Billings Refineries and Canadian Shale

MONTANA, Sep 23 2008 (Neo Natura) - Billings petroleum geologist Bob Fisher is saying that the United States would be wise to rely on a friendly country like Canada for more of its imported oil. Canada is one of our closest allies, is the leading exporter of oil to the United States and is the only major oil-producing country, besides the United States, that allows Western countries to freely explore and develop its oil resources, he said.

Fisher, with Augustus Energy Partners, wrote a guest editorial in The Gazette in late June, calling on Congress to repeal legislation that prohibits the U.S. government from using gasoline and other oil products refined from oil sands. The U.S. Air Force has also asked Congress to rescind the ban.

Fisher said he is against the congressional ban for many reasons, not least because it is nearly impossible to trace fuels back to their source when so many different crude oils are blended before being shipped to American refineries.

Regional oil producers may feel another effect of Canadian developments, he said, because there might be a lack of skilled workers, which could dampen oil exploration and development. It is also possible that Montana businesses will be able to cash in on helping build Canadian infrastructure.

All three refineries in the Billings area will have a finger in the oil-sands pie. Pat Kimmet, manager of the CHS refinery in Laurel, said 90 percent of the crude oil entering the Laurel refinery is already heavy crude, with high sulfur and asphalt content, from conventional wells.

Part of refinery's feedstock is "western Canadian select," or WCS, a blend of various crude oils including some processed from the oil sands of northern Alberta.

As the supply of oil from conventional fields declines, Kimmet said, western Canadian select "is really the future of our refinery here in Laurel." Oil derived from the sands, he said, "is a huge reserve."

In anticipation of handling heavier crude oil, the CHS refinery completed a $400 million upgrade this spring that will squeeze more gasoline and diesel out of each barrel of crude. CHS has its own crude pipeline from the Canadian border to its refinery in Laurel.

Kimmet said the supply of crude from Canada is particularly welcome nowadays, when people are "concerned about the stability of other oil-producing regions of the world."

"We are just very fortunate to have it available to us from a stable country, from a country that's friendly and close to us," he said.

And even though the refinery is using heavier, dirtier feedstock, Kimmet said, upgrades over the years have cut down substantially on sulfur dioxide emissions from the plant. In the early 1990s, when emissions were at their highest levels, he said, the CHS refinery emitted about 9,000 tons of sulfur dioxide a year. That number is now down to 400 to 500 tons a year, he said.

"We've been very progressive in dealing with the environmental issues," Kimmet said. "We have the equipment in place to deal with this kind of crude."

The ConocoPhillips refinery in Billings also plans upgrades that will make it possible to handle some Canadian crude. Charlie Rowton, a company spokesman in Houston, said construction of new crude and vacuum units, which has not begun, is scheduled for completion in 2011.

The new units will be used to perform the initial separation of the crude oil into various products, which would then be further refined in other units at the plant. When the new units are in place, the capacity of the Billings refinery will go from 58,000 barrels of oil a day to 70,000 barrels.

Rowton said it is difficult to say what impact oil-sands developments will have on the Montana economy.

He also states, "Having access to more secure Canadian crude oil and upgrading our U.S. refineries ... will help maintain the economic vitality of all our refineries, including the one at Billings."

The ExxonMobil refinery in Billings was designed to handle heavy crude and has been processing oil from the oil-sands industry in Alberta for many years, according to spokeswoman Pam Malek.

Malek said ExxonMobil, which processes 55,000 to 60,000 barrels of oil a day at its Billings refinery, isn't planning upgrades related to the oil sands.

Liquid Coal - An Oil Solution?

MONTANA, Aug 11 2008 (Neo Natura) - The liquefaction of oil, process transforming coal from a solid state into a liquid fuel, goes back to the beginning of the 20th century. However, low prices and abundance of crude oil and natural gas reserves marginalized its application. Only some countries, among which Germany during the Second World War and South Africa since the Sixties, have massively liquefied coal.

