Just how much oil is coming out of federal waters?

With US production being touted by President Obama as an achievement in his quest for re-election, Gary Gentile tackles the issue of output from federal offshore waters. You'd think that counting it all up would be easy. It isn't, as he discusses in this week's Regulation & The Environment column from Platts Oilgram News.

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How much oil and gas is produced each year from federal lands and waters?

What appears to be a simple question has proven to be anything but, especially in an election year when statistics get pulled and twisted like saltwater taffy to suit specific needs.

Understanding actual production from onshore oil and gas wells and platforms in the Outer Continental Shelf has always been a bit tricky. The government keeps track of production using a variety of methods, from the low tech dipping of measuring sticks into storage tanks, to electronic meters that must be periodically visually checked, like the glass globes on the side of homes, whose spinning discs mark the passage of every kilowatt hour.

But the goal of collecting the data is not necessarily to track production for its own sake, but to keep a check on companies that owe taxpayers royalties on the oil and gas they produce from public lands.

The Energy Information Administration regularly publishes reports of "production." But what they actually track are sales volumes reported by the Interior Department. Those sales represent the oil, gas, and natural gas liquids that producers sell into the marketplace and record each month on the "Report of Sales and Royalty Remittance," otherwise known as Form 2014.

It is the job of the Office of Natural Resource Revenue to keep track of royalties owed to the US government and then to disburse those royalties to Indian tribes, states and the US Treasury.

They do collect the production data from the meters and other sources on the Oil and Gas Operator Report (OGOR), which producers are also required to submit. But those forms are used primarily to help audit the accuracy of the royalty reports.

There are other serious challenges to keeping track of the vast number of onshore and offshore platforms that regularly produce oil and gas from federal lands. Those challenges were detailed in a March 2010 report issued by the Government Accountability Office. The 136-page report concluded that Interior's system of verifying production volumes "does not provide reasonable assurance that operators are accurately measuring and reporting these volumes."

Interior has been responding to the recommendations made in the report. For the first time, the agency is hiring a dedicated staff of inspectors to focus on the metering systems that track offshore production volumes. ONRR has received authorization to fill 18 full-time equivalent positions over the next two years, some of whom will be in the field and others at headquarters to compile their data.

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As it stands now, the same inspectors who get sent out to monitor safety conditions also have the job of witnessing meter calibrations and checking to be sure pipes haven't been installed to bypass the meters.

And sometime this year, ONRR will conduct a pilot study testing automated meters that can be remotely monitored in real time.

Other complexities exist, as demonstrated this year by a significant revision of EIA production data--a revision prompted by a letter from Representative Edward Markey, Democrat-Massachusetts.

In January, Markey objected to the EIA reporting that in 2010, 384.8 million barrels of crude were produced from federally administered lands. The problem with that number, Markey said, was that it only counted sales from which royalties were paid to the federal government.

That accounting ignored the substantial amount of oil produced under the terms of a royalty relief act passed in 1995 and applied to some especially risky deepwater leases issued from 1996 through 2000.

After several months of review, the EIA issued a revised report March 14. It showed that in 2010, instead of dropping by 29% from 2009, crude oil production on federal lands actually rose by 15%. In fact, the EIA's revisions reversed what had looked like a 10-year decline.

The EIA also corrected another glaring error. The old numbers pegged 2003 production at 422.6 million barrels. But that didn't count the more than 200 million barrels acquired by the US that year under the now defunct royalty-in-kind program and used to fill the Strategic Petroleum Reserve. The revised numbers now show 2003 production of 689 million barrels.

And, for those keeping score, the revised data show that crude oil production on federally administered lands rose in the first three years of the Obama administration: from 575 million barrels in 2008, the last of the George W Bush years, to 646 million barrels in 2011.

The previous figures had showed a decline from 476.6 million barrels in 2008 to 384.8 million barrels in 2010. The previous chart didn't include 2011 numbers.--Gary Gentile in Washington

 

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