“Ryan Zinke’s Great American Fire Sale” AKA The New Yorker’s total ignorance of oil & gas leasing.

“Ryan Zinke’s Great American Fire Sale” AKA The New Yorker’s total ignorance of oil & gas leasing.

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Guest commentary by David Middleton

Ignorance unbound…

Ryan Zinke’s Great American Fire Sale

By Carolyn Kormann April 14, 2018

Not long ago, the Bureau of Land Management, an agency within the U.S. Department of the Interior, began distributing “vision cards” to its employees. The front of each card features the B.L.M. logo (a river winding into green foothills); short descriptions of the Bureau’s “vision,” “mission,” and “values”; and an oil rig. On the flip side is a list of “guiding principles,” accompanied by an image of two cowboys riding across a golden plain. Amber Cargile, a B.L.M. spokeswoman, told me that the new cards are meant to reflect the agency’s “multiple-use mission on working landscapes across the West, which includes grazing, energy, timber, mining, recreation, and many other programs.”

[…]

Since last March, when Ryan Zinke assumed leadership of the Interior Department, vacating Montana’s lone seat in the U.S. House of Representatives, this sort of ideological conformity has been a top priority. On Wednesday, the department’s Office of Inspector General released a report finding that, between June and October of last year, Zinke reassigned twenty-seven senior officials without reason or adequate warning. Many of them “questioned whether these reassignments were political or punitive,” the report states, “or believed their reassignment may have been related to their prior work assignments, including climate change, energy, or conservation.”

[…]

Barely three weeks after Zinke took office, President Trump issued an executive order aimed at “promoting energy independence and economic growth,” in which he directed the Interior Secretary to “suspend, revise, or rescind” any guidelines that imposed “regulatory burdens” on the oil, natural-gas, and mining industries. Zinke, a former Navy seal who raised money for his congressional campaign by raffling off an AR-15 painted with the stars and stripes, seemed keen to carry out the President’s order, but he initially encountered some resistance. In a speech to the National Petroleum Council last September, Zinke claimed that a third of the career civil servants under his command were “not loyal to the flag,” by which he meant Trump. He compared his department to a group of pirates who capture “a prized ship at sea and only the captain and the first mate row over” to get the job done. The vision cards, it appears, were meant to remind B.L.M. employees that their main responsibility is not to keep the prized ship afloat but to plunder it for all the fossil fuels, ore, and grazing rights it’s worth.

Zinke isn’t the first Interior Secretary to see this as the agency’s proper function…

[…]

The New Yorker

This bit is priceless…

The vision cards, it appears, were meant to remind B.L.M. employees that their main responsibility is not to keep the prized ship afloat but to plunder it for all the fossil fuels, ore, and grazing rights it’s worth.

Zinke isn’t the first Interior Secretary to see this as the agency’s proper function…

That’s because it *is* the agency’s proper function.

In the early 20th century, Congress took additional steps toward recognizing the value of the assets on public lands and directed the Executive Branch to manage activities on the remaining public lands.[22] The Mineral Leasing Act of 1920 allowed leasing, exploration, and production of selected commodities, such as coaloilgas, and sodiumto take place on public lands.[23] The Taylor Grazing Act of 1934 established the United States Grazing Service to manage the public rangelands by establishment of advisory boards that set grazing fees.[24][25] The Oregon and California Revested Lands Sustained Yield Management Act of 1937, commonly referred as the O&C Act, required sustained yield management of the timberlands in western Oregon.[26]

In 1946, the Grazing Service was merged with the General Land Office to form the Bureau of Land Management within the Department of the Interior.[22] It took several years for this new agency to integrate and reorganize.[27] In the end, the Bureau of Land Management became less focused on land disposal and more focused on the long term management and preservation of the land.[22] The agency achieved its current form by combining offices in the western states and creating a corresponding office for lands both east of and alongside the Mississippi River.[28] As a matter of course, the BLM’s emphasis fell on activities in the western states as most of the mining, land sales, and federally owned areas are located west of the Mississippi.[29]

BLM personnel on the ground have typically been oriented toward local interests, while bureau management in Washington are led by presidential guidance.[30] By means of the Federal Land Policy and Management Act of 1976, Congress created a more unified bureau mission and recognized the value of the remaining public lands by declaring that these lands would remain in public ownership.[13] The law directed that these lands be managed with a view toward “multiple use” defined as “management of the public lands and their various resource values so that they are utilized in the combination that will best meet the present and future needs of the American people.”[31]

Wikipedia

In what sort of Bizarro World is it wrong to require employees to adhere to policy directives from management or to reassign or fire lower level managers who are unlikely to implement those directives ?  This buffoon seems to be horrified by the fact that B.L.M. employees are being directed to adhere to policy directives of the Trump administration… Policy directives that are actually consistent with the purpose of the agency (as opposed to those of the Obama maladministration.

The article goes on to babble about the “ ‘drill here, drill now’ days of the Bush Administration” no longer being necessary because “fracking on mostly private lands in the Permian Basin, in Texas, and the Bakken Formation, in North Dakota, has led to an energy surplus.”   Maybe I wasn’t paying attention… But when did the ‘drill here, drill now’ days of the Bush administration occur?  Furthermore, the time to open up Federal lands and waters to oil & gas exploration is not when the nation is facing acute shortages of oil and/or natural gas.  The process is not analogous to turning a faucet on and off.

The level of ignorance actually escalated throughout the article…

Last December, the B.L.M. offered leases on 10.3 million acres in the Alaskan Arctic, a sale that the Trump Administration touted as the largest in U.S. history. Less than one per cent of the land received bids. In March, the agency tried again, this time with fifteen thousand parcels in the Gulf of Mexico. Although Zinke advertised the auction as a “bellwether” for America’s “energy-dominant” future, barely a tenth of the parcels received bids.

