Energy

Obama’s Fuzzy Oil Production Math

Bush administration actions have led to gains in supply.

TAFT, CA - JULY 21:  An oil rig south of town extracts crude on July 21, 2008 in Taft, California. Hemmed in by the richest oil fields in California, the oil town of 6,700 with a stagnated economy and little room to expand has hatched an ambitious plan to annex vast expanses of land reaching eastward to Interstate 5, 18 miles away, and take over various poor unincorporated communities to triple its population to around 20,000. With the price as light sweet crude at record high prices, Chevron and other companies are scrambling to drill new wells and reopen old wells once considered unprofitable. The renewed profits for oil men of Kern County, where more than 75 percent of all the oil produced in California flows, do not directly translate increased revenue for Taft. The Taft town council wants to cash in on the new oil boom with increased tax revenues from a NASCAR track and future developments near the freeway.  In an earlier oil boom era, Taft was the site of the 1910 Lakeside Gusher, the biggest oil gusher ever seen in the US, which destroyed the derrick and sent 100,000 barrels a day into a lake of crude.  (Photo by David McNew/Getty Images)
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Amy Harder
March 17, 2011, 9:57 a.m.

Up­dated at 8:45 p.m. on March 17 to in­clude White House com­ment.

He doesn’t want to ad­mit it, but Pres­id­ent Obama is tak­ing cred­it for something George W. Bush did.

The White House is tout­ing fed­er­al data that shows do­mest­ic oil pro­duc­tion is at its highest level since 2003. In a blog post last week, Obama’s top cli­mate and en­ergy aide, Heath­er Zichal, points to En­ergy In­form­a­tion Ad­min­is­tra­tion data that shows oil pro­duc­tion from the Out­er Con­tin­ent­al Shelf (which ba­sic­ally means the Gulf of Mex­ico) has in­creased by more than a third between 2008 and 2010.

EIA Ad­min­is­trat­or Richard Newell says it takes sev­er­al years for any ma­jor fed­er­al policy ac­tion — such as is­su­ing leases — to af­fect do­mest­ic oil pro­duc­tion.

“Even if one has de­vel­op­ment drilling go­ing on, there is about a one- to three-year lag between drilling and pro­duc­tion that one will see,” Newell said dur­ing a break in a House Nat­ur­al Re­sources Com­mit­tee hear­ing on Thursday. “If you’re on a longer term — for ex­ample, new leases be­ing is­sued in an area — you can be on a sev­er­al-year time frame be­fore you can see a re­la­tion­ship between new leases and pro­duc­tion. So there are sig­ni­fic­ant lags.”

While Bush was in of­fice from 2001 to 2009, the oil and gas in­dustry saw many new leases and oth­er ex­pan­ded drilling op­por­tun­it­ies. In March 2010, Obama an­nounced plans to ex­pand off­shore drilling, but he re­treated in the af­ter­math of the BP oil spill.

Ac­cord­ing to EIA’s short-term 2011 out­look, re­leased last week, oil pro­duc­tion was sig­ni­fic­antly high­er in 2009 than in the years pri­or. Obama may have been in of­fice for most of that year, but the oil pro­duc­tion num­bers are due to ac­tion taken be­fore he be­came pres­id­ent. In 2010, most if not all of the pro­duc­tion in­crease re­cor­ded is likely due to ac­tion that pred­ates Obama, since Obama didn’t take any ma­jor ac­tion ex­pand­ing off­shore drilling his first year in of­fice.

“One can at­trib­ute an up­swing in the Gulf of Mex­ico over the last sev­er­al years to in­creas­ing leases and de­vel­op­ing of deep-wa­ter drilling,” said Newell, who de­clined to com­ment spe­cific­ally about wheth­er or not those leases were is­sued un­der Bush’s — and not Obama’s — watch.

“I haven’t eval­u­ated; one would have to go back and look at spe­cif­ic pro­jects com­ing on line at dif­fer­ent points in time,” Newell said.

White House spokes­man Clark Stevens noted that EIA’s oil pro­duc­tion data was cited as “a mat­ter of fact” as op­posed to tout­ing the in­crease in any way. “As our policy makes clear, this ad­min­is­tra­tion con­tin­ues to en­cour­age do­mest­ic ex­plor­a­tion and pro­duc­tion, and our top pri­or­ity is en­sur­ing that this pro­duc­tion is done safely and re­spons­ibly,” Stevens said in an e-mail to Na­tion­al Journ­al Daily.

EIA’s short-term out­look pro­jects a de­crease in do­mest­ic oil pro­duc­tion in 2011 and 2012. Newell sees a few reas­ons for that.

A de­cline cor­res­pond­ing to an up­surge in off­shore pro­duc­tion over the past few years would be nat­ur­al, he said: “That’s a nat­ur­al de­cline that we would have been fore­cast­ing prob­ably re­gard­less of what happened in off­shore in terms of the morator­i­um and reg­u­la­tion, etc.”

The pre­dicted de­crease in gulf pro­duc­tion is due at least partly to the ad­min­is­tra­tion’s ac­tions taken after the BP oil spill — an un­for­tu­nate pro­jec­tion for the White House, as it’s try­ing to stay on of­fense in the de­bate over gas prices go­ing in­to the 2012 elec­tion cycle.

“A por­tion of that, though, is as­so­ci­ated with the [BP] well blo­wout, morator­i­um and sub­sequent reg­u­lat­ory delays,” Newell ad­ded.

That pro­jec­tion bol­sters the po­s­i­tion of Re­pub­lic­ans like Rep. Jeff Landry of Louisi­ana and the Amer­ic­an Pet­ro­leum In­sti­tute. Since Zichal’s blog post last week, API and oth­er oil lob­by­ists have ar­gued that the ad­min­is­tra­tion was tak­ing cred­it for ac­tion taken be­fore Obama was in of­fice.

Newell noted that there has not been any ac­tu­al im­pact from the morator­i­um and new reg­u­la­tions.

“We have yet to see a down­ward im­pact on off­shore pro­duc­tion in re­sponse to the Ma­condo well blo­wout, and the sub­sequent morator­i­um and reg­u­lat­ory changes that took place,” Newell said. But giv­en his agency’s out­look, one is ex­pec­ted.

Later on in the hear­ing, Landry, a mem­ber of the House Nat­ur­al Re­sources Com­mit­tee, grilled Newell on his in­volve­ment of the ad­min­is­tra­tion’s po­s­i­tion on EIA’s data.

“Did you send that in­form­a­tion to the White House?” Landry asked.

“There is data from that fact sheet that comes from EIA,” Newell ac­know­ledged. “I was not in­volved in provid­ing that data.”

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