More Red Tape Looms for US Energy

Focus: MARKETS

New technologies have certainly created a boom in the US oil and exploration and production sector, but the federal government never lets an opportunity go unregulated...and that is slowing down what's happening on tribal and public lands, writes Don Groves at Casey Research.

On May 11, the US Bureau of Land Management (BLM) published proposed regulations governing "Oil and Gas; Well Stimulation, Including Hydraulic Fracturing, on Federal and Indian Lands."

BLM is a latecomer to this party. Its belated meddling lacks practical or economic justification. Instead, the proposed BLM rule would drive oil and gas developers off federal and tribal lands.

Complying with the rules is too complicated and costly. Producers can realize a much faster and much better return on their capital investment by developing oil and gas reserves on adjoining private lands.

Federal and tribal lands hold large reserves of oil and natural gas. At a time when the United States desperately needs to move toward, not away from, energy independence, it makes no sense to let bureaucratic meddling effectively place these valuable domestic reserves out of reach. The problems with BLM's approach are myriad.

BLM Misses the Mark
First, a central, federal, one-size-fits-all approach does not work. The reserves that the oil and gas industry wants to access using hydraulic fracturing occur in areas with different geographic, topographic, hydrological, population, precipitation, and umpteen other characteristics.

The oil and gas deposits are found at different depths; the water table is at different depths. The surface and subsurface vary dramatically, ranging from the Marcellus Shale Formation in the Northeast to the San Juan Basin in the Southwest.

States and tribes have long ago stepped up to the plate with sensible regulations suitable to their individual conditions.