FOR IMMEDIATE RELEASE
September 22, 2008
CONTACT
Brian Kennedy (202) 346-8826

IER Continues Energy Education Ad Campaign:
Only 9 More Days Until Congressional Bans on Offshore and Oil Shale Energy Expire

Washington, DC – The Institute for Energy Research (IER) continues its energy education ad campaign this week with two new radio spots, “Same Failed Policies” and “Drill More, Tax Less.”  Building on its August print and radio education campaign, IER’s new ads  will run starting today in Alaska, Georgia, South Dakota, Louisiana and Tennessee.  IER president Thomas Pyle issued the following statement:

“The continuation of our energy education campaign reminds Americans about one critical energy fact – as taxpayers, they own the federal lands and the energy resources that lie beneath them.  As such, Americans should be asking themselves why they are being subjected to an energy embargo from Washington.  By banning energy production on federal lands for the last few decades, American supplies have been restricted, contributing greatly to the energy crunch American consumers are enduring today.”

“Unfortunately, policymakers seem incapable of grasping that simple supply and demand equation.  Federal lands and their energy resources don’t belong to the government – they belong to the people.  Lifting the  bans on domestic energy production will put taxpayer-owned energy resources to work for us for a change. Our families and our economy need more American energy, not less.”

Text of the “Same Failed Policies” ad follows, and it can be heard by clicking here:

With rising gas and home heating costs – you would think that our leaders would want to help our families who are struggling to make ends meet.  But as usual – Washington has it backwards.  Some lawmakers are pushing more of the same failed policies that have led to record high energy prices.

While most Americans are calling for expanding exploration, some Washington leaders want to permanently ban exploration on most of our energy rich off-shore locations.  There is a better way to improve our lagging economy and put America back on its feet.

Opening up ALL of our taxpayer-owned offshore oil resources will make us less dependent on foreign imports from unstable nations, help grow our economy, and most importantly assist in making gas and home heating bills affordable again for American families.

A sound energy policy is one that allows for more energy, not LESS.

Text of “Drill Now, Tax Less” ad follows, and it can be heard by clicking here:

America’s energy problem is hurting our families.  With prices at the pump near historic highs, Washington is doing little to reduce our reliance on imports from unstable regions like Venezuela, Nigeria and the Middle East.

Instead of solving our energy problems, some leaders in Washington are actually trying to raise taxes on domestic energy production.  Raising energy taxes would cost America more than 600,000 jobs and do virtually nothing to decrease our reliance on foreign oil from unstable nations.

Washington needs to open our taxpayer owned land for exploration and production, but some policymakers want to permanently lock up nearly all of our energy-rich outer continental shelf.  Permanent bans on drilling and increased energy taxes mean higher energy costs for our families.

We need new American energy and lower prices, not increased taxes and empty promises on drilling.

The Institute for Energy Research (IER) is a not-for-profit public foundation that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets.  Founded in 1989, IER is funded entirely by tax deductible contributions from individuals, foundations and corporations. No financial support is sought or accepted from government (taxpayers).

#####

www.InstituteforEnergyResearch.org

This bill, like the recent “Gang of Ten” proposal, does almost nothing to increase domestic energy production. Instead, it offers more of the same government imposed mandates that promote inefficient or untested types of energy.

The following is an analysis of the most recently available proposal:

Title 1—Federal Oil and Gas Leasing

While the authors may seek to open up additional areas on the outer continental shelf (OCS) to new exploration and development, the bill permanently locks up the most oil and gas-rich areas of the OCS. For example, this would permanently ban about 97 percent of the undersea oil lying off the coast of California.

Subtitle A—Outer Continental Shelf Oil and Gas Leasing

• Permanently institutes a ban on new offshore development out to 50 miles. [Sec. 102]
  • The vast majority of undiscovered oil and gas reserves are projected to be between the coast and 50 miles offshore. Instead of allowing the production of great quantities of oil and gas, this section locks up billions of barrels of oil and trillions of cubic feet of natural gas.

• Permits leasing only between 50 and 100 miles offshore only if the adjacent state legislature ‘opts-in’ to allow leasing off its coastline. [Sec. 102]
  • Section 102 fails to provide royalty revenue sharing for the states near new offshore development. States will not have any incentive to allow oil development if there is not revenue sharing from the actual production.

• Fails to open new, energy rich areas for exploration and development in the eastern Gulf of Mexico. These areas in the Gulf could start producing oil and gas very quickly because they are close to existing infrastructure.

