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Setting The setting for the issues analyzed in this report is the federal lands and resources, including minerals, administered by the Bureau of Land Management of the Department of the Intenor, and the Forest Service of the Department of Agriculture. This chapter describes those lands, their significance for oil and gas exploration and development, the impacts of federal land management on states and Indian tribes, and the relationship of federal lands to the oil and gas industry. FEDERAL IANDS Of the 2.3 billion acres of land in the United States, 1.8 billion acres was at one time held for the United States by the General Land Office, the predecessor of the BLM. The remainder comprised lands either in the 13 original states or in Texas. By 1988, 1.1 billion of those public domain lands had been distributed to states, homesteaders, veterans, railroad companies, miners, and other public and private parties to whom Congress directed or authorized land conveyances. Portions of the public domain lands that were retained in federal ownership were set aside by acts of congress and executive orders for specific public purposes. These lands include Indian reservations, military reservations, national parks, and national wildlife refuges. The lands that remain open for various uses include lands in the first permanent federal land reservation system the National Forests under the jurisdiction of the 17

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18 Forest Service and the remaining unreserved public domain under the jurisdiction of the BLM. Today about one-third of the land area of the United States, 724 million acres, is federally owned. Approximately 64 percent of those federal lands, or 460 million acres, is managed by the BLM and the Forest Service. The Forest Service became an agency before it had lands to adminis- ter. The Division of Forestry was created in the Department of Agriculture in 1881. Congress authorized withdrawal of the Forest Reserves in 1891, enacted the Organic Administration Act (16 USC 3101) for their admin- istration in 1897, and transferred them to the Division of Forestry from the Department of the Interior in 1905. The division had been renamed the Forest Service, and the Forest Reserves renamed the National Forests, by 1907. The lands of the National Forest System were acquired by reser- vation of public domain land, principally in the West, under the Forest Reserve Act of 1891 (26 Stat. 1095), and by acquisition of private land, principally in the East, under the Weeks Act of 1911 (16 USC 480~. Idday, the Forest Service manages 191 million acres of National Forest System land, 163 million acres reserved from the public domain and 28 million acres of acquired land. The Forest Service administers most of these lands under statutory multiple-use management and planning mandates, although some of them are specifically designated for special management as units of the wilderness, wild and scenic river, national trails, or other conservation systems. Although mineral exploration and development were not among the uses specified by Congress for multiple-use management by the Forest Service, in recent years the agency has included these uses in its land use plans. The agency's 1979 planning regulations, promulgated to imple- ment the planning requirements of the National Forest Management Act (NFM.4) of 1976 (16 USC 1600-1604), gave explicit direction to the agency to take minerals into account in its planning (36 CFEt 219.22, as amended in 1982~. As discussed in Chapter 3, full statutory authority to ensure implementation of planning decisions relating to oil and gas exploration and development was granted to the Forest Service in the Reform Act. The Bureau of Land Management is a more recent institution with an older heritage. It was created in 1946 by the merger of two predecessor agencies, the General Land Office (1812-1946) and the Grazing Service (1934-1946~. Congress provided the BLM with its organic act in 1976 by enacting the Federal Land Policy and Management Act (FLP MA) (43 USC 1701-1782~. That act established the policy that the remaining public domain lands under the BLM's management were to be retained in federal ownership and to be planned and managed by the BLM under multiple-use principles. The BLM manages some 270 million acres of public lands, including 93 million acres in Alaska and 177 million acres in 29 other states

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19 (BUM, 1989a). The agency also manages an additional 67 million acres of mineral rights reserved to the federal government when the surface estate was patented to public and private parties (BLM, 1989a). Finally, subject to the concurrence of the Forest Service, the BLM manages leasing on the National Forest System lands for oil and gas exploration and development. The federal lands administered by the BLM and Forest Service are among the nation's greatest assets, affecting the economic, environmental, and social well-being of all Americans. They contain more than 50 percent of the softwood sawtimber in the United States and are the source of about 25 percent of the annual wood volume harvested. They furnish three- quarters of the West's water supply and a good share of the East's. They contain more than 274 million acres of grazing lands, which sustain large populations of livestock, wildlife, and wild horses and burros. They provide habitat for more than 60 percent of the animal species in the country, including more than 166 threatened or endangered species. They contain more than 215,000 miles of fishable streams, 2.2 million acres of lakes and reservoirs, 27.7 million acres or approximately 80 percent of the countries designated wilderness (outside of Alaska), and support nearly 300 million visitor-days of outdoor recreation a year. They include 66.5 million acres under lease for oil and gas, and more than 400,000 acres of leased federal coal (BLM, 1989a; Forest Service, 1989~. The significance of these varied economic and noneconomic resources to the nation and to the states in which they are located makes planning of their use a formidable task for the land management agencies. The Forest Service and the BLM will play a major role in shaping the future not only of the federal lands, and Me industries that rely on their resources, but also of many of the states in which the federal lands are located. This role stems from the dominant position of the federal lands in those states. In eleven states, the federal lands comprise more than 30 percent of the land base. In the five Rocly Mountain states in which oil and gas exploration interest on federal lands is highest, the percentages of federal ownership are Colorado 36, Montana 31, New Mexico 31, Utah 64, and Wyoming 50 (see Able 1.1, p. 9~. OIL AND GAS RESOURCES ON THE FEDERAL LANDS Among the most significant uses of the federal lands are the exploration for, and the development of, oil and gas. No readily available calculation exists of the federal acreage available for oil and gas leasing. The Office of Technology Assessment (OTA) estimated that, in 1975, about 375 million acres of federal land, including land in Alaska, was available for oil and gas leasing (see OTA, 1979, Able Beg. This amount has shrunk in recent years because of the passage

