Nick Snow
Washington editor
Like the proverbial bad penny, so-called "use it or lose it" legislation is back. US Sens. Robert Menendez (D-NJ) and Bill Nelson (D-Fla.) said on Mar. 16 they would introduce a bill requiring oil and gas producers to report on how they plan to explore and develop millions of already-leased federal acres, or pay an extra $4/acre yearly for land or water that wasn't used.
The idea never fully went away. Charging a fee for nonproducing federal onshore and offshore leases to encourage timelier production also is part of the Obama administrations proposed fiscal 2012 budget for the US Department of the Interior. US President Barack Obama referred to it during his Mar. 11 press conference.
Some Democrats on the US House Natural Resources Committee also mentioned it during hearings examining economic impacts of offshore permitting delays under new regulations imposed following the Macondo well accident and oil spill.
They and others who oppose more leasing say that less than 25% of the onshore and offshore public acreage already leased is actually producing. Producers supposedly are sitting on the rest to book more reserves, inflate their stock prices, or stymie competitors, they allege.
Menendez and Nelson said their measure would apply only to new leases, and would raise an estimated $874 million over 10 years. "Government will begin holding oil companies accountable, not holding their hands," Menendez declared.
Policies and delays
Producers still consider the idea ridiculous. "First off, about half of the nonproducing acreage results from [DOI's] own redundant regulations and bureaucratic delays," Kathleen Sgamma, government and public affairs director at the Western Energy Alliance, said on Mar. 17. "While companies are in the long process of satisfying all the requirements necessary to begin production, new federal policies and deliberate bureaucratic delays are preventing American production in the West."
The Denver-based producers association estimates that about 33% of existing onshore federal leases won't be developed because they don't have recoverable resources, she indicated.
The alliance released a list of the top 10 ways it believes the federal government actually is preventing more onshore oil and gas production. They include delays in issuing leases, drilling permits, and project approvals; regulatory overreach by the US Environmental Protection Agency; and confusion created by US Interior Sec. Ken Salazar's recent wild lands policy announcement.
"Companies are doing all they can to develop federal energy resources, but a lease is not a green light to produce," Sgamma said. "It's the first step in a long, expensive process that is fraught with bureaucratic red tape and lawsuits by environmental groups determined to stop domestic energy development."
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