Obama’s proposed BLM regulations to increase costs/harm economy



Photo by: Shutterstock

Photo by: Shutterstock

By Paul Gessing | Watchdog Opinion

The Bureau of Land Management (BLM) looms large as a land manager in the American West. Total surface acreage maintained by the BLM in my home state of New Mexico comes to 13.5 million acres. That’s more than twice the size of the state of Maryland or nearly as much land as the entire state of West Virginia.

Under the Obama Administration the BLM has become far more difficult for the oil and gas industries to deal with. An indicator is that since 2009, oil production on federal lands is down by 6 percent and natural gas production is down 28 percent. At the same time, oil production on non-federal lands is up by 61 percent and gas production on non-federal lands is up by 31 percent.

Unfortunately, a slew of new and proposed regulations will only make things more challenging. Combined with lower prices, these regulations could bring oil and gas drilling on BLM lands to a halt. This may be the goal of many in the Obama Administration. It is certainly the desired outcome of many of the President’s activist environmentalist supporters.

Proposed changes to Onshore Order No. 3 would dramatically alter the metering of production on federal leases, most likely forcing industry to install new meters on thousands of wells. 

These changes may slightly improve the accuracy of royalty payments, but the increased cost of compliance will lead to the premature abandonment of wells that cannot be economically updated. Significant revenue losses will be traded for minuscule changes to the accuracy of royalty accounting. A few years ago (when this same change was debated and then abandoned by BLM), New Mexico’s State Land Office conservatively estimated that the state could lose $1 trillion in revenue over a decade under this regulation.  

Another costly new BLM regulation expected to be formally proposed in the near future will address venting and flaring. The rule, submitted to the Office of Management and Budget for review in September, aims to reduce the amount of methane released into the environment.

A recent report from the Environmental Defense Fund (EDF) claims that $330 million worth of natural gas is “lost” on federal lands due to “excessive” venting and flaring. But like much of what passes for “energy analysis,” this figure is calculated by comparing estimates in two different time periods.  In the meantime, the EDF conveniently ignores the increasing amount of actual data that gradually shows reductions in methane emissions by industry action.

Photo by: Shutterstock

Photo by: Shutterstock

This new venting and flaring rule is expected to require the twice yearly inspection of all gas-producing wells with special, costly cameras. In northwest New Mexico alone, where there are over 20,000 active wells, the annual cost would be over $24 million a year not including administrative costs.

Ironically, the BLM’s own slow permitting process is a leading cause of flaring. When permits for rights of way for gathering systems are delayed, natural gas flaring times are often extended. This is a case of a bureaucracy-induced problem that has greatly impacted the industry in recent years.  

Another proposed BLM rule involves “fracking” on federal and Native lands. The BLM rules would require oil and gas companies to reveal the chemicals they inject, to meet construction standards in drilling wells and to safely dispose of produced water. This all sounds great, but “fracking” regulation has traditionally been done at the state level.  

According to Obama’s own EPA, states have been doing a good job. The EPA has never definitively identified a case where the fracking process itself resulted in water contamination.

Colorado Attorney General Cynthia Coffman in April joined North Dakota, Utah and Wyoming in arguing that the feds overreached and intruded into an area where state rules control.

Said Coffman, “It makes no sense that there would be two sets of regulations — one from the state and another conflicting one from the federal government that would apply to the same activity — especially when the state of Colorado has been responsibly regulating oil and gas in our state for decades.”

U.S. District Court of Wyoming Judge Scott Skavdahl agreed with Coffman. In late September he issued a preliminary injunction blocking federal land managers from regulating fracking on public lands until the legal case is resolved.

These are just three of the Obama Administration’s major new regulations being imposed on the oil and gas industries. Other regulations impacting Indian lands as well as mining rules relating to streams on BLM lands are in the works.

These costly regulations will reduce tax revenues and jobs on lands managed by the federal government with negligible positive impact on the environment.



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8 Replies to “Obama’s proposed BLM regulations to increase costs/harm economy”

  1. Philip K. Howard, author THE RULE OF NOBODY calls our present government a form of tyranny. Public law has become too big and too complex for any elected leader to take on. Every law has unintended consequences. Laws must be coordinated with each other in order to make them coherent to the people expected to abide by them.

    Congress has created no disciplined mechanism to make laws and regulations fit together. Drafting of statutes is done by whoever wants the law, often special interests; the drafts are cleaned up by a congressional Office of Legislative Counsel but not reviewed for substance. New major regulations are vetted by the White House as it does nothing to clean up old regulations. The effect is a giant disorganized pile of programs and bureaucratic requirements that go by the noble name of Rule of Law but are utterly uncoordinated.

    The game is rigged for powerful people and groups — aided by a system of campaign finance and electoral rules that gives the advantage to incumbent officials who promise to protect programs that benefit their supporters. Trial lawyers organized political funding makes it impossible to institute badly needed litigation reform. Common law judges not legislatures should be the ultimate arbiters of law. The role of the legislation is to establish principles; it is for the judge and jurist to direct their application.

