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Ken Salazar Blamed By Oil And Gas Companies For Scant Interest In New Drilling Projects

PAUL FOY   11/19/09 01:34 PM ET   AP

Salazar

SALT LAKE CITY — Drillers say it's getting so hard to obtain an oil-and-gas lease in the Rocky Mountains under the new administration of President Barack Obama that many aren't bothering to show up for auctions.

The criticism came after the government held an auction of public lands in Utah that was remarkable for how few parcels were offered or sold. Only five drilling leases sold Tuesday.

The Independent Petroleum Association of Mountain States says the new administration is scaring away drillers, who say it's holding up leases after taking their auction money.

"Why would any company want to go through the time and expense of participating in lease sales when there's zero certainty that the leases will be issued and that there will be any return on their investment?" asked Kathleen Sgamma, the association's government-affairs director, in an interview.

In part, that's a reaction to a series of decisions by the Department of the Interior that suspended the award of 60 of 77 leases sold at a contested December 2008 auction. Secretary of the Interior Ken Salazar faulted the outgoing Bush administration for rushing to award leases on the doorstep of many of Utah's national parks.

The Bureau of Land Management has turned exceedingly cautious about awarding leases in Utah, where many of the battles over vast swaths of public land have been playing out.

Some operators say market conditions – low natural gas prices and tight credit – also are keeping them from auctions. Denver-based Bill Barrett Corp., a regular at Utah's lease auctions, skipped Tuesday's sale, saying it doesn't have the money to acquire more leases for exploration.

"There's also uncertainty about the regulatory situation," said Duane Zavadil, the company's vice president for government affairs. "We're not exposing any dollars to a bid."

The Independent Petroleum Association of Mountain States also complained the new administration is doing little to clear a $100 million backlog of leases that were sold years ago but are being stifled by legal or bureaucratic review.

The Bureau of Land Management withheld 7,194 acres from lease auctions in March and June because they overlapped land designated by a redrock wilderness bill pending before Congress for two decades.

Before Tuesday's auction got under way, BLM dropped 13,543 acres of proposed drilling sites that were near proposed wilderness areas or state wildlife management areas, bureau spokeswoman Megan Crandall said. Those drilling sites were nominated by the oil industry for lease sale.

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Filed by Ethan Axelrod  |