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Offshore Drilling: Fact Vs. Fiction

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Old June 21st, 2008, 02:00 AM   Digg it!   #1 (permalink)
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Offshore Drilling: Fact Vs. Fiction

A recently released Congressional report produced by the House's Natural Resources Committee, found the following:
  • Between 1999 and 2007, the number of drilling permits issued for development of public lands increased by more than 361 percent.
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In other words, more drilling does not mean lower gas prices. But if you still believe – as the President apparently does – that high gas prices are a simple matter of supply and demand (and not the result of oil company greed or price manipulation from speculators), then there are already vast tracts of land, leased and ready for drilling, that the oil companies are just sitting on.

According to the Congressional report:
  • Onshore, there are 47.5 million acres of federal land leased by oil and gas companies, and yet those companies are only drilling on 13 million acres (34.5 million acres unused)
  • Offshore, there are 44 million acres of land leased by oil and gas companies, but they are only drilling on 10.5 million acres (33.5 million acres unused)
  • Which means, right now, without having to drill in the Arctic National Wildlife Refuge or off the coast of Florida, there are 68 million acres of federal land – both on and off shore – that are ready for drilling but are sitting idle.
  • According to the Bureau of Land Management, since 2004, oil and gas companies have received 28,776 permits to drill on public land, but only 18,954 have actually been used. Which means the oil and gas companies have stockpiled nearly 10,000 permits.
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If the oil companies actually went ahead and drilled on all of the land currently available to them, it would generate an additional 4.8 million barrels of oil a day, which would nearly double the amount of oil produced within the United States.

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Originally Posted by John McCain
"As for offshore drilling, it's safe enough these days that not even Hurricanes Katrina and Rita could cause significant spillage from the battered rigs off the coasts of New Orleans and Houston,"

Here again are the facts:
  • According to the federal agency that regulates offshore drilling, the Minerals Management Service (MMS), hurricanes Rita and Katrina destroyed 113 oil platforms and damaged 457 pipelines.
  • The MMS reported that the 2005 hurricanes caused 124 spills resulting in 741,000 gallons of petroleum from offshore rigs, platforms, and pipelines being dumped into the Gulf of Mexico.
  • Last year, 3 million gallons of fuel oil were spilled into the Gulf after a double-hulled tanker hit a submerged oil platform that collapsed during Hurricane Rita.
Also, the rigs themselves are an environmental hazard. The Sierra Club,
compiling information from various federal agencies, notes that:
  • Routine offshore drilling operations dump thousands of pounds of "drilling muds" (containing heavy metals like cadmium, chromium, arsenic, and lead) into the Gulf of Mexico. The routine pollution can cause severe disruption to marine environments and health and reproductive problems for marine mammals and fish species.
  • A single exploratory well dumps approximately 25,000 tons of toxic metals into the ocean.
  • A single production platform can have between 50-100 wells and can discharge 90,000 metric tons of drilling fluids, wastes, and metal cuttings into the ocean.
  • Offshore drilling releases "toxic brines" that are pockets of water that are trapped in the geologic pockets where gas and oil occur. This toxic brine contains NORMS (naturally occurring radioactive materials), cadmium, lead, and benzene. The petroleum industry admits that up to 1.5 million barrels of toxic brine are discharged into the Gulf every day.
http://cbs4.com/defedecolumn/offshore.drilling.fact.2.752174.html
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Old June 21st, 2008, 03:01 AM     #2 (permalink)
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The Truth About Leasing on the Outer Continental Shelf
Capitol Hill’s opponents of domestic energy production took to the stage yesterday to decry “Big Oil” again, not for its profits, but for “stockpiling” energy leases instead of producing them. In reality, it’s the government that is stockpiling leases.

This group of politicians stated that oil companies hold the rights to millions of acres of federal leases that are not currently producing energy. This is certainly true, but not because of the sinister reasons they would have you believe. The following may help provide the insights these Members of Congress neglect to provide.

The Claim: “Increased domestic drilling activity has not led to lower gasoline costs”

This may sound compelling at first, but “drilling activity” has nothing to do with the price at the pump. Supply - or actual energy production - is what influences the price at the pump. While it’s true that exploratory and development drilling has increased across the board since 2000, the important fact is that actual domestic energy production has fallen to levels not seen since 1947 during the same period.

