Drilling review process to speed up

04 03, 2012 by Fuel Fix

The Obama administration on Tuesday will announce plans to speed up the review process for oil and gas companies seeking to drill on U.S. lands.

Interior Secretary Ken Salazar is set to announce an automated system for tracking onshore drilling applications as he finishes a two-day tour of booming oil and gas exploration in North Dakota.

On Monday, Salazar joined the state’s congressional delegation to visit a rig drilling a well for The Woodlands-based Newfield Exploration Co. and temporary housing for oil field workers who have swarmed the region.

Under the change being detailed Tuesday, the Interior Department’s Bureau of Land Management will be able to better monitor permits at every step of the federal review process and quickly flag those with missing or incomplete information.

Modeled after an approach used for offshore drilling applications and piloted in the Bureau of Land Management’s Carsbad field office, the move could slash the amount of time it takes the government to process oil and gas permits by two-thirds, down from an average of 298 days.

Much of the current processing time is devoted to companies and regulators passing applications back and forth to fill in holes, and bureau officials attribute 230 days of the delays to operators.

Salazar also is set to tout the launch of a new National Oil and Gas Lease Sale System, which aims to electronically track the process of leasing federal onshore tracts from beginning — when companies first submit formal expressions of interest — to end, with the issuance of leases.

The changes to be announced Tuesday build on work to speed review of drilling permits in the Bureau of Land Management’s offices in Montana and North and South Dakota, which have been swarmed with applications for new wells.

Although the moves would apply to drilling nationwide, they are significant for exploration in the West, where companies are using horizontal drilling techniques and hydraulic fracturing to extract oil and natural gas from dense rock formations.

In the past four years, North Dakota has exploded with activity as companies take advantage of the techniques to extract crude from the Bakken Shale. The U.S. Geological Survey estimated in 2008 that the Bakken contains up to 4.3 billion barrels of recoverable oil, though an upcoming agency reassessment may raise the number.

Salazar called the region “ground zero for American energy production,” adding: “There is a huge future here.”

“The Bakken play here in North Dakota is generating impressive energy production for our country and creating thousands of American jobs,” he said.

Drilling applications on federal leases in the Bakken — including wells that start on private land but include federally owned minerals — have seen a 500 percent increase over the past five years. That includes territory inside the Fort Berthold Indian reservation, where applications have jumped from 0 in 2007 to 175.

The surge in oil production in North Dakota, both on federal leases and private lands, helped push domestic oil production up to an eight-year high in 2011. The Obama administration has been touting that development as it seeks to assuage voters worried about rising gasoline prices.

But critics say the jump is mostly from drilling on private lands – not on federal leases under the administration’s control.

“Where the growth in oil out here has been, it’s been on private land,” said Rep. Rick Berg, R-N.D., who joined Salazar Monday.

Berg warned that the specter of new regulations – including a rule governing hydraulic fracturing on federal lands – threatens some of the work even on privately held tracts.

“What we need is common-sense regulations that are stable … and based on sound science,” he said.

In January, North Dakota produced 546,050 barrels per day of oil, according to the North Dakota Industrial Commission. That makes the state the nation’s third-biggest oil producer, ahead of California and just behind Alaska and Texas, the national leader.

The oil boom has brought new jobs and drilling work, helping to drive down the state’s unemployment rate to 3.1 percent in February – the lowest in the U.S. – compared with a national average of 8.3 percent.

The development is a mixed blessing, as it strains local infrastructure. The biggest challenge is finding affordable housing for oil field workers without pricing out local residents.

One solution is the “man camp,” dormitory-style housing for workers of both genders, from roustabouts to office managers.

Salazar toured one Monday. At Target Logistics’ Dunn County Lodge, he saw dorm rooms, a cafeteria and the laundry room used by 320 workers living in the building. The company has similar camps in Texas’ Eagle Ford formation.

Two companies – Hess and Halliburton – have leased all the rooms at the Dickinson site. The fees they pay Target Logistics cover employees’ basic needs, from housing and food to laundry – though workers still have to clean their own clothes.

During a visit to the recreation room, Salazar and Berg joined Sens. Kent Conrad, D-N.D., and Sen. John Hoeven, R-N.D., in a game of foosball. Although there was no clear winner in the bipartisan match, there was good-natured ribbing. Hoeven dubbed the secretary “Stonewall Salazar” for his defensive skills.

Target Logistics is on track to build facilities for up to 6,000 workers in North Dakota.

Salazar said that “shows the robustness of the activity going on in the Bakken today.”

“This is a full-out boom,” Conrad said. “And it’s important for this state and local communities, but also the entire nation.”

In North Dakota, where the federal government’s footprint is small, much of the drilling is on private tracts. But because of the lateral reach of the oil wells in the area, even those drilled on private land can tap oil from subsurface acres in the federal government’s control.

From 2006 through March 23, 2012, 92 percent of the permits to drill and 92 percent of oil well completions in North Dakota were on private or fee leases, according to state data analyzed by IHS CERA’s vice president of industry relations Pete Stark.

By contrast, in the same time period, 4.8 percent of the permits to drill and 4.7 percent of the oil well completions were on federal leases. The remaining permits and wells — 3.3 percent — were on state lands.