What is the Truth about the Federal Leases and Oil Production?

Rep. Rahall is calling for “Use it or Lose it” legislation that would fine oil and gas companies for not developing the leases they hold on federal lands. Perhaps you have heard the Democrats saying the oil and gas companies have leased 68 million acres for drilling and exploration but have done neither. Here at CARE a question came in asking for the truth. Please read the response from one of our energy counsel members, Paul Driessen--a geologist well versed in petroleum exploration.

Permit or Pay
The Democrats have been alternating between claims that these federal lands leased to oil and gas companies leases are either not producing or have not been “explored,” which in their minds means drilled. From my perspective, their claims amount to either inexcusably gross ignorance and incompetence on the part of these senators and congressmen, or a complete fraud on the American people in furtherance of an anti-oil, higher energy prices agenda.

The reality is hardly as sexy as their sound bites, but boils down to sound corporate and financial management, where millions of dollars are at stake. An apt analogy might be buying a new home when you are being transferred to a new city. One doesn’t just buy a place sight unseen, or buy several and later decide which one you like best, or send a broker out with no guidelines as to price, style or neighborhood, or pay no attention to loan terms and conditions. Senators Bingaman and Schumer, Congressmen Rahall and Pelosi might do so--judging from the way they want the oil companies to proceed with leasing, exploration, drilling and production--but I wouldn’t. (And for them to be in charge of the committees and legislatures that are in charge of our energy policies is really downright scary.)

Just buying a lease these days costs huge amounts of money--and that is always somewhat akin to going for what’s behind the curtain. Based on theory of where oil might be on a particular piece of land, geologic maps, nearby exploration and production work, and other data accumulated companies bid on the lease. Then they have to do seismic work, magnetic studies, 3-D mapping and other preliminary analysis. All this costs a lot of money--but has to be done before you spend a million dollars (to 10 or 20 million offshore) to drill a well. Just renting a drilling rig these days costs a ton of money--and if your lease is offshore, especially in deep water, you’re talking many millions to rent a drill ship. If you don’t do your homework before you spend that kind of money, you’re guilty of gross mismanagement.

Of course, even if you get lucky and discover oil, you still need more (expensive) wells to determine whether there are commercial quantities--and then have to build (expensive) pipelines and other facilities to get the oil to market.

Of course, every one of these steps requires permits from the federal government--and that means longwinded permit applications and approval processes. These procedures include environmental and cultural impact studies, and environmental protests and legal actions almost every step of the way over endangered species, habitats, nesting and breeding areas, and these days global warming (as though only oil produced in the USA causes catastrophic climate change, but not imported oil to replace the oil we can’t produce here in the US, because most of our energy prospects have been locked up by congressional, executive and judicial fiat, or by endless environmental protests and legal actions).

It’s strange that the Democrats haven’t mentioned any of this in their impassioned floor speeches.

My view is that--instead of some kind of bogus “pay more every month if you’re not drilling or producing” legislation--what we really need is “permit or pay” legislation. If the bureaucrats don’t issue the necessary permits, or if courts put applications and leases in limbo, the government has to pay the companies, on an escalating scale, for the time their leases, seismic permits, drilling permits, production and pipeline permits, and money are tied up in the approval or litigation process. That would really result in rapid drilling, rapid production and lower oil and gas prices.

It would be so much nicer if we would all start pulling together on producing more energy here in America, enabling consumers to pay less, and safeguarding the energy and economic civil rights of poor and minority citizens.

For more on this topic: Sen. Bingaman out of step on energy needs

Paul Driessen is author of Eco-Imperialism: Green power ∙ Black death (http://www.eco-imperialism.com/) and senior policy advisor for the Congress of Racial Equality and Center for the Defense of Free Enterprise, whose new book (Freezing in the Dark) reveals how environmental pressure groups raise money and promote policies that restrict energy development and hurt poor families.

Memo to Senator Bingaman: Start Drilling!

With the President pushing for more drilling in his speech today adding to the public chorus of "Drill here. Drill now. Pay less." members of Congress opposed to drilling are getting it from all sides. Here Ron Arnold, an integral part of CARE’s founding, offers his thoughts on those who oppose drilling, especially Senator Bingaman. Do you agree?

