Surface nonsense refutes Interior on idle leases

May 28, 2012
Some arguments refute themselves with surface nonsense evident to anyone. A glittering example is the recurring argument that operators buy federal oil and gas leases in order to do nothing with them.

Some arguments refute themselves with surface nonsense evident to anyone. A glittering example is the recurring argument that operators buy federal oil and gas leases in order to do nothing with them.

That whopper surfaced again this month around a Department of the Interior report showing two thirds of offshore acreage and half of onshore acreage held under federal leases remains idle.

"We continue to offer new areas onshore and offshore for leasing, as we have over the last 3 years," said Interior Sec. Ken Salazar. "And we also want companies to develop the tens of millions of acres they've already leased but have left sitting idle in order to further reduce our reliance on foreign oil as quickly as possible."

See? Interior has offered plenty of land for lease. Oil companies are dragging their feet. If only they'd get busy, oil and gas production would rise, exports would fall, and Interior might then lease more land.

Anyone who understands how operators manage leaseholds and oil and gas plays knows this scenario is loopy. Others might be fooled.

Yet all that's required to draw sound conclusions from the scenario's economic superficialities is a clear head.

Companies pay bonuses to acquire leases and rent to hold them until production begins. They don't incur costs like for the right to do nothing with the leases.

The existence of undrilled leases testifies not to the indolence of leaseholders but to realities of the business, including but not limited to time spent waiting for permits from Interior agencies. Many leases never get drilled because nearby disappointments condemn them.

Interior is using idle leases—a fact of upstream oil and gas work—as cover for its own failure to lease federal acreage expeditiously.

It wants Americans to believe companies pay billions of dollars every year for rights they intend never to exercise.

Americans are smarter than that. On this and other energy issues, Salazar and the administration he serves should quit treating Americans like fools.

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