The U.S. Government Accountability Office (GAO) is out with a new report on oil and gas, providing even more evidence that drilling companies are moving operations to private lands because that’s where currently high-priced shale oil resources are most abundant.
The GAO explains:
“The increase in the development of shale oil and shale gas has largely occurred on state and private lands. This is consistent with our finding from September 2012, when we reported that the location of shale formations appears to be predominately on nonfederal lands, according to an official from the Energy Information Administration.”
The report echoes a March 2013 study by the Center for Western Priorities, which found the large majority of shale oil—the stuff propelling America’s domestic energy boom—is beneath privately held lands. In fact, the study finds that 93 percent of shale oil plays exist on nonfederal lands.
While shale oil plays are generally on private lands, like in the Bakken region of North Dakota, there are still some substantial natural gas deposits on federal lands (see dark blue above). So why has there been less drilling in recent years? The answer is simple—economics.
The price of natural gas has dropped significantly in the past few years, due to technological advancements that increased the supply of available natural gas. The GAO found, not surprisingly, that interest in natural gas on federal lands has dropped off because of low natural gas prices. Between 2007 and 2012 oil and gas companies submitted 50 percent fewer drilling permit applications for natural gas to the federal government.
On the flip side, drillers are shifting towards a more profitable commodity: oil. The GAO finds that where oil exists on federal lands, drillers continue to show a peaked interest. In fact, federal drilling permit applications for oil have increased by 70 percent over the previous six years. And in places with the very best shale oil—like in North Dakota’s Bakken formation—drilling permit applications on federal lands have grown by more than 240 percent between 2007 and 2012.
It’s time to move on from the disingenuous argument that government policy is driving a shift in drilling to private lands. Oil and gas companies will continue making economic decisions to help their bottom line; under current market conditions that means drilling for oil found predominately under private lands.