"No Drilling" is not an energy policy

Like many in Congress, New Mexico’s Democratic Senator Jeff Bingaman doesn’t get it.

If you tell him, “Good energy policy leads to more supplies of affordable American energy and bad policy leads to less,” his eyes glaze over.

While the public groundswell for more domestic oil drilling grows, Democrats like Sen. Bingaman consistently block American energy for Americans, arguing that it will take at least 10 years to bring more oil into production.

That line is so stale that Tonight Show host Jay Leno freshened it up in a recent monologue: “President Bush has blasted Congress for not allowing oil exploration in the Arctic National Wildlife Reserve. Democrats said it wouldn’t do any good because it wouldn’t produce oil for 10 years. That’s the same thing Democrats said 10 years ago.”

The audience laughed bitterly, because some recalled that President Clinton vetoed a 1995 bill to go get that ANWR oil, enough to run America all by itself for at least 10 years and probably twenty.

We would be using it now if it weren’t for politicians like Sen. Bingaman.

Washington Post contributing editor Robert J. Samuelson said, “We’re almost powerless to influence prices today because we didn’t take sensible actions 10 years ago.”

The headline on his column: Start Drilling.

Senator Bingaman won’t allow that. He cites Department of Interior statistics showing that “oil companies are agonizingly slow in developing federal lands that are already open to production,” and “about three-quarters of the all the Federal lands we have leased onshore is not currently producing.”

He insists it’s because oil companies are holding the leases for speculation.

Wrong. It’s his fault, not the oil companies.

Take a peek into the real world: once an oil company submits the highest bid for a drilling lease on federal lands, it takes months – sometimes years – for them to get the actual drilling permit from the federal agency.

Lease? Permit? Consumers having to wait months or years because of leases and permits tied up in red tape?

It’s true. We American consumers have to wait for our own American energy on some foot-dragging bureaucrat.

But it gets worse.

Let’s say you’re the oil company and you finally get your permit. Then, you find out that the agency only lets you explore to see if there’s any oil there when none of the local wildlife are mating or migrating. And bureaucrats are always adding new species you have to watch out for.

Okay, let’s say you find oil and at last you’re ready to drill. Then you get formal protests or lawsuits to stop the drilling because of tangled laws that can stop anything.

Try to schedule an expensive oil rig under those conditions.

You wonder why oil companies are agonizingly slow in getting your energy out of your federal lands?

Who passed all those leasing laws? Who made all those permit regulations? Who built all those roadblocks to speedy energy production?

Politicians like Sen. Bingaman.

The next time you see a chorus of politicians blaming the energy crisis on slow corporations, tell them, “You’d look more believable if you took your foot off America’s brakes.”

Then look them straight in the eye and tell them, "Start drilling."


Ron Arnold, executive vice president, Center for the Defense of Free Enterprise, a non-profit 501(c)(3) organization founded in 1976 to protect individual rights, private property, free markets, and limited government.

Let Your Thermometer Do The Talking

With four dollar-a-gallon gas, suddenly global warming doesn’t seem like the scary issue of the moment any more. Now we are more concerned about basic issues like food and getting to work. On top of that, the earth seems to be cooling. Who should you believe, the green gang and their computer models or your thermometer? We suggest you bet on the sure thing. Read what CARE’s Energy Counsel Member Dennis Avery has to say about it.

What a world!! Global warming alarmists bring us to the brink of world food shortage and economic collapse--using words and computer models, not higher temperatures. As a result, more wildlife species are threatened by palm oil plantations growing biodiesel than by climate change. Heavy sea ice just trapped a big Russian ice-breaker for seven days in the Arctic’s Northwest Passage, which the alarmists told us last year would soon be open sailing. The sunspots and a Pacific Ocean cooling phase are forecasting the earth will cool further over the next two decades. In the past, both have been accurate in their in their predictions.

The blue collar world sees no warming, but they surely see economic ruin staring them in the face. Finally, the workers of the world are crying, “Enough of this man-made warming hype without warming!”

