How Many Unused Oil and Gas Drilling Permits in the U.S.?

unused oil and gas drilling permits

50% of unused drilling permits are in New Mexico

It is also worth noting that roughly half of all approved, but unused, drilling permits are in New Mexico where drillers have dramatically ramped up production in the Permian Basin. Further, the Bureau of Land Management has continued its historical trend of rubber-stamping drilling permits. In FY 2020 and FY 2021, the agency approved 98% and 96% of all drilling permits it processed.

In total, the oil industry now holds leases to more than 25 million acres of public lands — an area roughly the size of Kentucky. Of those 25 million acres, roughly half are sitting idle, meaning oil companies hold existing rights to develop those resources, but are choosing not to.

Why aren’t oil companies drilling?

Over the last decade, oil companies have not only been lighting excess natural gas on fire, but they’ve also been lighting money on fire as well. As of the beginning of 2022, oil companies listed in the S&P Oil and Gas Exploration and Production index had amassed $167 billion in debt, down from a high of $298 billion in 2020. Now that oil prices have risen, investors are looking to see profits returned to shareholders in the form of dividends and stock buybacks, rather than investing in more production. Similarly, banks that once lent oil companies money are now hesitant to commit more funds without guarantees that they will plow revenues into loan repayment, rather than more new drilling. Further, oil companies face a host of constraints when looking to increase production, namely the availability of drilling crews and sand for hydraulic fracturing.

Oil companies are holding onto thousands of unused oil drilling permits.

It's a promising sign that the U.S. is moving away from traditional fossil fuels, but no one wants to see new oil drilling permits being handed out to big companies—especially when those permits are being held onto for years or even decades at a time. According to a recent report by The Guardian and FracTracker Alliance, there are currently more than 3,500 unused oil drilling permits in the U.S., granted by the Bureau of Land Management (BLM).

Permits allow companies to drill for natural gas and oil on public lands over an area of up to 20 acres. Once they've been approved, they can be held onto by companies for two years before they expire; after that point, they go back into circulation again so that other companies can use them if needed (although this typically doesn't happen often).

Drillers can hold onto a permit for up to 2 years.

You may have heard that oil and natural gas companies are holding onto unused drilling permits. In fact, the number of unused US onshore drilling permits is at its highest level since at least April 2015, according to data from the Bureau of Land Management (BLM).

Drillers can hold onto a permit for up to 2 years after they're issued, but it's not as easy as just filing away unused permits until they're needed again. If a company doesn't use their permit within 18 months of receiving it, they have to pay $100 each month until they use it or sell it off—unless there's an unexpected emergency or significant market downturn that prevents them from developing their project in time.

The number of oil drilling permits is down, but not because of unused permits.

While the number of permits issued is down, it's not for the reason you may think. That's because there are currently fewer unused oil drilling permits than there have been at any point since 1988.

In fact, the permit numbers are highly correlated with the price of oil: when prices go up, so do permit numbers; when prices drop, so do permit numbers. This makes sense when you consider that low oil prices make drilling unprofitable and therefore less appealing to companies that want their money back fast.

However! While there are plenty of unused plans out there (we're talking about one-third), they aren't contributing to our current lower overall count because all those unused plans came into being before 1988—so we can't count them towards our current number!

The price of oil is down and drillers are putting off development until prices recover.

According to the Bureau of Ocean Energy Management (BOEM), some companies are holding off on exploration because they don't want to lose money on unprofitable wells. If they can't afford to drill now, they'll have an unused permit that guarantees access when prices rise again. Other companies may be waiting out a drilling moratorium in the Arctic National Wildlife Refuge or new regulations from California's Air Resources Board before investing in exploration.

Permits are a tool to deal with unexpected emergencies, not to file away.

The current price of oil has dropped and the industry is waiting for it to recover before they start drilling again. They are not currently fracking anything onshore or offshore, but they will drill when there's enough of a profit margin in doing so.

In reality, these permits were never used because the industry was in hibernation as it waited for prices to rise again. This means that all these permits have been sitting around for years—and will continue doing so until oil prices improve and drilling begins again—which may take another year or two at the earliest.

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How Many Inactive Oil & Gas Wells Are There in the U.S.?