Murkowski Speaks on Misguided “Use It or Lose It” Proposal

WASHINGTON, D.C. – U.S. Sen. Lisa Murkowski, R-Alaska, yesterday made the following statement on the U.S. Senate Floor:

“Mr. President, I would like to take a few minutes this afternoon to perhaps switch the discussion from what my colleagues were referring to earlier in terms of the budget and speak a little bit about the issue of energy--obviously, a topic of great concern.

“The President has addressed it as recently as last week in a major address at Georgetown. There have been a lot of discussions about what it is we need to do to respond to the higher prices families are paying at the pump and just how we deal with the issue of energy in general. There has been much discussion about this concept of ‘use it or lose it.’ I want to speak to that proposal a little bit this afternoon.

“It is a rather strange proposal that claims to address the rising cost of oil and gas for America's working families. The premise of this is, even with oil at more than $100 a barrel, and even though lease terms are already limited by law to 5 to 10 years, energy companies somehow are hording Federal lands and refusing to produce the resources that are beneath them.

“’Use it or lose it’ has been presented by this administration and others as a way to increase our Nation's energy production. But even a cursory review will show this is fundamentally flawed in its premise. This proposal will not increase American production. It will not increase jobs or create jobs. It will not raise government revenues or bolster our security. Instead, I believe it is a diversion from our more critical need to produce more of our own resources and to streamline our burdensome regulatory processes.

“ Now, the idea behind ‘use it or lose it’ is to simply punish companies for not drilling on lands they have leased, so they either drill or they give back the acreage to the government which can then resell it to someone else. But, interestingly, this proposal has drawn some support from a number of Senators and from the President himself who, until recently, have claimed: Well, we can't drill our way out of this. We can't drill our way to lower gas prices. America's oil--and we have been repeatedly told this--has minimal impact on global prices and takes too long to bring online.

 “So I do not know, maybe this is a change of heart. If that is so, I am glad to see it. I do hope--I do hope--their proposal is a signal that, indeed, they would like to see drilling on every leased Federal acre onshore, offshore. That is certainly the premise of the proposal, even though it is perhaps a pretty major departure from the previous positions.

“Now, the advocates of ‘use it or lose it’ have pointed out correctly that there are millions of acres leased in this country that are not currently producing oil and gas, but they have misidentified the reason why. Chances are maybe there is just no oil present on that land. Perhaps exploration is ongoing or, in many cases, the Federal Government has simply blocked the drilling. To add a new penalty to this process and to add a new layer to existing bureaucracy will only backfire.

“From the outset, I think it is important to understand what is involved in oil and gas production. This is an incredibly capital-intensive, labor-intensive business, and from a technological perspective, the process is extraordinarily complex. I think we saw, after the Deepwater Horizon, cameras trained a mile below the surface of the ocean, and it was described by many as, this is akin to how we deal with putting a man on the Moon. This is complicated stuff, and there is no ‘X marks the spot’ as to where that oil is actually going to be found.

“It can take years, not to mention tremendous amounts of money, to finally locate these commercial deposits. When there is resource present, it takes some teams of some pretty highly skilled and trained engineers to figure out how we are going to bring it to market. There are the entire legal departments that have to wade through the multitude of permits, the analysis, the plans that are required by our Federal Government.

“This process takes a considerable amount of patience and for lots of good reasons, but the government is certainly not in a hurry to provide leaseholders the approval they need to move forward.

“Last week, the Interior Department had an opportunity to explain what goes on within the exploration process and show why not all Federal leases immediately produce oil and gas. Instead, the Interior Department issued a report that attempts to portray many Federal leases as idle or unused. What could have been a very helpful and instructive process was instead hopelessly politicized, and that is unfortunate.

“The findings of the Interior Department's report I believe defy common sense, general business principles, and what we know to be true about the Federal regulatory process. The definition of ‘inactive’ purposely excludes many important development activities, and there is no acknowledgment that oftentimes it is the government itself that is causing the delays in drilling.

“I guess one of the more telling examples of what is wrong with the Interior Department's new report is its depiction of what is happening in Alaska right now. Companies have been trying for years--trying for years--to bring their Federal leases in this State of Alaska into production.

“These efforts have been blocked. They have been delayed by the Federal Government, especially this administration, and they have been blocked at every turn. Despite this, the Interior Department's report claims that just 1 percent--1 percent--of Alaska's leases are producing and puts the blame on industry. But when I talk to folks back home, when I talk to those who are trying every single day, getting up and trying their hardest to advance so we can get to levels of production, they only find that there is yet one more hurdle, one more roadblock that is thrown up and thrown up by the government. It causes incredible frustration.

“It is hard to pick what would be described as the best example of companies trying to produce from their leases--which, I might add, they purchased at the invitation of the Federal Government--yet they are being forbidden by the administration from pursuing their exploratory operations. It is happening in the National Petroleum Reserve Alaska. Think about the name. This is the National Petroleum Reserve Alaska. That is pretty ironic. We can't get started there, and one of the biggest reasons we can't is we are being blocked--the producers are being blocked--from getting a permit to build a bridge over a river to get started.

