SEC, ‘Use It or Lose It’ Tops Agenda
The U.S. Securities and Exchange Commission (SEC) continues its march to modernize oil and gas reserves disclosure rules for companies traded on U.S. stock exchanges.
On June 26 the commission published a rule proposal on its Web site. The 172-page proposal suggests revisions to update and modernize oil and gas reporting requirements, and to “provide investors with a more meaningful and comprehensive understanding of oil and gas reserves.”
It’s been a long time coming, according to many industry veterans. The current requirements were adopted nearly three decades ago, and have not kept pace with industry practice and technological advances.
“We cannot overstate the importance of these developments, which will affect most AAPG members,” said past AAPG president Pete Rose. “These proposed rule changes represent a long sought-after and significant advancement, and AAPG members, together with their SPE colleagues, were instrumental in helping to catalyze and advance it.
“This is an excellent example of how AAPG can truly serve the interests of its membership,” he said.
Publication of the rule proposal opens a 60-day public comment period. The SEC solicits answers to specific questions in the document and invites other comments and suggestions on the proposed rule.
AAPG President Scott Tinker has asked the AAPG Ad Hoc Committee on SEC Response to evaluate the rule proposal and prepare a comment on behalf of the Association. Recognizing the important and historic opportunity to help improve and modernize the SEC reporting rules, each member of the committee has again volunteered their time and effort to make this contribution.
The AAPG Executive Committee will review and approve the comment prior to submission.
In addition, AAPG members should consider contributing their own expertise and perspectives on this topic with a personal comment. The GEO-DC Web page has a link to the SEC Web site where you can find additional information and offer your thoughts.
The deadline is September 8, 2008.
The Responsible Federal Oil and Gas Lease Act (H.R. 6251), authored by Representative Nick Rahall (D-W.Va.), chairman of the Natural Resources Committee, was the focus of much GEO-DC activity in the weeks leading up to Congress’s July 4 recess.
Dubbed the “use it or lose it” bill, its intent was to stop oil and gas companies from “stockpiling” federal leases and “holding back domestic production” from those leases while “enjoy[ing] world record profits.”
Specifically, the bill:
- Directed the Secretary of Interior to ensure that oil and gas companies were “diligently developing” any federal oil and gas leases they held.
- Prohibited the secretary from leasing additional federal acreage to lessees that were not producing or “diligently developing” existing leases.
- Shortened all lease terms (both on- and offshore) to five years with increasing rental rates for each additional one-year extension (if granted).
There were reports that the final bill extended the initial terms to 10 years, but that version of the legislation was not available for review at press time.
The origin of this legislation was two special reports prepared by staff for the House Committee on Natural Resources. Among other points, these reports suggest that:
“… Combined, oil and gas companies hold leases to nearly 68 million acres of federal land and waters that they are not producing oil and gas … Oil and gas companies would not buy leases to this land without believing oil and gas can be produced there, yet these same companies are not producing oil or gas from these areas already under their control.
“If we extrapolate from today’s production rates on federal land and waters, we can estimate that the 68 million acres of leased but currently inactive federal land and waters could produce an additional 4.8 million barrels of oil and 44.7 billion cubic feet of natural gas each day.
“That would nearly double total U.S. oil production, and increase natural gas production by 75 percent ...”
Thus, the committee reasons, industry should produce these “extrapolated” reserves on acreage it already holds before receiving leases to additional federal lands.
While this makes for snappy political rhetoric, it doesn’t reflect geological reality or the process of finding oil and gas. Note also that none of the facts presented in these reports are referenced, and the committee held no hearings to formally gather information and publicly assess the situation.
Seeking to provide lawmakers with some basic information about how we go about finding oil and natural gas, then-AAPG President Will Green sent a letter to Speaker Nancy Pelosi (D-Calif.), Majority Leader Steny Hoyer (D-Md.) and Minority Leader John Boehner (R-Ohio) on June 23, 2008.
In the letter Green talked about the geological and engineering work that must be done long before a drill rig shows up on site.
He concluded the letter, “… Policies that increase exploration costs, decrease the available time to properly evaluate leases and restrict access to federal lands and the Outer Continental Shelf do not provide the American people with short-term relief from high prices and undermine the goal of increasing stable long-term supplies.”
The letter was published as an Op-Ed commentary and was quoted by USA Today.
The letter’s complete text is on the GEO-DC Web site.
The letter represents the type of science-based, factual information and understanding that organizations like AAPG can uniquely provide. And the favorable response by the policy community confirmed the importance of making this contribution to society.
In order to act on several energy bills before leaving for the July 4 recess, House leaders rushed the “use it or lose it” bill to the floor on June 26, under a parliamentary procedure known as suspension of the rules. This limited time for debate to 40 minutes and prohibited amendments to the legislation – but in return the bill had to receive a two-thirds majority, rather than simple majority, for passage.
During the ensuing debate on the House floor, members of Congress repeatedly referred to AAPG and quoted from Green’s letter.
The outcome was uncertain as the vote began. But at 5:44 p.m., as the Speaker’s gavel banged the vote to a close, the final tally was 223 to 195. The bill failed to reach a two-thirds majority.