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20 I 100 1 1,000 1 1.0,000 1 100,000 11,000,000 1lO,OOO,OOOIAcres I daho Iowa Kansas Mississippi Alabama Competitive Leases1,167 Non Cornet i t i ve Leases154, 926 Produc i ng Leases1, 781 Arizona Competitive LeasesO Non Competitive Leases805,846 Produc i ng LeasesO Arkansas Competitive Leases64,885 Non Conpet i t i ve Leases428 303 Producing Leases88 259 California Competitive Leases 13,588 Non Cornet ~ t ive Leases 1, 035, 680 Produc i ng Leases 72, 932 Colorado Competitive Leases 134,887 Non Competitive Leases 8 126 979 Producing Leases 2 783 977 Florida Competitive Leases O Non Conpetitive Leases 255,432 Produc ~ ng Leases 4, 497 Georg i a Compet ~ t ive Leases O Non Competitive Leases 4,474 Producing Leases O I Competitive Leases O | Non Cornet i t i ve Leases ^^^ '^^ Produc i ng Leases I 11 inols Competitive Leases Non CoTpetitive Leases Produc i ng Leases Compet i t l ve Leases Non Competitive Leases Produc i ng Leases Competitive Leases Non CoTpetitive Leases Produc i ng Leases Kentucky Conpetit ive Leases Non Competitive Leases Produc i rig Leases Louisiana Competitive Leases Non Comets t ive Leases Produc ~ ng Leases Maryland Competitive Leases Non Competitive Leases Producing Leases Michigan Competitive Leases Non Conpet i t ive Leases Produc i ng Leases Minnesota Conuetit)ve Leases Non Con~eti tive Leases Produc i ng Leases Co pet i t i ve Leases Non Cornet i t i ve Leases Producing Leases Missouri Competitive Leases Non Conpet i t i ve Leases Produc i ng Leases Montana Competitive Leases Non Conpetitive Leases Produc i ng Leases Nebraska Conpet i t i ve Leases Non Cornet i t i ve Leases Produc i ng Leases 業e 業e 業e 1 業. 1 業e 業. 業e 業e 業eaaaaan.~e 業e 業n 戢.~eeaaaaaeenaaaaneneeaneenen.~.anaeneneneea.a 業eaneeaneaeneeaneneeaeeeanenea.~eanea.~e 業e A A 909,499 a 430 320 350 o 460 a 14, 335 27, 143 63, 507 987 51, 670 20, 080 11,879 196 011 62 329 a 10,800 2,105 4,137 446, 221 17,467 a 17,146 1 19, 220 業eaeaa.~e 671, 575 業.aaanea.~e 52, 204 業aaaanaeeeane.~e 1 329 ' 384 1, 329 95, 594 7,095 571 738 568 3 960 61 716 6,347 業e 業e 業a 業e 業e 戢aaaaaaneneaneaanane.a 戢aaaen.~eeeneneneanaaaa 業aaea.~eaanaeaneneeenen Ma 業.anenanenaaaananesenane - ~eeaneeneneeeanananene 業eaaaaaaaaaaeeanenaen 業eaneneaneeaaneneeneaeanesaaa 業e 業n A A 業e 業e 業n A I A 業e 業e 業e A 業e A FIGURE 2.1 Federal lands under oil and gas lease, effective as of September 30, 1988. SOURCE: Bureau of Land Management (1989a). Of the Alaska National Interest Lands Conservation Act (16 USC 3101) (converting over 100 million acres of federal land in Alaska administered by the BLM and Forest Service into National Parks, wildlife refuges, and wilderness areas), ongoing implementation of the Alaska Statehood Act (48 USC note preceding Section 21) (granting federal land to the state), the enactment of the Alaska Native Claims Settlement Act (43 USC 1601 et seq.) (transferring some 40 million acres of federal land in Alaska to Native organizations), the designation of new wilderness areas, the withdrawal of most other wilderness study lands from leasing, and other occurrences. On

