What you should know about drilling on federal land in Colorado

On Sept. 26, oil and gas companies logged on to EnergyNet and placed bids on 49 parcels of federal land in Colorado they may one day drill. The lease sales happen every quarter, as required by a 1987 federal law. About 42,000 acres were auctioned to drillers that day, according to the Bureau of Land Management.  

The amount of land leased was not unusual for recent years. What was, however, was where the leases were located. 

One company, Denver-based Woodbury Resources, staked out a parcel in a high-elevation basin in north-central Colorado for an annual rent of $2 per acre. That parcel fell within one mile of a greater sage grouse dancing site, where the imperiled birds mate. Under the 2015 sage grouse conservation plan, the BLM agreed not to lease that close to a so-called “lek.” The area would have been practically off-limits had the Trump administration not months earlier stripped protections for the sage grouse. 

The state is trying to keep that one-mile barrier intact. And earlier this month, an order from a federal judge in Idaho reinstated the 2015 sage grouse protections across the West, including in Colorado. That order could delay when the BLM issues the leases from the September sale.  

But that such a parcel was even offered indicates a change underway on Colorado’s federal lands. The BLM wants to loosen environmental protections across the 247 million acres it oversees, including vast territory in Colorado. The administration views rules passed under the Obama administration as burdensome for energy companies. Some of those rules sought to protect habitat for wildlife like the sage grouse, which once numbered in the millions across the western plains, and is now estimated at about 50,000, largely due to habitat loss caused by drilling and cattle grazing.

“At rock-bottom prices, we’re selling off critical habitat,” said Brian Rutledge, director of the Sagebrush Ecosystem Initiative for the Audubon Society. 

The Trump administration’s rollback of environmental protections in the pursuit of “energy independence” is not going unchallenged. Climate lawsuits in Colorado are putting projects on hold and forcing the BLM to re-write management plans to account for climate impacts from drilling. Bills such as the CORE Act would prohibit drilling on 200,000 acres of the Thompson Divide. And state officials, appointed by Democratic Gov. Jared Polis, have sent numerous letters to the BLM contesting federal management decisions that conflict with state climate and wildlife policies.

The push to open up more land for drilling is being headed by Department of Interior Secretary David Bernhardt, a former oil and gas lobbyist from Rifle, Colorado, and Bernhardt’s pick to oversee the Bureau of Land Management, William Perry Pendley, a so-called “sagebrush rebel” who has sought to transfer federal land to states and has said man-made climate change is a “fiction.” 

Meanwhile, Colorado state government is controlled by Democrats who want to reduce emissions and protect wildlife. Such goals are outlined in Senate Bill 181, a law signed in April requiring the state to update its rules for issuing drilling permits.

The divergence between Trump administration’s philosophy and state policy is clear in how the two jurisdictions seek to manage public land, and drilling is a flashpoint. With lawsuits pending, judges ruling, bills passing, and letters going back and forth between the state and the feds, here’s what you should know about drilling on Colorado’s public lands:

How much federal land is there in Colorado? 

About 36% of Colorado’s land surface — roughly 24 million acres — is managed by the federal government, according to the Congressional Research Service.

How much of that land is open to drilling?

About 3.7 million acres, or about 15% of all the state’s federal land, is open to drilling. The BLM currently manages nearly 5,000 leases on that acreage.

Where is that drilling happening? 

Most oil production on federal land in Colorado happens in Weld County, the state’s top-producing region in the high plains of northeast Colorado. Most gas production happens in Dolores County, which sits atop the San Juan Basin in western Colorado where the mountains fade to the desert. 

But now, new areas — or areas long dormant — are getting more attention.

In the North Park Basin, a high elevation region in north-central Colorado made up of mostly sagebrush plains, drillers pumped oil as early as the 1960s. Modern Colorado oil companies began exploring the oil-rich region again in 2013. And the September lease sale added more drilling claims to the region. The leases can be found on all sides of the Arapaho National Wildlife Refuge. 

Farther west, companies are bidding on land atop the gas-rich Piceance Basin even though natural gas production has slowed due to low prices. 

Other new areas for oil and gas include sensitive archaeological sites, such as land five miles north of Hovenweep National Monument, along the Colorado-Utah border, which has sacred sites with connections to indigenous tribes. 

Is the BLM leasing more federal land in Colorado for drilling?

In recent years, yes, but nowhere near what was auctioned in the George W. Bush years.

Under the Bush administration, the BLM leased 29,912 acres per month. That compares to 4,920 acres per month under the Obama administration and 6,617 acres a month so far under the Trump administration.

These leases are offered after oil and gas companies nominate parcels to the BLM for an auction. If a company wins a bid, it holds the rights to drill there for 10 years.

But not all the leased land is drilled.

How much is actually drilled?

The annual number of federal drilling permits issued this year is down from its record high in 2007, according to federal data dating back to 1987, when the federal government began regularly issuing permits to drill under the Federal Onshore Oil and Gas Leasing Reform Act.

The number of permits issued by the Trump administration has been about average when compared to recent administrations. The Bush administration issued 3,172 permits, about 33 per month, the Obama administration issued 2,774 permits, about 29 per month, and the Trump administration has issued 1,034 Permits, about 31 per month.

Such data indicates that most of the land leased under the Bush administration was not immediately drilled. Some companies lease unprofitable land at bargain rates as assets to refinance debt or attract investors. Others lease the land with the hope it will one day be profitable to drill, a process known as energy speculation. 

It’s worth noting that these permit totals do not reflect the total number of wells approved or the amount of resulting production.

