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The 'Idle' Oil Field Fallacy
June 20, 2008

From the Inhofe-EPW Press Office

The 'Idle' Oil Field Fallacy

House Democrats have been touting a "use it or lose it" theme, implying that oil and gas should be drilled on current leases before any other areas are opened. Four House Democrats authored a "Dear Colleague" letter with the following plea: "At a time when our constituents are paying $4 per gallon at the pump, the answer is to make sure that oil companies are producing on the land they currently own," they wrote. "They need to either use it or lose it."

Fact: Democrats’ assertions are based on naive assumptions. Sometimes at the end of the day there is no oil or gas found on a lease. Oil companies may hold a number of leases for drilling, but those lands are leased in a speculative environment without knowledge if commercial quantities of resources exist. The Energy Information Administration reports that between 2002 and 2007, 52% of all exploration wells were dry holes. Companies cannot be expected to produce oil from land that doesn’t contain any. According to the June 16, 2008 Wall Street Journal, "Companies don’t know how much oil is under the lands they lease, so they buy up large swaths in hope that a fraction will work out. Much of the area that isn’t producing, they say, doesn’t have oil or gas in commercially viable quantities. Moreover, bringing a new field into production can require years of mapping, testing, drilling and construction – during which time the land would show up in statistics as being ‘not in production,’ even as companies spend millions or even billions of dollars to bring it on line."

David Curtiss, director of the Washington office the Association for American Geologists, explains: "There’s the misconception that every lease has oil [. . .] A lease is a line on a map. It has nothing to do with the geology of where oil is." (LINK)

See Also: Wall Street Journal: The 'Idle' Oil Field Fallacy – June 20, 2008

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