Quote:
Originally Posted by WTF
https://oilprice.com/Energy/Energy-G...ear-Highs.html
Additionally, the President has called on Congress to pass legislation designed to incentivize energy companies to drill on public lands, applying a "use it or lose it" strategy. The White House has criticized the domestic energy industry for "sitting on" more than 12 million acres of federal land and 9,000 unused but already approved permits for production
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Alas young grasshopper, you have much to learn. Yes President Biden wants to use the oil and gas industry to help achieve his short term political goals, like lower gasoline prices before the 2022 and 2024 elections. But his clearly-stated long term goal is to decimate the industry.
Just the week before last, when he was announcing steps to increase exports of LNG to Europe, he said "This crisis also presents an opportunity that will drive the investments we need to double-down on our clean energy goals and
accelerate progress toward our net-zero emissions future." And, young grasshopper, "net-zero emissions future" means a future without oil and gas.
Recall that Biden campaigned on ending issuance of federal oil and gas leases and permits to drill on federal oil and gas leases. When Biden won, there was a rush of applications for drilling permits. Oil and gas companies wanted to get their applications in before the Biden administration stopped issuing permits. The permits are only good for two years after issuance, but at least they'd have an inventory of drilling locations that would last for a couple of years, assuming Biden complied with his promise.
Biden in the end, because of court challenges and presumed court challenges, did not put an end to issuance of leases and permits. It might take an act of Congress to do that.
So, what's the next best thing? Well, how about getting rid of as many drilling permits as possible, canceling as many federal leases as possible, and removing as much acreage as possible from existing federal leases? Maybe do this in a way that actually might stimulate drilling in the short term, to achieve political purposes, while also pursuing the long term goal of eliminating fossil fuel production in America.
Please note that changing the terms of federal leases is akin to thievery. While we have no idea exactly how the Biden administration intends to modify those terms, we can guess he'll make them more like some of the more onerous terms in some leases on privately-owned ("fee") lands. For example, a fee lease may have a term of 3 years, versus 10 years for a federal lease. The fee lease may require payment of a royalty of 25%, versus 12.5% for federal leases. And a particularly onerous fee lease would allow the oil company to only retain drilling rights to the drilling unit and 100 feet above and below the producing interval, while the federal lease, depending on its size, might allow the oil company to retain the right to drill as long as production continues from the lease.
So, you say, how is it fair that the terms of federal leases aren't as onerous as the fee leases? The reason grasshopper is that the oil companies paid through the nose when they acquired the leases, when they paid the federal government lease bonuses. If you look at fee and federal leases in an area that's actively being drilled, the lease bonus paid for the fee acreage might be, say, around $500 per acre, while the bonus for the federal acreage might be around $2000 per acre. The companies paid more for the federal leases because the other terms weren't as onerous.
To go back and reset the terms for federal leases is very much like outright theft, which of course is nothing new for the new brand of Progressive Democrats, just like their proposals to raise taxes on people like you, young Grasshopper, to extortionate levels. (Aside: I use the term "Progressive Democrats" to distinguish them from the Old Time Democrats, like Kyrsten Sinema and Joe Manchin, who are reasonable people.)
I would also point out that getting too onerous with lease terms can backfire. There were oil and gas companies that went bankrupt in the last bust because they were drilling as fast as they could to retain acreage and depth intervals on fee lands before their leases expired, spending in excess of their cash flow. And drilling a few wells to retain acreage, and then going back and drilling infill wells properly exploit the resource, has turned out to be a wasteful and often uneconomic practice. If you drill a group of wells and then frack them all at the same time, and start to produce them all at the same time, you recover more oil than if you drill just a few wells and then go back years later and drill more.
More facts for lustylad and Tiny
