The seven Rocky Mountain states – Wyoming, Utah, Colorado, New Mexico, Montana, Nevada and Idaho – currently produce more than 1.2 million barrels of crude oil and natural gas liquids per day, more than 20 percent of U.S. natural gas production, and more than half of the country’s coal output. And yet five of the 20 states most reliant on federal aid are in this region.
One reason for this continuing dependence is that these states are being systematically cut off from the resources that lie below their lands. Thanks to red tape, regulation and conflicting priorities, the wealth of natural resources in the region’s federally held lands is largely untapped – and the result has been a loss of economic growth in a region brimming with potential.
This contention is supported by the findings of Dr. Timothy Considine, a professor of energy economics at the University of Wyoming. Earlier this month, he authored a report for Utah’s Sutherland Institute Center for Self-Government in the West examining why the oil and gas production on federal lands has failed to match the growth on private property.
The differences are stark. As it stands, the production of oil and gas on private property in the region has significantly outpaced production from federal lands. While crude oil output on federal lands in the region increased almost 14 percent since 2009, production on private lands has increased twice as much, at 28 percent.
Similarly, private land production growth for natural gas and natural gas liquids has grown by 0.9 percent since 2009, compared to a 5.4 percent decline on federal lands over the same period.
This is important because nearly 50 percent of Western lands are owned by the federal government, and continued inaction in Washington, D.C., on the promulgation of rules for hydraulic fracturing, three-dimensional seismic drilling, and directional drilling on federal lands is creating a climate of uncertainty that is causing real harm to local and state businesses and communities.
To estimate the costs of these delays, the study examines fossil fuel and renewable energy development across the entire region. Based on historical data on drilling activity on federal lands, and with specific reference to those projects pending approval by the federal government, the study estimates direct stimulus provided to regional economies from these investments.
The numbers are staggering. Under the best possible scenario, the opening up of federal lands would lead to $26.5 billion in annual gross regional product, more than $5 billion in tax revenue for local, state and federal governments, and roughly 208,000 jobs.
Even under a more modest set of assumptions, the results are impressive. There, the potential annual job growth is 67,000, while the possible regional value added and tax revenues stand at $9.5 billion and nearly $2.5 billion respectively.
This far outstrips the growth potential of renewable resource projects on the same land – under every possible model. If oil and gas development only met the low figure, while renewable resource development came in high, the annual employment gains of the latter would still only generate just shy of 20,000 jobs – or less than a third of the 67,000 jobs from oil and gas extraction.
Of course, the key to developing federal lands in a responsible manner is having the ability to do so in the first place. A recent Congressional Research Service study finds that U.S. oil and gas production has increased in the last five years – but not on federal lands. This is one reason why Utah this year passed the Transfer of Public Lands Act, which requires the federal government to relinquish its title to much of Utah’s land. We anticipate that other states will follow suit with similar bills.
In an era of slow economic growth, we can’t afford to turn our nose up at these opportunities. Yet without final regulatory rulings from the federal government – or without a drastic rethinking of who owns the land in the Western states – that’s exactly what these states have been forced to do, even though economic opportunity is literally right under their own feet.
Carl Graham is director of Sutherland Institute’s Center for Self-Government in the West.