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Will Opening Restricted Federal Lands and Waters in the United States Ease Oil Prices?

Discussants: Sara Banaszak, Senior Economist, American Petroleum Institute, and Morgan Gray, Professional Staff, House Select Committee on Energy Independence and Global Warming
Updated: July 3, 2008


Oil prices are still rising and policy experts have offered a variety of policy remedies for how to curb prices. Most recently, some lawmakers have called for an end to the moratorium on drilling off of most U.S. coasts as well as an end to restrictions for drilling in the Arctic National Wildlife Reserve. But others say cast doubt on how much more drilling will impact current and future prices. Sara Banaszak, senior economist for the American Petroleum Institute, and Morgan Gray, a professional staff member for the Democratic side of the House Select Committee on Energy Independence and Global Warming, debate to what extent opening up restricted federal areas will have an impact on the price of oil.

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July 3, 2008

Morgan GrayMorgan Gray

The essential question for our energy future is this: where will the policy decisions that we make today lead us in the next century?

What if instead of discussing how to make new drilling areas available, we were discussing how to make new plug-in hybrids available? What if we were discussing how the tax breaks that we currently give to the oil industry to subsidize more drilling, could instead be used to develop the next generation of biofuels, to deploy renewable energy ubiquitously throughout our country?

At what point do we decide, as a nation, that the fossil fuel status quo is not sustainable? When will we look OPEC in the eye and say ‘enough’?

Our era of oil needs to come to an end because it is not working—for our economy, for American families, and for our environment. We need to start making smart policy choices, not rash decisions, to shift us away from the fuels and technologies of the last 100 years, and look instead towards the opportunities of the next 100.

The oil industry’s myopic focus on opening up our wilderness areas and coastlines benefits no one but themselves. It will not lower prices for consumers and it is not necessary when oil companies are sitting on 68 million acres of public land and already have access to 80 percent of our nation’s oil and gas reserves.

In contrast, deploying oil from our nation’s 700 million barrel petroleum reserve has a proven history of providing American families with short-term relief from high prices and could be accessed with the stroke of a pen. Setting a national renewable energy standard would create jobs, fight global warming, and unleash a technological revolution to stimulate our economy and lift our American industrial spirit once again. When two-thirds of the oil we consume every day goes into fuel tanks, pushing for better vehicle technology could break our dependence on oil and on the regimes that supply it, and reinvigorate America’s automotive industry.

Democrats in Congress, and American families from coast to coast, believe that a new, energy independent and safe climate future is within our grasp, if only we would grab it. The oil companies believe that all public land and water should be made available to them, and they are trying grab it. The contrast in these visions could not be clearer. The opportunity and the imperative to act could not be clearer. I trust that Americans will look through Big Oil’s drilling distraction and call for us, as a nation, to finally make a real commitment to a long-term, renewable energy future.

July 1, 2008

Sara BanaszakSara Banaszak

Supplies of crude oil, which, when refined, fuel the cars and planes used by millions of Americans including all members of Congress, are possible because of oil exploration.

Unfortunately, no one—including members of Congress or their staff—has a definitive map that tells you where you can find all the oil that can be commercially developed and produced. The oil and natural gas industry is proud of our technological ingenuity that has enabled us to find and deliver oil and natural gas better, faster, cheaper, and cleaner than was ever thought possible.  This type of innovation supports economic growth and improved quality of life.  But we cannot perform magic. Our industry takes big risks when it bids billions of dollars for leases and must still apply the process of exploration to learn about oil and gas potential.  Members of Congress and their staff don’t have the ability to pinpoint where commercially viable pockets of oil and gas are or—hopefully—they would have considered producing more to increase our domestic supplies. So I encourage you to question a politician when they tell you that they know where the oil isn’t or where it is and that it’s not being produced. 

Exploration is a process that changes what we know about oil and natural gas reserves and where those resources exist. In 2006, in the deepwater Gulf of Mexico, companies exploring a lease discovered a new oil and natural gas field that could rival Alaska’s Prudhoe Bay. Is it a producing lease yet? No. Why? The new field lies under 7,000 feet of water and then another 20,000 feet (almost 4 miles) below the sea floor. To explore in that depth of water safely and environmentally responsibly while also getting the engineering right takes time. This is why the federal government rightly grants 10-year leases for such ultra-deep activity. For members of Congress to ring alarm bells because such leases aren’t producing yet (or to say companies are given too much time before they must produce) is incredibly short-sighted and ignores geological reality.

