A recent economic report indicates that a federal pause on new oil and gas leasing will have minimal short-term impact on Utah's economy, as operators in the state continue to hold a massive stockpile of unused leases and drilling permits.
Minimal Regional Economic Impact
According to a report by the Conservation Economics Institute titled Economic Effects of Pausing Oil and Gas Leasing on Federal Lands, the national economic impacts of a leasing pause are expected to be negligible. The report notes that federal onshore oil and gas production represents only a small fraction of total domestic production, specifically 6% and 8% respectively.
Regarding regional effects, the report concludes that impacts in Utah will be minimal in the short term because operators have stockpiled thousands of leases and drilling permits. The institute determined that the benefits of a federal leasing pause outweigh the costs by a ratio of at least 40:1.
The abundance of available resources in Utah provides a significant buffer against federal leasing restrictions. Data from the Bureau of Land Management shows that 2,880,985 acres of federal public lands in Utah are currently leased for oil and gas development, but only 37 percent of that acreage has been developed. This means industry holds more than 1.7 million acres of undeveloped leases within the state.
Under a medium-intensity scenario, Utah has 63 years of drilling opportunity remaining on existing leases, a figure that increases to 98 years under a low-intensity scenario. This suggests that even if a leasing pause were to last eight years, Utah has sufficient potential well locations to avoid major disruption to overall activities, according to the Utah Governor's Office of Energy Development (OED).
The impact of a pause is further mitigated by the fact that a significant portion of Utah's energy production relies on non-federal land. A 2021 fact sheet from the Utah Governor's Office of Energy Development found that only 23 percent of the state's oil and 53 percent of its natural gas production comes from federal lands.
Furthermore, the OED noted that between 2015 and 2019, only 17 percent of all new oil wells drilled in Utah were located on federal lands, a trend expected to continue. The office also observed that low natural gas prices would likely limit drilling regardless of federal restrictions.
The industry also maintains a large inventory of approved but unexecuted drilling permits. In Utah, less than half of all approved permits to drill (APD) are eventually utilized, and of those that are drilled, less than half are on federal lands.
This stockpiling is a nationwide trend; the United States Government Accountability Office recently concluded that operators across the country are holding nearly 10,000 unused approved drilling permits. In Utah, the current list of approved and submitted APDs is estimated to last over eight years.
Federal Leasing Regulations
The Bureau of Land Management (BLM) maintains strict protocols for the issuance of competitive leases for oil and gas exploration on federal mineral estates. These leases are typically issued for a 10-year period, and state offices conduct sales quarterly when parcels are available.
To ensure compliance with environmental protection and lease terms, the BLM requires operators to provide bonds before conducting any surface-disturbing activities. The minimum bond amount is set at $150,000 for an individual bond and $500,000 for a statewide bond. Additionally, the federal onshore oil and gas royalty rate is 12.5%, though exceptions exist for older or declining production leases.
Low Demand for New Leases
While many industry leaders focus on existing assets, the demand for new leasing in Utah remains low. The Utah School and Institutional Trust Lands Administration (SITLA) has previously cancelled several auctions due to low demand. Unlike federal leases, SITLA leasing is not affected by a federal leasing pause.
