Contact your Congress critters to let them know that you are tired of high gas prices.
Posted on 08/16/2008 7:06:49 PM PDT by Delacon
If you’re against offshore drilling because you think it pollutes the environment and worsens our dependence on oil and if you think big oil should hand over more money to the federal government, what’s wrong with this scenario:
An oil company pays the government millions of dollars to lease a tract of land at the bottom of the Gulf of Mexico, does nothing, then after five or 10 years gives up the lease without spilling a drop of pollutant or producing a barrel of demon oil.
You’d think, nothing.
Which makes it curious that Democrats such as Nancy Pelosi and Barack Obama want to put a stop to it through the “use it or lose it” provisions of the Responsible Federal Oil and Gas Lease Act before Congress.
Use it or lose it has been made the centerpiece in the argument against granting oil companies permission to drill in areas of the Gulf, the Atlantic and Pacific coasts currently off-limits to oil and gas production.
Oil companies should drill on the 68 million acres they already hold leases to before being granted any new areas, both Pelosi and Obama have argued in recent weeks.
Pelosi says the oil companies are “warehousing” the acreage as a way of keeping supplies low, prices high and compelling the government to give them even more areas to exploit later.
But in fact, oil companies already are compelled to exploit areas they hold by the terms of the leases they sign.
Offshore leases granted by the U.S. Minerals Management Service are good for only five, eight or 10 years, depending on the depth of the water. Onshore leases for drilling on federal land, the purview of the Bureau of Lands Management, carry built-in 10-year expiration dates.
If a tract isn’t producing oil at the end of the lease, it reverts back to the government.
Use it or lose it is already in place.
What the Responsible Federal Oil and Gas Lease Act really does is add a layer of government.
Allyson Groff, spokeswoman for the House Natural Resources Committee, says under current law, so as long as the leaseholders pay the annual fee, the government cannot compel diligent development of the lease.
The new law would require diligent development all through the lease term, Groff said. “If they cannot certify that they are doing so, they must give up the unused leases, so that another company can develop them, before obtaining any new leases.”
But how much government prodding does a company need if it stands to lose its multimillion-dollar investment due to a lack of diligence? Common sense dictates a company wouldn’t take out a lease with the intent of just sitting on it, especially since it takes years to get permits, to determine exactly where to drill and to get the equipment up and running.
Pelosi, Obama and other proponents of “Use it or lose it” like to talk about the 68 million acres — half in the Gulf of Mexico — under lease to oil companies that aren’t producing any oil. “We should start by telling the oil companies to drill on the 68 million acres they have access to but haven’t touched,” Obama told a crowd in Michigan on Aug. 4.
The fact is, the oil companies have touched, in some case even drilled on, most of those acres. The MMS and the BLM don’t consider a lease “producing” until marketable amounts of oil are being pulled from it. If it is in the permit stage, if exploration is going on, if it is tied up in litigation or if it proves to be a dry hole, it is considered non-producing and is counted as part of the 68 million acres the Democrats harp on.
According to Minerals Management Service spokeswoman Eileen Angelico, there are about 7,500 active leases in the Gulf of Mexico. In 2007, 938 reverted back to the government and are available for someone else to bid on. Another 138 lease holders have asked for more time to develop the leases. So holders of fewer than 2 percent of the Gulf leases are seeking to keep their holdings beyond the initial expiration date.
Offshore lease payments for oil and gas rights raised $7 billion for the federal government in 2007.
Use it or lose it is at best a government program to force oil companies to do what is already in their own best interests.
At worst it’s a ploy aimed at convincing the country we don’t need to explore for oil in new areas because there’s so much, “untouched” area out there waiting to be exploited. There is definitely something wrong with that scenario.
E-mail Brent Batten at bebatten@naplesnews.com
ping
Good Article
BTTT
If we applied this to Congress, their brains would be our property now.
In many cases, there is oil on these 68million acres, but it’s too costly to extract at this time. If it wasn’t, the integrated oil companies would be drilling on it. But because deepwater drilling has had many technological advances recently with regard to better and cheaper equipment to get to lower depths, the companies are hanging on to and renewing the leases in the hopes that it becomes more economical at some point in the future. The seismic and other analysis of these continental shelf areas is more promising. And that is why they are asking to drill there.
Contact your Congress critters to let them know that you are tired of high gas prices.
It’s a little naive to think that, in some cases, oil companies don’t lease and hold - solely to keep the land from their competition.
From the article:
“If a tract isn’t producing oil at the end of the lease, it reverts back to the government.
Use it or lose it is already in place.”
Federal leases are offered in 5, 8 and 10 year terms depending on the location. If oil is not produced in those years, or significant development towards producing oil, they lose the leases.
Any business would love to slow down their competition for 10 years. Expecially if the leases are cheap.
The competition has the ability to bid the same leases. Any nobody knows if oil is on those leases until after the exploration is done. And the leases are not cheap.
Oil and Gas Lease Sales in Gulf of Mexico Attract $3.7 Billion
http://www.mms.gov/ooc/press/2008/press0319.htm
March 19, 2008
Good facts prove me wrong. Thanks.
There are few cases where a significant discovery is found, but it is not yet economically to produce. Really deep water, very high pressure or no transport pipeline yet built would be examples of this. Sometimes, if continued investment is made by the lease holder, like continuing to do more exploration wells and submitting plans/schedules for a completion, the leases are extended. But the company must be spending additional money and convince the governing agency that it will be brought into production later.
Point Thompson and ExxonMobil in Alaska is an example of this. It is mostly a natural gas field with condensates (natural gas liquids like butane, etc). No gas pipeline existed to bring the fuel south to markets or at least to an ice free port. Although a huge reservoir, it was not big enough by itself to justify a pipeline.
Recently, ExxonMobil lost the lease by to Alaska State Government (although still in court). It was interesting to me when Alaska decided to try to take it back, they changed the classification of the liquids to oil, previously they had been called condensates.
The justification for the currently proposed pipeline includes natural gas from Point Thompson as well as from other sources to get the quantity high enough to justify a $30 billion dollar project.
If ExxonMobil had done more to develop Point Thompson, they probably would still hold the lease.
To my knowledge, no oil or gas lease is issued with fixed payments. It is always a percentage of the product produced.
Certainly the Alaska leases are this way. Also Alaska usually takes the oil as direct payment, rather than argue over the value of the product so far from the final market. The state then sells the oil to the Refineries in Alaska.
Ok, thanks for the info. Doing it that way makes a lot of sense.
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