[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]
DOMESTIC NATURAL GAS SUPPLY AND DEMAND: THE CONTRIBUTION OF PUBLIC
LANDS AND THE OCS
=======================================================================
OVERSIGHT HEARING
before the
SUBCOMMITTEE ON ENERGY AND
MINERAL RESOURCES
of the
COMMITTEE ON RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTH CONGRESS
FIRST SESSION
__________
March 15, 2001
__________
Serial No. 107-6
__________
Printed for the use of the Committee on Resources
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
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_______
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COMMITTEE ON RESOURCES
JAMES V. HANSEN, Utah, Chairman
NICK J. RAHALL II, West Virginia, Ranking Democrat Member
Don Young, Alaska, George Miller, California
Vice Chairman Edward J. Markey, Massachusetts
W.J. ``Billy'' Tauzin, Louisiana Dale E. Kildee, Michigan
Jim Saxton, New Jersey Peter A. DeFazio, Oregon
Elton Gallegly, California Eni F.H. Faleomavaega, American
John J. Duncan, Jr., Tennessee Samoa
Joel Hefley, Colorado Neil Abercrombie, Hawaii
Wayne T. Gilchrest, Maryland Solomon P. Ortiz, Texas
Ken Calvert, California Frank Pallone, Jr., New Jersey
Scott McInnis, Colorado Calvin M. Dooley, California
Richard W. Pombo, California Robert A. Underwood, Guam
Barbara Cubin, Wyoming Adam Smith, Washington
George Radanovich, California Donna M. Christensen, Virgin
Walter B. Jones, Jr., North Islands
Carolina Ron Kind, Wisconsin
Mac Thornberry, Texas Jay Inslee, Washington
Chris Cannon, Utah Grace F. Napolitano, California
John E. Peterson, Pennsylvania Tom Udall, New Mexico
Bob Schaffer, Colorado Mark Udall, Colorado
Jim Gibbons, Nevada Rush D. Holt, New Jersey
Mark E. Souder, Indiana James P. McGovern, Massachusetts
Greg Walden, Oregon Anibal Acevedo-Vila, Puerto Rico
Michael K. Simpson, Idaho Hilda L. Solis, California
Thomas G. Tancredo, Colorado Brad Carson, Oklahoma
J.D. Hayworth, Arizona Betty McCollum, Minnesota
C.L. ``Butch'' Otter, Idaho
Tom Osborne, Nebraska
Jeff Flake, Arizona
Dennis R. Rehberg, Montana
Allen D. Freemyer, Chief of Staff
Lisa Pittman, Chief Counsel
Michael S. Twinchek, Chief Clerk
James H. Zoia, Democrat Staff Director
Jeff Petrich, Democrat Chief Counsel
------
SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES
BARBARA CUBIN, Wyoming, Chairman
RON KIND, Wisconsin, Ranking Democrat Member
W.J. ``Billy'' Tauzin, Louisiana Nick J. Rahall II, West Virginia
Mac Thornberry, Texas Edward J. Markey, Massachusetts
Chris Cannon, Utah Solomon P. Ortiz, Texas
Jim Gibbons, Nevada, Calvin M. Dooley, California
Vice Chairman Jay Inslee, Washington
Thomas G. Tancredo, Colorado Grace F. Napolitano, California
C.L. ``Butch'' Otter, Idaho Brad Carson, Oklahoma
Jeff Flake, Arizona
Dennis R. Rehberg, Montana
------
C O N T E N T S
----------
Page
Hearing held on March 15, 2001................................... 1
Statement of Members:
Cubin, Hon. Barbara, a Representative in Congress from the
State of Wyoming........................................... 1
Prepared statement of.................................... 3
Kind, Hon. Ron, a Representative in Congress from the State
of Wisconsin............................................... 4
Prepared statement of.................................... 5
Markey, Hon. Edward J., a Representative in Congress from the
State of Massachusetts..................................... 6
Otter, Hon. C.L. ``Butch'', a Representative in Congress from
the State of Idaho, Prepared statement of.................. 63
Statement of Witnesses:
Alberswerth, David, Director, Bureau of Land Management
Program, The Wilderness Society............................ 91
Prepared statement of.................................... 94
Downey, Marlan W., President, American Association of
Petroleum Geologists....................................... 75
Prepared statement of.................................... 77
Fisher, Robert W., President, Montana Petroleum Association,
and Senior Vice President/Managing Partner, Ballard
Petroleum Holdings, LLC.................................... 83
Prepared statement of.................................... 85
Hackett, James T., Chairman/President/Chief Executive
Officer, Ocean Energy, Inc................................. 12
Prepared statement of.................................... 14
Papa, Mark, Chairman & CEO, EOG Resources.................... 29
Prepared statement of.................................... 32
Simmons, Matthew R., President, Simmons & Company
International.............................................. 8
Prepared statement of.................................... 10
Speer, Lisa, Senior Policy Analyst, Natural Resources Defense
Council.................................................... 45
Prepared statement of.................................... 47
Additional materials supplied:
Cavaney, Red, President and CEO, The American Petroleum
Institute, Statement submitted for the record.............. 114
Powder River Basin Resource Council, Statement submitted for
the record................................................. 50
DOMESTIC NATURAL GAS SUPPLY AND DEMAND: THE CONTRIBUTION OF PUBLIC
LANDS AND THE OCS
----------
Thursday, March 15, 2001
House of Representatives
Subcommittee on Energy and Mineral Resources
Committee on Resources
Washington, DC
----------
The Subcommittee met, pursuant to call, at 2:00 p.m., in
Room 1334, Longworth House Office Building, Hon. Barbara Cubin
[Chairman of the Subcommittee] presiding.
STATEMENT OF HON. BARBARA CUBIN, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF WYOMING
Mrs. Cubin. The oversight hearing by the Subcommittee on
Energy and Mineral Resources is meeting today to hear testimony
on domestic natural gas supply and demand and the contribution
of the public lands and the OCS.
Under rule 4(g) the Chairman and the Ranking Minority
Member can make opening statements. If any other Members--and
you can see there are so many up here, we really need to worry
about it--have statements, we will include them in the record.
So, with that, our first hearing for the 107th Congress, we
meet today in our oversight function for issues concerning
public lands and mineral resources. Last week the full
Resources Committee began this inquiry by looking at the role
of our public lands and power marketing administrations to
provide a broad spectrum of energy supplies. Our hearing today
will focus upon the natural gas availability issues, both from
onshore Federal mineral estate and from the outer continental
shelf.
Fifteen months ago an advisory body to the Secretary of
Energy completed a report entitled ``Meeting the Challenges of
the Nation's Growing Natural Gas Demand.'' This study examined
demand-side projections and supply-side forecasts and concluded
that coordinated action by the Federal Government will be
necessary to stave off an impending imbalance. That was 15
months ago. That is, gas producers and pipelines may not be
able to meet consumers' expectations for this fuel if we don't
get our act together soon.
Perhaps the key recommendation of this panel was for the
President to establish an interagency working group within the
White House to bring industry representatives and various
Executive Branch agencies together to discuss the place for
natural gas and an energy strategy for the Nation. The panel
believed that interagency squabbles were inhibiting supply,
particularly from Federal mineral estate in the West and on the
outer continental shelves. A primary finding of the supply-side
team was that while sufficient resources exist to meet growing
demand well into the 21st century, many access restrictions are
denying significant volumes of gas today, and will continue to
do so unless administrative and/or legislative action to reduce
permitting delays occurs.
I don't need to tell everyone what happened this winter,
but the NPC guys look like they were pretty good forecasters,
better than the local TV weathermen actually anyway, the ones
that said that the 50-year storm was headed our way a week or
two ago, and then we had a half an inch of snow here. So, the
NPC did a good job. They warned of this problem by the end of
this decade, and it is here now.
One of the President's first initiatives was to ask Vice
President Cheney to lead an energy policy development group at
the White House level. He will report on the current state of
the Nation's energy situation and make recommendations for a
national energy strategy. The Vice President's report is
expected next month.
But, today I would like our Subcommittee to listen to the
views of industry and economists and the environmental
community about the role for natural gas. This energy source,
nicknamed ``the fuel of the future'' by some of the past
administrations, is an increasingly important fraction of our
domestic demand. But unlike crude oil and refined petroleum
products that we import by the tankerload, natural gas is a
commodity that we must get from North American supplies by way
of pipeline. Yes, there are a few mothballed LNG port
facilities in this country, but even if they were refurbished
and operating, it would still represent a small fraction of the
demand. And the proposed reopening of just such a facility on
the western shore of the Chesapeake Bay, right now, is causing
concerns among Maryland officials because of the proximity to a
nuclear power plant.
So, we are talking about getting our gas from the United
States and Canadian sources, as Mexico is currently a net
importer of natural gas. So far our neighbors to the north have
been willing to sell us their gas from Western Canada and more
recently from offshore of Nova Scotia. Still, this is not
enough. Perhaps stranded gas from the North Slope of Alaska is
finally becoming economic to transport to the lower 48 markets,
but that gas won't make it here for several years to come at
best.
But, significant amounts of the estimated natural gas
resource base is on Federal land or the submerged lands beneath
the Federal waters of the outer continental shelf. However, it
seems more and more potentially resource-rich land and
submerged lands in the United States are closed, both to
assessment and/or development. Land withdrawals, development
moratoria and regulatory restrictions on land use prohibit
development of significant gas resources in areas like the
eastern front of the Rocky Mountains, the eastern front of the
Gulf of Mexico and almost all of the Atlantic and Pacific
submerged lands. Likewise, many promising OCS lands are off
limits by an Executive Order and congressional moratoria or
both.
Our charge is to learn what, if anything, we might do to
foster exploration for natural gas in prospectively valuable
areas of the public lands. Can we do it while we are still
protecting the environment? Are trade-offs worth it to boost
the usage of favored energy sources? What will happen to our
national economy if we don't change the culture that has
hamstrung permitting of resource extraction activities over the
next decade?
These are the types of questions that we have to begin to
address, and we will do that today at this hearing.
[The prepared statement of Mrs. Cubin follows:]
Statement of The Honorable Barbara Cubin, Chairman, Subcommittee on
Energy and Mineral Resources
The Subcommittee meets today, in our inaugural hearing of the 107th
Congress, in our oversight function for issues concerning public lands
energy and mineral resources. Last week the full resources Committee
began this inquiry by looking at the role of our public lands and power
marketing administrations to provide a broad spectrum of energy
supplies. Our hearing today will focus upon natural gas availability
issues, both from onshore Federal mineral estate and from the outer
continental shelf.
Fifteen months ago an advisory body to the Secretary of Energy
completed a report entitled ``Meeting the Challenges of the Nation's
Growing Natural Gas Demand.'' This study examined demand-side
projections and supply-side forecasts and concluded that coordinated
action by the Federal Government will be necessary to stave off an
impending imbalance. That is, gas producers and pipelines may not be
able to meet consumers expectations for this fuel if we don't get our
act together soon.
Perhaps the key recommendation of this panel was for the President
to establish an Interagency Working Group within the White House to
bring industry representatives and various Executive Branch agencies
together to discuss the place for natural gas in an energy strategy for
the nation. The panel believed that inter- agency squabbles were
inhibiting supply, particularly from Federal mineral estate in the West
and on the Outer Continental Shelves. A primary finding of the supply-
side team was that while sufficient resources exist to meet growing
demand well into the twenty-first century, many access restrictions are
denying significant volumes of gas today, and will continue to do so
unless administrative and/or legislative action to reduce permitting
delays occurs.
I don't need to tell everyone what happened this winter, but the
NPC guys look like pretty good forecasters. Better than the local TV
weathermen anyway who said the 50-year storm was headed our way ten
days ago and Washington got a quarter-inch of snow. The NPC warned of a
problem by the end of this decade, and it is here now.
One of President Bush's first initiatives was to ask Vice President
Cheney to lead an Energy Policy Development Group at the White House
level. He will report on the current state of the nation's energy
situation and to make recommendations for a national energy strategy.
The Vice President's report is expected next month.
But, today I'd like our Subcommittee to listen to the views of
industry and economists, and the environmental community about the role
for natural gas. This energy source, nicknamed ``the fuel of the
future'' by some in the past Administration, is an increasingly
important fraction of our domestic demand. But, unlike crude oil and
refined petroleum products we import by the tanker load, natural gas is
a commodity we must get from North American supplies transported by
pipeline. Yes, there are a few moth-balled liquefied natural gas (LNG)
port facilities in this country, but even if they were refurbished and
operating it would represent a small fraction of demand. And the
proposed reopening of just such a facility on the western shore of the
Chesapeake Bay is causing concerns among Maryland officials because of
proximity to a nuclear power plant.
So, we are talking about getting our gas from U.S. and Canadian
sources, as Mexico is currently a net importer of natural gas. So far
our neighbors to the north have been willing to sell us their gas from
western Canada and more recently from offshore of Nova Scotia. Still
this is not enough. Perhaps stranded gas from the North Slope of Alaska
is finally becoming economic to transport to lower-48 markets, but that
gas won't make it here for several years to come, at best.
But, significant amounts of the estimated natural gas resource base
is on Federal land or the submerged lands beneath Federal waters of the
outer continental shelf. However, it seems more and more potentially
resource rich land and submerged lands in the United States, are closed
to both assessment and/or development. Land withdrawals, development
moratoria, and regulatory restrictions on land use prohibit development
of significant gas resources in areas like the eastern front of the
Rocky Mountains, the eastern Gulf of Mexico and almost all of the
Atlantic and Pacific submerged lands. Likewise, many promising OCS
areas are off-limits by Executive Order and Congressional moratoria
both.
Our charge is to learn what, if anything, we might do to foster
exploration for natural gas in prospectively valuable areas of the
public lands. Can we do it while still protecting the environment? Are
trade-offs worth it to boost the usage of this favored energy resource?
What will happen to our national economy if we don't ``change the
culture'' that has hamstrung permitting of resource extraction
activities over the past decade? These are the types of questions we
must begin to address at this hearing.
______
Mrs. Cubin. The Chair would now like to recognize the
Ranking Member, Mr. Kind.
STATEMENT OF HON. RON KIND, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF WISCONSIN
Mr. Kind. Thank you, Madam Chair, and distinguished guests,
and I am looking forward to what will hopefully prove to be a
very productive Subcommittee in this session of Congress as we
have a much needed and long overdue energy policy debate for
our long-term energy needs in this country. And I think it is
certainly timely, in light of the President's recent
announcements regarding carbon dioxide emissions and allowing
oil and gas exploration on all public lands, for the
Subcommittee to take a closer look at the question of supply
and demand of natural gas, and one of the cleaner and more
abundant energy resources that we have available.
It is also disappointing to find the President reversing
himself so early in his tenure on a campaign promise that he
made to the American people to have power plants reduce carbon
dioxide emissions in order to meet clean air standards. The
President has acknowledged that global warming is one of the
most important environmental challenges that we face, but
instead of addressing that issue, he has turned his back on it.
It is equally disheartening to learn that he has stated
that all public lands, even lands that have been set aside as
national monuments, can be made available to oil and gas
exploration.
This is not a good beginning for a rational and productive
debate on national energy policy, I believe. The solution to
this problem is not simply more supply at any cost, as the
President's recent actions seem to imply. Instead, we need a
comprehensive and coordinated strategic plan that incorporates
conservation measures and wise use of our resources. The best
interests of the American people and the oil and gas industry
will be better served by a balanced policy that consists of
promoting exploration and development where it is appropriate,
while also protecting our natural heritage and biodiversity,
and fostering conservation and developing alternative and
renewable energy sources.
Certainly, natural gas will be a critical component of
meeting those needs, and Federal lands have historically played
a very large role in helping meet our needs, producing about 11
percent of the natural gas produced onshore in the United
States, while the outer continental shelf currently accounts
for more than 26 percent of the domestic natural gas
production, with the Gulf of Mexico OCS producing on average
over 5.1 trillion cubic feet of natural gas per year.
Further there has been, according to the Department, a
nearly 60 percent increase in the production of natural gas on
Federal onshore lands over the last 7 years, but I am concerned
that some people believe that much of the Rocky Mountain area
containing significant gas reserves are off limits or
unreasonably restricted and therefore prevent oil and gas
exploration and production. However, the vast majority of the
restricted lands they cite are off limits only seasonally, to
provide wildlife protection, for example. That is just not
accurate to say there is no access to those lands or that
somehow such restrictions prohibit production in the long run.
Moreover, this line of reasoning appears to suggest that the
oil and gas producers are in a better position than wildlife
managers, for instance, many of whom are State fish and game
professionals, to determine when exploration, drilling and
production should occur in an environmentally sensitive manner.
If we are to continue America's economic growth and
continue creating jobs and wealth across the country, we need
the affordable, reliable energy that fuels our economy and
supports our way of life. If necessary, Congress can develop
cost-effective, environmentally sound mechanisms for increasing
domestic supply, but increasing supply, especially by opening
up protected areas such as national monuments or ANWR, is
neither the only nor primary answer, I feel. Environmental
concerns have to be addressed. We will not solve our energy
problems by opening up currently protected areas or ignoring
wildlife needs.
I thank the panelists for your testimony here today. I look
forward to constructive engagement on these very important
issues, and I thank the Chair for yielding me the time.
Mrs. Cubin. Thank you, Mr. Kind.
[The prepared statement of Mr. Kind follows:]
Statement of The Honorable Ron Kind, Ranking Democrat, Subcommittee on
Energy and Mineral Resources
Madame Chair, distinguished guests, it is certainly timely, in
light of the President's recent announcements regarding carbon dioxide
emissions and allowing oil and gas exploration on all public lands, for
the Subcommittee to take a closer look at the question of supply and
demand of natural gas, one of the cleaner and more abundant energy
sources.
It is disappointing to find the President reversing himself so
early in his tenure on a campaign promise he made to the American
people to have power plants reduce carbon dioxide emissions in order to
meet clean air standards. The President has acknowledged that global
warming is one of the most important environmental challenges we face,
but instead of addressing that issue; he has turned his back on it.
It is equally disheartening to learn that he has stated that all
public lands--- even lands that have been set aside as national
monuments---can be made available to the oil and gas industry.
This is not a good beginning for a rational and productive debate
on national energy policy. The solution to this problem is not simply
more supply at any cost as the President's recent actions seem to
imply. Instead, we need a comprehensive and coordinated strategic plan
that incorporates conservation, and wise use of our resources.
