William Perry Pendley

“When whale oil is gone,” Paul Harvey reports an apocryphal American pessimist once proclaimed, “the world will be plunged into darkness.” Fortunately, America’s energy picture has turned, not on the pronouncements of such cranks, but on the wisdom of men like the late Warren T. Brookes and Julian Simon. It was Brookes, a reporter for the Detroit News, who declared, “the nature of all technological and innovative advance is to teach us how to produce more value for less waste and less cost,” and, thus improve the human environment. It was Simon, victor in a famous bet over future mineral prices with an environmental crank and Cassandra, who proclaimed human ingenuity and technological innovation to be the twin and intertwined solutions to scarcity and shortages.

These thoughts come to mind with the remarkable news of a mammoth oil discovery in the Gulf of Mexico. Early last month, Chevron and its partners, including Devon Energy, released news that Chris Isidore of CNN reported “could be the biggest breakthrough in domestic oil supplies since the opening of the Alaska pipeline.” Located 270 miles southwest of New Orleans and 175 miles offshore in 7,000 feet of water and drilled through 20,000 feet of rock, the Jack 2 well had a test flow rate of more than 6,000 barrels of crude oil a day. Although Chevron had announced the Jack 2 discovery in September 2004, last month’s test confirmed suspicions as to its potential and caused Chevron to conclude that the Gulf of Mexico’s “lower tertiary region” may hold “3 billion to 15 billion barrels of oil.” U.S. reserves are estimated at less than 30 billion barrels of oil. No wonder the news made headlines!

The tract is located on the Outer Continental Shelf (OCS), an area of 1 billion federally-owned acres that extends from the U.S. coastline, beyond waters owned by coastal states, and was leased by the Minerals Management Service (MMS) in July 1996. The true origins of that lease, however, go back another fifteen years to when Reagan Administration officials abandoned the old system of offering only those tracts thought by government bureaucrats to have energy potential and began “area-wide leasing.” Under the new system, those who would spend hundreds of millions (now billions) of dollars would be able to choose where they took their chances. Moreover, bureaucrats, with nothing to gain and nothing to lose, had a terrible track record of finding oil and gas.

William Perry Pendley

William Perry Pendley is President and Chief Legal Officer at the Mountain States Legal Foundation.

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