5:30am

Wed March 6, 2013
Oil & Gas

Profits, Not Politics Pushing Drilling Onto Private Land

A new study of the oil and gas industry finds that geology and economics, rather than government regulation, are driving the shift in drilling from public to private lands in the U.S.

The nonpartisan Center for Western Priorities, using GIS mapping technology, found that the vast majority of shale oil deposits - such as the Niobrara formation in northeastern Colorado - are located beneath private, non-federal lands. With natural gas prices currently very low, many energy producers would rather drill for oil, which fetches higher prices.

That’s driving the growth in oil rigs on private land, says Greg Zimmerman, the report’s lead author.

"It’s simple economics," says Zimmerman, "that have encouraged oil and gas companies to move operations into liquids and oil, and specifically shale oil, because that’s what’s offering the most potential for profit."

Mark Squillace is a professor of law at the University of Colorado, and a former director of the Natural Resources Law Center. He says like for-profit companies, the federal government is obligated to manage its leasing policies based on where the market for oil and natural gas has been, and where it's going.

"It makes sense for the government to proceed cautiously, to ensure they’re not contributing to an oversupply that keeps gas prices down," Squillace says. "This actually benefits not just the government agencies that are going to receive revenues in terms of bids and the royalties. It also potentially favors the industry that can command higher prices for the gas if we have less supply, or if we manage the supply."

According to the report, even in the Rocky Mountain West, which has large amounts of federal land, 89 percent of shale oil formations or mixed plays with oil and natural gas lie underneath private lands.

You can read the report [.pdf] here.