Thursday, June 19, 2008

Democratic Lies on Oil Leases

These people are shameless and they believe that their fellow Democrats are just dimwitted, Rep. Edward Markey (D-Mass) got the ball rolling last week and since then others have jumped on the BSers Bandwagon including my congressman Rahm Emanuel (D-IL).* They are telling the world that Big Oil is trying to game the lease system and that they have ample acreage to drill on but that they are refusing to drill, for some unknown, conspiratorial reason. Maybe Rahm's brother can get a movie made about evil oil executives not using oil leases. This does go along very well with the Democratic manner of looking at the world, not as complex often intertwined systems but rather as various conspiracies often featuring great and powerful invisible hands, just not the Adam Smith types of invisible hands.

It should not really take much to imagine why any certain leased land may not be drilled on, the most obvious being dry holes. While looking around the internet for a more complete answer I ran across American Anachronism, the blog of Lt. Col. Mark Ward, US Army (Ret.) and the good Colonel had the good sense to contact one of his fellow Heritage Foundation members and former Oklahoma Congressman Ernest Ishtook who wrote a very interesting response that includes the following:

Believe me, with oil at $130 per barrel, they would drill on those lands if it made sense to do so! No, not all oil and gas leases are “being used”, because not all of them have production-worthy quantities of oil or gas. Lots of people have property that is not being used, but government doesn’t use it as an excuse to take it away, or to forbid the owners from buying other property.

First, a company may lease property, but never have the funds to properly explore it or drill an exploratory well. Second, after paying for further tests (such as seismic), they often decide the lease isn’t worth the high, high costs of drilling after all. Or they may hold onto the lease for years until either higher oil prices or new technology makes it feasible to drill. Third, a company may lease property but drill on another tract (which drains a “pool” that covers multiple leased tracts), so perhaps they’re counting it as “not used” if no well is sunk on that particular piece of property. Fourth, they may try to drill and be blocked by government bureaucrats, environmental lawsuits, etc.

Finally, not all acres are alike. Some have lots of oil. Others have virtually known (sic). Saying they’re not drilling for oil everywhere is like faulting them for not digging a gold mine on every acre.

*The linked article includes an argument for new educational funding and relies on the idea that this nation does not contain a large number of underemployed engineers.

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