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Executive Summary The Federal Onshore Oil and Gas Leasing Reform Act of 1987 (Re- form Act) requires a study by the Comptroller General of the United States and the National Academy of Sciences. The study is to address "the manner in which oil and gas resources are considered in land use plans" prepared by the Bureau of Land Management (BLM) in the Department of the Interior and the Forest Service in the Department of Agriculture 'for lands under their jurisdiction. In particular, the Reform Act requires that the study recommend "any improvements that may be necessary to insure that (1) potential oil and gas resources are adequately addressed in plan- ning documents; (2) the social, economic, and environmental consequences of exploration and development of oil and gas resources are determined; and (3) any stipulations to be applied to oil and gas leases are clearly identified." The General Accounting Office (the operating arm of the Comptroller General) and the National Research Council (NRC; the operating arm of the National Academy of Sciences) agreed that separate reports would be published embodying the study tasks assigned to each institution. Funding for the NRC's study was provided jointly by the BUM and the Forest Service. The Committee on Onshore Oil and Gas Leasing was established in November 1988 by the NRC to prepare a report to the Congress and to the funding agencies. The committee's report focuses on the "multiple-use" lands managed by the Forest Service and the Bureau of I>nd Management. These lands, especially those in the five Rocky Mountain states of Colorado, Montana, 1

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2 New Mexico, Utah, and Wyoming, have significant developable oil and gas resources. They also have important surface resources, which in some cases conflict with oil and gas exploration and development. By law, Congress has established land use planning as the process by which the two federal land management agencies are to seek resolution of such resource conflicts. As the Forest Service and Bureau of Land Management planning processes have developed, they have proven adequate to deal with issues related to oil and gas exploration and development on most of the federal lands. There are, however, some highly controversial areas where there is intense interest in development by the oil and gas industry and also high surface resource values. Many of these areas are in parts of the Rocly Mountains where there has been little exploration, and therefore little site-specific information on potential oil and gas resources is available. These controversies are casting doubt on the efficacy of the plan- ning process and threatening to bring leasing to a halt in some areas. The committee recognizes that the planning process issues generated by these controversies must be resolved, which is the focus and intent of its recommendations. 'rhis report identifies problems in land use planning that are caused by current leasing practices and the availability and reliability of information at the planning stage. This analysis is based on many hours of discussion with federal and state agency officials and representatives of germane interests; reviews of relevant laws, decisions, agency guidelines, plans, leasing documents, and literature; and field examinations of planning efforts and actual situations of oil and gas exploration and development. There are three important limitations on the scope of this report. First, the committee did not specifically address oil and gas planning issues on federal lands in Alaska because statutes, regulations, data availability, planning approaches, and actual conditions in that state differ considerably from those in the lower 48. Second, the committee did not address Indian lands for many of the same reasons. Mllltiple-use federal agency planning is not required on Indian lands, and the federal trust responsibility in the area of Indian resource development has no direct counterpart outside the Indian context. Third, on nearly 50 million acres of land, the United States owns the oil and gas (often along with other minerals) but does not own the surface (BLM, 1989, Able 9~. Planning for resource development where the surface is not owned or managed by the United States presents the agencies with somewhat different issues. The committee has not attempted to fashion special recommendations for this context, but most of the recommendations it does make are nevertheless applicable, in whole or in part, in this setting. The committee makes four core recommendations that address the in- terrelation between oil and gas leasing decisions and the land use planning