• Creates a new duty for the Secretary of the Interior, notwithstanding all current environmental laws, to make sure any activity “provides for the protection of the coastal environment.” [Sec. 104]
  • Offshore exploration and development is already subject to a large number of environmental laws such as the Marine Mammal Protection Act, the Coastal Zone Management Act, the Endangered Species Act, and the Magnuson-Stevens Fishery Conservation and Management Act.
  • Because this new language is not defined in the bill nor the U.S. Code, it is an invitation for environmental groups to sue so courts will determine what it means for the Secretary to “provide for the protection of the environment.” [Sec. 104] This will only slow new offshore development.

Subtitle B—Diligent Development of Federal Oil and Gas Leases

• Requires oil and natural gas leaseholders to “diligently develop” the leases they hold. [Sec. 121]
  • The bill does not explain how this would change existing law and existing requirements because existing law already requires leaseholders to develop leases or give them back to the United States.
  • This subtitle is a reference to the myth that there is 68 million acres with economical deposits that are leased by oil and gas production that oil companies are not using. More information on that myth is available here.

Subtitle F—National Petroleum Reserve in Alaska

• Accelerates leases sales on National Petroleum Reserve—Alaska (NPR-A). [Sec. 162].
  • NPR-A is estimated to contain 10.6 billion barrels of oil but those reserves are spread out over NPR-A’s 23 million acres. This bill does not open up nearby ANWR. ANWR also holds more than 10 billion barrels of oil, but ANWR’s resources can be accessed from a very small area. More information about the NPR-A and ANWR is available here.
  • The bill states that the Secretary must offer leasing in an “environmentally responsible” manner. This section does not define “environmentally responsible” potentially allowing environmental groups to sue to define what this means.

• Requires the President to facilitate construction of a natural gas pipeline from Alaska with unionized labor [Sec. 165-166]
• Bans the export of Alaskan oil. [Sec. 166]

Subtitle G—Oil Shale

There are more hydrocarbon resources in oil shale in the western United States than there are oil reserves in Saudi Arabia. The United States Geological Survey (USGS) has estimated the U.S. has 2 trillion barrels of resource of which 556 billion barrels is recoverable. A better approach would be to remove all impediments to oil shale research and development.

• Allows oil shale leasing for research, development, or production of oil shale only if states specifically pass a law permitting oil shale leasing within their borders. [Sec. 171]
  • This is only a half-measure to developing oil shale. Developing oil shale is expensive and requires experimentation to improve oil shale extraction technology. It is currently not necessary to get state approval for experimental projects, but this bill creates additional hurdles for experimental projects—the type of projects necessary to one day utilize this vast resource.

Title II—Consumer Energy Supply

• Sells 70 million barrels of light grade crude oil from the Strategic Petroleum Reserve and buys heavy grade crude. [Sec. 201]
• It is unlikely this scheme will have any effect on gasoline prices, as evidenced by this information here.

Title III—Public Transportation

From 1993 to 2003 capital expenditures for public transit grew by 100 percent, but transit ridership only grew by 13 percent. By that measure, federal subsidies for public transportation has been a bad investment, but it seems measure throws good money after bad.

• Spends $100 million in new federal spending for public transportation. [Sec. 303]
• Establishes a new pilot program for contracting vanpools. [Sec. 306]
• Authorizes $1 million in spending for public transportation advertising. [Sec. 307]

Title IV—Greater Energy Efficiency in Building Codes

This title usurps the authority to set building codes from state and local governments and institutes new national building codes standards in the name of energy efficiency. The likely outcome of this title will be an increase in the cost of new construction and renovation of buildings in the United States.

• Requires states to revise their building codes to comply with certain energy efficiency standards. [Sec. 401]
• Increases energy efficiency standards for building renovations.

Title V—Federal Renewable Portfolio Standard

This title requires electricity providers (except for state or local governments) to provide 15 percent of their electricity from renewable sources, excluding hydropower, by 2020. Currently, less than 5 percent of our electricity is generated by renewable sources according to the definition in this title. Renewable electricity mandates increase the price of electricity to consumers by forcing them to use more expensive and less efficient sources of electricity.

Title VI—Green Resources for Energy Efficient Neighborhoods

This title contains and myriad of subsidies and directives that interferes with housing markets in the name of “energy efficiency.”

