Does Utah verdict have wider implications?

Utah Oil Leases

Utah, a state ranked 13th in the country in crude oil production, and eighth in gas, has received significant bad news from the Department of Interior.

The state have had 60 out of 77 contested drilling sites for oil and gas development frozen by the Department, which claims that the process of leasing the land was rushed and improper, much to the delight of conservation groups.

The sites, all government-owned, cover over 100,000 acres in eastern and southern Utah and were leased in the final floundering weeks of the Bush administration. But the leases were immediately challenged by conservation groups, and in January a federal judge blocked drilling on the ground that the Interior Department had failed to follow its own procedures for reviewing the appropriateness of lands designated for oil and gas extraction, reports The New York Times.

The US Secretary of Interior, Ken Salazar, was then presented with a new recommendation from an Interior Department review team for 17 of the 77 parcels to be passed for drilling, while also requesting that eight of the sites be withdrawn. Furthermore, due to environmental concerns over wildlife and air and water quality, the Department said that 52 sites needed further investigation.

Salazar said: "The report of the review team helps clear the cloud that has hung over these 77 parcels since they were first proposed...and includes site-specific decisions on which should be leased and which - such as those near national parks - are simply not appropriate for development."

The environmental reasons cited by the review team included possible damage to the habitat of sage grouse, which is being considered for endangered species protection, and the dust and noise pollution associated with drilling operations.

In response to Mr. Salazar's decision, Amy Mall, of the Natural Resources Defense Council, said, "The Department of Interior should move forward with clean energy solutions that will protect our pristine wild lands and cut carbon pollution."

However, those in the industry are likely to view this as a further attempt by the Obama administration to curb domestic oil and gas production as the country moves towards an increasingly renewable future. With mixed signals being sent out over Obama's offshore drilling policies, inland drilling appears to be increasingly shrouded in controversy, with major commodity states such as Texas beginning to feel the effects of the move away from fossil fuels.

What's more, future policies such as the cap-and-trade bill will put even more pressure on the industry, despite calls from industry experts for Washington to recognise how vital domestic traditional energy production is if the US is to cut dependence on foreign fuel.

Jack N. Gerard, president of the American Petroleum Institute, the chief trade group for the industry, said, "this troubling trend means less revenue to federal, state and local governments at a time when our nation is running a record deficit.

"It also means fewer jobs at a time our nation is headed toward 10 percent unemployment, and it means less domestic energy available when our economy recovers and demand rebounds."

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