Obama misleads on oil leases: WSJ

The Wall Street Journal lambastes Barack Obama for disseminating falsehoods on oil exploration, either through malice or ignorance.  The Journal can’t identify the root cause, but in the end it matters little.  His misleading allegations regarding oil leases, joined by most of the Democrats in Congress, will lead to foolish and self-defeating policies, as anyone who has studied the process of oil production knows:

To deflect the GOP effort to relax the offshore-drilling ban – and thus boost supply while demand will remain strong – Democrats also say that most of the current leases are “nonproducing.” The idea comes from a “special report” prepared by the Democratic staff of the House Resources Committee, chaired by Mr. Rahall. “If we extrapolate from today’s production rates on federal lands and waters,” the authors write, the oil companies could “nearly double total U.S. oil production” (their emphasis).

In other words, these whiz kids assume that every acre of every lease holds the same amount of oil and gas. Yet the existence of a lease does not guarantee that the geology holds recoverable resources. Brian Kennedy of the Institute for Energy Research quips that, using the same extrapolation, the 9.4 billion acres of the currently nonproducing moon should yield 654 million barrels of oil per day.

Nonetheless, the House still went through with a gesture called the “use it or lose it” bill, which passed on Thursday 223-195. It would be pointless even if it had a chance of becoming law. Oil companies acquire leases in the expectation that some of them contain sufficient oil and gas to cover the total costs. Yet it takes years to move through federal permitting, exploration and development. The U.S. Minerals Management Service notes that only one of three wells results in a discovery of oil that can be recovered economically. In deeper water, it’s one of five. All this involves huge risks, capital investment – and time.

If anything, the Democrats ought to be dancing in the streets about “idle” leases. It means fewer rigs. The days of hit-or-miss wildcatting have been relegated to the past by new, more efficient technologies, such as seismic imaging, directional drilling (wells that are “steered” underground) and multilateral drilling (multiple underground offshoots from a single wellbore).

Last week in Las Vegas, Obama offered the same criticism — that oil companies haven’t drilled on the leases they already have.  That’s poppycock, as the Journal explains.  Not all leases get drilled because not all leases have oil.  The producers spend millions of dollars on geological surveys to limit bad investments and put resources where the oil can be accessed.  Right now, the best prospects for finding new fields are in the OCS, as Brazil has shown in two finds this year alone.  In 2006, we found a huge deep-sea reservoir in the Gulf: Wilcox, which may have as much as 15 billion barrels of recoverable oil.

Can we find more Wilcoxes?  Not as long as Congress refuses to lift their moratorium on exploration of the OCS.  Demanding drilling first on all extant leases is an absurd position to take when they don’t have any indication of accessible oil from the preliminary studies.  It amounts to drilling dry holes at a cost of tens of millions of dollars each just to demonstrate the futility.  Who do you think will pay that cost?  Hint: it won’t be Barack Obama or Congress, but the people who drive up to the pumps every day.

Republicans have to hammer home this point every day between now and the election.  Democrats offer disinformation on drilling rather than work for solutions to a supply crisis in energy which has all of the indications of a long-term problem.  One can either ascribe that to ignorance or malice on an individual or group basis, but then voters have to ask themselves this: does it really matter which cause is in play?   If Democrats are merely ignorant on energy production — after all of the years we have spent in crisis, and after months of being in control of Congress — that should be more than enough to show that we need a change, and not a President who is just as ignorant as Congressional leadership.