Report on the relationship between the offshore petroleum industries and the U.S. Government

[From the U.S. Government Printing Office, www.gpo.gov]

Coastal Zone
Information
Cente~-

The Petroleum Panel of the
Ocean Science and Technology Advisory Committee of the
National Security Industrial Association

-.~~-'~ ~ ~Report on the Relationship
Between the Offshore Petroleum Industries
and the U. S. Government

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xib~~ ~NATIONAL SECURITY INDUSTRIAL ASSOCIATION
Union Trust Building
15th and H Streets, N.W., Suite 700
Washington, D. C. 20005

TN
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jibf~~~~~~~~ 1974 INCO ASTAL C[WE
1974

PROPERTY OF TiE
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The Petroleum Panel of the
Ocean Science and Technology Advisory Committee of the
National Security Industrial Association

Report on the Relationship
Between the Offshore Petroleum Industries
and the U. S. Government

Property of CSC LUbrary'

U. S DEPARTMENT OF COMMERCE NOAA
COASTAl SERVICES CENTER
2234 SOUTH HOBSON AVENUE
CHARLESTON, SC 29405-2413

,- NATIONAL SECURITY INDUSTRIAL ASSOCIATION
Union Trust Building
r e-, 15th and H Streets, N.W., Suite 700
.b5 rt- Washington, D. C. 20005

C{Bl'ST . ZONE
IA N MA10i N CENTER
0

NATIONAL SECURITY INDUSTRIAL ASSOCIATION

Petroleum Panel
of the
Ocean Science and Technology Advisory Committee

Mr. Robert W. Bybee Comdr. John H. Jorgenson USN (Ret.)
CHAIRMAN, PETROLEUM PANEL National Security Industrial Assoc.
Exxon Company, USA (Executive Secretary)

Mr. Bill C. Anderson Mr. Thomas H. Montgomery
Atlantic Richfield Company Phillips Petroleum Company

Dr. F. Gilman Blake Mr. Eugene A. Moores
National Science Foundation Sun Oil Company

Dr. Kenneth A. Blenkarn Mr. L. A. Rupp
Amoco Production Company Mobil Oil Corporation

Mr. V. C. Eissler Mr. John E. Sherborne
Continental Oil Company Union Research Center

Mr. Ronald L. Geer Mr. J. L. Sleeper, Jr.
Shell Oil Company Texaco, Incorporated

Mr. Mike K. Horn Mr. Larry Thrasher
Cities Service Oil Company Chevron Oil Field Research Company

S ~~~~~~~~~~~PREFACE

The attached report by the Petroleum Panel of the Ocean Science

and Technology Advisory Committee of the National Security Industrial

Association is in response to numerous requests from several federal

offices, functions, and individuals desiring industry views on federal

marine goals, programs, and activities.

The precipitous cutoff of crude and petroleum product imports to

the United States from the Middle East due to the October 1973 Arab-

Israeli conflict will prove to be a momentous event in our history. At

the time this report was written, conditions were in such a state of

flux that little could be said about the short-range energy supply situation.

However, there is no question that with or without embargos the United

States faces a difficult energy supply picture for the next decade.

Whatever else evolves, the Arab action will do a great deal to increase

the awareness of the U.S. citizen of the great significance of energy and

particularly petroleum to his well being.

EXE CUTIVE SUMMARY

Summary

For the next decade, perhaps the most important priority facing our

nation is the provision of a reliable supply of energy. For at lea-st this

period of time, the burden of supply will fall largely on oil and gas.

The greatest U. S. potential for additional petroleum reserves lie offshore.

Demand for energy not met by increased domestic supplies must either be

satisfied by imports or go unfulfilled. Marine transportation and

associated terminaling facilities for petroleum produced either offshore or

imported are vital links in our energy outlook. Even with early adoption

of a sound national energy policy with means to implement it, most likely

some of our energy needs will not be met.

All segments of our society must work effectively together if our country is

to develop and maintain even an adequate energy self-sufficiency in a

reasonable period of time. A closer relationship between industry and

government must be developed so that the respective proper roles and

strengths of each can be maximized. Government can best provide national

direction including the articulation of national goals and priorities,

providing legal safeguards, encouraging economic growth, and fostering an

informed and unbiased political climate. Government and industry should

each develop needed technical information where it is most effectively,

appropriately, or economically done by them. Government should serve to

collect and make available to users such information as is essential for

achieving national goals.

