Tag: Department of Interior

Interior Leasing Plan is a Step Backwards

This afternoon, the Department of the Interior released its proposed final five-year plan (PFP) for offshore oil and gas leasing.  There’s really no way to sugarcoat this: today’s PFP is a major step backwards. 

The five-year plan proposed in January 2009 would have made new areas along the Outer Continental Shelf, including the Atlantic and Pacific coasts, available for leasing; today’s plan limits leasing to the Gulf of Mexico and parts of Alaska.  And it makes more areas off-limits than it makes available.

More than 85 percent of federal offshore acreage remains off-limits to development.  According to a study by WoodMackenzie Energy Consulting, policies that encourage domestic oil and gas exploration could add $127 billion in government revenue, 1.1 million jobs and 4 million barrels’ worth of oil and natural gas per day.  The PFP released today strongly suggests that job creation from increased oil and gas production is not as high a priority for the agency as other factors.

The PFP also ushers in a new leasing philosophy for the agency, what it calls a “regionally tailored” approach.  According to the PFP, “Decisions about the OCS planning areas to be considered for potential leasing, as well as decisions about the configuration of individual lease sales within a planning area, must be based on the unique combination of resource potential, and environmental and social factors specific to individual OCS areas.” 

What this appears to mean is that, as opposed to the past practice of leasing a tract and allowing the environmental review process to dictate exploration and mitigation, the agency will now preemptively take areas offline before even allowing environmental regulation to commence.  We’ll see how this plays out, but  the NAM is very concerned with Interior’s new approach to leasing.

Ross Eisenberg is vice president of energy and resources policy, National Association of Manufacturers.

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President Should Accept Responsibility for Lack of Domestic Energy

The Associated Petroleum Industry held a conference call with reporters this morning in anticipation of President Obama’s speech on energy. The API’s top policy expert on upstream operations, Erik Milito, discussed the many policy and regulatory decisions by the Obama Administration that have prevented domestic energy development, especially offshore oil and natural gas.

Milito was justifiably tough on Tuesday’s report from the Department of Interior on “unused oil and gas leases.” From his prepared statement:

Yesterday, the President’ point person for oil and natural gas development, Secretary Salazar, released a politically motivated and deeply flawed report on so-called idle leases. Among other things, it lists offshore leases that do not yet have approved exploration or development plans as “inactive,” regardless of whether there is exploration or pre-production activity going on such as seismic or technical reviews of the geography. This preparation work is necessary to determine whether natural resources exist on a lease and how to produce any oil and natural gas safely.

The Administration’s report assumes that oil and natural gas are spread uniformly across a lease acreage, suggesting that 70 percent of idled leases equates to 70 percent idled resources – as if finding oil were no more difficult than sticking a pipe in the ground. (continue reading…)

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The Department of Interior Issues Its Fifth Permit – But It’s Still Not Enough

The Obama Administration, today, issued its fifth deepwater permit since lifting the Gulf drilling moratorium, approving Chevron’s request to drill a “wildcat” well in 6,750 feet of water more than 200 miles off the coast of Louisiana.  This is the most important permit so far, in that it is actually for a new exploratory drilling as opposed to a permit that was previously issued.  It is also the second permit to be approved which is using the containment system designed by Marine Well Containment Company as its solution in the case of a loss of well control.  This is a good step forward and, we hope, marks the Administration’s intention to move more expeditiously on the other pending permits.  In addition, with the unrest in the Middle East, and the increasing oil prices, there is now talk of a possible double-dip recession.  Therefore, it is essential for the Interior to move on these permits as quickly as possible to ensure that as many companies are able to return to the Gulf of Mexico to safely drill and explore for domestic sources of oil and gas. 

Offshore drilling is a significant part of the U.S. economy.  The federal government estimates that the Gulf of Mexico Outer Continental Shelf contains proven reserves of 20.3 billion barrels of oil and 183.7 trillion cubic feet of gas.  Moreover, the waters off Alaska’s coast contain about 27 billion barrels of oil and 132 trillion cubic feet of natural gas.  These reserves can provide a dependable and secure source of energy which will keep energy costs low. 

With its action on Chevron’s application, Interior has shown itself capable of approving permits for new deepwater drilling.  Let’s see the agency follow through by moving on all these pending permits, ensuring that many companies are able to return to the Gulf of Mexico to safely drill and explore for domestic sources of oil and gas.

