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Federal Register/Vol. 69, No. 168/Tuesday, August 31, 2004/Rules and Regulations 53203
<br />habitat to oil and gas leases issued in
<br />the designation area since May 2002.
<br />These notices are part of the owl
<br />conservation activities undertaken by
<br />the BLM in order to raise awareness of
<br />owl issues at the leasing stage, and were
<br />considered in the economic analysis.
<br />However, the analysis has been
<br />revised to include further discussion of
<br />economic impacts resulting from delays
<br />of oil and gas activities for owl
<br />conservation. Further research suggests
<br />that before drilling can commence, two
<br />years of surveys must be completed,
<br />which may delay drilling activities.
<br />While operators may sometimes be able
<br />to plan ahead, often it is difficult to
<br />build two years into the planning
<br />process, so drilling may effectively be
<br />delayed, depending on when owl
<br />surveys are completed and drilling can
<br />commence. This postponement may
<br />result in regional economic impacts.
<br />Given the relatively small role the
<br />designation plays in the total supply of
<br />oil and gas and the availability of
<br />substitute sources of supply, national
<br />efficiency effects are not predicted. Of
<br />the active wells in Utah and New
<br />Mexico, less than one -half of one
<br />percent is in the proposed designation.
<br />However, localized regional economic
<br />impacts are possible, especially if
<br />producers are unable to shift production
<br />to other locations within the region.
<br />Based on available information, past
<br />impacts due to drilling delays have been
<br />limited; and the impact of delays in the
<br />future is subject to a variety of
<br />uncertainties. Future impacts will
<br />depend on the number of wells delayed
<br />by owl conservation efforts, the
<br />availability of substitute drilling
<br />locations within the region, the
<br />production and success rates of future
<br />wells, and future costs to develop wells,
<br />all of which are not known with
<br />certainty. Discussion of potential future
<br />regional economic impacts from delays
<br />to oil and gas activities has been added
<br />to Section 7.2 of the final economic
<br />analysis.
<br />(95) Comment: One commenter states
<br />that delays related to owl restrictions
<br />will preclude oil and gas development.
<br />The commenter goes on to detail the
<br />economic impacts of not drilling wells.
<br />The commenter believes that the
<br />economic impacts of not drilling a well
<br />impact the operator, the community and
<br />the public. The commenter provides a
<br />net present value estimate of $400,000
<br />for an individual well in the Stone
<br />Cabin area that encompasses part of CP-
<br />15.
<br />Our Response: The economic analysis
<br />does not estimate impacts related to the
<br />prohibition of drilling wells because
<br />this activity has not been prohibited in
<br />the past and is not anticipated to be
<br />prohibited in the future as a result of
<br />owl conservation. While the timing of
<br />drilling activities may be impacted as a
<br />result of owl conservation efforts,
<br />operators who hold oil and gas leases in
<br />the designation are not expected to be
<br />prohibited from drilling. Reductions in
<br />the supply of oil and gas or increases in
<br />the price of these commodities is
<br />unlikely given the relatively small role
<br />the designation plays in the total supply
<br />of oil and gas and the availability of
<br />substitute sources of supply. Of the
<br />active wells in Utah and New Mexico,
<br />less than one -half of one percent is in
<br />the proposed designation. However, in
<br />response to public comments and as a
<br />result of additional information
<br />gathered since the final draft report was
<br />published, Section 7.2 of the economic
<br />analysis has been revised to include
<br />further discussion of future impacts
<br />related to project modifications and
<br />potential regional economic impacts of
<br />delays in oil and gas well drilling
<br />projects, as a result of owl conservation
<br />activities.
<br />(96) Comment: One commenter
<br />believes that with respect to the oil and
<br />gas industry, the Service did not analyze
<br />"hidden social costs of the Act" such as
<br />the costs of reduced or terminated
<br />business activities and jobs, increased
<br />costs to provide services, and lower tax
<br />revenues from reduced or terminated
<br />business and personal income. The
<br />commenter further states that project
<br />delays or curtailment caused by the
<br />designation will have a ripple effect
<br />throughout local, state, regional and
<br />U.S. economies. In addition, the
<br />commenter provides estimates for local
<br />impacts based on analysis of drilling
<br />wells in Uintah and Duchesne counties
<br />in Utah.
<br />Our Response: In the economic
<br />analysis, regional economic impacts
<br />were not considered likely to result
<br />from owl conservation activities in the
<br />case of the oil and gas industry because
<br />of the small portion of the industry
<br />affected by the designation. As the
<br />commenter notes, the amount of owl
<br />critical habitat within the existing and
<br />projected oil and gas fields of Utah is
<br />negligible at best. Of the active wells in
<br />Utah and New Mexico, less than one-
<br />half of one percent are in the proposed
<br />designation. While there is some
<br />potential for project delays due to owl
<br />conservation activities, it is possible
<br />that employees are able to find other
<br />work in the region, as the critical habitat
<br />represents a small amount of the local
<br />oil and gas industry. Given the current
<br />high price of natural gas (which is
<br />expected to continue), the resources
<br />(e.g., equipment and labor) needed to
<br />develop this commodity are in high
<br />demand. Thus, even if development of
<br />certain wells in the designation is
<br />delayed, resources would likely be
<br />employed elsewhere, or would only
<br />remain unused for a short period of
<br />time.
<br />However, based on public comment
<br />and additional research, the final
<br />economic analysis includes a regional
<br />economic impact analysis for impacts
<br />on the oil and gas industry in Utah. The
<br />commenter notes that in Uintah County,
<br />it spends approximately $3.4 million to
<br />drill a deep well and $1.6 million to
<br />drill a shallow well. In order to estimate
<br />regional economic impacts, the analysis
<br />assumes that operators are unable to
<br />find suitable substitute drilling
<br />locations within Carbon, Emery and
<br />Uintah counties in Utah; thus, the
<br />associated economic contribution is lost
<br />to the region in that year. The direct
<br />effect of delaying the drilling of a well
<br />is estimated based on the level of
<br />spending that would be forgone in the
<br />region in that year. The regional impact
<br />analysis estimates the number of jobs
<br />and level of output that would be result
<br />from this potential loss of oil and gas
<br />activity in the region. The results of this
<br />analysis are included in Section 7.2 of
<br />the final economic analysis.
<br />(97) Comment: A commenter states
<br />that the use of past costs to estimate
<br />future costs is a faulty assumption
<br />because gas development is expanding
<br />in the region. The commenter provides
<br />supporting information to illustrate the
<br />rate of expansion of oil & gas
<br />development in Utah.
<br />Our Response: Section 7.2 of the
<br />economic analysis used estimates of
<br />past owl consultation efforts as the basis
<br />for forecasting the level of section 7
<br />consultation efforts and surveying
<br />efforts related to oil and gas activities.
<br />The commenter is correct that gas
<br />development is expected to increase in
<br />Utah in the future, and specifically in
<br />the area where unit CP -15 lies. The
<br />commenter notes that natural gas
<br />production in Carbon County, Utah, has
<br />increased an average of 49 percent per
<br />year for the 1993 to 2002 period. Based
<br />on the BLM's August 2002 Minerals
<br />Potential Report for the Price Utah area,
<br />Coal Bed Methane development in this
<br />region is expected to increase
<br />significantly over the next ten years.
<br />Given this expected development, and
<br />based on discussions with BLM and the
<br />Service, the analysis has been revised to
<br />forecast a 300 percent increase in
<br />consultations and owl surveying efforts
<br />related to oil and gas activities in this
<br />area in the future.
<br />(98) Comment: One commenter notes
<br />that, should critical habitat reduce or
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