The offshore petroleum industry feels that the government's primary

emphasis should be on activities traditionally performed for the benefit

of broadly based user groups. Commensurate with this philosophy, there are

ocean activities which the government performs or could perform which will

greatly assist the petroleum industry in finding and producing the additional

domestic petroleum so greatly needed by this country. Many of these activities

are closely aligned with offshore lease sales and when appropriate, should be

conducted as far in advance of pending lease sales as possible. These lease

sales should be on a firm and regular schedule. The scheduling of sale areas

under consideration should reflect technological, economic, social, and

environmental factors.

Recommendations

The federal government activities which the Petroleum Panel feels most

appropriate and important are listed below. Due to many factors, they are

not listed in any particular order of priority.

1. Determine the fate and effects of oil in the marine environment.

Special emphasis should be placed on the long-term sublethal effects

of low level petroleum hydrocarbons and also the establishment of

standards for equipment, techniques, and parameters or items for

measurement.

2. Assist the states in coastal zone planning and management to assure

the accommodation of offshore and onshore petroleum facilities to

meet regional and national needs.

3. Improve our knowledge of the weather and marine conditions in

frontier petroleum development areas.

4. Improve bathymetry and surface geologic mapping of the sea floor

where needed. Make broad, basin-type mineral resource potential

studies on a regional basis.

5. Measure and locate the mean low water line along the shore.

Charting offshore areas with geodetic markers. Aid mariners

in the establishment of precise positioning capability.

6. Intensify research and development on weather modification

with particular emphasis on hurricanes.

0 ~~~~~~~~~TABLE OF CONTENTS

CHAPTER PAGE

0 ~~~~~PREFACE........................

SUMMARY AND RECOMMENDATIONS . ... ... ...

I.ENERGY OUTLOOK .1...........

0 ~~~~~~Resources and Reserves .1.........

Availability. ......................2

Supply and Demand Balance................. 3

0 ~~~~~~Demand. .........................4

supply . .........................5

Oil Supply........................ 5

0 ~~~~~~Natural Gas Supply. ...................7

Causes of the Energy Shortfall.............. 8

II. PETROLEUM TRANSPORT ON THE OCEANS. .............10

0 ~~~~~~Crude Oil Imports. ....................10

Liquefied Natural Gas. ..................12

III. THE RESPECTIVE ROLES OF GOVERNMENT AND INDUSTRY. ......15

Development of Required Technical Information. ......15

Scheduling of Lease Sales. ................16

Consolidation of Federal Energy Activities. .......17

S ~~~~~~Priorities. .......................18

IV. RECOMMENDATIONS CONCERNING INDUSTRY AND GOVERNMENT
ACTIVITIES IN THE MARINE ENVIRONMENT. ..........20

* ~~~~~~Activities Considered Appropriate and Important. .....21

Activities Considered to be of Less Importance, of
Marginal Value, orl~ore Appropriately Performed
by Others . . .* ..... . . . . . . . . . . . 30

LIST OF FIGURES

FIGURE

* ~~~1. United States Fossil Energy Resources (1973)

2. Projected U. S. Petroleum Supply and Demand

3. Primary Energy Consumption by Sectors

* ~~~4. Comparison of United States Crude Oil Resources,
Reserves, and Production

5. Estimated U. S. Demand and Supply, Natural Gas

6. Comparison of United States Natural Gas Resources,
* ~~~~~Reserves, and Production

7. Projected Crude Oil Import Requirements

CHAPTER I

ENERGY OUTLOOK

* ~~~~For the next decade, perhaps the most important priority facing

our nation is the provision of a reliable supply of energy. It is clear

that for this period the burden of supply will fall on the fossil fuels

* ~~~and to a great extent on petroleum--oil and natural gas. For the long

term we do have adequate resources to satisfy most of our fundamental

needs. However, for the short-term numerous difficulties must be resolved

* ~~~if we are to satisfactorily meet our requirements. Certain remedies for

the resolution of these difficulties are apparent and have been variously

proposed by Congress, the President, energy companies, and others. Nonetheless

