Guest post by David Middleton
“We produce more oil at home than we have in 15 years.”
–President Obama, Feb. 12, 2013
Yes, Mr. President, we do produce more oil at home than we have in quite a long time. We could actually be producing a lot more than we currently are. See that decline in Federal Gulf of Mexico production from ~1.7 MMbbl/d to ~1.4 MMbbl/d since early 2010? You actually did build that.
It’s no secret in the oil patch that the recent increase in U.S. domestic oil production has occurred almost entirely on State and privately owned mineral leases in Texas and North Dakota and that production from Federal leases has been declining for most of the last four years.
The Congressional Research Service noticed the same pattern…
U.S. Crude Oil and Natural Gas Production in Federal and Non-Federal Areas
Marc Humphries
Specialist in Energy Policy
February 28, 2013
Summary
In 2012, oil prices ranged from $80 to $110 per barrel (West Texas Intermediate spot price) and remain high in early 2013. Congress is faced with proposals designed to increase domestic energy supply, enhance security, and/or amend the requirements of environmental statutes. A key
question in this discussion is how much oil and gas is produced each year and how much of that comes from federal and non-federal areas. On non-federal lands, there were modest fluctuations in oil production from fiscal years (FY) 2008-2010, then a significant increase from FY2010 to FY2012 increasing total U.S. oil production by about 1.1 million barrels per day over FY2007 production levels. All of the increase from FY2007 to FY2012 took place on non-federal lands, and the federal share of total U.S. crude oil production fell by about seven percentage points.
Natural gas prices, on the other hand, have remained low for the past several years, allowing gas to become much more competitive with coal for power generation. The shale gas boom has resulted in rising supplies of natural gas. Overall, U.S. natural gas production rose by four trillion cubic feet (tcf) or 20% since 2007, while production on federal lands (onshore and offshore) fell by about 33% and production on non-federal lands grew by 40%. The big shale gas plays are primarily on non-federal lands and are attracting a significant portion of investment for natural gas development.
[…]
Despite the new timeline for review, it took an average of 307 days for all parties to process (approve or deny) an APD in 2011, up from an average of 218 days in 2006.14 The difference however, is that in 2006 it took the BLM an average of 127 days to process an APD, while in 2011 it took BLM 71 days. In 2006, the industry took an average of 91 days to complete an APD, but in 2011, the industry took 236 days. Thus, since 2006, it took the BLM 56 fewer days to process APDs, while it took the industry 145 days longer to submit a completed application.15 The BLM stated in its FY2012 and FY2013 budget justifications that overall processing times per APD have increased because of the complexity of the process.
Some critics of this lengthy timeframe highlight the relatively speedy process for permit processing on private lands. However, crude oil development on federal lands takes place in a wholly different regulatory framework than that of oil development on private lands.16 State agencies permit drilling activity on private lands within their state, with some approving permits within ten business days of submission.
[…]
The permit delays cited by the CRS were just for the BLM (onshore) APD’s (applications for permits to drill). The CRS report did not discuss the even longer offshore delays. POE (Plan of Exploration) or DOCD (Development Operations Coordination Document) applications have to be submitted and approved before the APD. These plan documents used to be reviewed and approved in 30-60 days. Currently, the BOEMRE is taking 180 to more than 300 days to approve POE’s and DOCD’s. Quite often, the BOEMRE will even not “deem” the plan to have been received for more than 30 days. Then it can be another 30-60 days before they let the operator know if the plan is sufficiently completed for review. The 300,000 barrel per day decline can be laid squarely on the unlawful drilling moratorium in the Gulf of Mexico (yes, it was unlawful) and the subsequent “permitorium.” Back in 2007, Gulf of Mexico production was expected to reach 1.8 million bbl/day by 2013, largely on the back of the Lower Tertiary play…
This production was delayed by the moratorium and permitorium. The first field, Cascade/Chinook, has only just recently come on production. Several more fields should come on-line within the next year or two. So the Gulf may actually hit that 1.8 million bbl/day mark before the end of this decade.