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3 process for the federal lands. These core recommendations are supple- mented with five additional recommendations. The recommendations have to be read in the context of the entire report and, especially, the discussion of each recommendation in Chapter 8. Adopting these recommendations would significantly improve land use planning and leasing decisions by better integrating oil and gas exploration and development with wildlife and other resource uses on federal land. This coordination should help to resolve uncertainties over the use and protection of federal land resources related to oil and gas exploration and development. CORE RECOMMENDATIONS The agencies should use their planning processes to forecast the rea- sonably foreseeable consequences of oil and gas exploration and development. Where those consequences are deemed acceptable, the agencies should make the lands available for leasing. (Page 116) The committee believes that most federal lands that are available for leasing can continue to be made available, with the planning process used to identify stipulations that will be applied to leases under various conditions. Such stipulations must be employed effectively to meet site- specific conditions. In areas where available information indicates the potential for high- value oil and gas resources, but where surface values are especially high and potential land use conflicts cannot be resolved during planning, lands should be made available for leasing with a right only to drill exploratory wells in defined locations Information gained by that exploration should be used to make a subsequent analysis and agency decision on proceeding with development if discovery of petroleum makes development possible. If; after that analysis, farther exploration and development is prohibited, the lessee should be reimbursed for its direct costs of obtaining and exploring the leasehold. (Page 118) This recommendation recognizes the difficulties posed for the planning process where potential values of competing resources are judged to be nearly equal. In these relatively uncommon cases, gaining more information through carefully controlled exploratory drilling will improve the decision- making process. The committee recognizes the uncertainties this may cause for lessees, but believes this will be recognized in the bidding in competition for leases. Further, significant oil or gas discoveries during exploration will clearly weigh heavily in an agency decision in favor of development.

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4 . The agencies should use their planning processes to determine whether certain lands are current) unsuitable for oil and gas exploration and develop- ment when other potential uses of the land clearly outweigh potential values for oil and gas resources. (Page 122) Unsuitability determinations should be used only in relatively limited and specific circumstances, spelled out in advance in national and local criteria. All leases should include a standard stipulation that preserves the government's Jqexibili~ to control and, if necessary, to prohibit, activities on the leases that pose serious and unacceptable impacts on other vanes, but with the provision that a lessee would be reimbursed for its direct costs In acquiring and developing its lease if further exploration and development is prohibited. (Page 127) This proposed standard stipulation recognizes that new information may require changes in decisions made at the time of leasing, but that the cost of such changes should not be borne by the lessee. Including this stipulation in all leases will lead bidders to give more attention to the possibility of encountering unexpected environmental nslo;. The compensa- tion provision of this recommendation, along with the likely discounting of bids to recognize these risks, provides for fair treatment for lessees, while assuring the public that leasing will not lead to unreasonable environmental damage. SUPPLEMENTARY RECOMMENDATIONS The agencies should make efforts, short of creating substantial mora- toria on lease offerings, to control the configuration and timing of leases in a particular area to allow for better assessment of the cumulative impacts of leasehold activities in the area. (Page 134) Consideration ought to be given to shortening the tend of non compeiitive leases. (Page 136) Although it is difficult to predict the impact that a shortened non- competitive lease term would have on the onshore oil and gas industry, a shortened noncompetitive lease term would limit the planning horizon and allow better forecasting of impacts and therefore deserves consideration. The agencies should improve opportunities for public participation in their decisions to issue leases and to waive, suspend, or modify lease stipulations. (Page 136) Where the potential impacts of oil and gas activity would extend beyond the borders of the planning area, the federal land management agency should coorcl~inate its planning analysis with planning efforts by the same agency in adjacent planning areas, and with other agencies that have jurisdiction over nearby lands and other surface values. (Page 137)

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s To me extent feasible, the foregoing recommendations ought to be incorporated in the agencies' planning and leasing systems and applied to encisiing lessees. (Page 138) The committee has no firm basis for estimating the costs and agency staff needs that would be required to implement its recommendations. Only a portion of the cost of agency land use plans is related to oil and gas exploration and development. The committee's recommendations would place some additional burden on the planning process and add marginally to the cost of land use planning. In addition, they would add marginally to the already substantial costs to bidders and lessees of evaluating federal land areas for possible exploration and development. ~ he ~;~h~A ~ ~:~+ 4~ A _ ~ ~ ~ ~ __,= ~ 1~ ~`; w~l~n`;u agalnsl me aaaltlona1 governmental and industry plan- ning costs are the costs to the public of continued stalemates in oil and gas leasing on some federal lands. These, too, are costs for which the committee is unable to provide estimates. The committee believes that the most cost-effective and equitable way to resolve these issues is through strengthening the role of planning in the leasing process, and making some adjustments in the leasing process to make planning more effective. REFERENCE Bureau of Land Management, Department of the Interior. 1989. Public Land Statistics. 1988, Vol. 173.