In an attempt to encourage more domestic drilling, President Obama has called on the Interior Department to report to him before the end of the month on the number of oil and natural gas leases held by producers that aren't being actively developed.

"The industry holds leases on tens of millions of acres both offshore and on land -- where they aren't producing a thing. So I've directed the Interior Department to determine just how many of these leases are going undeveloped and report back to me within two week so that we can encourage companies to develop the leases they hold and produce American energy. People deserve to know that the energy they depend on is being developed in a timely manner," the president said during a press briefing in the Eisenhower Executive Office Building.

Appearing before the House Natural Resources Committee earlier this month, Interior Secretary Ken Salazar reported that 41.2 million acres of onshore land have been leased for oil and gas production, but only 12.2 million acres are currently producing. With respect to the offshore, out of the 38 million acres that are leased to oil and gas producers, he reported that only 6.3 million acres are producing (see Daily GPI, March 4). In the administration's budget for fiscal year 2012, Obama has proposed to levy a fee on nonproducing leases to encourage more production.

Before Congress last week, Robert Abbey, director of Interior's Bureau of Land Management, acknowledged that the agency has a backlog of applications for permits, and that leases were almost useless to producers without permits (see Daily GPI, March 9). "There's a big difference between leases and permitting. We aren't able to produce unless a permit is actually issued. Is that correct?" Rep. Scott Tipton (R-CO) asked Abbey. "That is true," he responded.

Obama further said that "we need to increase our access to secure energy supplies in the near term," and "we need to continue to boost domestic production of oil and gas." Despite the moratorium on production in the Gulf of Mexico following the Macondo well blowout that resulted in the Deepwater Horizon rig explosion, he noted that oil production reached its highest level in seven years in 2010 (see Daily GPI, April 22, 2010).

"So any notion that my administration has shut down oil production might make for a good political sound bit, but it doesn't match up with reality. We are encouraging offshore exploration and production," the president said. The American Petroleum Institute (API), which represents producers, begged to differ. "The Obama administration continues to delay or defer action on developing our domestic resources of oil and natural gas at every turn," said API President Jack Gerard.

Interior's Bureau of Ocean Energy Management, Regulations and Enforcement. (BOEM) has been issuing permits to resume drilling in the deepwater Gulf of Mexico at a snail's pace. On Saturday, the agency awarded to Australia-based BHP Billiton only the second permit to drill in the Gulf deepwater since the moratorium ended last October. The well was being drilled in 4,234 feet of water off the coast of Louisiana when the explosion occurred on the Deepwater Horizon rig.

The first permit to drill in the deepwater Gulf was issued only weeks ago to Noble Energy to move forward with a bypass well in the Santiago prospect in Mississippi Canyon Block 519, about 70 miles southeast of Venice, LA (see Daily GPI, March 1).

The slow permitting pace is expected to continue. "We continue to emphasize that the amount of work being done by the department to review, verify and approach each [drilling] permit has gone up significantly, creating a sustained bottleneck to a return to the pre-Macondo permitting rate," said FBR Capital Markets.

Nevertheless Obama paints a rosier outlook. "We're also taking steps that will enable us to gather data on potential gas and oil resources off the Mid- and South Atlantic, and we're working with the industry to explore new frontiers of production, safety measures and containment technology. We're looking at potential new development in Alaska, both onshore and offshore," he said.

But "we can't place our long-term bets on a finite [oil] resource that we only control 2% of -- especially a resources that's vulnerable to hurricanes, war and political turmoil," Obama cautioned.

"So beyond increased domestic production, if we want to secure our long-term prosperity and protect the American people from more severe oil shocks in the future, the way to do it is to gradually reduce demand and then do everything we can to break our dependence on oil.

"To satisfy our broader energy needs, we're working to diversify our entire portfolio with historic investments in clean energy...and in this year's State of the Union address, I set a goal for America: By 2035, 80% of our electricity will come from a broad array of clean energy sources -- from renewables like wind and solar and homegrown biofuels, along with natural gas, clean coal and nuclear power," Obama said.

"We've been having this [debate over energy] for nearly four decades now. Every few years, gas prices go up, politicians pull out the same old political playbook, and then nothing changes. And when prices go back down, we slip back into a trance. And then when prices go up, suddenly we're shocked. I think the American people are tired of that. I think they're tired of talk. We're got to work together -- Democrats, Republicans and everybody in between -- to finally secure America's energy future."

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