Tag: Use it or Lose It

Three Concrete Actions to Advance Energy Security

Ken Cohen, vice president of public and government affairs for Exxon Mobil Corporation, blogged his company’s reaction to President Obama’s speech on energy policy Wednesday.

Cohen’s commentary at the Perspectives Blog includes recommendations the Administration should undertake if the President really wants to achieve his stated goals, to “produce more oil (and gas) in America to help lower oil prices, create jobs and enhance our energy security.” It’s a very clear, very good statement.

From “Actions speak louder than words – especially when it comes to energy policy“:

  1. Approve the Keystone XL pipeline to bring Canadian oil to U.S. refineries. We can’t take advantage of Canada’s vast oil resources if we can’t get them here. Everything is ready to go – except government approval. Instead, the State Department announced another delay just a few weeks ago.
  2. Drop plans in the federal budget for billions of dollars in new, punitive taxes on U.S. oil and gas companies that will divert money from investments in new energy supplies. New taxes make U.S. companies less competitive internationally, and they discourage investment in energy supplies at home.
  3. Open up federal lands for oil and gas development. The tired and discredited “use it or lose it” talking point can’t hide the fact that there are millions of acres off limits to development of American energy resources. One recent study found that reversing drilling bans on federal lands could generate $1.7 trillion in government revenue over the life of the resource, create 160,000 jobs and increase U.S. oil output by as much as 2 million barrels a day by 2030.

Those three simple actions would send a message to the country that the president is serious about developing an energy policy that – as he says – will produce more oil in America, create jobs and enhance our energy security.

The Wall Street Journal also interviewed Cohen for its report, “Obama Adds New Luster to Old Calls for Energy Independence.

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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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Use It or Lose It, a History…a Very Short History

It’s not a perfect measure of the seriousness of “use it or lost it” as a policy proposal in Congress, but we tried a little experiment with Thomas, the Congressional Record search engine.

Going here, we entered the search term, “use it or lose it” — the quotation marks making it a specific phrase we were looking for. Sort by date and …

2000 Congressional Record articles from the 110th Congress sorted by date on “”use+it+or+lose+it”+ “.
       52 articles containing your phrase exactly as entered.
       2 articles containing all your search words near each other in any order.
       1085 articles containing all your search words but not near each other.
       861 articles containing one or more of your search words.


Listing of 52 articles containing your phrase exactly as entered.1 . PROVIDING FOR CONSIDERATION OF H.R. 1286, WASHINGTON-ROCHAMBEAU REVOLUTIONARY ROUTE NATIONAL HISTORIC TRAIL DESIGNATION ACT — (House of Representatives – July 10, 2008)
2 . MOTION TO GO TO CONFERENCE ON H.R. 3121, FLOOD INSURANCE REFORM AND MODERNIZATION ACT OF 2008 — (House of Representatives – July 10, 2008)
3 . WASHINGTON-ROCHAMBEAU REVOLUTIONARY ROUTE NATIONAL HISTORIC TRAIL DESIGNATION ACT — (House of Representatives – July 10, 2008)
4 . LEGISLATIVE PROGRAM — (House of Representatives – July 10, 2008)
5 . BIG OIL DOESN’T NEED MORE LAND TO DRILL; THEY SHOULD USE IT OR LOSE IT — (House of Representatives – July 09, 2008)
6 . BIG OIL DOESN’T NEED MORE LAND TO DRILL–THEY SHOULD USE IT OR LOSE IT — (House of Representatives – July 09, 2008)
7 . PROVIDING FOR CONSIDERATION OF H.R. 5811, ELECTRONIC MESSAGE PRESERVATION ACT — (House of Representatives – July 09, 2008)
8 . AMERICA’S BEAUTIFUL NATIONAL PARKS QUARTER DOLLAR COIN ACT OF 2008 — (House of Representatives – July 09, 2008)
9 . THE 30-SOMETHING WORKING GROUP — (House of Representatives – July 09, 2008)
10 . HOLDING THE LINE ON DEBT AND THE ENERGY CRISIS — (House of Representatives – July 09, 2008)
11 . INTRODUCTION OF THE NATIONAL GUARD TECHNICIAN RECRUITMENT AND RETENTION ACT — (Extensions of Remarks – July 08, 2008)
12 . ENERGY CRISIS — (House of Representatives – July 08, 2008)
13 . OPPOSITION TO NEW OFFSHORE DRILLING — (House of Representatives – June 26, 2008)

Etc. The list of all 52 mentions is in the extended entry below. 

