Oil & Gas News

Utah’s oil and gas industry is as busy now as it was during Trump’s ‘energy dominance’ era

Utah, Oil, Natural Gas

By: Brian Maffly – Salt Lake Tribune – There were just three rigs drilling in Utah’s oil and gas fields last January when newly installed President Joe Biden halted new leasing on public lands while his administration reviewed the federal oil and gas program.

Today there are 10 rigs sinking new wells in the Uinta Basin, according to energy consultant Baker Hughes. Meanwhile, the industry has flooded agencies with drilling proposals in Utah, filing more applications in the past six months than during any six-month period under Donald Trump’s industry-friendly reign as president, according to state data.

While state and industry leaders forecast doom for energy development and rural employment from Biden’s moratorium, which they characterized as a “ban” on development, the exact opposite appears to be happening. Utah’s oil and gas sector is waking up from its pandemic-induced slumber despite obstacles put up by the climate-friendly Biden administration.

So what’s going on? The price of oil has shot past $70 a barrel. Energy companies are acting swiftly to increase production while prices remain high, said the Utah Division of Oil, Gas, and Mining.

The boom is proof that financial incentives drive energy development in Western public lands states, not executive orders from the White House, according to Landon Newell, a staff attorney with the Southern Utah Wilderness Alliance.

“Utah has claimed the sky is going to fall [because of Biden’s lease moratorium], but this has been directly contradicted by facts and reality,” Newell said. “They are drilling like crazy in the basin where the governor’s office has been claiming things would be at a standstill.”

Critics of the Biden administration have repeatedly characterized the moratorium as federal overreach and predicted dire consequences for the rural West. An industry-backed study from the University of Wyoming, for example, said a ban on development on federal land would blow a $15 billion hole in the Utah economy over 20 years.

Utah Gov. Spencer Cox’s office in May said the leasing moratorium would “halt exploration and potential future investment.

While welcoming the upsurge in drilling, Cox stands by his earlier position, according to Thom Carter, director of the governor’s Office of Energy Development.

“The economic impact of all of this can be far-reaching and we are concerned that decisions could be felt nationwide and have a disproportionate effect on rural Utah,” Carter said. “While what you’re reporting in relation to a rebound out of the pandemic is great, there are still some real economic issues around petroleum right now, including the cost at the pump and that’s regressive at times.”

So far this year, Utah drillers have started 144 wells, according to state data. That’s nearly as many at the 154 for all of 2019, the year before the pandemic, and puts the year on track to beat 2018 and 2017, when 204 and 199 wells, respectively, were drilled.

Rikki Hrenko-Browning, president of the Utah Petroleum Association attributed the rebound to a combination of factors, such as lease agreements secured during the prior administration, a large number of applications submitted anticipating that the Biden administration would not support new federal drilling, and a shift to Tribal lands.

“There is a long lead time from leasing to permitting to actual drilling, and it will take time for the full impacts of the federal leasing policy to be felt,” she said in an e-mail. “However, right now, our state is missing out on key revenues from lease sales that should have happened this year and jobs are at risk if the illegal leasing ban continues.”

Industry critics, however, contend Utah’s oil and gas recovery tells a different story. They say it bolsters the cases made in internal memos prepared by Utah state agencies and a new report that argued Biden’s lease moratorium will not slow energy development in the short term.

 

This is because so much public land in Western states was put under lease for oil and gas development by the Trump administration. The glut of undeveloped federal leases in Utah would support drilling for the next 60 to 90 years at recent levels of activity, according to a report released Wednesday by the Conservation Economics Institute, an Idaho-based think tank.

“We think of these Western states as having their economies completely tied to this industry,” said Anne Hawke of the Natural Resources Defense Council, or NRDC. “But in fact, there’s so much more going on economically in these states in terms of services and information jobs.”

The report was commissioned by SUWA, NRDC, and several other conservation nonprofits that strongly support leasing reform. It examines federal leasing in Utah and four other energy-producing Western states: New Mexico, Montana, Colorado and Wyoming.

The groups posted it Wednesday ahead of an expected announcement from the White House of proposed reforms to the federal leasing program overseen by the Bureau of Land Management.

“When the industry freaked out after the Biden moratorium, this report is bringing some reason,” Hawke said. “This is a long game and it’s not like we’re going to end tomorrow. The jobs have not been affected the way they’re saying they are. It highlights all the reasons why stepping back taking a pause are really rational moves. We all know the system’s broken. We have to look at royalties.”

There is also evidence speculation runs rampant in the federal leasing program, especially in Utah where thousands of acres of leases are issued to people with no known ability to actually develop them.

On his first day in office, Biden halted new leasing while the Interior Department conducted a comprehensive review, which it submitted recently to the White House. The moratorium blocked only new leasing; it did not apply to drilling or production from existing leases.

A federal judge has since overturned the leasing moratorium, but the BLM has yet to resume offering new leases in Utah, although some have been issued in other states.

While conservationists hope Biden’s reforms limit federal leasing, especially in ecologically sensitive or scenic places, Utah officials want to see industry retain access to the West’s publicly owned energy resources.

“We are not interested in actions that pit rural and urban Utahns or rural and urban Americans against each other, and that’s what the president spoke about in his inauguration, it is what Gov. Cox believes, wholeheartedly,” Carter said. “We want market-based decisions. We don’t want government-based decisions, so if the market is driving some of [the drilling surge], that’s great.”

Still, at the end of the day, federal land is not central to Utah’s oil and gas production, even though Utah is a key public-land state. Of the 1,654 wells currently proposed for Utah, according to Carter, 58% are on non-federal land, that is tribal, state or private land.

A review of past drilling and production shows that only a third of this activity in Utah occurred on federal land. Yet plenty of federal land has been leased. Less than half the 3 million acres under lease in Utah are in production, according to BLM statistics.

In other words, unused oil and gas leases encumber 1.7 federal million acres in Utah, some of them within sight of national parks and monuments. There is not much the Biden administration can do to prevent the industry from drilling most of those lands.

The crossroads of energy information for minerals owners in Oklahoma. Where you can: See recent prices of mineral and lease transactions. Receive an offer to lease or buy your minerals.

Find relevant news stories on the most active areas, including the Scoop and Stack Plays.

Data Powered by Oseberg

Today’s E&P world is rapidly shifting towards data-driven decision making, but those decisions are only as good as the data behind them. Access Oseberg's deep, accurate, and detailed pool of insight-rich industry data with our powerful analytical and search tools and get the clearest picture of what's happening as soon as it happens.

Disclaimer

This web site is maintained solely for the personal use of our visitors. Although we at Oklahoma Minerals have made all reasonable efforts to provide accurate information, we cannot guarantee the completeness, timeliness or accuracy of the information contained herein. Nothing in this web site contains investment advice. Any decisions based upon the information contained in this web site are the sole responsibility of the user.

Copyright © 2021 OklahomaMinerals.com

To Top
Trudeau pledges to cut Canada's oil emissions even as country keeps pumping moreRead More