Administration (Again) Blames Oil Companies For Lack Of Drilling

Administration (Again) Blames Oil Companies For Lack Of Drilling
By Sean Higgins
Tue., March 29, 2011 6:30 PM ET
Tags: Obama - Oil - Energy - Natural Gas - Drilling

Earlier this month, Capital Hill predicted that a forthcoming Interior Department study would “prove” a favorite talking point of President Obama and other Democrats: One reason why gas prices are high is because oil companies are refusing to drill on land leased from the federal government.

Well, the report is out and that is pretty much what it does.

The oil industry has never denied that a lot of the leases in question are not developed. The problem, they say, is that it takes a long, long time to get to the point of drilling. They have to find out where the oil is first, and that’s not easy. Even if they do pinpoint it, there may not be enough to make it worth the expense of pulling it out of the ground.

Now maybe that is not true. Maybe it is just a cover story. (A Rand Corp. energy expert told IBD that the industry was telling the truth.)

Anyone hoping for any clarity on this from the Interior report will be sorely disappointed. Not only does the report fail to refute the industry’s claim, it doesn’t even acknowledge it. What it does do is slyly push the same argument that the administration and congressional Democrats have been using.

Here’s an Interior press release summarizing the report:

According to the report, more than 70% of the tens of millions of offshore acres under lease are inactive, neither producing nor currently subject to approved or pending exploration or development plans. This includes almost 24 million inactive leased acres in the Gulf of Mexico, which potentially could hold more than 11 billion barrels of oil and 50 trillion cubic feet of natural gas.

The same press release quotes Interior Secretary Ken Salazar as saying:

“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. As we continue to offer new areas onshore and offshore for leasing, as we have done over the last two years, we will also be exploring ways to provide incentives to companies to bring production online quickly and safely.”

By coincidence, this supports the very arguments Democratic lawmakers have been voicing on the subject. By another coincidence, Democratic lawmakers are pushing the kind of “incentive” that Salazar calls for, dubbed “Use it or lose it” legislation. It would penalize companies for not developing the leased land.

The Western Energy Alliance, an industry group, dismissed the report:

DOI continues to ignore all the exploratory, environmental analysis, regulatory and permitting work that companies are doing on their leases, and its own role in holding up development. Our public land managers should know that obtaining a lease is just the first step in a lengthy process filled with bureaucratic hurdles. If this Administration was serious about domestic energy production from federal lands, it would ease some of the redundant red tape that is preventing companies from developing leases they currently hold.