Posted on 08/18/2011 8:53:12 AM PDT by thackney
Oil companies are once again squaring off with government regulators in the Gulf of Mexico. This time, its Exxon Mobil. The giant oil company is fighting to retain leases for the Julia field, what could be the biggest oil discovery in the Gulf ever, or at least since BP’s Thunder Horse field in 1999. The problem: the government claims Exxon’s leases for the field have expired.
The Obama administration has been cracking down on unused offshore leases, which cost the Treasury royalties, the Wall Street Journal reported. Exxon seems to believe getting an extension on the lease was just a formality. “You state your case and you got it. [This] was unexpected,” a spokesman told the Journal.
For the past year, the industry and government regulators have been squabbling over how drilling should proceed in the Gulf. One thing is clear: This isn’t it. Obviously, Exxon should be following the rules on permit extensions, especially in a case where the stakes were so high. As the Journal describes it:
The Texas behemoth faces the sobering prospect that it may have made the largest discovery ever in the Gulf of Mexico only to lose it. Tens of billions of dollars of oil could slip through its hands because it failed to follow federal rules for getting a lease extension while it moved forward with plans to get the oil out of the ground.
The oil company claims drilling a well in deep water takes time to do safely, and that the government’s response creates a regulatory environment that encourages haste over thoroughness. Exxon also claims the government has changed its tactics and that its arguments for not extending the lease have never been applied before. The government says Exxon didn’t submit a specific production plan, which violated the legal requirements for granting a lease extension.
This battle, playing out in federal court in Lake Charles, La., dates to 2008, two years before the Deepwater Horizon disaster, but it illustrates the fundamental disconnect between the industry and the government that’s emerged in the Gulf. The industry acknowledges that last year’s accident changes everything, yet still seems surprised when it does. Recognizing that regulations must change, oil companies still argue, essentially, “We’ve never done it that way before.”
The government, meanwhile, seems so eager to show its a tougher regulator that it looses sight of the big picture. If it takes the leases away from Exxon, it will have to find another company to develop them. That will take even more time and cost even more lost royalty revenue. At the same time, it will only add to the confusion over the new regulatory scheme in the Gulf, potentially creating further delays for other projects as well.
WSJ excerpt:
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The loss of the leases would be an enormous black eye for Exxon. The company hadn't previously disclosed the size of the discovery in what is called the Julia field until it was mentioned in the suit Exxon filed against the Interior Department last week in federal court in Lake Charles, La.
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Now the department must decide whether to fight Exxon in court or settle and allow it to develop the oil. Turning the leases over to another company would mean further delays to the tax royalties that would go to government coffers. At current prices, potential royalties paid to the government over the lifetime of a one billion-barrel field would be about $10.95 billion.
this sounds like a GOP campaign talking point if ever I’ve heard one
The article makes the off base assumption that the Obama Administration wants the find developed.
I am certain they want to re-auction those leases. The dollars it would bring in now after the discovery would be immense.
They can hold up the production permits for a long time, but they want to get the dollars for the lease auction.
They have done the same thing in the National Petroleum Reserve, Alaska for years.
until that Worthless,skinny Commie and his lackeys are Voted out,we will have a HUGE energy problem,which is the base of our economy, NOT TAXES!
“this sounds like a GOP campaign talking point if ever I’ve heard one...”
Heh. I know Loren Steffy. He was my editor back when I was a columnist at THE BATTALION, school paper for Texas A&M..
I think Loren would be amused that he’s writing talking points for the GOP. =)
My first assumption is that in a corrupt administration the opportunity for graft will be irresistible.
The Health of our lifestyle depends on energy.
All politics aside. I work with the accounts payables (AP)department of many large corporations.
Little things can cause major disruptions. Back in the late 1990’s a major internet provider like Amazon or e-Bay was suddenly offline. The reason: AP had failed to pay a $50.00 bill to the internet name hosting company. This is something that is probably not billed, i.e. like rent; you are supposed to pay without receving a bill.
I wonder if these leases are managed the same way?
“it will have to find another company to develop them”. This will either be China or Cuba. Count on it.
Sounds like Obama’s goons are trying to pull a Hugo Chavez. Can nationalization be far behind?
Exactly, one of his unstated goals was nationalizing all oil and gas reserves in the US.
All those offshore reserves past the state boundaries are already under federal control. That is why private companies have to lease the access to them from the Federal Government.
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Oil companies are famous for sitting on big finds for years, even decades. Obama is just now stealing a page out of Sarah Palin’s book going after them.
This issue is about Exon not even submitting a plan on how it intends to recover oil found 3-4 years ago.
Obama knows the only way to get re-elected is with major improvements in the economy, and he knows that ain’t happening under $4 a gallon gas.
I thought you would get a kick out of that
It sounds like the feds were demanding that EXXON present operational plans for drilling, while the feds were still in the process of re-writing the rules for deep-water drilling.
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