The idea of treating energy exploration like a dinner plate (“Finish what you have before you ask for dessert”) instead of a pipeline that requires ongoing exploration to deliver a steady stream of energy into America’s homes and businesses is a recipe for disaster. 

To reiterate, the oil and gas industry believes America needs all forms of energy to meet our energy challenges, including renewables and alternatives and domestic oil and natural gas. Regardless of the energy future we envision and move toward, we cannot get through the next twenty-five years without additional supplies of oil and natural gas. 

June 27, 2008

Morgan GrayMorgan Gray

The argument that 85 percent of America’s Outer Continental Shelf is off limits to drilling is a red herring. According to the Bush Administration’s Department of Interior, 80 percent of America’s offshore oil and gas reserves are located in areas where drilling is already allowed. That’s what matters. Where the oil and gas is. Where the natural resources are.

It is completely false to suggest that drilling off the East and West coasts, where there is very little oil and gas according to the Department of Interior, will lower gas prices. Even the Bush Administration has said that the impact on prices that would result from opening the remaining areas of the Outer Continental Shelf would be insignificant.

Oil and gas companies already own and are not producing oil on 68 million acres of public land—an area the size of Georgia and Illinois combined. The oil industry argues that they are already required to return leases to the federal government if they are not producing. What they don’t say is that they are only forced to return those leases when the lease expires. Meaning they can stockpile leases for five, eight, or ten years before having to give them back. That is unacceptable. 

Last week, the CEO of Chevron said that 80 percent of their leases were being “actively worked.” However we know that as an industry, oil companies are producing on only about one-quarter of the land they hold. Moreover, by its own admission, Chevron is not actively working one-fifth of the leases they hold. Before we begin talking about whether to put drill rigs off our beaches where we swim, the oil industry should first produce on the millions of acres they already hold that are not in production. Instead, the oil industry has started saying that while they have no idea whether there is oil on the 68 million acres they already own, they are confident there is plenty of oil and gas under lands that they have never accessed. That is the height of absurdity.

The United States only controls 2 percent of the world’s oil reserves but accounts for 25 percent of the world’s demand. We will not be able to drill our way to energy independence. Democrats will continue to put forward proposals that will provide consumers with actual relief from high prices in the near-term, and move us towards a renewable energy future in the long-term to reduce our dependence on oil altogether.

June 25, 2008

Sara BanaszakSara Banaszak

Our energy future is going to require more efficiency than we’ve ever imagined. We’re going to need more renewable and alternative forms of energy than seems even possible. The oil and gas industry supports these components of our energy future. We are researching, producing and using new fuels for the transportation sector, including ethanol, cellulosic ethanol (made with nonfood plant material), and biodiesel. 

But we also know that under any scenario forecasted by the federal Energy Information Administration, our petroleum consumption continues for at least another 25 years. In five years, more than 300 million Americans will still ride in oil-powered cars, buses and airplanes. They will still pull up to gasoline stations 24/7 to refuel. Trucks will move all of the products we consume around the country. And petroleum will be used to make plastics, synthetic fabrics like outdoor fleece and nylon, cosmetics, and medicines. 

It is partly a failure to face this reality that led to today’s high prices. This head-in-the-sand attitude has kept 85 percent of America’s outer continental shelf off-limits to exploration and blocked any attempts to merely assess these areas to see how much oil and natural gas is there. Should we just continue to import more oil from other countries, send more jobs overseas while the dollar continues to slide as Americans spend more and more to pay for the imported oil?

Our known resources are almost certain to expand if we allow an assessment instead of relying on 25-year old data for off-limit areas. Years ago, Alaska’s Prudhoe Bay was forecast to produce no more than 9 billion barrels, but today it has produced more than 15 billion barrels. Today, the oil industry is actively exploring the leases made available by the federal government—none of them came with Mapquest directions that say “drill here for 50 million barrels.” By the way, those leases are already protected by “use it or lose it” laws.

