Friday, March 11, 2011

Obama Blames Oil Companies For Lack Of Drilling... 'FACTS DON'T SUPPORT' ADMIN'S CLAIMS ON DRILLING...

Obama Blames Oil Companies For Lack Of Drilling

By Sean Higgins

In his Friday press conference to discuss gas prices, President Obama was rather defensive, straining to counter the notion that his administration has been unfriendly to oil drilling, something most people would like to see a lot more of these days.

Where do people get that notion? Perhaps his Interior Department appealing a judge’s ruling that it act on several pending deepwater permits had something to with it.

Obama claimed repeatedly that he is not against drilling, then made the following comments:

There is more we can do, however. For example, right now, the (oil) industry holds leases on tens of millions of acres — both offshore and on land — where they aren’t producing a thing. So I’ve directed the Interior Department to determine just how many of these leases are going undeveloped and report back to me within two weeks so that we can encourage companies to develop the leases they hold and produce American energy. People deserve to know that the energy they depend on is being developed in a timely manner.

In other words, Obama is arguing that the oil companies themselves may be to blame for the fact that there isn’t more drilling. For some reason they’re ignoring making a profit. It’s a bizarro-world inversion of the usual complaint against oil companies — that they are reckless and all-too eager to despoil pristine lands in search of black gold.

Nevertheless, it is a familiar talking point that Democrats have been throwing out there for years now.  The Interior report Obama mentioned will probably come in the coming weeks or months and “prove” this point. Obama clearly hopes it will take the pressure off of his administration for high gas prices and throw it on the oil companies.

But is any of this true? Technically yes, says the oil industry, but the claim is extremely misleading. As Richard Ranger, a policy analyst with the American Petroleum Institute, has explained:

“The process of looking at an area that might have oil and gas potential and narrowing your search over time and over a sequence of steps to actually producing oil and gas involves kind of casting a big net first and over time through geologic work,” Ranger said. “[Y] You prioritize some over others, you may be lucky on those first ones you drill, you may not — then you drill prospects further down your priority list.”

Ranger also explained it’s not always a cut-and-dried situation. Some areas will have oil and gas, some won’t and some might have it, but it may not be economically feasible to pump it out of the ground.

“When you drill, you have results that are either sufficient oil or gas to allow production or a dry hole or somewhere in between where you think we may have production but we may need some further work to determine whether this formation, this target, is economic to produce. Those steps consume several years from the point of leasing to a point of decision.”

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Facts Don't Support Claims on Gulf of Mexico Oil Production

By Kyle Isakower

Last week, Interior Secretary Ken Salazar told Congress that oil production in the Gulf of Mexico "remained at an all-time high, and we expect that it will continue as we bring new production online."  He claimed: "In 2009 there were 116 rigs in the Gulf of Mexico, in 2010 in February, 120, in February 2011, 126."

But Salazar's numbers distort the true number of working rigs in the Gulf of Mexico. According to Baker Hughes:

  • Four days before the Deepwater Horizon accident there were 55 rotary rigs actually drilling offshore in the Gulf of Mexico.
  • On May 28, 2010, when the administration announced the six-month moratorium on deepwater drilling, there were 46 rotary rigs operating in the Gulf. 
  • Last week, 25 rotary rigs were operating in the Gulf of Mexico.
So the fact that there is an "all-time high" number of rigs in the Gulf ignores the fact that most of those rigs are not working.  Claiming an increase in idle rigs in the Gulf as a success story is like claiming the job market is great because a lot of people are unemployed and available to work.

In the same hearing, the Secretary also claimed that "the production has remained at an all-time high" within the Gulf of Mexico and there is no way to actually make this true.  The Energy Department's Energy Information Administration reports that production in the Gulf of Mexico is in decline, forecasting a decline of 250,000 barrels a day from Gulf production, due partly to the moratorium and restricted permitting.  While the annual production figure for 2010 was greater than 2009, EIA's month-by-month production figures show a peak in May of 2010, and a relatively steady decline since. And EIA Petroleum Engineer Gary Long told trade publication E&E News that the rig count in the Gulf was cut in half after the Deepwater Horizon accident and that it wouldn't rebound to previous levels until the end of 2011 under the assumption that the permitting process is restored to historical rates. Further, since there is a lag time from the time an exploration permit is approved to the time of actual production, and since no only a handful of permits for new wells have been granted since April of 2010, it is likely that Gulf of Mexico production will continue to be hit hard in 2012 and beyond.

We appreciate that, when it comes to selling the administration's energy policy, Secretary Salazar is in a tough position.  Fortunately we are here to help, help provide the abundant and affordable energy that our economy needs, and help create the jobs our workers want.  As API President Jack Gerard said recently:

"Our industry remains committed to working with government to meet our current and future challenges, but we need Congress and the administration on board. Let's stop talking and let's get back to work."

Update: Ex-President Bill Clinton calls offshore drilling permit delays "ridiculous".


Former President Bill Clinton said Friday that delays in offshore oil and gas drilling permits are “ridiculous” at a time when the economy is still rebuilding, according to attendees at the IHS CERAWeek conference.

Clinton spoke on a panel with former President George W. Bush that was closed to the media. Video of their moderated talk with IHS CERA Chairman Daniel Yergin was also prohibited.

But according to multiple people in the room, Clinton, surprisingly, agreed with Bush on many oil and gas issues, including criticism of delays in permitting offshore since last year’s Gulf of Mexico spill.

“Bush said all the things you’d expect him to say” on oil and gas issues, said Jim Noe, senior vice president at Hercules Offshore and executive director of the pro-drilling Shallow Water Energy Security Coalition. But Clinton added, “You’d be surprised to know that I agree with all that,” according to Noe and others in the room.

Clinton said there are “ridiculous delays in permitting when our economy doesn’t need it,” according to Noe and others.

“That was the most surprising thing they said,” Noe said.

The two former presidents both generally agreed on the need to get offshore drilling workers back on the job.

Clinton and Bush also agreed on the need for more domestic shale gas production, with Clinton noting that it has been done safely for years in his home state of Arkansas.

Bush — who referred to oil and gas in the discussion as “hydrocarbons” — described the anti-hydrocarbon sentiment in Washington as “dangerous.” He said while there is a need to develop new energy technologies, “we have to be prosperous in order to afford those technologies and, in order to be prosperous, we need to drill,” according to Noe.

Clinton was more cautious about expanding nuclear energy production, noting that can take a long time and is expensive. He also praised Bush for expanding wind energy in Texas as governor.

Energy only came up among the last couple of questions from the audience, with the discussion dominated by talk of the geopolitics of the Middle East and anecdotes and memories.

Clinton also said he was supportive of enacting a no-fly zone in Libya at a time when the Obama administration and other experts in the region are urging caution, according to witnesses.

The panel with the two presidents closed out the weeklong IHS CERA, which included more than 2,200 Obama administration officials, industry executives, former diplomats and others. The Clinton-Bush event was the only one at the conference that was closed off to the media, at the request of the former presidents.

Friday, President Barack Obama pushed back against Republican critics who blame his administration's policies for high gas prices.

Obama said that domestic oil refiners aren't seeing a supply shortage — they're operating at near-full capacity. Instead, he said the recent price increases come from global market unease and economic recovery in fast-growing China, India and Brazil.