New Mexico Permitting Backlog, Deferred Royalties Spoiling ‘New Energy Frontier’
New Mexico oil and natural gas officials called out excessive permitting wait times and other regulations they say are deferring state and federal revenue across the state and in the heart of the Permian basin, which local officials project to be the “new energy frontier.”
Carlsbad Mayor Dale Janway welcomed the industry to the Mayor’s annual Energy Summit, saying, “We dream big in Carlsbad, and so do you. Thank you for helping us make Carlsbad a new energy frontier.”
The current permit backlog for permits to drill oil and gas on federal lands is standing in the way of making that energy development a reality. Robert McEntyre, spokesman for the New Mexico Oil and Gas Association, told Western Wire his organization representing producers across the state appreciated the BLM’s commitment to relieving the backlog, a sign he called “encouraging” and a significant departure from the previous administration.
“We found that on average it was costing the state of New Mexico and the federal government about $2.3 million a day in deferred royalties. That’s expensive red tape,” McEntyre said.
Permitting backlogs have produced a “tremendously high cost of doing business and a tremendously high detriment to investment in New Mexico,” McEntyre said.
Federal delays entail the current backlog of Applications for Permit to Drill (APD) sitting at the Bureau of Land Management’s (BLM) field offices. Back in July of this year, Western Wire reported that in New Mexico alone, the BLM Carlsbad/Farmington field offices had 540 APDs pending. The longest APD review process in New Mexico’s northwest San Juan Basin has been up to 500 days, according to the New Mexican, when federal statute requires a 30 day review process by BLM. That’s nearly 17 times the length of time required by federal law.
“These kinds of delays push investment away from federal land,” McEntyre said.
Acting director of the Bureau of Land Management Mike Nedd addressed the crowd at the summit in Carlsbad in an effort to provide some reassurance that the BLM is working on the issue of reducing permitting times.
“The Secretary has been clear about removing unnecessary regulations,” Nedd said. “We continue to see demands and needs from the industry. We are actively seeking ways to reduce permitting time. The steps we’re taking will increase our effectiveness in oil and gas production.”
McEntyre said NMOGA looked forward to sharing best practices with the BLM to move permits through in a timelier manner. Permitting on state lands is typically done in 45 days or less, he said.
Last week the House Subcommittee on Energy and Mineral Resources heard testimony on a bill that would shift oil and gas permitting and other regulations, including hydraulic fracturing, to the states.
Rep. Paul Gosar (R-Ariz.) told the committee that “inefficiencies and redundant requirements imposed by the federal government have discouraged oil and gas production on federal land,” leading to “duplicative environmental reviews and unnecessary permitting delays.”
While oil and gas development on state and private lands has increased dramatically, according to Gosar, permitting backlogs on federal lands has led to a loss of state and federal revenues. Granting the state primacy to deal with the permitting would increase revenues and decrease wait times, the Congressman said.
In her testimony for the ONSHORE Act, Cathy Foerster, Commissioner for the Alaska Oil and Gas Conservation Commission, said that states were uniquely positioned and experienced to handle permitting on federal lands, often better than the BLM.
“State oil and gas regulatory agencies are well-equipped to regulate oil and gas operations on all lands in their states,” Foerster said, saying her agency was better prepared to handle such a process with well-trained personnel and better equipment than the federal government.
The oil and gas industry plays a key role in generating revenue for the state of New Mexico. Federal delays not only cost time and investment resources for oil and gas producers, but also money for the city of Carlsbad and the entire state of New Mexico as well as other states in the U.S. with major APD backlogs.
Western Wire has reported just how much revenue goes to the state from oil and gas activities. According to the Office of Natural Resources Revenue, New Mexico received $369 million in fiscal year 2016 from “[energy] revenues collected from oil, gas and solid mineral production on federal lands within their borders.”
Interior Secretary Ryan Zinke issued a secretarial order earlier this year in an effort to address the APD backlog and improve the agency’s APD process.
“Oil and gas production on federal lands is an important source of revenue and job growth in rural America but it is hard to envision increased investment on federal lands when a federal permit can take the better part of a year or more in some cases,” Zinke said in July.