Federal control means no oil


About 200 miles due north of Las Vegas is Nye County’s Railroad Valley. Home to only a few hundred people, it receives few visitors.

But Railroad Valley boasts something unique to Nevada that could someday mean a new boom of wealth and job creation to the tune of more than 21,000 jobs.

Here, in 1984, the Grant Canyon oil-field wells were first drilled. For nearly 10 years, before tapering off in the mid-1990s, the Grant wells produced about 110,000 barrels of oil per month. During these years, the Grant wells were the most productive onshore wells in the 48 contiguous states. Through most of the 1980s, in this section of rural Nye County, these few wells generated prosperity.

Despite this success, however, Nevada oil exploration has been slow and sporadic. In part this was because of a technological inability to identify and economically extract oil reserves. The rock formation beneath Railroad Valley and much of Eastern Nevada, known as the Chainman Shale, contains petroleum, but until recently the technology to extract it did not exist.

In 1995, the U.S. Geological Survey estimated that the Chainman Shale formation could contain as much as 383 million barrels of undiscovered oil, as well as 242 billion cubic feet of natural gas. Ten years later, using more sophisticated modeling techniques, the USGS. upgraded that estimate to 1.598 billion barrels of oil and 1.836 trillion cubic feet of natural gas.

In other words, Eastern Nevada could be sitting on one of the most energy-rich rock formations in the entire world. Around the time of the updated estimate, one oil developer told Las Vegas reporters, “You have the richest largest organic mature rock source anyplace in the world except Saudi Arabia or Kuwait. … There is no doubt, I can assure you 100 percent, you are sitting on some of the greatest wealth in this country and the world.”

However, before oil and gas developers can begin realizing this vast energy potential for Nevada, a major obstacle must be overcome: The Chainman Shale formation lies almost entirely under land controlled by the federal government. Without federal permission, these resources cannot be tapped.

The federal Bureau of Land Management, which controls most of the land in Nevada, occasionally auctions off mineral rights for small swaths of land. Mostly, however, it has blocked large-scale energy development in Nevada.

In early 2012, the BLM was scheduled to auction 75 Nevada oil and gas leases covering 133,000 acres. At the last moment, however, the agency reduced the auction to 42 leases covering only 72,000 acres. According to BLM officials, these lands included sage-grouse habitat, and the bird could conceivably, one day, be considered “endangered.”

“The BLM will do our part to avoid a listing of the sage grouse under the Endangered Species Act,” Amy Lueders, BLM director in Nevada, told the press. “Deferring parcels from oil and gas lease sales is just one step we are taking as we look closely at the many activities that can affect habitat important to sage grouse.”

However, modern oil and gas development — which uses new slant drilling and hydraulic fracturing techniques — leaves a very small footprint on the Earth’s surface. It is the large facilities to produce energy from industrial wind turbines and solar panels, which BLM continuously approves, that encumber far more land and therefore are more destructive to sage-grouse habitat.

That contrast is particularly relevant in light of a new analysis from Dr. Timothy J. Considine, a professor of energy economics at the University of Wyoming. He shows that development of the Chainman Shale on federally owned lands would result in $5.2 billion in economic impact over the next decade while creating 21,797 new jobs.

In addition, developing the Chainman Shale would yield a net positive for public revenue — channeling more than $100 million in direct taxes to state coffers and another $100 million to federal coffers. This is not to mention the indirect tax revenue that could be received when newly employed individuals begin paying sales, property and other taxes. Or the benefit of lower oil and natural gas prices for Nevadans.

Red tape on federal lands has unnecessarily stalled development of the Chainman Shale, despite numerous investors eager to purchase its oil and gas leases. Such federal resistance effectively restricts conventional energy development to the relatively small shares of privately held land. Across the Rocky Mountain region, oil output on federal lands since 2009 has increased only 14 percent, while output on private lands has increased at double that rate.

Nevada’s long legacy of federal land dominion continues to severely limit the state’s prospects for a new era of growth — even though untold wealth and tens of thousands of jobs are literally right beneath our feet.

Geoffrey Lawrence is deputy policy director at the Nevada Policy Research Institute (http://npri.org).

 

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