    Time to clean house: Congress should appoint independent commissions to propose simplified codes in each area. These proposals can then be debated, modified and approved.

    1. I almost agree with you Lee. This is the reason for federalism. Congress cannot and should not be involved in so much and certainly the regulators need to be pushed WAY back and their roles greatly diminished. States should be responsible for a vast majority of economic policymaking and regulation.

  2. Embellish the “almost agree” part. Is it the arbitration and trial lawyer issue?

    Another area of agreement we may share is about New Mexico’s perks to attract new business to the State. Don’t know if you watched Simon Thompson’s splendid report on NM Economic Development, KRWG TV, December 10, 2015. Fred Martino is also doing exciting work with NMSU’s Entrepreneur Ventures Program.

    1. Over-regulation is a problem Lee, that’s our main point of agreement. Our parks should make money. They could make more if we outsourced their management to the private sector. They would still be “owned” by the government, but could be managed better and for less money. I agree that Fred Martino is a gem. I just recorded a show that will run in January.

  3. When that remarkable group of men met in Philadelphia in 1787 to ratify the new Constitution to replace the Article of Confederation of 1775 which was unable to keep popular uprisings under control, the Federalists (George Washington, Benjamin Franklin, Alexander Hamilton, James Madison and John Jay among them) argued to convince the AntiFederalists (Samuel Adams, John Hancock, Patrick Henry and George Mason — Thomas Jefferson and John Adams were out of the country) that although all feared the greatest threat to the future United States was in the government’s potential to become corrupt, seize more and more power until its tyrannical rule completely dominated the people, that a “check and balance” system through three branches pitted against each other would prohibit one alone from total control.

    Moreover, through the diversity of business self interests (agriculture, manufacturing, merchants and creditors) they also would not be able to control or dominate the others. We now have a corporate/government partnership that has a tyrannical stranglehold over all of us. And to compound the problem they are not even acting as citizens of our own country. Their financial largesse favors underdeveloped countries, reaping huge labor creating rewards upon those citizens as our Middle Class has become Lower Class — fortunately in income only.

  4. Two editors of the highly esteemed ECONOMIST magazine, John Micklethwait and Adrian Wooldridge, have written a book THE FOURTH REVOLUTION: The Global Race to Reinvent the State. In it they put forth seven deadly sins afflicting state governance.

    #1. Out of date. States having a collective nervous breakdown trying to govern millions when the Constition was designed for 13 states with four million people and the primary objectives were containing breakaway armed militias and preventing a Kingship. “We are trying to govern the world of Google and Facebook with a quill pen and an abacus.”

    #2. Baumol’s Desease: Economist William Baymol’s classic paper (1966)
    argued that productivity increases much more slowly in labor intensive industries than in industries where capital in the form of machinery can be substituted for labor. Suggesting governments initially get bigger because they occupy labor intensive areas of the economy, education, welfare.

    Larry Summers argues that the average American salary has risen tenfold since the 1970s when measured against the cost of a TV set but fallen when measured against the cost of healthcare.

    #3. Olson’s Law: Economist Mancur Olson (1965) the Logic of Collective Action. Special interest groups have a huge advantage in democracies. A small determined lobby can fend off a wide public interest. The larger the group the less it will further its common interests. Narrow constituencies with passion about their cause are much more likely to do the painstaking organizing and commitment required.

    #4. The Overactive State: The proliferation of rules that government produces and their complexity. Taxation: States are constantly inventing new ways of raising taxes and then new ways of letting favored groups avoid those taxes. Feds even worse. The Tax Code has tripled in volume over the past ten years to 4 million words and ups daily. 42 different definitions of a small business. IRS booklet describes 15 different tax incentives for higher education. 9 out of 10 need to hire someone to help them complete their returns. Taxation only one part of the regulatory burden; gov requires Hospitals to use 140,000 codes for ailments they treat including “injuries from being hit by a turtle.”

    5. Fuzzy Math. Balancing a state’s budget requires all sorts of tricks like raising taxes retrospectively and off-loading costs onto cities and counties. There is a huge build-up of unfounded liabilities. Feds as bad: fiscal gap between spending commitments and taxes it expects to collect equals $211 trillion. Vagueness about numbers is a curse of the public sector.

    6. To Those who Have, More Shall be Given. Tax preferences are now worth $1.3 trillion or 8 percent of GDP and more than 60 percent go to the wealthiest 20 percent of Americans. The budget for public housing is only one-quarter of the amount that the richest Americans receive through the mortgage interest deduction. If you put spending and taxes together the government lavishes more dollars overall on the top fifth of the income distribution than the bottom fifth.

    7. Political Paralysis and Partsan Gridlock. For years Republicans have been drifting to the right and Democrats to the left with a vast no-mans-land opening up in between them. It is fashionable to blame this animosity on partisan media channels or the blogosphere but they reflect an “assortative mating” where people are choosing to live in like-minded places, reinforced by gerrymandering. The result is politicians can get their party’s votes only if they appeal to extremes. One dangerous effect: it is scaring talent away from a public sector that is already disfigured by low pay and rigid hierarchies.

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