The best interest of the American people and the oil and gas
industry will be better served by a balanced policy that consists of
promoting exploration and development where appropriate, while also
protecting our natural heritage and bio- diversity, and fostering
conservation and developing alternative energy sources.
Certainly natural gas will be a critical component of meeting those
needs. Presently natural gas provides nearly a quarter of the Nation's
energy needs. The Energy Information Agency, National Petroleum
Council, Gas Research Institute, and others forecast significant
increases in future domestic gas demand to as much as 29 trillion cubic
feet by 2010.
According to the Department of the Interior, the U.S. is mostly
self-sufficient in meeting an annual domestic demand for 22 trillion
cubic feet of natural gas, of which the United States imports 3.4
trillion cubic feet almost exclusively from Canada.
Federal lands have historically played a large role in helping meet
our needs, producing about 11 percent of the natural gas produced
onshore in the United States while the Outer Continental Shelf
currently accounts for more than 26 percent of domestic natural gas
production, with the Gulf of Mexico OCS producing, on average, over 5.1
trillion cubic feet of natural gas per year. Further, there has been,
according to the Department, a nearly 60 percent increase in the
production of natural gas on Federal onshore lands over the past 7
years.
Within the North Slope of Alaska, the Minerals Management Service
estimates that there is more than 26 trillion cubic feet of stranded
natural gas reserves. This equals nearly 21 percent of the total proven
onshore and offshore reserves of the Lower 48 States. The entire gas
endowment of Prudhoe Bay has been cycled through the oil field
infrastructure since 1977 to enhance oil recovery. Gross gas production
on the North Slope in 1999 averaged 8.7 billion cubic feet per day that
is just 1 billion cubic feet less than total net imports to the US in
1999. Until we can transport this gas to the Lower 48, it is premature
to even discuss exploration in ANWR.
But I am concerned that some of our witnesses today believe that
much of the Rocky Mountain area containing significant gas reserves are
off-limits or unreasonably restricted and therefore prevent oil and gas
production. However, the vast majority of the ``restricted'' lands they
cite are off-limits seasonally, for example, to provide wildlife
protection.
It is not accurate to say that there is no access to those lands,
or that somehow such restrictions prohibit production in the long run.
Moreover, this line of reasoning appears to suggest that oil and gas
producers are in a better position than wildlife managers--many of who
are state fish and game professionals--to determine when exploration,
drilling and production should occur in an environmentally sensitive
manner.
If we are to continue America's economic growth and continue
creating jobs and wealth across the country, we need the affordable,
reliable energy that fuels our economy and supports our way of life. If
necessary Congress can develop cost-effective, environmentally sound
mechanisms for increasing domestic supply. But, increasing supply---
especially by opening up protected areas, such as national monuments or
ANWR---is neither the only nor the primary answer. Environmental
concerns must be addressed; we will not solve our energy problems by
opening up currently protected areas or ignoring wildlife needs.
______
Mrs. Cubin. As the Committee knows, the rules are that only
the Chair and the Ranking Member give opening statements, but
since there are so few of us here, if any other Members would
like to give an opening statement, I would like to welcome them
to do that.
Mr. Markey.
STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MASSACHUSETTS
Mr. Markey. Thank you, Madam Chair, very much. I see from
press reports just two days ago that President Bush called for
allowing drilling for oil and gas on all public lands,
including some areas presently designated as national
monuments. So I suppose we soon may have to rename some of our
national monuments to reflect their new status. The Statue of
Liberty National Monument, for example, could become the Statue
of Fossil Fuels Production National Monument, with an actual
flame burning on the top of the torch. What an inspiring symbol
that would be of the Bush Administration's public lands policy.
Of course, we would have to change the inscription to read,
give me your drill bits, your rigs, your huddled oil companies
yearning to drill free, to dump their wretched refuse on our
pristine shores. Send your well-heeled executives to me. I lift
their lamps besides their golden doors.
Mrs. Cubin. He means well.
Mr. Markey. Now I am told in looking at this great threat
that exists in the lower 48 that we have 1,466 trillion cubic
feet of natural gas that unfortunately cannot be exploited,
which is really a shame when you hear about it, you know.
Sounds like a great tragedy and a loss, and we probably would
become completely energy-dependent on OPEC. But the closer you
look at the numbers, Madam Chair, you find out that 1,361 of
the 1,466 are now accessible, but the obsession, of course, is
with the 105 that are not accessible, and I guess the question
is, why don't they go after the 1,361 trillion cubic feet first
which have yet to be exploited before we have the debate over
the 105? And I think that those are the issues, that is, the
sequencing of the drilling, that have to be dealt with first.
We know that this 30- to 40 trillion cubic feet of natural
gas in Prudhoe Bay in Alaska that we all agree should be
exploited. There is between 60- and 100 trillion cubic feet of
natural gas off of Nova Scotia. There are scores of trillions
of cubic feet down in Trinidad that we could create a policy
for liquefying to bring into the East and gulf coast of the
United States to deal with that issue.
And I think these hearings are going to help us put
together a comprehensive policy where we are looking at all of
these sources in a way that I think is going to minimize this
final 100- or 150 trillion cubic feet and realize that we can
solve the problem if we use our heads in working together in a
bipartisan fashion as we did in Alaska where the environmental
impact statement was actually approved 18 years ago to bring
down the natural gas from Alaska, but yet the industry hasn't
built the pipeline yet. And I think the first set of questions
have to go to them so they can tell us why they haven't built
the pipelines where it is already approved before we open up
the most sacred lands in our country.
I thank you, Madam Chair.
Mrs. Cubin. Certainly welcome your comments, Mr. Markey,
anytime.
Mrs. Cubin. The Chair now would like to introduce the first
panel: Matthew Simmons, the President of Simmons and Company
International; Mr. James Hackett, Chairman, President and Chief
Executive Officer of Ocean Energy, Inc.; Mark Papa, Chairman
and CEO of EOG Resources; and Lisa Speer, Staff Attorney for
Natural Resources Defense Council. I will first call on Mr.
Simmons.
The Chair would like to remind you that your entire
statement will be included in the record, and if you would
please limit your oral presentation to five minutes.
STATEMENT OF MATTHEW R. SIMMONS, PRESIDENT, SIMMONS & COMPANY
INTERNATIONAL
Mr. Simmons. I commend this Committee for having this
hearing today. The current supply-demand balance for North
American natural gas is precarious. Supply has now fallen
behind demand, and to make up this shortfall the country has
withdrawn record amounts of natural gas storage, leaving us
already at record low levels of gas storage with still weeks of
cold weather still probably to come before the industry begins
an arduous task of trying to refill its storage system before
the summer air conditioning gas needs kick in.
Drilling for natural gas is at the highest level since the
drilling collapse of 1982, yet thus far there has been no
supply response. Canada is a year ahead of the U.S. in setting
new records for gas drilling, but has also yet to see any
significant supply response. There is a widespread hope that
this supply response is just around the corner, but a growing
number of industry experts, particularly those actually
drilling these record number of wells, are beginning to
question whether the current rig fleet and acreage available
for drilling are adequate to create significant supply
additions beyond the current base.
There is a distinct possibility that five years hence North
American natural gas supply base will be less than what we
enjoy today.
A week ago the Department of Energy held a 2-day workshop
to review the natural gas industry today pursuant to the
various assumptions that went into creating the NPC report on
natural gas's long-term outlook. The findings were grim. Demand
is outpacing the NPC estimates, while supply lags. A rig
shortage has emerged some five to seven years earlier than the
NPC report envisioned. People shortages are now becoming
severe. Access to potential added gas reserves have been even
more restricted. More troublesome is the fact that more new
natural gas-fired power plants are now on order to be online by
2002 than the NPC model assumed would be onstream by 2010. Few
have any plants or facilities for any fuel-switching
capability.
This adds up to a possible need for up to 30 TCF of natural
gas by as early as 2005. Adding so much supply is impossible.
Reaching the 30 TCF market even in 2010 is a question. There is
a risk that many parts of our country could be short of
electricity capacity for up to a decade. Nothing highlights the
urgency of finding fresh supplies of natural gas more than the
prospect of long-term electricity rationing.
The natural gas supply is particularly threatened by
increasing evidence that the current supply base is now
declining at a rate where half the current supply will be
consumed by 2005. This means that 50 percent or 25 BCF of gas
per day of new gas production needs to be added merely to keep
the current supply base flat. In this context it is hard to
exaggerate the importance of OCS energy resources.
Natural gas from our continental shelf makes up 25 percent
of domestic supply; 85 percent of this comes from the Gulf of
Mexico shelf, the balance from deep water, but the shelf supply
has one of the country's highest decline rates. What is now 11
BCF a day will likely decline to only 3 BCF a day by 2005.
Whether this can realistically be replaced by ever higher
drilling activity in this mature area is questionable for two
reasons.
First, the number of offshore rigs is now near a 100
percent utilization. Second, the finds each year are
diminishing. Deepwater gas is growing from almost nothing at
the start of the 1990s to over 2 BCF a day and projected to
grow as high as 5 by 2005. If these aggressive targets were
met, they would still only account for 10 percent of the U.S.
Supply base.
But complex technical issues to develop these deepwater
resources still remain unsolved. Leading this list is an
ability to strip associated gas from deepwater oil and how to
transport this dry gas from water depths up to 10,000 feet.
This highlights and underscores the importance of developing
natural gas reserves in the highly gas-prone part, eastern part
of the Gulf, an area that has been off limits to any
hydrocarbon exploration for over a decade.
The Clinton Administration placed a moratorium on any lease
sales in the eastern portion of the Gulf through 2012 with the
exception of a block of acreage planned for leasing this
December. Lease Sale 181 is critical to help resolve America's
pending natural gas crisis. It is extremely important to
prevent Florida and Georgia from experiencing the awful energy
problems now facing California.
The Rocky Mountain States are another critically important
area, but 40 percent of their reserves lie in Federal lands
currently unavailable for any development. Much of these
remaining reserves are burdened by cumbersome and lengthy
permitting delays and other restrictions.
Alaskan natural gas has suddenly become another critical
portion of our fragile energy equation. For the past 30 years
Alaskan energy just simply meant oil. Now Arctic gas could
become invaluable.
The Department of the Interior is about to begin a careful
and detailed inventory of onshore natural gas potential. This
inventory needs to be extended to the entire offshore waters of
the U.S. Whether or not any of the potential reserves get
developed is another issue, but unless an effort is made to
test the potential, the country will never know how much
natural gas we might have.
Despite record levels of the drilling and remarkable
technology advances and safer and more efficient drilling, the
amount of exploration wells has fallen to less than 10 percent
of wells drilled, and the exploration success is still less
than 35 percent. The cost to drill new wells is rising even
though drilling economics are not good enough to justify
contractors building new rigs.
Unless these problems are tackled quickly, America faces a
genuine energy crisis that could last for over a decade. As
natural gas becomes even more scarce, energy wars could erupt
between various States reminiscent of the water wars between
the Western States when the Colorado River dam system was
created. These are unpleasant comments to make at such an
important congressional hearing, but they are real issues, and
they are serious issues. I appreciate the opportunity of
sharing these concerns with this Committee.
Mrs. Cubin. Thank you, Mr. Simmons.
[The prepared statement of Mr. Simmons follows:]
Statement of Matthew R. Simmons, President, Simmons & Company
International
I am Matthew Simmons, President of Simmons & Company International,
a specialized energy investment bank. I have spent the past 28 years
focusing exclusively on energy related investment banking and research.
I am a member of the National Petroleum Council and was a member of the
Bush-Cheney Energy Transition Advisory Committee. I also am a past
Chairman of the National Ocean Industry Association. I served as the
Demand Task Force Chairman on the National Petroleum Council's
extremely important review of natural gas and the challenges we face in
addressing a future market likely to exceed 30 TCF per year.
I commend this Committee for holding these hearings today. The
current supply demand balance for North American natural gas is
precarious. Over the course of the past year, supply has fallen behind
demand despite a significant number of natural gas users abandoning
this precious fuel source because its price has soared. To make up this
shortfall, the country has withdrawn record amounts from natural gas
storage facilities. The country now has the lowest amount of gas
storage in modern history with weeks of cold weather probably still to
come before the industry begins the arduous task of trying to re-fill
its storage system before the summer air-conditioning gas needs kick
in.
Drilling for natural gas is at the highest levels since drilling
collapsed in 1982. Yet, thus far, there has been no supply response.
Canada is a year ahead of the United States in setting new records for
gas drilling, but has also yet to see any supply response.
There is a widespread belief, or at least a hope, that such a
supply response will arrive shortly. But a growing number of industry
experts, particularly those actually drilling these record number of
wells, are beginning to question whether the current rig fleet and
acreage available for drilling are adequate to create significant
supply additions beyond the current production base. There is a
distinct possibility that five years hence, North America's natural gas
supply base will be less than what we enjoy today.
A week ago, the Department of Energy held a two-day workshop to
review the natural gas industry today, pursuant to the various
assumptions that went into creating the NPC report on natural gas long
term outlook which was published just over a year ago. The findings
were grim. Demand is outpacing the NPC estimates while supplies lag. A
rig shortage is emerging some five to 7 years earlier than the NPC
reported envisioned. People shortages are now becoming severe. Access
to potential added gas reserves has been even more restricted,
particularly with the new roadless policies and the potential challenge
to the important upcoming lease sale in the Eastern portion of the Gulf
of Mexico.
More troublesome is the fact that more new natural gas-fired power
plants are now on order to be on-line by 2002 than the NPC model
assumed would be on-stream by 2010! Few have any plans or facilities
for any fuel-switching capability. There is growing evidence, or at
least strong suspicion, that many of these new gas-fired plants were
originally built as merely peaking plants but now will be forced to
become defacto quasi-base load plants in an electricity generation
scarcity world.
This adds up to a possible need for up to 30 TCF of natural gas by
as early as 2005. Unless a supply miracle soon arrives, the Nation's
ability to increase its use of electricity is severely threatened.
There is a risk that many parts of our country could be short of
electricity capacity for up to a decade. Nothing highlights the urgency
of finding fresh supplies of natural gas more than the prospect of long
term electricity rationing.
The natural gas supply is particularly threatened by increasing
evidence that the current supply base is now declining at a rate where
half of the current supply will be consumed by 2005. This means that 50
percent, or 25 BCF per day of new gas production needs to be added
merely to keep the current base flat.
THE IMPORTANCE OF OCS RESOURCES
Natural gas from our Outer Continental Shelf remains the backbone
of our domestic supply. Over 13 BCF per day come from these waters,
making up about 25 percent of total domestic supply. 85 percent of this
supply comes from the Gulf of Mexico's shelf. The balance comes from
deep water gas. The supply from the shelf has one of the country's
highest decline rates. What is now 11 BCF per day will likely decline
to only three BCF per day by 2005. Whether this can realistically be
replaced by ever higher drilling activity in this mature area is
questionable for two reasons. First, the number of offshore rigs is now
at near 100 percent utilization. Second, the finds each year are
diminishing.
Deepwater gas has grown from almost nothing at the start of the
1990's to over two BCF per day today and is projected to grow to as
high as five BCF per day by 2005. If these aggressive targets were met,
they would still only account for 10 percent of the U.S. base in 2000.
Furthermore, some complex technical issues still remain unsolved.
Leading this list is an ability to strip associated gas from deepwater
oil and how to transport this dry gas from water depths up to 10,000
feet.
This highlights and underscores the importance of developing the
natural gas reserves in the eastern part of the Gulf, an area that has
been off-limits to any hydrocarbon exploration for over a decade. The
Clinton Administration placed a moratorium on any lease sales in the
eastern portion of the Gulf through 2012 with the exception of a block
of acreage planned for leasing this December. Lease Sale 181 is
critical to help resolve America's pending natural gas crisis. It is
extremely important to prevent Florida and Georgia from also
experiencing the awful energy problems now facing California.
FEDERAL LANDS ARE ALSO CRITICALLY IMPORTANT
The Rocky Mountain states represent another critically important
gas prone area. But, 40 percent of their potential gas reserves lie in
Federal Lands currently unavailable for any development. Much of the
remaining reserves are burdened by cumbersome and lengthy permitting
delays and other restrictions.
Alaskan natural gas has suddenly become another critical part of
our fragile energy equation. For the past 30 years, Alaskan energy
meant simply oil. Now, its potentially vast gas resources are an
important resource. But to get this gas out of the ground, wells need
to be drilled in areas beyond the Prudhoe Bay region because much of
this area's gas may need to be re-injected to prop up a sagging, old
oil production. This puts added emphasis on the importance of opening
up ANWR and promptly resolving the pipeline route and considering the
possibility of constructing two pipelines so both Alaskan and Beaufort
Sea gas can be transported to a gas hungry USA.
The Department of Interior is about to begin a careful and detailed
inventory of onshore natural gas reserve potential. This exercise is
extremely important but it also needs to be extended to the entire
offshore waters of the U.S. Whether any of the potential reserves this
inventory might uncover get developed is another issue, but unless an
effort is made to test the potential, the country will never know how
much natural gas we might have available to curtail a terrible risk to
our economy's well being.
Natural gas is the most precious energy source in North America. It
is the most environmentally friendly real energy source we have. There
is no geo-political risk to this energy supply. But getting it produced
is a difficult task, even if all access problems are quickly resolved.
Despite record levels of drilling and remarkable technology
advances in safer and more efficient drilling, the amount of
exploration wells has fallen to less than 10 percent of all wells
drilled, and the exploration success rate is still less than 35
percent. This means that 65 of every 100 exploratory wells drilled
fail. The cost to drill new wells is rising even though drilling
economics are not good enough to justify contractors building new rigs
or paying wages high enough to attract a new generation of people to
operate the rigs and develop the prospects.
Unless these problems are tackled quickly, America faces a genuine
energy crisis that could last for over a decade. Even if the problems
of access are resolved, it might be too late to avoid a crisis for the
next several years. But, any delay in resolving all the obstacles to
growing fresh gas supplies merely extend and increase the crisis.
As natural gas supply becomes ever more scarce, energy wars could
erupt between various states reminiscent of the water wars between
western states as the Colorado river dam system was created. Texas, for
instance, has done a remarkably good job in building ample new gas-
fired power plants to safely supply its growing electricity needs. But
as these plants come on-line, more and more of Texas natural gas supply
needs to stay within Texas. This will cutoff supplies which other
states now take for granted.
