Oil Production On Federal Land Topped 1 Billion Barrels, Reducing Impact OPEC Has On Markets

From The Daily Caller

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Chris White Tech Reporter

February 12, 2020 10:27 AM ET

Oil production on federal lands topped 1 billion barrels in 2019, marking a 29% increase from the Obama administration, Department of the Interior officials announced Tuesday.

Technological advancements over the last decade in hydraulic fracturing helped drive the increase, as did President Donald Trump’s rollback of his Democratic predecessor’s environmental regulations. Production was up 122 million barrels from 2018, The Associated Press reported.

“You have to create an environment where folks want to bid on leases and then go develop them,” Acting Assistant Secretary of the Interior Casey Hammond told the AP. “One thing we can do as regulators is give people some assurances we’re going to work through the process in a fair and efficient way.”

The fracking boom, which began around 2009, collapsed the price of natural gas, giving public utilities a low-cost alternative fuel as regulations imposed by former President Barack Obama forced coal plants to install expensive equipment or retire. Fracking and the accompanying rules have provided a one-two punch to coal producers, while lifting the fortunes of gas and oil producers.

Such technological advancements were not the only element involved in the production increase. (RELATED: Big Oil’s Monster Decade Reveals Why Energy Experts Are Not Very Good At Making Predictions)

“This is another example of the Trump administration undoing four or five decades of thoughtful laws to protect the public lands,” Mike Penfold, a retired state director at the Bureau of Land Management, told the AP. Trump is setting up an environment in which “oligarchs” are benefiting more than taxpayers, Penfold suggested.

The increase does give the U.S. a significant geopolitical advantage over the Organization of the Petroleum Exporting Countries, according to one analyst.

The sheer amount of production coming from federal lands gives the U.S. a big enough stake in the international oil market to prevent OPEC from lording its crude over the world, Sarp Ozkan, director of energy analysis at the industry data firm Enverus, told the AP.

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57 thoughts on “Oil Production On Federal Land Topped 1 Billion Barrels, Reducing Impact OPEC Has On Markets

  1. Not to give the Hactivists any ideas but…
    There is likely only 1 way they’ll ensure that “It stays in the ground” and that is to buy up every available new lease sale and then Not Explore them. Costly to them but a functional alternative

    • Won’t work – you buy the lease, but then you are expected to produce government royalty income from it. There is a limited amount of time in the lease conditions in which you must start developing it, or have the lease voided.

      They tried the same thing with grazing leases a few years back – and had them voided when they didn’t run any livestock on the leased land.

  2. Control the banks and money firms and you can control investments. Fracking needs a lot of money to work, so their is one of their “Achilles Heel”s.

    Luckily we still live in a capitalistic society where money follows profit. Obama tried to change this, but then there was Trump.

  3. “The increase does give the U.S. a significant geopolitical advantage over the Organization of the Petroleum Exporting Countries, according to one analyst.”

    How does producing at a loss give the US an advantage over anyone? The shale miracle was manufactured by the Fed’s easy money policies but as all con jobs, the hope fades once reality intervenes. After that there is panic. American shale production is not economic because the energy content embedded in the factors of production exceeds the energy content of the production once royalties are accounted for. Shale production outside of the small core areas was always a scam.

    • Vangel
      Can you provide some citations to support your claims? Or at least a logical explanation of how and why “easy money” causes “producing at a loss?”

      • “Vangel
        Can you provide some citations to support your claims? ”

        Sollee Clyde the first part of his post is dead on. The “frac revolution” was just from technological continuous improvement, which, over a decade ago bought us a frac fleet, with foreign, spec $. That fleet is worn out, and is now in the process of being cannibalizing and stacked to scrap. With NO prospect of replacement CAPEX. I.e. “fool me once”.

        The second part of his comment is completely mysterious.

        “Or at least a logical explanation of how and why “easy money” causes “producing at a loss?”

        I don’t think he said that. Fraccing is “producing at a loss” because of the combination of low oil prices, increasing declines from competitive drainage, and frac hits. Even with all of the state regulatory Ben Dovers we will pay for sooner and later. As soon as the lower CAPEX and OPEX/boe FSU and mideast oil is produced off, it will resurge. I.e. not for at least a decade, and maybe more.