Theoretically, hydrogenating coal is the only requirement to get oil products. Two processes coming from Germany exist: addition of hydrogen can either be made directly on coal (direct liquefaction) or on the gases issued from gasification (indirect liquefaction). The products obtained thanks to the first method are of very great quality - in particular the diesel from which sulfur and aromatic compounds are eliminated - and energy efficiency is nearly equal to 50%, against more than 60% for the indirect but with a much lower quality.

Today, 96% of the energy consumed in transport comes from oil products. Its substitution by different alternative energies is justified by the reduction of the dependency with respect to oil.

Until 2003, with a price of the barrel of crude oil around $25, the CTL at $45 did not present any economical advantage. Today, coal is becoming the best option in order to guarantee the energy security of a country and to get away from high oil prices.

Being the two biggest oil consumers in the word, the United States and China are particularly vulnerable to the big rises of the crude and invest thus massively in this technology.

With oil prices at historic highs, Pike County, where coal trucks rumble at all hours and miners blast away at black seams, is moving ahead with a controversial project to turn its vast coal reserves into barrels of liquid fuel. Indeed, the county plans to develop a $4 billion coal-to-liquid plant that would produce 50,000 barrels of liquid coal a day. Pike County joins a growing number of communities across the United States considering such facilities (Alaska, Montana, Indiana, Pennsylvania, Ohio, West Virginia, Louisiana, Kentucky, Whitley, McCracken). Such efforts could help wean the nation from its reliance on foreign oil for transportation. The technology would strengthen national security and be cheaper than petroleum.

Over the last 20 years, the price of coal remained stable ($35 to $50 / ton) contrary to the price of oil which passed from $10 to more than $120 by barrel. In a world where everything depends on economy and where energy is essential for it, this aspect is far to be negligible and still promises great days for coal. Worldwide liquid coal production should rise from less than 200.000 barrels a day today to reach 1.800.000 Barrels daily in 2030.

Windfall Oil Tax

MONTANA, Jun 13 2008 (Neo Natura) - Montana Senator Jon Tester lashed out at Republicans on Tuesday, after the Consumer First Energy Act received only 51 votes, which was nine short of that needed to pass the legislation. The act was designed to roll back tax cuts for oil companies, impose a permanent windfall tax on those companies, and to help protect consumers from high gas prices caused by oil speculation.

"I remember when gas was a buck-46. It wasn't that long ago. It was before the Bush Administration took over. That was before the War in Iraq. Before speculators and market manipulators spiraled out of control. Before that $17 billion Bush tax cut for our nation's biggest oil companies." Tester said in a prepared statement.

Sen. Mitch McConnell (R-Ken.) said, "Hitting the gas companies might make for good campaign literature or evening news clips, but it won't address the problem. This bill isn't a serious response to gas prices. It is just a gimmick."

The purpose of the gas tax is simple: to raise revenue for building and maintaining roads and related infrastructure. This approach conforms to what economists call the "benefit principle" of taxation, which stipulates that consumers of government services should pay in proportion to the benefit they obtain from those services. It follows that the revenue raised from a tax that adheres to the benefit principle should be used solely to provide the good or service on which the tax is levied. Therefore, if gas taxes are paid by the individuals who benefit most from roads (drivers) and if the revenue is used solely for road building and maintenance, then the tax is a good one.

However, there is also the question of whether gas taxes should be used to decrease fuel consumption in order to protect the environment and reduce pollution. Pigouvian taxes, named after Arthur C. Pigou, a renowned English economist from the early 20th century, are taxes that attempt to make up for undesirable side effects of certain industries—what economists call "negative externalities." Pigouvian taxes are controversial and often difficult to calculate; they complicate the gas tax debate considerably.