These are unpleasant comments to make at such an important
congressional hearing but they are real issues and serious issues. I
appreciate the opportunity to share my concerns with this Committee and
urge all of you to help resolve this crisis.
______
Mrs. Cubin. The Chair now recognizes Mr. Hackett to
testify.
STATEMENT OF JAMES T. HACKETT, CHAIRMAN/PRESIDENT/CHIEF
EXECUTIVE OFFICER, OCEAN ENERGY, INC.
Mr. Hackett. Thank you, Madam Chairman. On behalf of the 22
companies that are part of the Domestic Petroleum Council,
independent oil and gas companies, I want to give some comments
about the situation we are facing, and I am going to skip
around a little bit, given Matt's summary at the beginning.
On page 4, if you would, the Department of Energy-sponsored
NPC study concluded that the North American natural gas
resource base is sufficient to meet the projected growth and
demand for natural gas, which Congressman Markey remarked as
well. However, this ability is very dependent on industry and
government positively addressing seven key challenges, which
are in front of you on the slide on top. Access to resources
tops this list.
Page 5 shows that access to the resource base and to rights
of way for infrastructure is critical for sustainable supply.
Of the lower 48 resource base cited in the NPC study,
approximately 47 percent is owned by the Federal Government.
But the resource base under Federal Government lands is far
more critical than that percentage might imply.
The map illustrates the total lower 48 natural gas resource
base and the percentages of it that are either completely off
limits or importantly is access-restricted according to the NPC
study. As can be seen on the map on page 6, a significant
portion of the Rocky Mountain area, including some 76 percent
of the natural gas resources, is owned by the Federal
Government.
Let me give you some examples of restrictions that we
believe can and must be dealt with.
Last year Bureau of Land Management officials in New Mexico
announced new criteria for approval of applications for permits
to drill in the San Juan Basin, while the BLM conducted a new
environmental impact statement in preparation for updating its
resource management plan. Had the criteria, including announced
moratoria on some applications, been put into effect as
announced, critical California gas supply from this mature
producing area would have been lost in the recent crisis.
Another prime example of this type of regulatory problem is
illustrated by the time line chart you see on page 7 for BLM
lands in southwest Wyoming. With the layering of wildlife
protection and other environmental restrictions, you can see
that there are only limited periods in which necessary gas
exploration and production drilling by the industry can occur.
Much of the land we are discussing is like that shown on
page 8 at the top in Wyoming. With our current technology we
can explore and produce gas on these lands with much smaller
drilling locations. Also improved geoscience technology allows
us to better target promising geologic formations below ground
so we drill fewer wells to develop larger producing fields, but
we still must drill to find and produce gas. Then we must and
do reclaim the land back to its original condition.
Now, an important word about the offshore appears on page
9. As the NPC study pointed out and Matt referred to, as we in
our industry know, with two of our three coasts completely off
limits to exploration and production, the Gulf of Mexico,
including its deep waters, will be crucial in meeting gas
demand. Lease Sale 181 in the eastern Gulf of Mexico scheduled
for December of this year provides a good example of what we
need to be doing. It alone can make a significant contribution
to providing natural gas to the Nation and the surrounding
region to meet increasing electricity generation needs with a
more clean-burning and environmentally safe fuel than any other
alternative.
The chart on page 10 illustrates the NPC's projection of
the impact of access restrictions in the eastern Gulf of
Mexico. Shown here on the bottom red line is the impact if Sale
181 does not happen. Our Nation will suffer if the sale doesn't
proceed as planned.
Page 11 shows that over the past decade production from the
wells we have drilled every year has declined more sharply.
This means that the number of wells to be drilled will have to
increase even beyond current high levels to meet projected
demand. This can only be achieved through billions of dollars
of investments by companies such as ours, but it will be a
limited exercise without greater access to the U.S. resource
base.
As shown on page 13, producers are responding to market
signals by spending billions of dollars putting additional gas
rigs to work to meet consumer demand, but this pace will
decelerate without more access to new inventory.
On page 14 appear our recommendations to the administration
about several steps to be taken to seek better coordination of
energy permitting.
In addition, on page 15 we support the ongoing
congressionally mandated inventory of energy resources on
Federal Government lands, but it needs to be expedited. Even
more importantly, Congress and the administration should use
the time during which the inventory is being undertaken to
consider whether there should be a simplified process to allow
States and their congressional delegations to seek removal of
the access restrictions where there is little or no other
benefit from the restriction, but the very real detriment of
not producing critically needed energy supplies. The U.S.
Government also needs to improve permitting processes and
coordination.
I appreciate the opportunity to be with you to discuss the
Nation's energy challenges. All of us that are producers care
as much about consumers as we do about producers. We are one of
both. Thank you.
Mrs. Cubin. Thank you, Mr. Hackett.
[The prepared statement of Mr. Hackett follows:]
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Mrs. Cubin. The Chair now recognizes Mr. Papa to testify.
STATEMENT OF MARK PAPA, CHAIRMAN & CEO, EOG RESOURCES
Mr. Papa. Madam Chairman, members of the Committee, I am
Mark Papa, Chairman of the EOG Resources of Houston Texas.
Today I am testifying on behalf of the Independent Petroleum
Association of America, IPAA, National Stripper Well
Association and 32 cooperating State and regional oil and gas
associations. These organizations represent the thousands of
independent petroleum and natural gas producers that drill 85
percent of the wells, produce 40 percent of the oil and 65
percent of the natural gas in the United States.
This issue is particularly important to my company, EOG
Resources, because we are at the forefront of the effort to
develop new domestic gas reserves. During the past three years,
EOG has ranked either number one or number two of all companies
in terms of footage drilled in the U.S. looking for new gas
reserves.
Today's hearing addresses the impediments to developing
domestic natural gas supply because access to the national
resource base is prohibited or constrained. Much of the
Nation's gas underlies Federal-controlled land both offshore
and onshore. Policies in these areas have constrained or
prohibited access largely based on fears of environmental harm.
But these resources can be developed in an environmentally
sound and sensitive manner. The Department of Energy recently
released a comprehensive report, Environmental Benefits of
Advanced Oil and Gas Exploration and Production Technology,
demonstrating that the technology is available to preclude
environmental damage. This technology is currently being
employed when exploration is allowed. However, without policy
changes the Nation may face a gas supply challenge.
The National Petroleum Council's natural gas study projects
demand increasing by over 30 percent during the next 15 years.
This will require not only finding and developing resources to
meet this higher demand, but also to replace the current
depleting resource.
While many analysts are focusing on how much natural gas
demand will grow, it is equally important to recognize what is
happening to supply. All natural gas wells begin to deplete as
soon as they come on production. In fact, depletion rates for
all U.S. production have increased from 16 percent in 1990 to
23 percent today. In simple terms, this means that the domestic
natural gas industry is on an ever-increasing depletion
treadmill, and the reserves underlying Federal lands become
that much more important.
Let me address both offshore and onshore land use issues,
and I will start with offshore. Currently over 75 trillion
cubic feet, TCF, of natural gas in the offshore is off limits
to development because of moratoria that are based on
technologies that have been replaced decades ago. It is
essential that those areas of the offshore that are scheduled
for leasing remain accessible.
Specifically, Lease Sale 181 lying off the Alabama coast
must be undertaken. Unfortunately after years of negotiation to
allow this lease sale, uncertainty remains as to regarding the
political efforts that may be made to halt this sale. Lease
Sale 181 is projected to be a significant natural gas area with
estimated reserves of about 8 trillion cubic feet, enough
natural gas to fuel Florida's 5.9 million households for 16
years. To prevent the sale in view of the extraordinary
environmental safety record of the Gulf of Mexico operations
would be a tragic energy policy decision.
Onshore the NPC natural gas study estimates the development
of over 137 trillion cubic feet of natural gas under
government-controlled land in the Rockies is restricted or
prohibited. It is important to understand that access to these
resources is limited by more than just one moratoria. The
constraints differ. Monument and wilderness designations
clearly prohibit access to some areas. Regulations like the
Forest Service roadless policy and prohibitions in the Lewis
and Clark National Forest are equally absolute.
Let me discuss the Lewis and Clark National Forest for a
moment as a specific example. The Rocky Mountain Division of
the Lewis and Clark National Forest is estimated to contain
large amounts of natural gas. The 1986 forest management plan
anticipated development of this resource and made it an
objective. In 1996, the Forest Service published a draft EIS
with a preferred alternative that would allowed limited
environmentally sensitive leasing. In 1997, the Forest Service
published the final EIS, adding additional environmental
protections to the preferred alternative.
Notwithstanding these additional restrictions, the Lewis
and Clark National Forest supervisor decided that no oil and
gas leasing in this area would be permitted. The Forest Service
amended the forest management plan without further public
comment, deeming the decision to exempt the Rocky Mountain
Division from leasing insignificant.
These types of decisions obviously generate adverse energy
supply consequences.
Regarding onshore Federal lands, we offer both the short-
and long-term recommendations. In the short term, additional
BLM personnel are needed to process the increased number of
permits that are being generated as the industry responds to
supply challenges, and regarding our company, I can
specifically mention the Rawlins and Pinedale offices in your
home State, Madam Chairman, and also the Vernal, Utah, offices
as areas where we have a potential backlog of getting permits
done.
Long term there are several policy decisions that need to
be dealt with. We need a commitment to assure that government
actions are developed with full recognition of the consequences
to natural gas and other energy supplies. IPAA believes that
all Federal decisions, regulatory guidance, environmental
impact statements, Federal land management plans should
identify at the outset the implications of the actions on
energy supply. These implications should be clear to the
decision-maker. Such an approach does not alter the mandates of
the underlying law compelling the Federal action, but it would
likely result in developing options that would minimize adverse
energy consequences.
In conclusion, it is time for this county to develop a
sound future policy. Certainly there is room in such a policy
for sound energy conservation measures and protection of the
environment, but energy production, particularly petroleum and
natural gas, is an essential component that must be included
and addressed.
Thank you for considering these comments.
Mrs. Cubin. Thank you, Mr. Papa.
[The prepared statement of Mr. Papa follows:]
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Mrs. Cubin. The Chair now recognizes Ms. Speer for her
testimony.
STATEMENT OF LISA SPEER, STAFF ATTORNEY, NATURAL RESOURCES
DEFENSE COUNCIL
Ms. Speer. Thank you. My name is Lisa Speer. I am Senior
Policy Analyst with the Natural Resources Defense Council. NRDC
is a national nonprofit organization dedicated to protecting
the environment and public health. My testimony today is on the
environmental impacts and other environmental issues related to
oil and gas or gas exploration and development on the outer
continental shelf. My colleague, Dave Alberswerth, will deal
with gas development onshore.
Our Nation faces important challenges in the coming year.
With California dealing with an energy crisis and natural gas
prices shooting up for many, many people, it is time for this
country to come together and develop a comprehensive national
energy strategy.
Two distinct visions of what that strategy should look like
have emerged. One vision focuses on extracting as much energy
as possible, principally in the form of fossil fuels, in the
hope that we can somehow drill our way out of our energy woes.
An alternative vision calls for encouraging innovative and new
technologies to meet our energy needs in an environmentally
responsible manner.
NRDC believes that U.S. energy policy must rely on the
application of readily available, currently available
technology as a way to reduce consumption. Such an approach
will decrease America's reliance on foreign sources of energy,
protect the environment, provide for our energy needs and
buffer the economy against short-term swings in the market.
NRDC recently published a report called ``A Responsible
Energy Policy for the 21st Century,'' which discusses these
issues in detail. I would like to submit it for the record, if
I might. (NOTE: This report is available for viewing in the
Committee's official files.)
Turning to natural gas development on the OCS, some people
argue that we should move ahead to open protected areas of the
OCS to natural gas development. They argue that natural gas--
the risk of oil spills when developing natural gas is
negligible, and, therefore, natural gas development can proceed
in an environmentally benign fashion. This argument ignores the
fact that oil spills are not the only concern with respect to
natural gas development on the outer continental shelf.
OCS gas development, like oil development, can have
substantial environmental impacts. For example, offshore
activity, be it for oil or for gas, frequently entails
extensive onshore infrastructure in the form of roads,
pipelines, processing facilities, waste-handling facilities and
other industrial infrastructure. This infrastructure can cause
significant harm to the coastal zone. For example, OCS
pipelines crossing wetlands in the Gulf of Mexico are estimated
to have destroyed more coastal salt marsh than exists from New
Jersey to Maine.
Moreover, the industrial character of offshore oil and gas
development is often at odds with the existing economic base of
affected coastal communities, many of which rely on coastal
tourism, fishing and recreation.
Air and water pollution is a second issue. Offshore
operations for oil or gas generates tremendous amount of waste,
some of which contains a variety of pollutants, including toxic
pollutants. Air pollution is also generated in significant
amounts by offshore oil and gas drilling rigs as well as
production platforms.
And then there is the possibility of an oil spill. There is
always the possibility of finding oil when searching for gas.
We know of no instance where a lease has prohibited the
development of oil in a gas-prone region, and we are not aware
of any company ever agreeing to such a restriction in the
history of the OCS program. If oil is found, the possibility of
spills exists. According to the Department of the Interior,
some 3 million gallons of oil have spilled from OCS oil and gas
operations between 1980 and 1999.
Concerns over these impacts have led many States and their
congressional delegations to oppose OCS development off their
coasts. Since 1981, Congress and two Presidents have imposed
restrictions on OCS leasing in sensitive areas off of our
coasts. These moratoria now protect the eastern and western
coast of United States, much of the eastern Gulf of Mexico and
Bristol Bay, Alaska. They represent a clearly established
consensus on where OCS development should take place in this
country. They have been endorsed by a broad array of elected
officials from former President George Bush to Governor Jeb
Bush, from Governor Knowles of Alaska to Governor King of Maine
and from Governor Davis in California and Governor Bush in
Florida.
We strongly oppose any attempt to lift the moratoria to
promote gas development or to promote gas development in other
sensitive areas off of Florida and Alaska. Fortunately, we
don't need to drill these areas for natural gas. That is
because some 80 percent of the Nation's untapped economically
recoverable OCS gas is located in areas already open to
leasing.
The idea that most of America's OCS gas is locked up is
simply not supported by the facts. It is also not supported by
this report. If you add up, as Mr. Markey indicated, the amount
of gas that is in OCS areas that are under restriction, it
amounts to less than 5 percent of the total amount of gas the
Nation has outside of Alaska as identified in this report.
Large untapped efficiency resources exist that can provide
more gas more cheaply and faster than drilling public lands.
For example, providing tax incentives for the construction of
energy-efficient buildings and manufacturing of energy-
efficient heating and water-heating equipment could save some
300 trillion cubic feet of gas over 50 years. That is more than
twice the amount of gas the Interior Department estimates is
economically recoverable from the entire OCS.
These strategies will do far more to increase our Nation's
energy security than a ``drain America first'' approach of
exploiting onshore and offshore Federal lands.
Thank you, Madam Chairman.
Mrs. Cubin. Thank you very much for your testimony.
[The prepared statement of Ms. Speer follows:]
Statement of Lisa Speer, Senior Policy Analyst, Natural Resources
Defense Council
My name is Lisa Speer. I am Senior Policy Analyst with the Natural
Resources Defense Council (NRDC) in New York. NRDC is a national
nonprofit organization of scientists, lawyers, and environmental
specialists, dedicated to protecting public health and the environment.
Founded in 1970, NRDC serves more than 400,000 members from offices in
New York, Washington, Los Angeles, and San Francisco. My testimony
today addresses environmental issues surrounding natural gas
exploration, development and production from submerged Federal lands on
the Outer Continental Shelf (OCS).
1. Background: Energy Policy in the 21st Century
At the dawn of a new century, America finds itself once again
wrestling with a problem that has, off and on, been at the forefront of
U.S. politics for several decades: energy. The United States has 5
percent of the world's population, but consumes nearly a quarter of the
world's energy supply. We use energy to heat our homes and our
businesses, power our computers and telephone systems, run our
automobiles and aircraft, and drive our manufacturing plants and
hospitals. In short, we have constructed an economy and a way of life
that depends on the ready availability of energy.
Two distinct visions of an energy policy for the United States have
emerged to meet these demands. One vision focuses chiefly on extracting
as much energy as possible, mostly in fossil fuel form (oil, coal and
natural gas), in hopes that supply can catch up with demand. The
alternative vision, however, calls for encouraging innovation and new
technology to meet our energy needs in an environmentally responsible
manner. This vision emphasizes efficient use of energy, and places
priority on using energy resources that are least damaging to our
environment. It promotes economic growth and American industrial
competitiveness. This energy path would not force consumers to make
sacrifices. Instead it relies on improved technologies that will
eliminate waste while increasing productivity and comfort.
Therefore, NRDC believes that U.S. energy policy must rely on the
application of technological advances already in place and readily
available as a way to reduce consumption. Such an approach will
decrease America's reliance on foreign sources of energy in the near-
and long-term, protect the environment, provide for America's energy
needs, and buffer the economy against short-term swings in the market.
NRDC's recently published report, A Responsible Energy Policy for the
21st Century examines these issues in detail. I ask that the report be
included in the record.
2. Natural Gas Resources of the Outer Continental Shelf
As the cleanest burning fuel, natural gas makes an important
contribution to the Nation's energy supply. Some argue that natural gas
development on the Outer Continental Shelf should be promoted. They
argue that the risk of oil spills is negligible, and that
environmentally sound development can take place. This argument ignores
the reality that oil spills are not the only environmental concern
related to OCS development. Offshore gas development, like oil
development, causes substantial environmental impacts, including the
following.
Onshore damage: The onshore infrastructure associated with offshore
oil or gas cause significant harm to the coastal zone. For example, OCS
pipelines crossing coastal wetlands in the Gulf of Mexico are estimated
to have destroyed more coastal salt marsh than can be found in the
stretch of land running from New Jersey through Maine. 1
Moreover, the industrial character of offshore oil and gas development
is often at odds with the existing economic base of the affected
coastal communities, many of which rely on tourism, coastal recreation
and fishing.
---------------------------------------------------------------------------
\1\ Boesch and Rabalais, eds., The Long-term Effects of Offshore
Oil and Gas Development: An Assessment and a Research Strategy. A
Report to NOAA, National Marine Pollution Program Office at 13-11.