In 2018, Colorado produced 6.6 million barrels of oil and 646 million cubic feet of natural gas on federal land, according to federal data. The state ranks behind New Mexico, Wyoming, North Dakota, California and Utah for oil production and behind Wyoming and New Mexico for gas production. 

How much money does the state make from drilling on federal land? 

Colorado receives 49% of the money paid by oil and gas companies that lease federal land for drilling within the state’s borders. This fiscal year, the state is projected to collect about $120 million, less than one percent of the state budget, from federal mineral leases, according to state budget documents. 

According to a state budget analyst, 48.3% of this revenue goes to public schools, 10% to the Colorado Water Conservation Board, and 41.7% to local governments and school districts in the form of grants from the Department of Local Affairs, or DOLA.

How does this drilling conflict with state policy? 

In two big ways.

The first has to do with the state’s effort to reduce greenhouse gas emissions 90 percent, compared to 2005 levels, by 2050. To achieve that goal, the state has said it wants to reduce emissions from fossil fuels.

Trump administration is going in the opposite direction on climate policy.

The BLM is proposing to strip environmental protections for how it manages the Uncompahgre management area, roughly three million acres of federal land in west-central Colorado. The plan would increase carbon dioxide emissions 129% across the region over the next 10 years and encourage drilling in areas such as the North Fork Valley near Paonia, according to an environmental impact statement. Another plan for managing federal land in eastern Colorado would strip environmental protections and could increase greenhouse gas emissions three-fold between 2018 and 2037. 

A July report by the Wilderness Society, an environmental advocacy group, estimated drilling leases already issued could increase carbon dioxide emissions by 184 million metric tons, the equivalent of adding 39 million passenger vehicles to the roads for a year. 

“Colorado already has disproportionate emissions from fossil fuel development on federal lands,” Polis said in a Sept. 9 letter to the BLM, “even before the large increase in oil and gas development proposed in the [Uncompahgre resource management plan].”

Fossil fuel extraction and combustion on federal land accounts for about a quarter of the nation’s carbon dioxide emissions, according to the U.S. Geological Survey. Colorado accounts for about 4% of that amount. The extraction and combustion of fossil fuels on federal lands accounts for 6.5% of total U.S. methane emissions, a more potent greenhouse gas.  

Drillers still need a state permit to drill on federal land, which means companies would have to comply with the state’s emissions laws.

The second area of conflict has to do with how the state manages wildlife.

On March 14, the BLM proposed a new plan for how it would lease federal land for drilling that stripped protections for the sage grouse. The state worked with the BLM to ensure that land managers would at least prioritize drilling outside sage grouse habitat. But, three weeks later, when the BLM released a list of parcels it proposed to lease for drilling in Colorado, more than three-quarters of them fell within sage grouse habitat. 

Dan Gibbs, the director for the Department of Natural Resources, responded to the BLM in a letter that expressed his frustration. He said the state had put in “considerable effort” to ensure there would be protections for the bird in the updated plan. He then requested a meeting to speak with BLM staff. 

Across the Uncompahgre resource management area, which the BLM wants to open up for more drilling, the elk population has been declining due to habitat loss and drought, according to the state. The BLM’s plan for how to manage this area does not account for the state’s efforts to prevent further population declines by protecting big game migration corridors, Polis said in the letter to the BLM. 

The BLM has released parcels for the March 2020 auction. Colorado Parks and Wildlife staff has raised concerns about the high percentage of parcels in sage grouse habitat.

“[This] appears to be inconsistent with the requirement that leasing be prioritized outside of sage-grouse habitat,” said Chris Arend, DNR’s communications director, in a statement. “DNR will continue to engage and work with the BLM and other federal partners to ensure that any lease sale or proposed plan is protective of Colorado wildlife and consistent with previously agreed-upon land use plans and amendments.”

The next lease auction is in December.

What’s the effect of all the lawsuits? 

In the near term, rulings are delaying oil and gas leasing.

A federal district court judge in Idaho blocked the Trump administration’s plan to strip protections for the sage grouse, saying that the plan would lead to further population declines for the bird. By not following procedures in the National Environmental Policy Act of 1970 (NEPA), the BLM did not follow the law, the judge ruled. The ruling reinstates a hard-fought 2015 conservation plan for the sage grouse and will make it harder to drill so close to sage grouse dancing sites. The ruling could delay the issuing of leases purchased in September and upcoming lease sales, according to the BLM. 

Climate-related lawsuits calling on the BLM to consider climate change are also having the effect of holding up permits. One lawsuit has so far blocked a BLM-approved drilling project North Fork Valley. Another lawsuit could force the BLM to re-write its management plan for the Grand Junction region. 

The lawsuits could have larger implications for drilling on federal land, too. A judge in Wyoming ruled that the BLM has the discretion to not issue leases due to climate change impacts. Because the BLM is required by law to hold quarterly lease sales, this legal interpretation could allow future administrations to phase out fossil fuel production on federal land, according to an analysis by High Country News. 

What do oil and gas companies think about all of this? 

The Colorado Independent sought comment from multiple oil and gas trade groups and was referred to the Western Energy Alliance. Despite multiple requests, a comment was not provided.

Kathleen Sgamma of Western Energy Alliance told The Denver Post this year that leasing in Colorado is returning to levels similar to those at the beginning of the Obama administration.

As for the impacts on the sage grouse, Sgamma said: “The balance achieved in sage grouse habitat ensures that multiple uses like energy development can coexist with species conservation. … We can do both: develop energy while ensuring the survival of the species.”