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21 100 1 1,000 1 10,000 1 100,000 11,000,000 1lO,OOO,OOOIAcres Nevada Compet i t ~ ve Leases Hon Con~etitive Leases Produc ~ ng Leases New Mexico Competitive Leases Non Con~et i t ive Leases Produc i ng Leases New York Coopet i t i ve Leases Non Conpeti tive Leases Produc i ng Leases N. Carol ~ na Con~et i tive Leases Hon Conpet i t 1 ve Leases8, 596 Producing Leases0 N. Dakota Conpetftive Leases31,111 Non Conpetitive Leases843,931 Produc i ng Leases396, 582 Conpet i t i ve Leases3 902 Non Conpetitive Leases19 830 Producing Leases9 470 Oklahoma Competitive Leases40 933 347,840 107,425 o 872,248 . . O 477 2,802 6, 677 o 1 19,851 o 1 8,465 732, 165 53, 478 o 1 49, 307 業 o 1 10,142 235,654 35,476 189,233 6,439,460 778,442 1,120 230, 760 2,165 o 1 710,461 o 1 2,278 285, 667 業 1 03, 803 業e o 1 95, 573 業-~e o 1 674, 283 16, 018, 588 2, 621, 067 業. Ohio Oregon Non Ca~etitive Leases Produc i ng Leases Conpet ~ t ive Leases Non Coopetitive Leases Produc i ng Leases Pennsylvan] aCon~et l t l ve Leases Texas Utah non con~etitive Leases Produc ~ ng Leases S. Caro l i na Con~et i t i ve Leases Non Competitive Leases Produc i ng Leases S. Dakota Con~etitive Leases Non Conpetitive Leases Produc i ng Leases Tennessee Co~npet~tive Leases Non Compet i t ive Leases Produc t ng Leases Compet ~ t 1 ve Leases Non Colipetit ive Leases Produc ~ ng Leases Conpetitive Leases Non Con~et i t ive Leases Produc 1 ng Leases Virginia Con~etitive Leases Non Co~pet i t i ve Leases Produc i r~ Leases Hashington Conpetitive Leases Non Competi tive Leases Produc i ng Leases It. Virginia Con~etitive Leases Non Calpet it ive Leases Producing Leases Wiscons i n Competi tive Leases Non Conpet i t ive Leases Produc i ng Leases Hyomi ng Conpet i t i ve Leases Non Con~etitive Leases Produc ~ ng Leases TOTALS Competitive Leases Non Conpetitive Leases Produc i ng Leases FIGURE 2.1 Continued. 3, 672 6, 797, 950 13,447 392, 397 8, 654, 962 4,802,072 1, 382 7, 287 o 1 o 1 業s 業e 業e 業e 業eaene~e 業e 業. 業n 業e 業eenaneanea.~e 業ea aa.~eanee - ~ea.~.an.~e 業ecaanee 業ea.~eeane.~e a.~eaenea~aaea.~e a.~e 業enaeneea 業eanena.~ea 業.anaaee.~eaneeneaeane aneaa 業ea.~a 業eaeaeane aa.~ecaaanenaen 業eeaenaneaean 業e a.~eeeaneaeeneea.~e 業eenaeneeneeneea.eena aaaaaaaaaaanean~a.~.aaneaaneea.~e 業eaneeane.~e .anaaaeeecaaaeaeaee.~eaeaeeaneaee aaanenanenaneneenea~aaaaaaaaa~aaaa.~eeeaneanees 戢nane.eeaeae - ~ena.~ean.~e 搪enea~aaaaa aa.~aaneeae.ea~a.~e 戢naeaenaaana 業ea.~eaeaneaneananeenene 業a 業ecane 業ea.~e 2,286,139 acres ( 7,547 leases) 64,494,544 acres (73,023 leases) 12,908,598 acres (19,434 leases) the other hand, a few previously withdrawn lands (e.g., some military lands) have been made available for leasing since 1975. Rough calculations based on these subsequent developments suggest that perhaps 250 million acres of BLM and Forest Service land outside of Alaska is available for oil and gas leasing today. As of September 1988, approximately 66 million acres was covered by approximately 80,000 federal onshore oil and gas leases in 41 states (Figure 2.1~. About 74 percent or 59,000 of these leases were located in the five Rocky Mountain states of Wyoming, New Mexico, Colorado, Montana, and

