July 17, 2008
TO THE MEMBERS OF THE U.S. HOUSE OF REPRESENTATIVES:
The U.S. Chamber of Commerce, the world's largest business federation representing more than three million businesses and organizations of every size, sector, and region, strongly opposes H.R. 6515, the "Drill Responsibly in Leased Lands Act of 2008," because its few pro-energy provisions are far outweighed by its punitive antienergy provisions. H.R. 6515 could ultimately result in the production of less American oil and natural gas, which, in turn, would lead to higher prices and even more pain at the pump for consumers.
Section 7 of H.R. 6515, more commonly referred to as "use it or lose it," is completely unnecessary because oil and gas producers already operate under binding, statutory time limits for their leases. For onshore production, Section 17(e) of the Mineral Leasing Act, 30 U.S.C. § 226(e), stipulates that an oil company must have a producing well within 10 years, or else surrender the lease. For offshore production, the Outer Continental Shelf Lands Act, 43 U.S.C. § 1337(b), stipulates that an oil company must produce energy within either five or 10 years, or else surrender the lease. Simply put, leaseholders are already required to surrender leases that are not producing.
According to the American Association of Petroleum Geologists, the process of leasing, evaluating, drilling, and developing an oil or natural gas field typically takes five to 10 years, and delays frequently occur due to permitting or regulatory concerns, or the unavailability of data acquisition, drilling equipment, and crews. Large projects and those in deep water may require a decade or more to achieve full production. However, throughout much of this multi-year process, the site under development will be listed as "nonproducing." It is extremely doubtful any energy company would invest millions of dollars to perform geological research, drill delineation wells, obtain government permits, and design and install complex production facilities at a site, only to be told the site has not been "diligently developed" as required by H.R. 6515. If signed into law, this bill would lead to less domestic energy production at a time of rising prices caused in part by rising demand and constrained supply.
The ban on Alaskan oil exports is neither necessary nor helpful. There have been no exports of crude oil from Alaska since 2004. Placing an absolute ban on oil exports from Alaska (particularly when the market has already dictated the same result) will only serve to harm trade relations with our oil trading partners, including Canada, our largest provider of oil imports.
The Chamber also opposes the section requiring project labor agreements, under which any contractor who is awarded work pursuant to the requirements of this bill would have to operate as if they are a union contractor. If they are not a union contractor, their employees must become members of the union and the contractor must operate using union work rules, wage rates, and worker categories on a project. Such restrictions freeze out non-union contractors who do not wish to operate in this manner, including small businesses and minority or womencontrolled contractors. Project labor agreements also increase the cost of such jobs by imposing higher wages and increasing the number of workers used due to more restrictive work rules.
H.R. 6515 does contain a few pro-energy provisions, but these are mostly "window dressing" to distract from the bill's anti-production provisions. For instance, the bill's call to develop the National Petroleum Reserve-Alaska (NPR-A) is commendable, but it may not be necessary; the Bureau of Land Management just this week made land available for oil and gas leasing in the northeast portion of the NPR-A, paving the way for a major lease sale as soon as this fall. Similarly, a statement by Congress that an Alaskan oil and gas pipeline is a priority is encouraging, but Alaskan pipeline development is already well underway, and market conditions will ultimately dictate how and when these projects are completed.
In all, H.R. 6515 diverts the attention of Congress away from legislation to address America's energy concerns, including obtaining access to the 85 percent of the Lower 48 Outer Continental Shelf and 83 percent of onshore federal, non-park, non-wilderness area lands currently off-limits or facing restrictions to development. The National Petroleum Council estimates that the banned OCS areas in the lower 48 states contain roughly 18 billion barrels of oil and 76 trillion cubic feet of natural gas. However, this data is 25 to 40 years old, and resources may in fact be well beyond that amount. According to the Minerals Management Service, the OCS contains 420 trillion cubic feet of natural gas and more than 85 billion barrels of oil. That amount of natural gas would heat all residential homes for about 93 years, and the oil would fuel 82 million cars for 35 years.
The Chamber strongly urges you to protect against increased energy prices by opposing H.R. 6515. The Chamber may consider votes on, or in relation to, this issue in our annual How They Voted scorecard.
R. Bruce Josten