The Claim: “Energy companies are not using federal lands already open to energy development”

Some lawmakers state that oil companies currently hold millions of acres of leases that are not producing. This is true, but not for the reasons politicians would have you believe. It seems the lawmakers would have us believe that oil and gas exist beneath every acre of every lease the government issues; that obtaining a lease was a virtual guarantee that the lease holder would strike oil and gas, or both. Obviously, that’s false. If it were true, who wouldn’t be on line at the Department of Interior trying to buy an acre or two for themselves?

Unfortunately, there are no guarantees. Oil and gas might be found during the exploration phase of the lease, or it might not. This process, and those that involve satisfying all of the government requirements, defending against frivolous environmental lawsuits, and preparing to drill if energy is found can take a long as a decade.

The Truth & The Laws

Energy companies cannot “stockpile” leases (even the ones that are found to contain no oil or gas) in order to drive up prices:

The Mineral Leasing Act (for onshore production): Section 17(e) stipulates that an oil company must have a producing well within 10 years or surrender the leases. Source: 30 U.S.C. 226(e)
The Outer Continental Shelf Lands Act: (for offshore production): Stipulates that an oil company must produce energy between 5 to 10 years (in the government’s discretion) or surrender the lease. Source: 43 U.S.C. 1337(b)
The Hard Facts:

97 percent of Federal offshore areas are not leased.
94 percent of Federal onshore areas are not leased.
Getting Blood From a Turnip

After the offshore drilling moratorium was implemented in 1982 the Department of Interior could only issue leases for areas that had already been offered/leased before, or those areas with little or no economic energy potential. The exception was when Congress provided incentives to invest in Ultra Deep Waters in 1995 to stimulate production in areas that were previously too deep for our technology to reach.

As the charts to the right illustrate, interest in American energy leasing declined after the moratorium. It remains low for the same reasons. If Congress were to open new areas to production, leasing would increase and so would domestic supplies of energy. Until then, the U.S. will simply be continuing its attempt to squeeze blood from a turnip.
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Old June 29th, 2008, 10:52 AM     #3 (permalink)
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This is actually from the mms site. maybe one person will go straight to the horse's mouth and verify this article which is apparantly straight from the horses ass.

Estimated Oil Spills As a Result of Hurricanes Katrina and Rita ~ Setting the Record Straight.

notice it says 20 spills. all very minor and less than natural seepage. not my opinion that is in the article. please read the article and not this sites or my opinion.
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Old June 29th, 2008, 11:38 AM     #4 (permalink)
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I think the general premise is that prices are rising because of supply shortages and therefore we must drill at a greater rate. If that were true, there would be gas stations running out of gasoline and cars would be forming lines around those stations that had gas. I don't see that happening. The data suggests that oil coming out of the ground is matching demand for oil products.

Sure, if oil companies drilled more than could be fed to the market, prices would fall but why would oil producers oversupply? It's in the producer's interest to match demand and no more. Thus, the reason producers aren't drilling in all these other places is that they don't have to.
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Old June 29th, 2008, 12:08 PM     #5 (permalink)
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If that were true, there would be gas stations running out of gasoline and cars would be forming lines around those stations that had gas. I don't see that happening.

It's being rationed by price.

BTW, some of the gas stations near me are running out once in awhile. Not all the time, just every now and then.
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Old June 29th, 2008, 12:23 PM     #6 (permalink)
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It's being rationed by price.

Demand is only down 5%. Are you suggesting that 5% causes a 2.5 times increase in price?
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Old June 29th, 2008, 12:33 PM     #7 (permalink)
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Originally Posted by MTAtech View Post
Are you suggesting that 5% causes a 2.5 times increase in price?

Other way around. As you probably know, gas is a pretty inelastic commodity, so demand won't decrease at the same rate price increases.
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Old June 29th, 2008, 12:37 PM     #8 (permalink)
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Originally Posted by MTAtech View Post
Demand is only down 5%. Are you suggesting that 5% causes a 2.5 times increase in price?

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Old June 29th, 2008, 04:37 PM     #9 (permalink)
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There's rumblings of an announcement from Iraq next week. We'll see:

"Several major oil companies are expected to announce next week contracts to start servicing the Iraqi oil infrastructure."
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Old June 29th, 2008, 05:20 PM     #10 (permalink)
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There's rumblings of an announcement from Iraq next week. We'll see:

"Several major oil companies are expected to announce next week contracts to start servicing the Iraqi oil infrastructure."

Isn't 'servicing' another word for screwing? They've been doing the latter since the invasion.
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