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22 Utah, with Wyoming having 34 percent of all leases (Figure 2.1~. As of the end of fiscal year 1988, more than 19,000 leases were either producing or capable of producing. During fiscal year 1988 production from federal lands outside of Alaska totaled 138.2 million barrels of oil and 873 billion cubic feet of natural gas (see Figure 2.2~. Oil production has declined steadily since 1985. While natural gas production has increased since 1986, it is still below production levels of 1976-1985 (Figure 2.2~. Although the number of producible and service wells for oil and gas has increased 1-3 percent per year since 1985 (see Figure 2.3), there has been considerable variation in the numbers of approvals of Application for Permit to Drill (APD) and of wells drilled, completed, or plugged. A comparison of production figures confirms that while the number of wells capable of production on federal lands has increased, the average production per well decreased in the period 1985- 1988 (Figures 2.2 and 2.3~. Federal oil and gas leases remain a significant source of revenues to the federal government and states. As indicated in Able 2.1, while bonuses paid when leases are sold have fluctuated, federal royalties paid upon production have declined steadily since 1984. Over $580 million in federal revenues was generated from oil and gas lease bonuses, rents, royalties, and fees in fiscal year 1988 (General Accounting Office, 1989~. Under Section 35 of the Mineral Leasing Act of 1920 (30 USC 181-287), 50 percent of all federal lease revenues, except fees, are paid to the 41 states in which the leases are located (30 USC 191~. Priority uses of those state-share mineral lease monies are for planning, construction, and maintenance of public facilities, and provision of public services in communities socially or economically impacted by the presence of mineral-related production (30 USC 191~. In addition to lease revenues, many states also receive significant revenues from taxes on federal lands, oil and gas production, and related operations such as severance (Bible 2.2), sales, and corporate franchise taxes. Although fiscal year 1988 was the first year of implementation of the Federal Onshore Oil and Gas Leasing Reform Act of 1987 (101 Stat. 1330-256), a number of the changes in the leasing system intended by that statute were achieved. During the five years prior to the enactment of the Reform Act, approximately 85 percent of all onshore oil and gas leases were issued noncompetitively either by the simultaneous oil and gas leasing system the lottery (mostly for parcels that had previously been leased)- or by over-the-counter application (for previously unleased parcels). The remaining 15 percent was issued competitively through a sealed bidding process (BLM, 1983-1988~. The Reform Act required that all parcels be offered initially through a competitive oral bidding process.

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23 1.04 1.00 o - 0.~e - ._ 0.84 0.80 Gas Production A -\ / ~ 0.96 C) _ - 0.92 - \ / \ V 170 _ 160 120 Oil Production A In 150- ' ~ - -- 6< _ D D - 140 o - - ~ 130 r - \ \ 1 976 1 977 1 978 1 979 1 980 1 98 1 1 982 1 983 1 984 1 985 1 986 1 987 1 988 FIGURE 2~2 Oil and natural gas production from federal lands, onshore continental United States, 1976-19~. SOURCES: Bureau of Land Management (1977-1983~; Minerals Management Service (1988~; 1988 data courtesy of the Bureau of I>nd Management and the Minemls Management Senace. The resultant change was significant, as shown by comparing the pre- Reform Act leasing statistics from fiscal year 1987 and the first part of fiscal year 1988 (FY 1987/1988) with the post-Reform Act leasing statistics from the latter part of fiscal year 1988 (FY 1988~. The percentages of noncompetitive leases decreased from 92 percent during pre-Reform Act FY 1987/1988 to 42 percent during post-Reform Act FY 1988 (BLM, 1989c). The average revenues per acre derived from the changed leasing system did not differ as dramatically as the types of leases issued. The average revenue per acre was $9.96 for all acreage leased under the Reform Act in fiscal year 1988, compared to $8.49 during fiscal year 1987 (BLM, 1989c). Total lease sale revenues declined by less than 1 percent between FY 1987 and FY 1988 (BLM, 1989c). A more significant change was seen ~

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1 o - 1 x x x x x x x - ~ x x x x x x x x x x x x x x x Excludes Alaska 1 98S 1 986 1 987 1 988 V/l 1\\1 15///? K\\ ~ APDs New Holes Producible Plugged and Producible Approved Started Completions Abandoned and Service Wells FIGURE 2.3 Oil and gas drilling activity, onshore continental United States, 1985-1988. SOURCE: Bureau of Island Management (1986-1989~. TABLE 2.1 Revenues from Oil and Natural Gas Production from Federal Leases, Onshore Continental* United States, Fiscal Years 1978-1988 . . . Bonuses freon Oil Natural Gas Oil and Gas Year Royalties Royalties Leases 1978 $180,195,273 $120,224,013 $ 12,705,965 1979 236,739,377 165,102,136 7,597,171 1980 408,651,338 2~)9,037,121 22,048,947 1981 593,364,744 . 264,983,101 ~103.,314,389 1982 531,605,614 336,232,740 23,950,711 1983 512,512,369 ~335,492,897 25,426,256 1984 513,489,455. .364,265,104- - 38,287,948 1985 487,363,560 317~739,073 41,838,444 1986 265,968,601 213,699,482 26,643,088 1987 286,332,579 175,717,447 33,345,494 1988 229,537,219 177,547,956 -51,208,736 SOURCE: Courtesy of Minerals Management Service. *excluding Alaska

