A Breakdown of Permits vs. Leases, and How They Impact Energy Development

Opponents of oil and gas development on federal lands often try to create confusion with claims against American energy production. One day, it’s complaints that oil and gas companies are “sitting on non-producing” federal acres, the next it’s statements that “nobody’s standing in the way” of oil production.

Unused leases or unused permits? What’s the difference?

One of the most popular methods used to create confusion is to claim that companies are “holding onto unused leases,” or “unused permits” on Federal lands. The tactic is a favorite of anti-development activistsand has been echoed by the Biden Administration.

Evenofficial White House facts sheetscasually use terms that have precise meanings to the industry and regulatory bodies to disguise the truth. Last year, they said, “the oil and gas industry [was] sitting on more than 12 million acres of non-producing Federal land with 9,000 unused but already-approved permits for production.” Later, the figure was quietly revised to actually be much less, blaming a reporting discrepancy due to an agency software transition made in mid-2020. In truth these facts sheets are aimed at political audiences, not in the interest of actually securing affordable domestic energy production for Americans.

Terminology and characterization are important to ensure accuracy – especially in public policies. First, we need to clarify the difference between leases and permits. These are different terms, with different meanings that should not be confused.

  • A lease is an agreement between the federal government and an energy company that gives the company an exclusive interest to explore for and hopefully produce oil and/or natural gas on the land.
  • Once a leaseholder or their operator identifies an oil and gas deposit on a federal lease, they can file an application for permit to drill (APD). That APD must then be approved and issued by the federal Bureau of Land Management (BLM).

Essential Facts:

  • By a wide margin, according to BLM’s data set, no administration has done less than the Biden Administration to facilitate new American oil and gas production on federal lands.
  • The domestic energy production numbers seen today are a reflection of leasing efforts by prior administrations of both parties.
  • Leasing is the primary data set upon which to focus since it is the required first step for enabling new future oil and gas activity and seated squarely within the administration’s authority and responsibility to execute.
  • Even the Biden Administration acknowledges that they are legally obligated to provide appropriate permit authorization under the terms of existing leases, so it is current lease sales that provide the clearest statement of an administration’s policy on oil and natural gas activity.

Only 4 percent of Federal Lands have Oil and Natural Gas Development
Of the roughly 650 million surface acres owned by the federal government, BLM manages about 30 percent of them (245 million acres). In addition to lands eligible for oil and natural gas development, the vast majority of BLM managed federal lands are used for and wildlife, grazing, recreation, mining and exploration of critical minerals, geothermal and renewable energy. Interestingly, oil and natural gas development only occurs on a very small percentage of federal lands (~4 percent).1 Yet in 2022, onshore production from federal lands provided 11% of total US oil production and 9% of US natural gas production.

Worldwide Demand for Oil and Natural Gas Production is Growing
In 2023, the United States produced more crude oil than any nation at any time in history. American natural gas production also set a record in 2023. Production is growing because demand for oil and natural gas is increasing worldwide. Global demand for oil is expected to grow by 2.25 million barrels per day in 2024. And demand for natural gas is expected to grow by 2.5% year on year in 2024.

The Biden Administration is Leasing Historically Less Acreage for Development
Oil and gas development cannot happen without leases. Despite growing demand for oil and natural gas, the Biden Administration has issued significantly fewer oil and gas leases than were issued by past administrations of both parties. Leasing has even fallen short of statutorily required minimums; a shortfall on which the courts have had to admonish the administration.

In 2023, BLM held lease sales in nine states, only offering 293,575 acres for lease nationwide. The majority of this acreage (78 percent) was located in Wyoming and only offered for lease in response to a court decision directing BLM to do so. The remaining 22 percent offered was spread across the 8 other states, many of which don’t even have much oil and gas production. Hence, BLM ultimately failed to lease most of the acreage offered, leasing a total of just 161,380 acres in all of 2023. In contrast, the Obama Administration leased over 7 million acres in his first term and an average of 1.35 million acres per year overall.

New Mexico is the largest producer of oil and the second largest producer of natural gas from federal lands over the last decade. What few lease sales BLM offered in New Mexico in 2023 were very competitive. Every acre offered received a bid and BLM received its highest per acre bid on a single parcel in New Mexico that year ($134,001/acre) as well as the highest average bid per acre in 15 years ($27,232/acre). Despite this interest, unfortunately these record highs really didn’t make a huge financial impact for Americans because BLM only offered a minute total of 3,713 acres for lease.