• Creates new subsidies for people who participate in HUD programs to implement energy efficiency programs. [Sec. 603]
• Authorizes $50 million in pilot programs for more energy efficient multi-family dwellings. [Sec. 605]
• Encourages Fannie Mae and Freddie Mac to favor energy efficient mortgages. [Sec. 606]
• Establishes a “duty to serve underserved markets” regarding energy- and location-efficient mortgages for “very low-, low-, and moderate-income families.” [Sec. 607].
• Authorizes $5 million for advertisements about energy efficient mortgages. [Sec. 609]
• Authorizes $10 million for “increasing sustainable low-income community development capacity.” [Sec. 617]
• Creates new requirements for state certified appraisers to consider the value of energy-efficiency features. [Sec. 620]
• Authorizes a $5 million fund for loans to states and tribes to carry out renewable energy sources activities. [Sec. 623]

Title VII—Miscellaneous Provisions

• Mandates each automotive fueling station owned by a major integrated oil company to have at least 1 alternative fuel pump. This section assesses a $100,000 fine for each gas station not in compliance. [Sec. 701]
• While section 701 appears to greatly increase the amount of alternative fuel pumps, this is not true. Only 3 percent of gas stations are owned by major oil companies.
• Authorizes $25 million in funding per year for a “National Energy Center for Excellence” at two universities. [Sec. 702]

Title VIII—Energy Tax Incentives

This final title is a hodge-podge of additional subsidies for politically-preferred and economically expensive energy projects, partially paid for by a major tax increase on oil companies. A recent IER analysis found that this could cost America over half a million jobs and tens of billions in lost household income and almost $200 billion in total economic output.

• Extends renewable energy tax credits. [Sec. 801]
• Creates new tax credits for “marine renewables.” [Sec. 802]
• Adds credits for pet energy projects. [Sec. 803]
• Extends credits for residential renewable energy projects. [Sec. 804]
• Authorizes $2.25 billion in tax credits integrated gas and combined cycle projects and advanced coal-based generation. [Sec. 811]
• Increases tax credits for coal gasification projects by $150 million. [Sec. 812]
• Increases the coal excise tax. [Sec. 813]
• Commissions the National Academy of Science to devise a taxation scheme to tax greenhouse gases [Sec. 815]
• Increasing subsidies for biodiesel and renewable diesel [Sec. 822]
• Creates new subsidies for plug-in automobiles [Sec. 824]
• Implements tax breaks for heavy duty trucks with idling reduction devices and thick insulation [Sec. 825]
• Implements special payroll tax breaks for governments around New York City [Sec. 826]
• Institutes special benefits for bicycle commuters [Sec. 827]
• Increases tax credits for alternative fuel vehicles [Sec. 828]
• Subsidizes loans for natural gas refueling at gasoline stations [Sec. 829]
• Subsidizes bonds for local governments to implement pet “green” projects [Sec. 841]
• Extends credits for biomass heating [Sec. 842]
• Extends credits for energy efficient commercial buildings [Sec. 843]
• Subsidizes for energy efficient appliances [Sec. 844]
• Institutes tax breaks for smart meters and smart grid systems [Sec. 845]
• Extends tax breaks for green buildings [Sec. 846]
• Retains the Gang of Ten’s tax increases on oil companies by ending section 199 credits for oil companies [Sec. 851]

National Association of Convenience and Petroleum Retailing, Who Sells Gasoline in the United States?, http://64.233.169.104/search?q=cache:3SO5I9pKI18J:cstorecentral.com/NR/rdonlyres/e4byydgy5rac32l3xw2ajs53o2jolqw73vsi6roq5dag2vh2hzrx4flprwtlvzgwcjukq434wwsesxqwzspln4ynzxh/Who%2BSells%2BGasoline%2Bin%2Bthe%2BUnited%2BStates.pdf+what+percentage+of+gas+stations+are+owned+by+major+integreated+oil+companies%3F&hl=en&ct=clnk&cd=2&gl=us&client=firefox-a

But if [Congress and Presidential candidates] are looking for the actual culprits for the gas prices that now ail most Americans, they’ll have to cast their eyes beyond our own shores. Most informed people and every energy economist know that in the $10 billion-a-day commodity market for crude oil, the only force that can move energy prices day to day beyond where the market dictates are the state-owned oil companies of Saudi Arabia, Russia, Iran, and a handful of other countries that control 80 percent of the world’s reserves and nearly as much of the world’s daily oil production. To put it in perspective, the three biggest U.S. oil companies—ExxonMobil, Chevron, and ConocoPhillips—account together for less than 4 percent of worldwide reserves.