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Alaska’s Senators Debunk ‘Use It or Lose It’ Distraction on Energy

Sens. Lisa Murkowski (R-AK) and Mark Begich (D-AK) released a joint statement on Wednesday blasting the introduction of S. 600, the “Use It or Lose It” bill. They’re exactly right. From “Sens. Murkowski and Begich Opposed to ‘Use it or Lose it’: Unwarranted Fees on Energy Companies Will Result in Less Production, More Imports, and Higher Prices.”

Murkowski, the ranking member of the Senate Energy and Natural Resources Committee, said the bill was an attempt to shift blame for rising gasoline prices to energy producers.

“While I don’t accept my colleagues’ analysis, I am glad to see them acknowledge that increasing domestic oil production will help address rising energy prices,” Murkowski said. “Unfortunately, their bill is misguided. Our laws already reflect a use-it-or-lose-it policy; that’s why we have lease terms and a range of lease fees. It is the current administration’s intentional slowdown of the permitting process that is stopping millions of acres onshore and offshore from producing the energy we need. In Alaska, ConocoPhillips and Shell have both seen work on promising oil projects blocked by government obstruction. To hold them responsible – and force them to pay for delays that are not their fault – is simply absurd.”

Sen. Begich: (continue reading…)

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‘Use It or Lose It’ Meant to Distract from Real Energy Debate at

President Obama used his recent news conference on energy to dust off his discredited campaign claim that energy companies are sitting on leases.

“There is more we can do, however. For example, right now, the industry holds leases on tens of millions of acres — both offshore and on land — where they aren’t producing a thing,” the President said, announcing he had asked the Department of Interior “to determine just how many of these leases are going undeveloped.”

“People deserve to know that the energy they depend on is being developed in a timely manner,” President Obama continued.

On Wednesday, three Senate Democrats reinforced the President’s misdirection by introducing S. 600, a bill to promote the diligent development of Federal oil and gas leases. At a news conference, chief sponsor Sen. Robert Menendez (D-NJ) dubbed the measure the “Use It or Lose It” bill. From the news release, “Senators Demand Oil Companies ‘Use It or Lose It’ on Drilling Leases“:

Under current law, oil companies can lease possible oil reserves on Federal land regardless of whether they are producing oil on that land or even have plans to produce oil there. In some cases, oil companies are leasing – but failing to develop – federal land in order to book more reserves on their balance sheet and inflate their stock price. In others, oil companies are attempting to prevent competitors from producing on those acres.

One can appreciate the President and Senators’ motivation to deflect the public’s attention from the Administration’s failure to promote domestic energy development. Unfortunately, in this display of message discipline, the message is bunk.

Erik Milito at the American Petroleum Institute explained the realities of oil and gas leasing at EnergyTomorrow.org, the API’s blog, in a post appropriately titled, “The ‘Use It or Lose It’ Deception“:

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.

Companies pay millions of dollars to acquire these leases (each lease costs at least $250,000 and some have gone for more than $100,000,000), further fees for renting the leases and the leases have a finite term. If a company does not produce oil or gas from a lease then they are required to return it to the government. In other words “use it or lose it” is already the law.

These are very successful and sophisticated companies that are engaged in this business and it makes no logical sense for companies to pay millions of dollars to purchase leases, sit on them for 10 years, and then give them back to the government. They make money by supplying the American economy with the energy it needs to grow, not from sitting on assets.

The fact that the companies invest billions of dollars to develop these leases demonstrates their commitment to finding oil and gas, Milito explains. And the argument ignores the basic reality of the oil and natural gas industry, that companies purchase leases in order to explore for resources, and one cannot ascertain if they will produce until exploratory wells are drilled.

The President knows these facts, and if he wants a detailed accounting of the leases, he should instruct Secretary Salazar to hit the “print” command to produce a list. This month’s revival of the “use or lose it” canard is meant to evade the serious discussion — the accountability — about the critically needed development of America’s abundant domestic energy resources. It’s transparent politics.

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API Analysis: Offshore Permitting Delays Threaten U.S. Jobs

The American Petroleum Institute (API) released a study this morning on the negative impact the delays in offshore drilling in the Gulf will continue to have on the US economy and energy security. The analysis by Wood Mackanezie supports what the National Association of Manufacturers has pointed out in the past -– delays in permitting have had and will continue to have detrimental impact on the U.S. economy and domestic energy.

