Unused Oil Leases in Gulf May Meet Two Years of U.S. Demand

Undeveloped oil and gas leases in the Gulf of Mexico may hold 11.6 billion barrels of crude, enough to meet U.S. demand for almost two years.

Companies are producing from less than 20 percent of 34 million acres leased in the Gulf, according to data released today by the Interior Department. Less than half of leases on federal lands are active, the report found.

The Obama administration said it sought the inventory of leases as a way to press companies into speeding development of energy resources. The oil industry and Republican lawmakers in Congress are seeking to open the Arctic and Atlantic oceans for additional exploration, to reduce dependence on foreign oil.

“They should either use the leases they have, and score on it, or give them up,” Senator Robert Menendez, a New Jersey Democrat, said today in an interview. “ I hope this will give us a new impetus.”

Menendez and Senator Bill Nelson, a Florida Democrat, on March 16 introduced legislation that would require oil and gas companies to pay an annual $4-an-acre fee for unused lands, estimating $874 million would be generated in 10 years.

“This administration seeks to increase politics rather than increase energy production,” Erik Milito, upstream director at American Petroleum Institute, said in an e-mail today. “This is an effort to distract the American people from rising gas prices, and the fact that the administration has been delaying, deferring or denying access to our oil and natural gas resources here at home.”

Lease Adjustments

The administration may trim the duration of leases to accelerate development or may reward companies that step up production with lower royalty rates, Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement that oversees drilling, said on March 17.

“There are tens of millions of acres that are currently under lease that remain idle,” Heather Zichal, deputy assistant to the president for energy and climate change, said on the White House website. “Taxpayers are not getting the full advantage of America’s resource potential.”

The U.S. consumes about 18.8 million barrels of oil a day, according to the Energy Information Administration. The undeveloped leases in the Gulf may hold 59.2 trillion cubic feet of natural gas, according to the Interior report

House Republicans today introduced legislation that would force the administration to sell leases in the Atlantic off the Virginia coast for exploration within a year.

Obama is scheduled to outline his plan for the nation’s energy security during a speech at Georgetown University in Washington tomorrow.

To contact the reporter on this story: Katarzyna Klimasinska in Washington at kklimasinska@bloomberg.net

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.