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Gulf index still shows oil permits behind

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By Debbie Glover
St. Tammany News

Before oil spill, deep water drilling permits were being issued at a rate of an average of 7 per month. Today, only 4 are being issued on average a month.

Things are not much better for shallow water permits. While an average of 7.3 permits are being issued a month, about 14.7 permits per months were issued before the oil spill.

In addition, the number of days it is taking for a plan to be approved is now 115, compared to the historical average of 61 days. All deep-water plans that include any type of drilling activity must now undergo an environmental assessment process; for those plans requiring them in 2011, the average approval time is 235 days, significantly higher than the overall average approval time. Additionally, in 2011, 37 percent of plans submitted to BOEMRE are being approved, or about half of the historical 73.4 percent approval rate. At a St. Tammany West Chamber of Commerce meeting earlier this year, Sam Giberga, senior vice president and general counsel of Hornbeck Offshore Service said the typical cost of a well is $120 million. The success rates of wells is about 15 percent. “You’ve got to drill a lot wells to get oil,” said Giberga.

“Companies are dying every day,” he said. “Each barrel of oil that is used has to be replaced and it is getting harder and more expensive to replace it.” Giberga said that from the first leasing of the territory to a working, producing drilling rig is about five years. Plans must be approved, testing and explorations are done long before the rig is built. Therefore, even though the statistics that are released show a permit has been issued, this does not mean a rig will suddenly appear and produce oil.

In fact, some of those permits that have been given since the moratorium was declared over last October are permits that are being re-issued from last year, not new wells that can drill that day and oil will flow. Since last October, only four drilling plans have been approved. There is a backlog of plans pending approval for both deepwater and shallow water in exploration and development.

With the new regulations that have been issued by the executive branch, new sources of conflict are arising because of environment assessments that are now required for all permits, spurring environmental groups for the first time regarding drilling in the Gulf of Mexico.

There is a lot of confusion over the new regulations. “There exists now a cloud over the industry. Do we need to rebuild existing structure? What kinds of adjustment must be made? Other questions entering the minds of the industry are what’s coming into the future?” asked Giberga. When so much capital is needed prior to realizing any return, companies are asking if it’s worth it.

The lack of drilling is also affecting other industries. “Shutting down rigs has caused a ripple effect,” said Giberga. “There is a web of infrastructure that depends upon this industry, and if the assets leave, they won’t be coming back… There is a direct threat to companies and the country at large.”

Sadly, many states around the country still don’t understand the plight of the industry in the Gulf. For one thing, Giberga confirmed that it is true that other countries are drilling in areas of the Gulf not regulated by the United States. In other words, drills from Mexico, Venezeula and other countries can drill in other parts of the Gulf and could cause a spill due to lack of safety or poor decisions that would still effect the United States’ coastlines, not to mention the economy.

The affects of the new regulations on permits and plans and the long range energy economy will be seen for many years to come. Meanwhile, the permits are being approved—very slowly.

Source

Offshore Energy Leases Fall from $10 Billion to Zero Under Team Obama

Even as the Obama administration postures on behalf of deficit reduction and job creation, it continues to advance policies that undermine energy production in the Gulf region and lower federal revenue, Sen. David Vitter (R-La.) has pointed out in his correspondence with top officials in Washington D.C.

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Most recently, in a letter addressed to Interior Secretary Ken Salazar and Bureau of Ocean Energy Management Regulation and Enforcement (BOEMRE) Director Michael Bromwich, warned of a severe revenue fall off attached to declining energy lease sales.

“Under the Obama administration’s management, revenue from our offshore lease sale program has gone from $10 billion to nothing in just three years,” Vitter said. “Revenue cannot be generated from sales that do not happen, and jobs cannot be created on leases that private industry cannot acquire. We’re in a severe fiscal crisis and we’re facing significant economic challenges related to job creation, yet the administration continues to neglect our offshore resources.”

