Why haven’t oil companies sold back there “useless” leases to the government?

[briv1016]

We have discussed many times how oil companies are sitting on thousands of acres of land that they claim are “useless” for oil and subsequently want to drill on continental shelf. Ignoring the drilling on the continental shelf for a moment; why haven’t oil companies sold back these “useless” leases to the government?

Are they lying about it being useless, do they have other plans for it, do they have to hold onto it for a certain number of years or is it just a land grabbing thing? I would think if the land truly didn’t have oil they would want to get rid of the lease in order to streamline there business. Something doesn’t make sense.

[BlooInBloo]

1. Because they can see the price of oil going up as well as the next guy?

[EbenezerMcIntosh]

2. The United States buys useless oil leases?

Wow. I thought people in the private sector bought and sold that stuff. I thought the United States only killed people to get control of oil. My bad.

[briv1016]

4. I assumed that the companies had leased the land from the government for a price.

What I meant by "buying back" was that the government would refund part of the money the companies had paid and re-designate the land for other uses.

[EbenezerMcIntosh]

6. Oh.

Huh?

[cherokeeprogressive]

3. Why hasn't the gubmint just invalidated the leases due to lack of activity

or eminent domain?

[EbenezerMcIntosh]

7. Yea. Whatever happened to that government power to invalidate leases?

Huh?

[cherokeeprogressive]

8. I guess you's making fun o' me. That's okay.

If the gubmint can appropriate land to build a park, why can't it appropriate land for what everyone agrees is a national emergency?

[EbenezerMcIntosh]

9. I think you're great.

No making fun intended. Imminent domain and illegal seizure of lands are two different things. Or are they? ;)

[cherokeeprogressive]

10. That would be the question of the moment I guess. Given the fact that Big Oil

has in the last year garnered the largest corporate profits that the world has ever seen, I'd think the American public at large wouldn't scream bloody murder if the government told Big Oil to bugger off.

Myself I'd sooner pass legislation, grandfathered, that gave publicly traded entities a finite amount of time to make use of whatever land they leased in sweetheart deals. Or any deal for that matter.

Failing that, I'm thinking they should bugger off.

[Yupster]

5. I don't know the answer to your question

But here's what I've learned just from living in oil country the last 30 years.

Oil isn't underground in pools waiting to be slurped up. It's more like the consistency of caliche that covers a street. It's just under incredible pressure so a hole and some fracturing down there will allow lots of oil to move toward the hole to releive the pressure.

There's oil pretty much everywhere. The problem is the concentration of it and the cost of getting it out of the ground.

Around here there are hundreds of wells and the owners know how much it costs to get each barrel extracted. So for one well, it may make sense to put the pumpjack on at $ 60 a barrel, but the well down the road it may not make sense unless the price is $ 120 a barrel. If it doesn't make sense, they just cap the well until it does. There's no sense spending money to sell your finite resource at a loss.

A good example is wind power. We always knew how to make them, but the cost was too high to make them economically feasible. Now at $ 140 a barrel, there's windmills going up all over the place. The area where I live looks like the Planet of The Apes. There are long lines of windmills on every mesa in every direction. You see the huge blades being transported all over the place on even 'hugier' trucks.

There is an incredible boom going on currently in West Texas. Every well is pumping and more and more are being drilled. Windmills are going up everywhere. No one wants to be stuck with their oil in the ground while the price is $ 140 a barrel.

I imagine it's the same with any other leases. The owners probably know exactly what price it becomes economically feasible at. When the oil hits that price, the wells will be drilled. -- that is assuming they can get the drilling equipment, because that's not at all easy today. Th rigs are all spoken for with long lines and the skilled labor is going very dearly to keep the rigs operating.

If anyone needs a job, come to West Texas. Everyone down here is hiring.

[Igel]

11. The leases are for a certain duration.

They haven't violated the terms of the leases if they sit on them.

Now, much of the land is almost certainly fairly useless for oil. They get no profit from ignoring useless land, and none from returning it to the feds. So why not sit on it?

The problem is that much of the land hasn't been properly explored. That takes time, and they usually explore more promising territory first. It costs money to explore. Exploring territory that's highly unlikely to return a profit is, well, silly. But often you have to lease large chunks of useless territory to get access to the parts you want access to.

So as far as leases go: Sitting on them has no downside, and might have an upside. They'll expire eventually.

There's a nifty federal report that looks at lands that have been probed and which are likely to contain petroleum deposits. Then there's a Congressional report misquoting the nifty report, and confusing % of oil with % of land. A large percentage of untapped oil reserves aren't available for drilling. Most known, untapped oil reserves that could be drilled occur on a fairly small fraction of the leased territory. The latter point is, oddly, exactly what you'd expect, so you'd expect Congress to have to do some selective misquoting to show otherwise.

Now, consider Mexico's problem with oil fields. They have territory they know contains oil. But they lack the technology to get to it. Some of the known oil in lands that *can* be drilled probably hasn't been profitable to get to. Having the feds revoke the leases and re-bid the leases wouldn't make them any more profitable. Crank the price of oil ... they might be profitable. However, given the low price of oil until fairly recently there wasn't much motivation to invest in oil exploration equipment so most companies didn't, and it can take years to develop a field. Now there's motivation, worldwide, and so the equipment's very much in demand, so much so that there's a bit of a shortage. Moreover, most of it (like most of the oil production) is in the hands of governments, not "big oil", so don't expect the oil fields in the US to be pumping oil any time soon.

[Subdivisions]

12. According to an energy speech Barack Obama gave on Friday,

Big Oil has access to 68 MILLION ACRES.

Why won't they work those leases? That's a question that remains unanswered.