Legislation Requires Oil & Gas to Use Existing Leases First

( – promoted by Colorado Pols)

Congressman Nick Rahall–Chair of the House Natural Resources Committee–introduced legislation (HR 6251: Responsible Federal Oil and Gas Lease Act) yesterday to require that oil and gas companies begin development of the tens of millions of acres of public land leases they have been stockpiling BEFORE they get to lease additional public lands.

Colorado Reps. Udall, Salazar, Perlmutter and DeGette all voted FOR the legislation, which failed because it was introduced under a suspension of the rules, requiring a 2/3 vote to pass.  Reps. Musgrave and Lamborn voted against, and Tancredo was MIA. President Bush has threatened a veto

More after the flip…  

This bill would–

prohibit the Secretary of the Interior from issuing new Federal oil and gas leases to holders of existing leases who do not diligently develop the lands subject to such existing leases or relinquish such leases

The Natural Resources Committee recently released a detailed analysis on just how much oil and gas Big Oil is sitting on, even as it makes a renewed effort to get at our most sensitive lands–like Colorado’s Roan Plateau, the Arctic Refuge, and our coastal waters.  That report is here http://courtney.house.gov/Uplo…

This report shows that:


Increased Domestic Drilling Activity Has Not Led To Lower Gasoline Prices:

Since the 1990s, the federal government has consistently encouraged the development of its oil and gas resources and the amount of drilling on

federal lands has steadily increased during this time. The number of drilling permits has exploded in recent years, going from 3,802 five years ago to 7,561 in 2007.

Between 1999 and 2007, the number of drilling permits issued for development of public lands increased by more than 361%, yet gasoline prices

have also risen dramatically contradicting the argument that more drilling means lower gasoline prices. There is simply no correlation between

the two.

Energy Companies Not Using Federal Lands Already Open to Energy Development:

Even if increased domestic drilling activity could affect the price of gasoline, there is yet no justification to open additional federal lands because oil and gas companies have shown that they cannot keep pace with the rate of drilling permits that the federal government is handing out.

In the last four years, the Bureau of Land Management has issued 28,776 permits to drill on public land; yet, in that same time, 18,954 wells were actually drilled. That means that companies have stockpiled nearly 10,000 extra permits to drill that they are not using to increase domestic production.

Further, despite the federal government’s willingness to make public lands and waters available to energy developers, of the 47.5 million acres of on-shore federal lands that are currently being leased by oil and gas companies, only about 13 million acres are actually in production, or producing oil and gas. Similar trends are evident offshore as well, where only 10.5 million of the 44 million leased acres are currently producing oil or gas.

Combined, oil and gas companies hold leases to nearly 68 million acres of federal land and waters that they are not producing oil and gas.

Oil and gas companies would not buy leases to this land without believing oil and gas can be produced there, yet these same companies are not producing oil or gas from these areas already under their control.

If we extrapolate from today’s production rates on federal land and waters, we can estimate that the 68 million acres of leased but currently inactive federal land and waters could produce an additional 4.8 million barrels of oil and 44.7 billion cubic feet of natural gas each day. That would nearly double total U.S. oil production, and increase natural gas production by 75%. It would also cut U.S. oil imports by more than a third,and be more than six times the estimated peak production from the Arctic National Wildlife Refuge

Sensible energy policy would

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25 Community Comments, Facebook Comments

  1. DavidThi808 says:

    Kudos to all 4 (yes, including Udall).

  2. Even if this bill got out of the House it would never have made it through the Senate or past the President. But what if a Democrat becomes president?

    Big Oil’s last hope to grab that 69,000,000th acre might depend on a Schaffer Senate.

    (And I know Bob is from out of town, and can’t tell McKinley from Pike, so for his benefit I will point out that the entire State of Colorado is just over 66 mil. acres.)

    So if you want to protect corporate welfare, vote for Big Oil Bob! He is the crude choice.

  3. ClubTwitty says:

    Today, a majority of Democrats in the House voted to compel Big Oil to drill on the federal oil and gas leases it holds, and drill on them now. But Republicans in the Congress appear to be more intent on playing politics at the pump than on voting for sensible solutions to our energy woes.  They talk the talk, but they did not walk the walk when it came to a measure that has the potential to nearly double U.S. oil production and cut oil imports by one-third.

    • GeoGreg says:

      Double US production?  Cut imports by one-third?  That will never happen.  Never.  Ever.  US production is in permanent decline.  It peaked about 1970.  Prudhoe Bay couldn’t reverse the decline.  ANWR would not.  The Bakken play will not.  Ultra-deep-water Gulf of Mexico will not.

      • DavidThi808 says:

        The U.S. produces about 40% of it’s oil. If it doubled it would jump to 80%. So that would reduce the 60% imported to 20%. In that case we would cut oil imports by 2/3s.

        And as you said, doubling U.S. oil production is definitely a fantasy. But I wanted to point out than even in their fantasy land, they’re numbers are wrong.

  4. GeoGreg says:

    … but not someone who makes drilling decisions, I can make a few comments.

    It is not true that oil/gas companies lease only tracts where they believe oil and gas can be produced immediately.  They will typically lease large areas that they believe to be prospective, then start evaluating those areas in detail.  They will often find that some of the leased areas have potential, while others don’t.  But, prospects can take years from initial identification before they are ready to drill, especially in deep water and other areas where drilling is expensive.  Also, as their capital is limited (yes, really!), they prioritize some areas over others.