In fiscal year (FY) 2008 revenue from bonus bids on offshore leases was approximately $10 billion, but for FY 2011 that amount is down to $0, according to Vitter’s letter. “Revenue cannot be generated from lease sales that do not occur, and jobs cannot be created on leases that private industry cannot acquire,” he continued.

Unless, the administration reverses course, Vitter anticipates “long-term economic impacts that include lose jobs, lost royalties and lost rental fees.” Companies will be reticent to own a lease if they cannot be reasonably certain that exploration plans or permits will be approved, he added.

Daniel Kish, senior vice-president of policy with the Institute for Energy Research (IER), sees an “opportunity cost” for the Gulf region that may not be recaptured anytime soon.

“The Obama administration has virtually put a stop to energy development in federal waters,” Kish said. “This is like planting seeds, if the government won’t allow to the seeds to be planted now, they are preventing future production. We are talking about a lost generation of economic activity.”

In September, President Obama rolled out a new deficit reduction plan built around income tax increases for higher income Americans.

“We can’t just cut our way out of this hole,” Obama said during a speech at the White House.  “It’s going to take a balanced approach. If we’re going to make spending cuts … then it’s only right that we ask everyone to pay their fair share.” Obama also said that would veto any deficit reduction plan that includes only spending cuts and no tax increases.

“When you include the $1 trillion in cuts I’ve already signed into law, these would be among the biggest cuts in spending in our history,” Obama continued. “But they’ve got to be part of a larger plan that’s balanced –- a plan that asks the most fortunate among us to pay their fair share, just like everybody else. And that’s why this plan eliminates tax loopholes that primarily go to the wealthiest taxpayers and biggest corporations –- tax breaks that small businesses and middle-class families don’t get.”

But the slow pace of permits for oil drilling also contributes to the deficit, Vitter explained in a previous letter to administration officials. The right mix of policies could unleash America’s abundant supply of domestic energy resources, which would in turn boost revenue into the federal treasury, Vitter argued.

“I share the frustration of Louisianians and Gulf Coast residents with the disparity between  the president’s rhetoric and the Interior Department’s actions,” Vitter said. “The administration’s policies have led to massive deficits and job losses, especially in Louisiana, and it’s time for the president to stop lecturing about job creation and allow our energy industry workers to get back to work.”

Without a higher volume of additional permits, the number of active oil rigs will continue to decline in the Gulf, Vitter warned in one of his earlier letters. The 2011 permitting rate is well below the historical average, Vitter observed.

As of early September, “there were 19 floating units operating in the Gulf, up from four in the third quarter of 2010, but down from the average of 28 recorded in the 2007-2009 period,” he wrote.

Up to 20 oil rigs could leave the Gulf, in addition to 11 that have already left, since the administration’s moratorium on deepwater oil and gas drilling went into effect in May 2010, according to a new report.

The future could still be there for the Gulf coast with the right mix of policies, the American Petroleum Institute (AEP) has concluded in a new study.

If U.S. companies were permitted to drill with fewer regulatory hurdles, they could boost government revenues by $800 billion and generate over a million new jobs by 2030, according to API.

But even with a change in administration heading into 2013, the Gulf region is not likely to experience a robust recovery in the short term, Kish, the IER policy expert, warns.

“It will take time to correct these policies,” Kish said. “The Obama administration has shifted the entire ground on which the Gulf of Mexico operates.”

by Kevin Mooney

Original Article

Vitter to Feds: Lower Deficit by Increasing Energy Production

Energy lease sales drop to zero as permitting remains slow under Obama administration

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Even as the Obama administration postures on behalf of deficit reduction and job creation, it continues to advance policies that undermine energy production in the Gulf region and lower federal revenue, Sen. David Vitter (R-La.) has pointed out in his correspondence with top officials in Washington D.C.

In a letter addressed to Interior Secretary Ken Salazar and Bureau of Ocean Energy Management Regulation and Enforcement (BOEMRE) Director Michael Bromwich, Vitter warned of a severe revenue falloff attached to declining energy lease sales.

