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August 15, 2008 05:39 PM UTC

Oil and Gas Industry Full of Crap

  • 42 Comments
  • by: Colorado Pols

Do you remember a year ago when the oil industry confidently predicted “a billion dollars” in Roan Plateau lease revenue would go to Colorado, if we would just go along with their demands to “drill here, drill now?”

Only off by $885 million or so, as the Grand Junction Sentinel reports:

Both opponents and supporters of a federal drilling plan for the Roan Plateau are lamenting what they say is disappointing revenue from Thursday’s leasing of the area for oil and gas development.

The Bureau of Land Management’s lease auction of more than 55,000 acres in its Roan Plateau planning area near Rifle Thursday yielded about $114 million, or an average of $2,084 per acre.

That’s well below the $300 million high-end estimate the BLM had said the leasing of the Roan might generate, not to mention the $2 billion the industry advocacy group Americans for American Energy had said last year might be bid for the leases.

In a news release, Colorado Gov. Bill Ritter said the BLM’s actions shortchanged Coloradans. He had called for phasing leasing of the plateau top, which he says would have increased revenue and better protected the environment.

The lease revenue will be split between the federal and state governments.

“Today is a sad day for Colorado. It’s a missed opportunity – one we will never get back, one that falls squarely on the shoulders of the Bush administration, which is rushing through bad fiscal policy in its waning days,” Ritter said.

U.S. Reps. John Salazar and Mark Udall, and Sen. Ken Salazar, all Colorado Democrats, also criticized the outcome of the leasing of the Roan. But Americans for American Energy president Greg Schnacke said politicians such as Ritter and Ken Salazar depressed values of the Roan leases through their efforts to stop the leasing from going forward…

Which is completely ridiculous. The Democrats failed to get their plan for phased drilling enacted, and this lease auction took place on the energy industry’s terms. They got exactly what they wanted, and apparently at a shocking bargain. All of this in an economy where natural gas is about to become much more important (spelled Pickens Plan)–how are these leases depressed in value by a few Dems who carped about conditions they didn’t even get?

Bottom line: the energy industry lied to the public about the net value to Colorado of drilling the Roan Plateau. They lied, and a gaggle of mostly GOP elected officials helped them do it. Blaming the Democrats for something they didn’t succeed in doing, especially as nasty as industry mouthpieces got yesterday when these pitiful numbers were announced, is a pretty sure sign they know how it looks.

These are the same people who are about to put the hard-sell on the same voting public to divert energy revenue to a single pork-barrel project in a few weeks, while insisting they will curl up and die if they lose decades-old tax subsidies that help make Colorado one of the cheapest states by percentage in energy production taxes.

We think the energy lobby has opened itself up to a devastating credibility hit here, and Democrats would be idiots not to climb all over the industry’s now-proven laughable earlier estimate. This impugns the credibility of pro-energy industry ballot initiative positions, as well as politicians who used this BS to justify their own.

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42 thoughts on “Oil and Gas Industry Full of Crap”

  1. There will be a bill to increase the taxes on these hyenas even more to put into Ritter’s scholarship program.

    We Dems should make this the major issue in state races, not just to win (hello Senator Whitcomb) but also so that there is then the backing for further increasing the O&G taxes in January.

    As to the O&G spokespeople (and I include Penry in this category), I hope the press will start labeling them honestly – Industry Shill.

    1. Penry has been Pimped by Big Oil.

      I can honestly say this isn’t a big shocker to me. We warned about the hyper-inflated numbers the Republicans were promising (lying) to voters. It truly is a said day for Colorado.  

    2. There’s a lot of talk on the Web today about $50 to $30 oil in the next year or so. If those predictions match those of the bidders, they had good reason to bid lower than what some oil bulls were predicting even a month ago.

      Predictions aren’t promises, and the markets don’t always give us what we want and beg for.

      Yeah, I know the Dems want $200 oil and $10 gasoline, but the rest of us prefer lower prices.

      1. Yeah, I know the Dems want $200 oil and $10 gasoline, but the rest of us prefer lower prices.

        This is ridiculous. I don’t know why I’m even responding to it, it’s that ludicrous.

