http://money.cnn.com/2011/06/06/news/economy/oil_drilling_leases/?section=money_latest

By Steve Hargreaves @CNNMoney June 7, 2011: 12:42 PM ET

Leases for millions of acres of land that the oil industry could be drilling on lay idle, but experts don’t see it as part of a plan to drive up gasoline prices.

NEW YORK (CNNMoney) — The oil industry isn’t drilling on leases for millions of acres of land that could be producing energy.

Yet despite claims from several lawmakers, it doesn’t appear this is part of a nefarious plan to drive up gas prices or reap huge profits by companies like Exxon Mobil (XOM, Fortune 500), BP (BP), Chevron (BP) or Royal Dutch Shell (RDSA).

Experts say oil companies aren’t drilling on the land because it doesn’t make economic sense to do it.

During recent congressional hearings many Democrats cited a recent report from the Interior Department showing that over 70% of the offshore acres the industry has leased from the federal government are sitting idle.

Onshore, nearly 60%, or 22 million acres in total, aren’t producing any oil or gas.
They were responding to calls for more acres of the country to be opened up for oil and gas drilling.

“They have the drilling rights to an area of public land the size of Minnesota where they could and should be drilling,” Massachusetts Representative Ed Markey, a Democrat, said in a statement to CNNMoney. “But instead [they] are coming back and asking Congress to allow drill rigs off our beaches up and down the East Coast.”

Drill baby drill won’t lower gas prices

How the leases work: The oil industry routinely leases blocks of land from the federal government to explore for oil and gas. The leases typically last for 5 to 10 years and cost anywhere from $75,000 to $2 million to get. Then the companies have to pay an additional fee each year for the duration of the lease.

If oil is found, the company get’s to keep the lease for the life of the well, which could be 40 years. They would also have to pay the government a royalty on the production, usually ranging from 12% to 18%. If no oil is found, the land reverts to the government.

Markey and other lawmakers say the industry is purposefully idling production so they can book the oil and gas reserves on their balance sheet as an asset — a move that might drive up their stock price.

Critics also say they might be saving the oil for a future date, when prices might be higher.

The Interior Department, which supports efforts to put more of these leases into production, says over half the nation’s 20 billion barrels of recoverable oil reserves lie untapped in the Gulf of Mexico.

To prod the industry into more rapidly exploring and drilling on these acres, the administration and members of Congress have proposed shortening the period for which leases are awarded — a so-called “use it or lose it” provision.

They have also proposed increasing the amount of money companies have to pay each year for their leases, which can range from $40,000 to $200,000.

Drilling for oil isn’t so simple: But the oil industry and independent experts say it’s ridiculous to believe that companies wouldn’t be trying to produce all they can from the land they have leased if it made financial sense.

The huge amount of untapped land being leased is accurate, said Erik Milito, director of exploration and production at the American Petroleum Institute. But to just look at that number and say the industry is sitting on its hands is too simplistic, “it doesn’t explain the oil and gas businesses at all.”

One reason the industry isn’t producing on these lands, said Milito, is because there’s simply no oil there. Only 25 to 30% of the acres the industry leases offshore ends up having large enough oil deposits to bring into production, he said.

Another reason is the time it takes to go from bidding on a lease to producing oil. It can take seven, eight, nine years to do the seismic work, line up the contractors, conduct the exploratory drilling, and then build the infrastructure needed to bring the oil and gas market, he said.

“Companies are in the businesses of developing oil and gas resources, not buying leases,” said Milito. “You’re not going to make any money if you’re sitting on it.”

Guy Caruso, former head to the government’s Energy Information Administration who’s now at the Center For Strategic and International Studies, agreed.

Caruso also cited the long lead time needed to develop an oil lease and the fact that firms want to recoup any money they put into exploration relatively quickly.

Accusations that oil companies aren’t drilling in order to book the oil reserves also seem simplistic. An exploration well would be needed for the firm to book the discovery on its balance sheet.

Plus, he said oil at $100 a barrel is a huge incentive for companies to produce oil now. The price in the future, he noted, is anyone’s guess.

“This is good politics,” said Caruso, “but it’s not the way the business works.”