The very first mention chronologically in the 110th Congress of the phrase “use it or lose it” in the context of energy leases occurs on Senate page S5566, as Sen. Christopher Dodd (D-CT) discusses the proposal. That day? June 12, 2008.

So for all the years of debate over energy policy, “use it or lose it” only appears as a policy proposal on the House or Senate floor a little over one month ago.

It’s as if someone said, “We’re losing this debate. We’ve got to come up with something. Anything!”

(continue reading…)

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Needed: a Serious Debate about Energy Supply

In recent weeks, as the public and political support grew for domestic energy production, we’ve seen interesting counterproposals. Today, for example, in response to the President lifting the executive order banning offshore energy development, House Majority Leader Hoyer issued a statement:

“Drilling in the OCS will do nothing to lower gas prices, but it will mean one more handout to those who are already enjoying billions of dollars in taxpayer subsidies. Let me remind President Bush: If the oil companies wanted more domestic drilling, they could begin today. They could begin on the 68 million acres of land that are already set aside, leased, and available for drilling. And with upcoming Democratic legislation to speed up the leasing process for 20 million more acres in the Strategic Petroleum Reserve-Alaska, they’ll be able to drill there, too.”
 
Funny thing is, up until the last, oh, two months, we’d barely heard of this “use it or lose it” idea, demanding energy companies drill on existing leases before drilling commenced elsewhere. It certainly wasn’t a major part of the public policy debate the last several years when Congress considered more leasing in the Gulf of Mexico or took another run at ANWR.  Then all of a sudden, people are introducing bills, it becomes a major talking point…
 
And the idea of accessing the Strategic Petroleum Reserve-Alaska, well…what? Where did that come from? 
 
It’s true that in 2002, the National Petroleum Reserve Alaska (NPRA) was mentioned as an alternative to the Alaska National Wildlife Refuge development.  The Congressional Research Service did a study, “The National Petroleum Reserve – Alaska (NPRA).” Included was this finding:

[New] estimates for NPRA present a more optimistic picture, estimating 1.3 billion barrels economically recoverable at a price of $22/barrel (bbl), and 5.6 billion barrels economically recoverable with a market price of $30/bbl (2001 constant dollars). Technically recoverable oil is estimated at 5.9-13.2 billion barrels; the mean estimate is 9.3 billion barrels.

Well, that’s something, but according to this 2007 report on Alaska’s energy potential from the Department of Energy and National Energy Technology Laboratory, it’s not all that much of something in comparison to ANWR.  A chart on page 19 reports:

 

So the NPRA has a potential of 281,600 barrels of recoverable oil per square mile, versus 3.5 million barrels for square mile of ANWR? Maybe that’s why we hadn’t heard about it before.

Advocates of increasing domestic energy supplies have been consistently making the same case for years now: America is foolish to lock away its own energy resources when they can be accessed in a way that’s both environmentally safe and profitable. Let’s not ignore the supply side of energy supply and demand. (Again, take a look at that API statement from 1990.)

In contrast, these various counterproposals — “use it or lose it,” NPRA, let’s tap the Strategic Petroleum Reserve for two days and a couple of hours — are coming up in shotgun, reactive way, almost as if they are intended not as serious policy proposals but rather as political chaff meant to deflect criticism. 

It’s not that confusing, really. We have vast energy resources in the United States. We need that energy. Let’s go get it.

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Use it or Lose it, Play or Pay, Drill or Get out of Dodge….Fails

H.R. 6251, the winsomely titled Responsible Federal Oil and Gas Lease Act, fell far short of the two-thirds margin needed to pass under a suspension of the rules, 223-195. Reuters story here.

The White House issued a tough and clearly worded veto threat earlier today. From the Statement of Administration Policy:

Some have argued that leaseholders are “sitting on” leases rather than producing oil from them. This absurd claim ignores the tremendous incentive for a firm to drill when oil prices exceed $130 per barrel. Firms want to drill where they can most profitably extract oil. A firm that is not drilling in a particular area either cannot find recoverable oil there, or thinks it can find oil that can be extracted at lower cost, or has not yet completed the more than a dozen plans and permits needed to allow drilling. Congress should be allowing firms to find oil where it will produce the least expensive gasoline for the American driver.

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