Tax Foundation President Scott Hodge's Tax Gouging at the Pump and Record Taxes Paid before Record Oil Profits explain that oil companies actually pay more in taxes than they earn in profits, contrary to some people's notion that "greedy" oil companies are raking in huge profits without paying their fair share of taxes. The Tax Foundation Background Paper Paying at the Pump: Gasoline Taxes in America provides an in-depth look at the history and use of gas taxes. The Fiscal Fact Questions to Ask before Raising the Federal Gas Tax presents a concise discussion of the role of fuel taxes. The Distributional Impact of Windfall Profits Taxes and a Gas Tax Holiday shows how much money taxpayers in each income group stand to gain or lose under the gas tax proposals put forth by the presidential candidates.

The Democratic energy package would have imposed a 25 percent tax on any "unreasonable" profits of the five largest U.S. oil companies, which together made $36 billion during the first three months of the year. It also would have given the government more power to address oil market speculation, opened the way for antitrust actions against countries belonging to the OPEC oil cartel, and made energy price gouging a federal crime.

"Americans are furious about what's going on," declared Sen. Byron Dorgan, D-N.D. He said they want Congress to do something about oil company profits and the "orgy of speculation" on oil markets.

As with all tax initiatives instituted by governments, there is always a divide between those who are for and those who are against the tax. The benefits of a windfall tax include proceeds being directly used by governments to bolster funding for social programs. However, those against windfall taxes claim that they reduce companies' initiatives to seek out profits. They also believe that profits should be reinvested to promote innovation that will in turn benefit society as a whole.

There were arguments in the early 1980's about whether it made economic sense to tax away much of the gain from higher oil prices. But there was no question that the windfall tax was needed to ease the political sting of allowing the domestic price to rise to the level set by OPEC.

Congress hammered out a complicated formula for determining the revenue base liable for taxation and the tax rate. The criteria vary according to the date that oil was discovered, the difficulty of extraction and the size of the company. For some categories of oil, taxes phase out early in the 1990's. In all categories, the taxable base price is adjusted each year for inflation.

The tax raised a whopping $26 billion in 1981, 27 percent of domestic oil revenues. Thereafter, revenues sagged with the price of oil, running just $5.6 billion in 1985 and nothing in 1986. If the price inches above $20 a barrel, Washington may collect a few hundred million dollars this year from the owners of oil discovered before 1978. New discoveries won't be taxed again unless the price soars to $29.

Despite a number of government studies and congressional hearings, no evidence has been presented showing that the oil industry has colluded to keep retail gasoline prices high. For instance, the Energy Information Agency (EIA) in the U.S. Department of Energy found that approximately 85 percent of the changes in gasoline prices in the aftermath of Hurricane Katrina were due to changes in the market price of crude oil.

Global energy markets determine the price at which oil is bought and sold by even the largest oil corporations. For instance, ExxonMobil, the world's largest private oil company, accounts for only 3 percent of the market and the prices it pays for crude oil are set by trading on commodities exchanges in London, Hong Kong and Chicago.

What they won't get, however, is nearly as much money out of such a tax as they probably think. A windfall profits tax targeted at earnings far beyond the U.S. industrial average would return zero revenue to the Treasury because windfall profits in the oil sector are figments of the imagination.

While the raw earnings figures sound big, they are unexceptional when we take into account the size of those companies. Divide profits by sales, for instance, and you'll find that in the fourth quarter of 2005 (the last quarter for which data are available), profit margins were 6.8 percent at British Petroleum, 7 percent at ConocoPhilips, 7.1 percent at Shell, 7.7 percent at Chevron, and 10.7 percent at ExxonMobil. The 20 largest investor-owned oil companies earned a collective 8.8 cents on every dollar of sales for that quarter.

While tariffs provide an incentive to increase supply, taxes will decrease demand and therefore prices. With a sufficiently low price expensive domestic production may be crowded out. In the extreme, a halving of demand from 20 to 10 mbd would not eliminate imports, but instead raise their share to 100% with all domestic production becoming uneconomic.