* ~~~time is definitely not on our side, and even if a sound national energy

policy is adopted soon with viable means to implement it, there is great

likelihood that some of our needs will not be met.

* ~~~~The recent petroleum embargo placed upon the United States as a result

of the Arab-Israeli conflict merely catapulted forward the point in time when

this nation recognized it must address itself to the question of dependence

* ~~~on foreign sources of energy. While severe dislocations and diseconomies

will be borne by our country as a result of this embargo, the immediate

severity of the problem will be less now than if the embargo had occurred

* ~~~at a later date.

Resources and Reserves

The fossil fuel resources and reserves of the United States are presented

in Figure 1. To make comparison easy, they have been expressed in terms of

quadrillion BTU energy units. There is much confusion about the difference

between resources and reserves, and these terms are often used interchangeably

by individuals who do not recognize the difference between them. Resources

are the total amount of a material known to exist or which are authoritatively

estimated to exist. Proven reserves are that portion of the resource which

can be produced by today's technology and at today's prices. Thus, the

amount of reserves available is determined by technological, environmental,

economic, and often political factors. On the other hand, the resource, e.g.,

the amount of oil and gas in place, does not change but the amount we have

discovered at any one time changes.

It can be seen from the chart that by far the largest amount of

fossil fuel resources enjoyed by the United States is coal. The 74,400

quadrillion BTUs are equivalent to 3.2 trillion tons. The reserves represent

about one-twentieth of the resource--enough to last about 250 years at present

usage rates.

Oil shale is the next most abundant fossil energy resource amounting to

10,000 quadrillion BTUs or the equivalent of 1.78 trillion barrels of oil.

Although currently we have the technology to produce 54 billion barrels, i.e.,

3 percent of this amount, no reserves are shown because historic domestic

oil prices have not justified the necessary investment. It can be seen also

that the United States has substantial resources of oil and natural gas.

These will be discussed more fully later.

Availability

The fact that a given amount of reserves is known to exist does not

mean that they are instantly available. There is for each type of energy

resource a limiting rate of availability governed by many factors. For example,

any given petroleum field may take from 20 to 40 or more years to recover

the reserves. Significant production from a new field may take from 7 to

10 years after its discovery.

Supply and Demand Balance

* ~~~~Until recently, most energy studies concentrated on juggling the types,

origin, and percents of various primary fossil fuel energy forms necessary

to meet the nation's projected energy demands. The general consensus was

* ~~that total unrestrained energy demand would approximately double between

1970 and 1985, or to approximately 125 quadrillion BTUs per year. If the

total demand were to be supplied by oil alone, it would require the equivalent

* ~~of 62.5 million barrels per day. Current studies are now concentrating on

the forcing of demand to meet available supplies.

The most comprehensive studies of both types have been conducted by

* ~~the National Petroleum Council. 1 2In the first referenced NPC report which

was made prior to the recent Arab oil cutoff, 22 alternative cases were studied.