On the outer continental shelf, 600 million acres are under moratoria and sitting idle. This acreage is beyond the line of sight from any beach, a fact the governor of Florida (a major tourist state) must have considered when he joined Americans asking for the ban to be lifted. 

June 24, 2008

Morgan GrayMorgan Gray

First, let me say thank you for inviting me to participate in this extremely important and timely debate. I look forward to what I am sure will be a spirited discussion.

The oil industry and pro-drilling Republicans continue to disseminate the myth that oil companies don’t have access to enough places to drill. They argue that, in order to lower prices, we need to allow drilling off our beaches on the East and West coast and in America’s most pristine places such as the Arctic National Wildlife Refuge. This argument is nothing more than a drilling decoy. Roughly 80 percent of America’s oil and gas resources onshore and offshore are located in areas where drilling is already allowed or will be, pending planning or review.

The reality is that allowing drilling in the Arctic Refuge or the remaining areas of the Outer Continental Shelf (OCS) would not lower prices today, tomorrow, 10 days from now, 10 months from now, or even 10 years from now. Even the Bush administration’s own Energy Department has concluded that if we allowed drilling in the Arctic National Wildlife Refuge today, the first barrel of oil would not be produced for 10 years and the projected impact on gas prices would be less than 2 cents nearly 20 years from now. Similarly, according to DOE, if we repealed the OCS drilling moratoria today, oil and gas production would not begin until 2017 and that the impact on prices before 2030 would be “insignificant.”

The oil industry is now arguing that we need a grand compromise that will both increase supply and reduce demand. However, the Bush administration has already spent the last seven years fulfilling the supply side of that “compromise.” Since 2001, the Bush administration has offered oil companies the rights to drill on more than 300 million acres offshore and approved more than 40,000 applications for permits to drill onshore. As a result, oil companies currently hold the drilling rights to 68 million acres of public land on which they are not even producing oil or gas.

Meanwhile, Big Oil and their allies in Congress have been blocking efforts to increase efficiency and our use of renewable energy to help consumers and our economy by reducing our reliance on fossil fuels. That’s why Democrats in Congress will tell the oil companies this week to begin producing on the thousands of leases that they already have before coming back to Congress with their hand out asking the American people to compromise by giving away even more public land.

June 23, 2008

Sara BanaszakSara Banaszak

Will opening U.S. lands to more exploration help ease prices? The United States is the third largest oil producer in the world, and a strong signal that we are serious about tapping the abundant oil and natural gas resources that has been placed off limits to exploration should help put downward pressure on prices. We are seeing these high prices basically because global supply has not been able to keep up with global demand growth. Perhaps the question we should be discussing is whether NOT developing known oil and gas resources will help ease prices. The answer is absolutely no.

The tight market and the high prices we face today are partly a result of missing yesterday's opportunities to develop more oil and gas. Since the early 1980s, for instance, Congress has prevented oil exploration or development on most of America's offshore outer continental shelf—today over 85 percent is off limits.

With gasoline prices now over $4 per gallon at the pump and global demand still rising, it is time to address BOTH sides of the demand-supply equation that drives energy prices. On the demand side we must increase efficiency throughout the country, and on the supply side we need more of all kinds of energy—from alternatives to renewables to the oil we use today.

The U.S. government controls a vast share of our lands such that non-park, non-wilderness federal lands hold an estimated 118 billion barrels of recoverable oil, enough to fuel 65 million cars and heat 3.2 million households for 60 years. In addition, these lands are estimated to hold an incredible 651 trillion cubic feet of clean-burning natural gas, enough to fuel the 60 million households that currently use gas for 160 years! Using ever-improving technologies, the oil and gas industry has demonstrated that it can operate in an environmentally responsible manner, especially when more than three-quarters or 3,000 of the Gulf of Mexico offshore platforms withstood powerful Force 5 hurricanes in 2005.

Recent criticisms that the oil industry is not using acreage it has already leased reflect a lack of understanding of how the industry and government leasing operate. Leases that are not yet producing oil are being actively explored for oil and when or if they become idle or fail to produce within a time limit, the leases are returned to the government.

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