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March 5, 2013 - Center for Western Priorities

REPORT: Profit, Geology Driving Oil and Gas Drilling to Private Land

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DENVER – Economic realities and the location of untapped energy sources are the driving causes behind oil and gas companies’ transition from public to private land, according to a new report by the Center for Western Priorities (CWP). Its in-depth analysis and mapping project found the combination of historically low natural gas prices, near record oil prices, and vast shale oil deposits under private lands make drilling and fracking for oil more profitable for oil and gas companies.  And most of that oil happens to be on private land.

“Who owns the land doesn’t impact the quality or price of the gas and oil below ground,” said CWP Policy Director Greg Zimmerman. “Market forces are moving drilling activity away from shale gas and toward shale oil, and most shale oil happens to be private lands. Oil and gas companies are in business to make money, and profits in recent years show they’re good at it. These companies are going where the money is, and the money is in oil, which is generally found on private  lands.”

According to the report, 93 percent of shale oil and mixed oil and gas plays in the lower 48 states are located under nonfederal lands, a majority of which are privately owned. Even in the Rocky Mountain West, where large amounts of the federal lands are located, 89 percent of shale oil and mixed oil and gas plays underlie nonfederal lands. The report, Follow the Oil, includes infographics that precisely display the location of oil and gas deposits compared to federal and nonfederal land boundaries.

Market forces have driven the price of natural gas down to around $3.30 per thousand cubic feet – or approximately half its 2006 price. Meanwhile, oil prices have soared, increasing 44 percent in the same period, growing from $66 in 2006 to $95 per barrel in early 2013. Prior to the collapse in gas prices, oil and gas companies developed operations on federal lands in an effort to maximize profits.

“Critics have wrongly blamed the federal government for a decline in federal oil and gas leasing. In reality, the decline is best explained as the result of market choices made by individual companies to shift their production to oil and other liquid plays and away from gas.  And this means less activity on public lands.” said Professor Mark Squillace, the former Director of the University of Colorado’s Natural Resources Law Center, who studies oil and gas exploration and development in the West

CWP used Geographic Information Systems (GIS) in conducting the report’s analysis of the land ownership status of major U.S. shale deposits. Calculations were made by overlaying a map of shale plays in the lower 48 with a map showing all federal and nonfederal lands. Using the best available information, shale plays were defined as either primarily shale gas or mixed shale oil and gas.

Read the report here.