”Use It or Lose It” Is a Solution in Search of a Problem

For Immediate Release:                                                      Contact:  Nicolette Nye

Tuesday, March 29, 2011                                                     (202) 347-6900          

”Use It or Lose It” Is a Solution in Search of a Problem

WASHINGTON, DC – NOIA President Randall Luthi today issued the following statement in response to DOI’s report to the President on Oil and Gas Lease Utilization:

“It is disappointing to see the resurgence of the “use it or lose it” rhetoric.  Claims that the offshore industry is intentionally idling production of precious energy resources ignore the fact that it takes years of mapping, testing, exploratory drilling and construction to bring production online. It is not by coincidence that offshore oil and gas leases are offered for terms ranging from anywhere from 5 to 10 years. The fact is, it generally takes anywhere from 5 to 10 years of work and millions or even billions of dollars of investment for a lease to successfully produce, depending on the depth of the resources and the availability of supporting infrastructure.

“So let’s set the record straight: The Interior Department’s definition of “Inactive Leases” includes ones where seismic and other survey work are ongoing. These are necessary precursors to drilling and production and will also improve the success rate of exploratory wells. Their conduct cannot be considered “inactivity” by any measure.

“Interior also seems to be arguing that each and every lease block holds the same potential for oil and natural gas production. In fact, oil and gas reservoirs are not uniformly distributed under every square mile of the seabed. Geology does not conform to man-made partitions. Commanding oil and gas companies to drill a well in every lease block would not necessarily lead to greater production overall; it would only create a lot of unnecessary dry wells.

“Finally, existing federal laws already require that companies must achieve production within the timeframe of their lease, or lose that lease.  The non-producing lease initiative is a solution in search of a problem.  We would be better served if Interior’s valuable resources were focused on approving exploration plans, environmental analyses and permits rather than tallying up so-called inactive leases.”

###

NOIA is the only national trade association representing all segments of the offshore industry with an interest in the exploration and production of both traditional and renewable energy resources on the nation’s outer continental shelf.  The NOIA membership comprises more than 275 companies engaged in business activities ranging from producing to drilling, engineering to marine, land and air transport, warehousing and logistics to offshore construction to equipment manufacture and supply, telecommunications to finance and insurance.