Interior Secretary Ken Salazar and members of the Senate Energy and Natural Resources committee last Tuesday disagreed about the significance of declining oil and gas production on federal lands during a hearing on the department’s proposed 2013 budget.

More significant, according to Salazar, are the overall production increases the country has seen in recent years.

“When you look at the crude oil production in the United States in 2011, it’s the highest level since…2003,” Salazar said. “When you look at oil imports into this country, they’ve dropped below 50%…We’re moving in the right direction, and it’s coming about as a result of multiple approaches, including what’s happened with the development of private lands and the domestic gas industry, which is so abundant and so important to the future of this country.

“But it’s also happening with respect to our efforts in the onshore, as well as the offshore…Natural gas production on just the public lands alone was the second highest since 2004, and oil produced on public lands the highest in 2010 since 1997, so the amount being produced is very huge. I would also say that contrary to some of the reports that you see from some of the trade associations and the press, we’ve continued to provide permits and lease out vast amounts of acreage…We continue to be very bullish about the opportunity to develop our oil and gas resources on the public lands, both onshore as well as offshore.”

But several committee members disputed Salazar’s interpretation of production data.

“In fact, the oil and gas production in our country…is lower than it has ever been on federal lands, both offshore and onshore, and the increase has come from production on private lands,” said Sen. Mary Landrieu (D-LA). “Those are the facts.”

Oil and natural gas production on federal lands declined during the 2011 fiscal year (FY), according to a recent report by the nonprofit Institute for Energy Research (IER) (see NGI, Feb. 27). Citing data from the Department of Interior, IER said oil production on federal lands totaled 656 million bbl during FY2011, an 11% decline from the 736 million bbl produced during the previous fiscal year. Natural gas production, which totaled 4.98 Tcf in FY2011, fell for the second consecutive year, down 6% from FY2010 (5.28 Tcf) and 27% from FY2009 (6.82 Tcf).

Conversely, the study found that oil production on private and state lands had increased 14% from FY2010 to FY2011, while natural gas production grew 12%.

Gasoline prices at the pump aren’t increasing because the Obama administration hasn’t opened enough land to oil and gas exploration and drilling, Salazar said. Domestic oil production is only one of many factors that contribute to the price of gasoline at the pump, he said.

“In terms of the gas price question, I think the reality of it is that it’s easy to play politics with gas prices and everybody has their ‘bumper sticker solution’ for what we can do with it. The reality of it is that gas prices are set on the global market,” Salazar said. “The instability in the Middle East is part of what has created the most recent gas price hike, and we’ve seen these kind of spikes over a long period of time…”

The $45 million cost of a proposed study of hydraulic fracturing (fracking) to be performed by the United States Geological Survey (USGS) should be paid by the oil and gas industry, said Sen. Al Franken (D-MN).

“Oil and gas companies are making record profits. In fact, the big five oil companies combined made a record $137 billion in profits in 2011,” Franken told Salazar.

“I’m pleased that you’ve proposed a $4/acre fee on leases that are not being used…that creates incentive for them to drill on these leases. I’m also pleased that some of the permitting expenses have been transferred to the companies. In light of that, I would like to ask you whether the $45 million USGS fund that you intend to use to study shale gas development through hydrofracking, will that also be paid by companies engaged in this activity?”

Money in the 2013 federal budget currently dedicated to the USGS study would be better spent on other projects — specifically, the Lewis and Clark regional water system in Minnesota, South Dakota and Iowa — Franken said.

Salazar said Interior would continue to work with the Environmental Protection Agency to coordinate the federal government’s study of fracking, but he did not offer an opinion on industry-funding of the study. “This money is part of our investment in understanding shale gas,” Salazar said.

ExxonMobil and Shell may be making record profits, but smaller independent oil and gas companies are far less likely to be able to afford paying for such a study, according to Sen. Mary Landrieu (D-LA). A study recently released by Greater New Orleans Inc. found that 41% of independent energy companies on the Gulf Coast were making no profit; 70% have lost significant cash reserves and 82% of business owners have lost personal savings as a result of the slowdown that followed the blowout of BP plc’s Macondo well and the Obama administration’s subsequent suspension of drilling in the GOM, she said.

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