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June 30, 2008

WSJ: Obama, Democrats Lying About "Nonproducing" Oil Leases

Caught between public anger over $4.00+ per gallon gas and their anti-oil base which cannot countenance additional drilling of any kind, Democrats have trotted out an extremely stupid talking point -- make oil companies drill where they currently hold leases before allowing any additional exploration. If they can sell this stupidity, they can claim they are in fact for additional oil production -- they're the ones trying to pressure the oil companies to stop "stockpiling" oil-rich lands -- while holding the line on additional wells, thus appeasing their base.

No Republican would be permitted such a convenient absurdity; the MSM would demolish it. But the rules are always different for Democrats, and the media is determined to help sell this lie.

Except for a few conservative-titling outfits, such as the WSJ.

Oil companies take leases not because they know there's oil on the land (or under the sea), but because they think there might be oil and need the lease in order to explore that possibility and to secure the legal right to pump it if they do find it. It's simply ridiculous to assume, as the Democrats' talking points do, that each and every lease actually contains a huge amount of recoverable oil, and the oil companies are simply refusing to drill there. Instead, the claim goes, the oil companies are clamoring for the right to grab up additional leases... which then, of course, they will also leave untouched.

Why are oil companies securing leases for oil they know is there but have no intention of drilling? If their goal is to not drill, why bother with the expense of a lease at all? They're all in on it together, in this conspiracy theory, so they can all just agree to not drill at all. They hardly need to pay the government money for the right not to drill.

This is all so ridiculous that the entirety of the MSM should have called this dishonest spin for what it is. But they didn't, of course, and so the WSJ is left to explain the obvious:

To deflect the GOP effort to relax the offshore-drilling ban and thus boost supply while demand will remain strong Democrats also say that most of the current leases are "nonproducing." The idea comes from a "special report" prepared by the Democratic staff of the House Resources Committee, chaired by Mr. Rahall. "If we extrapolate from today's production rates on federal lands and waters," the authors write, the oil companies could "nearly double total U.S. oil production" (their emphasis).

In other words, these whiz kids assume that every acre of every lease holds the same amount of oil and gas.

In other words, they're assuming that that the currently-nonproducing leases can produce the same amount of oil as the producing ones. And yet the productive wells were not chosen at random, were they? They were explored because they were the most likely to have oil, and then they were drilled because the exploration proved they had oil.

This is like assuming that because your wife agreed to marry you when you asked her to, you can randomly walk down the street proposing to strangers and enjoy the same 100% success rate.

Yet the existence of a lease does not guarantee that the geology holds recoverable resources. Brian Kennedy of the Institute for Energy Research quips that, using the same extrapolation, the 9.4 billion acres of the currently nonproducing moon should yield 654 million barrels of oil per day.

Nonetheless, the House still went through with a gesture called the "use it or lose it" bill, which passed on Thursday 223-195. It would be pointless even if it had a chance of becoming law. Oil companies acquire leases in the expectation that some of them contain sufficient oil and gas to cover the total costs. Yet it takes years to move through federal permitting, exploration and development. The U.S. Minerals Management Service notes that only one of three wells results in a discovery of oil that can be recovered economically. In deeper water, it's one of five. All this involves huge risks, capital investment and time.

It also involves guessing at where one's resources are best used. If ExxonMobile has, say, thirty leases, and the money and equipment and manpower to only explore on, say, five areas at a time, they're obviously going to go after the most likely sites first, and the least likely areas will remain "nonproducing" in the interim.

But even the most likely sites are in fact highly unlikely to produce recoverable oil. It's a numbers game. Oil can be found -- but they need to be able to look in a lot of places.

...

Yet companies are not allowed to explore where the biggest prospects for oil and gas may exist especially on the Outer Continental Shelf. Seven of the top 20 U.S. oil fields are now located in analogous deepwater areas (greater than 1,000 feet) in the Gulf of Mexico. In 2006, Chevron discovered what is likely to be the largest American oil find since Prudhoe, drilled in 7,000 feet of water and more than 20,000 feet under the sea floor. The Wilcox formation may have an upper end of 15 billion barrels of recoverable oil and should begin producing by 2014 perhaps ushering in a new ultradeepwater frontier.

But by all means let's try to force companies to drill where they have little hope of finding oil.

Via Hot Air, which also makes this point:

Demanding drilling first on all extant leases is an absurd position to take when they dont have any indication of accessible oil from the preliminary studies. It amounts to drilling dry holes at a cost of tens of millions of dollars each just to demonstrate the futility. Who do you think will pay that cost? Hint: it wont be Barack Obama or Congress, but the people who drive up to the pumps every day.

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posted by Ace at 02:17 PM

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