The Russian invasion of Georgia underscored the influence of a few nations over the world’s most important economic commodity and once again made it an important geopolitical issue. While Georgia’s pipelines are only one of several sore spots for Vladimir Putin, effective influence over them fits nicely into his campaign to centralize the Kremlin’s control over Russia’s enormous oil and gas reserves and production—second in the world to only Saudi Arabia—and use them as geopolitical tools. With Putin’s confiscation of the Yukos oil conglomerate, the key institution for this strategy is Gazprom, the huge, state-owned natural gas conglomerate that today supplies nearly one third of the gas needs of France and Italy, more than 40 percent of Germany’s needs, 60 to 70 percent of gas consumption in Austria, Hungary, and Turkey, and virtually all the natural gas used in Greece, Finland, and most of Eastern Europe. Gazprom is not only also developing the vast Shtokman gas field in the Barents Sea to produce liquefied natural gas for the U.S. market, it also has absorbed Russia’s largest oil producing company, Sibneft, with more reserves than any nation except Saudi Arabia and Iran.

In this energy and geopolitical environment, and with Putin’s Kremlin watching closely, it surely makes little sense for the U.S. government to single out U.S oil producers for special taxes.

Failing to develop our oil and natural gas resources only gives more power to Vladimir Putin. As Ronald Reagan asked in his classic 1984 campaign commercial, isn’t it smart to be as strong as the bear?

According to the summary released by the Speaker of the House, the new “compromise” would:

• Institute a permanent ban out of 50 miles.
• Permit leasing between 50 and 100 miles offshore if a State ‘opts-in’ to allow leasing off its coastline by enacting state law.
• Continue the ban on energy production in the Eastern Gulf of Mexico.
• Lift the ban on energy production beyond 100 miles.

To the casual observer, this certainly seems like a reasonable compromise.  Unfortunately, it’s not.  It’s a bait and switch.  Here’s why:

• A permanent ban out to 50 miles locks-up the largest known offshore energy reserves, including those off the coast of California, that are close to existing infrastructure and be produced the fastest.
• The plan permanently bans access to 97 percent of the 10.527 billion barrels off the coast of California.  It allows the State to decide whether to produce just 3 percent, or 287 million barrels, which is highly unlikely anyway.  The remainder…10.24 billion barrels…is off limits.
• Keeping the Eastern Gulf of Mexico off limits also denies access to large reserves located close to existing pipeline infrastructure.  The plan keeps an estimated 3.65 barrels of oil and 22 trillion cubic feet of natural gas off limits
• The offshore areas surrounding the State of Alaska are not currently subject to any bans.  This plan appears to institute a 50-mile ban around energy-rich Alaskan shore for the first time ever.  Energy exploration there is just beginning.
• While the plan enables the states to “opt in” and produce energy between 50 and 100 miles, it lacks a revenue sharing mechanism, thereby making it highly unlikely that state would chose to do so.  In the case of energy production on federal lands – both onshore, and offshore in the Gulf of Mexico, states split production revenues with the federal government.  Denying the states this incentive effectively prevents new production.

Of the 18 billion barrels of oil locked-up by current bans, the new plan allows access to less than four, and perhaps as little as 2 billion barrels.  And without revenue sharing, even the four states most lilely to allow production – Virginia, North Carolina, South Carolina, and Georgia – would not do so.

For Comparison: The new plan may make available 2 billion barrels of oil available, beyond 100 miles of the shores on the East Coast.  Opening 2000 acres of ANWR’s northern coastal plain – onshore, 70 miles from an existing pipeline – would yield the United States at least an additional 10.4 billion barrels oil.

The Bottom Line: It appears as though the new plan would take the America from banning access to 85 percent of the OCS acreage surrounding the lower 48 states to banning access to roughly 90 percent of its most-promising and easy-to-produce offshore energy reserves.  By opening only the farthest reaches of the OCS where no infrastructure exists, denying the states a share in the revenues, and locking up the reserves that are closest (and largest), this proposal ensures that (1) new production would be sparse, at best, and (2) new supplies would not come online for a long, long time.  Combine these facts with the plan’s new taxes and government handouts, and the American consumer gets little more than an expensive energy bridge to nowhere.

Click here for charts which illustrate the points above.

