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Tuesday, March 22, 2011

More On The Absurd Claim, Oil Companies Not Drilling In Held Lease Areas

They continue to spread the Lie.

Hey folks,

During that Conference call last week, I asked John Felmy, Chief Economist with API, about this absurd argument that Obama brought up about Oil and Natural Gas Companies, not drilling or doing anything in areas that they have already gotten approved and granted. Here is the exchange.

34:19 MR. CARLOCK: This is Peter from OPNTalk again, if nobody has a question right this second. Could we just clarify one more thing from the president’s speech? And I know that a lot of people on the left jumped all over it when he said it. There are a lot of permits already in existence that nobody is drilling yet, or drilling now. And is the explanation not as simple as, well, there’s just not enough oil to produce to justify the expense?

34:52 MR. FELMY: Well, I think you mean leases. And there are leases that aren’t being explored for right now primarily because of the permitting situation. If you can’t get a permit, you can’t explore in those leases. And it’s also a case that – you know, this issue has come up before. And it’s being spun in a way that’s just ridiculous.

You know, you got all these idle leases, and you have companies that are just sitting on them. I mean, that’s just plain silly. These companies have spent millions of dollars in terms of looking at getting bids out and looking for it. And they’re going to prioritize where they think the best opportunity is based on their seismic work and whatever. And you got a series of priorities that you would focus on irrespective of the permitting issue.

But now, it’s hard to make an argument: Well, why aren’t you drilling when the same, you know, folks are not releasing permits to drill? So that’s the added dimension. You know, we heard this back a couple years ago. And it was just silly. It was a desperate attempt to, you know, add Washington political spin.

35:57 MR. CARLOCK: Very good.
Those are just the facts folks. That is the reality of the situation. However, some in Government wants to continue this absurd argument. So here is even MORE on why this is a completely ridiculous argument on the Left. Once again Ladies and Gentlemen, John Felmy.

Energy Tomorrow - Developing Domestic Energy - What the Issue Is
By John Felmy


As a rule of thumb it is generally not a good idea to spend a lot of time arguing against the ridiculous. But when the ridiculous is coming from folks who have the power to implement policies which will harm our economic and energy security an exception to the rule is warranted. Such is the case with the notion that oil and natural gas companies don't want to develop oil and natural gas resources.

"The issue "is not a failure of the government to lease lands or to authorize drilling," [Sen. Robert] Menendez said. "It is that millions of acres under lease exist but the industry is not developing them."

Of course a year ago Sen. Menendez let "...the administration know that offshore drilling is a non-starter for me," and earlier in the week we got "The other side of the aisle likes to say if we just produced more oil and gas, prices will go down, but the facts suggest something different." So I suppose it is good news that the Senator is now eager for increased domestic production. But the above argument is what we call "The 'Use It or Lose It' Deception" and while there are numerous political reasons why we might be seeing it right now, I will simply assume those making the argument have no idea how energy production works. Erik explains here:

"Companies purchase leases for the right to explore for the resources. You don't know if a lease actually contains oil or natural gas until you move forward and drill an exploratory well. Companies purchase a large portfolio of leases to give them the greatest opportunity to find oil and natural gas. They work hard to survey and study all of their leases with the hope that they can narrow the list down to a subset that have the best likelihood of actually containing oil or natural gas. However, it is not uncommon for a company to spend $100 million to drill a well and find no oil or natural gas. In fact, companies drill more wells that have no oil or natural gas than wells that actually do."

In other words, within the leased lands there are more areas which do not contain oil than do. A company that randomly dropped $100 million wells onto leased land where there was no oil would soon be out of business and would contribute nothing to the supply of oil. The effect on price? Please consult the law of supply and demand.

Now please ask yourself. Who in their right mind would advocate for expensive, symbolic projects which raise costs for consumers and return nothing? Oh wait, we are in Washington, please withdraw the question.

Developing America's domestic oil and natural gas resources is necessary to power our nation's economy, create jobs and enhance our nation's energy security. And America's oil and natural gas companies invest heavily and want to invest more, to develop these resources. Unfortunately, from the very beginning, the current administration has taken dozens of specific steps to stop or delay development. And as to those leases, Erik has more:

The administration itself is preventing the industry from developing these leases because it is not issuing permits to drill or conduct seismic studies of these leases. They want the industry to develop the leases it already possesses, but they won't grant the permits to do so.

The administration's approach to energy policy is to propose and support energy taxes. However, a recent study by Wood Mackenzie concludes increased access to domestic oil and natural gas--rather than increased taxes on the U.S. oil and natural gas industry--is the best strategy for increasing government revenue, jobs and energy production. Increased access could (by 2025) create 530,000 jobs, deliver $194 billion more in tax, royalty and other revenue to the government, and boost domestic production by four million barrels of oil equivalent a day. Raising taxes on the industry with no increase in access could reduce domestic production by 700,000 barrels of oil equivalent a day (in 2020), sacrifice as many as 170,000 jobs (in 2014), and reduce revenue to the government by $128 billion dollars by 2025.

America's oil and natural gas industry supports 9.2 million jobs. Positive energy policy has the potential to increase that number, while negative policies can put many of those jobs at risk. Energy is a global business and negative policies could shift these American jobs offshore to other areas around the world. We have already seen rigs leave the Gulf and move to Africa and South America.

What we don't need from policy makers is a communications campaign designed to obfuscate the fact that an energy policy of "no" is no energy policy for America. What we need from policy makers is a firm "yes" to developing the energy that Americans use today, and will use tomorrow.

Get briefed on the onshore and offshore lease programs.

So there you have it once again folks. FACTS and REALITY vs the Political Spin and Rhetoric. Ask yourself this. "What about me?" Someone tells you that you can go did for Gold in Area A. So you buy that right. You go and scan the area, you find little to nothing. However, all indications are that Area B DOES contain Gold. So you go back and they say, "Sorry. We gave you a lease for Area A, So unless you spend a few Million on the Lease you already have, we will not give you one for B." So ask yourself, would you throw that money away KNOWING that there is no Gold? Or at least not enough to make up the cost of going to get it? Of course not. That is what the Government is doing. They KNOW that there is no Oil in these areas, or the Companies WOULD be Drilling as we speak. They ARE they ones playing games here, not the Oil Industry. Most likely at the Direction of Obama. It really IS just that simple.
Peter

Sources:
Energy Tomorrow - Developing Domestic Energy - What the Issue Is

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