These studies took into consideration various rates of population growth, per

* ~~capita usage, environmental impacts, and conservation possibilities. These

were condensed into high, intermediate, and low cases. The low case may be

said to represent a low population growth rate, minimum adequate environmental

* ~~impact, maximum feasible conservation, etc. The high case is representative

of opposites of these. The intermediate case represents what is thought can

be more reasonably expected. The most significant aspect of all these

1U.S. Energy Outlook, National Petroleum Council, Washington, D.C.,
December, 1972.

* ~~~~2Emergency Preparedness for Interruption of Petroleum Imports into
the United States, National Petroleum Council, July, 1973, and Its Supplemental
Interim Report, November, 1973.

projections is that even with the major effort to conserve usage a 1985

demand of over one and one-half times the present requirement seems inevitable.

A thorough study of Figures 2, which is based on the NPC intermediate

case, will reveal the seriousness of the energy problem. Although these figures

were compiled prior to the recent Middle East outbreak of hostilities, the

demand projections up to 1985 have not been altered or reduced, since the

duration and severity of the denial of petroleum by the Organization of Arab

Petroleum and Exporting Countries (OAPEC) to Japan, Western Europe, and the

United States cannot be projected. Also many other factors have a significant

bearing-on the U.S. demand and supply, including the demand savings due to

lower speed limits, lower thermostats, less airconditioning and so on.

Nonetheless, the reader is urged to appreciate the growing gap between the

normal upward trending "demand" curve and the "total domestic supply" curve.

As of 1973, Middle East imports amounted to approximately 3 million barrels

of oil per day and had been expected to provide the necessary incremental

growth amounts in the future. Nonconventional sources of energy are not

included in domestic supply sources in Figure 2 due to their anticipated

small singificance of contribution and their unpredictability of becoming

economically available. Synthetic crude from oil shale and coal was optimis-

tically projected to contribute a little over I million barrels per day by

1985. The recent oil embargo and crude oil price increases have increased

interest in synthetics and nonconventional sources of energy to a high degree.

Significant contributions from these new sources will probably now occur

sooner than previously anticipated.

Demand

The manner in which energy has been and could be used is presented in Figure 3.0

It can be seen that the rate of growth of use of electrical energy is much

higher than that of other uses. However, most electrical energy has been made

from primary energy sources such as coal, oil, and gas. In the process much

primary energy is lost. It is estimated that by 1985, 24 percent of all

primary energy used will be lost in the generation of electricity. Electrical

energy usage is divided among industrial, commercial, and residential end users.

Supply

How will these demands be met? At present, petroleum hydrocarbons--

* ~~~oil and natural gas--supply about three-fourths of our total energy demands.