By forcing the industry to produce on its idle leases, lawmakers hope to raise domestic oil production, which would tend to increase U.S. jobs and add to federal tax rolls without having to open up additional lands for drilling.

Some hope it would also lower gas prices. But it’s questionable if forcing production would have the desired effect.

“Diligent development policies are unlikely to encourage money-losing production today,” said Kevin Book, a managing director at ClearView Energy Partners, a research outfit. “If producing were economic, investor-owned oil companies would be doing it.”

Special thanks to Richard Charter

http://www.boston.com/business/articles/2011/06/02/brazil_ex_president_silva_tours_cuba_port_project/?s_campaign=8315

June 2, 2011

HAVANA—Former Brazilian President Luiz Inacio Lula da Silva has toured a Cuban port that is undergoing a multimillion-dollar overhaul to become a base for industry and oil operations in the Gulf of Mexico.

The Communist Party newspaper Granma says Cuban President Raul Castro accompanied Silva to the Mariel port facility, about 30 miles (45 kilometers) west of Havana, on Wednesday.

Brazil has invested $300 million in the joint project.

Granma says the leaders were given presentations on the progress of the project, which currently in its initial stages.

About 700 yards (meters) of docks will permit the port to begin operations, and accommodate ships with a draft of up to 50 feet (15 meters).

http://economictimes.indiatimes.com/news/international-business/arctic-protesters-force-cairn-to-halt-drilling/articleshow/8726355.cms

Reuters Africa

4 JUN, 2011, 07.38PM IST,REUTERS

LONDON: British oil explorer Cairn Energy said on Saturday it had suspended drilling from a rig off the coast of Greenland after environmental protesters breached an exclusion zone.

The company, which plans to drill a total of four wells off Greenland this summer, said Greenpeace activists boarded its “Leiv Eiriksson” drilling vessel and entered a restricted area.

“In accordance with the strict Health and Safety practices employed in this drilling programme and in order to ensure safe operating conditions, drilling has been suspended,” Cairn said.

Two days ago, Cairn filed a lawsuit against Greenpeace to deter it from disrupting its exploration plans in the Arctic, one of the last untapped hydrocarbon basins in the world.

It is seeking fines of up to 2 million euros ($2.89 million) for every day that protesters stop it from drilling.

Environmentalist argue drilling in the Arctic carries unacceptable risks because harsh conditions and the remoteness of the region will make it difficult to tackle an offshore spill.

Greenpeace confirmed 18 activists had scaled Cairn’s Arctil oil rig in the early hours of Saturday.

“Their mission – to find Cairn’s elusive Oil Spill Response Plan,” it said in a web posting. “Cairn is hiding it so we’re going to the one place where there must be a copy of it!”

Cairn is leading a charge into offshore Greenland, which explorers believe could hold billions of barrels of oil.
Exxon Mobil, Husky Energy and others also plan to drill there.

Special thanks to Richard Charter

Belize campaign to push the government for a referendum to ban off shore oil exploration has gathered enough signatures to force the referendum! The next step is a massive education campaign to get the votes. It is time for the government to step up with regulatory reform and offer compromise. Many people will agree to drilling in terrestrial protected areas if government makes strict regulation and bans offshore drilling.
Dr. KC Mattes
For more info: go to: www.BelizeMarineTREC.com
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http://www.pnj.com/article/20110602/OPINION/106020301/Editorial-big-chemistry-

Palm Beach Post: Editorial

9:00 PM, Jun. 1, 2011 |

Questions about the ultimate impact of the BP oil spill continue to pile up. New findings about the effect of the oil dispersant Corexit on the Gulf of Mexico confirm what has become increasingly – and disturbingly – evident over time: The response to the oil spill was a crap shoot from Day 1.

Really, that’s what we’re learning. Despite all the assurances from the oil industry – and the government supposedly regulating that industry – no one really knew what they were doing. The industry’s approach to dealing with a big oil spill was to hope it didn’t happen. At least, that’s the generous interpretation. It might be more accurate to say they didn’t really care.

The government’s approach to dealing with a big oil spill was to put all its trust in oil industry assurances that it had things under control. At least, that’s the generous interpretation. It might be more accurate to say it didn’t really care. So when the well the Deepwater Horizon rig was drilling deep in the Gulf of Mexico exploded, both were caught with their oil-stained pants down.

