68 Million "Acre" Lie

The Democrats have "new" defense against drilling in ANWR (Arctic National Wildlife Refuge) and off the coasts of Florida and California. They are now trying to say that the "oil companies" have purchased 68 million acres of oil leases and aren't even drilling on those lands before they want more access to other sites like off-shore and ANWR. Politically, this is designed to deflect the blame for high oil prices and the lack of domestic oil production by trying to "point" to the oil companies. But, this is a red-herring and they know it.

First and foremost, Federal lands in this country are made up of the National park system, national forests and wetlands, wildlife refuges, military reservations and installations, Federal penitentiary lands, and those designated as public-domain lands. Land that is not usable for these purposes can be put up for lease for mining and oil exploration. These unwanted pieces of land are leased in parcels from 1,000 to 3,000 acres in size and are scattered throughout the United States and its territories.

The process of leasing these "parcels" is like a grab bag. The land is leased out on sight-unseen basis without any advanced exploratory methods being used to determine if any oil is even available. The leases are usually for five years. If production doesn't begin within the period of that lease, the land reverts back to the Federal Government for re-auctioning. So, it behooves the "lessee" to move quickly to take advantage of that land or they may lose it to another competitor when the land is auctioned off again. Typically, the lessee (the oil company or wildcatter) will have to do the following "before" it can actually begin production:

1. They begin the process of exploring using a variety of geological "sounding" techniques to try and determine if any "pockets" of oil (or natural) might exist on that land. Think of this process as being similar to using a metal detector. If you get a hit, you know somethings down there but you don't know if it s a an worthless old nail or a valuable gold coin.
   
2. If they think there might be available oil, the lessee must then complete a number of environmental impact studies in compliance with Federal Law before any drilling can begin.
3. After determining the possibility of an oil field and its possible size, a number of "costs" are calculated to determine if it economically feasible to drill. The costs include the cost of complying with environmental laws; the cost of access to the site (additional leases and easements for road building and delivery pipelines, etc); and the cost of drilling (based on soil conditions and depth). This is compared to the current and projected price of oil to determine if any profit can be made.
   
4. If it is economically feasible to drill and profitable and the Federal Government has given an "environmental" green light, the company will begin to drill. Keep in mind that, even after all this, there is still only a 10 percent success rate in actually bringing oil to market.
   

What the Democrats won't tell you is that step 4 is often blocked from ever happening because of people like those in the Sierra Club and other environmental groups. More often than not, these groups will seek a court injunction in order to bar drilling whenever and wherever they can. They will use all kinds of noise, pollution, and wildlife concerns to thwart drilling anywhere in this country. And, the liberal courts tend to oblige their requests. This fact, alone, causes many potentially valuable oil fields from ever being drilled on in America.

If you listen to the Democrats, it should be a fact that you give an oil company a lease; they drill; and, they find oil. These simple minded people act as if oil is everywhere. However, if that were true, anyone with a any land could drill a well and start making money, literally, out of their own back yards. But, it isn't. The "economic" land-based oil concentrations in this country are generally in the areas in and around Texas, Oklahoma, Louisiana, Alaska, and California. There oil shale concentrations in Colorado and in North Dakota/Montana but these require very high tech and costly extraction techniques.

My family has been in oil since the early 20th century when my grandfather bought oil rights and wildcatted wells in Texas and Oklahoma. It took a lot of "busts" to find one good oil well in order to make any money and recover his losses on other failed wells. Most all those wells that my grandfather found are now dry. I still get a couple of hundred dollars a month from a handful of wells my Grandfather drilled and that are still operating. Some are producing oil and gas. I actually get some revenue from a dead well that is now producing iodine. I know the business and the business in this country is mostly a dying one. A single drilling platform in the Gulf of Mexican will cost between $500 million and $1 billion. So, for Exxon-Mobil to make 30 billion in profits only equates to a few dozen new oil platforms or 3 or 4 new refineries. Further, Exxon-Mobil only controls about 5 percent of the world's oil. It buys most of the oil that it refines and markets from state-run oil fields in Saudi Arabia and Nigeria. Much of the new oil in this country is found by small independents; of which there hundreds with names like Diamond, Northern, and Pyramid, etc. These are not the big oil companies that the Democrats keep demonizing.

The oil business is a tough business. It is not the simple one that the Democrats make it out to be. Of course, the real truth is that the Democrats are beholding the "special interests" of the environmental groups that give them so much money and get them so many votes. And, it is this the special interest of the environmentalist that trump any the of lobbying and cash donations that the Republican might get from the "big" oil companies. The fact is, the oil companies have the same "political contribution limit" of $2500 that any single voter has in this country. And, there is no "voting block" called the oil companies. But, there sure as hell is one called the "environmentalists" and they always vote for Democrats.

Update: I believe this later blog entry does a better job of explaining why oil companies would, if they could, drill on those 68 million acres of Federal land (See Full Story).