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25 or - - v) o o o . - 5 U. C; - ._ o o A Cal I_. - C~ C * * 5 0 ~ ~ 3 2 ~ ~ =o To ~ o o ~ o ~ o ~ ~ o ~ o ~ ~ ~ ~ fi ~.~ o ~ ~ 3 9 e.g ~ ~ ~ ~ ~ E an $_0 ~ 0 ~ ', ~ O or S ~ =e ~ ~' .~ ~ e ~a,=- o 3 _ C t: o : ~ C 9 9 E _ ~ ~ ~ ~ G o _ ~ ~ 0\ ~-. O O ~ O ~ O ~ ~ O ~ O _ C~ oo 0\ 0 O O ~ O ~ O oo ~ O ~i O oo _ oo ~ O O O O _ ~ O ~ \0 O ~-O-O O O~ -~ ~ ~ ~ O _oooo~omoo~om _ C~ 83 c ~ ''_ ~ o ~ o ~3 ~ g 80 ~ =- 5 - - o

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26 competitive lease sale revenues. The average per-acre bids for competitive leases declined between FY 1987 and FY 1988 (Table 2.3 and 2.4~. RELATIONSHIP OF FEDERAL LAND MANAGEMENT TO STATES AND INDIAN LANDS As previously noted, because of the large area of federal lands within some states and within or adjacent to some Indian Reservations, federal management of oil and gas activities has a significant impact on those states and Indian tribes. The interests of states and tribes can be generally considered in three categories: land and resource manager, royalty owner, and regulator. Furthermore, in the case of Indian lands, the federal government's trust responsibility for Indian affairs can also significantly affect the development of Indian resources. Impact on States As a land manager, a state is concerned with prudent management of all lands, including BLM and Forest Service lands, and related resources within the state. Although states with a major federal land base have from time to time planned for specific development, such as pipeline corridors, water projects, and recreational facilities, in the majority of cases the federal government has taken the lead in land use planning. Where federal lands constitute a significant presence in a state (see Table 1.1, p. 9), federal planning decisions may directly or indirectly limit options for planning the adjacent nonfederal lands and inholdings. For example, where state School Must Lands occur as inholdings within a designated National Forest wilderness area, the lack of economic access may preclude a state from deriving maximum economic benefit from those Must Lands.iAlso, the ability of a counter to manage its resource base for a variety of reasons, including lack of revenues, is often severely curtailed by the size of, and planning decisions for, the federal landholdings within its boundaries. The process of planning for, and protection of, a state's wildlife re- sources is distinct from timber, mineral resource, or rangeland management. A state wildlife agency generally owns or exerts direct management author- ity over only a small portion of total wildlife habitat. Except in the case of threatened and endangered species, the ability of the state or agency to ensure protection of wildlife habitat is dependent on its ability to use ~ State School llust Lands are lands that were granted to the state by the federal govern- ment at the time of statehood. The lands generally include specific sections scattered within federal landholdings and/or other specific land grants. These lands are managed in trust by the state, with revenues dedicated to support the state's school system.

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27 so ~ ._ CD ~ U. Boo ._ . :t ~ oo - - in o - c Do U' . - ._ C} C; ~4 ~Cal ~ Via ~<7\ Cal t-C-) ~Go ~ 4 X _ of rid ~ cat ~ O ~ cat oO ~ ~ X x vim to ~ ~ in __ _ ~ t ~_ _ ~ t_O4 ~ _ ~t_ en ~t_ ~ ~_ oo ~ ~ 0 ~0 sip ~ ~ x ~ 8 \0 ~-, ~ Atop ~of ~ x- ~ =~t ~ ~ c-4 'a: 'in, 'is. ` ~t" or cut ~-- ~ cut ~-~ to Q -- c4 - - ~o' ~ ~o ~- , ~_ _ _ ', _ _ ~ox Q~ ~ ~ ~ O- ~-~ ~ ~ ~o ~ ~ ~ ~ ~.= t~ ~ ooo ~ C ~ox c~ r ~2` r~ =- oo m m r~ ~ O4 = d ~ _ oo-;.~ o, o, ~-. ~O, ~ ~ ~ ~ x ~o~ oo =, oo- ~oo ~oo ~ ~ O ~- ~4 Q ~- ~ x O ~ ~ os ~ t~ _ oo ~<~\-~) _ c~ ~ - O r~ ~ ~ ~-C ~ t~ ~ l~ ~ c4 ~ _ ~ ~ ~ _ ~x,-~ ~ x x r~ oo r~ ~ ~oo O ~D - \0 - ~ ~ <: <: 3 0 ~ ~o ~ ~ ~ ~ ~ a E o O _ oo ~ ~oo ~ ~4 ~ C~ o ~o~ _ _ ~o ~ o,o, ~ ~ ~- - ~ o ~ ~4 ~ V-3 _ - x~ _ o O ~ ~n ~ _ _ _ o~ ~ ~ oo _ ~ _ 0 ~ ~o~ oo O oK ~4 ~ x x - ~C4- C l ~ t- 1~1 X ~ t- - ~ \0 O4 O4 oo ~ t_ _ ~ ~ _ _ 0 ~m0~ - O Q ~ c~- <' t~ x" =, oo ~ ~ \0 ~ 0` ~] \0 ~- _ _ _ _ _ ~ ~ - 0` oOo x O4 ~r ~ -~? ` 00~0 \8 c~ - v~ _ _ - t4 (~ e-) O ~ t-~ ~ _ x oo \0 0 oo ~n ~- ~ '~' ~? ~-~n 0 ~ ~ _ _ _ _ _ _ r ~ ~ ~ ~ ~ ~D ~ ~ ~ ~ _ e4 ~ x -x 0 ~ ~ ~ Yo x -O O O -000 00 --00 00 - 0\ oo c~ - - C c, oo c _4 o c, . . L~ O cn C =; C ~ Q] o c~ c, - U' E C) C~ ;= 11