According to the study, an estimated 125,000 jobs can be lost by 2015 and approximately 680,000 barrels of oil a day could be at risk by 2019. The delay on permitting continues even though the moratorium on offshore drilling was lifted in November of last year. This stems from the fact that companies are now faced with new procedures and guidelines in order to secure permits to resume their activities in the Gulf. These requirements mean companies can no longer rely on the old applications which they submitted for a permit. They now have to go back to the drawing board, re-start their application process and go through the steps of applying for a permit all over again.

This continued delay is devastating to the U.S. economy as it has and will continue to cause a great deal of job loss which this country cannot afford, especially with an unemployment rate of 9.4 percent. More delays will only lead to companies leaving the U.S. shores to drill in foreign waters and reduce domestic oil supply. Drilling off the coast of Brazil or West Africa does a lot less to create U.S. jobs than drilling in the Gulf of Mexico.

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Drilling IS Energy Security

In government and journalism it’s usually considered bad form to paraphrase another group’s name in a news release or article. You’re supposed to refer to the group at least once by the name it chooses to call itself and then shortening is OK. (Shortening for headlines is understandable, however.)

This old rule of civility came to mind this morning as we read the media advisory from the Department of Interior about Secretary Ken Salazar’s visit to Lousiana to meet with people affected by the Obama Administration’s drilling moratorium. From the advisory, headlined, “Salazar to Meet with Shallow Water Drilling Coalition in Louisiana“:

HOUMA, LA - On Monday, November 22 Secretary of the Interior Ken Salazar, Assistant Secretary Tom Strickland, and Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) Director Michael R. Bromwich will meet with representatives of the shallow water drilling coalition. Following the meeting, Secretary Salazar will hold a brief media availability to discuss ongoing efforts to improve the safety of offshore drilling.

The group calls itself the Shallow Water Energy Security Coalition.  From its info page:

Our nation’s jobs and energy security remain at risk due to a regulatory blockade that is being imposed by the Obama administration on America’s energy producers. Unless regulators start issuing permits and plans for safe oil and gas drilling, we cannot produce the energy America needs.

Unfortunately, the federal officials at the Department of the Interior and the Bureau of Ocean Energy Management (BOEM) has imposed a “one size fits all” approach to permitting that ignores the strong track record of the shallow water drilling industry. The recent history of shallow water permitting in the U.S. Gulf of Mexico is a cautionary tale for those who profess optimism about the end of the deepwater drilling moratorium. Although the moratorium on shallow water drilling was lifted in May 2010, permit approvals have been nominal.

Obviously the coalition promotes drilling, but its arguments also represent legitimate advocacy for energy security.

It’s understandable that Interior staff are cranky about the Secretary being maneuvered into this meeting by Sen. Mary Landrieu (D-LA), but it’s only polite to refer to the organization you’re meeting with by its real name.

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No Surprise: Drilling Moratorium Costs Jobs

Big story posted online in advance of Saturday’s Wall Street Journal, “U.S. Saw Drill Ban Killing Many Jobs“:

Senior Obama administration officials concluded the federal moratorium on deepwater oil and gas drilling would cost roughly 23,000 jobs and freeze up to $10.2 billion in oil-industry investment, according to previously undisclosed documents detailing their internal debates….[snip]

The administration hadn’t previously disclosed its estimates of the economic effect of the controversial halt, ordered after the April explosion at a Gulf of Mexico well. The documents doing so were filed in a New Orleans federal court by the Justice Department earlier this week as part of the latest round of litigation over the moratorium.

The moratorium on drilling was represented as one affecting only deep-water operations, but the effect was more encompassing. The Houston Chronicle this week reported on “DISASTER IN THE GULF: Drillers fear sinking in shallow waters“:

A post-oil-spill delay in issuing new federal drilling permits in the shallow waters of the Gulf of Mexico, at first an inconvenience, has suddenly emerged as a real threat to the future of companies in the business, industry executives said Wednesday….[snip]

So far, permitting delays have idled 14 of the 46 available jackups in the Gulf and forced offshore companies to cut several hundred jobs. Each rig employs about 100 workers and supports many additional indirect jobs at supply boat companies, oil field services companies and other businesses.

If the delays continue, 30 rigs could be idled by the end of September, the Chronicle reported.

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Interior Imposes Moratorium Without Economic Analysis

Attorneys for the Department of Interior will be in federal court in New Orleans Wednesday to argue for the dismissal of the suit by Hornbeck Offshore Services Inc. of Covington, La., challening the federal moratorium on deepwater drilling. (New Orleans Times-Picayune, “2 offshore drilling firms to argue the legality of Obama moratorium.”