It appears that this proportion will decrease only slightly sometime after

1985. Its importance can be appreciated when one recognizes that as of

* ~~~1972 petroleum supplied essentially 100 percent of our transportation energy,

78 percent of industrial, 97 percent of that used in homes, and 40 percent

of our electricity.

Oil Supply

Based upon the intermediate case developed by NPC, Figure 2 shows a

projection of U. S. oil supply to 1985. This has been modified to allow

for delays resulting from the fact that until recently very little has been

done to stimulate domestic production. Expected demand by 1985 is 26 million

barrels per day. However, it can be seen that domestic sources can be expected

to supply only about 14 million barrels per day, leaving 12 million barrels per

day to be supplied either by other sources or not met. It will be noted that

both the Alaskan North Slope and offshore production are expected to play a

significant and increasing role in domestic supply. The estimated 2 million

barrels per day from the North Slope and 2 million barrels per day from offshore

are expected to account for over 1/3 of total 1985 domestic crude supply.

Our lack of ability to supply more of our demand domestically is not

through lack of resources. The present status of U3. S. resources and reserves

is given in Figure 4. The United States has an estimated ultimate discoverable

amount of oil in place of 810 billion barrels, of which 434 billion have already

been discovered. About 100 billion of these have already been produced, and

a reserve of 36.3 billion presently exists at early 1973 conditions. Note

that this leaves about 298 billion barrels already discovered but not

classifiable as reserves. With technology already developed, reputable

engineers have estimated that 35 to 40 billion barrels of these can be

recovered with an adequate increase in price to offset the higher recovery

costs which more sophisiticated recovery methods require. The industry has

eminently demonstrated its capability to develop its needed technology and

will continue to do so if it has an adequate economic incentive and political

climate. Since 1942, as a result of improved recovery technology, the

average recovery of oil in place from known fields has increased from 21

to 31 percent. With further development of recovery methods, both by

improvement of existing procedures and pursuit of concepts currently under

study in research laboratories, it has been estimated that average recovery

efficiencies in excess of 50 percent of the oil in place can be achieved.

This would amount to 70 to 80 billion barrels from currently producing

fields.3 Currently, about 40 percent of U. S. domestic daily production is

obtained by means of secondary and tertiary recovery methods.

Probably the most promising way of increasing our near term domestic

crude oil availability is to intensify offshore exploration and development

activity. This is over and above oil from the Alaska North Slope which,

3Clewell, D. W., An Appraisal of the Petroleum Situation in the Ocean,
presented before NOAA Conference, Seattle, Washington, July 17-19, 1973.

it is hoped, will become available during the period by expeditious

installation of the required pipeline. As Figure 4 shows, about 65 percent

of our onshore domestic discoverable crude oil has been found. The U. S.

land area, excluding Alaska, has been one of the most intensively explored

regions of the world. The opportunities of finding large new fields on

land are now limited and future on-land discoveries can be expected to

be mostly found in smaller, deeply buried fields. In contrast, only about

14 percent of offshore discoverable oil has been found, and it can be

expected that significant quantities of remaining discoverable offshore oil

will be found in large and relatively shallow fields. Such fields are much

more susceptible to discovery by present oil-finding techniques than are

the remaining undiscovered fields onshore. This is not to imply, however,

that we should ignore onshore possibilities. As indicated earlier, we

shall need to take all reasonable steps to increase domestic energy

availability.

Natural Gas Supply

In some respects the natural gas demand-supply outlook is even more

bleak than that for crude oil. Even with an aggressive domestic exploration

and development program and an intensive effort to increase our import and

synthetic gas production capabilities, it would appear that we shall fall

even shorter of supplying the potential demand for natural gas than we have

for oil. The outlook for natural gas is presented in Figure 5. This is based on

data developed by NPC.4 It is significant that even with an accelerated effort

the decline in onshore gas supply will continue through 1985. If steps are not

4NPC, U. S. Energy Outlook, An Initial Appraisal, Volume II, November, 1971.

taken to intensify exploration and production and the present decline in gas

productivity persists, the onshore yearly production can be expected to drop

to below 10 trillion cubic feet per year in 1985 rather than the 15.2 trillion

projected in the intermediate case shown.

As in the case for petroleum liquids, it is not a lack of gas resources

which lies at the root of the problem. Rather, the problem stems directly

from the ill advised Federal Power Commission policy of regulating gas

prices at the wellhead at unrealistically low prices. The relationship between

risk and return on investment has caused a poor economic climate. A table

of resources and reserves is shown in Figure 6. It will be noted that of

the 1857 trillion cubic feet of ultimate discoverable gas in the U. S., 699

TCF have already been found, as of the end of 1973. Of that discovered,

433 TCF have been produced. Thus, there are on hand reserves amounting to

266 TCF and another 1158 TCF remain to be discovered.

Similar to the case for oil, the most promising means of increasing

domestic production rapidly would be intensification of offshore operations

and for the same reasons. It should be noted that about 15 percent of