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28 reliable wildlife data in decisions concerning land use planning, leasing, and development. The importance that the state and its citizens place on wildlife, timber, oil and gas, and other resources is critical in establishing wildlife priority in the planning process. The governor, as well as the legislature, counties, and citizens, have opportunities to comment on proposed federal land use plans under a variety of statutes including NEPA (National Environmental Policy Act), FLP MA, and NFMA Furthermore, in Granite Rock v. California Coastal Commission (480 US 572 [19873), the court confirmed the states' rights to enforce environmental regulations on federal lands, absent a clear conflict of federal law. A state not only may suffer a loss of control under aggressive federal planning programs, but also may be harmed by the consequences of poor federal planning. . . Administrative or judicial suspension of oil and gas activities stemming from an inadequate land use plan will have the same impact as an overly restrictive plan: no oil and gas leasing, exploration, or development. Therefore, the state has an interest in ensuring that the federal land planning and management are comprehensive, accurate rip -- -= balanced, workable, and timely. As previously noted, under the Mineral Leasing Act, the states receive 50 percent of all bonuses, rentals, and royalties from the leasing and production of federal minerals within their boundaries. In fiscal year 1988, the states received more than $229 million from federal oil and gas leasing and production (Bible 2.1~. As a royalty owner, the state is best served by orderly development and maximum, efficient extraction and sale of federal oil and gas. Conservation and maximum recovery of oil and gas from state lands may be dependent on coordinated recovery from adjacent federal lands. From the state's perspective, any planning decision that limits leasing or exploration and development may result in lost state royalty revenues as well as federal lease revenues. Although this revenue sharing gives the states a powerful fiscal incentive to support oil and gas leasing and development on federal lands, states may also sometimes favor restrictions on such activity in order to protect other values and resources (e.g., wildlife that is generally subject to state authority). The state's role as a regulator has become increasingly important in the last 15 years and presents a significant opportunity for the state to influence operations on federal lands within its boundaries. States have as- sumed primacy for environmental programs governing air, water, and solid or hazardous wastes, as well as delegated authority for auditing, inspection, and enforcement of federal oil and gas operations. The Clean Air Act, Safe Drinking Water Act, and Resource Conservation and Recovery Act are enforced through permits or other compliance measures during explo- ration, development, and reclamation. These delegated federal authorities

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30 are, in addition to legislatively mandated regulatory authority, generally in- terpreted to apply to all lands within the police power of the state. Federal primacy programs set a floor on regulation through state program require- ments that are "no less effective than," "as eDective as," or "equivalent to'' federal regulations. However, the state sets the regulatory ceiling and establishes and enforces regulations, unilaterally and in coordination with federal agencies. Most states have an approval process for APDs, although each state's interpretation of its authority over approval as opposed to acceptance- of the application on federal lands varies. Most states have authority to establish shell spacing on nonunitized federal lands. Most states regulate the use of water, although the degree of regulation and the roles of the state land management agencies may vary. Furthermore, state and county health departments are responsible for compliance with health codes on federal lands. All states with a significant federal land base require bonding of oil and gas operations, and most have agreements with federal agencies that alleviate the need for duplicate bonding. While oil and gas well bonds in the past were principally well-plugging bonds, current bonding practices of the BLM, Forest Service, and most states extend the bonding to cover surface reclamation. The effectiveness of federal land management from the states' per- spective is reflected in a balance of resource management, royalty and tax revenues, energy development, recreational use, wilderness, Must Land values, wildlife values, and local government needs. Where problems have developed In the process of balancing these varied interests, they appear to be the result of insufficient or inaccurate data bases, mechanisms that are not mandatory and are poorly coordinated for factoring specific resource management information during planning and leasing, and federal resource priorities that differ from state, county, or citizen priorities for federal and adjacent nonfederal lands. Impacts on Indian Lands Native Americans are also affected by oil and gas activities on federal lands. They are often concerned with the impacts of exploration and development on surface resources such as wildlife and sacred or ceremonial sites. They are also primary beneficiaries of oil and gas leasing when it takes place on lands where they enjoy full rights to subsurface resources or derive revenue from permits for surface occupancy. However, the impacts of federal land use planning and leasing actions on lands with surface or subsurface Indian tribal or allottee ownership and Indian reservations reflect important distinctions in federal actions and responsibility. The federal government has a trust responsibility to tribes and allottees

