Feds holding back $100 million in drill leases
August 10, 2009
SALT LAKE CITY – Brian Wixom’s company has paid the U.S. government hundreds of thousands of dollars for leases to drill for oil and gas on federal lands over the years, only to never put a rig in the ground.
The money simply sits in a federal bank account as Wixom and other drillers wait for an agonizing bureaucratic process to run its course.
As it turns out, the federal government is holding a boatload of money for leases it auctioned and sold but hasn’t issued, holding them back for bureaucratic review because of environmental protests and lawsuits. The backlog grew exponentially under the administration of President George W. Bush as it pushed for more domestic drilling.
The Associated Press has calculated that the government is sitting on close to $100 million paid for millions of acres of energy leases in the Rocky Mountains that have been withheld for as long as seven years, according to records and interviews with BLM officials in Utah, Colorado and Wyoming.
Drillers are steamed by the process. They don’t understand why the federal government is sitting on such an enormous sum of money, especially at a time when politicians in Washington are so focused on spending stimulus money to revive the economy.
“It’s just crazy that the government, because of bureaucratic delays, is sitting on that kind of money,” said Kathleen Sgamma, government affairs director for the Denver-based Independent Petroleum Association of Mountain States. “Talk about an economic stimulus.”
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Secretary of the Interior Ken Salazar got an earful from oilmen on the issue during a “listening tour” stop in Salt Lake City in May. Then only a few months on the job, Salazar vowed to find out more about the process.
“We think the government should issue the leases we purchased or give the money back,” Wixom told Salazar.
Officials acknowledge the leasing delays have grown worse, but say their hands are tied by legal wrangling that allows anyone to challenge a lease on public lands. Environmentalists seized on this option during the Bush years as the administration rushed to drill more, making the delays even longer.
“It’s gotten very complex,” said Kent Hoffman, deputy Utah director of lands and minerals for the Bureau of Land Management, the federal agency in charge of energy development on public lands. “We have to answer the protests in a very legal fashion, knowing the next step could be the Interior Board of Land Appeals or federal court.”
So-called protest parcels have always been auctioned on a buyer-beware basis, yet that did little to deter speculators, brokers, drillers and oil companies in the past. It used to be that protests were resolved fairly easily – either a parcel was fit for oil and gas development or it wasn’t. Now things have turned into “this long-term suspense,” said Larry Williams, Utah director for the American Association of Professional Land Men.
“It’s money sitting in the government’s bank, not doing anybody good,” Williams said. “It’s just sitting there. The government can’t use it, because they may have to give it back.”
BLM records show the agency has been holding 46 leases belonging to Wixom’s International Petroleum, a Salt Lake City family firm with backing from outside investors, for administrative review since 2005. Par Five Exploration LLC of Orem, Utah, and its affiliates have hundreds of thousands of dollars tied up for parcels that the companies paid from as far back as 2005.
“If you don’t issue them, it’s the same as taking them away,” said Kimball Hodges of Par Five.
According to Hodges, it’s like buying a car but not being able to take delivery of it – and worse, not knowing if or when the car will ever arrive on a dealer’s lot.
“When you pay for something, you expect to get it,” he said.
The Southern Utah Wilderness Alliance takes credit for helping gum up the works.
“Leases were being issued at a breakneck rate throughout the Bush administration, and we were challenging that because they were being sold in spectacular landscapes,” said Stephen Bloch, a staff lawyer for the wilderness alliance.
The complaints have become more common since Salazar in February scrapped the leasing of 77 parcels that were offered at a Utah auction in the final days of the Bush administration. Salazar said the parcels were too close to wild areas or national parks.
In a rare exception, Salazar ordered the return of that auction money.
Yet, according to agency records, the BLM is holding leases worth more than $40 million in Utah, around $50 million in Wyoming and $1.2 million in Colorado. BLM officials say that in Colorado, that amount grows to $6.9 million including withheld leases on coal, uranium and potash rights.
Other holdups continue. On June 23 in Salt Lake City, the BLM held what it initially described as a protest-free auction, which would have been the first time in seven years no parcel was being offered under protest of any group.
That changed during the auction, when Selma Sierra, the director of the BLM’s operations in Utah, decided that every one of the drilling parcels offered or sold at the auction was, in fact, under protest. Sierra decided at that point to accept protests that had been filed after a deadline by the Denver-based Center for Native Ecosystems and the Washington, D.C.-based Theodore Roosevelt Conservation Partnership.
Hoffman said it could take months for his team to scrutinize the 31 parcels sold to make certain each one withstands environmental scrutiny required by federal law.