future gas will be obtained from that associated with oil production. Hence,

accelerating the finding and production of new oil will also make new gas

available.

Causes of the Energy Shortfall

A great number of factors have combined to create the current situation.

The reasons behind these factors are often numerous and complex and the

reader is urged to ask himself "why?" as he reads each of the more significant

of these factors:

1. Stagnation of domestic crude oil production rates

2. Decline of domestic natural gas production

3. Delays in planned completion and operation of nuclear

powered electric utility plants

4. Technological difficulties with the development of sulfur

control equipment for coal and oil burning equipment

5. Rapid upturn of economic activity

6. Environmental and safety-related equipment on motor

vehicles

7. Lack of significant expansion and addition of new refineries

8. Concern about environmental effects of strip mining and human

safety in deep mining.

CHAPTER 11

PETROLEUM TRANSPORT ON THE OCEANS

It is evident that even with a very material conservation of energy,

and marked increase in domestic petroleum exploration and development, a

very large increase in imports of petroleum will be needed. Both crude oil

and natural gas will be required. It is expected that a portion of U. S.

needs can be obtained from Canada by pipeline. Nevertheless, by far the

greater bulk of our imports will have to be transported by ship. Transport

of natural gas by ship requires a different type of operation than that for

crude oil and will be treated separately.

Crude Oil Imports

Reference to Figure 2 will establish that the period between now and

1977 will be particularly critical with respect to domestic supply. Even

with a greatly expanded domestic effort., because of the time required,

domestic production rate will decrease during this period. Beyond that

time with continued effort it will slowly increase but not commensurate

with the increase in demand. A projection of anticipated crude oil import

requirements is provided in Figure 7. It will be noted that overland imports

from Canada are projected to rise from a present value of approximately

3/4 million barrels per day to 2.8 million by 1985. This, of course, will

depend upon developments in Canada in the intervening period. Changes in

Canadian domestic needs, supply, import availability and export policy can

markedly affect the projection. Thus, the need for foreign waterborne

imports could be higher than projected.

10.

Just to handle the waterborne crude indicated in Figure 7 will require

a great increase in maritime shipments into U. S. ports. In order to handle

these increasing volumes of imports, the transportation system made up of

very large crude carriers (VLCC's) and modern deepwater terminals is both

environmentally preferable and economically superior to alternative

transportation methods.

In the past, most waterborne imports have come from Latin America.

This relatively short haul has been accomplished with tankers mostly

within the range of 35,000 to 70,000 deadweight tons. As a consequence,

only a few ports exist at present in the U. S. capable of handling ships

larger than 70,000 dwt capacity. While a "tight" definition of port

capability depends on more than tonnage specifications, e.g., draft and

mooring equipment, the following ports have some ability to handle larger

ships.

Portland, MA
New York Harbor (Stableton Anchorage)
Northville, L.I.
Norfolk, VA
Corpus Christi, TX
* ~~~~~~~~Estero Bay, CA
Huntington Beach, CA
El Segundo, CA
Long Beach, CA
Los Angeles, CA
Anacortes, WA
* ~~~~~~~~Ferndale, WA

The prospects are that oil from Latin America will decrease in the

future and that the bulk of imports will come from the Middle East and Asia.

* ~~Because of the economics in transportation cost it is expected that the bulk

of the ships used for this purpose will average 250,000 dwt and range up to

400,000 dwt or larger. Unless port facilities are provided to handle vessels

* ~~of this size, crude will have to be transferred from them at nearby foreign

ports to the smaller tankers for reshipment into U. S. ports. The use of

combined large and small vessels or transshipping would require an amount

over the use of large vessels between $0.05 and $0.15 per barrel.

Continued use of small tankers could increase traffic in U. S. ports

threefold by 1985. This would impose a severe burden on already congested

harbors with greatly increased probability of collision and spills. On the

other hand, the use of large vessels could keep the number of unloadings

estimated for 1985 at about present day levels. Further, these large vessels

would call at separate, specially designed terminals, away from existing

harbors and congested areas, further reducing the risk of accidential collision.

In view of the significant economies to be had and the marked increase

in safety which would result, it appears imperative that the development

of facilities to handle larger vessels should proceed as rapidly as possible.

The single point mooring techniques for unloading tankers are a proven

technology, with over 100 such facilities in service around the world.

It is not only possible to install such facilities in association with

current port activities, thus relieving inner port congestion, but a new

dimension has been provided in that such facilities can be installed close

to a center of usage for which no natural port exists or for which expansion

of existing ports to accommodate larger vessels is not feasible. Recently

the U. S. Corps of Engineers has thoroughly studied the relative advantages

of offshore facilities and endorses their use.

Liquefied Natural Gas

A significant increase in imports of natural gas will also be required.

As indicated earlier, even with a several fold increase in imports, it will

not be possible to fully supply potential demand. It is expected that some

5Brig. Gen. J. L. Kelly, "Offshore Terminals and the National Perspective."
Presented before the annual meeting of the Marine Technology Society, Sept.
