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Lands bill a new package of horrors for US oil and gas

Bob Tippee
Editor

As horror follows horror in Washington, DC, the US oil and gas industry needs a scorecard to keep track of threats building against it.

Oil & Gas Journal reports continuously on political and regulatory developments. The stories appear on the OGJ Online and Washington Pulse web sites, in associated electronic newsletters and, of course, in the magazine itself.

In the May 25 edition, the print editorial assembled a catalog of the most-pressing industry headaches, enacted and proposed (p. 18). It was an impressively full list. And it already has grown.

Large among the latest reasons to worry is a bill under discussion by the House Committee on Natural Resources called the Federal Lands and Resources Energy Development Act.

According to a draft now making the rounds, the bill would expand the federal-lands bureaucracy and raise payments by leaseholders.

It would create one bureau to handle leasing, inspections, and auditing of all energy activity on all federal land. It also would add planning steps, including a system of regional councils for energy development on the Outer Continental Shelf.

In other words, the bill would multiply opportunities for drilling opponents to block activity.

Among onshore reforms, the bill would eliminate noncompetitive leasing, cut initial lease terms by half to 5 years, and require regulations to ensure "diligent development." It would raise the minimum royalty to 18.75% from 12.5%, the minimum bonus bid to at least $2.50/acre from $2/acre, and rental rates to at least $3/acre from $2.50/acre. It also would call for "best management practices" rules to "ensure sound, efficient, and environmentally responsible energy development."

Offshore reforms include a no-discharge requirement for new leases and repeal of deepwater royalty relief.

For all leases, the bill would impose a $4/acre fee for nonproducing leases in their 4th and 5th years, rising to $10/acre in 6th years and beyond.

This combination represents the second-most effective way imaginable to foreclose oil and gas production from federal land.

The best way to choke energy supply, of course, is to issue no oil and gas leases at all.

At that, the US already has become painfully adept.

(Online May 29, 2009; author's e-mail: bobt@ogjonline.com)


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