Nowhere in the administration of US President Barack Obama has action conflicted with narrative more than it has with offshore oil and gas leasing. And the narrative keeps changing.
The Obama team took office complaining that its predecessor was leasing the Outer Continental Shelf too fast. Ken Salazar, then secretary of the interior, in February 2009 called the 5-year oil and gas leasing plan his department inherited "a headlong rush of the worst kind" and suspended leasing for 6 months. This was to allow time for study, as though the Interior Department had not learned anything in 55 years of OCS leasing.
Not so headlong
Bureau of Ocean Energy Management data indicate the rush of the administration of George W. Bush wasn't quite as headlong as Salazar made it sound. In each of its 8 years in office, the Bush administration offered on average 9,844 OCS tracts covering 51.7 million acres for oil and gas leasing. The leasing pace was increasing at the end of the Bush term, to be sure, but the averages weren't out of line with history. The administration of Bill Clinton offered slightly fewer tracts and slightly more acreage on average per year than Bush. The administration of George H.W. Bush offered much more in each category.
In any event, the Obama narrative has changed. Now the administration regularly implies that it's leasing enthusiastically in service to an "all-of-the-above" energy policy. Typical is this boast in documents supporting the president's budget proposal for fiscal 2014: "The current OCS 5-year leasing program will make more than 75% of undiscovered technically recoverable oil and gas resources on the OCS available for development."
Indeed, leasing has quickened lately. Last year, Interior offered 11,307 tracts and 60.1 million acres for lease, more than in any of the three previous years. But of course those earlier years included the study interregnum of 2009 and the activity lull after the Macondo tragedy. So the administration is right if it feels compelled to play catch-up on OCS leasing. But does it?
Its current 5-year schedule, covering OCS auctions into 2017, offers an average 43.8 million acres/year for lease. That's only 1 million acres/year above the circumstantially shrunken lease-offering rate of the administration first's term. And it's 20% below the average rate over the 20 years before Obama took office.
Furthermore, recommendations in the administration's fiscal 2014 budget proposal conflict with the implied goal of expeditious oil and gas leasing. They include the establishment of minimum royalty rates for oil and gas and sliding-scale royalties linked to oil and gas prices. They include a shortening of primary lease terms and the elimination of interest accruals on royalty overpayments by companies. And they include the imposition of a per-acre fee on nonproducing oil and gas leases to encourage what the budget document describes as "diligent development."
The silly produce-or-pay proposal probably makes sense in a bureaucracy that knows no better than to crow about undiscovered resources offered for "development." While the exploration that must happen prior to development might not matter to administration officials, it surely does to the companies that must pay for it all. Budget writers might be able to ignore the time required to acquire permits, shoot seismic surveys, analyze data, secure drilling and other services, and perform myriad other tasks that must happen prior to the start of production. Producers cannot. They have to pay for it.
Devaluing leases
The Obama administration thus has slowed the rate at which the government offers OCS acreage for oil and gas leasing. And it wants to make leases on the acreage it does offer less valuable to the producers that lease it. These are not the elements of an OCS policy favorable to development of oil and gas supplies. They are quite the opposite.
The narrative has changed. But the effort to slow oil and gas development on the OCS, which began early in Obama's first term, has not.
