LOGA: 'Failed energy policies' to blame for limited domestic production

By Don Briggs, president Louisiana Oil & Gas Association

Reacting to mounting pressure over rising gasoline prices, President Obama commissioned the Interior Department to conduct a study on oil and gas activity on federal lands. Today, the Interior released its response report that suggests more than two-thirds of offshore leases in the Gulf of Mexico are sitting idle. The Administration claims that these leases are neither producing oil and gas resources, nor being actively explored by companies who own the leases. In addition to a large percentage of stagnant leases in the Gulf, the Interior reports that over 45% of onshore federal leases have been identified as inactive.

Interior Secretary Ken Salazar noted in reaction to the report, "These are resources that belong to the American people, and they expect those supplies to be developed in a timely and responsible manner and with a fair return to taxpayers."

Instead of taking blame due to its failed energy policies, the Administration is attempting to put pressure on oil and gas companies to increase U.S. domestic production. In an attempt to relieve political pressure, the Administration is claiming that idle activity on federal oil and gas leases is the reason for limited supply and rising oil prices.

It would seem somewhat ironic that while the Interior Department continues its de facto moratorium in the Gulf of Mexico, it would urge companies to develop resources in a timely and responsible manner. Currently, the BOEMRE has issued six permits to companies operating in the Gulf. Prior to the federal drilling moratorium, the government was issuing approximately five permits each month. Logic would suggest that the government, not inactive companies, is to blame for the slow development of our offshore resources.

Leases on federal lands remain inactive due to a number of reasons. For starters, overburdening environmental regulations and bureaucratic permitting processes with federal government agencies have always been significant hurdles to ensuring projects on federal lands develop in a timely fashion.

A more important reason is simply that idle leases are not idle at all. When companies acquire a lease they must conduct geological analysis, seismic testing, drill a discovery well, and then attempt to determine if the lease has potential for further development and capital investment. The geological surveying alone can take years to identify whether a reserve is even capable of production. Also, a large percentage of the production in the Gulf of Mexico exists on leases that expired in the past and were re-leased from another company. Sometimes the ten-year lease process is not sufficient for many potential offshore prospects. Just because a company has a lease does not mean they are guaranteed production from the geological structures below that lease.

Currently, members of Congress are pushing for the federal government to expand and open up access to domestic resources such as ANWR and offshore leases off the Northeastern coast. To avoid pressure from environmental supporters and negative heat from consumers suffering from high gas prices, the Administration chooses to blame oil and gas companies for failing energy policies.

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