“As regrettable and as ironic as that example is, there is an even higher profile example that we see up North, and that is what Shell is attempting to do. They have set a record--and a record that is certainly not enviable but a record nonetheless--for both dollars invested and frustration experienced in return. This is a situation where a company has spent a little over $4 billion--this is billion with a B--they spent $4 billion to buy Federal acreage in Alaska's Outer Continental Shelf nearly 7 years ago. Since that time, Shell has done nothing but slog through an incredibly long and incredibly arduous permitting process. Air permits that take 6 weeks to acquire in the Gulf of Mexico have now been delayed for over 5 years.

“I ask my colleagues to put that in context. A company, at the invitation of the Federal Government, purchased leases over 7 years ago, has put more than $4 billion into trying to get to exploration, has spent 5 years waiting on permits, where in other parts of the country permits can be turned around in 6 weeks, and they have yet the opportunity to even start. So can anyone honestly suggest we ought to punish Shell or any company that is going through this for the Federal Government's failure to allow even exploratory drilling to proceed? Is it fair that we demand Shell pay the price because the government has failed to issue a permit that even the EPA and even the Administrator of the EPA has acknowledged poses no human health risk? This is where we are sitting right now.

“I was incredulous. I had an opportunity to ask the Secretary of the Interior, who is a friend of mine--most certainly a friend who I acknowledge has a very difficult job, a very challenging job--but he could not assure me that the so-called ‘use it or lose it’ fee would not apply to the millions of acres of leased land in Alaska, both onshore and offshore, where the Federal Government has sold the leases but is not allowing drilling activity. It is similar to a commercial real estate company offering to rent some office space to you. We go ahead. You pay the rent. I never give you the key, so you can't access your commercial office space. Then I am going to go ahead and assess a fine. We are going to penalize you when you failed to open your doors for business. That is kind of what is happening up North. It is not a ``use it or lose it'' policy, it is ‘heads we win, tails you lose.’ My colleagues have to imagine: What would such a policy say about the way our government conducts its businesses and manages its resources?

“’Use it or lose it’ is drawn from a desire to do the right thing, which is to increase our domestic production, but I also believe it reveals a fundamental lack of understanding about how energy resources are developed and how they are brought to market. It risks very real consequences for our energy production here in America. Because instead of encouraging producers to find energy faster, it would actually discourage them from discovering it in the first place. Instead of creating jobs, it would likely end jobs. Instead of raising new revenues for the Federal Government, it would likely diminish taxpayers' returns from leasing and production.

“It seems as though every time oil prices are on the rise, we come together and we debate how we are going to respond to them and every time someone points out we should be producing far more of our own--frankly, very tremendous resource base--someone steps forward with the potential scapegoat, perhaps to distract attention from our need to be leasing more new lands. It is like clockwork around here. Instead of making the hard choices about what we can do to better insulate ourselves from higher crude prices and geopolitical instability, we see proposals to impose windfall profit taxes, to pour unprecedented sums of money in unproven alternative technologies, to rein in speculators, to sue OPEC, to raise taxes and fees on production, and now to force companies to act faster or to face greater penalties.

“Until we see some evidence that companies are refusing to develop their leases, I have to call it like I see it. ‘Use it or lose it’ is a ploy to claim that we support increased domestic production, without doing anything to ensure that domestic production is the actual result of our Federal energy policies.

“There has been a lot of discussion, when we are talking about energy, about Brazil and their potential--how that nation is set to significantly ramp up its oil production, and we commend the Brazilians. They have been able to make a number of very important discoveries, estimated at about 50 billion barrels of oil equivalent.

“According to the Wall Street Journal, Brazil's oil production rose by 876 percent over the past 20 years--876 percent over the past 20 years. They are now planning to double their current production in less than 10 years. So there are pretty remarkable things going on there. Even while Brazil is developing their current resource base, they are actively looking for more. They are working aggressively. They are pursuing that objective while expanding their production and their use of alternative energy sources. They are kind of pursuing the ‘all of the above’ we talk about so often.

“In the United States, we have technically recoverable oil resources estimated at 157 billion barrels, more than three times--more than three times--what Brazil has recently found. I don't understand. I don't understand why we refuse to set the same ambitious goals for increasing our production that Brazil has, even as we continue to pursue alternative energies that will diversify our supplies equally. When it comes to energy, we should strive to be our own best customer, not Brazil's.

“As Federal policymakers, we need to think carefully about what we demand of any industry, including oil and gas. When we tax something, the fact is, we get less of it. I don't think we want to make ourselves even more dependent on foreign oil right now. We don't want to discourage domestic production, especially under the guise of promoting it, and we have no reason to add yet another layer to an already daunting regulatory system.

“I strongly urge us in the Senate, in the Congress, to recognize ‘use it or lose it’ for what it is. It is an attempt to extract more money from the companies, not to extract more energy from the ground. It is not the right approach for America, and it will not move our energy policy in the right direction.

“I do take comfort in one fact, and that is this: At least the debate is now about how to produce more oil and not whether to produce more oil. My work on the Energy Committee and certainly what goes on in the State of Alaska has taught me much about how and how not to achieve greater oil production if we want more domestic production--and I think we all recognize the President's verbal commitment to this and the change of heart amongst some of my colleagues--it is time to eliminate the needless redtape and allow access to America's huge resources that are still off-limits.

“I thank the Presiding Officer for the time and the opportunity to speak this afternoon on yet another aspect of our country's much needed energy policy and how we can continue to find ways that will move us toward a future where we do engage in energy sources that are clean and renewable while also harvesting our bountiful supply in this country as we find ways to produce more domestically.”