Rep. Edward Markey (D-MA) and Rep. Rush Holt (D-NJ) introduced legislation Thursday to establish an escalating fee on the “tens of millions of acres of public lands” that oil and natural gas producers have under leases but which are not producing. The objective of the measure is to compel companies to produce on existing leases before they can acquire new leases, a Markey spokeswoman said.

Appearing before the House Natural Resources Committee, Interior Secretary Ken Salazar said that such a fee was already part of President Obama’s fiscal year (FY) 2012 budget for the department (see NGI, Feb. 21). But he supported the House measure and would work with Markey and Holt on the “specifics of the legislation.”

In the onshore, “we have 41.2 million acres of land that we have leased for oil and gas production, but we only have 12.2 million that is currently producing,” he told the House committee. 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.

At a separate hearing by the Senate Energy and Natural Resources Committee last Wednesday, Sen. Lisa Murkowski (AK) expressed concern when Salazar failed to provide assurances that fees won’t be assessed on nonproducing leases being held up by the federal government.

“Mr. Secretary I did not hear you say that there will not be fees imposed for nonproducing leases if it is, in fact, our own federal agencies that are prohibiting production…I would like the assurance that as long as there is the effort being made, [producers] won’t be penalized when it is the federal government that is holding us back,” said Murkowski, the ranking member of the Senate energy panel.

Exploration projects by ConocoPhillips — the CD-5 field in the National Petroleum Reserve-Alaska (NPR-A) — and Shell have been stalled because of federal obstruction, she said. Shell’s plan to drill an exploratory well in the Beaufort Sea has been held up for years over an Environmental Protection Agency (EPA) air permit (see NGI, Jan. 10).

“Is it the position of the department that penalties for not producing, whether onshore in NPR-A or offshore in the Chukchi [and Beaufort seas], would be assessed if it is the agency that is holding up the production or the attempt to produce? Murkowski asked.

They’re “trying their [darndest] to get to production and it is the federal government, it is the agencies, that are keeping [them] from doing this. But if the department’s approach is going to be we’re going to assess fees…because you haven’t been producing, this is a real issue for us.”

Odds are remote that a measure calling for a fee on nonproducing leases will clear Congress this year. The Obama administration proposed such a fee last year, and Markey has been unsuccessful in his attempts to push the so-called “use it or lose it” legislation through Congress in past years (see NGI, Jan. 15, 2007).

Markey also pressed Salazar on whether Interior is examining the manner in which drilling wastes associated with hydraulic fracturing (hydrofracking) are being managed on federal lands.

“We are working with the EPA,” which has “primary jurisdiction” over the use of hydrofracking fluids in the development of shale natural gas, said David Hayes, deputy assistant secretary of Interior. He said the department is in contact with the oil and gas industry on its hydrofracking practices, but he doesn’t think the practice is a major threat to public lands.

“The federal estate in terms of gas shale is a small percentage of the overall resources, perhaps 15%. But we are looking to make sure the operators on public lands are not using hydrofracking in a way that is harmful to the environment,” Hayes said.

In raising the question on hydrofracking, Markey cited a recent article in The New York Times, which was critical of drilling wastewater disposal (see related story).

Markey also questioned Salazar about a report issued last Tuesday by the General Accountability Office (GAO) that concluded that one of the top ongoing challenges that Interior faces is the collection of oil and gas revenues. It “concluded that [the] American people may not be getting fair return on federal oil and gas resources. What reforms are you putting in place to ensure that American taxpayers receive the billions of dollars which they are owed?” Markey asked.

“We are working very hard to implement many of the GAO recommendations,” Salazar said. He further noted that a study currently is under way with the Bureau of Land Management addressing the issue of a fair return on oil and gas resources. It is expected to be completed in the fall.

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