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.

The proposed rule seeks to remedy that.

“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 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 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.

Comments (0)


Washington Watch

Washington Watch - David Curtiss

David Curtiss served as the Director of AAPG’s Geoscience and Energy Office in Washington, D.C. from 2008-11.

Policy Watch

Policy Watch is a monthly column of the EXPLORER written by the director of AAPG's  Geoscience and Energy Office in Washington, D.C. *The first article appeared in February 2006 under the name "Washington Watch" and the column name was changed to "Policy Watch" in January 2013 to broaden the subject matter to a more global view.

View column archives

Members Invited to Be Part of CVD

This year’s Geo-Congressional Visit Days (geoCVD) will be held Sept. 8-10 in Washington, D.C., and interested AAPG members are invited to participate.

Deborah Sacrey
Deborah Sacrey

Deborah Sacrey, chair of AAPG’s Washington Advocacy Group, said geoCVD is an effort by the American Geological Institute, working with AAPG and several other member societies, to bring members to Washington to tell Congress about the importance of the geosciences.

She said the event consists of two-and-a-half days of geoscience briefings, which includes meeting with the respective congressional delegations and possibly one or two key federal agencies.

Sacrey noted that AAPG does not provide funding for members’ participation at geoCVD, but divisions and Sections can consider sponsoring one or more of their members to ensure representation.

A limited number of spaces are available. To register, contact David Curtiss at (202) 684-8225, or by email

See Also: Book

Alternative Resources, Structure, Geochemistry and Basin Modeling, Sedimentology and Stratigraphy, Geophysics, Business and Economics, Engineering, Petrophysics and Well Logs, Environmental, Geomechanics and Fracture Analysis, Compressional Systems, Salt Tectonics, Tectonics (General), Extensional Systems, Fold and Thrust Belts, Structural Analysis (Other), Basin Modeling, Source Rock, Migration, Petroleum Systems, Thermal History, Oil Seeps, Oil and Gas Analysis, Maturation, Sequence Stratigraphy, Clastics, Carbonates, Evaporites, Seismic, Gravity, Magnetic, Direct Hydrocarbon Indicators, Resource Estimates, Reserve Estimation, Risk Analysis, Economics, Reservoir Characterization, Development and Operations, Production, Structural Traps, Oil Sands, Oil Shale, Shale Gas, Coalbed Methane, Deep Basin Gas, Diagenetic Traps, Fractured Carbonate Reservoirs, Stratigraphic Traps, Subsalt Traps, Tight Gas Sands, Gas Hydrates, Coal, Uranium (Nuclear), Geothermal, Renewable Energy, Eolian Sandstones, Sheet Sand Deposits, Estuarine Deposits, Fluvial Deltaic Systems, Deep Sea / Deepwater, Lacustrine Deposits, Marine, Regressive Deposits, Transgressive Deposits, Shelf Sand Deposits, Slope, High Stand Deposits, Incised Valley Deposits, Low Stand Deposits, Conventional Sandstones, Deepwater Turbidites, Dolostones, Carbonate Reefs, (Carbonate) Shelf Sand Deposits, Carbonate Platforms, Sebkha, Lacustrine Deposits, Salt, Conventional Drilling, Directional Drilling, Infill Drilling, Coring, Hydraulic Fracturing, Primary Recovery, Secondary Recovery, Water Flooding, Gas Injection, Tertiary Recovery, Chemical Flooding Processes, Thermal Recovery Processes, Miscible Recovery, Microbial Recovery, Drive Mechanisms, Depletion Drive, Water Drive, Ground Water, Hydrology, Reclamation, Remediation, Remote Sensing, Water Resources, Monitoring, Pollution, Natural Resources, Wind Energy, Solar Energy, Hydroelectric Energy, Bioenergy, Hydrogen Energy
Desktop /Portals/0/PackFlashItemImages/WebReady/book-m100-Tectonics-and-Sedimentation-Implications-for-Petroleum-Systems.jpg?width=50&h=50&mode=crop&anchor=middlecenter&quality=90amp;encoder=freeimage&progressive=true 5823 Book

See Also: Bulletin Article

Gas generation is a commonly hypothesized mechanism for the development of high-magnitude overpressure. However, overpressures developed by gas generation have been rarely measured in situ, with the main evidence for such overpressures coming from source rock microfractures, the physical necessity of overpressures for primary migration, laboratory experiments, and numerical modeling. Indeed, previous in-situ observations suggest that gas generation only creates highly localized overpressures within rich source rocks. Pore-fluid pressure data and sonic velocity–vertical effective stress plots from 30 wells reveal that overpressures in the northern Malay Basin are primarily generated by fluid expansion and are located basinwide within the Miocene 2A, 2B, and 2C source rock formations. The overpressures are predominantly associated with gas sampled in more than 83% of overpressure measurements and have a sonic-density response consistent with gas generation. The association of fluid expansion overpressures with gas, combined with the sonic-density response to overpressure and a regional geology that precludes other overpressuring mechanisms, provides convincing in-situ evidence for basinwide gas generation overpressuring. Overpressure magnitude analysis suggests that gas generation accounts for approximately one-half to two-thirds of the measured excess pore pressure in the region, with the remainder being generated by coincident disequilibrium compaction. Thus, the data herein suggest that gas generation, if acting in isolation, is producing a maximum pressure gradient of 15.3 MPa/km (0.676 psi/ft) and not lithostatic magnitudes as commonly hypothesized. The gas generation overpressures in this article are not associated with a significant porosity anomaly and represent a major drilling hazard, with traditional pore-pressure prediction techniques underestimating pressure gradients by 2.3 plusmn 1.5 MPa/km (0.1 plusmn 0.07 psi/ft).
Desktop /Portals/0/PackFlashItemImages/WebReady/evidence-for-overpressure-generation.jpg?width=50&h=50&mode=crop&anchor=middlecenter&quality=90amp;encoder=freeimage&progressive=true 3717 Bulletin Article

See Also: CD DVD

Desktop /Portals/0/images/_site/AAPG-newlogo-vertical-morepadding.jpg?width=50&h=50&mode=crop&anchor=middlecenter&quality=90amp;encoder=freeimage&progressive=true 4578 CD-DVD

See Also: DL Abstract

The results of regional deep seismic acquisition in the South Atlantic continental margins have shed new lights on the birth and development of sedimentary basins formed during the Gondwana breakup. Recent models of mantle exhumation as observed in the deep water Iberian margin have been applied extensively to the interpretation of several basins in the Eastern Brazilian and West African conjugate margins. However, the tectonic development of these basins is markedly different from the magma-poor margins, and in this lecture we emphasize the contrasts from the tectono-sedimentary features imaged in deep-penetrating seismic profiles that extend from the platform towards the oceanic crust, which indicate that the Red Sea constitutes a better analogue for the birth of divergent continental margins.

Desktop /Portals/0/images/_site/AAPG-newlogo-vertical-morepadding.jpg?width=50&h=50&mode=crop&anchor=middlecenter&quality=90amp;encoder=freeimage&progressive=true 3088 DL Abstract

See Also: Energy Policy Blog

In January several long-awaited actions are likely: The Nebraska Supreme Court should rule on a suit challenging the right of the governor to approve the pipeline route; President Obama may decide whether to issue a presidential permit; and the House and Senate plan votes on legislation to approve the pipeline without a presidential permit.
Desktop /Portals/0/PackFlashItemImages/WebReady/keystone-xl-pipeline-update-and-timeline-hero.jpg?width=50&h=50&mode=crop&anchor=middlecenter&quality=90amp;encoder=freeimage&progressive=true 14126 Energy Policy Blog