      2. Gas prices are down sharply from recent highs, along with oil even though oil is an international commodity and gas is mostly a domestic market.

          1. The non-partisan Association for the Study of Peak Oil & Gas had this to say about $200/barrel oil in their Aug. 11th report:

            “In London, a Chatham House report says the world faces a serious oil supply crunch within five to 10 years that may drive prices up over $200 a barrel because of inadequate investment by oil companies in raising output — not because of a lack of oil underground. (8/8, #18)”

            Here’s the link to their site for anyone interested:

            http://www.aspo-usa.com/index….

            So the issue of holding fire sales on oil and gas leases seems to be all about locking in future profits, not lowering the price of gasoline.

            The sooner we invest in solar, wind, and other alternative energies (and their transmission facilities), the better.

      4. …what the Democrats want, what do the Oil Companies, who have been making record profits of of high oil prices for the last few years want?  

        Why do we have to remain addicted to oil?  

        And why is it that a mouth-breather who claims to be so smart can’t seem to wrap his head around the fact that things need to change and that (a) drilling won’t happen for years even if it is approved and (b) the drop in price would be extremely insignificant (say $0.01 to $0.04 a gallon) and (c) the U.S. uses 25% of the World’s Oil supply when the U. S. only sits on about 2%, and (d) if the Oil Companies extract Oil in the U. S., it is definitely not outside the realm of possibility that they will export some of it.

        1. which is all being exported to the Mid West and West Coast where it can fetch top dollar.  Colorado’s most biologically diverse places (Roan #4, other three protected already in Park Service) gets leased for $2k average an acre, even though there is currently a ‘glut’; of natural gas, but since its all bound for export it means our prices here go up as well.  Colorado gets drilled and doubly screwed–higher consumer prices, low taxpayer return.  This is the Republican plan for Colorado and America–enrich corporate sponsors off the graft of the American taxpayer. GOP stalwart Ted Stevens–Poster Boy.    

  2. The bonus is just the first income from the lease.  Any produced oil/gas will result in a 12.5% royalty, split between the feds and the state.  But, those $1 bil bonus predictions were obviously made in fantasyland.

    However, I wouldn’t be surprised if the potential for a long, expensive fight over regulation did suppress the auction prices somewhat.  I also expect some companies would decline to participate due to not wanting to deal with the bad publicity (“XYZ Gas is raping the Roan!”).  That’s what the protesters want, right?  To discourage companies from drilling.  Just like on eBay, fewer bidders means lower prices.  Only six companies submitted bids.  The only company I’ve ever even heard of that won a bid was Oxy (who’s “Meadow Ridge #3 LLC”???).  The rest were likely speculators.  If real companies do get interested in the Roan, those speculators will be the ones who make the big money, not the governments.

    Here’s a conspiracy theory for you, with no basis in fact:  speculators covertly fanned the flames of protest over the Roan to drive off bidders and suppress the auction prices.

    1. The BLM estimates that there might be 8.9 tcf of recoverable gas under the Roan.  If all of this gas is produced at a rate of $10/mcf (within the price range of the last year), that would result in royalty payments of about $5.6 billion to the state of Colorado over the entire producing life of the wells.

      The two major factors affecting this estimate are the wellhead price of gas and the actual recovered gas.  I know some groups think the BLM was overly optimistic in their reserve projections.  As to the price, $10 is in the middle of the wholesale price range over the last year.

      1. The BLM docs clearly show several winners other than Vantage.  Maybe the key word is “atop”, as weren’t there leases for sale below the rim as well?

        1. I found the map of parcels on the BLM website.  Vantage won all the parcels on top of the plateau.  The highest prices per acre went to properties below the rim, won by Vantage, Oxy, and Sellersearch.

        2. So once again Greg Schnakes et.al. are twisting reality, just as when they claimed the moratorium area has 16.8 trillion cubic feet (when that’s actually the entire Picance and Wasatch basins atop and below, federal and nonfederal land added together).

    3. There’s gotta be a way to impose a minimum price for a lease, to ensure that prices WON’T be artificially reduced through backroom deals and so that speculators won’t profit.

      Too late for the Roan though. Nice going you idiot politicians, greedy oil barons, etc.