To the House of Representatives: To the Senate: Draft of the legislation:

September 9, 2008

The Honorable Harry Reid
Majority Leader
United States Senate
S-221, The Capitol
Washington, DC 20510

The Honorable Mitch McConnell
Minority Leader
United States Senate
S-230, The Capitol
Washington, DC 20510

Dear Leaders Reid and McConnell:

I write today in my capacity as president of the Institute for Energy Research (IER), a not-for-profit organization that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets, to express my concerns about the so-called Gang of Sixteen’s New Energy Reform Act (New Era) of 2008, led by Senators Kent Conrad (D-ND) and Saxby Chambliss (R-GA).

While we applaud efforts to reach political “compromise” on the energy issues facing our country, this plan will only create a false sense of energy security.  The American public has been loud and clear in their support for more drilling and more domestic energy production.  And when they discover that this initiative does virtually nothing to decrease our reliance on imports from unstable nations like Venezuela and Nigeria, they will want answers.  This hollow plan is a tremendous missed opportunity that actually puts more of our oil off limits, while raising taxes and increasing government subsidies.  The American people will come to realize that this pass-the-buck plan does not guarantee that any new oil is produced, or that any new exploration can even be conducted for that matter.

The political logjam over solving America’s energy woes comes down to two competing views: some policymakers want to remove federal restrictions that prevent onshore and offshore energy production, while others believe large tax expenditures and R&D subsidies are necessary to encourage the nation’s transition away from fossil fuels altogether.  The charm of the New Era plan is its apparent compromise:  it relaxes some restrictions on offshore drilling but supplements this concession with new and generous expenditures for alternative fuels and alternatively-fueled vehicles.  Unfortunately, this act of political theater does nothing to reach the full potential of America’s energy resources.

The appearance of a compromise in the ‘New Era’ plan is very misleading, as it would deliver for consumers and the economy much more in terms of new tax burdens than it would new energy supplies.  The New Era plan offers only tepid and potential increases in offshore production in exchange for a $30 billion tax hike on producers, which will surely be passed on to consumers.  The net effect will very likely result in an overall reduction in U.S. oil production and even higher energy prices.  Furthermore, the New Era Plan contains $84 billion in spending measures designed to “encourage” the development of potential energy sources and technologies that are both uneconomical and impractical today.  If these sources were commercially viable, they wouldn’t need billions of dollars in new or additional government subsidies in the first place.

The New Era plan also falls short with respect to expanding access to the energy-rich outer continental shelf (OCS).  Energy exploration and production is currently outlawed on 85 percent of the OCS surrounding the lower 48 states.  And while the New Era plan does extend access to a limited area in the Gulf of Mexico, it enables only four coastal states the right to explore and produce if and only if their state legislatures agree to do so.  Even then, these four states – Virginia, North Carolina, South Carolina, and Georgia – would still be prevented from exploring within a 50 mile buffer zone off their coasts.  Some of the most lucrative known deposits are located within this zone, such as the Gulf of Mexico’s Destin Dome.  What is most troubling about the New Era position on drilling, however, is that it appears to replace the current moratorium – which must be annually renewed by Congress – with a permanent ban.

In total, if the ‘New Era’ plan were to become law, energy exploration and production would still be banned, permanently, on roughly 78 percent of the entire OCS surrounding the lower 48 states.  Taxpayers own the OCS lands and the energy resources that lie beneath them, and we at IER believe their government owes them more than a 7 percent solution to skyrocketing energy prices.

Moreover, the bill painfully misses the mark on the principal reason behind our current energy supply shortage.  The federal government owns roughly 2.4 billion acres of lands – an area larger than the land mass of the United States and larger than all other nations on earth, except for Russia and Canada.  Of these lands, which belong to the American public, only about 4% have been leased for energy production.  This circumstance is mainly due to 40 years of land use management laws that have de facto or de jure limited access to our own resources.  That’s why those who repeat ad infinitum that “the U.S. only has 3% of the world’s proven oil reserves” are not telling the whole story.  America’s current reserves stand (artificially) at a mere 3 percent of the world’s total only because government policies have effectively prevented and/or hamstrung energy exploration on roughly 96 percent of the taxpayer-owned lands here at home.

In short, the federal government has placed an embargo on our national energy supplies and consumers are paying unnecessarily high energy prices as a result.  The New Era plan does little to rectify this, and depending on the final language of the bill, may even make it worse.

Because energy production on federal lands nets the U.S. Treasury tens of billions of dollars in the form of corporate income taxes, bonus bids, royalties and land rents, IER also believes that consumers should not have to bear the costs associated with this or any other legislative solution.  The New Era Plan quite simply takes taxpayer money in order to achieve inefficient outcomes.  Consider the $20 billion earmarked for converting 85 percent of the nation’s cars to run on non-petroleum fuels within 20 years.  With 250 million vehicles on the road, a conversion rate of less than $100 per vehicle makes this particular proposal little more than a symbolic gesture.

