The Obama Administration is hardly gung-ho about increasing fossil-fuel production. Yet the Department of Interior recently called on oil and gas companies to “develop the tens of millions of acres” of public land “they’ve already leased.”
This “touché” was intended to blunt criticism from the oil industry that federal bureaucrats were obstructing domestic energy production. But the Interior Department’s new report simply attempts to distract Americans from the feds’ constricting approach to domestic oil and gas production, a policy which deprives the American economy of thousands of new jobs and hundreds of billions of dollars in gross domestic product.
The DOI report notes that oil companies are lobbying for access to new sites for drilling even as they sit idly on acres upon acres of open leases. So why open up more reserves, when Big Oil isn’t using what it already has?
The report calculated that 70 percent of offshore acreage and nearly 56 percent of inland acreage are currently inactive. But DOI’s definition of “inactive” defies the realities of best-practices hydrocarbon production.
Specifically, acreage not currently producing or green-lighted for development is assumed to be “inactive,” which knocks out acreage where geophysical and geotechnical analyses and seismic surveys are underway. But what’s wrong with preparatory work that reduces dry–hole risk and other resource waste? The fact is that for every 100 new leased areas, only one will result in a viable oil discovery.
Obtaining a lease is just the first step in producing energy, after which companies must obtain exploration and drilling permits. Leases may appear idle — but only because planned exploration and development are being held up by other federal agencies, such as the Bureau of Ocean, Energy Management, Regulation and Enforcement.
Throughout the pre-leasing, leasing, exploration, drilling, and production processes, companies have to apply for more than 15 permits and comply with more than 90 sets of federal regulations. A permit just approved in Utah, for example, was four and half years in the making. In an earlier report on lease activity, this land would have been considered inactive.
The more the government stalls, the more oil and gas companies pay. Annual rental fees for leased land can now exceed $100,000 annually — and can increase as the lease goes on. This hardly suggests that companies are somehow incited to postpone drilling and production.
Not to worry, leases also include a “use it or lose it” provision to ensure that oil companies promptly return acreage unworthy of development to the government. Such is also the case with most private-land mineral development.
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