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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

Chickens are Coming Home to Roost for Obama Energy Plan

Posted April 27, 2011

Earlier this week, Director of BOEMRE, Michael Bromwich, claimed that increasing energy exploration and production in the U.S., the world’s third largest oil producing nation, “would not have a material effect on gas prices.”  Apparently unaware of the principle of supply and demand, Bromwich claimed that “you can’t drill your way to lower oil prices.”

President Obama disagrees.  Currently, the President admits that he is in talks “with the major oil producers like Saudi Arabia to let them know that it’s not going to be good for them if our economy is hobbled because of high oil prices.”  The President obviously believes that increasing oil output from the world’s major oil producers would decrease the price of oil.  Unfortunately, he does not consider the United States to be one of those major producers.

In response to President Obama’s statements, Dan Kish, vice president of policy at the Institute for Energy Research, issued the following statement:

“The President now says his administration is pushing major oil producers to increase oil output in an effort to lower prices.  What he really needs is to have someone tell the government of the world’s 3rd largest oil producer to boost output.  In case he is unaware, that oil producer is the United States.”

“He could do that at his next cabinet meeting by telling EPA to stop holding up Shell’s drilling in Alaska and by telling Secretary Salazar to stop closing access to our nation’s energy supplies, which the Congressional Research Service says are larger than any country on earth.”

“The President is beginning to look like the Ugly American in his attempts to point the finger of blame anywhere but his record, which includes seeking higher taxes on energy and stopping energy production wherever possible.  It requires a suspension of disbelief to accept his protests about higher energy prices when that is his policy.  His chickens are coming home to roost.”

Original Article

Louisiana Energy Leader Describes Obama Administration as Hostile

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By Kevin Mooney

Louisiana’s strategic importance to the U.S. a major theme of LOGA luncheon

NEW ORLEANS, La – Top Obama Administration officials who visit the state should not expect an audience with Don Briggs, president of the Louisiana Oil and Gas Association (LOGA).

In his keynote address at Thursday’s LOGA’s “State of the Industry” luncheon in New Orleans, Briggs was particularly critical of Interior Secretary Ken Salazar and Michael Bromwich, the director of the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE). Although both federal officials have expressed support for increased production in the Gulf Coast, these statements do not square with their actions, Briggs told audience members.

“They talk about wanting to help [the domestic oil and gas industry], but it’s like watching a magician who is doing one thing with his hands but the action is really somewhere else.”

When Salazar and Bromwich last visited Louisiana, members of the state’s congressional delegation invited Briggs to meet with them. But, he declined. “Been there done that,” said Briggs.

“They tell you one thing and they do another. We give them too much attention and way too much credit because they do not want us to go back to work.”

LOGA’s luncheon, with approximately 40 attendees, coincided with the one-year anniversary of the British Petroleum explosion in the Gulf that resulted in the death of 11 workers and spilled an estimated five million barrels of crude oil. While BP clearly made costly mistakes, there is a large body of evidence that shows the industry as a whole is very responsible and innovative, Briggs said. There are about 40,000 wells in the Gulf, and deepwater drilling has taken place safely and effectively in 1298 wells, he pointed out.

Industry workers on rigs who use joysticks to control robots in the deep water are performing a task that is the equivalent of “going to the moon every day.” Even so, he argued, a change in administration is needed before the region can fully recover economically.

Looking ahead over the long-term, oil and natural gas are not going away and this reality puts the state in a strong strategic position, especially if the right mix of polices are in place, he continued.

“Louisiana is the Aorta of America,” Briggs said. “When we shut down our refineries this means 60 to 70 percent of the fuel that runs this country gets shut down… We will become even more important to this country’s national security and infrastructure over time.”

Unfortunately, for the moment, investors are reluctant to re-enter the Gulf, Briggs lamented. Prior to the BP spill, there were 61 rigs in the entire Gulf and now there are only 26. Where there used to be almost six new deep water permit applications per month, there is now only one, he added. Shallow water permits are also down from about seven to under five, he said.

“You have to understand one thing,” Briggs continued. “If [the administration officials] wanted us to drill in the Gulf of Mexico, we would be drilling.”

The Obama Administration’s actions have created an “unprecedented uncertainty” in the Gulf of Mexico both for small independent companies and for major oil companies, Briggs observed.

He also said that policymakers should carefully consider the real value of renewable efforts, which tend to be very expensive. While it may be fine to have some solar and wind, “they are not going to be the driving fuel of the future,” Briggs said. “Ethanol is the joke of jokes.”

Original Article

BOEMRE: Official lashes out at ’sniping’ over oil drilling permit delays

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by: Amanda Carey

Earlier this week, Michael Bromwich, Director of the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) lashed out at critics of his agency’s dealings with offshore drilling permits since the BP oil spill last year.

It was during a speech at the Center for Strategic and International Studies, and Bromwich was quite put out. “What was destructive, corrosive and not done in good faith was the sniping from certain public officials and industry trade associations,” he said.

“They claimed, and some continue to assert, that we had imposed a ‘de facto’ moratorium or created a ‘permitorium’ that was blocking the issuance of drilling permits,” Bromwich continued. “Not because the applications had failed to meet all the requirements, which was the fact, but supposedly because we had made politically motivated decisions not to issue them. That could not have been further from the truth, but it was repeated often enough that people who should have known better came to believe it.”

In mid-February, the first Gulf of Mexico drilling company declared bankruptcy. And according to the Texas-based Seahawk Drilling’s CEO Randy Stilley, the decision to file for Chapter 11 came after the company’s revenue stream had “been adversely affected by the dramatic slowdown in the issuing of shallow-water permits in the U.S. Gulf of Mexico following the Macondo well blowout.”

At the behest of a bipartisan group of lawmakers and fed-up industry officials, BOEMRE and the Department of Interior issued the first permit for deepwater drilling in the Gulf of Mexico on March 1. Since then, then agency has issued a handful of permits for drilling in the Gulf.

But one industry official isn’t taking Bromwich’s rebuke sitting down. In a statement, Jim Adams, President and CEO of Offshore Marine Service Association, slammed the director, saying “Bromwich should spend less time trying to silence public criticism and more time actually approving drilling permit.”

Adams then asserted that Bromwich should “get his story straight,” noting that Bromwich says permits are not being delayed, but also claims Congress has not provided the sufficient funds the department needs to approve the permits.

“The bureaucratic double-talk would be laughable if thousands of Gulf workers weren’t sitting idle, or if Americans weren’t paying $4 a gallon for gasoline,” said Adams. “There’s a way Bromwich could stop the criticism that seems to bother him so much. He could simply do his job.”

Original Article

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