XTO Purchasing Bakken Land

MONTANA, May 28 2008 (Neo Natura) - XTO Energy Inc. announced today that it has entered into a definitive agreement to acquire producing properties and undeveloped acreage from privately-held Headington Oil Company for $1.85 billion. Consideration in the transaction includes $1.06 billion of cash and 11,742,391 shares of XTO common stock valued at approximately $790 million, or $67.35 per share. The purchase includes 352,000 net acres of Bakken Shale leasehold in Montana and North Dakota.

XTO Energy's internal engineers estimate proved reserves on the properties to be 68 million barrels of oil equivalent, of which 60% are proved developed. Upon closing, the acquisition will add about 10,000 barrels of oil equivalent per day to the Company's growing production base. The acquisition is scheduled to close on or before July 15, 2008.

"Since 2004, XTO has aggressively pursued the best shale basins -- in terms of geology, productivity and economics -- to stake a claim for long-term growth. Our successful development results in these plays have created value for our shareholders and motivated additional investment for our future. With this acquisition in the Bakken Shale, our Company is now established as a leading producer and leasehold owner in this emerging oil shale play," stated Bob R. Simpson, Chairman and Chief Executive Officer. "As in our other producing arenas, the XTO team will bring experience and expertise to this multi-zoned, over-pressured and complex basin. We expect to grow production and reserves from this prolific shale into an environment of strong commodity prices."

"Across the 15,000 square mile Williston Basin, results from new Bakken wells, utilizing progressive horizontal drilling and completion techniques, are revealing the true potential of this extraordinary hydrocarbon target," noted Keith A. Hutton, President. "With over 3 billion barrels of oil held in place within our acreage position, our team expects to more than double the acquired reserve volumes over time. Drilling and operational activities should grow our production in the region by 12% to 15% annually, with about one-third of cash flow. Given the $3 per barrel production cost and high economic margin of these flowing oil wells, this expansive shale acquisition is a superb addition to XTO's portfolio of premier properties."

In a recent report, the U.S. Geological Survey published a new assessment of the Bakken Shale play of North Dakota and Montana. The report cites that 3 billion to 4.3 billion barrels of undiscovered oil are technically recoverable with current technology and industry practices. This estimate by the USGS made the Bakken Shale the largest continuous oil accumulation in the lower 48 states. In addition, the USGS has estimated total oil-in-place at 200 to 400 billion barrels.

The acquired properties are located in the Bar Trend and Nesson Anticline of the Bakken Shale development. At present, the primary producing field is Elm Coulee in Montana. Undeveloped leasehold comprises about 215,000 net acres of the total. Production volumes are 88% oil, but the associated natural gas is Btu rich in composition, realizing a 30% premium to NYMEX pricing.

"They come into a basin and they're very aggressive," Brian Corales, an analyst at Coker & Palmer in Metairie, Louisiana, who rates XTO shares a buy and doesn't own any, said in a telephone interview. The Bakken Shale "is a very hot play."

XTO said drilling and operational activities should increase production in the region by 12 percent to 15 percent annually. The acquisition brings the total of XTO's purchases this year to more than $4 billion.

"With over 3 billion barrels of oil held in place within our acreage position, our team expects to more than double the acquired reserve volumes over time,'' Keith Hutton, XTO's president, said in the statement.

A federal magistrate fined XTO Energy Inc. $10,000 and ordered it to pay another $10,000 in restitution in the deaths of two golden eagles electrocuted in 2006 by power lines leading to energy production sites near Gillette. They were charged on May 22, 2008.

Chief Executive Officer Dominic Domenici, resident agent in charge of the U.S. Fish and Wildlife Service for Wyoming and Montana, said Wednesday that XTO Energy, Inc. pleaded guilty last month to a misdemeanor violation of the federal
Bald and Golden Eagle Protection Act.

Dominic Domenici, the federal magistrate that charged them, said U.S. Fish and Wildlife Service Special Agent Tim Eicher of Cody found the dead eagles during a survey. Domenici said the birds were electrocuted after they touched improperly constructed power lines.