10-13, 1973, Washington, D.C.
12.

of the demand can be supplied by pipeline from Canada, but the same factors

which can be expected to control Canadian oil exports will affect natural gas,

too. These factors revolve around such items as the amount and location of

both supply and demand, energy alternatives available, economics, environmental

considerations, and most importantly, Canadian, U. S., and other governments'

policy considerations. A small amount of gas imported at present from Mexico

is expected to become unavailable by 1975. Thus, a significant increase

in waterborne liquefied natural gas imports is projected to 1985. only a

very small amount of LNG is imported at present. Because of lack of ships

and handling facilities, it is expected that the amount imported by 1975

will not exceed 0.25 trillion cubic feet per year. However, the amount

shipped in is expected to rise at a much faster rate after that time, reaching

a level of about 4.5 TCF by 1985. This will not adequately meet demand because

imports will be primarily controlled by the rate at which adequate facilities

can be provided assuming that foreign supplies will be made available at an

acceptable cost.

While liquefied natural gas plant technology is fairly well established,

the optimum means of shipping LNG is still being actively researched. At

least four different types of containment systems are being routinely used

or considered at present. Again, port restrictions may prove to be a more

important factor than technological development. Since virtually a new

fleet will have to be developed for LNG shipment, much consideration is

being given to optimum vessel characteristics. At present it appears that

a ship having a capacity of about I million barrels and possessing about a

20 knot speed will be best suited for the anticipated conditions. If the

projected imports are to be achieved, about 44 such vessels together with

the necessary port facilities at each end of the voyage will be required by 1985.

13.

Because the unloading of LNG requires a very substantial plant for the

vaporization of the low temperature liquid, the relatively simple offshore

unloading systems envisaged for crude oil handling will not suffice for LNG.

Thus, unless substantial fixed offshore structures upon which the necessary

vaporization facilities can be placed prove economically feasible, present

port facilities will have to be modified or new onshore facilities built to

provide for LNG imports.

By now it should be sufficiently apparent to all that we must move

without delay to alleviate our energy shortage by all reasonable means. To

delay action can only mean a more aggravated problem in the future.

14.

0 ~~~~~~~~~~CHAPTER III

THE RESPECTIVE ROLES OF GOVERNMENT AND INDUSTRY

0 ~~~~If our country is to develop and maintain an adequate energy self-

sufficiency in a reasonable timeall segments of our society will have to

work effectively together. Every reasonable effort to conserve energy must

0 ~~be pursued. All avenues of communication must assume greater responsibility

for informing the public as to the facts, the nature of the problem, and the

alternative solutions available to us. A closer relationship between industry

0 ~~and government must be developed--one in which the respective parts which

each can best play are fully recognized and in which the necessary cooperation

and encouragement are provided.

Of overriding importance is the necessity for the government to provide

national direction, articulating national priorities and goals, providing

legal safeguards, encouraging economic growth, maintaining and enhancing

this country's appropriate conservative use of its natural resources and its

optimum environmental and social amenities. It should foster an informed

and unbiased political climate. The government should develop needed technical

information where it is best suited to do it, and to encourage its development

by others whenever development can be done more effectively, appropriately,

or economically by them. The government should serve to collect and make

available to users such information as is essential for achieving national

goals.

Development of Required Technical Information

In general, the country's interests will be best served if members of

industry are encouraged to undertake that research and development essential

15.

to the maintenance of an economically viable and competitive industry.

The petroleum industry has amply demonstrated its willingness and capacity

to conduct the necessary R and D effort given a favorable economic and

political climate. It can be counted upon to continue its efforts if

favorable conditions prevail. Indeed, its research staffs and facilities

for this purpose are unexcelled in the world. On the other hand, the industry

has relied heavily upon R and D and technical information developed by

others both in academic and government circles where such has been available.

Closer cooperation between those responsible for government, industry, and

academic research activities will enhance greater understanding of the

part each can best play and, under optimum conditions, should result in each

performing that portion of the task which the most efficient and expeditious

course of action dictates. Unnecessary and costly duplication of effort could

thereby be eliminated while still allowing for that freedom to pursue new

ideas regardless of source so essential to scientific progress.

In the past, much of offshore operations were evolutionary extensions

of onshore efforts and the technology developed over many years has sufficed

with only nominal change to provide for near-land operations in shallow water.

In the future, the number of operations-conducted in frontier areas will

increase. Much of the necessary knowledge and technology for successful

resource recovery for these frontier conditions awaits development. Moreover,

these resources will be more difficult and costly to find and produce. Thus,

more precise and abundant knowledge will be required and will have greater

