Obama challenges oil companies to drill existing leases

05 16, 2012 by Fuel Fix

he White House on Tuesday pushed back against the oil and gas industry’s claims that the Obama administration is blocking domestic energy development, releasing a new analysis showing that 46 million acres of federal lands and waters leased for drilling are sitting idle.

According to the Department of Interior report, oil and gas companies are actively drilling or have launched development on less than a third of the 36 million acres they have leased offshore, and on just over half of their onshore leases.

That includes leases where the companies have not yet filed exploration and development plans with the federal government, and ones where companies have received drilling permits but haven’t launched the work. According to the report, the government has issued about 7,000 permits for exploration not yet under way on federal and Indian lands.

The Interior Department analysis, which updates an assessment issued last year, comes as industry leaders accuse the Obama administration of walling off access to domestic energy resources. In particular, industry leaders and their congressional allies complain about the Interior Department’s decision not to sell drilling leases in the Atlantic and Pacific oceans over the next five years.

With gasoline prices and the economy looming large at the ballot box this year, the administration has been emphasizing its commitment to an “all of the above” energy policy and especially touting its support for domestic natural gas production.

Administration officials said the report underscores the White House’s commitment to allowing oil and gas drilling on federal lands and waters.

“We continue to make millions of acres … available for safe and responsible domestic energy production on public lands and in federal waters,” said Interior Secretary Ken Salazar in a statement. “We also want companies to develop the tens of millions of acres they’ve already leased but have left sitting idle.”

But industry leaders argue that the administration’s numbers don’t reflect the sometimes-long lead times between buying leases and winning federal regulators’ approval to drill on those tracts, or the time needed to assess leases geologically before launching exploration.

‘Election-year politics’

American Petroleum Institute President Jack Gerard dismissed the report as “election-year politics” and said it was “absurd to contend the industry pays the government billions of dollars every year in bonus bids and rents to leave land idle.”

On the contrary, Gerard insisted, oil and gas companies develop leases as expeditiously as they can.

“The industry last year alone invested $200 billion in the United States,” Gerard said. “So we’re hardly sitting on anything. We’re waiting for Uncle Sam to give us permission to produce these resources.”

Industry representatives also argue that it takes time for companies to conduct technical research and plan for drilling – generally without any guarantee that they will find oil and gas.

Kathleen Sgamma, vice president of government and public affairs at the Western Energy Alliance, said the administration was trying “to deflect blame for leases that are not producing onto the industry.”

Sgamma said the alliance estimates that about half of non-production on onshore acres results from “redundant regulations and bureaucratic delays,” not industry disinterest.

‘Use it or lose it’

Some congressional Democrats have argued that the onus is on the industry to develop their existing holdings. They have proposed “use it or lose it” fees for undeveloped leases that would be paid on top of existing rental rates.

In a bid to spur development, the Interior Department already has boosted annual rental rates for offshore acres that are leased but haven’t started producing oil. The government also has shortened the leasing times for initial drilling in some shallower water depths and hiked the minimum bid for some offshore tracts from $37.50 to $100 per acre.

Separately Tuesday, the Interior Department’s Bureau of Land Management kicked off the formal planning for a November lease sale in Alaska’s National Petroleum Reserve, when it asked energy companies and other stakeholders to say what parts of the region – if any – should be auctioned for drilling.

As many as 630 tracts covering 7.1 million acres in the reserve could be up for grabs.