---------------------------------------------------------------------------
Water pollution: Drilling muds are used to lubricate drill bits,
maintain downhole pressure, and serve other functions. Drill cuttings
are pieces of rock ground by the bit and brought up from the well along
with used mud. Massive amounts of waste muds and cuttings are generated
by drilling operations an average of 180,000 gallons per well.
2 Most of this waste is dumped untreated into surrounding
waters. Drilling muds contain toxic metals, including mercury, lead and
cadmium. Significant concentrations of these metals have been observed
around drilling sites. 3
---------------------------------------------------------------------------
\2\ MMS, 2000. Gulf of Mexico OCS Oil and Gas Lease Sale 181,
Draft Environmental Impact Statement (DEIS), p. IV-50.
\3\ Id.
---------------------------------------------------------------------------
A second major polluting discharge is produced water, the water
brought up from a well along with oil and gas. Offshore operations
generate large amounts of produced water. The Minerals Management
Service estimates that each platform discharges hundreds of thousands
of gallons of produced water every day. 4 Produced water
typically contains a variety of toxic pollutants, including benzene,
arsenic, lead, naphthalene, zinc and toluene, and can contain varying
amounts of radioactive pollutants. All major field research programs
investigating the fate and effects of produced water discharges have
detected petroleum hydrocarbons, toxic metals and radium in the water
column down-current from the discharge. 5
---------------------------------------------------------------------------
\4\ Id., p. IV-32.
\5\ Id., p. IV-32-33.
---------------------------------------------------------------------------
Air pollution: Drilling an average exploration well generates some
50 tons of nitrogen oxides (NOx), 13 tons of carbon monoxide, 6 tons of
sulfur dioxide, and 5 tons of volatile organic hydrocarbons. Each OCS
platform generates more than 50 tons per year of NOx, 11 tons of carbon
monoxide, 8 tons of sulfur dioxide and 38 tons of volatile organic
hydrocarbons every year. 6
---------------------------------------------------------------------------
\6\ Id., p. IV-40.
---------------------------------------------------------------------------
Oil spills: If offshore areas are leased for gas exploration there
is always the possibility that oil also will be found. We no of no
instance where a lease prohibits an oil company from developing oil if
oil is found in a gas prone region. We are not aware of any company
ever agreeing to such a condition in the history of the OCS program.
Without such a restriction included in a lease there would be no
assurances that oil in fact would not be developed, raising the
possibility of an oil spill. According to statistics compiled by the
Department of the Interior, some 3 million gallons of oil spilled from
OCS oil and gas operations in 73 incidents between 1980 and 1999.
7 Oil is extremely toxic to a wide variety of marine
species, including marine birds, mammals and commercially important
species of fish.
---------------------------------------------------------------------------
\7\ MMS, 2000. Gulf of Mexico OCS Oil and Gas Lease Sale 181,
Draft Environmental Impact Statement (DEIS), pp. IV-50.
---------------------------------------------------------------------------
3. The OCS Moratoria
Beginning in 1981 and every year since then, Congress has imposed
restrictions on OCS leasing in sensitive areas off the Nation's coasts.
These moratoria now protect the east and west coasts of the U.S. and
most of the Eastern Gulf of Mexico. The moratoria reflect a clearly
established consensus on the appropriateness of OCS activities in most
areas of the country, and have been endorsed by an array of elected
officials from all levels of government and diverse political
persuasions, from former President George H.W. Bush to Governor Jeb
Bush of Florida, and from Governor Tony Knowles of Alaska to Governor
Gray Davis of California.
We strongly oppose any attempt to lift the moratorium, or to
promote gas development in other sensitive OCS areas, including the
Sale 181 area off the west coast of Florida and areas off Alaska. We
have called on the Interior Department to remove these areas from the
new Five Year OCS Program currently under development.
4. Drilling in the Moratoria Areas, the Sale 181 Area and the Alaskan
OCS is Not Necessary
Despite assertions from industry and their supporters on Capitol
Hill, it is not necessary to drill in sensitive areas to meet America's
energy needs. For example, industry is pressing to drill in the
moratorium areas, the Eastern Gulf of Mexico, and off Alaska. But such
drilling is unnecessary because seventy per cent of the nation's
undiscovered, economically recoverable OCS oil and gas, and 80 percent
of the Nation's undiscovered, economically recoverable OCS gas, is
located in the Central and Western Gulf of Mexico. 8 Thus,
removing the moratorium areas, the OCS off Alaska, and the Eastern Gulf
of Mexico from the five-year program will leave the vast majority of
the nation's OCS oil and gas available to the industry.
---------------------------------------------------------------------------
\8\ U.S. Department of the Interior, Minerals Management Service
(MMS), 2000. Outer Continental Shelf Petroleum Assessment, 2000, page 5
and Gulf of Mexico Assessment Update.
---------------------------------------------------------------------------
Large untapped energy efficiency resources provide a much better
choice. Congress can help by providing tax incentives for the
construction of energy efficient buildings, manufacturing energy-
efficient heating and water heating equipment. These measures could
save 300 Tcf of natural gas over 50 years. 9 This is more
than twelve times the Interior Department's mean estimates of
economically recoverable gas located outside the Central and Western
Gulf of Mexico. 10 These strategies will do far more to
increase our nation's energy security than a drain America first policy
of exploiting sensitive offshore and onshore Federal lands.
---------------------------------------------------------------------------
\9\ NRDC, 2001. A Responsible Energy Policy for the 21st Century,
p. 32.
\10\ U.S. Department of the Interior, Minerals Management Service
(MMS), 2000. OCS Petroleum Assessment, 2000, p. 5 and Gulf of Mexico
Assessment Update.
---------------------------------------------------------------------------
Thank you for the opportunity to testify.
______
Mrs. Cubin. I thank all of the Members of the panel.
Before I forget it, I would like to ask the Committee's
unanimous consent to submit for the record statements that are
being made by a couple of constituents of mine, who live in the
Powder River Basin, where there is a huge coal bed methane
play. They have some concerns about the water and the
environment and what is going on up there. So with unanimous
consent, I will offer this for the record.
[Letters from the Powder River Basin Resource Council
submitted for the record follow:]
[GRAPHIC] [TIFF OMITTED] T1208.002
[GRAPHIC] [TIFF OMITTED] T1208.003
[GRAPHIC] [TIFF OMITTED] T1208.004
[GRAPHIC] [TIFF OMITTED] T1208.005
[GRAPHIC] [TIFF OMITTED] T1208.006
[GRAPHIC] [TIFF OMITTED] T1208.007
[GRAPHIC] [TIFF OMITTED] T1208.008
[GRAPHIC] [TIFF OMITTED] T1208.009
Mrs. Napolitano. Madam Chairman, can we also introduce into
the record the report she handed to be introduced? I don't
think you accepted it.
Mrs. Cubin. Certainly, we accept that to be put on the
record.
[The aforementioned report has been retained in the
Committee's official files.]
Mrs. Napolitano. Thank you, ma'am.
Mrs. Cubin. You bet. I will start off with my five minutes
really with a statement. No one argues that we are having an
energy shortage or that there is some sort of a crisis. There
certainly is. Many of us have known that for a long time. What
has been disturbing to me is--I am glad that Vice President
Cheney is the head of the task force that the President has
appointed to come up with a national energy policy. I would
like to give you my view of what a national energy policy
should include.
First of all, I think we have to estimate--not estimate, we
have to figure out what our national consumption is and how
much we actually need to be safe as a Nation, and how much we
need to consume or how much we do consume. Then, we need to
predict or estimate future growth in consumption or reduction
in consumption, whichever that might be. At that point, we need
to apply the forces of conservation, better technology,
efficiencies in the technology that we have and try to reduce
our consumption of energy as much as we possibly can. At that
point, we need to--when we know what our energy consumption
needs are, then we have to decide what percentage of that
should be produced domestically.
After we decide that, we need to decide what sources--what
percentage of that domestic production should come from coal,
oil, gas, wind, solar, geothermal, hydro, whatever, and that
way we would have an idea.
This document or this policy could certainly change, and
there would be times when one fuel would be contributing more
to the energy supply than others, but at least we wouldn't find
ourselves in a situation where we don't--a boom-and-bust
situation which the minerals industries usually find themselves
in.
I think if we all work together as Congressmen, and we work
with industry, and we work with agencies so that we can have
access to produce the energy that we need, we will be far
better off than politicizing this issue. To say or to think
that President Bush would want to put every acre of public land
open for drilling is simply nonsense.
I wish Mr. Markey were still here. The statement he made
about the 1,466 trillion cubic feet available for production
are total and 1,361 are available, well, they may be available
to be permitted, but they aren't ever going to get the permit
because we have the Endangered Species Act that affects access.
We have wilderness areas, wilderness study areas, national
parks, national forests, on and on and on and on.
So the information is truly slanted, and that isn't going
to help us get to a national energy policy, and it is not going
to help us solve the problems that we have.
So I hope that this Subcommittee will work together to put
forward honest pictures of what the situation is like out
there. What I see so far has been very distorted, and I
certainly hope the Committee can do a better job of being
realistic with the facts.
Having said that, I will now recognize Mr. Kind for any
questions he might have of the panel.
Mr. Kind. Well, I want to thank the witnesses for your
testimony here today. I think as we embark upon this, what will
hopefully be a national discussion in regards to our long-term
energy needs, that we will be able to approach it in a
bipartisan and balanced fashion.
One of the disturbing things that I have witnessed thus far
in the early stages of this next session of Congress is there
has been a lot of focus, a lot of attention on the supply
equation, and that is the business that you gentlemen are in,
and we recognize that, and it is going to have to play an
important role in regards to our energy needs. But I think we
need to be careful that it doesn't become too one-sided,
because obviously we need to focus on the demand aspect. And I
appreciate Ms. Speer's testimony today in regards to various
ideas and proposals to deal with the demand, and I would hope
that all of us here would be in agreement that there is a lot
of work that we can do, a lot of progress we can make in
regards to sound conservation practices and trying to reduce
the demand side of the equation, things we may be able to
pursue in the Tax Code to encourage greater energy-saving
devices and development of higher efficient buildings, for
instance. And I think we also need to take a serious look at
the CAFE standards when it comes to oil production and the
needs of oil in this country.
And I agree with the Madam Chair's assessment in regards to
what data and what information we are going to need, and that
is where I think you all can be of invaluable assistance in
trying to project out what the energy consumption needs are
going to be in light of the economic fluctuations that we are
in right now. But hopefully we are going to be able to bring
some balance to this and take a serious look at developing a
long-term energy conservation policy, which I believe this
country sorely lacks, an honest assessment of the type of
alternative and renewable sources that we can honestly and
cost-effectively pursue today.
But one of the questions that I have for you gentlemen here
today is it appears as if you do have a political problem. I
mean, Ms. Speer testified in regards to the congressional
moratorium on OCS exploration and drilling off the east and
west coast and the eastern part of the Gulf, for instance. Even
Governor Bush in Florida, for instance, has come out on record
opposed to drilling in 181, for instance; Governor Knowles up
in Alaska. In light of that, how do you make the case to the
American people when you have community leaders and Governors
of the very States who are on record as saying--some of them
actually saying that we believe in drilling, just not in our
backyard. I mean, how do you overcome that type of political
resistance that you may be facing? And I would open it up to
anyone.
Mr. Hackett. I might just try to clarify what my view of
that situation is, is that while Governor Bush may be against
the OCS sale that has been announced for December, it has been
some five years in the making. The other four Governors of the
States that it touches are in support of it. So four out of
five are actually in support of it, and the onshore facilities
that were referred to earlier are not anticipated to be in
Florida. So States who will be most impacted by this who
actually welcome offshore rigs for fishing purposes in the
States that I work in, Louisiana and Texas, because they
attract fish, they may have a very different view than Governor
Bush about that particular sale.
And more importantly, I think there are a lot of answers,
and I think you are absolutely right, Congressman Kind, in the
long term in terms of demand reduction, more efficiency, LNG,
frankly nuclear energy, a number of different alternatives for
supplies of energy that we need to look very hard at. The
problem is they don't get here for five years, and neither does
the pipeline from Alaska. So we all sit here as citizens of
this country worried about our global competitiveness and how
we are going to make it over the next five years, and we need
to take very seriously getting the facts out in front of us
about what we are facing and the question about whether there
really is a lot of free property out there that we are somehow
not taking advantage of.
I promise you in a competitive market-based economy people
tend to take advantage of what is given to them. If that was
truly there, I promise you we wouldn't be spending our energy
up here talking to you. We would be out there trying to drill
it up. Thank you.
Mr. Kind. Ms. Speer, let me throw it at you for a second.
In light of what Mr. Hackett just testified to, given our
short-term energy needs, do you believe it is possible through
conservation and development of alternatives and renewables to
pivot in a short period of time, given the demand that already
exists in the marketplace and what will inevitably be there in
the very near future?
Ms. Speer. That is a very good question, and the short-term
needs are very pressing right now. There are some ramping-up
activities that we can take. But the reality is my
understanding is that for most offshore gas fields, as well as
onshore gas fields, that it takes a good five or six years,
according to Chevron, to bring those on, too. So this is going
to take time to solve, and there are a lot of issues that have
to be addressed, including things like pipeline availability in
some areas.
But I just want to emphasize with respect to the eastern
Gulf that you know this is not just a few people here and
there. Every single member of the Florida delegation with one
exception has supported the moratorium and supported the
position that we have articulated and Governor Bush has
articulated. These are very deeply held views on the part of
very many people, and fortunately, there is not that much gas
there by the Interior Department's estimates. The Interior
Department again says there is about 6.9 trillion cubic feet in
the entire eastern Gulf of Mexico, and again, that is only
about 5 percent of Interior Department's estimates of the total
OCS undiscovered resources.
Mrs. Cubin. The gentleman's time has expired.
The Chair now recognizes Mr. Flake from--oh, he is gone. So
Mr. Otter.
Mr. Otter. Thank you very much, Madam Chairman. I wasn't
quite ready. Being the bottom of the political food chain here,
I expected some of the more senior Members to get their
opportunity in the box first, but thank you very much.
Mrs. Cubin. If you would like, I could recognize somebody
else. Generally on the Committee we can recognize people in the
order that they show up.
Mr. Otter. I shall show up very early from now on.
Mrs. Cubin. If you would like to take a few minutes.
Mr. Otter. No, no, I am ready. Having got this position, I
am not giving that up for anything, and now that I have used 2-
1/2 minutes of my time getting the floor--you know, much is
said about who is and who isn't supporting this thing, and I
think it is important--in fact, I think it ought to be the
direction that we always look to first rather than looking to
an organization from New York or an organization from San
Francisco or Dallas, Texas, or someplace else about where we
ought to be drilling and where we ought to be exploring or
where we ought to be looking for energy needs, I think we ought
to look to the States first, and if Governor Jeb Bush doesn't
want his State to develop, that ought to be so.
But would you then agree--would you all then agree that if
Governor Kempthorne of Idaho or all the other Governors said,
yes, we want to build dams, yes--because I don't, Madam
Chairman and members of the Committee, I don't think that we
can talk about this subject in a vacuum. I think it is going to
have to be part of the entire piece for energy, and so I think
we have got to talk about dams and coal-fired plants. I think
we have talk to about FERC. I think we have got to talk about
additional potential; heaven forbid, even nuclear plants. I
think we need to talk about all these things as part of our
national energy policy.
And so I want to know, I want to hear from each of the
Members that--would you be equally enthusiastic about extolling
the statements if a Governor said, yes, come and drill in my
State; yes, come and build a dam; yes, we want a coal-fired
plant from clean coal?
I will start with you, Mr. Simmons.
Mr. Simmons. I spent this morning at the Department of
Energy workshop on the power situation of the United States and
heartily endorsed clean coal, nuclear. Natural gas will not get
to 30 TCF, in my opinion, and it is going to basically cause
severe risk of electricity problems for a decade. So I think
the time has come that we need to embrace every form of energy,
including conservation, but the conservation numbers, unless
the conservation people can do some very quick education, do
not add up to enough reduced demand to basically conserve us
out of a problem.
Let me give you one example. If we could create tomorrow
morning 100,000 80-mile-per-gallon cars, we would save 4960
barrels a day. That is a single well in the Gulf of Mexico.
Those are real economic reality numbers. So I think it is going
to be very important as we go into these very serious energy
debates that we have some real genuine intellectual honesty
about how we deal with some numbers very precisely, because
this could be the greatest risk to our economy since World War
II.
Mr. Hackett. Thank you, Congressman. I agree with Matt that
we are a very spoiled Nation, this Nation doesn't like to
conserve, generally speaking. You look at the demand for oil
products, even with the crunch that you had in the late 1970's,
early 1980's, and you see it has gone up over that whole
period. I was not pointing to governors' support of individual
States as a reason to necessarily approve or disapprove of
anything. It was just to straighten the record out, so we are
not biased in one direction. This is a national issue, it is a
national issue on environment and energy. The biggest risk to
us is the economy against a global competition that will have
much lower natural gas costs.
There is plenty of natural gas in the world we just, can't
get it in here because we don't want to allow degasification
facilities to be sited in our country. We have four of them. We
are refurbishing two of them. They do not make a big enough
dent. They costs hundreds of millions of dollars just like the
ships that are required to get them here, and the facilities
overseas that you have to make it from, but there is plenty of
it at the right price over time. It doesn't happen for five
years. So what do we do in the meantime? That is where you look
at all the alternatives, you mention and I applaud you for your
thought process.
Mr. Papa. Congressman, we agree that we need a national
energy policy that embraces not only natural gas, but also
clean coal, consideration of nuclear, certainly renewables,
wind, solar, some of those items, and I think none of us
disagree with that. To me, I think you can frame the debate on
access for natural gas is very simply, I believe, that if, the
Nation is willing to tolerate a higher average natural gas
price over the next 10 or 20 years, then we can continue to
withhold lands from drilling. If however we open up these lands
for drilling, the consequence will be you have more supply, you
will have an average lower natural gas price over the next 10
years or so. And I guess the Nation has to weigh what are the
economic consequences of those two items?