The Fish and Wildlife Service together with the Wyoming Game and Fish Department investigated the case, which was prosecuted by the U.S. Attorney's Office.

In addition to the court fine and restitution, Domenici said the company spent $988,000 on an avian protection plan that involved retrofitting miles of power line to make it safe for birds.

Jackson lawyer Hadassah M. Reimer represents XTO Energy. She said the company examined 95 miles of existing power lines and made improvements as necessary to make sure all of it was safe for birds.

According to a Fish and Wildlife Service statement, electrocution has been identified as one of the leading killers of eagles, hawks and owls since the 1960s. The agency said current standards in the electrical industry require power lines be placed at least 5 feet apart or insulated to make them safe for birds.

The agency statement says the $10,000 restitution that XTO Energy agreed to pay will go to the Murie Audubon Society in Casper, which rehabilitates sick or injured migratory birds.

John R. Barksdale, assistant U.S. Attorney in Casper, prosecuted the case. He said the company was responsive when contacted by his office and had already taken steps to address its power lines.

"We don't like to have any birds killed, but XTO was responsive when we contacted them," Barksdale said.

New Mexico-based Yates Petroleum Corp. last year also agreed to make improvements to its power line facilities in Wyoming and New Mexico to help prevent bird deaths.

A settlement between Yates, the U.S. Department of Justice and the U.S. Fish and Wildlife Service stemmed from the discovery of four dead eagles found near power lines owned by Yates at its coal-bed methane facilities in the Powder River Basin of northwest Wyoming.

USGS Releases Bakken Report

MONTANA, Apr 10 (Neo Natura) - North Dakota and Montana have an estimated 3.0 to 4.3 billion barrels of undiscovered, technically recoverable oil in an area known as the Bakken Formation.

A U.S. Geological Survey assessment, released April 10, shows a 25-fold increase in the amount of oil that can be recovered compared to the agency's 1995 estimate of 151 million barrels of oil.

Technically recoverable oil resources are those producible using currently available technology and industry practices. USGS is the only provider of publicly available estimates of undiscovered technically recoverable oil and gas resources.

New geologic models applied to the Bakken Formation, advances in drilling and production technologies, and recent oil discoveries have resulted in these substantially larger technically recoverable oil volumes. About 105 million barrels of oil were produced from the Bakken Formation by the end of 2007.

The USGS Bakken study was undertaken as part of a nationwide project assessing domestic petroleum basins using standardized methodology and protocol as required by the Energy Policy and Conservation Act of 2000.

The Bakken Formation estimate is larger than all other current USGS oil assessments of the lower 48 states and is the largest "continuous" oil accumulation ever assessed by the USGS. A "continuous" oil accumulation means that the oil resource is dispersed throughout a geologic formation rather than existing as discrete, localized occurrences. The next largest "continuous" oil accumulation in the U.S. is in the Austin Chalk of Texas and Louisiana, with an undiscovered estimate of 1.0 billions of barrels of technically recoverable oil.

"It is clear that the Bakken formation contains a significant amount of oil - the question is how much of that oil is recoverable using today's technology?" said Senator Byron Dorgan, of North Dakota. "To get an answer to this important question, I requested that the U.S. Geological Survey complete this study, which will provide an up-to-date estimate on the amount of technically recoverable oil resources in the Bakken Shale formation."

The USGS estimate of 3.0 to 4.3 billion barrels of technically recoverable oil has a mean value of 3.65 billion barrels. Scientists conducted detailed studies in stratigraphy and structural geology and the modeling of petroleum geochemistry. They also combined their findings with historical exploration and production analyses to determine the undiscovered, technically recoverable oil estimates.

USGS worked with the North Dakota Geological Survey, a number of petroleum industry companies and independents, universities and other experts to develop a geological understanding of the Bakken Formation. These groups provided critical information and feedback on geological and engineering concepts important to building the geologic and production models used in the assessment.