        • Talk is cheap.
          US fracked oil and gas is even cheaper!
          This country, our planet, our entire solar system, galaxy, and Universe are awash in titanic amounts of energy.
          Party on Wayne!

      • Watch out, guys! I’ll bet they have models that back up their claims! And we all know models are better than real world observations.

    • And the lower electric bills and gas pump prices for Americans, and affordable energy for manufacturing and transportation that has driven the US economy now 10 years without a recession… was just a mirage too.

      The two biggest players that got crushed by the US shale fracking revolution has been OPEC and Russia. Never underestimate the intangible geopolitical cost impacts that has had on their dreams and US dominance around the world. There are lots of people who want the US fracking to stop, and Putin is certainly one of them. Like Mike Bloomberg trying to buy the WH, Putin is willing to spend a lot of Russia’s foreign currency reserve to try and make that happen with misinformation and subterfuge.

    • It’s hard to imagine that private companies would drill hundreds of oil wells that operate at a loss. Even for those whose returns are marginal, if crude oil prices drop below their production costs, the owners “shut in” the well (stop producing) but reserve the right to revive it once the crude oil price rises above their costs.

      In addition to the well-known shale oil reservoirs that are currently being used, there is another large shale oil deposit in the Rockies, across eastern Utah, western Colorado, and southern Wyoming, which was estimated (in 2005) to contain between 800 billion and 1.2 trillion barrels of crude oil, which could supply the USA crude oil needs for 160 to 240 years. It is currently not being exploited due to the mountainous terrain, which make exploration and production costs higher than current crude oil sales prices.

      But if the currently productive areas reservoirs started to run low, and production rates dropped and crude oil prices rose high enough, companies would start looking to the Rockies to frack for oil if it were profitable and if the government and/or landowners allowed it.

      • Steve Z

        I think you refer to the Green River Formation oil “shale” resource. Well, it is there but unlikely to be utilized for lack of water, technology, environmental impacts and viable economics. This has been investigated with billions of dolars over many decades and is not going to happen any time soon and not at all unless an unprecedented national crisis occurs.

        You have to mine the rock, cook it and create a low-quality goo that then must be turned into useful petroleum. Oh, yes, I know that various in situ processes have been tested but this resource is no where close to being a petroleum reserve unless an major breakthrough has recently been achieved. The Exxon Colony Oil Shale effort comes to mind as does the Unocal contract with the military. At $200 per barrel and limited environmental restrictions, maybe it will happen but that scenario is not realistic.

        And, hydraulic fracturing has nothing to do with it.

        Am I wrong? If so, please advise.

    • Fascinating how all the oil companies are working so hard to lose money.
      Fascinating how you are the only one able to figure out that the oil companies are losing money, when they believe they are making money hand over fist.

    • “Shale” has almost nothing to do with this…

      Most Federal lease oil production comes from the conventional reservoirs of the Gulf of Mexico.

  4. “This is another example of the Trump administration undoing four or five decades of thoughtful laws to protect the public lands,”

    And for 4 or 5 decades OPEC and China have been handing the US manufacturing and steel workers closed factories, mills, and smelters. And the emissions have just shifted to China and the rest of Asia. Economic decline is not the way to Save the Planet nor be able to pay for environmental stewardship.

    “said Mike Penfold, a retired state director at the Bureau of Land Management,”
    said the Jimmy Carter Admin era appointee, and a lifelong environmental activist whose idea of balance is “keep it in the ground,” and NIMBY. I suppose he’d rather see vast vistas of wind turbines stretching across Montana’s eastern landscapes and wiping out raptors and migrating waterfowl like scythes through a wheat field..

    • Carter got one thing right (and maybe only one thing). He called the oil crisis the moral equivalent of war.

      In 1980, following the outbreak of the Iran–Iraq War, oil production in Iran nearly stopped, and Iraq’s oil production was severely cut as well. Economic recessions were triggered in the United States and other countries. Oil prices did not subside to pre-crisis levels until the mid-1980s. link

      It was bad. We really don’t want OPEC, or anyone else, to be able to jerk us around on energy.

      • Jimmy,
        Department of Energy 1977, never got us free of OPEC, free enterprise did.
        Depatment of Education, 1979, boy that really helped the country, NOT, but it DID help the Dem party.

