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Published April 20, 2010, 09:17 AM

Feds weigh leasing changes over climate worries

BILLINGS, Mont. — Climate change is prompting the federal government to increase its scrutiny of oil and gas lease sales on public lands — a potential first step toward reining in greenhouse gas emissions from drilling.

By: Matthew Brown, Associated Press

BILLINGS, Mont. — Climate change is prompting the federal government to increase its scrutiny of oil and gas lease sales on public lands — a potential first step toward reining in greenhouse gas emissions from drilling.

Under pressure from environmentalists, the Bureau of Land Management in recent weeks suspended or postponed the sale of almost 130,000 acres of leases in Montana and neighboring states.

The agency plans over the next several months to craft a first-of-its kind analysis of emissions from future development of the leases.

For now, the effort is limited to Montana, North Dakota and South Dakota. But BLM officials and industry observers said a nationwide approach is inevitable as the Obama administration tries to reconcile energy demands with climate change worries.

“We are working on addressing it nationally,” said BLM spokeswoman Celia Boddington. “That discussion is already underway.”

Energy companies and industry groups are closely tracking the effort, concerned the Montana case could lead to new restrictions against drilling on federal lands from Alaska to Arkansas.

“This has the potential to affect all oil and gas development in this country,” said Dave Galt with the Montana Petroleum Association. “It really raises questions about the ability to do new exploration and development.”

Oil and gas production is one of the largest U.S. sources of methane, a greenhouse gas at least 20 times more potent than carbon dioxide. Industry activities account for 2 percent of total U.S. greenhouse gas emissions annually.

Before the methane can be captured and sold as natural gas, vast quantities of it leak from aging oilpatch equipment. Companies also routinely vent methane directly into the atmosphere as part of the drilling process. And crew trucks, drilling rigs and other machinery churn out significant quantities of carbon dioxide.

Realizing lost gas means lost dollars, companies in recent years have started plugging those leaks on their own or through voluntary programs. One program run by the Environmental Protection Agency encourages companies to use more efficient technologies and retrofit existing wells with leak-prevention devices.

In the past, such efforts took a backseat to increased production through drilling.

Companies were anxious about meeting their production targets so they could keep investors happy, said John Savage with the Verdeo Group, Inc., which works with energy companies to upgrade their equipment.

But Savage said companies increasingly are focused on eking out more profits by reining in so-called “fugitive” methane emissions. He said they also are motivated by the likelihood of new greenhouse gas restrictions from either Congress or the EPA.

“The ones that figure it out first and best are going to have a competitive advantage,” he said.

Oil and gas companies hold leases on 45 million acres of federal land nationwide, including 1.9 million acres sold last year.

The majority of the leases, comprising more than 40 million acres, are in Alaska and seven Western states — Colorado, Montana, Nevada, New Mexico, North Dakota, Utah and Wyoming.

Those figures do not include offshore oil and gas leases.

In 2009, oil and gas was extracted from about a third of onshore leases, or just under 13 million acres.

That’s only a portion of overall oil and gas activity, which also takes place on private and state land. But in the West, where public and private lands are interspersed in checkerboard fashion, access to federal acreage often drives development decisions.

Interior Secretary Ken Salazar in January announced plans for broad reforms of the onshore leasing program.

He criticized what he called the Bush administration’s “anywhere, anyhow” approach to energy development, saying it had carved up the landscape, disrupted communities and spurred courtroom battles and administrative challenges that left the industry unsettled.

The reforms are expected to be released in coming weeks and will include stricter environmental reviews. It is uncertain whether greenhouse gas emissions will be included.

Salazar said the reforms would restore the balance between competing demands for public lands and provide certainty for companies hesitant to invest in new drilling.

But the recent move to suspend and postpone leases in Montana and the Dakotas has had the opposite effect, Galt said, causing confusion among companies that perceive the balance tilting against development.

Rep. Denny Rehberg, a Montana Republican, characterized the suspensions as “another attack on good-paying jobs in the West” by an alliance of special interest groups and Washington, D.C. bureaucrats.

BLM spokeswoman Boddington compared the criticisms to past “sage brush rebellions” against the BLM, in which rural Western lawmakers rebelled against perceived heavy-handed actions by federal regulators.

“BLM is used to that,” she said. “Our response is that oil and gas leasing is an important element of our multiple-use mandate.”

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