An Abundance of Ignorance
Rahall to Big Oil: Use It or Lose It
June 12, 2008
Washington, D.C. – In an effort to compel oil and gas companies to produce on the 68 million acres of federal lands, both onshore and offshore, that are leased but sitting idle, says House Natural Resources Committee Chairman Nick J. Rahall (D-WV) today introduced legislation that gives Big Oil one option—either “use it or lose it.”
Chairman Rahall ought to know that we already have “use it or lose it.”
Use it or lose it is what is built into the system.
Most oil and gas leases are acquired by an oil company with a down payment, called a bonus, then maintained by rentals, usually paid annually. From whom is the lease acquired? From the lessor, which is usually the mineral owner. The mineral owner and the surface owner are usually — but not necessarily — the same.
Oil companies purchase oil and gas leases for exploration purposes. They have a life of so many years, called the primary term. That term can be extended by drilling operations, or by actual production of oil or gas. If it is producing it is then considered to be held by production (HBP).
A typical company will conduct the necessary operations on an undeveloped lease to determine whether or not it wants to go further — but being run by humans (thank goodness, and not government), different companies have different opinions of a given area, or lease.
Or if the area is perceived to be larger than a single lease, there may be more than one.
A typical oil company will plan to conduct exploration operations on a lease, which is why the company bought it. These exploration operations are most likely to include seismograph, in which energy is bounced off subsurface rock formations to ascertain likelihood of a geological structure that would trap oil or gas.
We have all heard the expression “One man’s poison is another man’s meat.”
The same applies to oil companies. One may get to the point where it gives up on an area, only to see another come right behind it to find a bonanza. Rare? Yes. Unheard of? By no means.
Use it or lose it? It goes on all the time. It is what makes the system work.
House Natural Resources Committee Chairman Nick J. Rahall ought to do his homework. Perhaps Chairman Rahall’s ignorance is an indication that the House Natural Resources Committee needs a new Chairman.
A great argument for constitutionally required congressional term limitation.
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