In an era of high oil prices and increasing natural gas demand for power generation, it is simply insane that oil & gas production from Federal leases has been declining for most of the last four years…
It’s even more insane for this to be happening at a time when the Federal government claims that it desperately needs more revenue.
The CBO estimates that the full opening of the Outer Continental Shelf (OCS) and ANWR Area 1002 to exploration and production would quickly generate more than $35 billion per year in Federal revenue from lease bonuses and royalties…
On top of that, the BEA estimates that it would also generate more than $24 billion per year in Federal tax revenue…
That’s about $60 billion per year.
Simply allowing oil and gas companies to do their jobs could more than offset all of the real sequestration cuts (~$44 billion per year) without raising taxes on anyone.
Climate Progress and other green activists seem to be blaming geology for the decline in oil production from Federal leases. They must think that organic-rich shale deposition somehow managed to avoid Federal lands…
The shale plays have nothing to do with the decline in oil production from Federal leases. This is not an “either, or” thing. The increase in oil production from shale plays on non-Federal leases is not causing the decline in production from Federal leases.
The decline is entirely due to the drop in Gulf of Mexico production and this decline is entirely due to the moratorium and subsequent permitorium. As recently as 2010, before Macondo and the moratorium, the MMS was forecasting 1.8 million bbl/d from the Gulf by 2013…
Without the moratorium and permitorium, Gulf of Mexico oil production would likely be about 400,000 bbl/d more than it currently is. Possibly even higher, because production was recovering very quickly after the September 2009 economic crash and Hurricane Ike. While it is true that only about 10% of the current shale oil plays are being exploited on Federal lands, half of the shale gas plays in the Western U.S. are under Federally controlled lands.
Beyond that, the hydrocarbon potential under unavailable Federal lands and waters dwarfs the non-Federal shale plays. The undiscovered technically recoverable resource potential of the lower-48 OCS (Eastern Gulf of Mexico, Atlantic and Pacific), ANWR Area 1002 and other unavailable onshore Federal leases exceeds the discovered technically recoverable resource potential of the active shale oil plays by nearly 50%…
Also, the assertion that Federal leases only cover 10% of the shale oil plays misses the potential “mother-of-all” shale plays: The Green River Oil Shale of the Piceance Basin.
The vast majority of this play is under Federal control and largely unavailable for meaningful exploitation efforts…
While not a conventional oil play, the Green River Oil Shale is now technically and economically exploitable. Last fall the Interior Department announced that it would close off another 1.6 million acres to oil shale development. As it currently stands, very little of this acreage is available for leasing and then only for R&D purposes.
- Gulf of Mexico: 400,000 bbls/d shortfall due to the ongoing permitorium and more difficult lease terms.
- ANWR: 400,000 bbls/d shortfall due to failure to open Area 1002 in a timely manner.
- Green River Oil Shale: 500,000 bbls/d shortfall due to failure to effectively open Federal leases for exploitation.
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@- Jim Clarke
“I am so happy that the price of PVs is getting cheaper all the time. Let me know when PVs are the same price (factoring in all subsidies on both sides) and efficiency and ease of use as fossil fuels and I will gladly use the sun for most of my energy needs.”
Next year.
Get a EV and you can charge it at home.
http://www.pv-magazine.com/news/details/beitrag/deutsche-bank–sustainable-solar-market-expected-in-2014_100010338/#axzz2LyRXuVHd
@- David Middleton
Assuming we never figured out a more economic energy source, the fossil fuel (petroleum, natural gas and coal) will run out in about 5,000 years.
You have a erroneous extra zero in that answer, and it is only the coal which would last that long, 500yrs. Oil has less than fifty years at present consumption rates.
But long before that the cost of seeking those last dregs of fossil fuel will far exceed the cost of other energy sources, they will be extracted as organic feedstuff, not for their energy content.