Five continuous assessment units (AU) were identified and assessed in the Bakken Formation of North Dakota and Montana - the Elm Coulee-Billings Nose AU, the Central Basin-Poplar Dome AU, the Nesson-Little Knife Structural AU, the Eastern Expulsion Threshold AU, and the Northwest Expulsion Threshold AU.

At the time of the assessment, a limited number of wells have produced oil from three of the assessments units in Central Basin-Poplar Dome, Eastern Expulsion Threshold, and Northwest Expulsion Threshold.
The Elm Coulee oil field in Montana, discovered in 2000, has produced about 65 million barrels of the 105 million barrels of oil recovered from the Bakken Formation.

Montana Ranked 2nd In Oil Expansion

MONTANA, Apr 08 (Neo Natura) - Montana is currently the second fastest state to expand in oil recovery. New York takes the lead with an average 133% expansion in U.S. oil production in the last 5 years. Pennsylvania took 3rd as it's oil production grew 76% in the same period.

In 2002 Montana produced 46,000 barrels of oil per day. In 2003 Montana produced 53,000b/d. In 2004 Montana produced 68,000b/d. In 2005 Montana produced 90,000b/d. In 2006 Montana produced 99,000b/d. This gives Montana a 115% increase in oil production from 2002 to 2006. In 2006 Montana ranked 7th in the nation for inland oil production.

Proposed Federal EIS Plan

MONTANA, Jan 31 (Neo Natura) - A public discussion on the proposed federal EIS project, a plan to designate energy corridors on federal land in 11 Western states, drew few comments at a public meeting in Helena, but for the most part was supported from representatives of organizations who attended.

Use this form to submit comments on the Energy Corridor Draft Programmatic EIS. All comments received or postmarked by Thursday, February 14, 2008 will be considered. You can also view the proposed corridor area.

Most favored a route for oil and natural gas pipelines, power lines and distribution facilities that follows U.S. 287 from Townsend to Three Forks, then westward toward Butte and Anaconda and splitting to run north and south along the inter-states.

Another favored route could run from Townsend across Interstate 15 and the Beaverhead-Deerlodge National Forest, then north to Garrison and continue into Idaho.

“I’m bringing 200 petition letters asking for either the Garrison/Milltown or Townsend/Three Forks/Milk Creek routes,” Linda Sather, Anaconda-Deer Lodge County commissioner said at Tuesday’s meeting. “We want this in our county. We welcome it and support it wholeheartedly.”

But others are wary of the corridors, saying they could run through roadless areas. In New Mexico, critics said the map of the proposed corridors show only disconnected lines and that connecting the corridors would involve pipelines and power lines crossing state, tribal or private land. They said the connecting routes should be determined before the true impacts of the corridors can be measured.

Throughout the West, the proposed corridors cross through 12 national parks, monuments or recreation areas and three wildlife refuges. That’s down from the initial plan that involved 29 national parks, monuments or recreation areas; 15 wild-life refuges; and 58 wilderness areas.

“Although the Energy Department has made significant improvements in their proposed corridor designations, the proposed corridors still lack thorough consideration of the likely damage to federal lands and other places,” said Nada Culver, who has tracked the process for the Wilderness Society since it began. “In Montana and elsewhere, the Energy Department needs to come up with alternatives to minimize the number of corridors and maximize use of renewable energy, and it should include firm requirements to limit all projects to designated corridors.”

The energy corridors are part of an energy bill passed in 2005 to provide more energy to Western states and shorten the length of time it takes the energy industry to gain approval to run pipelines and power lines.

Once projects are proposed for the corridors, they would undergo additional environmental review before permits were issued and rights-of-way granted.

Jeff Barber with the Montana Environmental Information Center said the center supports the idea of energy corridors, but would like them placed within existing transmission routes and, if possible, to limit the export of Montana power.

