You are here

Trump policy changes brings fracking boom to US

The administration is auctioning off millions of acres of drilling rights to oil and gas developers, driving up oil production and govt revenue from lease sales and royalties

Converse County, Wyoming

THE parade of trailer trucks rolling through Jay Butler's dusty ranch is a precursor to a new fracking boom on the vast federal lands of Wyoming and across the West.

Reversing a trend in the final years of the Obama presidency, the Trump administration is auctioning off millions of acres of drilling rights to oil and gas developers, a central component of the White House's plan to work hand in glove with the industry to promote more domestic energy production.

Seeing growth and profit opportunities at a time of rising oil prices and a pro-business administration, big energy companies such as Chesapeake Energy, Chevron, and Anschutz Exploration are seizing on the federal lands free-for-all, as they collectively buy up tens of thousands of acres of new leases and apply for thousands of permits to drill.

sentifi.com

Market voices on:

More than 12.8 million acres of federally controlled oil and gas parcels were offered for lease in the fiscal year that ended Sept 30, triple the average offered during president Barack Obama's second term, according to an analysis by The New York Times of Interior Department data compiled by Taxpayers for Common Sense, a nonpartisan group that advocates budget discipline.

Likewise, the acreage actually leased by energy companies on federal lands hit its highest level last year since 2012, the height of the nation's initial fracking boom. After 2012, a combination of Obama administration policy decisions and lower oil prices slowed demand for new drilling rights.

The reversal under President Donald Trump has been propelled in part by the Interior Department's willingness to go along with industry pressure to weaken rules that govern how these federal lands can be used, as regulators follow detailed industry scripts for rollbacks in protections for wildlife, air quality and groundwater supplies, documents show.

The push amounts to one of Mr Trump's most comprehensive and controversial policy initiatives. It underscores the administration's eagerness to reshape regulation at the behest of industry, and is playing out more immediately and visibly across big parts of the country than many of the other changes he is making to federal management of the environment.

The boom is already transforming this rural landscape at a tremendous pace. The number of drilling rigs in the state has doubled since 2016 - and more are on the way. As many as 5,000 new oil wells are being planned in Converse, a county of about 14,000 people, along with 1,970 miles of new roads.

The leases give fossil fuel companies the right to drill for the oil and gas beneath the land at any point in the coming decade. Once the wells have been drilled - and the companies start to pay a 12.5 per cent royalty on any oil or gas they extract - they can hold the producing leases indefinitely.

A successful push by industry lobbyists has changed internal policies that govern how frequently new federal leases are offered, how quickly drilling permits are approved and how much the companies pay in royalties on what they extract from the federal lands. The administration, at the industry's request, also cut the time the public has to challenge federal land sales.

The Interior Department is also moving to ease restrictions that had limited access to certain critical wildlife habitats, such as the mating grounds used by the sage grouse.

The population of sage grouses in Wyoming - home to an estimated 40 per cent of their global population - slumped over the past decades, but had started to recover after an intense effort to protect their mating grounds. Now, for two years in a row, the estimated male bird population has dropped nearly 30 per cent according to state counts, declines that in the past have been attributed to surging energy production.

But perhaps the most visible shift - and real-world consequence - involves the watering down, completed in August, of an Obama-era rule intended to curb the flaring or venting of methane, an earth-warming gas that is roughly 30 times more potent than carbon dioxide.

"The president, love him or hate him, he's doing what he said he would do in Washington," Samantha McDonald, who until August served as a top lobbyist at the Independent Petroleum Association of America, said during an industry event in Houston. "He's been actively pursuing a deregulatory agenda that has had millions of dollars of impact."

The move is generating windfalls for the companies involved.

"The Powder River Basin in Wyoming is quickly establishing itself as the growth engine of the company," Chesapeake Energy told investors in its most recent earnings report. The company expects oil and gas production in the region to more than double in 2019 compared with this year.

To proponents, the Trump administration is putting government-owned land to good use, with big returns for taxpayers.

Nationally, oil production on federal lands is rising at an extraordinary pace, jumping 25 per cent in the first seven months of this year compared with 2016, the last year of the Obama administration.

That boom has driven up government revenue from lease sales and royalties, which is shared with the states. Wyoming received US$669 million from federal oil, gas and coal sales last year, money it uses to help pay for schools, roads and other needs. One federal lease sale in New Mexico last month brought in nearly US$1 billion worth of bids, more than the total lease sale revenue from all sales nationwide in 2017.

"This historic lease sale shows what is possible when we leverage the vast natural resources we have in our country, using innovation, best science and best practices," Interior Secretary Ryan Zinke said in September, celebrating the result of that particular lease sale, adding that critics of the Trump administration's efforts to increase energy production "are eating their words and once again President Trump's policies are bearing fruit for the American people". But the Interior Department has offered so much land through auctions in the past two years that the majority have failed to attract any bidders. Even so, the overall amount of land actually leased - in deals signed with oil and gas companies or investors - was 1.2 million acres (0.49 million hectares) in 2017, according to the agency, more than double the amount from the previous year, and reached 1.35 million acres this year.

The stack of pending "permits to drill" sat in a neat pile nearly three feet (0.9 metre) high on Randy Sorenson's desk at the Wyoming regional office of the Bureau of Land Management, the division of the Interior Department that oversees an inventory of 700 million acres of mineral rights in the US. The land is concentrated in 12 Western states. That stack is likely to grow. Mr Sorenson is preparing for a February lease sale of as much as 780,000 acres in Wyoming, the largest sale he can remember in decades.

Representatives for ConocoPhillips, Chevron and EOG, together with energy industry associations, said they were committed to responsibly extracting oil and gas from public lands.

Faith Vander Voort, the Interior Department's deputy press secretary, said that actions the agency had taken were smart regulatory overhauls that were "fostering increased investment". The changes were based largely on requests from the states, which were now benefiting from that increased investment, not industry players. NYTIMES