@-“I spend money to fill my tank. My company drills wells for oil & gas to make money. My gas & electric bills are paid for with money. My pay check, ExxonMobil & Shell credit card statements and checks to the gas & electric companies aren’t denominated in joules, kilowatts or btu – They are denominated in $.”
If other sources of energy are cheaper per mile then you would have to be some sort of luddite to still use fossil fuels to run your vehicle.
But then the are still people who ride horses I suppose….
“fossil fuels” are chemical fuels whose feedstock traditionally has been fossil material. There is no reason to believe we need ever run out of liquid or gaseous carbon based high density fuels to power some of our machines should we wish to keep using them. But whether the real answer is 5000 years, or even with an order of maginitude error 500 years, concern is theological, not practical.
How many catastrophic spills from drilling and production operations in the Gulf occurred prior to Macondo?
This was on the MMS website up until a few weeks after the Deepwater Horizon explosion…
I wish I had screen-capped it.
From the time the first OCS well (Odeco A-1 in Eugene Island Block 94) was spudded in the Gulf of Mexico on May 10, 1947 up until Macondo… 99,718 miles of measured depth hole were drilled without a catastrophic failure like BP’s, almost 100,000 miles of drilling.
While there were some positive changes after Macondo… Every company went to great lengths to restate their “All Stop” policies… And there were a few sensible changes – Like ensuring that you never had drill pipe in the hole so strong that the shear rams couldn’t cut it.
But, 99% of the reaction was idiotic. It just made it more expensive to do everything and it lengthened permit and plan approval times from 30-60 days to 6 months to 2 years.
Dave Middleton: “I wish I had screen-capped it”
Thanks very much for your reply. That is exactly what I was looking for…
“Japan Cracks Methane Hydrate In Dramatic Leap For Global Energy”
http://www.thegwpf.org/japan-cracks-methane-hydrate-dramatic-leap-global-energy/
“Japan has extracted natural “ice” gas from methane hydrates beneath the sea off its coasts in a technological coup, opening up a super-resource that could meet the country’s gas needs for the next century and radically change the world’s energy outlook.”
izen says (March 12, 2013 at 9:22 am): “If other sources of energy are cheaper per mile then you would have to be some sort of luddite to still use fossil fuels to run your vehicle.”
And if fossil fuels are cheaper, you’d have to be some kind of idiot to insist people use more expensive “alternative” energy sources.
Or a politician. But I repeat myself.
David Middleton says:
March 12, 2013 at 7:46 am
“The Eagle Ford and Bakken had nothing to do with the decline in oil production from Federal leases.”
But these 2 plays do largely explain why non-federal acreage oil production is climbing. Without those 2 plays, federal & non-federal production profiles would not look that dissimilar.
There are plenty of shale plays that have been tried &/or are producing on federal acreage – the Niobrara, Mowry, Heath, Lewis, Pierre, Mancos, Manning Canyon, Cane Creek, Monterey / McClure to name a few, but they just don’t have the same quality as the Bakken or Eagleford. Thus my comment – all shale plays aren’t created equal. It’s hard to argue any of these plays would be producing as well as the Bakken with a more favorable regulatory environment.
Don’t get me wrong – I agree with your premise that federal regulation is stymieing production on federal lands – no doubt that is true – however, I also think it is unfair to suggest there would be a play equivalent to the Bakken or Eagleford that would be contributing similar production under a different regulatory environment.
If you feel there is such a play out there on federal lands, I would like to take this conversation off line & talk to you about investing in it :))
If I knew where the next Eagle Ford was, I wouldn’t be working the Gulf of Mexico!
Apart from the Green River Oil Shale, I wasn’t implying that there was a quality shale oil play, ready and waiting, under unavailable Federal lands.
My point was that the Bakken and Eagle Ford didn’t cause the production from Federal leases to drop by ~300,000 bbl/d since 2010. That decline was caused by the moratorium and permitorium.
How many catastrophic spills from drilling and production operations in the Gulf occurred prior to Macondo?
