Who’s Hoarding America’s Oil?

(Compiler's note: Must read. rca)

Opponents of domestic energy production constantly say that America “uses 25% of the world’s oil, but only has 3% of the world’s oil reserves.” This talking point is misleading, at best, and its trumpeters get away with it because the federal government has made it illegal to explore for and expand our reserves.

We will never increase our oil reserves if we can never look. A huge amount of acres are owned by the federal government off our shores and onshore, principally in the western states, but instead of addressing that problem and helping to bring down energy prices, politicians have been making up stories and trying to fool Americans with wild allegations. The truth is, over 96% of the lands that belong to the taxpayer haven’t even been leased by the government so that energy exploration might occur. Consumers are paying for this failure at the pump and in utility bills. Some are even paying for it with their jobs.

But instead of opening new areas to energy exploration and production, some in Congress have taken to diversionary tactics. Take, for example, the mysterious “68 million acres” myth. As the story goes, 68 million acres have been leased to energy companies by the government but are allegedly not producing oil or natural gas to help bring down energy prices. This is a legend that originated in a recent report entitled “The Truth About America’s Energy: Big Oil Stockpiles Supplies and Pockets Profits,” which was prepared by the staff of the Committee on Natural Resources in the U.S. House of Representatives with this caveat: “This report has not been officially adopted by the Committee on Natural Resources and may not therefore necessarily reflect the views of its Members.”

The unofficial staff report correctly states that the government has leased 47.5 million acres of onshore lands and 44 million acres of offshore (Outer Continental Shelf or “OCS” lands) to oil companies. That’s a total of 91.5 million acres under lease. Of that, however, only 13 million onshore acres and 10.5 million acres offshore are currently producing energy. That’s 23.5 million acres, currently producing a total of 1.6 million barrels of oil per day. By simple subtraction then, the staff is able to conclude that conclude 68 million acres under lease are not currently producing. All true. No arguments.

From here, however, the staff report jumps from simple arithmetic to quantum fibbing. Because companies are currently producing energy on just 25.6% of the government lands leased to them, the staff concludes that “Big Oil” must be “stockpiling” the plots to drive up energy prices and increase record profits. Then they “extrapolate” that another 4.8 million barrels of oil per day if the companies would just drill those leases. This argument has even made it into this year’s presidential campaign, and is repeated as talking points by those who oppose more American drilling.

So if this report says we can double American production and get that energy to consumers, why hasn’t the Committee endorsed the report? Or held hearings? Or asked for input from experts? Surely the analysis is good enough to withstand the scrutiny and focus of hearings. Right?

Wrong. You’ll have a hard time finding energy experts who can talk about the report without shaking their heads or rolling their eyes in disgust. Imagine being told that the “Big Solar” companies were “stockpiling” energy supplies by deliberately refusing to produce power at night. That’s absurd -- everyone knows that the sun doesn’t shine at night. Unfortunately, not everyone knows the ins and outs of energy development on federal lands, which is exactly what proponents of the “68 million acres” claim are counting on.

According to the U.S. Interior Department, which overseas energy production on federal lands, “The views contained in the report are based on a misunderstanding of the very lengthy regulatory process. The existence of a lease does not guarantee the discovery of, or any particular quantity of oil and gas.”

Translation: The lease is the first of many steps, and being able to look for oil doesn’t mean you’re guaranteed to find it. In fact, according to the Department, “In shallow water, approximately one in three wells results in a discovery of a quantity of oil and/or natural gas sufficient to produce economically. In deeper water, one well in five is economical….For onshore leases, the well success rate is about 10 percent for new areas.”

So, if the chances of finding oil under leases in various categories of lands are 33%, 20% and 10%, it probably makes sense that they’re only producing oil on 25.6% of the leases they hold. In fact, that’s pretty good, and well within the historic range of lands producing versus lands leased. The problem is the government is leasing much less land than it did several decades ago. If oil explorers could look in more places for oil and gas, the chances are they would find more of it. With more supply, prices would come down.

Environmental lawsuits also add to delays and, in some cases, prevent production indefinitely. Appeals filed against federal energy leasing have increased a whopping 706% on since 2000, according to the Bureau of Land Management. Most of these appeals have been filed by the same anti-energy groups that are now perpetuating the “68 million acres” myth. If an area is open for leasing, they’ll sue to stop production. If the area is closed for exploration and production, they’ll sue to keep it that way.

If that doesn’t outrage consumers struggling to pay for gas, maybe the government’s contribution (or lack thereof) to our energy production will. Taxpayers own 1.76 billion acres of offshore and 700 million acres of onshore federal lands that could be leased for energy production. That’s 2.46 billion acres. Yet, despite $4 gasoline, record-high natural gas and home heating oil prices and rising rates for gas-fired utilities, government policies have led to only 91.5 million acres being leased for energy exploration and production. More than 2.3 billion acres are not even being looked at for energy. In total, that’s an amount of land larger than China or Brazil.

So while opponents domestic energy production clamor about “68 million acres” and point fingers at each other, ask yourself who’s doing more to help bring down energy prices -- companies that are producing oil and natural gas at record-high 25% success rate, or your government, which refuses to establish policies that contribute any more than 3.7 percent of your land to help lower prices.

The problem is simple: we need to start looking on this huge amount of lands currently off limits for the energy we need to run our country and put our people to work and generate new money right here at home. But most of the proposals fall far short. In a recent letter to Congress, the Institute for Energy Research detailed the problems with a bipartisan scheme called the New Energy Reform Act, or better known as the “Gang of 10” proposal. Their answer: reduce the amount of lands off limits in the OCS from 85% to about 78%....leaving about three-quarters of our lands still untouched. They then proceed to add new taxes and fees of all kinds to come up with $84 billion to spend on earmarks and pet projects and whatever the latest fad in energy proposals is. Nothing on ANWR. Nothing on oil shale. Nothing about the 10 billion barrels of oil right off the coast of California that their bill ignores. In the end, American consumers get little or no new energy supplies, but have to swallow a huge new set of taxes and mandates and limits on their liberties so politicians can say they are doing something about energy prices. It’s the same old Washington game, and the results will be the same….increased imports and prices for Americans. The best thing Congress could do at this point is nothing…if they pass nothing, the embargo of American supplies stops on October 1 and we can start drilling for energy once more in America. We have the energy supplies -- the government has to get out of the way and let them come to market.

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Mr. Kish is senior vice president for policy at the Institute for Energy Research (IER). With more than 25 years of experience on Congressional committees, Kish�s primary focus is access to conventional and unconventional energy resources on federal government lands and in the waters of the Outer Continental Shelf.