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31 (e.g., see United States v. Mitchell, 463 US 206 [1983]). Where federal planning and leasing on federal lands impacts operations on Indian lands, federal actions may be further constrained by the government's fiduciary duties trustee. There is no federal planning responsibility, per se, governing Indian lands. However, the federal government, through the Department of the Interior (BLM and Bureau of Indian Affairs), is responsible for NEPA compliance and regulation of oil and gas exploration and development on Indian lands. The tribe sets the standards and procedures for leasing and establishes the terms of the lease. However, because the federal government plans for federal lands adjacent to Indian lands, Indian tribes often find themselves in a position similar to that of the states, where planning for federal lands becomes de facto planning for the nonfederal lands. The converse is also true in that some Indian tribes can assert treaty rights for use of federal lands for the taking of wildlife or for sacred or ceremonial sites. These rights are often contested, along with Native claims to the land itself, when their exercise would inhibit other planned uses of the federal lands. THE OIL AND GAS INDUSTRY AND ITS FUTURE ON THE FEDERAL LANDS Onshore federal land management has had an important, but far from dominant, role in the development of the oil and gas industry in the United States. Over the years, the industry has been shaped by broad economic, political, international, and technological factors that entirely overshadow federal land policies and programs. 1b a large degree these factors will dictate the industry's future interest in, and activities on, the federal lands. Recently, the percentage of the nation's daily consumption of oil sup- plied by imported crude oil and product rose above 50 percent a situation that has significant national security, balance of payments, and other eco- nomic implications. Additionally, recent rig counts in the United States have been below or near historic lows, indicating diminished domestic ex- ploration. Although no expert pretends that onshore federal lands outside Alaska may be the answer to the country's increased dependence on for- eign oil, they remain an attractive area for further exploration and may contribute significantly to domestic production. ~day, federal onshore lands outside of Alaska provide 4.6 percent of the nation's oil production and 5.0 percent of the its gas production. These proportions have declined slightly since peak production years (1969 for oil, 1982 for gas) from onshore federal lands: from 5.9 percent for oil in 1969, and from 5.8 percent for gas in 1982. Overall, and with the exception of some parts of Alaska and the Outer Continental Shelf, the United States

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32 has been more thoroughly explored for oil and gas than any other region of the world. It is what geologists describe as a "mature province" for oil and gas exploration. Most observers agree that where future oil and gas reserves will likely be found in the contiguous 48 states is now generally known. Of course, their precise locations and volumes can be ascertained only by exploration, but major surprises are unlikely. The economic factors of prime importance in stimulating oil and gas exploration have been the prices of crude oil and natural gas. As long as domestic oil supplies were plentiful and crude oil prices were low, profits for the major oil companies were made in processing and marketing. The prices of crude and refined oil products were essentially controlled by market conditions in the United States. With the ascent of the Organization of Petroleum Exporting Countries (OPEC) and the shifting of control over price to overseas, prices were first (1972-1982) escalated sharply, encouraging investment in improved oil recovery methods in onshore fields. Then (1982-1987) prices fell so low that several efficient recovery methods became uneconomic and many old wells were abandoned with substantial amounts of oil remaining in the reservoirs. While crude oil prices have risen in the last two years, unpredictability has made the financial community reluctant to make long-term investments in oil properties, thus restricting the drilling activities of the independent producers, the segment of the industry most dependent upon borrowed money. In addition to impacts from price fluctuations, natural gas producers have faced concern about the ability of domestic gas fields to meet gas demand at adequate rates. Some industry observers believe that price increases could have a more immediate impact on gas production because the financial community might find the greater predictability of natural gas prices and markets more to its liking than the foreign controlled prices for oaf. In recent years, government policy on supply of energy resources has been noninterventionist, with diminishing control of natural gas prices. Increased natural gas production may result from legislative efforts to improve air quality by reducing sulfur dioxide and nitrogen oxide emissions and the resultant need of fixed site energy consumption for cleaner fuels, as well as the natural gas shortage apparently developing in California. Any substantial shift toward greater natural gas consumption likely will entail some increase in the price of domestic natural gas, an expansion in exploration for new gas fields in the United States, and a greater dependence upon foreign (mainly Canadian) sources of natural gas. If oil and gas prices increase the same relative amount, industry funding for new domestic exploration will probably focus on efforts to find new gas, rather than oil, fields. Funds for oil are more likely to be channeled into improved recovery of oil from existing fields. To prominent factors favor