Mr. Middleton, there was one “catastrophic spill” pre-Macondo; the Ixtoc 1 well in the bay of Campeche spilled about 3.3 million barrells of oil in 1979 before finally being brought under control with relief wells. Notwithstanding that oversight, your basic point is sound; The safety record of oil and gas drilling in the GOM is pretty darn good, especially in light of the difficult engineering issues involved in extracting hydrocarbons from deep wells in deep water. it’s a shame the average citizen can’t travel to some of the rigs or platforms in the GOM to witness and get some basic understanding of what is involved in the process. i hope they, like i always am, would be amazed at human ingenuity in the modern world.
David Middleton says:
March 12, 2013 at 12:18 pm
“My point was that the Bakken and Eagle Ford didn’t cause the production from Federal leases to drop by ~300,000 bbl/d since 2010. That decline was caused by the moratorium and permitorium.”
Agreed !!!
I was discussing the U.S. OCS portion of the Gulf of Mexico.
Ixtoc was really bad. But the Bay of Campeche is not part of the U.S. OCS, not regulated by the MMS (now BOEMRE) and USCG, nor is Pemex a competent operator.
Mr. Middleton,
I find it interesting about this 300 Mbbl/day figure you mention since it matches up pretty well with the exact difference in the BP oil production in the GOM prior to and after their accident/oil spill in April 2010: http://www.rbnenergy.com/bridge-over-troubled-water-gulf-of-mexico-oi-production-recovering
That specific drop in BP oil production couldn’t have anything to do with the fact that BP itself was under criminal investigations and reviews of safety and environmental procedures regarding the accident and deaths and it was therefore prevented from drilling until those criminal investigations and reviews had been completed could it?
By the way, that forecast of 1.8 MMbbl/day you brought up was already proven to be wrong as GOM production had already dropped by 2 Mbbl/day well before the April 2010 BP oil spill incident: http://www.rbnenergy.com/sites/default/files/styles/extra_large/public/field/image/chart2_2.png?itok=vdU7VHQ-
Back in February 2009, before any BP oil spill/accident or moratorium, there was already a discussion that the long-term GOM oil production trend would continue on a general decline from its 2002 peak: http://www.theoildrum.com/node/5081
In regards to the moratorium, it was fully lifted by March 2011: http://bizmology.hoovers.com/2011/03/24/deepwater-drilling-permits-in-the-gulf-of-mexico-get-the-green-light/
and BP was granted a deepwater drilling permit in November 2011: http://bizmology.hoovers.com/2011/11/01/bp-wins-permission-to-drill-in-the-deepwater-gulf-of-mexico/
It was after the granting of that deepwater drilling permit that GOM oil production actually dropped by about that additional 300 Mbbl/day figure soon thereafter.
As you already generally noted, crude oil production in the GOM production is still forecasted to slowly increase to 1.5 MMbbl/day by the end of 2014: http://www.rbnenergy.com/sites/default/files/styles/extra_large/public/field/image/chart2_2.png?itok=vdU7VHQ-
as the number of oil rigs in the GOM has now fully returned levels just below where they were before the BP accident: http://www.rbnenergy.com/sites/default/files/styles/extra_large/public/field/image/chart3_0.png?itok=gBbQM3Xn
But again the forecasted GOM production trendline is generally downward based on the information provided in that February 2009 report, and that was well before this hype about the moratorium and permitorium ever came into play.
People who say that increased US oil production has done NOTHING to reduce the price of oil need to look at the price spread between WTI oil and Brent oil.
It’s impressive.
@Sceptical:
” stabilize the price of oil.”
Don’t know much about commodities or oil, I see. There’s this thing called OPEC that “stabilizes the price of oil” at high prices. Though even there, the fundamental nature of commodity markets is to be unstable, so they have challenges.
The goal is not to “stabilize the price of oil”, the goal is to keep US $$$ in the USA and Canada, not send them to OPEC members.
@Izen:
“Unlike renewable sources of energy like PVs. Reducing in cost every quarter, and with a free and infinite fuel supply.”