The economy is teetering on the brink of recession and energy prices are still at near record high levels.  In this difficult time for American families, the last thing the country needs is $84 billion in new taxes and spending that will be dispersed to inefficient, but politically popular, sources of energy production.  By penalizing consumers with higher prices and more imported energy, and subsidizing alternative technologies that currently cannot survive in the open market, the New Era plan will harm consumers while squandering scarce funds in exchange for very little new energy.

In contrast, a much more economically sensible plan – simply letting the current OCS ban expire at the end of this fiscal year – would provide far greater access to both onshore and offshore energy resources, lower energy prices and bring in billions of dollars in extra revenue for the U.S. Treasury.  That’s a win-win-win scenario for America.

The Gang of Sixteen’s New Era plan is yet another act of political expedience at a time when the American public is demanding real energy solutions.

Sincerely,

Thomas Pyle
President
Institute for Energy Research

6 Months, 40 Oversight Hearings, 160 Witnesses Sworn-in, But Zero New Supplies

WASHINGTON, D.C. – Now adjourned for its Independence Day recess, the U.S. Congress has convened at least 40 hearings on the issue of skyrocketing energy prices in the first six months of 2008. At least 160 witnesses have been sworn-in and questioned. But, even as consumers suffer, the Congress still has done nothing to increase American energy supplies. Institute for Energy Research (IER) president Thomas J. Pyle issued the following statement:

“Don’t mistake activity for productivity,” Pyle said. “Members of Congress have been questioning witnesses and pounding podiums for the news cameras, but they have done nothing to increase American oil production by even one single barrel. Families are paying the price of Washington’s willful refusal to do what we all know must be done.”

“American taxpayers own the federal lands, and they own the vast energy resources that lie beneath them too,” Pyle continued. “If the federal government continues to withhold these supplies, how is it any different than OPEC? That’s something all of us should think about on Independence Day.”

More from the Institute for Energy Research (IER):

· Top Five Actions Government Can Take to Lower Gas Prices
· Speculators Fixing Oil Prices? Don’t Bet on It
· The World’s Biggest Oil Companies Aren’t American, and Aren’t Private
· Is it Price Gouging?
· Who’s to Blame for High gas Prices?

The Institute for Energy Research (IER) is a not-for-profit public foundation that conducts intensive research and analysis on the functions, operations, and government regulation of global energy markets. Founded in 1989, IER is funded entirely by tax deductible contributions from individuals, foundations and corporations. No financial support is sought for or accepted from government (taxpayers).

###

Washington politicians are accusing oil companies of “stockpiling” federal energy leases to keep supplies low and prices high. They claim “Big Oil” holds leases for 68 million of acres of federal leases that are not currently producing energy.  The following will help separate fact from fiction in the “68 million acres” sound bite.

The Claim: “Energy companies are not using 68 million acres of federal lands already open to energy development.  If we extrapolate from today’s production rates on federal land and waters, this means that Big Oil is stockpiling an additional 4.8 million barrels of oil and 44.7 billion cubic feet of natural gas each day.” – The Truth About America’s Energy: Big Oil Stockpiles Supplies and Pockets Profits , page 2.

The Extrapolation: To arrive at the production numbers above, it appears as though the authors of the report “extrapolated” as follows:

• Roughly 23 million acres of onshore and offshore federal land are producing 1.6 million barrels per day today.

• Roughly 3 times as many onshore and offshore federal acres – or about 68 million – are leased to oil companies, but not currently producing oil or gas.

Therefore, the authors conclude, the United States could be producing 3 times as much oil – or an additional 4.8 million barrels per day – if the lease holders for the non-producing federal lands started producing oil today.

The Reality: America Cannot ‘Extrapolate Its Way Out of an Energy Crisis

Using the very same extrapolation, the Institute for Energy Research has calculated that the United States could produce an additional 160 million barrels of oil per day if the government leased all 2.46 billion onshore and offshore acres in the federal estate. That’s almost double the amount that is produced on a daily basis in the entire world.

Using the very same extrapolation, the Institute for Energy Research has calculated that 9.4 billion non-produing acres of the moon could produce an additional 654 million barrels of oil each day.

