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Alternate headline: Lucy now charging Charlie for not kicking the football.

The Obama administration, which has hamstrung domestic energy production through drilling bans and senseless permitting delays, now wants to punish companies for not producing domestic energy, according to the President's latest budget proposal.

Specifically, President Obama wants to impose a $4-per-acre fee for existing leases held by oil and gas companies that are currently not producing any oil or gas. The motivation behind the proposal is that energy companies are deliberately holding on to the rights to drill but not doing so in order to drive up prices. The administration thus claims that the proposal is designed to "encourage more timely production."

Such a belief borders on the absurd, especially when you consider that it's the Obama administration that has been actively discouraging timely production through its numerous misguided policies.

A few examples

* Revoking existing permits: Shell Oil spent more than $3 billion since 2006 to maintain a lease to drill off the coast of Alaska, but Obama's EPA withdrew the air quality permit after environmental activists sued and won a lawsuit against the project. The EPA then refused to provide any guidance to the company for how it could regain approval. Rather than participating in a time consuming and costly appeals process, after which environmentalists could simply sue again to invalidate the permit, Shell cuts its losses and abandoned the project, a decision that will cost the region nearly 800 jobs.

* Cancelling leases to drill: Immediately after taking office in 2009, President Obama's handpicked Secretary of the Department of Interior, Ken Salazar, canceled 77 leases for oil and gas drilling in Utah. The fact that this was one of the administration's first regulatory decisions meant that American energy companies were immediately concerned about their ability to produce oil and gas in the future, injecting a level of uncertainty into the market that moves the country away from job creation and economic recovery. One year later, the administration canceled 61 more leases, this time in Montana, as part of President Obama's war on global warming.

* Needlessly delaying offshore leasing: Not long after Ken Salazar canceled the Utah leases, he decided to extend for another six months the public comment period for new offshore drilling. As allowed by law, the public had already been given 45 days to comment on the federal government's pending lease sale to offshore energy producers, after which time the administration would begin developing plans for new leasing. But the Obama administration was so opposed to oil and gas drilling that it wanted to drag the process out further, which meant offshore producers would have to wait even longer before they could start drilling. This was in addition to the 25 years that no drilling was allowed for most of the Outer Continental Shelf due to a congressional moratorium that ended in 2008. Adding insult to injury is that the additional public comments for which the White House asked actually supported expanding offshore drilling by a two-to-one margin, a fact that the administration deliberately kept hidden from the American people. Put simply, the Obama administration did not want any additional offshore drilling, and the fact that the public overwhelmingly opposed them wasn't going to stop them from pursuing their ideological goal.

* Pushing for more taxes on American energy: When the Pelosi-led House of Representatives passed its massive cap and trade energy tax, the Obama administration celebrated. After all, it was then-candidate Barack Obama who happily declared that under his plan of cap and trade, energy prices would "necessarily skyrocket." Although his target was primarily the coal industry (which suffered badly in 2010 under President Obama's watch), imposing a tax on carbon dioxide would also heavily impact oil and natural gas production. In fact, there was a new gasoline tax in the most recent cap and trade bill in the Senate, legislation President Obama helped negotiate and would have happily signed had both chambers of Congress passed it. A study from Harvard University found that a carbon cap that was less stringent than what Congress was considering could send gasoline prices soaring to $7 per gallon. When all efforts to pass cap and trade legislatively failed miserably, Obama ignored the message -- that Americans strongly oppose new energy taxes -- and moved instead to impose a carbon cap administratively through the EPA. Such regulation targets all sectors of the economy, including transportation and oil production and refining, which ultimately means higher gasoline prices at the pump.

* Imposing a moratorium on oil and gas drilling: Immediately after the Gulf oil spill began in April 2010, the White House began soliciting input from drilling experts in the National Academy of Engineering as to what the proper response should be. The Obama administration then imposed a six-month moratorium on offshore drilling, claiming that the experts they consulted had advised them to take such an action. Except they hadn't. The experts stated publicly that they never supported such a moratorium, and that the White House had manipulated their opinions and expertise solely to advance a political agenda. Because the administration had no basis for its ban, two federal courts stated on three separate occasions that the moratorium was unjust. The Obama administration ignored the experts and the courts and kept the ban in place; Salazar said that lifting the moratorium would make him "uncomfortable." Such a decision ultimately led drillers to relocate their rigs (and hundreds or even thousands of good paying jobs) to other parts of the world, and the long-term impact on domestic production will no doubt be devastating for consumers.

* Issuing a new offshore drilling ban: Within weeks of announcing that the moratorium had come to an end, the White House announced a new executive ban on offshore drilling, a ban that is almost identical to what was in place until 2008 when gasoline prices began their climb past $4 per gallon. Amid mounting grassroots opposition to that ban -- led by American Solutions' 1.5 million-member "Drill Here, Drill Now, Pay Less" effort -- then-President Bush lifted the executive ban in July 2008, and Congress ended its own quarter-century long legislative ban a few months later, after which gasoline prices plummeted. But President Obama completely ignored that lesson (and the pain consumers felt) and has set the stage for a repeat of the 2008 gasoline crisis by trying his hand at imposing his own ban. Meanwhile, in the few areas where the White House approves drilling, the administration has completely halted new permitting, a de facto moratorium in and of itself. All told, the Energy Information Administration projects that offshore oil production will decline in 2011 by about 220,000 barrels per day (before the Obama administration's bans, the EIA had actually predicted an increase in production for 2011.) The current "permitorium" has forced at least one drilling company to file for bankruptcy, with others expected to follow as the de facto moratorium continues.

