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In Utah, federal oil and gas production steadily increased over the past decade. Last year, oil production topped 11 million barrels and reached its highest level in more than a decade.
Sources: Utah Division of Oil, Gas and Mining, WTI Crude Oil Spot Price.
Even though oil production continues to rise, operators have been “shutting-in” (i.e., halting production from) a growing number of oil wells in Utah. Most shut-ins are likely low-producing “stripper” wells that have become un-profitable with oil prices falling below $50/BBL.
Source: BLM Oil and Gas Statistics
Most federal leases in Utah did not produce oil or gas last fiscal year. Of the 2.3 million acres under lease, only 1.1 million acres were producing. The surplus of federal leases is not new—since FY 2000, there have been more than 1.5 million acres of non-producing leases in Utah every year.
State and federal permitting both declined in Utah last year, as oil prices fell below $40/BBL. Even though a smaller number of new federal drilling permits were issued (after BLM issued a record number last year), there is still a surplus of more than 1,300 approved, unused federal permits.
Nearly 35% of all non-producing federal leases in Utah are “suspended.” As The Wilderness Society recently disclosed, industry has widely-abused the federal lease suspension program, particularly during times of economic downturn, to extend federal leases beyond their normal primary terms without satisfying normal drilling and development obligations, while also avoiding rental and royalty payments.