        • President Reagan put an end to the oil crisis.

          Reagan’s first executive order eliminated price controls on oil and natural gas. Production soared, and the price of oil declined by more than 50 percent. This was a remarkable contrast to President Carter’s gasoline rationing, which limited us to buying gasoline every other day depending on the last number of our license plate. From scarcity of gasoline to abundance in six months–this was one of Reagan’s first evident accomplishments. link

          Reagan’s trust was in the marketplace.

        • Carter stated gas rationing in1974. 8,8million cars and trucks, 106 billion gallons of fuel produced. With the restrictions nobody wanted to run short so people refueled about twice as often and fuel “on the road increased about 50%”. Enough that every tanker to the gas stations was vital to keeping the supply going. Eventually the program was cancelled and lines at gas stations disappeared with a rise in price of 5-8% a gallon.

          With many fewer vehicles sitting in lines with the engines running mostly(especially in winter) the amount of wasted fuel decreased dramatically.

  5. U.S. Department of Energy (or such like) should calculate oil price at which USA domestic oil companies can produce oil at decent margin of profitability. The DoE should also calculate a wholesale market price at which most of economy can function profitably. So obtained values (dynamically updated) should be balanced against OPEC prices for an optimum value. When domestic cost to producers and consumers is below OPEC available optimum, domestic oil should be taxed and proceeds collected by federal government to be invested in modernising the USA’s electric greed. Any efficiency in electricity distribution improvement should be translated into establishing appropriate electricity price ceiling. This way cheaper OPEC oil or excessive domestic production will directly benefit to 99%+ consumers of electric energy, while at the same time improving country’s perhaps the most important infrastructure sector.

    • “When domestic cost to producers and consumers is below OPEC available optimum, domestic oil should be taxed and proceeds collected by federal government to be invested in modernising the USA’s electric greed (sic). “

      And what happens when oil prices rise? Does the tax go away? Fade out?
      The problem Vuk is that when a tax is imposed, its gains a life of its own because a government bureaucracy grows, and a political constituency forms around maintaining it. Then hungry mouths of lobbyists force the tax to continue for political reasons.

      Sounds good in theory, but we live in the real world with political decisions more based on emotions and political expedience rather than cold hard logic. That is also the false lure of socialism and Marx’s Communism. It all looks good on paper. But human greed and other emotions make decisions. A benevolent ruler or group of people with unlimited political power are really more than just tyrants in the making.

      • Sounds like you have read a bit of Taleb-

        “What we do today has nothing to do with capitalism or socialism. It is a crony type of system that transfers money to the coffers of bureaucrats.”
        Nassim Nicholas Taleb

      • Even if the tax did operate the way Vuk wants, it would still be a bad idea.
        Government determining what the proper price of anything should be, is a very bad idea.

    • What is it about some people that they have a reflexive desire to take as much money from others, so that they can spend it on what they consider to be important. Why is it that these same people consider themselves so smart, that they and they alone are capable of determining what the proper price of everything should be, and that they should have the power to force others to go along.

      • Hi Mark
        People elect governments to stop the humans reverting to laws of jungle to which some of the exponents of the strongest minority are often attracted. As the second best alternative they proceed towards monopoly or cartels. The governments are there to stop such things getting out of hand, so that even lowest strata of citizens has access to the basic commodities of which fuel and electricity come next to the food and water.

        • People selling stuff for a price they want is “law of the jungle”??????

          Is people being allowed to keep the money that they have earned “law of the jungle”????

          Only government is capable of creating monopolies and cartels. The free market destroys such things.

          It is capitalism, not government that creates wealth and it is capitalism not government that makes sure the poor have basic necessities.

          If you want to know how good government is at providing basic necessities, just check out Venezuela.

        • Vuk,
          No, government is there to prevent others from using force and fraud against you. It also needs to provide some common services that can’t practically be provided by private enterprise, like national defense, negotiating with foreign governments, etc. “Leveling the playing field” or setting “fair prices” is not a part of that mandate. Governments are made up of humans, and humans are too easily corruptible, so limiting the amount of power the government has is vital as this limits the amount of damage they can do.

