Based upon geologic formations and other modeling, energy companies identify potential areas for production and then obtain leases to explore for oil and gas. But because these resources are not evenly distributed, many of these leases do not (and cannot) lead to production. Assuming all currently leased acreage can produce oil and gas is like assuming you can pump water out of every well, whether it’s filled with water or bone dry.
In addition, many of these leases targeted by the Obama administration have not been held long enough to reach the production phase. Once a lease is obtained, it can take years until production begins. In addition to costly investments in exploration technology, companies must navigate the circuitous leasing and permitting process inside the EPA and the Department of Interior, paying millions or even billions of dollars often just to hold on to what little acreage the government has kept open for production. Under a ten year lease, it’s not uncommon for companies to need nearly all of the time allowed just to reach the production phase.
The idea that a company would spend five years and $3 billion, as in the case of Shell in Alaska, just to keep its operations idle is a concept that could only be formulated by people with appallingly little business acumen.
Contrary to the beliefs of “use it or lose it” proponents, drilling for oil is quite a bit more complicated that jamming a straw into a Big Gulp. And as long as the current administration and its cheerleaders in Congress willfully ignore the facts in the pursuit of political gain, America’s broken energy policy will remain broken, and the millions of jobs to be gained from expanding domestic energy production will never be created.
Obama Wants to Tax Energy Companies for Not Drilling
