Target Rich Environment: News from talking points central

8 mins read

During 32 years as a chalk-smeared academic foot-soldier I corrected over 10,000 term papers and essays. Most were mediocre, a few were brilliant, and some dazzled me in another way. E.g., there was that girl with a hair-do that looked as if her head was exploding who explained how Harry Truman bombed Pearl Harbor after Adolf Hitler nuked Herosheema. A treasured memory.

John Frary

Imagine my delight four years after retirement on discovering a paper that compresses within a thin rectangle more flagrant flapdoodle than fifteen pounds of semi-literate scribblings by the dregs of the college classroom. The fact that it contains no mis-spellings or grammatical errors only adds to its charm. Connoisseurs of codswallop should Google the “Special Report by the Committee on Natural Resources” dated June 2008 and savor it at leisure.

I will provide some highlights for readers who don’t want to take the trouble. The one that shines brightest is a chart showing that DRILLING DOES NOT MEAN LOWER GAS PRICES. At first glance I thought they must be talking a bout dentists. Wrong. Its drilling for oil that doesn’t lower gas prices.

Price is unaffected by increasing supply! Here’s a theory unheard of in the whole history of economic science; a concept unknown in ancient China or medieval Europe; an idea that would startle tribesmen in the most remote areas of the Amazon Basin.

The chart shows that (AHA!) prices go up even as drilling increases. Well, sure. You could construct an almost identical chart showing that the price of gas goes up even while ethanol production goes up. Or another showing that even as wind-power generation increases, the price of electricity increases. The fallacy here should be apparent to an intelligent middle-school student. A chart showing increases in supply and price without reference to an increase in world-wide demand is worse than valueless. It is idiotic.

Elsewhere we read that “In the last four years, the Bureau of Land Management has issued 28,778 permits to drill on public land; yet in that same time 18,954 wells were actually drilled. That means that companies have stockpiled nearly 10,000 extra permits to drill that they are not using to increase domestic production.”

Let’s try a little common sense. Increased demand drives up the price of oil. The sources of cheap oil decline. More expensive sources offshore and in remote areas become more profitable. Oil companies rush to bid for lease-holds in areas where they think there might be oil. The number of lease-holdings double in a few years.

Does it follow that the equipment and man-power available to exploit the new acreage automatically doubles? Does it follow that preliminary tests will show that every leased acre is going to be equally promising? Is it reasonable to expect the oil companies to simultaneously and immediately drill on every single ten-year lease? Does history show that every lease taken by an oil company produces a bonanza?

The answers, in order, are: No, No, No, and No.

Let the Department of Interior Minerals and Management Service explain: “undiscovered fields are explored and discovered as a function of profitability and exploration drilling success rates. Once discovered, the timing of these developments is governed by each undiscovered field’s expected value and is constrained by the availability of drilling rigs competing to drill all assets in the deep water Gulf of Mexico arena…”

This is how it works in the real world. British Petroleum (BP) starts bidding on leases in the Gulf of Mexico around 1995. In 1998 a discovery drilling finds an oil field nearly 30,000 feet deep. An appraisal well drilled in 2000 established a potential for 300 million barrels. A second appraisal well in 2001 raises the estimate to 575 million barrels. In 2002 Exxon Mobile approves funding for its 25 percent share of the $7 billion needed to build the “Thunder Horse” rig. BP aims 20 to produce oil by 2005. Damage from Hurricane Dennis and several equipment failures set the production date forward to the end of this year. They are expecting 250,000 barrels per day. Factor in taxes and production costs and it will be years before the companies pay off their $7 billion investment and start making a net profit.

Here is evidence enough that we are confronted with boobery of the highest order, but these boobs aren’t content. The compulsion to dive still deeper into the depths of nincompoopery has them in its grip. They breathlessly report that there are 91 million acres available for leasing in Alaska outside of ANWR, but Evil Big Oil (EBO) has leased only 11.8 million of them and drilled only 25 exploratory wells.

So there we have it. EBO compounds its wickedness in “stockpiling” offshore leases, by refusing to stockpile Alaskan leases. Worse yet, it drills only 25 exploratory wells and refuses to discover new oil fields. The villains!

Here is one more gem (among many). Some busy young staffer whips out his pocket calculator and adds this: “If we extrapolate from today’s production rates on federal land and waters, we can estimate that the 68 million acres of leased but currently inactive federal land and waters could…cut U.S. oil imports by more than a third…”

Let’s see. Drilling is no use, BUT it would reduce our imports by more than a third. All leases are as sumed to have equal potential. It would never occur to EBO to go after the most promising blocks first; they just drill randomly and hope for the best. And why do they bid on 10-year leases when all they have to do grab a block on Monday, drill on Wednesday and start pumping oil on Friday?

You would be right to ask yourselves how an obscure selectman of a small Maine town gets the gall to apply such words as boob, ninocompoopery, flapdoodle, etc. to a report produced by the professional staff of a mighty congressional committee. The report is short and accessible. Go read it. Think about it. Decide for yourselves whether milder nouns are called for.

So we are left in the end with this question. Is the committee majority really that stupid, or do they think the voters are that stupid? I have no certain proof either way, but I have my suspicions.

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