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33 expending new money in old oil fields and new gas fields. First, there is very limited engineering potential for improved recovery from many gas fields, making enhanced recovery largely an enterprise in existing oil fields. Second, the geochemical conditions for generation and preservation of oil and gas underground favor oil fields at relatively shallow depths and gas fields at greater depths. Because, in most of the United States the shallow rock horizons have been intensively explored and the deeply buried formations have not, the chances for-findin~ new fields are greater at denths that are more prone to contain gas. ~ ~ ~. . . . . D - ~By' ~r ^^- wattle recem projections suggest the largest undiscovered onshore resenes of natural gas occur in Alaska and the Gulf Coast (U.S. Geological Survey and Minerals Management Service, 1989), the exploration for new domestic gas fields will include the Rocky Mountains. Key Rocly Mountain geologic provinces for natural gas resources include federal lands in the Overthrust Belt of Utah, Idaho, Wyoming, and Montana-a region that also has highly significant surface values. According to the U.S. Geological Survey and the Minerals Management Service (1989). un to 30 Percent ~. ~. . ~ 1 ~ ~ or fine region s reserves have been produced. Of course, such estimates are highly speculative. The National Research Council is studying the methodologies used in these assessments and will issue a report on the subject in the spring of 1990. In general, much of the land base of the Rocly Mountain states, and most of the relatively unexplored lands are federally owned, making gas exploration a significant future use of the federal lands. The likelihood that new exploration and development on federal lands will favor gas over oil is of significance to future onshore oil and gas leasing and the environmental impacts of leasehold activities. For example, gas fields are usually developed on a spacing pattern of one well per 160-640 acres, whereas oil fields are developed on patterns of much more closely spaced wells, generally one well per 20 or 40 acres. This lower density of gas wells has the potential of reducing the magnitude of environmental impacts from developed fields. It should be noted, however, that such considerations do not rule out the. geologic fact that a lessee often does not have a choice as to whether to develop oil or gas. The profile of companies actively exploring and developing the federal lands may also change. Onshore federal lands, especially those in the Rocly Mountains, increasingly are becoming the domain of the independent oil and gas companies. The expected more modest size of future discoveries on federal lands is likely to attract more independent operators than the major companies. The major companies are increasingly spending their exploration funds overseas where the likelihood of discovering large fields is greater, where costs and conditions may be more conducive to drilling, and where nations often offer price guarantees, tax incentives, or other

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34 financial inducements. Some industry observers believe that although major companies may retain inventories of onshore federal leases, the bulk of the leases that experience active exploration and development will be held by independents. At the same time, some of the problems encountered during ex- ploration and development may be of greater concern to independent companies. Some federal lands, particularly those in the Overthrust Belt in the Rocky Mountains, present very difficult and costly conditions for exploration and development. The topography is rough and the geology is complex. Under natural limits and federal lease restnctions, surface activi- ties are eliminated altogether in some areas and can take place only during certain seasons or at certain times in other areas. Some independents may find it more difficult to fund the high front-end costs associated with these restrictions. Certain natural gas reserves in the Rocly Mountain region are sour (high sulfur content) and need special equipment for processing that is costly and requires added time for installation. The committee saw one such natural gas processing facility for the Riley Ridge gas field located mainly on federal lands in Wyoming, which was being developed in a joint venture involving one of the major companies. The higher capital and operating costs for such operations may discourage participation by independent operators. Nonetheless, many independent producers are strongly dedicated to finding and producing oil and gas on the federal lands. If oil and gas resources on these lands are to be developed In the near future, that development likely will be accomplished primarily by the independents. The BLM and the Forest Service must be cognizant of the interests, capabilities, and concerns of independents, as well as the major operators, in framing their decisions on planning and leasing for, and development of, oil and gas on federal lands. REFERENCES Bureau of the Census. State Tax Collections in 1970, State lax Collections in 1975, and State lax Collections in 1980. Bureau of Land Management. 1977-1983. Public Land Statistics, 1976-1982. Bureau of Land Management. 1986-1989. Public Land Statistics, 1985-1988. Bureau of Land Management, Department of the Interior. 1983-1988. Public Land Statistics 1982-1987. Bureau of Land Management, Department of the Interior. 1989a. Public Land Statistics, 1988, Vol. 173. Bureau of Land Management, Department of the Interior. 1989b. Competitive Sales by BLM Offices, FY 1987 and FY 1988 (draft). Bureau of Land Management, Department of the Interior. 1989c. Onshore Oil and Gas Leasing Report, Fiscal Year 1988, BLM Facts.

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35 Forest Sentence, Department of Agriculture. 1989. Report of the Forest Service, Fiscal Year 1988. General Accounting Office. 1989. Mineral Revenues, Implementation of the Federal Onshore Oil and Gas Leasing Reform Act of 1987. GAO/RCED~ 108. May. Minerals Management Service. 1988. Mineral Revenues: The 1987 Report on Receipts from Federal and Indian Leases. Office of Technology Assessment. 1979. Management of Fuel and Nonfuel Minerals in Federal Lands, Appendix B. p. 336. U.S. Department of the Treasury. 1981. The Outlook for Severance lax Collections and the Intestate Allocation of Revenue Sharing (Office of State and Local Financed. U.S. Geological Survey and Minerals Management Service. 1989. Estimates of Undiscovered Conventional Oil and Gas Resources in the United States-A Part of the Nation's Energy Endowment.