Fishing fleets have gone on strike across Europe against ultra-high diesel prices, while the Greens demand that fuel become even more scarce and expensive
Truckers are staging fuel-protest slowdowns in major European cities.
Protesting French farmers have blockaded fuel stations.
More than 70 percent of Britons now say they will not pay any extra taxes to “save the planet.”
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Meanwhile, the Vatican, widely flung governments, and dozens of universities have scheduled conferences on the global food shortage.

Guess whose advice we took on shifting much of our cropland from food to biofuels? The advice of the same Greens who told us not to burn coal or oil. We shifted too much of our scarce cropland into corn ethanol and palm oil biodiesel. We forgot that the world’s food and feed demand was in the process of doubling due to 1) the last surge in human population growth; 2) rising Third World incomes and expectations; and 3) millions more beloved cats and dogs as households have fewer children and more affluence

Assuming society is not yet ready to starve the poor or euthanize their pets, we must feed them. That means at least twice as much global food and feed per year by 2040. Nor do we want to clear the forests or drain the wetlands to grow more crops. That means there is no “spare” cropland for corn ethanol

Unless the planet starts warming again, quickly and significantly, the Green momentum for a low-carbon society will come to a screeching stop. There are many indications that we are in a long, moderate warming cycle, which began 150 years ago with the end of the Little Ice Age, and may continue for several more hundred years. There is no indication that this modest warming will be bad for humans, or for the wildlife. The thermometers show a net global temperature increase of just 0.2 degree C since 1940 --and even that tiny increase has been inflated by the urban heat island effect.

The big temperature increases are all in those unverified computer models so beloved by the Green movement. The mothers of the world’s kids and the workers who grow and catch its food now demand to see the thermometers climb more than .2 degrees before they renounce their food and jobs. Without energy, the workers can’t work, the farmers can’t farm, and the children can’t eat.

Until and unless the Greens and the UN can offer some evidence beyond the guesses of computer models that consistently over-estimate the warming that is occurring, we’ll accept the unsung voice of the thermometers

DENNIS T. AVERY is a senior fellow for the Hudson Institute in Washington, DC and is the Director for the Center for Global Food Issues. (http://www.cgfi.org/) He was formerly a senior analyst for the Department of State. He is co-author, with S. Fred Singer, of Unstoppable Global Warming Every 1500 Hundred Years, Readers may write him at PO Box 202, Churchville, VA 2442 or email to cgfi@hughes.net

America's Flawed Energy Policies

Omigosh! Reading this recent editorial by Pete DuPont was like listening in on a conversation here at CARE. It has seemed to us that the public is beginning to get a sense of the scary energy place America is in, that they have become disillusioned with ethanol, and that all of this has the potential to impact America’s economic situation for the worse—and soon. But, we have wondered, is this just us? Is this just because we focus on these issues day in and day out? Hallelujah someone with a louder voice is beginning to say what we have been saying for months. If you missed this opinion piece in your regular reading, please be sure to read it here! This piece is also an excellent follow up to our last posting: Climate Change and the Presidental Election.

Energy and the Executive
This election is notable in many ways. For the first time since 1952, neither the president nor the vice president will be his party's presidential nominee. For the first time since 1960, a sitting U.S. senator will be elected president. And for the first time ever, if the Democrats win, the next president will be female or black.

We are also at a fork in the policy road, for any of the three major candidates would lead us in very different directions on major public policy issues, from spending and taxation on the one hand, to international relations and the war on terror on the other.

Equally critical will be their direction on how we generate the energy America needs. Over the past 20 years, have our presidents and Congresses allowed us to drill for the additional offshore oil available to fuel our economy and reduce imports? No. Have they encouraged the building of nuclear power plants that would generate pollution-free energy? No. Are they now supporting the building of coal-fired power plants to generate the electricity our economy needs? No.
We have an abysmal national energy policy, and as our population grows and our economy expands, energy needs will increase. From 1980 to 2006 America's annual energy usage increased from 78 to 100 quadrillion British thermal units, and the figure is estimated to grow to 118 quadrillion BTUs by 2030. If our regressive energy production policies continue when the next administration takes office, our economy and the personal lives of Americans will be severely affected.

