The United States government leases specific parcels of federal land to private companies and individuals for oil and natural gas drilling. Overall, approximately 26% of federally owned lands are leased to private enterprises for resource extraction and solar energy generation. There are many rules and regulations surrounding this practice.
Below, Ferrari Energy, a mineral and leasehold acquisitions company, explains the ins and outs of oil and natural gas drilling on California’s federal lands. Keep reading to see what’s happening currently:
A Year of Changes
It has been very volatile the past few years for drilling on federal lands in California. The Trump administration took steps to open up more federal lands for private oil and gas drilling in 2019 and 2020. However, current president Joe Biden has vowed to ban the administering of new permits for natural gas and oil drilling on federal lands.
In an order dated January 20th, President Biden issued a 60-day moratorium on issuing new permits for natural gas and oil drilling on federal lands. The administration seeks to revisit the issue once it has reviewed the legal and policy details of the leasing program.
Hitting Historic Lows
Last year, the oil and natural gas in California hit the lowest point in history which contradicts the fact that the number of sealed wells recorded high, according to the state Geological Energy Management Division. One of the major reasons why this has happened is the Covid-19 pandemic.
California has been known across the US for enforcing strict measures for combating the virus which resulted in poor results when it comes to new oil and natural gas, too! The state’s economy has been severely damaged and that is yet another reason why we are seeing the decline. Most of the oil that we have in California comes from imports when only about 32% of the demand is supplied from the production in the very state.
Why is this concerning?
California has been one of the top oil producers in the country in the last couple of decades, but they are going down and that number is definitely going to drop. In 2020, only 138 wells were open which is a lot fewer compared to 2019 when 1,032 saw the light of the day. Pandemic or not, this is something nobody really expected out of California. The decline has been severe and it will continue in the years to come.
One more thing that is concerning is the new state policies which are removing wells from the operation.
California Oil and Gas
Natural gas and oil drilling on federal lands in California are handled by the state’s Bureau of Land Management (BLM). The California BLM currently manages over 200,000 acres of natural gas and oil activity with over 600 leases. Approximately 80%-90% of all surface-disturbing activities related to oil and gas in California occur in the San Joaquin Valley.
Overall, California manages one of the most productive onshore leases in the country and has some of the nation’s largest oil-producing fields. In total, California leased lands produce between 8%-10% of natural gas and oil in the state. California’s mineral leasing program pulls in over $1.35 billion for the state every year and is a significant revenue source.
How Are Lands Managed?
The US BLM manages federal lands for drilling with a 5 step process.
- Land use planning – Parcels of land are identified
- Leas sales – Land parcels are competitively auctioned off
- Well permitting – Leaseholders must obtain a permit to let them drill
- Well operation & production – Drilling is performed
- Reclamation – Drilling wells are plugged and closed once resources extraction is finished
How to File for a Permit
Over the past few years, the government has moved to online filing for Applications for Permit to Drill (APDs). Through the department’s e-portal, you can apply for a permit and also file important documents like Sundry Notices, Well Completion Reports, and Associated attachments with BLM offices around the country. AS of 2017, it currently takes approximately 121 days for the California BLM to process a permit application for drilling on lands.
It is unlikely that drilling on federal lands is going away entirely, but depending on the political climate, access to drilling on public lands may increase or decrease. Time will tell whether the state continues to support the economically beneficial practice of mineral leasing.
Once the Permit Arrives You Are Ready to Go
You cannot start drilling without a permit. During this waiting period, you need to make sure to prepare and once issued, you will be able to drill. This is a tiresome process and you need to have all the requirements fulfilled if you want to receive a permit in the first place. Once you do your job, you need to restore the land to its former state.
This land is about to be used for something else and it needs to be as if it hasn’t been drilled there. Of course, wells need to be sealed properly and only after everything like that is done you can move on to another place and look for a permit to drill there.
As you can see, extracting oil and gas from federal lands in California isn’t a simple process. There’s a lot to be gained here, but, you need to invest in order to see the results as well. California has been one of the largest gas and oil suppliers in the USA for decades, but that appears to be changing with fewer resources to pull out. The new laws, state legislature, and covid restrictions are making it harder for companies to receive the necessary permits to do their job. This is another thing to keep in mind.
Hopefully, we have managed to sum this up for you.