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Contact Jim: jdipeso@rep.org (253) 740-2066 / 2008 Archive / 2007 Archive / 2006 Archive / 2005 Archive
Why Are So Many Oil and Gas Leases Sitting Idle?
June 13, 2008
The bumper sticker solution to high gasoline prices that is coming out of too many congressional offices goes something like this: "Drill. Drill again. Then drill some more."
Ask where the drilling should commence, and the answer is invariably in places on land and at sea that are now closed to drilling.
Put aside for the moment the fact that a country with less than 3 percent of the world's oil reserves isn't likely to add enough to the global oil supply to make an appreciable dent in prices anytime soon.
Let's say, for discussion sake, that more drilling is the answer. Then why focus on areas that are closed to drilling? Opening them would, in many cases, require acts of Congress, or at the very least, lengthy administrative processes. That would require a lot of time and political hassle.
Instead, why not speed things up by drilling in areas that already are open and available for oil and gas production? Oil and gas companies are doing nothing with millions of acres of existing leases that they already hold, on land and offshore. Why do they need more leases when they're not using most of the ones that they already have?
Here are the raw numbers: On the federally managed Outer Continental Shelf, 44 million acres of coastal waters have been leased for oil and gas production. Only 10.5 million acres are in production. On public lands, mostly in the West, 47.5 million acres have been leased. Only 13 million acres are in production.
These leases are on public property. Many questions arise. Are companies hoarding the leases at public expense in order to polish up their books? Are they leaving supplies off the market that don't offer maximum profit potential?
One reason for offshore leases sitting unused is that there is more competition for access to deepwater drilling rigs as a result of high global demand. A few weeks ago, for example, Brazil announced a freeze on auctioning new offshore production areas until at least next year because of a shortage of deepwater rigs.
If companies don't have enough hardware to drill on existing leases, how would opening more coastal waters to drilling help?
Such questions need to be asked. Summer is the time to ask them. Congressmen will spend a lot of time in their districts holding town hall meetings. When congressmen clamor to open more lands and waters to leasing, their constituents should ask them why so many existing leases are not in production. We'd be interested in hearing their answers.
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