          Of course, the market place is made up of these same imperfect people, so it will also not be perfect. However it will naturally be as good as our flawed natures will allow, assuming of course that there is protection from force (theft) and fraud (swindle). The bottom line is, imperfect people can’t create a perfect system, so something self-adjusting like the free market system is the safest and best way to go.

          • It is definitely true that all people are imperfect, regardless of whether they work for government or the private sector.
            The big difference is that if a company becomes corrupt, it will become inefficient and it’s customers will go elsewhere.
            If a government becomes corrupt, your only choices are revolution, or emigration. Assuming the government will let you leave.

    • Vuk,

      “…calculate oil price at which USA domestic oil companies can produce oil at a decent margin of profitability.”

      Past experience with the government setting a price ceiling is everything gets sold at that price ceiling. No business is going to leave anything on the table for the government. No government will make a dime off this scheme unless it sets an arbitrary purchase price of A and sales price of B > A leaving a cut for the government (aka a tax).

      In any case government price setting will result in shortages and a black market if the production price is set too low or a glut and dumping of product if the price is set too high.

      Regardless, the oil market is far too complicated for the government to effectively set prices.
      – Every oil well has a different ‘lift’ cost (cost to get oil to the surface) which varies from $100/BBL (obviously in the current environment the high cost wells are mostly shut in).
      – Every well has a different transportation cost ranging from $50/BBL.
      – Every grade of oil has a different sales price based on gravity, sulfur, acid content, water content, asphaltene content, and distillation curve.

      Furthermore refineries purchase crude through a mix of long term contracts and spot market purchases, where contract prices typically run at some discount to spot prices or at an offset to an index crude (e.g. West Texas Intermediate). There is a large secondary market for “distressed cargoes”, crude that was slated for delivery to one refinery that can no longer take it due to operating problems and therefore, like the discount bin at the local store, is sold for whatever price the seller can get for it. Refineries only buy crudes that they can process: A refinery designed to process 10 API crude with 5% sulfur will not buy 40 API crude with 0.15% sulfur. Refineries typically blend crudes to optimize feedstock properties, and the preferred blend will vary depending on season and product slate. Refining companies have large staffs dedicated to doing nothing other than buying and scheduling crude (it is, after all, far and away the single biggest expense of running a refinery.)

      So the government would be tasked with trying to figure out a fair price for every oil well in the country and that will produce a crude slate that will match the needs of all the refineries in the United States. This is the kind of wicked problem the self-organizing nature of the free market can solve and which no government bureaucracy will ever solve.

      What will happen should the government get involved in trying to set prices is massive graft and corruption will quickly develop. The money is too big for this not to happen. In the end the bureaucrats, lobbyists, and politicians would win and the producers and consumers lose.

      Therefore the only efficient way for the government to interact with the crude oil market is to tax sales and let the market figure out pricing.

      • Bit by the hypertext bug…

        – lift cost from less than $1/BB to greater than $100/BBL
        – transport cost from less than $0.00/BBL to greater than$50/BBL

        Dang, dang, dang, dang…

  6. High hydrocarbon production on federal land is great for national security and energy independence. It is also good news for federal/state/local government income.

    The feds get large income in lease bonuses, royalties, and income tax. States and counties also get plenty $$ with severance and ad valorem taxes. Additional gasoline taxes on the downstream help fund road construction/maintenance. Domestic hydrocarbon energy industry is doing a lot more for economy than subsidized renewable energy due to this tax and royalty system on domestic production and consumption.

  7. “an environment in which “oligarchs” are benefiting more than taxpayers”.

    Why “taxpayers”? Why not “citizens”? If an oligarch delivers vastly increased amounts of cheap reliable energy to citizens, wouldn’t you expect the oligarch to benefit more than any one of those citizens? If there are multiple oligarchs competing for the market, wouldn’t you expect the total benefit to the oligarchs to be in balance with the total benefit to the citizens? OK so nothing’s perfect, and there may be some things going wrong, but the solution is an open democracy not an authoritarian bureaucracy. And of course lots of cheap energy allowing ordinary people to improve their own lives the way they want.