The NPR-Alaska and Gulf of Mexico leases sales were in areas that have been open and picked over for decades.  Opening up the entire areas in more frequent lease sales makes it easier for oil companies to manage their prospect inventories… But it doesn’t create more prospects.  Every lease in the open areas of the Gulf of Mexico has gone through about 35 lease sales since area-wide leasing was established in 1983.  The fact that 10% of the tracts might still receive bids is a testament to the prolific nature of the Gulf of Mexico, not an indication of lack of industry interest in new leasing areas.

The fact that the government offers leases doesn’t put prospects under those leases.  There has yet to be a Trump administration lease sale which has actually significantly opened up new areas for leasing.   The first ANWR Area 1002 lease sale could take place as early as 2019.  This will be a true measure of industry appetite for Federal leases and Arctic ventures.  An Alaska state lease sale on the North Slope took place about the same time as the NPR-Alaska sale and it was one of the most active in decades, with leases adjacent to ANWR receiving a great deal of interest.

Is this cognitive dissonance or just a tired old canard?

Across Utah and other Western states, there is a huge surplus of leased but undeveloped oil-and-gas parcels. Right now, the Interior Department source told me, the land sold in March shows little potential for lucrative development. So why did the industry bid on it? [Steve Bloch, the legal director of the Southern Utah Wilderness Alliance] suggested two possible reasons. First, he said, companies sometimes stockpile leases because it looks good to their investors: in theory, more assets mean more reserves, which mean more profit down the road. (Never mind that the reserves may not actually exist.) Second, some buyers purchase undesirable leases with the hope of unloading them when better extraction technologies or a needier market increase their value. In March, Bloch said, “that was borne out by looking at who showed up for the lease sale—wildcatters, speculators, unknowns.” The largest buyer, Ayers Energy, has no record of bidding on public lands in the West in recent years.

Why would anyone consider the legal director of the Southern Utah Wilderness Alliance an authority on the oil & gas business? If the author truly wanted to know why oil companies have inventories of undeveloped acreage… Why not ask someone in the oil industry?

Firstly, oil companies do not “stockpile leases because it looks good to their investors.”  It’s actually impossible to “stockpile leases.”  B.L.M. oil & gas leases have primary terms of 5 to 10 years.  If you don’t establish production on the lease during the primary term, you lose the lease.  Oil companies continuously build portfolios of prospective acreage, like a construction company builds a backlog of projects.   It takes time develop a lease sale prospect into a drill-ready prospect and get it drilled.  Many, if not most, lease sale prospects never make it onto the drilling calendar.  More detailed geological and geophysical work sometimes kills lease sale prospects… Sometimes decent prospects never make onto the drilling calendar because better prospects are available, creating an opportunity for other companies to take advantage of when those leases expire.  The third company I worked for made a killing picking up and drilling prospects that my first company had leased but never drilled.

Secondly, “some buyers purchase undesirable leases with the hope of unloading them when better extraction technologies or a needier market increase their value,” is perhaps the most moronic sentence I have ever read.

Thirdly, “in March, Bloch said, ‘that was borne out by looking at who showed up for the lease sale—wildcatters, speculators, unknowns.’ The largest buyer, Ayers Energy, has no record of bidding on public lands in the West in recent years.”… And the problem is?  The fact that new oil companies are formed is actually a good thing.  My current company never showed up at a Gulf of Mexico lease sale before 2012… and had no record of bidding on anything before the company was formed… Despite the fact that people working for the company had probably worked every Gulf of Mexico lease sale since 1983.

How does Mr. Bloch think that big oil companies start out?

DEC 6, 2012

Birth Of A Wildcatter – How Harold Hamm Got His Start

Christopher Helman , FORBES STAFF
Big Oil, Big Energy

(This recollection is part of our continuing series ‘When I Was 25,’ where the most successful tycoons of our time tell how they got their start.)

By Harold Hamm

I’m a professional geologist, an explorationist for oil. That’s what I’ve done in my career, one that’s culminated in–at least to this point–playing a part in finding the largest field in the last 40 years anywhere in the world. That’s the Bakken field, which I believe will yield 24 billion barrels of oil in the decades to come, maybe more. Today, the company that I founded, Continental Resources, has the biggest position in the Bakken. We’ve doubled our oil output in the last five years. We’ll double it again in the next five.

But you don’t just start off in this business with a home run.

[…]

Forbes

Why would the author of The New Yorker article be so utterly ignorant of the oil & gas industry and the purpose of the B.L.M.?

Carolyn Kormann spent several months reporting in Ecuador, Peru, and Bolivia as a 2008 Middlebury Fellow in Environmental Journalism. She was also the recipient of a fellowship from New York University’s Center for Latin American and Caribbean Studies, where she completed a master’s degree in journalism with a focus on Latin America and climate change. She is now a reporter for the East Hampton Press in New York. Her work has recently appeared in the Virginia Quarterly Review.

Yale Environment 360

Now, it makes perfect sense why she would consider the legal director of the Southern Utah Wilderness Alliance an authority on the oil & gas business.

In the interest of full disclosure:

David Middleton has spent the past 37 years as a geophysicist and geologist in the oil & gas industry, including a six-year exile into management… Working for wildcatters, speculators and unknowns (AKA Little Oil).  The vast majority of that career has been spent in the Gulf of Mexico… Well, not actually *in* the Gulf of Mexico… Mostly in an office in Dallas and/or Houston interpreting geological and geophysical data that were acquired in the Gulf of Mexico for the purpose of stockpiling Federal leases from fire sales and not drilling wells.  If I have to tell you which bits were sarcastic, you shouldn’t be reading this.

Superforest,Climate Change

via Watts Up With That? https://ift.tt/1Viafi3

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