True Grit: Should the oil and gas industry return non-producing lands to taxpayers

It appears that the oil and gas industry can’t get their talking points straight about the energy potential of all the public wild lands they’re after. On one hand, when asked how much oil and natural gas a coveted area holds, industry lobbyists make bold predictions about abundant supply.  But once industry actually has access to public land the prospects dim considerably. 

Is this simply a matter of inaccurate predictions?  Not at all.  The oil and natural gas industry appears to be engaged in some false advertising: misleading stakeholders by promoting what’s technically possible before switching to what’s economically feasible when the bill comes due.

Recently the Obama Administration released a report detailing the millions of acres of public land already under leased to industry but not in production.  In response, industry lobbyists admitted that the reason many leases are not in production is because the oil and gas deposits are not commercially viable. 

John Hofmeister, former president of Shell Oil Co. said in a Bloomberg interview: “Thousands of leases that the president is referring to, are the bottom-of-the-list leases, which are unlikely to hold commercial deposits of oil and gas.”

Jack Gerard, president and CEO of the American Petroleum Institute was quoted similarly. "The majority of these leases are always turned back because we can't find resource in commercial quantities," said Jack Gerard, the president and CEO of the American Petroleum Institute.

The point they themselves make is that not all technically recoverable oil and natural gas deposits are economically recoverable.  It’s a good point, yet one the industry often fails to reveal when asking for greater access to public lands to drill.

Economists at The Wilderness Society have for a long time recommended that economically recoverable resources be the basis of analysis and discussion of U.S. energy policy

Given their statements I am sure these lobbyists would agree with us:  estimates of technically recoverable energy resources tend to distort the debate on our nation’s energy policy because the economic costs of bringing the energy to market are not being considered.  For example, technically it is possible to get all of our energy from the sun and the wind – but few folks are talking about that option right now.

Unfortunately in studies estimating federal oil and gas resources “off-limits”, the oil and natural gas industry has consistently utilized estimates of technically recoverable resources – which are, as noted above, optimistic estimates that ignore the risks and challenges of producing commercial quantities of oil and natural gas.  Why then would the oil and gas industry rely on technically recoverable estimates when examining the amount of oil and gas affected by policies designed to protect the environment?

Perhaps it’s because estimates of technically recoverable oil and gas are always greater than the amount of resource economically recoverable – and will therefore generate higher estimates of the oil and natural gas off limits in wilderness study areas for example.  However, these same industry lobbyists have now confirmed our past research findings, that in many cases the oil and gas resources are “off limits” for economic reasons, not as a result of the federal government efforts to protect the environment. 

The oil and gas industry’s contradictory recommendations therefore involve using the much larger estimates of technically recoverable resources when complaining about the amount of oil and natural gas off limits in a wilderness study area or in critical wildlife habitat, while at the same time downplaying the oil and gas quantities already accessible and under lease by relying on the lower estimates of what is actually economically recoverable. 

I will end with this suggestion: if the majority of the non-producing leases do not hold commercial quantities of oil and natural gas, why doesn’t industry voluntarily return the public land to taxpayers?  Returning non-producing leases would reduce the ecological footprint associated with potential drilling and allow public land managers better information for assessing the cumulative impacts from future leasing decisions. 
 

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