Production rose on federal land last year, fell in Gulf of Mexico

Oil production on federal land rose 7 percent in 2012 over the previous year but fell by more than 8 percent in the Gulf of Mexico, according to the latest Interior Department data.

The rise on federal lands is the largest single-year production gain in at least the past eight years. Growth was driven especially in New Mexico, where production increased 21 percent to 41 million barrels in 2012, and North Dakota, where it rose about nearly 15 percent to 12 million barrels last year, according to the agency data, which are subject to slight changes.

But in the Gulf, continued declines in oil and natural gas production suggest the effects of the April 2010 BP PLC oil spill, which halted deepwater permitting in the region for nearly a year, continue to be felt. The BP explosion and spill killed 11 men and released 5 million barrels of crude into the Gulf, the nation's worst environmental disaster.

Although oil production in the Gulf dipped 8 percent last year, that's half the rate at which it fell from 2010 to 2011, which suggests the production slide may be leveling out.

According to the Energy Information Administration, production in 2012 was expected to be lower than 2011 in part because wells were shut down during Hurricane Isaac, which also delayed development activities at several sites in the Gulf.


Natural gas production appears to have held steady on federal lands last year but fell by nearly 20 percent in the Gulf, continuing a nearly decadelong slide in the region, according to the Interior data.

The numbers suggest that President Obama's pledge to increase domestic oil and gas production through less burdensome regulations and faster drilling permits has yielded mixed results.

While production of crude in the United States grew to 7 million barrels a day in late 2012 -- its highest level in the past 15 years -- most of the production increase has come from shale rocks underlying private lands in North Dakota and in south and west Texas, according to EIA.

Production from federally controlled tracts in the Gulf and onshore dipped by a combined 5.6 percent in 2012, a point that has drawn criticism from some industry advocates who say Obama is claiming credit he doesn't deserve for the nation's energy renaissance. It's a point Obama's nominee for Interior secretary, Sally Jewell, may hear from Republican lawmakers at her confirmation hearing Thursday before the Senate Energy and Natural Resources Committee. Interior manages drilling both onshore and offshore.

"Overall, oil and natural gas production is at an all-time high and creating thousands of new jobs across the country," House Natural Resources Chairman Doc Hastings (R-Wash.) said at a hearing this morning to discuss offshore energy development. "Yet this is only half the story -- the half that President Obama likes to take the most credit for, but for which he actually deserves the least."

Federal lands account for about 5 percent of the nation's oil production and 11 percent of its natural gas, according to Interior's Bureau of Land Management. The Gulf has historically accounted for about 20 percent of U.S. oil production and about 6 percent of its natural gas. The location of energy production is determined by a multitude of factors, some of which are outside the president's control.

Randall Luthi, president of the National Ocean Industries Association, said Gulf production is still hindered by the 2010 drilling moratorium but that the regulatory environment has improved.

"While the atmosphere is certainly better than two years ago, the industry still faces uncertainty in the consistency of permitting, more paperwork and longer times to prepare and receive permits, and increased costs including much higher inspection fees," he said. "Rigs are contracted for years in advance, and industry went to other countries in 2010 and 2011. It takes time to restart a process that was virtually shut down for months."

Gulf production rising -- EIA

Interior said there were 37 deepwater floating rigs drilling in the Gulf at the end of 2012, up from 26 at the beginning of the year. In addition, the Bureau of Safety and Environmental Enforcement approved 112 new deepwater well permits in 2012, the most since Interior started tracking such data electronically in 2005.

And production is expected to increase, according to EIA's latest short-term energy outlook, which projected that monthly oil production in the Gulf would rise over the course of 2012 by about 6 percent. EIA, which is the nonpartisan research arm of the Energy Department, said Gulf oil production is expected to increase from an average of 1.27 million barrels per day in 2012 to 1.39 million barrels per day in 2013 and 1.45 million barrels per day by 2014.

Overall, oil production in the Gulf has averaged 536 million barrels annually from fiscal 2009 to 2012, up from 496 million barrels annually from the previous four years.

Dave Alberswerth, senior policy adviser at the Wilderness Society, said the production gains on federal lands suggest that calls to open new areas to development are unfounded.

"Those who continue to argue that somehow we need to change our federal policies to reduce environmental protections and open more lands to oil production just aren't getting it," he said.

Alberswerth said the data reflect a broader trend on federal lands -- also evident in the Gulf -- of companies transitioning from gas drilling to oil drilling to take advantage of the favorable price of crude.

The production data from Interior's Office of Natural Resources Revenue are based on royalty payments from industry. Thus, they are subject to slight revisions as companies amend sales figures and as federal agencies verify production at well heads. But they are generally reliable indicators of trends.

Although the numbers will undoubtedly become talking points for political talking heads, they should be taken with a grain of salt.

Production trends are dictated by many factors, including geology, the price of energy, government regulations and the availability of infrastructure. Federal officials in recent years have argued that the most prospective shale plays for oil and gas are found on private land.

In addition, companies have shut in thousands of gas wells in some parts of the West as operators wait for prices to rebound, Alberswerth said.

But Republicans and oil trade groups insist government regulations play a larger role. Companies face longer permitting times on BLM lands, which are managed for a multitude of uses, including wildlife and cultural resource protections. BLM last year issued more leases and more acres for oil and gas development compared with the previous year, but overall sales are down compared with the George W. Bush administration. Lease sales in the Gulf were halted for more than a year following the BP spill but are currently being held regularly across all of the central and western planning areas.

Republicans on the House Natural Resources Subcommittee on Energy and Mineral Resources this morning argued that the Obama administration has locked up access to the vast majority of the nation's oil and natural gas, including in the Atlantic and Pacific oceans, stifling millions of jobs.

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