Monday, June 30, 2008

WSJ: Some Remedial Education on Idle Leases

"I want you to think about this," Barack Obama said in Las Vegas last week. "The oil companies have already been given 68 million acres of federal land, both onshore and offshore, to drill. They're allowed to drill it, and yet they haven't touched it – 68 million acres that have the potential to nearly double America's total oil production."

Wow, how come the oil companies didn't think of that?

(MP: Especially now that oil is $142 per barrel!)

Perhaps because the notion is obviously false – at least to anyone who knows how oil and gas exploration actually works.

As a public service, the WSJ provides some remedial education about "idle leases."


At 6/30/2008 9:11 AM, Blogger Marko said...

But how it actually works has nothing to do with the power of rhetoric. If how things really work were the guiding factor, Dems would never get elected to anything!

It seems like the debates lately have been govererned by Marko's Rule of Complexity: The side that is forced to give the more complex argument looses the public argument.

The ability to turn a complex argument into a simple one is priceless. that is why Reagan was so succesful with the American public, and Clinton too. Bush is very very bad at it, Kerry may have been worse, and Obama may well win because he is good at it. McCain needs to brush up on the simple attack.

Obama has done a good job turning the Lease argument, which is pretty complex, into a simple argument (oil companies could drill more, but they don't to drive up the price). This is a pretty simple answer to the very simple "drill more" argument. If McCain doesn't come up with a simple effective answer, he could lose the argument.

At 6/30/2008 12:25 PM, Anonymous Anonymous said...

Bakken is open for business, its just expensive. ND says 'come and get it.' As for the deepwater gulf, much of that is allowed for drilling, west of Alabama and north of Mexico.

At 6/30/2008 12:44 PM, Anonymous Anonymous said...

Since oil companies are obviously evil, spreading lies about them is ok.

At 6/30/2008 2:45 PM, Anonymous Anonymous said...

I must say, as someone who has both training in economics and has spent my career in the oil & gas business, this is a truly horrifying comment.

The horrifying part is not so much the astonishing level of both economc and industry ignorance required to makes such a comment, but the realization that the people who mean to rule us don't even bother to ask someone who might actually have some knowledge about the subject before they make such comments.

Or that they just don't care.

There are roughly 10,000 oil & gas producers in the US and Canada. An idea that there is a conspiracy among them not to drill is insane on its face.

If that's not enough, how about some more facts?

There are 3000 rigs working in the world today.

2000 of them are at work in the US and Canada. 1900 in the US.

By comparison, there are 278 rigs working in the entire Middle East.

There are 60 in Africa, and 100 in all of Europe.

This is not because the prospects are better in the US and Canada, but because there is private access to reserves in the US and Canada.

At 6/30/2008 3:10 PM, Blogger juandos said...

"I must say, as someone who has both training in economics and has spent my career in the oil & gas business, this is a truly horrifying comment...

Which statement in particular diz?

BTW thanks for that link...

At 6/30/2008 5:02 PM, Anonymous Anonymous said...

Obama's comment.

He didn't invent it, because I had already heard it a couple times before. I believe it came from Barbara Boxer.

Barbara Boxer has lost the ability to horrify me, but a guy who is the favorite to be President saying this is pretty scary.

As an aside, it wasn't so long ago that I would have said the government was mostly reasonable in terms of energy policy. The Clinton Administration did a pretty good job of actually trying to figure out what was right and do it. There were a few high profile exceptions like ANWR, but for the most part energy policy was not of enough interest to be politicized, and was mostly left to technocrats who had a good understanding of energy markets.

Then, in just a few years we had the California Energy Crisis, Enron, Bush the oil man in the Whitehouse, Cheney task force, Halliburton/Iraq, $100 oil, Global Warming, etc.

So, now energy is highly politicized.

At 6/30/2008 5:20 PM, Blogger juandos said...

diz replies: "Obama's comment"...

Hmmm, I thought that is what you meant...

Regarding this previous comment by you: "someone who has both training in economics and has spent my career in the oil & gas business"...

I keep hearing from Dems (and some R.I.N.O.s) that if we started pumping crude from the Gulf coast area it would take 10 years for that to make it into the system...

I'm thinking, 'baloney!'...

Am I being excessively optimistic when I think it could be done in five year or less?

At 7/01/2008 8:52 AM, Blogger Unknown said...

So this begs the question:

(1) Are Obama and the Democrats outright lying to us to push their agenda or

(2) Are they woefully misinformed?

If (1), then they are no better than Bush if they believed Bush lied (wrt to Iraq) to achieve his agenda

If (2), then they are irresponsible and should not be entrusted with governing this country if they can’t d0 the necessary leg work to understand the facts and issues before deciding upon policy.

Either way, we no longer have a democracy or representative republic. Government is now shamelessy based on purely ideological grounds and everything and everyone else be damned.

Yes sir Senator, 'change we can believe in'.

At 7/01/2008 9:15 AM, Anonymous Anonymous said...

Am I being excessively optimistic when I think it could be done in five year or less?

I typed a fairly long response to this but it somehow got lost to some sort of error.

Anyway, teh short version of the answer is: It depends.

Where there is sufficient will and government support the actual comstruction of the necessary infrastructure should be doable within a year.

When German U-boats started sinking our oil tankers in WWII, we built the Big Inch pipeline from Texas to New Jersey in about a year using 1942 technology. And laying pipe offshore is generally easier than onshore.

What you can't guess at is how much will there will be or how much the government processes will slow you down. There would not be much will to build a mega project infrastructure project until a fairly large amount of oil were discovered and proved up. How long that would take depends on what exactly it is people find out there.

In the mature areas of the Gulf of Mexico, there is generally seismic available from spec shoots before they even lease the acreage. The typical cycle goes something like this: Before a lease sale they buy the seismic spec shoot, they see a prospect available in the lease sale, they lease the acreage block, qualify the prospect and get the exploration capital approved, contract a rig, drills the well, (if successful) create a development plan and get development capital approved (in mature areas this generally involves laying pipe to the nearest major trunkline that will get them onshore into the Gulf Coast refining complex), and then developing and producing the field. Because of all the existing infrastructure offshore TX and LA, you can probably complete this whole cycle in a matter of months to a year for even relatively small discoveries.

Anyway, I would steer away from that whole line of argument anyway. "It takes a long time" is not a valid reason not to get the oil. Actually, I dispute the entire notion that we want to get oil "to make the price go down" as well.

The reason to get the oil is that it is a valuable resource that (once produced) can be used to meet human needs. In the ground it is worth nothing to society.

At 7/01/2008 1:49 PM, Blogger juandos said...

Good stuff diz!

Thanks and those last two paragraphs show the real wisdom of what you offer...

Much appreciated...

Gosh bob I think you're a bit pessimistic: "Either way, we no longer have a democracy or representative republic. Government is now shamelessy based on purely ideological grounds and everything and everyone else be damned"...

Then again I'm at the very least as pessimistic as you are...

I mean when you have elected leaders saying stuff like the following: Coal Makes Us Sick, how else can one feel?

Also consider Charles Krauthammer's Obama's flip-flops will make even Clintons look scrupulous


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