Ms. Speer. Thank you. I want to agree with Mr. Hackett that
we are a spoiled Nation, and we really do have to get our house
in order on this question if we are going to continue to
prosper in the way we have. In our view, the way to proceed,
though, is a different way. And I think that the record of
energy efficiency improvement really speaks for itself. For
example, from 1975 to 2000, new generations of energy efficient
refrigerators has reduced their electricity consumption by 75
percent saving some 60,000 megawatts of electricity. And
standards that have been adopted by the Energy Department since
1997 for clothes dryers and air conditioners and other
appliances will eliminate the need to build 120 new power
plants. These are real figures, and we think this is the
direction people should go. With respect to the discussion of
governors--.
Mrs. Cubin. The gentleman's time has expired. If you could
make it quick.
Mr. Otter. I think she answered the question. Madam
Chairman, I reserved my opening statement and I would like it
submitted for the record.
Mrs. Cubin. Yes.
Mr. Otter. Thank you.
[The prepared statement of Mr. Otter follows:]
Statement of The Honorable C.L. ``Butch'' Otter, A Representative in
Congress from the State of Idaho
Madam Chairwoman, thank you for holding this hearing today on the
important role that public lands play in the development of a
comprehensive domestic energy policy. I am pleased to join you and my
colleagues in support of proposals to increase our natural gas supply.
At first look, you might ask, why would Idaho be interested in
this? There are no natural gas plants in Idaho. Almost 87 percent of
Idaho's electricity-generating capability comes from hydroelectric
power. However, while Idaho does not produce natural gas, it now
imports nearly 64 trillion cubic feet of gas that is used to provide
energy for homes, businesses, and industrial operations in Idaho--
almost all of it in my District.
Additionally, over 914 trillion cubic feet of gas is transported
across Northern Idaho from Canada into the United States to serve the
demand for natural gas in California, Washington, Oregon, and other
western states. This trend is growing dramatically. The U.S. Energy
Information Agency forecasts that within 20 years, demand for natural
gas will increase 62 percent--much faster than it is being produced.
Madam Chairwoman, we need to develop an energy policy now--one that
will utilize resources we know are already available right here in the
United States--on public lands and submerged offshore in methane
deposits.
Under the previous Administration, U.S. imports of foreign oil
increased to 56 percent--7 percent of it from Saddam Hussein. Last
summer, gas prices skyrocketed, and the only answer from the previous
Administration was to beg foreigners for more oil, tap into our
Strategic Petroleum Reserve, and actually cut off efforts to create new
sources of energy in the United States. Because of stringent
regulations, relicensing existing hydro, nuclear, or natural gas
facilities has become costly and time consuming. We should be seeking
ways to bolster our national security by developing domestic energy
sources and decreasing our dependence on foreign oil
The crisis is at near-critical mass in Idaho and the West. Record-
low water levels will severely harm hydroelectric dams' ability to
produce sufficient power to meet Idaho's needs--let alone increasing
demands of Californians and other western power users. The previous
Administration's forest roadless restrictions on Forest Service and
Bureau of Land Management lands is blocking access to 9 million acres
of Idaho public lands--land that most certainly would yield to the
development of new sources of natural gas supply and rich mineral
resources. These rules were imposed contrary to BLM's statutory duty to
manage public lands for multiple use and sustained yield.
Recent estimates reveal that 1,300 trillion cubic feet of natural
gas and some 204 billion barrels of oil could be made available on
American soil. That energy that could fuel American industries,
businesses, homes--and help offset the millions of dollars that
taxpayers are now paying for years of poor maintenance by the Federal
agencies in our national forests.
Madam Chairwoman, we also need to block efforts that would tear out
existing clean, renewable sources of hydroelectric power.
Environmentalists have proposed tearing out hydroelectric dams that
produce up to 3,000 megawatts of power at their peak--enough to power
the City of Seattle three times over. Replacing the clean electricity
generated by the dams with the next cheapest source--natural gas--would
take years to implement, cost millions of dollars per year, and would
further exacerbate the growing demand for natural gas that is already
there. Instead, we should support efforts to swiftly relicense these
dams, and authorize access to public lands to increase transmission
capability.
I look forward to working with you, Madam Chairwoman, and the rest
of the members of this Committee, to explore common sense proposals to
unlock the abundant natural gas supply on the millions of acres of
public lands and to review unwise directives such as the roadless
regulations, that prevent access to those who could untap resources,
reduce the risk of forest fires, and to ease our nation's energy
crisis.
______
Mrs. Cubin. The Chair recognizes Mr. Markey.
Mr. Markey. Thank you, Madam Chair. Let me go to you, Mr.
Papa, the 1999 report of the National Petroleum Council (NPC).
The report estimates that the total of natural gas resource
base in the lower 48 States, including offshore, equals 1,466
trillion cubic feet. Much of this resource base resides on
Federal lands or Federal waters. The NPC study asserts that a
large portion of this resource base is not open to either
assessment or development.
So I would like to ask you some questions, if I may, about
this assertion, which I believe to be a total exaggeration.
First of all, I see that the NPC asserts that approximately 40
percent, or 137 TCF of the Rocky Mountain States resources is
either closed to exploration or is under restrictive
provisions. Isn't it true that the fine print in this report
states that only 29 TCF of the Rocky's gas resources are
actually closed to development, that is, in a natural park or
wilderness area, while the remaining 108 TCF are available for
oil, gas or leasing under certain stipulations, such as
seasonal limitations during calving periods.
So wouldn't you agree that this 108 TCF is, in fact,
accessible in the same way the industry is arguing that in the
Arctic Refuge, that they can drill in a way that doesn't
disturb the caribou? Isn't it true that you are also permitted
to right now drill in these areas under the same conditions
that you are requesting to be able to drill in Arctic Refuge?
Mr. Papa. Congressman Markey, I believe that a study is
underway, as has been initiated by Madam Chairman, to take a
look at these numbers and see if we can get to some numbers
that everyone can agree on. The issue that you bring up here is
a very viable one. The problem with the reasoning, in my
opinion, that you just generated, is that a lot of these areas
that are accessible to drilling and leasing have very severe
restrictions on them. For example, there may be a very narrow
window such as a two month window that you can access it.
Mr. Markey. I am looking at the chart here that Mr.
Hackett, the Chairman and President/CEO of Ocean Energy has
provided, and I am looking at Wyoming, and a lot of these look
like they are State restrictions for the NRA and fishermen that
have been put on the books by the State government, big game
winter range, sage grouse nesting, raptor nesting, prairie dog
avoidance. I don't know how hard it is to avoid a prairie dog.
I can move over here a little bit, but just don't disturb that
nest. They do not seem like they are the most restrictive. Most
of them are State restrictions. Are we supposed to preempt the
governors in all these western States from putting on these
relatively modest seasonal restrictions?
Mr. Papa. It is good we are having the debate on this
because it has opened up--in my opinion, the numbers are really
misleading. As someone who tries to access these lands to
drill, I can tell you a lot of this land is not accessible.
Mr. Markey. When we are talking about seasonal here, aren't
we really talking about what the NRA wants? They just want a
season, but the rest of the year would be fine. Do you have a
problem with that? Does the NRA support your position on
drilling?
Mr. Papa. I am not aware of the NRA's position on this .
Mr. Markey. I look at your own chart here and it looks to
me like only 3.5 percent of all public lands are off base, and
it goes up to 10 percent, but then you have to include the
Department of Defense and Department of Energy lands as well,
which are public lands, obviously.
But I don't know that we really want to move on to the
Department of Defense reservations for drilling. But it is only
3.5 percent if you eliminate the Department of Defense and
Energy. And these are under the--this is the Independent
Petroleum Association of America study that I am reading that
was provided to me here today, which seems like a pretty low
percentage. Let me move on quickly. The NPC report also asserts
that 76 trillion cubic feet are closed to development in
offshore areas, that is, California, Florida and Atlantic
coastal moratoria imposed by Congress with the full support of
the affected States.
Are you calling for a repeal of the moratoria on offshore
drilling along the Atlantic and Pacific coasts?
Mr. Papa. At this time, no. We are designating it as
resources.
Mr. Markey. So you are not calling for repeal? Okay. So as
I look at the numbers, it seems there is only 105 TCF--29 in
the Rocky mountain States and 76 on the OCS--of the natural gas
resource base that are not accessible. That means there are
1361 TCF, of the 1466 TCF natural gas resource base which are
available for development, and I am told at a 31 TCF per year
consumption rate, that is enough to meet America's anticipated
needs for over 40 years. Does that number square with you? Do
you disagree with this number that 1361 TCF would be available,
at least for part of the area for drilling?
Mr. Papa. That is the potential that is out there. That is
not proven reserve. In a competitive marketplace, I can assure
you that if that were readily available--.
Mr. Markey. So even that number is speculative, is that
what you are saying? Even that you don't know. It could be
lower.
Mr. Papa. It could be lower. That is exactly right.
Mrs. Cubin. The gentleman's time has expired. I would like
to answer one of the requests that you brought up, Mr. Markey,
if you do not mind. You were talking about the chart where the
seasonal use restrictions. I wanted to point out that they are
not really State laws or State regulations. The State manages
the wildlife, but the habitat is managed under the Federal
Government, so that is the answer to that.
Mr. Markey. If you would yield. I am told that many of
these restrictions are put in place by the BLM at the request
of the State gaming officials, and that it is only the Federal
Government responding to the State requests in almost all of
these restrictions. Although they don't have the legal
authority to impose them requested by Wyoming or Arizona or
other States.
Mrs. Cubin. Based on managing the animals, that would be
correct.
Mr. Markey. So that is a State action.
Mrs. Cubin. But I can't say that all or most of them are. I
don't know the answers to that but fortunately we do not need
to know the answer to that because we were smart enough as a
Congress last year, Mr. Skeen, and I, as you recall, offered
the amendment to have the USGS do an inventory of all of the
mineral wealth underground in the United States, and then do an
overlay of any rules, regulations, laws designations that
restrict the possibility for exploration or introduction. And
this is a priority of Secretary Norton. I have talked to her
yesterday. So, soon we will have the facts that we need, so
that we can do something. The Chair now--.
Mr. Markey. Can I just? I await that report. But pending
that we have the Independent Petroleum Association's report,
which makes it clear in their own study that 95 percent of it
is available.
Mrs. Cubin. One last thing, he and I need to do this off
the record. Believe it or not, it is okay to mine coal in the
Black Hills National Forest, but it is only okay to mine it
where it isn't. So the point is, it is not okay to mine coal in
the Black Hills Forest where it is, but it is okay to mine it
where it doesn't occur. So that is my point.
Mr. Markey. So, I don't care honestly, as you can
appreciate, whether your constituents can kill animals or not,
but your constituents might care. So I think these are
primarily restrictions imposed by the States for your
constituents.
Mrs. Cubin. We appreciate your concern. The Chair
recognizes Mr. Gibbons.
Mr. Gibbons. Thank you, Mr. Chairman. To follow up on what
you were just mentioning. The State of Nevada is nearly 90
percent owned by the Federal Government. Yet in the State of
Nevada, probably 1000 of 1 percent has either oil or gas
deposits located on it. Oil and gas is not located under every
square inch of available land to determine whether or not it is
there for production. And it is found where you find it, which
makes many of these large leases that you have out there
literally valueless when it shows that you have entered a dry
well and not found what you thought you had found in the
beginning.
So speculation, of course, as to what might be under there
at this point in time is, as a geologist would say, only as
good as as far as you can stick your finger in the ground to
see what is there. You have to spend that money. You have to
invest in those drilling operations to make that determination.
Nonetheless, let me say that I do support the effort to
increase our resources, energy resources in this country.
There is, no doubt, in my mind, even though we are spoiled,
we are a Nation that has 5 percent of the world's population
using 25 percent of the world's energy, but I guarantee you
that not one person in this room is ready to reduce the quality
of life. They will not reduce the quality of their health care
and the benefits that have come from the development of
resources in this Nation. And I dare say that once the rest of
the world begins to catch up with us in the quality of life and
things that we have enjoyed because of our resources, that the
consumption rate will pretty much level out in those countries
at about our per capita rate of consumption of energy.
My point being in all of this is that in this support for
your effort to supply this Nation, which has seen in recent
months some great challenges to its energy consumption, what
single issue, what is the biggest impediment that if we were to
go at it legislatively, taking a bite of the apple, not being
able to take the whole thing at one time, but one bite of the
apple, what impediment would you like to see us address first?
And I will begin, and let you go right down the aisle just as
Mr. Otter did.
Mr. Simmons.
Mr. Simmons. Unfortunately, I think the magnitude of the
problem is such that we don't have the luxury of prioritizing
and doing one thing at a time. If, for instance, we decided to
waive every access issue, which I know will not happen, we open
the door to the next problem, which is an unbelievable
limitation in people and rigs. So it goes on one problem after
another. So I think one of the critical needs in getting the
proper national energy strategy together is to recognize how
fragile our energy supplies are right across the face of
energy. We can't make the mistake of saying there is one area
we can solve, and then we are out of our energy problems.
Unfortunately we have a thousand things to simultaneously
solve.
Mr. Hackett. It is hard to disagree with that assessment,
and I think that, as with many things in a free market economy,
we tend to realize too late when we find ourselves in the
situation, and oftentimes we tend to ignore that we are heading
into it as well politically, in particular, and I think
California is a great example of that. I think Matt is
absolutely right. I think we need to be absolutely committed to
the notion that we have to develop the resources we can
environmentally safely develop as quickly as we possibly can to
bridge us into the period when we can have the very serious
debate about things like nuclear energy and improving our
ability to import LNG and bringing a pipeline down from Alaska.
Whatever it takes from government and industry hand in hand
to make that happen, we need to get serious about it. We needed
to get serious about it probably five years ago. The industry
itself probably started to get serious about it two or three
years ago in terms of making pronouncements up here, but it is
upon us.
Mr. Papa. Congressman Gibbons, in response to your
question, I give you two answers. One, I think we need a
pragmatic review of surface access in the lower 48 States and
the outer continental shelf in terms of availability to drill
and balancing all considerations including environmental. At
the same time I would recommend that you look very hard at fast
tracking the permitting for an Alaskan gas pipeline. I think
that is a longer-term solution to the problem.
Ms. Speer. Thank you. I think that is an excellent
question. And I would say corporate average fuel economy
standards are the number one priority. They have been frozen by
a congressional rider since 1994 at 27.5 miles per gallon for
cars and 20.7 for SUVs and trucks. By increasing that to an
average for both of about 30.9 miles per gallon we could save
over 1.6 billion barrels of oil annually by 2020. That is more
oil than the government estimates would be produced from under
Arctic Refuge, the entire outer continental shelf, plus the
amount we import from Saudi Arabia, Kuwait, Qatar, Bahrain and
the United Arab Emirates. That is the kind of step we ought to
be taking to help our Nation reduce its dependence on oil.
Mrs. Cubin. The gentleman's time has expired. The Chair
recognize Mrs. Napolitano.
Mrs. Napolitano. Thank you, Madam Chair. May I defer to Mr.
Inslee? He has to leave.
Mr. Inslee. Thank you very much. I do have a flight. I
appreciate that, so do my children. My name is Jay Inslee. I
represent the First District. It is located in the suburbs
north of Seattle. I am sure you are aware of it. The folks in
the State of Washington are seeing their electrical prices go
up five-, tenfold or at least the wholesale prices to date,
which are already resulting in astronomical retail price
increases. We have an emergency situation up in the Pacific
northwest right now. I say that because a lot of people think
it is just California. It is felt in the Pacific north as well.
And a lot of the things we have been talking about potentially
have some resolution five to 10 years from now.
But I want to focus on today and tomorrow with my
constituents, because the fact of the matter is, this year, to
prevent us from tripping into a recession, we need some relief
led by this administration today on two things: Really, the
only two things we can do right now, today, this week, which
are conservation and a realistic wholesale price cap on
electricity. And frankly, neither one are we seeing leadership
too much on getting those immediate help for the Pacific
northwest and whole west of the United States.
I want to ask you gentlemen your thoughts in that regard.
First, Mr. Simmons, I noted you were in the Bush-Cheney
transition team. I think I read that in your testimony. What
did you advise the administration and what is their position on
immediate conservation efforts to try to reduce the demand in
the next five to six months in the western United States on how
to help us give incentives for conservation? Can you tell us
what you advised the administration and what their position is
as far as you understand it?
Mr. Simmons. My advice has been that conservation is a very
important thing to take seriously. But I do not honestly
believe in any stretch of the way that we can do anything in
the next 6 to 12 months to even make a dent on these terrible
problems. I am originally from Utah. I am afraid Utah will get
sucked into the California problems, too. I would love to think
we can conserve our way out, but I think we are actually
talking about Draconian life-style changes, as was said
earlier, none of us in this room are probably emotionally
prepared to do.
I think one of the dangerous things we could do is hold
conservation out as a silver bullet. That has nothing to do
with not being a really strong believer that we have to find
ways to start conserving energy, but I just do not believe we
will all turn in our Suburbans. I think we need to hunker down
for a possible decade-long solution to a really massive energy
problem. I have described this in a Senate hearing a month ago
as a Marshall plan of energy that will literally take us a
decade to do, and I think the bad news is there is no solution
in the next 6 months.
Mr. Inslee. Well, thanks for the optimistic note. I frankly
think you are dead wrong, just flat dead wrong. It is that kind
of thinking that got us behind the eight ball. I tell you, if
we achieve 10 percent conservation of electrical usage in a
retail and commercial basis in the State of Washington, we will
relieve enormous pressure on our utilities during peak demands.
As you well know, it is the peak pricing in the electrical
market that kills utility. If we look at this and if we hit 10
percent conservation, we will dramatically reduce the pricing
benefits that the generators have in a moment.
And so, I guess I will reiterate the question, Mr. Simmons,
for instance, did you encourage the administration to get
behind an effort to increase our CAFE standards and if so, what
was their response?
Mr. Simmons. No, I didn't. I actually do not believe that
CAFE--that we mandate people to do things they are not prepared
to do. I think the evidence is you can enact CAFE standards and
Americans will buy sport utility vehicles and suburbans, so
that wasn't any of my recommendations.
Mr. Inslee. You understand the goal is to close the
loophole in the CAFE standards so that if you close the
loophole, you do away with that loophole. You understand that
can be done, I am sure. So what you are telling me is you are
here to advocate drilling in national monuments before the
United States of America closes a major loophole in their CAFE
standards, and simply gains gasoline by conserving it. Is that
what you are telling us?
