As oil prices creep back above $100 a barrel, Senate Democrats are dusting off a plan first unveiled in 2008 to take away federal leases from oil companies that rent federal land but don’t use it for drilling and exploration.
The revived bill, which is co-sponsored by Sens. Robert Menendez of New Jersey, Bill Nelson of Florida and Charles Schumer of New York, would charge oil companies an extra fee on every acre they are not using for energy production and would force companies to show that they are actively seeking energy sources in the area.
The bill’s proponents say the measure is a response to calls for opening up new land for oil drilling and that the companies should use the land they already have allotted to them. The U.S. government currently leases out 41 million acres of onshore land and another 38 million offshore. About 12 million acres of the onshore land are producing oil and 6.5 million are producing offshore.
“Its like the oil companies want to be taken out to dinner when they have a kitchen that’s full of food going to waste,” Schumer said. “Now maybe if we smack an expiration date on the unused groceries they’ll start cooking…. Just like misbehaving children are sometimes going to hoard toys they’re not playing with, the oil companies are sitting on lands they aren’t using. It’s time to start acting like adults.”
Until the companies prove they can’t extract energy from the land already leased, the bill’s sponsors said, there would be no reason for them to open up new areas for exploration.
The idea that oil companies that pay rent to the government for the right to look for oil are sitting on it for profit is “pure bullshit,” said Daniel Kish, vice president for policy at the conservative Institute for Energy Research.
“There’s not oil under all these lands. Just because you buy a lease, which gives you the right to look — and if you find, produce — doesn’t mean that you’re always going to find,” Kish said. “If it were that simple then everybody would just be drilling on every acre.”
Kish said that that in a world with $4 a gallon gasoline, oil companies would have no incentive to sit on lands they knew had oil under it.
“If companies lease lands, they have to go through a whole series of proving whether there’s oil, he said. “In many cases it turns out they don’t have sufficient qualities. On those they do drill, and they find oil, they work like hell to get those resources to market as quickly as possible.”
When they can’t find oil, Kish added, companies often forfeit their lease anyway.
The sponsors of the “use it or lose it” policy want to ensure that happens through law.
“Put up or shut up,” said Nelson, one of the bill’s co-sponsors. “Put your money down or get off the lease. And if it’s a particularly robust productive potential lease then somebody else can come in there and start producing.”