The People of America's Oil and Natural Gas Indusry

Energy Today - March 18, 2011

Rayola Dougher

Rayola Dougher
Posted March 18, 2011

Times-Picayune: More Deepwater Drilling Permits Expected Soon, Obama Administration Official Says: In "a very few days there will be several additional permits" issued for deepwater drilling in the Gulf of Mexico with a surge of new applications to follow, the top federal regulator of offshore drilling said Thursday. Appearing at a hearing on his agency's 2012 budget, Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement, told a House Appropriations panel that for the first time since the oil spill, there are now more than 10 permits pending. ExxonMobil Perspectives: Let's Lose the "Use It or Lose It" Rhetoric: Oil and gas companies have every motivation to develop leases because of the large up-front investments they require. Here's how it works: First, companies pay a bonus bid - which can total millions of dollars - to the federal government to acquire a lease, which can last anywhere from five to 10 years. On top of that, we then make annual rent payments to the government to maintain the leases. And, it's not like your apartment complex when you get your deposit back after you move out - if we don't find oil or gas, we've lost that money. After acquiring leases, we invest many millions more on seismic surveys, environmental studies, technology development and exploratory drilling to find the oil and gas, if we have reason to believe it exists. For example, one deepwater exploration well in the Gulf of Mexico can cost in excess of $125 million to complete. That's a huge investment, especially when the chances of not finding oil or gas in an individual well are greater than the chances that we do find oil and gas. So, the only way to recoup the millions spent would be to produce oil or gas. In a highly competitive industry like ours, letting potentially productive leases lay idle would make no economic sense.

Energy In Depth: March Madness: Small Group in Congress Renews Efforts That Could Cost Jobs, Undercut American Energy Security: A quick look around the U.S. at the overwhelmingly positive impacts that hydraulic fracturing - which is tightly and aggressively regulated by energy-producing states - continues to have, all of which would be jeopardized if the FRAC Act were to become law: MT Gov. Brian Schweitzer, Western Governors Association chair, and fmr. Democratic Governors Association chair: "We're increasing in Montana by thousands of jobs in drilling in what's called the Bakken (Shale Formation) in eastern Montana," the state's Governor Brian Schweitzer told Fox News. "It is the richest geologic structure in all of the United States. Recent estimates are that there's about 25 billion barrels of recoverable oil in the Bakken in North Dakota and Montana. To put that in perspective we import about 4 billion barrels a year. We use about 6 billon barrels a year. So this one structure in North Dakota and Montana could be one of the keys to energy independence in the short term."

The Foundry: Drilling Delays Inspire New Proposal to Reform Permitting Process: Two Republican lawmakers have developed a plan they hope will put pressure on the Obama administration to speed up the permitting process for offshore drilling in the Gulf of Mexico. Reps. Bill Flores (R-TX) and Jeff Landry (R-LA) introduced legislation to codify timeliness of permitting process by establishing stringent deadlines and clear requirements on drilling applications. Leaseholders would even be able to request a refund on their bonus bid if the Department of Interior rejects and application. The goal is to finally end the de facto drilling moratorium, which was the subject of Wednesday's hearing of the House Natural Resources Committee.

ABOUT THE AUTHOR

Rayola Dougher is senior economist at The American Petroleum Institute (API), where she analyzes information, manages projects and develops briefing materials on energy markets and oil industry policy issues. She is the author or co-author of economic research studies covering a diverse range of topics including crude oil and petroleum product markets, gasoline taxes, energy conservation and competition in retail markets. In addition to testifying before federal and state legislators, she has participated in numerous newspaper, radio and television interviews on a wide range of issues affecting the oil industry, including crude oil and gasoline prices, industry taxes and earnings, exploration and production, and refining and marketing topics.

Prior to joining API, Rayola worked at the Institute for Energy Analysis where her research focused on carbon dioxide related issues and international energy demand and supply forecasts. Rayola holds a Masters degree in Economic Development and East Asian studies from the American University and a degree in History and Political Science from the State University of New York at Brockport.