Mr. Simmons. No, I am saying we need a very carefully
designed and very balanced energy policy that does a little bit
of everything, because not one thing will get the job done.
Mr. Inslee. I agree with you. Are you telling this panel
that we should allow drilling in national monuments, crown
jewels of the west before we increase CAFE standards? Is that
your testimony?
Mr. Simmons. No, not at all.
Mrs. Cubin. Mr. Inslee, he answered your question.
Mr. Simmons. I don't know that anybody here is proposing
drilling in national monuments.
Mr. Inslee. Just so you know, President Bush yesterday said
we should drill on national monuments.
Mrs. Cubin. The gentlemen's time has expired. The Chair
recognizes Mr. Rehberg.
Mr. Rehberg. No questions.
Mrs. Cubin. You have no questions. Mr. Inslee, I believe it
is your turn now.
Mr. Inslee. Thank you, Madam Chair, for your courtesy.
Mrs. Napolitano. I am sitting here shaking my head in
disbelief because we in California are going through the energy
crisis, and now we are faced with the increase in gas prices
because of its ability to create energy, and we are now facing,
supposedly, a crisis in supply of gas.
I am not quite sure that I totally agree with some of what
I have been presented with in that for years, we have been
saying we have more than ample supply of gas. We have heard it
for years when I was in a State assembly. I have heard it in
dialogue, I have heard it in testimony, and now we are saying
that we need to go and drill in areas because we must find--to
make sure that we have enough, and if I heard you, Mr. Papa,
you stated that you did not know how much there was.
Our chair has indicated they have done an assessment and
evaluation, and they have an idea why most of these precious
resources are. Just recently there was a statement made by me
that I am very concerned about continuing to not necessarily
explore but dig out our resources, because in the end, we may
not leave that much for our successors, the children,
grandchildren and future generations.
While we need to know what we have and be able to tell our
constituents, our friends and our neighbors that conservation
is going to have to be a fiber and not just a side line. It is
a major portion for me in the State of California that they, to
be able to tell my constituents that they need to understand
that the future rests on every one of us, not just the
industry, not just government, but everyone.
That said, I am concerned because of the implications of
not necessarily wrongdoing, but the gouging by the providers of
energy that are driving up the prices because they control the
abilities for us to be able to get it. We no longer produce it,
so we have to pay the price. And my understanding that that is
a problem, that we are now looking at in the CPUC, looking at
the three contracts of marketers that have brought capacity
through the El Paso natural gas and others, that they may have
controlled, that they were able--my entities in California
bought, were unable to use, sold back and this particular
entity held on to it driving the price up.
To me that is unconscionable, because people that are
mostly hurt when they can't pay the price of this energy are
people on fixed income. The poor people. And I just can't see
why we can not come to other meeting of the ways to provide
energy and be able, especially now that we are beginning to
feel a downturn in the economy. We are just keeping fueling
while somebody is making an inordinate amount of money for
their investors. And I am going to look at some of this
material.
I have just found most of it as I came in. I would like to
see a lot more dialogue going on. I would like to see more
people who can give the other sides of it, so we can better
understand and have some clarity to where we are and what we
can do about it. I thank the Chairwoman for bringing this
session, at least, to light so we can make some of our
frustrations known and maybe have you talk to us about what is
it that you can help us clarify in our minds when we talk to
our constituents to say look, this is what needs to happen. But
so far I haven't seen that I haven't heard that, and I would
like to see how you gentlemen can somehow clarify a little bit
of that mystery behind what is happening, and now can we work
together so that we may be able to do our job and help you do
yours.
Mr. Papa. Congresswoman, thank you. I think that is a very
germane comment that comes up when you have got an upset
condition in California, and most everywhere else, and your
constituents are saying why is this upset? It hasn't happened
in the past. Speaking for natural gas producers in the U.S.,
and, as part of IPAA, I will say that one thing we will welcome
the opportunity to discuss with you, one on one or as a group,
more details on this, but the one thing that hopefully will
bring some light to it is if you think about it, that every
single gas well in the United States for the last several years
has been producing at maximum rates 365 days a year, and yet we
still don't have enough gas to really meet the demand
requirements there.
I can tell you that there has been no curtailment by any
producers or anything along those lines. We as an industry are
racing as hard as we can. We have increased the level of
drilling activity, and we are trying to grow supply as fast as
we can. We are facing a higher depletion rate, a treadmill
every year. If we stop drilling as a Nation for one year, we
would lose 23 percent of our productive capacity in one year,
and we have to make up that 23 percent to just stay even. So I
do think that more dialogue is absolutely necessary on this
subject, and we would certainly welcome it.
Mrs. Napolitano. I appreciate your comments and thank you,
Madam Chair. There will be a hearing at next week at the State
legislature in California to deal with the specific comment I
made on the overpricing or the holding back of the supply.
Thank you.
Mrs. Cubin. One comment I would like to make is with retail
prices capped as the California electric dereg did, it gives
the consumer no incentive whatsoever to conserve, so that could
be something that ought to be brought up too, maybe.
Mrs. Napolitano. Madam Chair, I couldn't agree with you
more, but I think it is inherent upon the leadership to begin
espousing down to the local conservation, the methodology and
do concerted efforts through the media, it is the highest
authority. They have every right and every ability to get it
across. It happened when we did water conservation some 10
years ago and we met it and were able to survive, and I think
we will survive this one. But you are right. I think we need to
do a concerted effort for teaching people when, where and how
to do it, because we take it for granted we know, people may
not.
Mrs. Cubin. Right. The Chair now recognize Mr.Rehberg. He
has a question.
Mr. Rehberg. Thank you, Madam Chair. It is often said that
life kind of repeats itself, and I found myself remembering
exactly 20 years ago when I first came to Washington D.C., it
was May of 1979 in the middle of a gas crisis. Sitting in back
of me where my staff is sitting today, I sat behind Congressman
Marlenee staffing this Committee. And at that time we were
talking about energy shortages and how we were going to
conserve our way out of this problem. We funded, over the
course of the next three years, a lot of solar energy policy, a
lot of wind energy policy a lot of alternative energy policy
and that seems to have fallen by the wayside.
Mr. Simmons I totally agree with you, with all due respect
to my colleague from the State of Washington. I fear that we
are creating a debt even more serious than the financial debt
that we were creating for the next generations, the energy debt
we are creating because a day will come where we will not be
able to dig one more shovel full of coal or one more gas well
can be punched, whether it be in Alaska or Montana. So I would
not feel good about my representation for my State if we didn't
seriously address the issue of production aside from
conservation.
We will do the best we can with conservation. One of the
things I remember from 20 years ago was a stupid policy called
the windfall profits tax, and here we are again talking about
the same thing in the State of Montana. I see in the
legislature they just introduced the windfall profits tax on
the electric companies out there because of the wholesale price
of energy.
My question to you, and I apologize I looked through the
materials and I didn't see if you touched on it. If you had, I
apologize. I was looking for your resume and I don't have that
as well. I see you are from the investment arena. Do you feel
that the Federal taxation policy and the policies such as
another quick example, CARA, where are we going to take off
shore drilling revenues and put it into something called
purchases of additional properties as opposed to taking that
revenue and turning it into a solution for the energy crisis,
keeping it in the same arena. Do you think our taxation
policies in many of the things we talk about, capping of
electrical costs and such, give a true picture? Has it made it
more difficult for your clientele or your group to be able to
fund people in the production of energy that this country
needs?
Mr. Simmons. I think the thing that has been the real
inhibitor more than anything else is energy prices that were
just simply too low. Unfortunately, America got to thinking
they were real, but they virtually devastated the petroleum
industry. They almost wiped out the country's spare energy fuel
reserves. The industry spent 30, 20 years trying to cope with
low energy price by downsizing, and we became a shadow of
ourselves. It was not the tax policy. I think there are some
creative things we can do on tax policy, particularly in some
areas that won't work unless there is some extra stimulus.
This is a personal view, but I don't believe the current
energy prices are probably yet high enough to actually pay for
an energy Marshall plan. And someone has got to foot that bill.
I think that we have an enormous education ahead of us to
educate Americans on the proper relationship of energy costs.
The natural gas consumers last year, commercial and residential
spent about $31 billion on natural gas. They spent $7.7 billion
on movie receipts. Now I don't think that necessarily means
they should not have done that. We spent $135 billion on
residential energy last year and we spent $205 billion last
year on advertising, most of which doesn't ever get seen and
all of which is embedded in costs.
So I think in this complicated energy relook we have to
basically come back and know an awful lot more about energy
costs, and if we are crazy enough, reckless enough to go back
and try to windfall profit, we will never get the energy
Marshall plan built because it will not be built by the
government. It has got to be the private sector and they have
to have money or they will not be able to afford it. It will be
costly. We are talking trillions of dollars.
Mr. Rehberg. Would you say also because of the cost of
regulations it has inhibited the companies' ability to get out
and find the additional resource that is available to us.
Mr. Simmons. Absolutely. It has not helped anything, but it
has been one of a whole long laundry list of problems.
Mr. Rehberg. Certainly it is not one issue this is, it is
the cumulative effect.
Mr. Simmons. Yes, the buildup over 30 years.
Mr. Rehberg. Thank you, Madam Chair.
Mrs. Cubin. Thank you.
The Chair recognizes Mr. Carson.
Mr. Carson. Just a couple questions for you. I thank you
for being here today. Ms. Speer brought up the point that was
not addressed in the testimony I heard, the testimony is quite
eloquent and the evidence quite well that the actual footprint
of new exploration platforms is actually quite low . She talked
about the coastal development, the infrastructure needs to back
that up. I want the three panelists from the energy industry to
talk about their experience with that.
And Ms. Speer, if you might respond to what their concerns
are that it is not so much of the exploration equipment itself,
but in fact, the roads in infrastructure to back that
exploration up.
Mr. Simmons. There was a terrific article in The New York
Times in the last couple of months on the wildlife refuges of
Louisiana, and I wasn't aware that Louisiana had wildlife
refuges, and the data was remarkable because they have been
doing the spoiling of the coastal plains in Louisiana for over
50 years now, and the numbers in The New York Times, I have
never known The New York Times to be proenergy, were really
stunning.
And so I would encourage you to have one of your staff dig
out that article and look at it and just see that--you know,
some stuff built 50 years ago was really built sloppily. But
anything in the last 20 years has really been done in an
unbelievable--I am not in the energy business. I am in the
investment banking business. But I have worked with these
energy companies for 30 years. They are very responsible
corporate citizens. Most executives are passionate outdoorsmen.
I have never known an outdoorsman that doesn't love the
environment. So I think the reality turns out to be quite
different than the rhetoric.
Mr. Hackett. I might add the last five years are
dramatically different than the first 15-, 20-year period that
was referred to earlier in the testimony. As with most
statistics they can tell you what you want them to tell you,
depending on what period you choose. I do not know the actual
details behind the comments that either of the witnesses have
given you on the shoreline, but I will tell you that when you
look at alternate fuels, which we thought might be the holy
grail back in the late 1970's, early 1980's, we need to be very
careful to know what we are getting into in terms of cost, in
terms of damage to the environment.
You talk about substituting for an offshore platform that
has a one block imprint, granted, with affiliated structures on
shore, and you look at an equivalent power generating capacity
of a wind farm, some of which are out in California, and you
are talking about sizes that are 320 times the size, 45 square
miles to have a wind farm with comparable capacity. Ten square
miles for a photovotaic farm to be able to produce solar
energy. We were not talking about always environmentally
friendly alternate technologies. We have got to use whatever we
can the best way we can, but we have to keep in mind that no
solution is perfect. There is always a balancing act that has
to occur.
Mr. Papa. Congressman Carson, I would echo those comments.
I would recommend that you might want to take a look at this
DOE report entitled ``Environmental Benefits of Advanced Oil
and Gas Exploration and Production.'' I can tell you that
technologies today are much different than they were 20 or 30
years ago. Horizontal drilling, ability to drill multiple wells
from a single location. Lots of activities. And I think the oil
industry is unfortunately stereotyped by things that may have
occurred 30 or 40 years ago, certain specific upset cases that
may have occurred. But I think a look at the last five years
particularly shows that we can be very responsible
environmental citizens.
Mr. Carson. Ms. Speer do you have a comment about those?
Ms. Speer. Yes. First of all, I think that we all agree
that the industry has done a tremendous job in improving its
record of environmentally sound development. Things have
improved dramatically in the last 20 years. That said, there
are still very significant impacts that accompany offshore oil
and gas development. Spills happen routinely. They happen in
great magnitude.
You need roads, you need processing facilities, you need
storage tanks, you need an infrastructure that can have very
significant impacts in the coastal areas. I was reading the
comments of the State of Louisiana yesterday on the 5-year
program, and they talk about continuing impacts that they are
experiencing, particularly with respect to their coastal
wetlands.
Also, you know, you have air pollution that generates over
100 tons per platform per year. Nearly 70 tons per exploratory
well per year. You have water pollution, enormous amounts of
waste are generated by those operations, and a lot of it is not
handled by a closed loop system. Most of it is not on the OCS.
Right now most of it is discharged over the side after minimal
treatment.
Mr. Carson. Great. Let me ask you a different question
about that. The testimony of the IPAA was helpful about some of
the tax policies that might be beneficial. Being from Oklahoma,
I have a lot of friends in the oil and gas industry, and they
talk often about tax policies that would encourage stripper
wells and things like that from being kept up. I would like the
comments of Mr. Simmons, Hackett and Papa about now that the
emphasis seems to be access, if we have different tax treatment
in the oil and gas industry, whether the deductibility of
certain costs or changing the AMT, the very things you proposed
in your testimony, to what extent will that get us to the holy
grail of increased sustainable natural gas production?
Mr. Simmons. I would repeat a comment that probably sounds
like a broken record, but there are no silver bullets. Every
one of them are important, and unfortunately, they all have to
be done at the same time. And to the extent we don't do ten of
the thousand, we are basically whatever the percentage that is
behind. And again, it is the best thing you can do in
conservation to the best thing you can do on access. And if we
don't do them all at the same time, then the awful problems of
California are going to be all over the United States for the
next decade.
Mrs. Cubin. The gentleman's time has expired. I would like
to thank the witnesses for their valuable testimony and thank
the members for their questions. This Subcommittee may have
additional questions. And we will ask that you respond to them
in writing if you would not mind doing that.
I would like to thank the panel, and you are free to go. I
would like to recognize now the second panel of witnesses,
Marlan W. Downey, President of the American Association of
Petroleum Geologists; Robert Fisher, President of the Montana
Petroleum Association and Vice President of Ballard Petroleum;
and Mr. David Alberswerth, Director of the BLM Program for The
Wilderness Society. If you would please take your places at the
table.
Mrs. Cubin. Thank you. First I would like to recognize
Marlan W. Downey.
STATEMENT OF MARLAN W. DOWNEY, PRESIDENT, AMERICAN ASSOCIATION
OF PETROLEUM GEOLOGISTS
Mr. Downey. Thank you, Madam Chairman. I am President of
the American Association of Petroleum Geologists, which is an
international association that represents the energy
professionals in geology, geophysics, and engineering
worldwide. I was greatly impressed by the testimony and the
questions coming before us, and I am going to skip over the
testimony that I have provided in written form. And I am going
to attempt to talk very briefly about some elements of the
questions that have been brought up previously.
I would like to start with just the simple description of
what the scale of the problem is. I think from all estimates,
we are going to need about 10 trillion cubic feet of new gas
every year for the new demand. That is a tough thing to do. The
good thing is that we do have enormous resources undiscovered,
unproduced, but estimated in the United States. That is the
good news. The bad news is that we do not get to go to Saudi
Arabia or Qatar or Mexico or Venezuela for any of those
supplies, as we can do for oil. America has to solve its gas
problems all by itself, within its own boundaries, with
possibly a little help from Canada.
Gas is very difficult, very expensive, to transport, so
forget about any significant help on our 10 trillion cubic feet
of gas increase in demand every year from any other place than
internal. It is our problem. Fortunately we do have a very
large resource and I would say that, especially for that part
that is located, appears to be located in the Rocky Mountains;
I think it is vastly underestimated in the Rocky Mountains. We
are going to need all of that, and we are going to need all the
help we can get from conservation while we are at it.
Now, the good news is that once upon a time not too long
ago, in fact, for 25 years running, we found an extra 10
trillion cubic feet of gas every year. Well, folks, we had 2000
rigs running. Right now we have got a thousand. And we are
barely able to stay ahead of the game and to find each year
what we burn up last year. Natural gas is important in the
United States for two reasons: One is that it emits a lot less
carbon dioxide than any other fossil fuel when converted to
electricity; that is good; the second one is that it provides
much more nearly a quick fix for local energy problems, because
given the equipment, you can start up a large gas turbine
electric generating plant, in probably under a year, as opposed
to four or five years for a coal-fired plant and an infinity
currently for a nuclear plant.
So that is a powerful reason why we were interested in
being able to handle that natural gas. When we put those
additional one thousand rigs to work for us to add that ten
trillion cubic feet of gas, we have another subtlety in the
problem. Shell won't help us, Exxon won't help us, ARCO and
Amoco won't help us. All the majors have left the domestic
onshore. The problem, and the solution, is going to be almost
entirely with the small mom-and-pop operators, the independent
producers that are drilling with most of those thousand rigs--
using those thousand rigs currently.
And I heard a mention of the taxation problems. Is there
anything that can be done to help? Well, I will say that since
the solution for this problem, if it is going to be attacked
from a supply standpoint, is going to be the mom-and-pop
independent operators, that there is a world of difference in
how they need to operate in a tax system than the large
companies. The small companies are capital short. They need to
get their money back from each well they drill before they can
drill another one. Currently you have to wait 7 years to fully
recover your expenses, your general expenses from drilling a
well.
That doesn't bother Shell or Exxon, but it does bother
small companies. Something that allows small companies to
recover their cost, the same year they start recovering
revenue, would make a world of difference for little companies.
No less tax to the government, no greater benefit to the small
company, but cash flow, little companies live on cash flow.
At the end I have to agree, I would love to have the
problem solved with conservation, but there isn't a chance in
hell in the short term that can be anything but a partial help.