    4. How many companies normally submit bids? I am not sure there were fewer bidders than usual.

      In fact, the leases sold for higher than many leases sell for in the Piceance, so unless you have some other facts or information you are not sharing, I believe you’re a speculator too.

      The fact is, Greg Schnake–who never met a lie he wouldn’t gladly embrace if it helped, at least in the short term, his paymaster–pulled the $2 billion dollar lease bonus bid out of his ass, and Penry held the turd aloft to call his own for whatever political calculations added up in his Machiavellian math.  

      Gargi at the Rocky Mountain News reported it as fact, and there apparently aren’t any editors around anymore to catch the obvious mistake, since the News has itself reported that many people thought Schnake’s figure was incredible–as in lacking all credibility.  It’s amazing to me that someone can lie as much as that man and still get media calls.  

      Schnake’s figure, which was explained on a  ‘fact sheet’ was based on a single parcel of private land in a producing gasfield that sold for 40k/acre, which has never, ever, ever in the history of Colorado happened when they are auctioning off the public’s land and minerals, Uncle Sam being a sucker for any corporate land man.   The highest BLM parcel has been somewhere north of 20k for an acre, again in the heart of a producing field. The top ROan bid was at the base where production has been booming since about 1999.

      Roan’s leases were never going to fetch $2 billion (with $1 billion going to the state).  It was  a bold-faced lie to begin with and now Schnake and his counterpart Meg Collins are blaming environmentalists and Democrats, which they will do for everything that might be bad, incessantly between now and November, and even after that, through November 2010 when they go after Ritter.  Milk turn sour in the fridge?  Its Gov. Ritter’s fault.  

      I leave you this from an AP story that ran in 2007:

      Based on 19 federal tracts leased in the area over the last year, an analysis by Denomy, done for environmental groups and Democratic legislators, concluded the state’s share of lease revenue over 20 years would be $8.1 million at most.

      “For the largest gas reserve in the lower 48, that’s not credible,” state Sen. Josh Penry, R-Fruita, said of Denomy’s analysis.

      Penry believes the figure would be closer to $1 billion, based on recent sales in the area.

      Denomy’s estimate were off base as well, by $106 million.  Sen. Penry’s estimates were off by $886 million.  

      1. Since only 1/2 of the lease revenue comes to Colorado, this means Denomy was off by $49 million (86% below the actual state share).

        Meanwhile, Penry was off by $944,000,000 (or 1686% over the actual state share).

        (I really like the image of Penry waving a Sssnake-turd over his head, still trying to claim it should be worth $1Billion! Has this man no shame?)

  4. For the Dems. Makes it look like they are just doing more blocking of domestic oil exploration. Will definitely be used by 527s against Udall and Obama come closer to November.

    1. Total annual oil production in Colorado supplies less than 26.5 HOURS of US oil consumption.

      Local Dems need to remind people that there is a difference between gasoline (which is refined from crude oil and Colorado produces less than 0.3% of US needs) and natural gas (aka, methane).

      Doubling or even tripling oil production in Colorado will do nothing but put more holes in the ground.

      Meanwhile in Colorado last year, drilling permits increased 8%. The number of active wells increased by nearly 8%. However, oil production decreased by 3%.

      Hmm. Who’s responsible for this decrease in oil production? Certainly not the regulators. Certainly not any new rules. Ask your favorite industry shill (err, GOP elected official) why the oil operators in Colorado hate America.

  5. We think the energy lobby has opened itself up to a devastating credibility hit here

    The public will buy the Schnacke-Oil that prices were lowered because of opposition to the leasing.

    I wonder why we couldn’t have had leasing with a minimum reserve price? Of say, $750 million?

      1. That Oil & Gas companies are greedy lying scumbags awash in money and are unwilling to pay their fair share. A competent ad campaign favoring Ritter’s scholarship proposal will beat any amount of anti-funding.

        2. Nah, they’re just doing their part to keep the GDP rising. Since most oil executives have sleepless nights — not that they’d trade the life! — I say we defer to their preferred rules and let them let us know what’s best for us.  

  6. I didnt even bother reading the diary, but when I was scrolling the front page all that showed at the bottom of my window was the headline.  Best Headline Ever.

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