Federal Government Charging Much Higher Fee for Oil-Drilling Applications

November 12, 2009 - 9:05 AM
The $6,500-per-well application fee was part of the Interior Department appropriations bill passed by Congress and signed by President Obama on Oct. 30. The new fee amounts to a 62 percent increase over the previous $4,000 fee.
Cheyenne, Wyo. (AP) - A huge increase in the application fee for oil and gas companies to drill on federal land is unfair and won't speed up review of drilling permits, industry officials said Wednesday.
 
The $6,500-per-well fee was part of the Interior Department appropriations bill passed by Congress and signed into law by President Obama on Oct. 30. The new fee amounts to a 62 percent increase over the previous $4,000 fee.
 
The U.S. Bureau of Land Management, which oversees federal oil and gas rights and drilling on federal land, says the higher fee is needed to keep up with the cost of processing new drilling applications.
 
But oil and gas industry officials pointed out that the money goes into the U.S. Treasury and not specifically to the BLM, where it might offset the costs of reviewing drilling applications.
 
What's more, companies pay the fee with no assurance that the BLM will approve their permits. Even after winning approval, a company can't be certain that a well will produce enough to be viable, said Steve Degenfelder, vice president of Double Eagle Petroleum, a small gas drilling company based in Casper.
 
"There's no guarantee that you will get anything for your $4,000 -- or now $6,500 -- and that's what's unfair about this whole process," Degenfelder said. "It just adds another reason why it's difficult to drill wells on federal land."
 
The industry would be more receptive to the higher fee, he said, if the BLM would speed up the review process and decide on permits within, say, a month's time. Right now, Double Eagle waits as long as three years for BLM to approve wells and Degenfelder doesn't expect faster approval.
 
Instead of speeding things up, the fee has increased work for BLM field offices since President Bush signed it into law in late 2007, said Cheryl Sorenson, vice president of the Petroleum Association of Wyoming.
 
"If you are paying money for that fee, you expect a service," Sorenson said. "Better, faster service -- and that is not guaranteed with this money. It won't even help those offices."
 
BLM officials weren't available for comment late Tuesday or Wednesday, a federal holiday. But an environmentalist said the agency needs more funding to adequately review drilling permits.
 
"BLM is charged with exercising oversight over the public lands and if it's going to do that in a careful, well-reasoned way, it has to have sufficient funds to allow for a good, thorough review," said Bruce Pendery, an attorney for the Lander-based Wyoming Outdoor Council.
 
The BLM manages 258 million surface acres of public land, most of it in 12 Western states. The agency also administers 700 million acres of subsurface minerals.
 
The BLM leasing program returns $46 in federal royalties for every $1 the government spends, said Kathleen Sgamma, director of government affairs for the Denver-based Independent Petroleum Association of Mountain States.
 
Only the Internal Revenue Service generates proportionately more money for the federal government, she said.