How Did Public Land Drilling Rights Become Cheaper Than a Cup of Coffee?

Yves here. While the media has been working overtime on Russiagate theories, the Trump administration has been busy with giveaways, this one of public land rights.

By Greta Moran, a news fellow at Grist. Follow her on Twitter: @gretalomoran. Originally published at Grist

Last December, a London-based energy company secured drilling rights to 67,000 acres in Montana for the paltry sum of $1.50 per acre – a steal compared to the $100 per acre average price tag for land leased under the final four years of the Obama administration, according to The New York Times.

This wasn’t some end-of-the-year clearance sale. While you might think public lands would be more safeguarded than most from oil and gas development, the Trump administration has actually made it dangerously affordable to lease drilling rights. That’s especially concerning in light of a new federal report that found drilling on public lands accounts for nearly a quarter of greenhouse gas emissions in the U.S.

“We clearly have a system that is incentivizing speculation,” said Jeremy Nichols, the Climate and Energy Program Director at WildEarth Guardians. He said the low lease prices allowed companies to take advantage of public lands and make money off the backs of taxpayers.“I call it a liquidation. When you’re selling public lands for $1.50 an acre, you are liquidating.”

Recent oil and gas lease sales, listed by the Bureau of Land Management, show parcels frequently selling for about $2 an acre — the minimum legal bid, which can drop as low as $1.50 per acre if there are no other bidders — as was the case for the Montana drilling rights.

This devaluing of public lands and their wholesale leasing is not only alarming because of the associated greenhouse gases. Drilling can end up cutting off wildlife corridors, threatening native flora and fauna. It can also lead to massive spikes in air pollution — which is why some towns located near the gas fields in western Wyoming have experienced higher smog levels than Los Angeles.

The public technically has a say over these leases (as the lands are, well, public), but the Trump administration has made it harder for people to share their concerns. Officials have shortened the federal period for public comment from 30 days to 10 days. In New Mexico, the Bureau of Land Management now only accepts mailed public comments.

The Trump administration is capitalizing an outmoded system. The Mineral Leasing Act. That federal law authorizes and governs leasing of public lands, was passed in 1920—a time when climate change was not yet well understood. “Although it was amended in 1987, the foundation of the act, which is to encourage blanket disposal of federal oil and gas, has remained unchanged since the 1920s,” Nichols said.

Controversies over public land rights also predate the current administration. Back in 2008, college student Tim DeChristopher caused a stir after he was able to walk into a public land auction, pose as a bidder, and purchase drilling rights to public lands near Utah’s iconic national parks. DeChristopher was sent to jail for this act of civil disobedience, and later hailed as a climate hero for helping to expose the problems associated with undervaluing public lands. But the set price point of public lands has only decreased since then.

Depending on how they are used, public lands will be a big part of our climate problems, or our climate solutions. Based on that alone, they’re probably worth more than a cup of coffee.

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    1. johnnygl

      Capitalism’s original sin of primitive accumulation/enclosure/accumulation by dispossession…

      It’s never really stopped, it’s just morphed into different forms. It’s more about oil/gas drilling and mining than agriculture these days, but the pistachio empire story featured the other day shows it’s still alive and well in agriculture, too!

      I mean, come on, do people think oligarchs build their wealth through risky things like R&D?!??!! No way, get the government to do that kind of hard work!!!

      Oligarchs have to get rich the old-fashioned way: they rob and steal and get the government to do their dirty work and cover up what happened.

  1. The Rev Kev

    Sounds legit to me. Let’s see – 67,000 acres at an average of $100 per acre gives a total of $6,700,000 that would have been realizable. BUT, Trump’s business government let it secured it for $1.50 per acre which comes to $100,500 so not so smart sounding to me. Consider this however. The difference to what could have been realized to what actually was comes to $6,699,500 so you should look at it as to how business is done these days. That is $6,699,500 that can be funneled into executive bonuses, political donations, contributions to Think Tanks advocating “liberating” publicly-owned land, performance bonuses, gratuities to staff at the Bureau of Land Management, money to fund future jobs for members from the previously mentioned Bureau but I think that you get the idea.

  2. cnchal

    In the land of the golden arches, coffee can be had for a buck, so the Trump admin still has a ways to go to get the price for an acre of drilling rights lower than a cup of coffee, but why isn’t drilling on public lands priceless?

    > . . .in light of a new federal report that found drilling on public lands accounts for nearly a quarter of greenhouse gas emissions in the U.S.

    Moar decades of denial dead ahead.

  3. jefemt

    The cheap easy oil has been had. So has that investment group. Not much happening in ‘new’ Montana oil and gas. Not too likely anything at all will come of that.

