Curmudgeon blogger RC Lloyd over at the Daily Camera propagates Representative Peter DeFazio’s position that…
…oil companies are currently sitting on 10,000 leases and permits holding a 20 year supply of potential petroleum given the nation’s current usage. He further indicated that the oil companies are not drilling because its not in their best interest, at this juncture, to produce more oil.
No critical thinking is necessary, so RC concludes…
This Republican buzz is another prime example of framing an issue to support an extremely biased and jaded agenda. If the Administration can convince the American public that current prices at the pump are due to a ban on drilling then they are able to escape the accusations of speculation, price gouging and profit taking. Were it not for a single voice in the person of Representative DeFazio they might just get away with it!!!
Rep DeFazio, Mr. Lloyd and the people they influence are the target audience of a column in todays Wall Street Journal authored by Red Caveney of the Amerpican Petroleum Instittue. One key highlight…
In reality, a lease is simply a block on a map, with no guarantee that it contains any resources. If all of them did, one could simply pay for the lease, haul in equipment and start pumping oil. But that only happens in fiction.
Unfortunately, many Democrats and Big Oil company haters live in that fictional world.
A few other salient points. Leasing is expensive..
However, until the actual exploration is complete, a company does not know whether the lease will be productive. If, through exploration, it finds there is no oil or natural gas underneath a lease – or that there is not enough to justify the tremendous investment required to bring it to the surface – the company cuts its losses by moving on to more promising leases. Yet it continues to pay rent on the lease, atop a leasing bonus fee.
In addition, if the company does not develop the lease within a certain period of time, it must return it to the federal government, forfeiting all its costs. All during this active exploration and evaluation phase, however, the lease is listed as “nonproducing.”
There are additional reasons oil companies just don’t bring in the equipment and start drilling because…
Obviously, companies want to start producing from active fields as soon as possible. However, there are a number of time-consuming steps to be taken before they can do so: Delineation wells must be drilled to size the field, government permits must be obtained, and complex production facilities must be engineered and installed. All this takes considerable time, and during that time, the lease is also listed as “nonproducing.”
Because a lease is not producing, critics tag it as “idle” when, in reality, it is typically being actively explored and developed. Multiply these real-world circumstances by hundreds or thousands of leases, and you end up with the seemingly damning but inaccurate figures our critics cite.
It’s called exploration for a reason…
As I’ve often said, the first step in our business is called “exploration” for a reason. Exploration is time consuming, very costly and involves a great deal of risk. Importantly, you see neither a drop of usable oil nor a cubic foot of natural gas while it is going on. But it is absolutely essential, and there is nothing “idle” about it. Without the exploration that took place years ago, less domestic oil and natural gas would be available today to meet consumer demand.
The United States needs oil from it’s shores for a number of reasons…
1. Alternative energy sources are going to take time to develop
2. We’re much better off keeping our dollars in the United States, for two reasons: 1). I’d rather pay the domestic oil companies instead of Middle Eastern companies. 2). It’s better for our fiscal health to keep our money within our borders.
3. It’s hard to determine the psychological factors that effect the price of oil. The United States increasing oil production is a good thing, especially since we are a major consumer. It’s the responsible thing to do.
