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Interior Report: More Than Half of Offered Leases Are Idle

More than two-thirds of the offshore oil and natural gas leases in the Gulf of Mexico (GOM) and more than half of the onshore leases on federal lands remain idle, according to a report requested by President Obama and released Tuesday by the Interior Department.

The report shows that about 70% of the undiscovered technically recoverable resources currently under lease in all areas of the federal GOM are not producing or not subject to approved or pending exploration/development plans. Earlier this month Obama ordered Interior to report back to him (see Daily GPI, March 15) on "how many of these leases are going undeveloped...so that we can encourage companies to develop the leases they hold and produce American energy."

Of the 34 million acres under lease in the GOM as of March 1, Interior estimates that 23.8 million acres have inactive leases, which potentially could hold more than 11.6 b/d and 59.2 Tcf of natural gas. It said only 6.3 million acres in the Gulf are producing.

In most of the offshore areas -- GOM, Pacific, Alaska -- an estimated 37.9 million acres are under lease, of which 27.5 million are considered inactive, according to Interior.

For onshore leases, the review found that approximately 45% of all leases on federal land and about 57% of all leased acres were inactive as of March 14. That means that out of a total of more than 38 million leased onshore acres, almost 22 million leased onshore acres on public lands are nonproducing, according to Interior.

It estimated that 27,640 oil and gas leases are producing on public lands, while 22,663 leases are not.

The department said it is evaluating policy options to provide companies with additional incentives for the more rapid development of oil and gas production from existing and future leases.

"It is ridiculous for anyone to imply that these companies [producers] would be willing to spend billions of dollars to acquire leases and then simply sit on them while their competitors around the world are busy producing oil and natural gas," said Erik Milito, director of the American Petroleum Institute's (API) upstream and industry operations, last Thursday. "We have heard these tired charges before and we have refuted them with the facts."

In general, from purchase of an offshore lease to first production can take anywhere from seven to 10 years in areas that have existing infrastructure, he said. With respect to onshore leases, the entire process -- from acquisition of a lease to production -- "can take as little as a few years; and in some cases as much as almost 10 years," API said.

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