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Interior Secretary Takes Oil and Gas Associations to Task

Interior Secretary Ken Salazar last Tuesday hammered oil and gas trade associations for uttering "untruths" about the record for onshore and offshore leasing during the Obama administration's first year. He said the associations were acting like an "arm of a political party" during an election year by "repeatedly" launching attacks against the department.

He declined to name the trade associations and energy companies that were the most vocal critics. "They know who they are," Salazar told reporters during a teleconference in which he announced Interior's plans to hold 38 quarterly auctions in 2010.

The Bureau of Land Management (BLM) held 32 onshore lease sales this year, while Interior's Minerals Management Service (MMS) conducted two lease sales in the Outer Continental Shelf (OCS), Salazar said. The two agencies combined offered more than 55 million acres for oil and gas development in the current year, he noted.

"We believe that our oil and gas leasing program is robust...but you wouldn't know it if you listened to the untruths coming out of some corners of the oil and gas industry," Salazar said. The oil and gas industry "[needs] to understand that they do not own the nation's public land, taxpayers do."

The industry claims its criticisms are based on the facts. "We have been concerned about the pace of leasing since the cancellation" in February of the 77 Utah leases issued during a late 2008 auction, "which Salazar said was a midnight decision" of the Bush administration that was rushed through without a proper environmental review, which "wasn't true," said Dan Naatz, vice president of federal resources for the Independent Petroleum Association of America (IPAA). "I think it was indicative of the strategy that they were going to move forward with out of the box...It was pretty blatant," he told NGI (see NGI, Feb. 9).

Naatz said he thought Salazar's attack on oil and gas associations was prompted by the results of a recent position paper by the Independent Petroleum Association of Mountain States (IPAMS), which found that the Obama administration in its first year issued 1,934 fewer leases and leased 1,146,949 fewer acres in the Intermountain West than during the first year of the Clinton administration.

"The facts speak for themselves," Naatz said. "I think they [the Obama administration] will make it more difficult and costly to drill" on federal lands in the Intermountain West, which will take a toll on independents.

Thomas J. Pyle, president of the Institute for Energy Research, said the Obama administration's first year in office has been the worst on record for domestic energy development. "President Obama and Secretary Salazar may speak of responsible, homegrown energy, but their actions are in direct contrast to their words. In fact, this administration has kept more publicly owned federal lands off-limits for energy development this year than any on record," he said.

While Pyle faults the administration, Salazar believes the onus is on producers and trade associations. "The truth is most energy companies are responsible developers...But those companies need to make a choice. Their shareholders didn't sign up to have their companies [and] trade associations behave like an arm of a political party. Oil and gas companies can choose a different path -- one of engagement, corporate responsibility [and] honesty," he said.

Salazar said 26 million acres of leased public land and 28 million acres of leased ocean currently are idle. BLM Director Bob Abbey reported that approximately 5,000 of the 7,735 active leases in the OCS are not producing, while about half of the 53,585 active onshore leases are not producing. This is in large part due to the fact that about half of the parcels offered for lease in 2008 and this year have been protested or are the subject of litigation.

Abbey and Interior Assistant Secretary Wilma Lewis are working on reform efforts to lessen the controversy and litigation surrounding leases, according to Salazar. He said the two are expected to make an announcement in the near future.

Producers are not sitting on their leases, as some in the administration and on Capitol Hill contend to justify arguments that no new lands should be opened for oil and gas development, Naatz said. That's a "tired argument." After having paid "huge amounts" to lease land and on rental rates, "companies are out there working their leases," he said.

To avoid a repeat of the Utah auction debacle, "we believe that industry deserves greater certainty when they go into [a] lease auction. They should never be given the false promise of a lease parcel next to a national park," Salazar said. "The reason that there is uncertainty [now] is because of the fact in [the] prior administration there were shortcuts taken," such as leasing parcels next to national parks, he noted.

IPAMS said it believes both producers and Interior needed to be held accountable to the public. "We are all accountable to the American public to ensure that responsible development occurs. As such, we don't believe it's unreasonable to ask the Department of Interior to explain the rationale for its decisions and express concern when trends are not headed in the right direction.

"The management of federal energy resources has profound implication for the cost of energy, job creation, revenue growth and economic activity. We were very encouraged to hear that Secretary Salazar believes 'it is important for the oil and gas industry to have certainty.' We look forward to meeting with Department of Interior to explore ideas about how America can more responsibly develop its federal energy resources," IPAMS said.

The American Petroleum Institute (API), which represents major producers, echoed the sentiment. "While we appreciate the already anticipated lease sale announcement for 2010, the oil and natural gas industry, which supports 9.2 million American jobs, believes more can be done to expand the economy and create new jobs. We want to be part of the solution and a constructive partner in a comprehensive energy policy that could create over a hundred thousand new jobs and we are ready to meet with Secretary Salazar to help advance our shared objectives," API President Jack Gerard said.

The 2010 schedule calls for onshore auctions in New Mexico (three), Montana (five), Wyoming (four), Colorado (four), Utah (four), Eastern States (four), Nevada (three), California (four), Oregon (three) and New Mexico (three), and in Alaska's National Petroleum Reserve (one). Salazar said he also expects to complete his evaluation of the existing 2007-2010 OCS leasing plan, which was vacated and remanded by the U.S. Court of Appeals for the District of Columbia Circuit in April, "in the near future" (see NGI, April 20).

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