Even worse, the "use it or lose it" proposal is so divorced from intellectual honesty that no one with even a basic comprehension of energy production considers it a legitimate solution.

Based upon geologic formations and other modeling, energy companies identify potential areas for production and then obtain leases to explore for oil and gas. But because these resources are not evenly distributed, many of these leases do not (and cannot) lead to production. Assuming all currently leased acreage can produce oil and gas is like assuming you can pump water out of every well, whether it's filled with water or bone dry.

In addition, many of these leases targeted by the Obama administration have not been held long enough to reach the production phase. Once a lease is obtained, it can take years until production begins. In addition to costly investments in exploration technology, companies must navigate the circuitous leasing and permitting process inside the EPA and the Department of Interior, paying millions or even billions of dollars often just to hold on to what little acreage the government has kept open for production. Under a ten year lease, it's not uncommon for companies to need nearly all of the time allowed just to reach the production phase.

The idea that a company would spend five years and $3 billion, as in the case of Shell in Alaska, just to keep its operations idle is a concept that could only be formulated by people with appallingly little business acumen.

Contrary to the beliefs of "use it or lose it" proponents, drilling for oil is quite a bit more complicated that jamming a straw into a Big Gulp. And as long as the current administration and its cheerleaders in Congress willfully ignore the facts in the pursuit of political gain, America's broken energy policy will remain broken, and the millions of jobs to be gained from expanding domestic energy production will never be created.

http://www.americansolutions.com/drill/2011/02/obama-wants-to-tax-energy-companies-for-not-drilling.php

PDF fact sheet...

http://www.api.org/policy/exploration/upload/Fact_Sheet_NonProducingLeases.pdf
 

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Grey Squirrel
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Specifically, President Obama wants to impose a $4-per-acre fee for existing leases held by oil and gas companies that are currently not producing any oil or gas. The motivation behind the proposal is that energy companies are deliberately holding on to the rights to drill but not doing so in order to drive up prices. The administration thus claims that the proposal is designed to "encourage more timely production."
If only that claim were true, I would support the move to encourage production.
 

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Discussion Starter #3
They'll just write it off... and the left will state the write off is yet another tax break for the rich. ;)
 

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If only that claim were true, I would support the move to encourage production.
There are only so many qualified drilling companies, and they can only drill in so many places at once. One arm of those companies is constantly seeking and obtaining leases. Another arm does the actual drilling. I'm sure which lease gets drilled on is a matter of how profitable the results are anticipated to be on that well, along with the political difficulty of drilling the well. If one company finds the time not to be right to drill on a particular lease, chances are other companies would feel the same way. The real purpose of this move is to get companies to abandon leases and hope that no one will pick them up - thus removing land from the drillable sites. Oil companies are in the business of drilling and selling the product. Sitting on leases that could be profitable is not the way they make money.
 

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Oil companies are in the business of drilling and selling the product. Sitting on leases that could be profitable is not the way they make money.
Bingo.. there was a study done a few years back, most of the leases the left likes to complain about are not profitable at the current price of oil. Sure, there is some oil there, but it's hard to get, and hard to deliver. Maybe when the government gets oil up into the $220-240 range, those leases will come alive with activity.
 

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GOOD! Thay have had leases for decades that they are not using. All the while, they bitch about some alleged moratorium or bans that never were. Why? More money for less production.
 

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GOOD! Thay have had leases for decades that they are not using. All the while, they bitch about some alleged moratorium or bans that never were. Why? More money for less production.
Oh, the bans and moratoriums are very real.. they just aren't written. Go get a permit to drill... and come tell me how long (if ever) it takes you to get the paperwork done. ;)
 

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I'll deffer to the Beatles for my comment on this
Let me tell you how it will be
There's one for you, nineteen for me
'Cause I'm the taxman, yeah, I'm the taxman

Should five per cent appear too small
Be thankful I don't take it all
'Cause I'm the taxman, yeah I'm the taxman

If you drive a car, I'll tax the street,
If you try to sit, I'll tax your seat.
If you get too cold I'll tax the heat,
If you take a walk, I'll tax your feet.

Don't ask me what I want it for
If you don't want to pay some more
'Cause I'm the taxman, yeah, I'm the taxman

Now my advice for those who die
Declare the pennies on your eyes
'Cause I'm the taxman, yeah, I'm the taxman
And you're working for no one but me.
 

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GOOD! Thay have had leases for decades that they are not using. All the while, they bitch about some alleged moratorium or bans that never were. Why? More money for less production.
This is nothing new. Oil companies have sat on leases forever while they drill more profitable wells elsewhere. In the meantime, the mineral rights owner is getting some lease royalty. There is absolutely nothing wrong with this. If it costs a few million to drill a well, and the anticipated production is a a few barrels a day, it's not worth drilling. But technology improves over time, and they want to hold that lease because as time passes, many of those leases will be more valuable as they are able to increase production via new technology. That exact thing happened around here where gas has been known to be below us for decades. But until horizontal drilling and hydraulic fracturing came along, it wasn't worth going after. Those companies that got in early and leased cheaply were in the catbirds seat when the boom hit. It's insane to criticize oil companies for having leases they don't drill on. There are many good reasons for that way of doing business.
 
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