Oil Companies Fail to Exploit US Leases

John McCain, George W. Bush and others have suggested that one part of the solution to America’s (and hence the world’s) energy problem is to allow more drilling off-shore and in the Arctic National Wildlife Refuge. That would provide 2 million extra barrels of oil a day according to petroleum experts, bringing the national total to 10 million barrels a day. The nation consumes 21 million barrels daily. However before opening up new areas for drilling, the oil companies should be required to exploit the 70 million unused acres currently leased, mostly in the Gulf of Mexico.

More oil production isn’t really going to do much but continue the world’s addiction to oil, but for the sake of argument, suppose these 70 million acres could be brought into production tomorrow. Some believe that 5 million extra barrels a day lie there, while the oil companies say it’s much less. To quote Vice-President Dick Cheney, “So?”

If it is the oil companies’ intention to develop those resources, surely they must be farther along with those plans than they would be with development of the ANWR fields? As Congressman Edward Markey (D-MA) said, “We should not even begin discussing handing over more public land to the oil companies until they first use [the land] they already hold.” The congressman has co-sponsored legislation that would charge oil companies a fee for any acreage they have leased that is not producing oil. Far better would be to rescind the leases.

That is not to say that the oil companies are leaving land fallow. Rayola Dougher, senior economic advisor for the American Petroleum Institute said, “No one is sitting on leases these days,” not at $135 a barrel. However, the industry has seen oil busts before and is hesitant to make the investments needed to bring some of the more difficult oil to market. That’s why oilmen like the Middle East so much; it’s cheap to produce there.

What the oil firms are after, and what Mr. McCain has proposed to give them, is access to oil fields off-shore and in the arctic that are easier to develop than those non-producing fields currently under lease. Lower costs mean fatter margins, greater quarterly earnings. Perhaps a deal could be made; for every acre developed that is currently leased, Uncle Sam will open up an acre currently out of bounds. Of course, that looks too much like a coherent strategy.

© Copyright 2008 by The Kensington Review, Jeff Myhre, PhD, Editor. No part of this publication may be reproduced without written consent. Produced using Fedora Linux.

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