because of federal constraints.
“If federal APDs could be guaranteed to be approved with the 45 days mandated in Onshore Order No. 1, we would move back onto federal lands in the Rockies.”
- $708 million has shifted from federal to private lands, thereby reducing return to American taxpayers on energy resources they own.
“Timing kills industry. Because all leases have a finite timeline, we prefer fee/state leases because we can be certain we can get a timely lease, APD, and the lease will not be revoked or suspended after we have invested significant funds.”
“State agencies require much of the same information as federal agencies but approve permits much faster.”
- 90% of respondents will continue to divert investment until the regulatory environment changes.
“Capital is available to be deployed for a short period of time. Unless there are certainties that capital can be invested with a reasonable rate of return, the Rockies will become less and less attractive for investment. Timely access to federal minerals, reasonable environmental requirements and an administration willing to work together to explore and exploit federal mineral resources is key to renewing our investment in the Rockies.”
“The new Colorado state oil and gas regulations have made us shift our focus to other states.”
Click here to access the entire survey.
Thankfully, the West has some strong leaders in Washington who understand the impact that federal mismanagement can have on jobs and investment. Senators Robert Bennett (R-UT) and John Barrasso (R-WY) sent an excellent letter to Interior Secretary Ken Salazar last week expressing their intention to introduce legislation blocking Interior from implementing the onshore policies that Salazar announced in early January. The Senators make use of the IPAMS survey data and point out the danger of burdensome new polices on investment and economic growth in the West. The Senators urge Interior to engage the public and analyze the economic impact before issuing the new policies.