“If it’s a coal plant exporting power, that’s not a direction we want to go,” Barber said. “But if it’s wind generation we want to export, that’s a different situation.”

Overall, the corridors include 6,055 miles over almost 3 million acres in Montana, California, Nevada, Colorado, Utah, Washington, Oregon, Wyoming, Idaho, New Mexico and Arizona.

Brian Mills, Department of Energy environmental protection specialist, said the corridors would be about 3,500 feet wide — although that could vary — with 3,700 miles in existing corridors’ right of way.
In Montana, the proposed corridors cover 102 miles over 42,000 acres of federal land.

Pros and Cons of Oil

MONTANA, Nov 19 (Neo Natura) - The following is an excerpt from an November 18th article written by John Cramer of the Missoulian discussing the pros and cons of future petroleum drilling in Montana.

Much of Montana's Rocky Mountain Front, a wilderness largely unchanged since Lewis and Clark's expedition, was protected from energy development last year after a high-profile push by citizens and legislators.

Many of Montana's other prairies, peaks and watersheds, though, have proved to be gushers for the oil and natural gas industry as it expands its search for more domestic energy sources.

Their next shot at reserving some of the state's fossil fuels comes Nov. 27, when the federal Bureau of Land Management hosts another round of bidding in a drilling expansion that's producing record amounts of revenue in the Big Sky state.

But those profits may be coming at a cost.

Early studies show that petroleum development is threatening habitat for many native species, including antelope, sage grouse, mule deer, elk, burrowing owls, pallid sturgeon and westslope cutthroat, rainbow and brown trout.

Some of those species have healthy populations statewide, but their numbers are declining in areas close to oil and gas wellheads, roads, pipelines, power lines and other energy infrastructure, said T.O. Smith, energy coordinator for Montana Fish, Wildlife and Parks.

“It's an urban development built in a short period in rural areas,” Smith said. “There's no way you can have that kind of intense development and not damage the fish and wildlife habitat nearby. But there are ways to mitigate the damage. That's why we try to look at the landscape comprehensively.”

David Dobkin, executive director of the High Desert Ecological Research Institute in Bend, Ore., said the drilling boom has overwhelmed the BLM, leaving it incapable of monitoring drilling sites and their impact on wildlife.

“It's clearly a formula for implosion,” Dobkin said. If oversight isn't dramatically increased, Montana “could easily become another Wyoming,” where gas development is wiping out vast stretches of sage grouse habitat.

In western Montana, many areas are protected from drilling by national park and wilderness designations, but energy companies have proposed adding thousands of new wells covering hundreds of square miles on federal, state and privately owned land in central and eastern Montana. And on the west side of the Continental Divide, drilling has been approved from near Glacier National Park to Beaverhead County in the state's northwestern and southwestern corners, respectively.

Across the West, the oil and gas boom continues to worry conservation groups and others who say it's harming wildlife habitat, fishing streams, hunting grounds, Native American tribal sites and public health in exchange for only enough petroleum to meet national consumption for a few months.

They maintain that the Bush administration should focus on energy efficiency, conservation and renewable power rather than drilling without adequate environmental review and public input.

“It's a broken system and we don't want Montana to make the mistakes Wyoming did,” said Bruce Farling, executive director of Montana Trout Unlimited.

Industry officials and the BLM, which oversees most drilling in the West, say underground exploration can occur with little impact to the environment, creating jobs, revenue for the state and energy independence.

Greg Albright, a BLM spokesman in Montana, said the agency is obligated to manage public lands for multiple uses, which means balancing energy needs and ecological concerns.

“Granted, oil wells aren't the prettiest thing on the face of the planet, but we also have a responsibility to develop natural resources in an environmentally sound way for the benefit of everybody,” he said. “There are a lot of fears, a lot of emotion, but we don't have a division called ‘How Can We Circumvent The Law?' ”

Energy companies often request that much more land be offered than they intend to lease in an effort to conceal their real interest from their competitors, so the true measure of energy development is how many drilling applications are filed and how much oil and gas is actually being produced.