We recommend this opening statement to Interior’s lawyers: “Your honor, we ask you to dismiss this lawsuit because it has become moot. Secretary of Interior Ken Salazar today ordered the lifting of the moratorium.”

Absent that smart choice, the legal question is whether Interior has the authority to issue a moratorium despite its failure to lay out solid, fact-based case for the action. The Administration has, in effect, embraced the “precautionary principle” — because there’s some slight, slight, slight, slight danger of another catastrophic spill, drillers must affirmatively prove that there is NO risk. And you can’t prove a negative.

U.S. District Court Judge Martin Feldman has previously ordered the lifting of the federal moratorium because of Interior’s “arbitrary and capricious” case versus the economic harm the halt to drilling inflicted on the Gulf Coast.  But since then, the Administration has analyzed the economic impact and concluded the risks justify the effect on local economies and jobs. Right? There’s been an in-depth, serious analysis?

From “Meet the Press,” Sunday, August 8, David Gregory interview with White House energy and environmental advisor Carol Browner:

MR. GREGORY:  You talk about all the work here being done for safety.  Did the White House do any economic analysis about what a moratorium–what impact it would have on jobs in the Gulf Coast?

MS. BROWNER:  There is, there is an economic analysis being done.  It’ll be ready later…

MR. GREGORY:  But it was never done before the moratorium was put in place? Because those who are down there say, “You know what, the moratorium by the Obama administration is far worse than the spill itself.”

MS. BROWNER:  Here’s what we knew the minute the accident happened:  that if there was another accident of equal size, we didn’t have the equipment to respond.  All the boats, all the resources were being used.  We had a close–over 6,000 vessels, we embedded private citizens into this effort.  It was a massive undertaking, and if another accident were to occur, we would not have had the ability to respond.  And, you know, that formed a basis for putting a pause on drilling while we looked at the safety, while we looked at how we would contain it, ultimately, and then clean it up.

Well, since Interior needs an economic analysis, here’s a solid, even conservative one offered by Joseph R. Mason, the chairman of banking at the E.J. Ourso School of Business, Lousiana State University, at a Senate Small Business Committee on July 27, “The Deepwater Drilling Moratorium: A Second Economic Disaster for Small Businesses?

Mason:

These projections are lower than those presented by other studies because I estimate the period of new production loss to be only six months. However, if we were to extend the loss in new production in our model to the 18 months assumed by other sources, we would see a loss of 36,137 jobs nationally, 24,532 jobs lost in the Gulf region, and 14,156 jobs lost in Louisiana.

His study also examines the loss of earnings and state tax revenues.

Michael Bromwich, the head of the Bureau of Ocean Energy Management Regulation and Enforcement – formerly the Minerals Management Service — last week said the Administration might lift the moratorium early: “I think it’s everybody’s hope that we will feel comfortable enough that the moratorium can be lifted significantly in advance of Nov. 30.”

Wednesday, August 11, would be significantly in advance of Nov. 30.

Coverage …

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Brazil, Where Energy Flows (Alberta, Too), In Contrast To…

From Slate.com, boiling down Bloomberg, “BP Spends Billions To Hunt for Oil off Brazil“:

BP, the largest oil and gas company in Europe, has finalized a deal to fork over $7 billion in cash for a chunk of Devon Energy Corp.’s assets. BP will buy U.S. deepwater sites in the Gulf of Mexico, sites in Azerbeijan and, most notably, 10 sites off the coast of Brazil, home to some of the largest deepwater oil fields in the world. “This strategic opportunity fits well with BP’s operating strengths and key interests around the world,” BP Chief Executive Officer Tony Hayward told Bloomberg. “As well as giving us a broad portfolio of assets in the exciting Brazilian deepwater, it will strengthen out position in the Gulf of Mexico, enhance our interests in Azerbaijan and enable us to progress the development of Canadian assets.” As part of the deal, Devon will take a 50 percent stake in BP’s Kirby oil sands in Alberta, Canada.

Wall Street Journal editorial, “An Energy Head Fake“:

President Obama used his January State of the Union speech to promise “a new generation of safe, clean nuclear power plants” and “new offshore areas for oil and gas development.” Judging by its recent decisions, we’d say his Cabinet hasn’t received the memo.

Congress’s ban on offshore drilling expired in September 2008, and a Bush Administration plan for leasing the energy-rich Outer Continental Shelf was due to begin this year. Yet within a month of taking office, Interior Secretary Ken Salazar halted leasing by extending the public comment period by six months. When that period ended last September, Interior said it would take “several weeks” to analyze the results. It has yet to release a summary.

 

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