The Federal Government is Also Approving Fewer New Pipelines
Since President Biden took office “his administration and its allies have taken over 200 actions deliberately designed to make it harder to produce energy here in America.” Many of these actions focused on reducing flaring from oil and gas operations, however, without sufficient pipeline infrastructure in place operators may have no option to capture the gas and to meet the Biden Administration’s goals. In many instances, production from federal lands simply cannot occur until more pipeline infrastructure is built. Despite this clear necessity, data published by the Federal Energy Regulatory Commission, shows that the average number of natural gas pipeline approvals per year has also significantly dropped during the Biden Administration by more than 50% compared to past administrations.

Government Delays for Drilling Permit Approval are Also to Blame
Recall that a federal permit to drill is a different step in the approval process than a lease; these permits cannot even be applied for until after a lease is already in place. The government could approve these permits more expeditiously, enabling development to move forward, but restricting this energy development from federal lands has been a consistent policy tactic of the Biden administration. The lack of action or delayed action on permit applications can have harmful consequences in the long run.

In 2023, the Biden Administration took much longer to approve permit applications.

BLM tries to deflect blame, claiming to policymakers that delays are due to deficiencies in operator applications and that BLM is waiting on operators to revise such deficient applications. However, that is deceptive twisting of the real story. First, the below chart shows at least a 55-day increase in permitting timelines even after BLM deems that the application is error free and ready for processing.

Second, BLM’s system is known for having errors, causing errors, and at times even generating false statistics. In reality, many operators report it is taking between 8–18 months to get an APD approved. This trend is especially common in regions with the most oil and gas activity for BLM to oversee and yet those regional offices have been woefully understaffed in this administration.

Third, applications that BLM logs as ‘Waiting on Operator’ are often actually because operators are waiting on BLM so they can complete a required step or addressing errors caused by BLM’s own software. Though operator errors or delays can occur, below are real world examples that operators experience which BLM inappropriately categorizes as ‘Waiting on Operator to Submit Deficiencies’:

  • In 2023, many APDs were deemed incomplete and sent back to operators due to agency software problems. Operators entered accurate lease number information into BLM’s software system (AFMSS), but the system struggles to accept zeros within BLM’s own lease serial numbers, causing data entry issues. Later, the errors were discovered, and BLM sent pending APDs back to operators asking them to modify and tracked them as ‘Time Deferred (waiting on operator)’.
  • Over the last few years, numerous APDs were deleted or disappeared from BLM’s system after the agency transferred pending applications into its AFMSS software system from an older program. BLM eventually asked operators to resubmit these APDs. This lost time was tracked in BLM’s system as ‘Waiting on Operator’, even though deficiencies were due to agency software system errors and complications.
  • New species, archaeological features, or other surface issues can arise after a permit application is submitted. In these situations, the APD is sent back to the applicant, who must then get the agency to conduct new surveys and collaborate to resolve surface issues. This process involves BLM Field Office specialists and takes time for both agency staff and the applicant to gather additional information. But, agency staff shortages are resulting in significant delays outside the operator’s control but still categorized as ‘Waiting on Operator.’
  • Before a permit can be deemed administratively complete, a lot of diligence is required from the applicant including coordination with BLM on required permit elements that the agency must contribute. Currently, BLM is severely lacking in surface specialists and adjudicators in the offices with the most oil and gas activity. Key Field Offices are only at 50% capacity for these needs and are taking 7–12 months to fill. As a result, complex projects or those in more active BLM regions suffer delays when such agency specialists are needed.

Lack of Action and Delays Will Cause Harm in the Long Run
Production today is a result of the policies and actions of past administrations. Once a lease is issued, companies must spend significant time and resources to determine whether the lease is producible, and then more time and resources to be able to apply for a permit to drill. It can easily take 5-6 years before an issued lease has its necessary approvals and its first well on production. Wells produce their highest volumes in their first year or so, which then decline rapidly, often by as much as 90 percent by year two. For the remainder of its life, the well may continue to produce at a lower, still steadily declining rate (~10 percent a year). This means that without regularly adding new wells to the mix, to replace lost volumes of production as existing wells decline, total federal production volumes and the revenues and economic activity they generate will also fall. With the Biden Administration dragging its feet on leasing and permit approvals, it will be a future administration that gets saddled with the pains of lost federal production and steep declines in the federal revenues and state disbursements that go with it.

Supporting Production on Federal Lands is a Key Input to Energy Security
Chaos in global energy markets is very likely to continue. Policymakers in Washington should be clear that the surest path toward domestic – and global – energy security is here at home. American oil and natural gas production, whether obtained from private lands or federal acres, should be the goal of a supportive, long-term energy strategy to support our security and energy needs. In order to provide more energy for Americans, there needs to be a predictable permitting process. Instead of misleading claims about leases or permits, policymakers should know the facts: production from federal leases is a major input to the nation’s energy and economic lifeblood and integral to everyday quality of life for Americans. US energy producers need energy leases, pipelines, and timely permits to ensure that the US remains the world leader in providing affordable, reliable, and ever-cleaner energy.

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