I would love to have gas brought in from Alaska, but you are
talking a decade from now. Short term, to keep our head above
water, we better be encouraging domestic drilling by small
companies in the United States. And if we do not, well, then,
our national planners better be looking at a new energy future
for the United States, one that doesn't count on natural gas.
Thank you, Madam Chairman.
[The prepared statement of Mr. Downey follows:]
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Mrs. Cubin. Thank you, Mr. Downey. The Chair now recognizes
Mr. Rehberg for an introduction.
Mr. Rehberg. Madam Chair, it gives me a great deal of
pleasure to introduce the next gentlemen to you, Bob Fisher
from my home State, the State of Montana is president of the
Montana Petroleum Organization, an organization I have had a
real close association with since my dad was the executive
director of the Montana Petroleum Association for many years.
He is the senior vice president and managing partner of Ballard
Petroleum holdings, a big name for a little company, and to
tell you how much I have appreciated and honor the Ballard
family, when I became lieutenant governor in 1991, I
immediately appointed Dave Ballard to the Oil and Gas
Commission in Montana, a position he still holds at the age of
44 and is chairman of that commission.
The most recent governor has reappointed him. And we just
look to this family and to this company for their leadership
within this arena that we are talking about today. Ballard
Petroleum employs 28 people and produces 1100 barrels of oil
per day. Bob is a professional geologist who, despite his
youthful appearance, has spent 25 years in Montana's oil and
gas business.
Bob, welcome to the Energy and Minerals Resources
Subcommittee. I really appreciate your taking the time. I know
how many barrels of oil it took to fly you out here.
STATEMENT OF ROBERT FISHER, PRESIDENT, MONTANA PETROLEUM
ASSOCIATION, VICE PRESIDENT, BALLARD PETROLEUM
Mr. Fisher. Thank you very much, Congressman Rehberg, thank
you for your introduction. Madam Chair, members of the
Committee, thank you for the introduction. I am here on behalf
of Montana Petroleum Association and some of the mom-and-pop
operations that Mr. Downey has just referred to. Independent
producers supply over half of the Nation's natural gas needs.
The company I helped establish, Ballard Petroleum is one of the
few independent producers remaining in Montana. Since there has
been so much addressed of the National Petroleum Council
findings, I think I will address a few other concerns and some
of the National Petroleum Council findings. Secretary Pena
noted in 1998 that for a secure energy future, government and
private sector decision makers need to be confident that
industry has the capability to meet potential significant
increases in future natural gas demand. That is a fairly
prophetic outlook by Mr. Pena.
It is important to note that at the same time, the Clinton
Administration was restricting air emissions from coal-fired
generation facilities, and we are restricting access to
government lands and access to the basic resources. These are
various forces that are put in motion, along with hundreds of
other small things we have done over 30 years that have
combined to create a very bad recipe for the long-term supply
problems.
In Montana, to give you an idea where we have been for the
last decade or so, we have had three major forest service
decisions, and I want to focus in on the forest service and
BLM. Those three major decisions started with the Beaverhead
National Forest in southwestern Montana. We started with about
a million six, 2.1 million acres of land, a million six of it
legally available. The games of explaining what is available
for lease. No surface occupancy was almost a half a million
acres. When they came out with their final EIS, a half a
million acres is put into NSO; 741,000 acres is put into
controlled surface use with timing limitations; and we had
415,000 acres, bless their heart, that were standard lease
terms, and it goes downhill from there.
The next forest service decision has 997,000 acres
available. Of that, 185,000 is put off discretionary
unavailable, legally unavailable is 144,000 for wilderness
areas. No surface occupancy takes up 384,000 or 45 percent of
the forest remaining. Controlled surface use and timing
limitations takes up another 25 percent, and bless their heart,
they gave us 24,000 acres out of a million acres as standard
lease terms. It gets worse. Lewis and Clark came along. The
decision there in 1997, we had 1.8 million acres of land
available to start with. 614,000 were the Bob Marshall
wilderness areas and I love them. They are a great wilderness,
but then the remaining 1.2 million acres, 356,000 no lease, the
entire Rocky Mountain area of the Lewis and Clark Forest.
363,000 acres, no surface occupancy. Controlled surface use and
timing limitations takes up another 400,000, and bless their
heart, standard lease terms, zero acres.
I am here to tell you that access in Montana has been
severely restricted and that the lands that were allowed to
explore on and to help this country meet its energy needs have
been severely restricted in Montana. As far as moving forward I
think there have been a lot of good comments today,
conservation being a very important issue, but I also think
attitudes need to change, across the country, we need to work
with the conservation groups, with environmentalists, with
preservationists, industry and State, local and Federal
governments. NIMBY has to leave. NOPE has to leave. And NOPE
means ``not on planet earth,'' ``not in my backyard.'' .
This whole attitude that this country needs energy, it is
important to our economy, it is important to our way of life
and our quality of life. And we all need to come to the table
and work together. And there are some very successful
cooperative efforts out there that we could look at and model
going forward. Some of these are known as the petroleum
showcase models that are out there in the Forest Service
presently.
I am a small operator and I can tell you this: these are
personal experiences, when you go to do business on Federal
lands, it takes 30 to 45 days to permit a well in Wyoming. I
can drill it in 8 days. Okay. That is a 9,000 foot materials
test. If I drill the same well which I did on Forest Service
administered grasslands in Wyoming, it took me 6-1/2 months to
get a permit. This country drills 24,000 wells a year. We have
need to go to a pace of approximately 40,000 wells a year. We
are short drilling rigs, but we also have to increase the pace.
Streamlining the permitting process, bringing all the factions
to the table when we are developing areas, is really critical
for our country to meet, just to arrest the decline of
production, let alone find new reserves.
So I know my time is short, but there are a lot of acres
that the Federal lands cover, 200-- over 252 million acres in
the west. Not all those acres are in productive areas. The
geologic basins that hold oil and gas are unique.
So are some of the environmental concerns cover very unique
areas, and sometimes we clash, but because we clash does not
mean that the oil and gas sector has to be locked out of those
areas. There are enough technologies out there now that we can
mitigate environmental concerns, and I would just as soon have
the Wilderness Society at the table with me, or the Nature
Conservancy at the table with me so I know what to protect when
I go into an area so I can develop those resources, because it
does nobody any good to be issued an APD, an approved permit
for drill, and then be served with a lawsuit and we begin the
litigation.
And there are enough examples throughout the Rockies where
litigation can last up to a decade for a well to be drilled.
And that serves nobody any good. I thank you for your time.
Mrs. Cubin. Thank you.
[The prepared statement of Mr. Fisher follows:]
Statement of Robert W. Fisher, President, Montana Petroleum
Association, and Senior Vice President/Managing Partner, Ballard
Petroleum Holdings, LLC
Madam Chairman, Members of the Committee, for the record my name is
Robert Fisher and I am the President of the Montana Petroleum
Association (MPA) and Managing Partner in a small independent
exploration and production company headquartered in Billings, Montana.
It is a distinct honor to be here today at the invitation of
Congressman Rehberg to represent the MPA and independent oil and gas
business at work in the Rocky Mountain States.
Independent producers supply over half of the Nation's natural gas
needs. The company I helped establish, Ballard Petroleum, is one of the
few independent producers remaining in the state of Montana. I am here
today to attempt to convey to this Committee the challenges facing all
exploration companies in their quest to help this Nation meet its
energy needs. Specifically, I would like to address some of the
findings of the 1999 National Petroleum Council report on natural gas,
entitled Meeting the Challenges of the Nation's Growing Natural Gas
Demand .
The 1999 NPC report was prepared at the request of then Secretary
of Energy, Federico Pena. Secretary Pena noted that, For a secure
energy future, government and private sector decisions makers need to
be confident that industry has the capability to meet potential
significant increases in future natural gas demand. A very prophetic
outlook indeed.
It is important to note that in 1998 the Clinton Administration was
restricting air emissions from coal-fired generation facilities forcing
this sector toward increased natural gas usage to meet new air quality
standards and at the same time fostering an environment in our Federal
land management agencies that continued to restrict access to
government lands and access to the basic resource. To put these various
forces in motion without consideration of the impact on the commodity
of natural gas was poor policy decisionmaking at best, and a recipe for
long term supply problems.
The 1999 NPC report identified several key factors influencing
natural gas supply and deliverability to this nation. These factors
include:
LAcess to resources and rights-of-way
LContinued technological advancements
LFinancial requirements for developing new supply and
infrastructure
LAvailability of skilled workers
LExpansion of the U.S. drilling fleet
LLead times for development
LChanging customer needs
In regards to the National Petroleum Council's report, I would like
to relate my company's specific interactions with various government
agencies and other examples of Montana's attempts to help meet this
Nation's energy needs.
First, a history of various Federal agency actions was prepared to
give this Committee a reference point from which to evaluate the
ability of the industry in Montana to help assist this Nation in the
development of energy resources and power generation.
In January 1994 the Beaverhead National Forest began scoping for a
new Environmental Impact Statement (EIS) for oil and gas leasing. In
February 1996 a Record of Decision (ROD) was issued concerning the
original 2,149,300 acres.
LLegally Unavailable 503,400 acres (23 percent)
LAdministratively Unavailable 9000 acres (<1 percent)
LAdministratively Available 1,636,900 acres (76 percent)
Of the Administratively Available acreage the following
designations were enacted:
LNo Surface Occupancy (NSO) 479,300 acres (22 percent)
LControlled Surface Use (CSU)/Timing Limitations (TL)
741,700 acres (35 percent)
LStandard Terms (STD)* 415,900 acres (19 percent)
*Bureau of Land Management (BLM) standard lease terms are
applicable.
In February 1996 a Record of Decision was issued by the Helena
National Forest covering approximately 997,700 acres. In July 1996 the
Forest Service promptly withdrew their 2/96 ROD because of other
reasonably foreseeable projects that had arisen since the EIS was
prepared. Subsequently, a new ROD was issued in May 1998 with the
following leasing availability designations:
LLegally Unavailable 144,500 acres (14.48 percent)
LAdministratively Available 853,200 acres (85.52 percent)
Of the Administratively Available acreage the following
designations were enacted:
LDiscretionary Unavailable 185,100 acres (18.55 percent)
LNo Surface Occupancy 384,700 acres (38.56 percent)
LControlled Surface Use and or Timing Limitations 258,700
acres (25.93 percent)
LStandard Terms Only 24,700 acres (2.48 percent)
Finally, in September 1997 a Record of Decision was issued for
1,862,453 acres in the Rocky Mountain Division and the Jefferson
Division of the Lewis and Clark National Forest with the following
leasing availability designations:
LLegally Unavailable 614,458 acres (33 percent)
LAdministratively Available 1,247,995 acres (67 percent)
Of the Administratively Available lands the following designations
were enacted:
LNo Lease 356,111 acres (19.12 percent)
LNo Surface Occupancy 363,033 acres (19.49 percent)
LControlled Surface use 393,793 acres (21.14 percent)
LControlled Surface Use and or Timing Limitations 135,058
acres (7.25 percent)
LStandard Lease Terms 0 acres (0 percent)
It is important to note that for the Rocky Mountain Division no
lands were offered for lease. Only certain lands will be offered for
lease in Central Montana in the Jefferson Division of the Lewis and
Clark National Forest.
The summary of these three combined Forest Service decisions is as
follows:
LTotal Forest Service Acres 5,009,453 acres
Legally Unavailable 1,262,358 acres (25.2 percent)
LLegally Available 3,747,095 acres (74.8 percent)
LAdministratively/Discretionary Unavailable 194,100
acres (3.87 percent)
LNo Lease 356,111 acres (7.10 percent)
LNo Surface Occupancy 1,227,033 acres (24.15 percent)
LControlled Surface Use and or Timing Limitations
1,529,251 acres (30.53 percent)
LStandard Lease Terms 440,600 acres* (8.80 percent)
*94 percent of these available acres are in the Beaverhead
National Forest These combined decisions have potentially cost the
State of Montana 10 to 30 TCF in natural gas reserves. This equates to
tens of billions in revenues for local and state government.
In October 1997 Mike Dombeck, Head of the U.S. Forest Service,
issued a memo to all employees of the USFS stating the following:
Recently, Forest Supervisor Gloria Flora and the staff of the Lewis
and Clark National Forest made a decision to not allow any further
exploration for oil and gas on the Rocky Mountain Front. The decision
was widely and positively covered by the media, including several
national outlets. This decision was based primarily on the will of the
people who responded to the draft EIS and preferred alternative. If
collaborative stewardship is to be a cornerstone of our working
relationship with the American people, we must, as the Lewis and Clark
National Forest has done, demonstrate that the will of all people will
be one of our key bases for decisions, along with sound science and
resource objectives. This is true conservation leadership.
When you have people in the highest positions of government
praising their employees for eliminating access and locking up the
resource base then you create an environment that fosters opposition to
Congressionally mandated Multiple-Use land policies. The greatest
concern of our industry following these decisions was the copycat
phenomenon that would ensue following, in particular, the No-Lease
Decision of the Lewis and Clark Forest. This perceived threat to
responsible resource development and to basic access is now coming to
fruition in the State of Wyoming in the recently released Preferred
Alternative for the Bridger-Teton Forest. The Forest Service decision
to adopt a No Lease policy even after a 10-year process to prepare the
Bridger-Teton Land and Resource Management Plan is in total disregard
for the science and detailed planning that went into the document. This
latest decision by the Forest Service bypasses Congressional directives
for multiple-use and places another 370,000 acres in a de-facto
wilderness classification and more resources off limits.
Following these decisions, of course, was the designation of
Monument status for almost one-half million acres along the Upper
Missouri River and the Clinton Administration's Roadless Initiative
that locked up over 6 million acres of Forest Service land in Montana.
Attitudes must change!
LNIMBY: Not in my back yard
LBANANA: Build Absolutely Nothing Anywhere Near Anyone
LNOPE: Not On Planet Earth
Our country cannot afford the radical swings of policy that can
adversely effect our environment or our national security. Responsible
development with utmost care for the environment is not mutually
exclusive!
The problem facing this industry and this Nation is reasonable
access to resources! The National Petroleum Council went further in its
recommendations by stating that The Council believes that unprecedented
and cooperative effort among industry, government, and other
stakeholders will be required to develop production from new and
existing fields and build infrastructure at sufficient rates to meet
the high level of demand indicated in this study.
Specific examples of the regulatory burden and inefficiencies are
everywhere. As an independent exploration company Ballard Petroleum
(BPL) has dealt with many of the Regional BLM and Forest Service
offices throughout the western U.S.
In the Manti-LaSal Forest of Utah it took BPL 10 months to receive
a permit to drill a single well. The well was drilled in two weeks time
on Forest Service lands and subsequently plugged. We then left the area
for the winter months and came back to reclaim the well pad per USFS
regulations. The USFS intervened and requested changes to the
previously approved USFS reclamation plan. These changes then had to be
re-submitted and re-approved. This process took the entire summer and
early fall period. The USFS instructed reclamation to begin just prior
to the fall snow period. BPL began reclamation knowing that there was a
significant chance of snow and that operations would be forced to stop
due to heavy snows. The snow came, we were forced to leave and then
subsequently served with a non-compliance letter for not reclaiming the
well pad in a timely manner. If BPL had been left alone, BPL would have
properly reclaimed the location in June and July of 2000. Instead, the
USFS bureaucracy cost BPL the entire summer period of decent working
weather due to the USFS mandated changes to a previously approved USFS
reclamation plan!
Another example of stifling regulatory oversight experienced by BPL
was in the Powder River Basin of Wyoming in 1999/2000. In order to
permit a single well on the USFS administered Thunder Basin Grasslands
it took BPL 6 months to receive an approved permit to drill. It took 8
days to drill the well.
Generally speaking, when operating in the Powder River Basin of
Wyoming, it takes one week to two weeks to drill 5000 to 12000 feet in
depth. It takes the Forest Service a minimum of 6 months to permit a
single well as opposed to 30-45 days for the BLM to permit the same.
The industry in the United States needs to drill thousands of new wells
every year to arrest the natural decline of known resources and to
develop new reserves to meet this Nation's energy needs. If you examine
production volumes in this country you will find that all producing
areas are declining in production except for one area in Wyoming, the
Powder River Basin.
In the Rocky Mountain States of Montana, Wyoming, Colorado and Utah
there are 44,655,799 acres of Forest Service lands and 45,771,563
available acres of BLM lands. (1995 statistics) The National Petroleum
Council report identifies additional resources by region in excess of
300 TCF in the Rocky Mountain Foreland Basins and Overthrust Province.
Continued restriction of access to these resource areas will only drive
investment away. Our Federal, state and local economies will continue
to lose revenues. Our nation will continue to lose good paying natural
resource jobs and will become even more dependent on imports of all
resources, not just natural gas and oil.
Montana and the Western States have a wealth of natural resources
that can be responsibly developed. Eastern Montana can supply the
Nation with super-compliant low sulphur coal. Coalbed Natural Gas is
just beginning to be developed in Montana and could supply several TCF
for future energy needs. Montana's Overthrust province may hold in
excess of 20 TCF but is currently out of reach because of recent USFS
decisions. The representatives for the western States need to take a
much more aggressive role in Federal lands decisions or their state
economies will suffer!
The Oil and Gas Industry can address the concerns voiced by the
National Petroleum Council pertaining to investment, drilling fleet
expansion, technological advancement, training skilled workers and
contracting lead times for development.
Our industry cannot solve government lands access issues without
unprecedented cooperation from our government! Federal surface
ownership in the western U.S. totals more than 252 million acres. The
Forest Service needs to have a specific mandate from Congress that
directs that prudent, environmentally sound resource development needs
to be considered on an equal footing with current environmental and
sense of place issues that are dominating the decision processes.
Public land managers of the Forest Service are ignoring Congressional
mandate that directs the Forest Service to support, facilitate, and
administer the orderly exploration, development, and production of
mineral and energy resources on National Forest System lands to help
meet the present and future needs of the nation.
There are those in the government and the press that are very quick
to point the accusatory finger of blame at industry, but please examine
the facts and your sacrosanct positions. The government, in aggregate,
is the largest natural gas producer in our country and therefore
benefits enormously from this resource base. At the same time the
government is further restricting access to the resource base at an
alarming pace, both onshore and offshore through moratorium, No Surface
Occupancy, No Lease declarations and regulatory overlap of Timing
Limitations and Controlled Surface Use stipulations.
