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WASHINGTON -- Despite soaring oil and gas prices, oil companies and individuals who own nearly 30 million acres of non-producing federal oil and gas leases have made little effort to transform them into energy producers, reported the Associated Press.
An AP analysis of Bureau of Land Management records obtained under the Freedom of Information Act found that 98 percent of the more than 33,000 leases still considered non-producing by BLM have never had an exploratory well drilled. 97 percent have never had a single application for a permit to drill filed with the BLM.
Environmentalists say the lack of exploration belies the Bush administration's push to open even more federal land to oil and gas development, particularly in environmentally sensitive areas. A recent Wilderness Society analysis of new BLM management plans in Utah, Wyoming, Montana and New Mexico concluded that 80 percent of the 6 million acres of environmentally sensitive land covered by the plans would be opened to oil and gas leasing.
Pete Morton, a Wilderness Society economist, said the administration's push for more oil and gas leasing of federal lands is more about boosting the financial prospects of oil companies than producing more oil and gas. "Share prices are based on rational expectations of future earnings potential," Morton said. "If companies can increase that potential, the expectations, and hence share price, by leasing more acres, then it may make economic sense to lease more acres regardless of whether the wells will ever be drilled and/or whether the wells drilled become economically viable."
Industry officials contend that large inventories of undeveloped leases are normal and necessary to protect their investment in energy exploration. And they dismiss suggestions that unproductive leases boost their financial standing.
Oil and gas companies "don't make money and profits by sitting on leases," said William F. Whitsett, president of the Domestic Petroleum Council. "The acreage drilled first is a function of expectation of what they believe they can discover and produce."
Analysts claim the lack of development is caused by permitting delays, a shortage of skilled labor and equipment, and pipeline infrastructure deficiencies that make it uneconomical to explore in some areas. Some also say soaring oil prices may dampen exploration because increased production would tend to drive down prices.
"Why should the industry go and risk more capital, bring more oil and gas to the market and risk the much lower price?" said Fadel Gheit, an oil and gas analyst for Oppenheimer & Co.