Industry faces more governmental red tape to drill on public lands

Not surprisingly, the oil and gas industry and Obama’s Administration find themselves at odds regarding offshore leases and opening up more public lands for drilling. A common complaint since the Deepwater Horizon disaster in April 2010 has been that the Interior Department has been purposefully either blocking domestic oil and gas production through lease rejections or through approving them so slowly to make them not worth pursuing.

Recently the Obama Administration came out with a new claim to deflect the industry’s complaints elsewhere by claiming that U.S. oil and gas producers are sitting on millions of acres of idle government land leases.

Secretary of the Interior Ken Salazar says that if producers really are sincere about wanting to increase energy production domestically, that they would activate millions of acres of public land already lease to them. A report released by the Department of the Interior claims that of the 36 million acres leased offshore for oil and gas production, 72 percent sit idle.

The industry claims the accusations are “absurd and willfully misleading.”

Jack Gerard, American Petroleum Institute CEO says just because a lease doesn’t fit the government’s definition of active doesn’t mean it’s idle. With only 30 to 40 percent success rate in finding oil, many factors could affect why a lease is idle:

– With a low success rate, a producer has to narrow down its leases to find the lease good enough to drill on

– The lease may be currently uneconomic to extract – take the Bakken fields for example – up until 5 years ago most of those leases now producing millions of barrels of oil a day were sitting idle because the technology was invented yet to blast through those fields.

– Governmental red tape and delays could take up 19 years from the time it takes to prospect, drill and wait for government approvals – during which part of that wait the government considers the lease to be idle, says Kathleen Sgamma, vice president of government and public affairs for the Western Energy Alliance. Sgamma also contends the government can move energy projects like the offshore and domestic leases through more aggressively if it wanted to because that is exactly what it has done with wind and solar projects.

“It’s only politics that accounts for the different treatment accorded oil and gas,” Sgmama said.

Erik Milito, API director of upstream and industry operations claims the government is fallacy: ‘We don’t have to open up any more public land to you, because you’re not using the leases you’ve already got’–is the belief “that you just put a pipe in the ground, and you’re ready to go–that there’s always oil there.”

The Interior’s reaction to API’s explanation: “The report speaks for itself. The notion that we have somehow locked up federal lands clearly doesn’t square with the facts. Our goal is to continue expanding safe and responsible development and we will continue to take steps to deliver on that priority.”

You can check out the government’s full report on the idle leases here.

What has your experience been with drilling on public lands? What red tape have you run into?

Source: SherWare Blog

Phil Sherwood

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