If oil and natural gas companies are not drilling on leased land, it is because the land probably does not hold sufficient reserves to warrant significant investment, says API chief economist John Felmy.
U.S. crude oil production in March reached the highest monthly level since February 1973 at 9.32 million barrels per day, up 13% from a year ago, the American Petroleum Institute said Thursday in a report. Natural gas liquids output also rose 9.1% to a March record of 3.05 million barrels per day. "Production of both crude oil and natural gas liquids last month remained at the highest levels in decades even as rig counts reached a five-year low," API Chief Economist John Felmy said in a statement.
The U.S. stands to benefit from opening more offshore sites to oil and natural gas development, witnesses said during a House Natural Resources subcommittee hearing. "If offshore energy production were extended to new areas, it could generate a bounty of job creation and new revenues to the government while improving America's energy security," said John Felmy, chief economist of the American Petroleum Institute. "As wells are drilled and the leases begin to produce, the revenue impact will only grow, along with the prospects for employment in the region and around the country."
Congress should stop awarding tax incentives to oil and natural gas companies, said Rep. Earl Blumenauer, D-Ore., who sponsored legislation that would eliminate $40 billion over five years in tax credits to oil majors. "This is a tired old argument we've been hearing for two years now," said John Felmy, the American Petroleum Institute's chief economist. If the U.S. wants new jobs, it should "develop American oil and gas by American workers for American consumers," Felmy added.
The American Petroleum Institute criticized a House committee's approval of the Consolidated Land, Energy, and Aquatic Resources Act, which includes reforms to the country's oil-and-gas leasing program in response to the Gulf of Mexico spill. The measure goes beyond spill response "to the point where -- if adopted by the Congress -- provisions of the legislation will kill jobs, stifle economic recovery and punish an already-reeling Gulf Coast community," said API President and CEO Jack Gerard.
API says Democrats' attempts to force oil companies to develop 68 million acres currently under lease are unrealistic given geological challenges, uncertainty whether oil exists on the leased land and other barriers to development. With oil companies spending billions on leases, "the last thing you want to do is sit on potential oil production or natural gas production," said API spokeswoman Karen Matusic.