“Under the Obama administration’s management, revenue from our offshore lease sale program has gone from $10 billion to nothing in just three years,” Vitter said. “Revenue cannot be generated from sales that do not happen, and jobs cannot be created on leases that private industry cannot acquire. We’re in a severe fiscal crisis and we’re facing significant economic challenges related to job creation, yet the administration continues to neglect our offshore resources.”

In fiscal year (FY) 2008 revenue from bonus bids on offshore leases was approximately $10 billion, but for FY 2011 that amount is down to zero, according to Vitter’s letter.

Unless the administration reverses course, Vitter anticipates “long-term economic impacts that include lost jobs, lost royalties and lost rental fees.” Companies will be reticent to own a lease if they cannot be reasonably certain that exploration plans or permits will be approved, he added.

Daniel Kish, senior vice-president of policy with the Institute for Energy Research (IER), sees an “opportunity cost” for the Gulf region that may not be recaptured anytime soon.

“The Obama administration has virtually put a stop to energy development in federal waters,” Kish said. “This is like planting seeds, if the government won’t allow to the seeds to be planted now, they are preventing future production. We are talking about a lost generation of economic activity.”

In September, President Obama rolled out a new deficit reduction plan built around income tax increases for higher income Americans.

“We can’t just cut our way out of this hole,” Obama said during a speech at the White House.  “It’s going to take a balanced approach. If we’re going to make spending cuts … then it’s only right that we ask everyone to pay their fair share.” Obama also said that would veto any deficit reduction plan that includes only spending cuts and no tax increases.

“When you include the $1 trillion in cuts I’ve already signed into law, these would be among the biggest cuts in spending in our history,” Obama continued. “But they’ve got to be part of a larger plan that’s balanced –- a plan that asks the most fortunate among us to pay their fair share, just like everybody else. And that’s why this plan eliminates tax loopholes that primarily go to the wealthiest taxpayers and biggest corporations –- tax breaks that small businesses and middle-class families don’t get.”

But the slow pace of permits for oil drilling also contributes to the deficit, Vitter explained in a previous letter to administration officials. The right mix of policies could unleash America’s abundant supply of domestic energy resources, which would in turn boost revenue into the federal treasury, Vitter argued.

“I share the frustration of Louisianians and Gulf Coast residents with the disparity between  the president’s rhetoric and the Interior Department’s actions,” Vitter said. “The administration’s policies have led to massive deficits and job losses, especially in Louisiana, and it’s time for the president to stop lecturing about job creation and allow our energy industry workers to get back to work.”

Without a higher volume of additional permits, the number of active oil rigs will continue to decline in the Gulf, Vitter warned in one of his earlier letters. The 2011 permitting rate is well below the historical average, Vitter observed.

As of early September, “there were 19 floating units operating in the Gulf, up from four in the third quarter of 2010, but down from the average of 28 recorded in the 2007-2009 period,” he wrote.

Up to 20 oil rigs could leave the Gulf, in addition to 11 that have already left, since the administration’s moratorium on deepwater oil and gas drilling went into effect in May 2010, the Pelican Institute has reported.

The future could still be bright for the Gulf coast with the right mix of policies, the American Petroleum Institute (API) has concluded in a new study.

If U.S. companies were permitted to drill with fewer regulatory hurdles, they could boost government revenues by $800 billion and generate over a million new jobs by 2030, according to API.
But even with a change in administration heading into 2013, the Gulf region is not likely to experience a robust recovery in the short term, Kish, the IER policy expert, warns.

“It will take time to correct these policies,” Kish said. “The Obama administration has shifted the entire ground on which the Gulf of Mexico operates.”

Kevin Mooney is an investigative reporter with the Pelican Institute for Public Policy. He can be reached at kmooney@pelicaninstitute.org and followed on Twitter.

Original Article

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