Why 37 Million Acres of New Oil Leases Might Actually Slow Offshore Development

A federal oil and gas lease sale that will open up 37 million acres offshore the Gulf of Mexico confirms what the oil industry has been saying all along: Obama is against us.

Yup, you heard me. Even though the lease sale has a few environmentalists shaking their heads in disapproval, it actually might end up hurting offshore oil development.

That's because as part of Lease Sale 213 scheduled for next month., the U.S. Mineral Management Service tightened the lease terms. In short, oil companies will be given less time to develop oil and gas tracts in the area off the coasts of Alabama, Louisiana and Mississippi. MMS estimates the sale could result in production of between 0.8 to 1.3 billion barrels of oil and 3.3 to 5.4 trillion cubic feet of gas.

So, don't worry enviros. It'll all be OK.

At water depths between 400 meters and 800 meters, the old eight-year lease has been shortened to five years. The lease can be extended for three more years if a well has been started during the initial term. Leases in water between 800 and 1,600 meters will now be seven years instead of 10. Deepwater leases -- those deeper than 1,600 meters -- will stay at 10 years.

MMS' logic is this: By shortening up the time periods it will encourage "diligent development" and provide a fair return to the public for outer continental-shelf resources. MMS argues that advances in drilling technology make it faster and more efficient to extract oil and gas. In deeper waters, by contrast, MMS contends that frontier conditions still hold, and as a result didn't shorten the time frame on those leases.

Ah, but the oil industry says 'not so fast.'

The American Petroleum Institute argues that as Gulf oil development has matured, it's become harder to find and produce oil and gas. Gulf fields tend to run out quickly, API spokesman Cathy Landry told me by phone today. "When the easy-to-find resources are tapped, oil companies have to look elsewhere." And that means digging into the complex geology of the Gulf.

Landry doesn't go so far as to call the abbreviate lease terms an intentional political move to kill all oil development. But she notes it's another roadblock and that "these kinds of things all nick at the edges" of oil and gas development.

This won't keep every oil company away, something even Landry admits. But it will give a number of oil companies reason to pause and potentially decide to hold off. And that means fewer oil companies exploring for oil and gas in the area and perhaps less money for the feds (and us).

Photo of oil barrels by Flickr user barekim, CC 2.0