We need reforms to the gas and oil industries

Life in states with significant public land has changed dramatically since the passage of the Mineral Leasing Act of 1920, which governs the leasing and production of oil and gas on federal public lands. While oil and gas development brought jobs and royalty payments to many rural communities in the 20th century, macroeconomic changes, accelerated by market-driven climate solutions in the 21st century, have led many cities and towns to begin transitioning towards more diverse sources of jobs and revenues. 

New uses of public lands are bringing new opportunities including renewable energy, outdoor recreation and businesses seeking quality of life via outdoor access for their employees. The COVID-19 pandemic accelerated an existing trend as more and more businesses and professionals seek to locate in places with outdoor recreation. Investments in recreation assets are bringing improved prosperity to a broad group of communities not only through tourism and visitation, but increasingly through new business investment, along with the recruitment of entrepreneurs, professionals and retirees. However, the current oil and gas leasing and development system created in 1920 is undermining this transition and making it more difficult for local communities to diversify their economies. 

The regulations and policies that govern federal oil and gas leasing, permitting and management can be changed by both congressional legislation and the Department of the Interior (DOI). Overdue leasing reforms must address low potential leasing, inadequate bonding, best practices for dealing with orphan wells and unfunded reclamation, along with inadequate royalties. Rates have not been updated for a century. Proactively addressing all of these problems will directly benefit transitioning communities. A pause in oil and gas leasing is merited to create a comprehensive plan for addressing today’s needs.  

Industry defenders claim that changes in oil and gas policies on public land will destroy tens-of-thousands of jobs, but the fact is the decline is well under way. The pandemic sent oil and gas prices tumbling, and this descent is part of a long-term trend that has led oil and gas prices to fall by more than 40 percent 10 times since 1983. The decline of oil and gas has been broadly accepted by industry giants such as BP and Shell who have pledged to reshape their businesses with a focus on zero-carbon energy sources. The investment community agrees as  an increasing number of investors commit to reducing carbon. In 2008, the S&P 500 was composed of more than 15 percent oil and gas companies; today they make up only 2.3 percent.

Meanwhile, more people are choosing places with access to the outdoors where they can expect clean air, clean water and recreation assets that accommodate an outdoor lifestyle. Many communities who began with tourism have now evolved to year-round economies with diverse economic drivers. And places currently struggling with lower county budgets due to decreasing oil and gas royalties and less job opportunities have taken note and are investing in their public lands to attract quality of life recruits: businesses, entrepreneurs, professionals and retirees who bring revenue streams and jobs. 

Changing energy economics are incentivizing a growing list of cities and towns, like Farmington, N.M., and Fruita, Colo., to pivot their economies away from carbon producing industries. But these places need changes in the laws and regulations that determine how our public lands are used. The status quo allows oil and gas developers to leave communities with damaged air quality, threatened aquifers and an alarming number of abandoned well pads. It is time to reevaluate the way we prioritize and facilitate resource extraction. 

Congress and the DOI have a significant opportunity to better support economic development through critical updates to the oil and gas management system — and many of these updates have industry support. Opposing this work will not turn the clock back and restore $100 a barrel oil. Instead we should be supporting transitioning economies through oil and gas reforms, as we all make the necessary transition to renewable energy.

Ashley Korenblat, CEO of Western Spirit Cycling and managing director at Public Land Solutions.