Yet more extreme lack of understanding. First off, PV isn’t free. There isn’t any “fuel supply” to it, it is all sunk cost capital. Photovoltaics are pricy. Second, take a look at where oil goes. It goes into transportation. Then look at where electricity goes. It does NOT go into transportation. That means you need “fleet change” if you wish to use electricity to do transportation. That runs into $Trillions for the nation. Now look at ‘vehicle lifetime’. AVERAGE is now about 12 years for “light duty cars and trucks”. Heavy vehicles even longer. Even IF every single new vehicle being sold today were an electric, it would be a dozen years to turnover 1/2 of them. Oh, and we can’t make them that fast. (Hint: Look at copper supply… and lithium… and …)
Next look at things like ships, trains, and airplanes. You know, things that take a LOT of that oil. And large trucks. And farm and construction equipment. Now where are you going to buy your electric container ship? Your electric 787? Do you know the cost to electrify 3000 miles of train track for just ONE of the cross country lines? There’s a reason they run on Diesel. Trains migrate to the lowest cost energy source. In small urban areas with light trains and frequent start stop, that is electricity (so subways are often electric). For long haul it’s not electric. (Though if we built a load of nuclear power plants like in France and Japan it can become economical).
Now compare that with solar at God Awful per kW-hr (about 40 cents instead of 4 to 8 for bulk nuke baseload). No way any train is going to be using that stuff. It would be more economical to go back to coal and steam engines. (Better is just to use F-T and convert coal to Diesel and keep the rolling stock the same).
So we’re going to be using oil products in that transportation fleet for a very long time. We may make them from coal, or even garbage, or even “pond scum” (all of which are proven) but we will not be using solar PV for transportation in any significant amount. Just not going to happen.
There’s a nice US Govt graph of where energy comes from and goes to in this article (about using a coal /water slurry in Diesel engines):
http://chiefio.wordpress.com/2013/03/09/chws-charcoal-liquid-diesel-fuel/
Interesting article, btw, the author of the quoted paper finds he can make charcoal into Diesel fuel with ash levels suited to heavy machinery use. Yes, charcoal. So we can, at lower costs than present, BTW, use wood farms to replace oil. As trees are more energy efficient than corn ethanol, likely at a much better energy efficiency too.
Oh, and I see you trolled the “too much energy to lift it” line. That is a Red Herring. The form of the energy matters. Just as we take natural gas that we have in excess (and often stranded for lack of pipelines) and use it to cook tar sands for oil to make liquid fuels, we can use natural gas or nuclear electricity to “lift” oil long after it is a net energy consumer, because we want the liquid fuels it produces. We never run out of nuclear power (and it can be made quite cheaply) so we will be using it to lift oil for a long time to come. (The oil wells along Hwy 101 in California are running on electric motors now, and we get nuclear power shipped in from Palo Verde plant in Arizona, so this is NOT a hypothetical.)
http://chiefio.wordpress.com/2009/05/29/ulum-ultra-large-uranium-miner-ship/
@Phlogiston:
Japan has started the first test production. It will take a while to find out how well it goes:
http://chiefio.wordpress.com/2010/11/30/clathrate-to-production/
Ultimate resource is gigantic. Haven’t kept up on the newest news, so maybe time to go looking again.
I am guessing not many are following this post at this point, but I thought I would post this link , which just got this morning, but is a 3rd party opinion in lock-step with David’s thesis of the federal government being a significant impedance to production on federal lands:
http://www.epmag.com/Production/Production-Declines-Pose-Challenge-Gulf-Mexico_113649?utm_source=sp&utm_medium=em&utm_campaign=5772917-March%2014,%202013&utm_term=EP%20Buzz%20March%2014%202013%20Auto%20(1)&utm_content=578623&spMailingID=5772917&spUserID=MTc3Nzg4NzE1MAS2&spJobID=68534813&spReportId=Njg1MzQ4MTMS1
Awesome. Thanks David! Please keep it up!