It seems the lawmakers would have us believe that obtaining a lease was a virtual guarantee that the lease holder would strike oil and gas, or both. In reality, not every acre of federal land contains oil and gas. If it were true, who wouldn’t be on line at the Department of Interior trying to buy an acre or two for themselves?

The chart to the right illustrates the correlation between the acreage of federal lands leased and the amount of crude produced over the past 25 years.

Unfortunately, there are no guarantees. Oil and gas might be found during the exploration phase of the lease, or it might not. This process, and those that involve satisfying all of the government requirements, defending against frivolous environmental lawsuits, and preparing to drill if energy is found can take a long as a decade.

The Truth & The Laws

Energy companies cannot “stockpile” leases (even the ones that are found to contain no oil or gas) in order to drive up prices:

• The Mineral Leasing Act (for onshore production): Section 17(e) stipulates that an oil company must have a producing well within 10 years or surrender the leases. Source: 30 U.S.C. 226(e)

• The Outer Continental Shelf Lands Act: (for offshore production): Stipulates that an oil company must produce energy between 5 to 10 years (in the government’s discretion) or surrender the lease. Source: 43 U.S.C. 1337(b)

In fact technology has improved over time, allowing companies to increase their production on leased acreage. The chart at right demonstrates that oil companies are using more of their land, not stockpiling leases.

The Hard Facts:

• 97 percent of Federal offshore areas are not leased.

• 94 percent of Federal onshore areas are not leased.

Getting Blood From a Turnip

After the offshore drilling moratorium was implemented in 1982 the Department of Interior could only issue leases for areas that had already been offered/leased before, or those areas with little or no economic energy potential. The exception was when Congress provided incentives to invest in Ultra Deep Waters in 1995 to stimulate production in areas that were previously too deep for our technology to reach.

As the charts above illustrate, interest in American energy leasing declined after the moratorium. It remains low for the same reasons. If Congress were to open new areas to production, leasing would increase and so would domestic supplies of energy. Until then, the U.S. will simply be continuing its attempt to squeeze blood from a turnip.

In her weekly radio address on Saturday, U.S. Senator Barbara Boxer (D-CA) urged support for the carbon “cap and trade” bill (S. 2191, the Lieberman-Warner Climate Security Act), on which the Senate begins debate today.  She urges support, not only on the basis that it’s needed to save the Earth as we know it from the evils of carbon dioxide, but because it “will create millions of jobs” and “put us on the path to energy independence.” 

 Senator Boxer’s claims mirror the common refrains of those who support government intervention to limit greenhouse gas emissions. In the first part of the refrain, proponents exaggerate the state of knowledge about our complex climate system and the nature of the problem: “…the overwhelming majority of scientists say that the earth is in peril if we don’t act now…40 percent of God’s creatures could face extinction…unchecked global warming will lead to severe conflict and war as droughts, floods and rising sea levels create huge numbers of desperate refugees.”

As the refrain continues, proponents proclaim that taxing economic activity via a cap on greenhouse gas emissions will actually create jobs, rather than harm the economy.  And finally, the refrain ends with the assertion that increasing the cost of using America’s most abundant energy source (coal) will actually increase our energy independence, not our foreign dependence.

Of course, the problem with this refrain is that it ranges from the hyperbolic to the absurd. For example, while many scientists are indeed concerned about the atmospheric concentrations of greenhouse gasses, the Earth’s climate system is complex and not completely understood and the critical role of features of the system (i.e. clouds) remain a mystery.

The claims of economic growth and energy independence, however, strain credulity. Proponents of Lieberman-Warner act as if this Bill should have been considered as part of an economic stimulus plan. Consider, however, that two federal agencies, the EPA and EIA, and a host of think tanks and academic institutions, have examined the economic ramifications of S.2191. While these models are all different in terms of assumptions and methodology, they are all the same in one respect: all clearly argue that S.2191 increases the cost of consuming energy — whether it is in the form of electricity, natural gas, gasoline, or diesel – and thus, results in lower economic growth and job loss. The fact that cap-and-trade mandates cost should surprise no one – such proposals only work if they impose significant cost; it is the increase in cost of using energy that brings about the change in behavior the authors of such mandates are seeking. 

Similarly, the energy independence argument runs counter to common sense: this bill creates huge disincentives to the use of the United State’s most abundant energy resource (coal) and, of course, does nothing to open America’s vast store of petroleum and natural gas resources which are currently off-limits to production. In fact, a portion of this bill, the “low carbon fuel standard” actually threatens the use of oil from our number one supplier – Canada.