We have failed to increase our country's crude oil production. Domestic oil production has declined, to 1.9 billion in 2007 from 3.1 billion barrels in 1980, while imports increased to 3.7 billion barrels from 1.9 billion. We now importing about 60% of the oil we use.

One reason for the imports is that our public policy has forbidden offshore oil drilling for much of the estimated 85 billion barrels of recoverable oil and 420 trillion cubic feet of natural gas (an 18-year supply) that are on the Outer Continental Shelf, and another 10 billion barrels of oil in Alaska. Together they could replace America's imported oil for about 25 years, but the first President Bush issued a directive forbidding access to a significant portion of the Outer Continental Shelf. President Clinton extended the restriction through 2012 and vetoed legislation that would have allowed drilling in Alaska.

So America has large amounts of oil and gas, but our efforts to extract it have been significantly reduced by the federal moratorium on drilling. America remains the only nation in the world that has curtailed access to its own energy supplies. Meanwhile China will soon begin drilling for oil off Cuba and in Venezuela.

Among the worst antienergy policies we have experienced was President Carter's 1980 "windfall profits tax" on oil companies, which reduced domestic oil production by between 3% and 6% and increased imports by 8% to 16%. Yet last week Majority Leader Harry Reid and 20 other Senate Democrats introduced a similar 25% tax.

We have failed to allow the construction of new nuclear power plants to add to the 104 that we have in operation. Nuclear power is clean and efficient, but no new nuclear plant construction has been granted permits in the past 30 years. By contrast, China plans to build 40 nuclear power reactors in the next 15 years -- two or three each year.

Nor are we fully using the huge coal resources America has. We have in the past, but an effort to prohibit them has become the environmentalists' goal. NASA climatologist James E. Hansen said last month that "building new coal-fired plants is ill conceived," and that it is time "for a moratorium on coal now with phase-out of existing plants over the next two decades." The phase-out is under way: Of the 151 coal-fired plant construction proposals in 2007, more than 60 have been abandoned as the result of environmentalist pressure. And last month Gov. Kathleen Sebelius of Kansas vetoed a bill that would have allowed the construction of two new electricity generators at an existing coal fired power plant -- because they would emit greenhouse gasses.

We have also pursued new energy policies that turn out to be mistaken. Ethanol is perhaps the best example, with congressional enactment of ethanol subsidies -- 51 cents a gallon for production of it, and a 54-cent-a-gallon import fee to keep competitive, less expensive and more environmentally friendly ethanol out of America. Congress in 2005 required 7.5 billion gallons of ethanol to be produced by 2012; and then in 2007 upped that to 36 billion gallons by 2022. President Bush enthusiastically supports subsidized ethanol, and Barack Obama believes there should be a 65-billion-gallon ethanol mandate. Only John McCain wants to end ethanol subsidies and import fees.

Ethanol was a bad idea from the start, for as The Wall Street Journal recently reported, producing one gallon of ethanol requires 1,700 gallons of water (primarily to grow corn). The journal Science recently found that "corn-based ethanol, instead of producing a 20% savings, nearly doubles greenhouse emissions over 30 years."

The good news is that an effort to reverse all these antienergy, antigrowth policies is beginning. Earlier this month Sen. Pete Domenici (R., N.M.) introduced the American Energy Production Act to expand offshore oil production, establish a leasing program to get to Alaska's untapped 10 billion barrels of oil, and support the construction of new oil refineries. The last is a particularly good idea, for it has been 30 years since we have built one in the United States.

The May 11 New York Times contained a surprisingly sensible lead editorial: "The time has come to rethink ethanol. . . . Specifically, it is time to end an outdated tax break for corn ethanol and to call a time out in the fivefold increase in ethanol mandated in the 2007 energy bill."
So perhaps America is beginning to rethink its flawed energy policies. And so it must, for our challenge is to remain competitive in a growing global economy, and that requires feeding the engines of growth with more energy. Our next president must advance drilling for offshore oil, building nuclear power and clean coal fired plants, and developing other energies such as solar and wind power. Otherwise America's people will miss future opportunities and slip backwards economically, and our country will become far worse off than it is today.

Pete du Pont Policy Chairman of the National Center for Policy Analysis. He writes a regular column for OpinionJournal.com, the online news service of The Wall Street Journal.