US House panel's minority report disputes majority's findings

The US House NRC's minority staff released its own report on Oct. 9 challenging one which the majority staff issued previously that has been the basis of many 2008 Democratic candidates' energy stands.

Nick Snow
Washington Editor

WASHINGTON, DC, Oct. 10 -- The US House Natural Resources Committee's minority staff released its own report on Oct. 9 challenging one which the majority staff issued 6 months ago that has been the basis of many 2008 Democratic candidates' energy stands.

The new report, "Drilling for Truth and Coming Up Empty," highlights major flaws and inaccuracies in the committee majority staff's document which Democrats from House Speaker Nancy Pelosi (Calif.) to presidential nominee Sen. Barack Obama (Ill.) have cited, according to Rep. Don Young (R-Alas.), the NRC's ranking minority member.

The majority's report contained unsupported and undocumented extrapolations regarding oil and gas resources contained in nonproducing federal acreage that has already been leased, he continued. It illustrates a lack of knowledge about the onshore and offshore leasing process, costs to the lessee to acquire acreage, the nature of oil and gas deposits, and the time required to explore and, if a discovery is made, develop the lease, Young said.

"Our analysis pulls together all of the facts about leases issued on federal lands. These findings clearly outline the numerous misrepresentations in the majority's report," he maintained.

The minority staff's report used information from the US Department of Energy, Department of the Interior, Energy Information Administration, Minerals Management Service, Bureau of Land Management, US Geological Survey, and other federal sources, Young said.

Minority's conclusions
Young said the report shows that more domestic drilling yields more domestic resources, that the federal government profits from high oil and gas prices, that drilling for more domestic oil and gas will help lower prices and reduce US dependence on imports, and that only 4% of the total 2.46 billion-acre federal mineral estate is leased for oil and gas exploration and development.

The minority staff's report said that in 2007, committee chairman Nick J. Rahall (D-W.Va.), held hearings "to examine the rapid oil and gas development that has taken place on our nation's land in recent years." These were used to justify legislation increasing the drilling permit application process timeline from 30 to 90 days, repealing provisions in the 2005 Energy Policy Act designed to help regulatory agencies coordinate and facilitate oil and gas projects' permits, and increasing costs for producers to do business with the government and DOI in leasing administration and royalty programs.

When gasoline prices doubled in 2008 and voters began to demand more access to energy resources on federal acreage, the majority blamed "Big Oil" and claimed that the industry was stockpiling drilling permits and leases, the minority staff's report said. It challenged the majority staff report's conclusion that the increased number of drilling permits (from 3,802 in 2005 to 7,561 in 2007) shows that "the federal government has consistently encouraged the development of its oil and gas resources."

In fact, said the new report, onshore acres leased from the early 1990s to the present are less than one-third the total leased during the early 1980s, while offshore acres lease dropped dramatically after Congress began to enact moratoriums in 1982.

It also challenged the majority report's conclusion that opening additional federal acreage to leasing is not justified because producers can't keep pace with the rate of permits that are being issued. The earlier report said that BLM issued 28,776 permits to drill on public land from 2004 through 2007, but only 18,954 wells were actually drilled. "That means that companies have stockpiled nearly 10,000 extra permits to drill that they are not using to increase domestic production," the majority staff's report said.

'No incentive to stockpile'
But the minority staff's study found that before BLM issued revised Onshore Order No. 1 in 2007, federal drilling permits were good for only 1-2 years. Consequently, any issued in 2004 and 2005 which were not utilized have expired and those that were issued in 2006 will expire this year. "Anyone who was unable to use [a drilling permit] before it expired will have to reapply and wait for BLM approval before proceeding with drilling. So the life of [a drilling permit] is limited and oil prices are high; there is no incentive or ability to stockpile [drilling permits]," it said.

Onshore drilling permits which BLM issues now are good for 2-4 years, an amount of time necessary to deal with stipulations limiting when an area can be drilled to accommodate wildlife mating, nesting and migration, the minority staff's report continued.

It also questioned the majority staff's conclusions that only about 13 million of the 47.5 million onshore acres and 10.5 million of the 44 million offshore acres which the oil and gas industry has leased from the federal government are actually producing. "Oil and gas companies would not buy leases to this land without believing oil and gas can be produced there, yet these same companies are not producing oil and gas from those areas already under control," the earlier report said.

The report pointed out that the leasing, exploration, and development process goes through several stages where permits are acquired, financing is obtained, and geophysical and exploratory tests are conducted. "Any one stage can take 6 months to 3-4 years to complete," it indicated. Only one well in 10 is successful in new onshore fields (compared to 9.5 in 10 in developed onshore fields), while the success rate is one in three in offshore shallow leases and one in five in deepwater tracts, the report said.

"Once a field is discovered and is determined to be economic to develop, it has to be put in production by drilling additional wells, completing the wells so they produce oil and/or gas, installing collection facilities, laying pipelines, etc. It may take several years to bring a new field into production," it added.

Sound bites, talking points
Young said that since the majority staff's report was released, no hearings were held to examine legislation which resulted from it. Democrats "appear unwilling to allow their report to be examined and questioned in open hearings by federal agencies and members of Congress," he said, adding, "Instead, the majority has relied on using it only for sound bites and talking points to defend their lack of action on our nation's energy crisis."

Young continued, "The majority's document misleads members of Congress and the American public. Our report and the federal studies provide context for questions and answers raised in the majority's report regarding the federal onshore and offshore oil and gas leasing program, outlines the complexity of the issue and, most importantly, explains why the United States is now dependent on foreign nations for more than 60% of its oil."

Rahall, the committee's chairman, did not respond to the report but issued a separate release noting that the committee has conducted more aggressive oversight of federally controlled natural resources and the agencies that manage them since he became chairman in early 2007.

Contact Nick Snow at nicks@pennwell.com.

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