Jane Van Ryan
Posted November 16, 2009
Late last week, the Minerals Management Service (MMS) announced that they will shorten lease sale terms on nearly 36 million acres in the Gulf of Mexico off the coasts of Louisiana, Mississippi and Alabama.
The proposed plan would set five-year terms for leases in water depths of 1,300 to 2,600 feet, instead of the standard eight-year term. Leases in water depths between 2,600 and 5,200 feet would run for seven years instead of 10.
This new plan comes as some in Congress have criticized the oil and natural gas industry for retaining so-called "idle leases," and pushed for development requirements commonly referred to as "use-it-or-lose-it" provisions.
API President and CEO Jack Gerard responded in a statement on Friday saying:
"The shortening of lease terms does nothing to guarantee more discoveries but rather takes away from companies the flexibility necessary to operate in an extremely challenging and risky environment."
Oil and natural gas companies put a lot of time, money and effort exploring leased areas in the hopes of finding oil and natural gas, and it's not a risk-free proposition--but an absolutely essential part of the business. There is nothing "idle" about it.
It is not unusual for companies to invest $100s of millions to evaluate leases. And if the company does not develop the lease within a certain period of time, it must return it to the federal government, forfeiting all its costs.
MMS' recent action is one more impediment to the development of the domestic oil and natural gas necessary for the American economy to prosper.
For more information, read these facts about non-producing leases and take a look at the Offshore Leasing Timeline. You can also visit the Action Center to encourage Congress and MMS to put America's energy to work for Americans.
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