Supporters of Lieberman-Warner would have one believe that up is down; that we can have our cake and eat it too; that increasing the cost of something makes it cheaper. Do not be fooled, however.  This bill would increase the cost of using our most prevalent forms of energy: coal, natural gas and petroleum. These cost increases will be felt by every consumer of energy in this country – families, farmers, small businesses, and manufacturers – and will result in lower economic growth and fewer jobs.

· Link to full BLM Report: http://www.blm.gov/wo/st/en/prog/energy/oil_and_gas/EPCA_III.html

· Link to BLM news release: http://www.blm.gov/wo/st/en/info/newsroom/2008/may_08/NR_052108.html

TOTAL OFF-LIMITS ENERGY

The new report, known as EPCA III, puts the total figures for energy supplies withheld by the Congress at 117 billion barrels of oil and 651 trillion cubic feet of natural gas. (The U.S. Minerals Management Service (MMS) estimates that America’s outer continental shelf contains nearly 86 billion barrels of oil and 420 trillion cubic feet of natural gas). This is enough oil to replace our OPEC imports for over 50 years, and enough natural gas to supply all US needs for 30 years.

The complete BLM press release follows:

Report Offers Road Map for Energy Relief

With average national gas prices hovering around $4 per gallon, the Bureau of Land Management today released a study that shows vast untapped oil and natural gas resources exist on public lands in the U.S.

“America has abundant energy resources,” said Assistant Secretary of the Interior for Land and Minerals Management C. Stephen Allred. “However, for a variety of reasons, many of these resources are not available for development. At a time when energy prices have reached record levels and Americans are feeling the impact, we must find ways to develop those key energy resources that are available to us right here at home, on our public lands.”

The report is the third in a series of congressionally mandated scientific studies of U.S. onshore Federal oil and natural gas resources and limitations on their development. All onshore Federal lands throughout the U.S. believed to have energy potential are included in this latest study. These public lands are estimated to contain 31 billion barrels of oil and 231 trillion cubic feet of natural gas. The BLM administers leasing of onshore Federal oil and gas resources.

The inventory found that 60 percent of the onshore Federal lands that have potential as domestic sources for natural gas and oil are presently closed to leasing, making 62 percent of the oil and 41 percent of the natural gas inaccessible for development. An additional 30 percent of onshore Federal oil and 49 percent of onshore Federal gas may only be developed subject to restrictions over and above standard environmental lease terms, including seasonal timing limitations. The study found that in the inventory areas just 8 percent of onshore Federal oil and 10 percent of onshore Federal gas are accessible under standard lease terms.

The 279 million acres inventoried are managed by various Federal agencies, including the BLM and other agencies in the Department of the Interior and the U.S. Forest Service, which is part of the Department of Agriculture. Some of these acres are split estate, where the subsurface mineral resources are Federally owned but the surface is privately owned.

“Public lands have a significant role to play in meeting our domestic energy needs securely and affordably,” said BLM Director Jim Caswell. “Current technology allows us to develop energy resources without adversely impacting the environment or permanently diminishing other non-energy resources found on public lands. With the means to make energy development a temporary use of the land, we don’t have to choose between energy security and healthy lands.”

The latest inventory expands on earlier reports published in 2003 and 2006 pursuant to the Energy Policy and Conservation Act of 2000, or EPCA. The Energy Policy Act of 2005 also directed that the EPCA study consider conditions of approval, which are restrictions attached to drilling permits (e.g., no drilling permitted during seasonal migration of sensitive species), and to which companies must adhere during lease development.

The new report was prepared under the direction of the BLM. Co-authors, contributors, and reviewers include the U.S. Geological Survey, the USDA-Forest Service, and the Department of Energy and its Energy Information Administration. Copies can be obtained by writing to the Bureau of Land Management, Office of Public Affairs, 1849 C Street, N.W., MS-LS 406, Washington, D.C. 20240. The report and a related fact sheet are also available online at: www.blm.gov

The BLM manages more land – 258 million acres – than any other Federal agency. Most of this public land is located in 12 Western states, including Alaska. The Bureau, with a budget of about $1 billion, also administers 700 million acres of sub-surface mineral estate throughout the nation. The BLM’s multiple-use mission is to sustain the health and productivity of the public lands for the use and enjoyment of present and future generations. The Bureau accomplishes this by managing such activities as outdoor recreation, livestock grazing, mineral development, and energy production, and by conserving natural, historical, and cultural resources on the public lands.

# # #