The greatest impediment to securing our Nation's natural gas
resources for energy generation is our own Federal Government! Since
the early 1980's there has been an enormous amount of discussion/
reporting on the ever-increasing volumes of imports and potential
energy shortages. Well, the energy shortages are here (California and
the Northwest United States), imports are at all time highs and
government continues to reduce access to oil and gas minerals on public
lands. Our country has just experienced something that many of us only
thought happened in Third World nations and portions of the Former
Soviet Union rolling black outs and power shortages. With snow pack and
moisture levels at record lows in the Northwest and low levels of
natural gas in storage the individual consumer and all of business has
not seen the end of the energy shortages and high power bills!
As a Nation it is easy to sit back and enjoy low inflation and a
vibrant economy while putting off the nagging question of energy policy
when the raw commodity is cheap. Now that energy has everyone's
attention our Nation rushes to govern, as more often than naught, by
crisis. My brother served in Desert Storm, for cheap oil. He came
home--others did not! Leadership demands that this Nation describe a
course that best meets the demand for energy, in high or low commodity
price environments, that protects our citizenry and arguably the
strongest economy on earth.
If you can't access the basic resources don't be surprised when you
reach for the light switch and there is no light!
______
[Attachments to Mr. Fisher's statement follow:]
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Mrs. Cubin. The Chair now recognizes Mr. David Alberswerth.
STATEMENT OF DAVID ALBERSWERTH, DIRECTOR, BUREAU OF LAND
MANAGEMENT PROGRAM, THE WILDERNESS SOCIETY
Mr. Alberswerth. Thank you, Madam Chairman. Before I start,
I couldn't help but notice that the staff has identified me
that I am with the BLM. And I can assure you that the current
management at the BLM would be dismayed to hear this. Thank you
very much for the opportunity to testify on behalf of the
Wilderness Society today on this important topic of the public
lands' contribution to domestic natural gas supplies.
My name is David Alberswerth and I am the director of the
Wilderness Society's Bureau of Land Management Program. Prior
to joining the Wilderness Society staff last year, I served the
Clinton Administration within the Department of Interior as
special assistant and senior advisor to the Assistant Secretary
for Land and Minerals Management. It is the Wilderness
Society's hope that in exercising its oversight role regarding
this important matter, the Subcommittee will seek to be as
objective as possible in reviewing the extent of natural
resources on our public lands and the environmental values that
also reside on those lands that can be placed at risk by
natural gas exploration and development activities.
For although natural gas extracted from our public lands is
an important component of our Nation's well being, the
environmental, wildlife, watershed, and wilderness values of
those lands are also vitally important to Americans. Some
suggest that these two interests are incompatible, or that we
cannot meet our energy needs without sacrificing some of our
most precious lands. The Wilderness Society believes that we
can meet our energy needs without sacrificing our most
treasured natural landscapes. In fact, America has a proud
tradition of combining a strong economy with strong
environmental values, and we urge the Subcommittee to be guided
by both goals. A review of some pertinent facts, which I will
set forth below, demonstrates clearly that this is possible.
One fact of central importance that I wish to draw to the
Subcommittee's attention is that the vast majority of public
lands managed by the BLM in the overthrust belt States are
presently open to leasing exploration and development by the
oil and gas industry. In fact, information presented to the
Assistant Secretary for Land and Minerals Management by the BLM
in 1995 indicated that over 95 percent of BLM lands in those
states, including split estate State lands, were available for
oil and gas leasing.
Although there have been some changes in the land status of
some of the lands indicated on the attachment to my testimony,
the data here is still essentially valid, and I would suggest
it would be in the Subcommittee's interest to request an update
of that data from the BLM for the Subcommittee's consideration
of next week's hearing on the same topic. In addition, the
Subcommittee should ask the Interior Department for its report
to Vice President Cheney's energy policy task force, which I
understand is being finalized this week and will be submitted
to the task force.
I think, given the Subcommittee's charter here for
oversight of Federal land policies and their relationship to
energy development, that the direction that the Vice
President's task force is headed is of vital importance to this
Committee. It is also relevant to any discussion of our public
land energy policies to understand that the BLM has been
carrying out a robust onshore oil and gas leasing program for
the past decade. For example, the Clinton Administration issued
oil and gas leases on more than 26 million acres of public
lands during the last 8 years.
Mr. Alberswerth. There are nearly 50,000 producing oil and
gas wells on the public lands. Thousands of new drilling
permits have been issued during the past 8 years, 3,400 by the
BLM in fiscal year 2000 alone. Production of natural gas from
onshore and offshore Federal lands has steadily increased from
1991 to the present.
Now, criticism by some that in recent years too much public
land has been made unavailable for oil and gas activities is
simply not supported by the facts. Upon close examination,
industry criticism of lack of access to onshore public lands
really falls into two categories: Lands that are off limits
entirely to oil and gas development and lands available for
development if the industry takes special care of the
environment. The former areas include wilderness areas,
wilderness study areas and areas such as steep slopes or areas
where other mineral activities are taking place; in other
words, places where oil and gas activities could pose extreme
environmental or safety hazards or be incompatible with other
values. Currently such areas comprise roughly 5 percent of BLM
managed lands in the five States.
The latter category often encompasses areas where evidence
indicates the presence of sensitive wildlife habitat such as
elk calving areas or sage grouse leks where operations at
certain times of the year could pose severe threats to
wildlife. The basic types of stipulations imposed by the BLM
are described in more detail in my written statement.
Although industry public relations campaigns frequently
emphasize the benign nature of contemporary exploration and
development practices and technologies, when required by the
BLM to utilize these technologies to minimize environmental
impacts the industry is reluctant to do so, as we have been
hearing here today. In fact, in testimony delivered before the
Full Committee last week, the Independent Petroleum Association
of the Mountain States specifically singled out protection of
elk habitat as an example of an unnecessary environmental
precaution. The witness' candor was refreshing. Clearly the oil
and gas industry cares little for the concerns shared by most
Americans that environmental values on our public lands be
protected. However, the purpose of these stipulations which the
industry disdains is simply to ensure that these advanced
technologies touted elsewhere are used to minimize the impact
of energy production on environmentally sensitive public lands.
In conclusion, I had planned to talk about everybody's
favorite natural gas report here today. I hope everybody would
agree on the basic data in there. Our conclusion from reviewing
that report is that there is about a 40-year supply of natural
gas without having to go into the sensitive areas that the
industry is complaining about that they would like to go into.
In any event, in conclusion, if we are careful we can
pursue energy policies that allow and even encourage increased
natural gas use while protecting sensitive public lands and the
environmental values that all Americans have a right to have
protected, but our policies must also recognize that there are
adverse impacts to natural gas development and valid safety
concerns with natural gas distribution issues that should not
be swept under the carpet in a headlong drilling and
development frenzy.
Thank you very much.
[The prepared statement of Mr. Alberswerth
follows:]
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Mrs. Cubin. Thank you, Mr. Alberswerth, and thank all of
you for your testimony.
My first question will be of Mr. Downey. I understand that
you have some geologic experience on the North Slope of Alaska.
Can you describe for me, please, how much gas Prudhoe Bay and
satellite fields could provide to the lower 48 States and how
long it would take to get that down?
Mr. Downey. Sure, I think the key thing is that in Prudhoe
Bay, the 30 or 40 trillion cubic feet that are there are not
available at all for going to a pipeline, not for many years,
and the reason is simple physics. It is the gas at Prudhoe Bay
that moves the oil out so that it flows to the pipeline. As
soon as you take the gas out, the oil stops flowing. So the
only time that any reasonable person would start tapping into
the gas at Prudhoe Bay is long down the road when we run out of
oil in Prudhoe Bay. All the rest is wishful thinking.
Mrs. Cubin. Can you identify for me some of the high gas
potential areas in the United States, the lower 48, that have
serious access problems?
Mr. Downey. I would defer to some of the other people who
have had firsthand experience as to access, as I have never
myself permitted a well in those areas. I would say that I
think the Rocky Mountains is going to be one of the great gas
provinces of the United States. We had a wonderful technical
conference a few months ago in which people were pointing out
an entirely new development of gas, and of a gas accumulation
that is largely restricted to the Rocky Mountains, and I think
you all are going to be a major exporter of gas to save
California in the years to come.
Mrs. Cubin. Could you explain to me why Mexico isn't a
potential source of natural gas?
Mr. Downey. They are a user. We supply gas to them, about,
I think, 140 million cubic feet of gas per day. They need all
they can get, and they are buying from us. Not much of a chance
they will turn around and stop buying and start exporting.
Mrs. Cubin. One last question, Mr. Downey, if you don't
mind. Is there any gas potential in the OCS off our
northeastern United States that are akin to the Sable Island
discovery and project off of Nova Scotia that Mr. Markey
referred to?
Mr. Downey. Sure, there is potential, because we haven't
been allowed to explore there, but all you have to do is go
across the State line into Canada. They are finding all sorts
of gas in that same setting and, thanks to Canada, they are
keeping northeast United States warm with offshore Canadian gas
while northeastern states refuse to allow it to be drilled and
produced from their own offshore. I hope Canada stays friendly.
Mrs. Cubin. Isn't that the truth? It really makes you
wonder, doesn't it?
My next question, I guess, will be for Mr. Alberswerth. You
talk about the 95 percent of BLM land that is available for oil
and gas leasing. Does that include land that has no prospects
at all for oil and gas production?
Mr. Alberswerth. That 95 percent, Madam Chairman, is within
the overthrust belt States of Montana, New Mexico, Colorado,
Utah and Wyoming, and the information that I presented was
based on information developed by the BLM in response to a
question as to what the potential availability of oil and gas
resources were in those States. It is probably not as precise
as one might want. I am sure that there are lands, you know,
incorporated in that analysis by the BLM that may not have oil
and gas potential, but I couldn't tell you where they are. It
would be a good question to perhaps ask the BLM, you know, if
they could do a better job of disaggregating that information.
Mrs. Cubin. Well, hopefully in the study that is being done
by the USGS, or will be soon done by the USGS, they can get
that information. I think all of the information that we need
is really out there. It is just a matter of someone bringing it
all together, focusing on it and applying it to reality.
Mr. Alberswerth. That is right, and I want to make clear,
though, it doesn't include States like Idaho and Nevada, for
example.
Mrs. Cubin. It did not?
Mr. Alberswerth. No, ma'am, it does not include those
States which are generally considered to not have a great deal
of oil and gas potential. So we had asked information from
States where there was an ongoing oil and gas program.
Mrs. Cubin. As you know, the subsurface of the U.S. Forest
Service land is managed by the BLM, but BLM will not lease any
Forest Service land for oil and gas without Forest Service
approval, is that correct?
Mr. Alberswerth. That is correct, and that 95 percent
figure, I just want to be very clear about this, does not
include Federal oil and gas on national forest lands. It is
only BLM-managed surface and subsurface State or Federal
minerals under privately owned lands. As you know, in your
State of Wyoming there is a lot of split estate land, so it
does not include minerals on national forests.
Mrs. Cubin. Is the 95 percent adjusted for areas like the
BLM lands in southwest Wyoming where layering of multiple
overlapping restrictions of wildlife protection leaves such a
small window of availability of time and so for all practical
purposes they can't drill because the time is too short?
Mr. Alberswerth. Well, see that is a dispute here. I
mean--.
Mrs. Cubin. Pardon me.
Mr. Alberswerth. That is a dispute.
Mrs. Cubin. Okay.
Mr. Alberswerth. The 95 percent are lands that are
available for oil and gas leasing and development, much of
which is in fact subject to the sorts of environmental
protections that members of the previous panel and others have
objected to. For example, the seasonal elk habitat, no surface
occupancy stipulation there is correct. In our view, those are
appropriate protections that have been proposed.
Mrs. Cubin. Sure.
Mr. Alberswerth. In an attempt by the BLM to try to reach
this balance, you know, where you allow oil and gas activities
but they are trying to protect seasonal elk habitat or other
types of wildlife habitat.
Mrs. Cubin. I want to look at that language again just a
second. 95 percent of BLM land is available for oil and gas
leasing, and you are saying that doesn't count any of the BLM
land in Idaho. Is that what you said?
Mr. Alberswerth. Yes, the 95 percent figure, if you look
carefully at the attachments, is in the States of Montana,
Wyoming, New Mexico, Utah and--.
Mrs. Cubin. And another one.
Mr. Alberswerth. Colorado, excuse me. That is right. It
does not include any other Western State and I should add, too,
you know, there is an oil and gas program that is fairly
significant in the State of California, but this whole debate
about restrictions seems to be centered in overthrust belt
States. So that is where that information is concentrated.
Mrs. Cubin. But all of those nine, that 95 percent that you
are talking about has restrictions, I don't mean every single
square foot has restrictions but across the 95 percent there
are other restrictions in place due to regulations, rules,
things other than land designations, right?
Mr. Alberswerth. I would assume so.
Mrs. Cubin. And land designations, wilderness study areas,
for example, would be included in that or not?
Mr. Alberswerth. No, ma'am. My understanding is, and it may
be worth asking the BLM about this, that the 95 percent
excludes wilderness study areas. In other words, wilderness
study areas are in the 5 percent where oil and gas leasing is
not allowed.
Mrs. Cubin. And you know, I think that the 95 percent
figure can be very misleading because it is like I said with
the coal in Black Hills National Forest, if you do drill on 95
percent of it or you can mine in 95 percent of it but you can't
mine where the coal is, it doesn't do you much good, and I
think that is the claim a lot of people have made in a lot of
the objections I have personally heard.
Now a question for Mr. Fisher. Can you tell me your
comparative experiences in permitting wells between the Forest
Service, BLM and various State Oil and Gas Conservation
Commissions? And the reason I ask this is because I am curious
about a bill--not curious about, obviously I think it is a good
idea or I wouldn't be writing a bill about it, but allowing the
State Conservation Commissions to administer programs
permitting wells. So just give me an idea of your experiences
in dealing with those regulatory agencies.
Mr. Fisher. From a standpoint of the Forest Service,
generally the rules that are in place right now prohibit
obtaining a drilling permit in less than 6 months. They can
take upwards, I believe, to 10 months and my personal
experience is, drilling a 9,000 foot well in the Powder River
Basin on grasslands administered by the Forest Service, 6-1/2
months to get a permit.
Drilling a 3,500-foot overthrust test in the Manti-La Sal
Forest in Utah, 10 months for a two-acre disturbance.
Mrs. Cubin. Forest Service.
Mr. Fisher. Forest Service, Manti-La Sal. I spent $700,000
on a rig and the well cost me $400,000 to drill. I drilled the
well in two weeks. There are some very disproportionate costs
associated with conducting business on the Forest Service. When
we get to the BLM, the BLM usually takes 30 to 45 days to
process an APD. They are quite efficient, I think. They do a
good job at it. When they have concerns, you have longer
periods of time to get an APD, specific wildlife concerns or
something that is special to or unique to an area, and those
are understandable and you have to mitigate them.
Mrs. Cubin. Is that in the Powder River Basin that you are
speaking of?
Mr. Fisher. I have permitted BLM in the Powder and down in
Colorado, Utah, Montana. All four States I have done business
in.
Mrs. Cubin. Okay.
Mr. Fisher. The BLM is fairly efficient at it and you have
more personnel within that agency that have, or are ex-oil
field if you will. They have some knowledge of the oil and gas
industry. What I find, there is a very large gap between the
knowledge base in the Forest Service in oil and gas operations
and in the BLM, and that large gap I think has served the
industry very poorly in the last decade on a lot of decisions
that have been made concerning Forest Service lands. We have
done a lot of effort to try to educate the Forest Service and,
to put it bluntly, I think we are wholly ignored in the State
of Montana when it comes to current technologies and smaller
footprint technologies.
Mrs. Cubin. What do you mean by wholly ignored?
Mr. Fisher. We bring the data to them from service
companies, from drilling contractors, from our known
experience, explaining closed mud systems, explaining
directional drilling multiple wells from a single pad, what our
limitations are. In overthrust provinces you are not going to
reach out much more than a mile. There are technologies now
that could reach up to five miles, but you are in soft
sediment, you are in offshore type situations. Alaska is
different, but they can reach upwards of five miles in Alaska.
Not in the lower 48. We do not have the tools, we do not have
the technology, and it is much more complex geology.
To the extent that I gave a lot of testimony on the Lewis
and Clark, that I participated in the Helena National Forest
debate and the results of those, I think when we talk about
pendulums swinging one way or the other, whether or not the
environment is the driving force in the decision process or the
resource is the driving force, if the pendulum swings in either
direction it is bad because something is ignored, and I am here
to tell you in the State of Montana the resource development on
Forest Service lands was wholly ignored in favor of environment
exclusively, and those are the results of the decisions. So--.
Mrs. Cubin. Do you think there is a significant difference
in the environmental protection outcomes between those
different agencies, including the State ConservationCommission?
Mr. Fisher. I don't think the State does as good a job, if
you will. If I permit on fee minerals, if I permit on State,
the State of Montana has some fairly strict application of
environmental laws through NEPA standards which are much like
NEPA and so that permitting on State lands can be quite
difficult if there are environmental concerns, but generally
State lands are not in uniquely sensitive environments. Now
there some along the Rocky Mountain front and other areas
without a doubt.
Mrs. Cubin. So between Forest Service and BLM, is there a
significant difference between them in the resulting
environmental protection that comes from those, you know, that
they put out?
Mr. Fisher. I don't believe so. The standards are
relatively the same. I think the Forest Service a lot of times
has different environments to deal with than the BLM. But then
the BLM comes in after the Forest Service makes the decision
and then administers the APD and you go through an entire other
round of environmental analysis through the APD process.
Mrs. Cubin. Does one or the other have a higher standard, I
guess is what I am trying to say.
Mr. Fisher. I would say that the Forest Service without a
doubt has a higher standard to meet for environmental
protection.
Mrs. Cubin. Yes, that was the question, the way I should
have put it in the first place. Well, I would like to thank you
gentlemen for being here, taking your time today and would ask
that you would respond to any questions that the Subcommittee
members would like to ask but weren't able to do that. So thank
you very much.
The Subcommittee on Minerals and Energy is now adjourned.
[Whereupon, at 4:17 p.m., the Subcommittee was adjourned.]
[Additional material supplied for the record follows:]
[A statement submitted for the record by Red Cavaney,
President and CEO, The American Petroleum Institute, follows:]
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