    Federal lease rates, along with ridiculously low royalty rates, are unconscionable. Oil, gas, and hard-rock- all.

    We need to move past carbon-based non-renewables- doing so will make these nominally marginal plays even less likely to become bit in the ground realities. We can’t wait for governments or businesses to lead the charge. What will you do today to move away from carbon based energy in your life?

  4. Rod

    Recently saw statistics on uncaptured wellhead Methane gas resulting from drilling over the last 10 years to be more than 750 Mcf–avg 75Mcf per year.
    How about a contract rider that mandates at least 80% capture from Fed Land Lease wellheads?
    How about a Million dollar prize(tax free) for the inventor of portable or a localized systems of accumulation?
    How about a ‘waste tax/penalty on every cf of uncaptured Methane released from Fed Leases?
    How about declaring uncaptured Methane a Free Resource byproduct available to any entity(OTHER THAN THE NEGLIGENT LEASE HOLDER) with proven efficient capture technology?
    I could go on.
    Waste not want not.
    We can do better.

    1. Hot Dog MCKoy

      I am in shipping and I move for these guys. They make the equipment you speak of. From what I know of it there use, or at least required use is up to the state. State to state you have different rules for capture of vapor. Most of there stuff is being sold too and implemented in CO and NM. Oil companies only use this vapor capture equipment when required by law.

  5. Steve

    While lowering the rate is ridiculous, I don’t see why it matters practically. The expenses of drilling still must completely dominate the total cost.

    If they made the cost $1000 per acre, maybe that would be significant.

  6. Rod

    Saw some statistics recently showing uncaptured wellhead Methane gas emissions from 2006-2016 estimated to be in excess of 750Mcf—75Mcf per yr avg. Gone right into the thinning air.

    How about a Contract Rider for Fed Leases that mandates at least 80% capture at the wellhead?
    How about a Million dollar prize (tax free) for the inventor of a effective Portable or Localized Methane Accumulation system?
    How about declaring the uncaptured Methane a Free Resource for any legitimate accumulator to legally access(other than the negligent Leaseholder)
    How about…
    Waste not want not.
    We can do better.

  7. EoH

    This administration – and many before it – imagines public lands are like the cow in the Restaurant at the End of the Universe:

    A large dairy animal approached Zaphod Beeblebrox’s table, a large fat meaty quadruped of the bovine type with large watery eyes, small horns and what might almost have been an ingratiating smile on its lips.

    “Good evening,” it lowed and sat back heavily on its haunches, “I am the main Dish of the Day. May I interest you in the parts of my body?”

  8. Fred

    If that was private land in Texas you would get something like $1000 per year to lease an acre for drilling or exploration.

  9. Anon

    Drilling can end up cutting off wildlife corridors, threatening native flora and fauna.

    That is because “drilling” requires an extensive system of roads to get supplies and equipment to the drilling site. New roads in a forest are the largest source of soil erosion and impact rivers and streams long after the drilling stops.

    And don’t expect “environmental regulations” to limit drilling impacts. There is minimal state and federal staff to oversee/review these operations for violations.

    The Red Hatters in Montana have been appropriately PUNKED!

    1. W

      On this point: The auction DeChristopher bidded in was illegally held. He didn’t even mean to bid when he entered the auction space, I believe, he just wanted to stop the illegal auction.

      Of course, none of the bidders or auctioneers got charged for anything, and auctions (I’ve heard) are moving/have moved online to limit the ability of protesters to physically interrupt them.

      The only person who got convicted of anything at that illegal auction was DeChristopher, the one who showed up to try and stop it.

  10. redleg

    All of the above arguments are true If the leases are surrounded by oil/gas plays. However, If they are exploring for oil/gas in granite or schist, then that price isn’t too cheap- the likelyhood of finding any hydrocarbons is so small (zero, actually) that only companies looking for a tax write-off (another form of public ripoff) would pay anything at all for drilling rights. The alternative could be not leasing the mineral rights at all.

    However, included in those kind of contracts are royalties- the public’s piece of the action should exploration result in production. A lower cost per section for a 20% royalty instead of 2% might be beneficial to the public (depending on how that money gets allocated- federal doesn’t matter because MMT, but State and local it does). Royalties are almost always taken from the gross, not the net. I’ve never heard of a royalty calculated from the net (record label deals not included).

    So this could be fleecing the government, or not. The devil is in the details.

    1. Anon

      Yes, of course, the details matter. But encouraging low-margin operations to befoul public lands with road scars, drilling equipment, and likely toxic waste is beyond stupid—at any price. The search for marginal hydrocarbons are the death-bed of the planet: on land and in the atmosphere.

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