Production on federal tracts fell in 2011

Domestic oil production may be at an all-time high nationwide, but the increase is primarily occurring on state and private lands rather than on federal land and waters, where production appears to have dropped significantly in 2011, according to the most recent government data.

Production of natural gas on public lands and waters in fiscal 2011 dropped 11 percent from the previous year, according to Interior Department data. Oil production dipped nearly 14 percent.

The reduction in oil production was most significant in the Gulf of Mexico, where it declined nearly 17 percent to 514 million barrels from 618 million barrels in 2010.

There could be many causes, but some say Gulf production is beginning to respond to the drilling moratorium that stalled deepwater exploration for much of the summer and fall of 2010 after the massive BP PLC oil spill. In addition, permitting was initially slow after the moratorium was lifted as companies adjusted to new safety standards designed to prevent another spill. Today's production levels are responding accordingly.


"We all know how long it takes for production to come online," said Dan Kish, senior vice president for policy at the Institute for Energy Research. "This is a pretty significant decline; it almost has to represent the impact of the moratorium."

By contrast, oil production on public lands grew by about 4 percent, while gas production dipped slightly.

An Interior spokesman cautioned that the department is still receiving 2011 production reports from industry and that the total numbers for oil and gas could increase measurably. But in the Gulf, oil production is unlikely to eclipse 2010 production levels that were the highest since 2002.

In addition, industry has up to six years to report adjustments for production in previous years, which means data could change -- although only slightly -- for years as early as 2006.

The new data potentially undermine a key talking point for President Obama as he pitches his energy agenda on the campaign trail. Republicans and industry groups last week pounced on the president's claim that oil production is at an eight-year high.

"Under my administration, America is producing more oil today than at any time in the last eight years," Obama said in a speech at the University of Miami (E&ENews PM, Feb. 23). "That's why we have a record number of oil rigs operating right now -- more working oil and gas rigs than the rest of the world combined."

But much of the new production appears to be occuring on state and private lands in oil-rich places such as North Dakota and Texas, rather than in the federally controlled Gulf.

Others have noted that increases on public lands should be attributed to the leasing and permitting decisions of previous administrations, given the long lead time to develop energy projects.

"Because of the restrictions this administration has placed on accessing public land, as well as the ever-increasing amount of red tape, the energy industry has moved to produce oil and gas on private lands," said Karen Harbert, president of the Chamber of Commerce's Institute for 21st Century Energy. "The fact that the administration would repeatedly try to take credit for this shows a troubling lack of understanding of energy production in this country."

'Facts are the facts'

A reporter pressed the White House in a news briefing last week to clarify to what extent the president deserves credit for the increase in production.

"It is simply a fact that every single year that President Obama has been in office that oil and gas production has increased every year. And our imports of oil and gas have declined every year," White House spokesman Josh Earnest said. "I'll let all of you in this room assess who deserves the credit and who deserves the blame, but at the end of the day, the facts are the facts."

But while production in the Gulf has dropped, future production should increase now that the pace of permitting has accelerated, said Michael Bromwich, who was Interior's top offshore drilling chief for nearly a year and a half before leaving the post late last year.

"When you had the moratorium during part of that time and the initial slowdown in permitting because of the new requirements, it's not surprising to me that Gulf of Mexico production would be down a little," he said.

But although it took time for industry to comply with the new regulations, the pace of permitting has accelerated significantly and there are as many, or more, rigs in the Gulf as there were at the time of the spill, he said. Future production should increase accordingly, he said.

"I think people, particularly some of the Gulf-state senators and representatives, conveniently ignore that fact."

His views match those of the Energy Information Administration, the Energy Department's statistical arm, which last month predicted the deepwater Gulf will ldikely be more important to long-term U.S. oil production than shale formations, and should experience a turnaround in production beginning this year (Greenwire, Jan. 27).

Gulf output could expand from 1.3 million barrels a day in 2011 to as much as 2 million barrels a day by 2020, depending on market conditions, acting EIA Administrator Howard Gruenspecht said.

And while energy proponents have urged the president to open new lands and waters and speed approvals to drill, critics note that many companies have failed to use the leases and permits they already own.

Oil and gas firms own roughly 7,000 drilling permits that have been issued by the Bureau of Land Management but not yet developed. That figure has remained steady for at least the past year (Greenwire, March 25, 2011).

While industry has leased roughly 38 million acres of land, it is actively producing or exploring on just 16 million of those acres, Interior said. Industry argues that most leases do not contain commercial oil and gas and that some projects are awaiting additional permits before drilling begins.

But with thousands of drilling approvals in hand, conservationists say there's no reason to open up new lands.

"It looks like the only barrier to more domestic drilling is the oil industry itself," said Dave Alberswerth, senior policy adviser for The Wilderness Society.

The Obama administration is planning 32 onshore leases in 2012. It is also proposing a five-year offshore leasing plan that would delay sales in the Atlantic or Pacific through at least 2017, a move that has angered Republicans and industry groups.

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