    • Mike Jonas. I wish I could do the “Thumbs Up” thingy here for you. Please, people – take a minute to open my link in earlier comments. The skeptics are (in my view) losing. I have spent my entire adult life in the oil services industry, and I monitor the major players in what Vangel describes as “Shale production outside of the small core areas was always a scam.” Small? Provide a link. The Marcellus in the the US and Duvernay, Montney plays in Canada are not “small”. Do you call 449 TCF (ya, trillions) of gas small? (Just BC and Alberta} Do you think that the 1.125 billion barrels in the Montney is small? I can’t wait for David Middleton to respond. The Canadian government is currently concentrated on measuring meaningless CO2 emissions, rather than an economy that might have a chance. I don’t even like Trump, but I hope he wins again.

    • The US does not have anything like oligarchs.
      Unless we let them do as they have been trying to do.

  8. [QUOTE FROM ARTICLE]“This is another example of the Trump administration undoing four or five decades of thoughtful laws to protect the public lands,” Mike Penfold, a retired state director at the Bureau of Land Management, told the AP.

    How “thoughtful” is it for the Federal Government to take over land and forbid people from doing anything with it? Or is it more “thoughtful” to develop reasonable regulations for development of Federal land, which balance the need to protect the environment against the energy needs of the nation? It takes more thought to develop a balanced approach than to say “You can’t develop anything here because we said so”.

    • My understanding is that the regulations that have been repealed are only some of the ones put in place by eight years of the Obama Administration.
      And as the article mentions, all of them are not rolled back yet.
      Under Obama, every week an entire pallet of new regulations was being imposed every single week.
      John Stossel had a show which ran until he was forced to retire for health reasons, in which he would detail the massive burden being imposed on businesses and individuals by fanatical maniacs who had been given carte blanche to shut down industry and seize control of even private land.
      The whole idea was to cripple economic growth.
      We hear Greta rail against growth whenever she opens her yap.
      So-called “sustainability” is antithetical to economic growth, and is in fact a code phrase for a long term plan to dismantle our civilization.
      Thank God for President Donald John Trump.
      And thank God for the coming landslide which will give the sane people back control of the House of Representatives, and the way things are going, has an outside shot at a filibuster-proof majority in the Senate.
      Get out and vote, and make sure everyone you know will vote conservative gets to the polls.
      Anyone who is voting against, encourage them to stay home and emphasize the futility of voting.

      • Unfortunately, we will always be stuck with those who consider anything less than government control of everything to be “law of the jungle”, or who believe that without government charity, the poor would starve.

  9. “The fracking boom, which began around 2009, collapsed the price of natural gas,…”

    Since we have been fracking since the 1940’s shouldn’t that sentence say, “The horizontal drilling boom, along with use of shale plays…”

  10. Oil production trends on federal land are the same as on private land. Yes, I’m sure that you could statistically isolate an increment from “relaxed environmental trends”, but that’s just more communization of an E&P external cost from them, and on to the rest of us.

    Conspicuously absent is any data on what increment those relaxed federal lease regs had.

    • Almost none. The vast majority of oil production from Federal leases is from the highly regulated Gulf of Mexico. The end of Obama’s unlawful slow-walking of permits and other obstructionist enforcement of real and imaginary regulations did the trick.

  11. Here in western Colorado the old drill pads have so ruined the environment that they are the hot spots for elk in the winter.

  12. Frac’ing had very little to do with this. Most oil production from Federal leases comes from the conventional reservoirs of the Gulf of Mexico.

  13. I applaud these companies and their innovation which made possible the extraction of this valuable resource. Lower energy costs benefit all Americans.

    • Not only that, but our current technological civilization is predicated/dependent on plentiful, affordable energy. I doubt many people would really volunteer to return to 1850 level conditions.

  14. Low price has downside for the OPEC, Russia, etc. but is beneficial not only to USA but even more so to her biggest industrial competitors China, Japan and Germany, none of which have or very little of domestic hydrocarbon natural resources. I believe that those three combined GDP surpasses that of USA, thus the USA has to be cautious of too low oil price.

    • You are neglecting the money those countries send to us when they buy our oil and gas.

      Regardless, it’s not the governments job to set the price at which people are allowed to sell their own property.

    • Another point is that countries don’t benefit from lower prices, individuals do.
      Once again you are demanding that Americans suffer so that the government can be better off.

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