Over the past decade in Montana, the leases and acreage offered and the number that sold decreased until this year, when there was a big jump, according to BLM records.

During the same 10-year period, though, drilling permit applications increased, the annual production of natural gas nearly tripled and the amount of oil increased more than 50 percent in Montana.

That's because energy companies have become more efficient at the risky and costly business of locating, tapping and transporting underground fuels.

Since 1997 in Montana, that efficiency translated into $264 million in royalties, rents and bonuses, some of which were shared with the state.

During that period, the BLM has offered lease sales on 4,570 parcels covering

4.4 million acres in Montana. Of those, 3,122 parcels were sold covering 3.3 million acres. Of those, 2,226 parcels produced applications for drilling permits.

Since 1999, Montana has increased its total oil production from both public and private lands, making it one of only two states in the nation to boost oil production in the last year, according to the Energy Information Administration and the governor's office.

On Nov. 27, the BLM will offer 215 leases for sale covering 227,654 acres in Montana. Most are in traditional oil- and gas-producing areas in the central and eastern parts of the state, but some are in western Montana.

The BLM has responsibility for oil and gas leases on its lands, national forest lands and private lands where the federal government has mineral rights.

The agency can refuse leasing requests if they threaten wildlife habitat, but some environmental protections can be waived at the request of companies. The companies post bonds and other fees, but those fees often fall far short of costs incurred closing wells and cleaning up drill sites.

Drilling on federal lands in five Western states - Montana, Wyoming, Utah, Colorado and New Mexico - has doubled over the past decade to more than 2,000 wells per year, and another 118,000 wells are planned, according to the Environmental Working Group and the National Wildlife Federation.

According to the Government Accountability Office, the BLM doesn't have enough time for oil and gas field inspections or to care for wildlife, cultural resources and the environment because it's so busy processing drilling permit applications.

Federal lease sales in Montana used to be handled quarterly, but now occur every other month. Conservationists say that's because of pressure from the Bush administration to open more public land to energy development, but the BLM says it's because of greater market demand.

The average number of federal oil and gas leases sold each year in Montana has fluctuated under the last three presidents: 199 in the first Bush administration, 301 in the Clinton administration and 260 under the current Bush administration.

Petroleum companies bid to buy the leases, which typically last 10 years but can be extended if the wells are in production. Of the 35 million acres under lease nationwide, about 12 million are in production.

As of September 2006, 3,714 leases covering 4,012,246 acres were in effect in Montana. So far this year, 469,137 acres have been offered for sale in Montana, a big jump after a decade of decline in the amount of land on the auction block.

That increased offering hasn't translated into more actual sales, but it has prompted protests from hunting and fishing groups.

They objected to more than 285,000 acres offered for sale in July alone, prompting the BLM to withdraw 73,000 acres that are to undergo further environmental reviews.

The protests also resulted in several restrictions being added to lease parcels, including protections of streamside areas, although the BLM refused to withdraw leases near the Beaverhead River.

In addition to environmental and sportsmen's groups, concern also is being expressed by outdoor-dependent businesses, the 19-state Western Governors Association and some pro-industry politicians, such as former Sen. Conrad Burns, R-Mont., who want tighter environmental restrictions on oil and gas projects.

The BLM's Albright said the leasing system works well. He cited the agency's decision to remove some tracts from its July lease sale in McCone and Garfield counties because of concerns about sage grouse habitat.

“Everything people do has an impact,” he said. “Just hiking and taking pictures and driving our car to the trailhead have an impact. But we try to minimize our impacts and not allow anything that's irreversible.”

Farling, of Montana Trout Unlimited, said Montanans must act now.

“You're not going to see another Jonah Field in Montana yet, but that's what people are afraid of,” he said, referring to a vast natural gas field in Wyoming that has become ground zero in the controversy over energy development in the West. “We want to get ahead of the curve, so that won't happen.”