July 9, 2008

Is "Stupid" the New "Cool" for Democrats?

Hatched by Dafydd

Good news and bad news from Senate Majority Whip Dick Durbin (D-IL, 95%):

"I'm open to drilling and responsible production," Senate Majority Whip Richard Durbin told The Wall Street Journal, adding that Senate Majority Leader Harry Reid could also support the move.

However, Durbin said his support for opening new areas to drilling was contingent on setting requirements that oil and gas companies begin production within a specified time frame on acreage they have leased from the government.

Reuters helpfully adds this, ensuring we all know who the real villains are:

Democrats say energy companies are producing oil and gas from only about a quarter of the 91.5 million acres currently leased from the government.

Um... how difficult is this concept? Let me lay it out in black and white. (Oops, this is Big Lizards... is brownish-red and parchment-tan)...

  • Oil companies do not get to set up rigs and explore for oil before leasing the land they intend to explore. They're allowed to send petroleum geologists to walk around the joint and make an educated guess that this is the kind of geology that often contains oil... but that's it.
  • So when the company leases land, it's really buying a pig in a blanket: Geologists don't really know whether it contains oil at all; and even if it does, whether that oil is economically extractable. They're gambling. (It's not a crap shoot, because they have intelligence; think of the company more as a professional poker player... the odds are still against making a hand; but he knows what those odds are, thus he has a good idea whether to raise, call, or fold.)
  • So all that Reuters' last graf tells us is that Big Energy wins that bet about 25% of the time; and that 25% produces enough oil for them to show a profit.
  • But what about that remaining 75% of lots where they're not pumping oil? Well, one of two things must be true: Either the company has not yet found any oil accessible enough to pump without losing money... or else they have found accessible oil, but they're deliberately not pumping it... and therefore they're committing corporate suicide for some unfathomable reason that we simply cannot -- er -- fathom. After all, their competitors are busily pumping every barrel of oil they can get their rigs on.

Somehow, I think the first option is more likely: They simply haven't found accessible oil on 75% of their leases; they looked and looked, but they came up dry. (Or else they grabbed the lease because it looked promising, but they haven't had a chance to explore yet because they've only had it for a few months -- and they're busy exploring on other leases.) The idea that they're sitting on billions of barrels of oil and deliberately not pumping it, at a time when a barrel of oil sells at an all-time high, is laugh-out-loud ludicrous.

Thus, if we take Durbin's comments seriously (and why should we? it's Dick Durbin), the deal Senate Democrats offer is that they'll graciously allow oil companies to drill where the oil is -- on the outer continental shelf (OCS) -- but only if they agree to also drill where the oil isn't... in the dry holes they're currently leasing.

Democrats: "In your heart, you know they're dolts."

Hatched by Dafydd on this day, July 9, 2008, at the time of 4:45 PM

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The following hissed in response by: Mr. Michael

I wonder if the Eeeeeeeeeevil oil companies get to pick and choose their choices for leasing... of if they are required to lease entire blocks of land?

For example, say OilCo experts find good evidence that profitable amounts of oil can be extracted from a geological area roughly 10 acres by 40 acres. Since it is one singe fluid oilfield, it doesn't matter where they stick in the straw, as long as they can get most of it out easily. OilCo decides to lease one acre of land, and erect a half-dozen pumping stations to extract the oil... sure they could put in more pumps, but the downline oil pipeline couldn't take the extra capacity, making that a waste of time and money.

However, the folks in the Gov't know the score, and will only lease blocks of land... say a square 40 acres by 40 acres. That way the taxpayer gets more relief from higher revenues, and they are able to lease land that could never be drilled, like steep mountainsides and river beds. Thus, even if OilCo puts a well on every usable acre, they would only be extracting from 25% of what they are leasing.

Certainly if I were in charge of setting up the leases for a private landowner or the Government, I'd try to work out a deal like that for the landowner/taxpayer. I have no idea if this kind of thing is actually happening, but as a taxpayer I certainly HOPE so!

Before anybody believes stats out of context, I think a quick look at the facts not spoken are in order.

The above hissed in response by: Mr. Michael [TypeKey Profile Page] at July 9, 2008 9:41 PM

The following hissed in response by: TerryeL

When I farmed we had a gas and oil lease. It was rumored there might be some natural gas in the area, but everyone around us would have to sign a lease before they would come after it. Needless to say there was one old fart who refused, there always is. So the lease ran out. But they paid some nominal amount of money for the lease and the old guy wanted to do some one on one negotiations and they said no, you get the same deal as everyone else or forget it. So he forgot it. That was 15 years ago.

The truth is they know that oil is in the ocean. They would rather go out there and get it. They don't have to mess with land owners or local government or anything else.

The above hissed in response by: TerryeL [TypeKey Profile Page] at July 10, 2008 3:41 AM

The following hissed in response by: TerryeL

Besides, when the oil companies wanted to go after a lot of the oil in the west the government said no.

The above hissed in response by: TerryeL [TypeKey Profile Page] at July 10, 2008 3:42 AM

The following hissed in response by: Karmi

Democrats...You're Stuck on Stupid! - Lieutenant General Russel L. Honoré

The above hissed in response by: Karmi [TypeKey Profile Page] at July 10, 2008 9:28 AM

The following hissed in response by: BarbaraS

Isn't it cute of the senate to tell the oil companies how to do their business and limit them to the unknown as opposed to the known? This, of course, just delays the inevitable. We might as well accept the fact that congress is working against us at all times. They have even given up the facade and pretense. Their agenda is socialism and this oil crisis is messing up their timeline. They are going to have to back down on this or lose the house and senate in November. By that time the economy will be really down and people will be extremely angry. The noise has only just started. In my town restaurants used to be packed until this crisis started, now they are sparsely filled even at peak lunchtime. People don't have the money for extras due to gas prices and the rise in groceries, etc.

The above hissed in response by: BarbaraS [TypeKey Profile Page] at July 10, 2008 6:04 PM

The following hissed in response by: Roy Lofquist

The Democrats want a use it or lose it law? The oil companies would love that particular briar patch.

The above hissed in response by: Roy Lofquist [TypeKey Profile Page] at July 10, 2008 9:21 PM

The following hissed in response by: Karmi


Something is wrong with the "OPEC Threatens America..." comment page...comes up blank when trying to get there. Tried it on two browsers.

Anyway, I don't think the US or Israel will dare attack Iran after the new pictures came out today:

Missile Test


The above hissed in response by: Karmi [TypeKey Profile Page] at July 11, 2008 6:28 PM

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