GAO: Interior should encourage faster oil and gas drilling on federal land

Oil and gas companies produced energy on only about 12 percent of leases giving them access to millions of acres of federal land offshore, according to a recent audit by the Government Accountability Office.

Energy production on federal land onshore was even lower, at 5 percent, the GAO report stated. Auditors examined data on 55,000 offshore and onshore federal leases issued from 1987 through 1996. The leases reviewed had exceeded their primary 10-year duration, allowing GAO to consider activity throughout the original lease period and during extensions.

The watchdog agency found that companies had begun development on about 26 percent of offshore leases and 6 percent of onshore leases during the same period. For those leases that eventually produced oil or gas, however, one-quarter of initial drilling activity onshore occurred after the original 10-year lease had expired.

The federal government does much less than state governments and private landowners to compel corporate lessees to develop and produce energy, GAO found. While Interior does increase rental rates from $1.50 per acre annually for the first five years to $2 per acre annually for the next five years, states and private owners often issue shorter lease terms and escalate royalty rates over the course of the lease to encourage speedy development, GAO noted.

Energy company officials told auditors that a number of factors influence their decisions to develop leased land, including oil and gas prices, the availability and cost of specialized equipment, geological features, and regulatory issues. In some areas, exploration and development are restricted to certain times of the year to preserve critical habitat or at-risk species.

GAO's findings are likely to bolster the contention of some lawmakers who feel energy companies sit on federal leases that should be developed more rapidly to increase domestic energy supplies.

Rep. Nick Rahall, D-W.Va., and Sen. Russ Feingold, D-Wis., introduced similar legislation in the House (H.R. 6251) and Senate (S. 3239) earlier this year that would prohibit the Interior secretary from issuing new oil and gas leases to companies that fail to develop existing ones. When Feingold introduced the Senate bill in July, he said Americans wanted to know why oil companies are seeking to expand offshore drilling when those same companies haven't yet developed 66 million acres they already leased from federal taxpayers.

"At a recent Senate Judiciary Committee hearing, I actually had the chance to ask the top five oil executives in the country just that question, and it was incredible," Feingold said. "They couldn't come up with any good explanation at all. In fact, one of the executives told me they have the manpower and the infrastructure to put all of their existing leases of federal lands into oil production."

The bill is now before the Senate Energy and Natural Resources Committee.