Their attitude toward dispersant chemicals? Inject a few million gallons into the oil stream and let’s see what happens.
Now a University of West Florida researcher is raising questions about whether the dispersant really worked, and worse, if the impact of the dispersant – alone or in combination with the oil – on marine life was worse than the oil itself.

You would think that before approving the use of large amounts of this chemical into the Gulf that such questions would have already been answered. Instead, we have what amounts to a huge chemistry experiment: add millions of gallons of a powerful chemical to millions of gallons of toxic oil and natural gas, and see what happens.

While the dispersant might have functioned well to break up the oil, the supposed point was to allow natural forces – especially bacteria – to consume the oil faster. But what might have happened was that it made the oil more toxic in the ecosystem by spreading it out more finely.

Maybe dispersing the oil reduced the amount that spoiled beaches and clogged marshes. But maybe the trade-off was more damage to the Gulf food chain. Hopefully, scientists will come up with some answers. But what we might discover is the folly of taking action when you don’t know what the impact of that action might be.

______________________

http://thinkprogress.org/green/2011/06/02/234653/corexit-makes-oil-spills-worse-not-better-scientists-find/

Our guest blogger is Kiley Kroh, Associate Director for Ocean Communications at the Center for American Progress.

In yet another alarming glimpse at the long-term effects of the BP disaster, the preliminary findings of two new studies show that the nearly two million gallons of toxic dispersants applied to the more than 200 million gallons of oil that gushed from its exploded rig may have been more damaging to the ecosystem as a whole than the oil alone.

The government approved application of the dispersants in an attempt to prevent oil and tar mats from washing into the marshes along the coast. BP maintained the dispersants would break down the oil and allow more of it to be eaten by bacteria that would consume some of the most harmful products in the oil. But initial experiments conducted by Wade Jeffrey, a biologist with the University of West Florida’s Center for Environmental Diagnostics and Bioremediation, point to the opposite. After adding BP oil to seawater and combining with Corexit, Jeffrey found that the chemicals did not have their intended effect:

The way we’re doing the experiment, the Corexit does not seem to facilitate the degradation of the oil.

In fact, Jeffrey found that the combination of Corexit and oil was more toxic to phytoplankton in the sample than oil alone and did not prompt the oil-eating bacteria to consume the oil any faster.

A similar study, conducted by Susan Laramore of Florida Atlantic University’s Harbor Branch Oceanographic Institute and also released last week, looked at the effects of the oil-Corexit mixture on slightly larger species, including conch, oysters and shrimp. Early results point to the same conclusion – that the oil and dispersant mixture is more toxic than the oil alone. Laramore notes that her study runs directly counter to the assurances BP and others presented to the public when making the case for dispersant use:

These results are backwards of what the oil companies are reporting.

In the immediate aftermath of the spill, BP quickly stockpiled and deployed massive quantities of Corexit with the aim of keeping the oil from fragile marshlands – and out of the public eye. As E&E News uncovered, the chemical is manufactured by “a company that was once part of Exxon Mobil Corp. and whose current leadership includes executives at both BP and Exxon.” According to EPA data, “Corexit ranks far above dispersants made by competitors in toxicity and far below them in effectiveness in handling southern Louisiana crude.”

The oil giant simultaneously worked to convince an uneasy public that the chemicals, previously untested at such depths, would naturally biodegrade. In an official statement last year, BP called the chemical “one of the most well-studied dispersants” and asserted that it would rapidly biodegrade, in many cases in a matter of days. Even when it became clear the company was using the chemicals in “unprecedented volumes” and the EPA demanded BP find a less toxic alternative, the oil giant refused to comply, calling Corexit “the best option for subsea application.”

Both the Jeffrey and Laramore studies, however, clearly debunk BP’s claims that the materials would prove benign. Frustrated by the lack of federal response to their requests for a less-toxic alternative and no longer willing to subject its coasts and citizens to the harmful chemicals, the state of Louisiana has taken matters into its own hands – the senate is moving forward this week with a bill that would effectively ban the use of dispersants in responding to oil spills in Louisiana waters.

Special thanks to Richard Charter.