    For example, I believe BP’s ThunderHorse project in the Gulf of Mexico took about 10 years and $2 billion from initial discovery before a single drop of oil was produced.

    So, I don’t think oil companies are sitting on leases that would be prolific producers.  Rather, they need an inventory of leased areas from which to choose where they are going to drill next.  Drilling rig utilization rates are very high, so the companies can’t just drill every well they would like to drill.

    I’m not just a cheerleader for the industry I work in.  But, I think this type of legislation doesn’t address real issues.  Companies simply can’t just wait until they have a rig ready and then lease the land.  For multi-year capital expenditures, they need the land (or offshore blocks) in hand before they can even start the process.

    • There are by all accounts 10,000 outstanding well permits undrilled.  If in the period from 1999 through 2007 we drilled 18,000 wells, then at the same rate it will take approximately 4 years before the current drilling permits are exhausted.

      Now, that doesn’t take into account the various companies and their individual inventories, but the legislation doesn’t ban new leases – it only bans new leases for companies whose current leases aren’t explored and used.  There are many many acres of proven reserves among these current leases, and many thousands of wells to be permitted and drilled on those acres.

      I think this legislation is reasonable considering the limited number of rigs and high outstanding lease acreage.

  5. ClubTwitty says:

    where the oil and gas companies do control vast acreages in productive areas that they have yet to put into production.  Take the Piceance, for instance, 90% or so of the BLM lands are leased in the area, most of the private land is owned or controlled by the industry, and drilling has just begun (relatively speaking).  Williams–for instance–has acknowledged that it has a decades worth of drilling sites already.

    • GeoGreg says:

      Sounds like Williams has a development plan for their acreage.  If we use the pipeline metaphor here (appropriate I think), a large company will want to have projects at all stages in the pipeline.  They’ll have some wildcat prospects, some fields in development, some mature and declining fields, and some that are played out and ready to be shut in.  So the fact that a company may be buying up new leases while still developing others is not necessarily an indication of poor stewardship.  It probably means they have set things up to try to level out production over time so that the fields pay for themselves.  To me, that doesn’t mean that they should be able to buy up more leases; as a company, they have to keep that pipeline primed.

      In fact, in some areas, going in to drill up every potential well site and produce as fast as you can would be extremely poor stewardship.  Producing a reservoir too quickly or too intensively can seriously damage the long-term recovery of hydrocarbons.  In other words, you can turn a 100 million barrel field into a 50 million barrel field if you don’t manage it well.

      • Jumbo says:

        I was leaning the other direction but you’ve offered some good points. Always good to get some comments from someone who actually knows the issues.

      • bob ewegen says:

        You’re bringing facts and logic to a forum designed to whip up a good auto de fe at the expense of “Big Oil.”

        You actually think development plans and the economic facts of life can trump conspiracy theories–and in an election year at that?

        Have you no shame, Sir?

        • ClubTwitty says:

          would not halt leasing, Bob, only ensure that companies are developing leases and reserves that they already have or making a diligent effort to do so before acquiring more public resources.  Once they begin developing those leases they are able to lease additional lands, plan for their economic futures, etc.  

          I think you’re a bit full of yourself here.

          Talk about an election year gimmick–what about:the GOP’s “Gas Price Reduction Act of 2008” which would open the Arctic Refuge (bringing some new reserves onto the GLOBAL market in 8-10 years), and speed up oil shale (again, a decade down the road–if ever).  

          How is that reducing prices in 2008?  Great name though, that alone should garner a few votes, all facts aside.

          As I noted in a post above, regarding onshore (and from what I have gathered via research, many of the off-shore leases as well) many of the existing leases are in fact in proven reserves.  That is most certainly the case for Colorado, where some 70% of federal leases have yet to be put into production.  I understand that companies (setting aside if its best for the public–for whom the publicly-owned minerals and lands are to be manged in trust) need some certainly and need reserves in their portfolio for a variety of reasons, including attracting investors, but for oil companies and their GOP allies to insist that not allowing them to lease and lease and lease some more, determined primarily by what they want on their terms, will drive prices up, and that letting them have their way will bring them down is neither accurate nor fair.

      • DavidThi808 says:

        If they required that X% of the leases was at each stage of the process? I think that would speak to your points and at the same time make sure they’re not just building up a 100 year backlog.

  6. Disinterested17 says:

    So the bill will clear the house and die on the senate doorstep.  It’s totally irrelevant.  Besides, Rahall is no friend of the environment, he strongly has supported mountain removal coal mining which has destroyed his West Virginia district.

    He did for some press in an election year, knowing it can never pass.

    • DavidThi808 says:

      We don’t make progress by only attempting what we’re sure will succeed. We don’t make it even if we include those things that will probably succeed. We make progress by trying those things that fail and trying again and again. Edison had hundreds of attempts before he came up with a working light bulb.

  7. Paraducks says:

    In the 1970s we developed domestic resources as the price climbed. OPEC turned up it’s spigot a little and the price fell below our production  

    costs. Small Oil, it’s hub, Denver, began floundering as cheap oil entered the US. The final blow was Windfall Profits. Oil company offices emptied and filled in a few years with lawyers and collection agencies. Foreclosures were marketed by catalog. To prevent a repeat of this, we need, not another punishing tax on the risk-takers, but a tariff on imports formulated to keep OPEC oil above domestic production costs.  

     

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