relative value than heretofore. Specific suggestions as to needed information

will be presented and discussed in more detail in Chapter IV.

Scheduling of Lease Sales

A great and immediate aid the government can provide is a firm and

orderly scheduling of lease sales of greatly expanded acreage. The industry
16.

is encouraged by the recent releases by the Department of the Interior of

its five-year lease schedule for certain offshore areas. Greatest efficiencies

can be achieved if all proposed sales up to two years in the future are firm

with sales two to five years in the future on a semi-firm basis. Both

government and industry can achieve mutual benefits by working closely together

0 ~~in a cooperative annual updating of the schedule. Industry can certainly

best conduct its operations if it has at least a two-year notice of a sale,

and this time lead will also probably allow all interested government offices

0 ~~sufficient time to properly plan. The offshore areas that are of greatest

immediate interest to the offshore industry are the Gulf of Mexico, Baltimore

Canyon, Gulf of Alaska, Bristol Bay, Offshore North Slope, Chukchi Sea,

0 ~~Southern California, Blake Plateau, and Georges Bank. Industry, environmentalists,

and government are working together in selecting provinces for future nominations

both by point in time and sequence. This will allow industry to utilize to

the fullest extent its imminent or current technological capabilities. This

cooperation will also encourage a logical development of the total resources

within general geographic areas rather than providing what appears to be a

0 ~~less efficient procedure as in the present approach. It seems quite likely

that future events resulting from the latest Arab-Israeli conflict may warrant

the nation to adopt as a matter of policy the exploration and development

0 ~~of its most promising offshore areas at the earliest feasible time.

Consolidation of Federal Energy Activities

Another step which would appear to enhance the direct communication

and-cooperation required to develop and carry out national goals is the

incorporation of those parts of the many government agency activities that

pertain to energy into one or a very few highly coordinated focal points.

A difficulty which harasses all those in government concerned with establishment

and implementation of federal policy is lack of an integrated source of

0 ~~~~~~~~~~~~~~~~~~~~~~~~~17.

necessary information. This arises not so much from lack of provision of

the needed information by industry as it does from the fact that portions of

the information are collected by many agencies. Each agency or office collects

that data needed for its own special purposes or needs but nowhere in government

Is a timely composite accumulation made. Consolidation of federal energy

activities should greatly aid representatives of industry and government to

consult effectively relative to offshore matters, thus enhancing expeditious

accomplishment of necessary goals.

Priorities

The Petroleum Panel suggests that the benefits to this nation of steady

and orderly recovery of the petroleum resources of its outer continental

shelf are too great to allow for any unnecessary impediments. While properly

recognizing the legitimate rights and desires of individuals, and of local

and state governments, the federal government also has the obligation to

recognize the equally legitimate regional and national rights and needs. The

delicate balancing of these sometimes apparently opposing interests should be

accomplished by the democratic processes and the federal government is the

proper focal point for the resolution of these conflicts. Coastal zone

planning and management implemented at the state level but with federal

involvement is a natural and desired consequence of these democratic processes.

Finally, it is realized that the National Energy Policy must stand in

legitimate competition with and be reconciled among other equally valid

national policies, programs, and goals dealing with such subjects as tax

reform, national defense, environmental protection, marine and estuarine

sanctuaries, clean air and water, coastal zone management, land use, and

optimization of federal revenues and expenditures. The fact that only

the government can make the final decision on the priorities of these and

other national goals is fully appreciated and concurred with by industry.

Industry is most willing to fully cooperate with government in any and

every legitimate way and will accommodate all other interests in every

reasonable manner.

0~~~~~~~~~~~~~~~~~~~~~~~~~~9

CHAPTER IV

RECOMMENDATIONS CONCERNING INDUSTRY AND
GOVERNMENT ACTIVITIES IN THE MARINE ENVIRONMENT

Commensurate with the general observations made in the preceding

chapter, the Petroleum Panel has listed in this chapter those areas of

ocean activity which the government now performs or which we feel the

government could perform, the undertaking of which would greatly assist the

offshore industry to find and produce the additional domestic petroleum so

greatly needed by this country. As an example, industry has benefited from

continued improvement in navigation and oceanographic data. Continued

improvement of such information in frontier areas would be of great technical

assistance. It is recognized that certain government activities naturally

are closely aligned with lease sales and that, in general, should continue

wherever possible. Other data could be more useful to industry if provided

as far in advance of pending lease sales as possible. Certain oceanographic

data fall into this classificaiton. Not only would early provision of such

data allow industry to better preplan exploration, production, and transportation 0

activities and programs, it should allow government offices involved with

offshore activities to better preplan also.

The Petroleum Panel recognizes that federal agencies serve the needs of

many segments of society as well as industry and that data of only marginal

value to the offshore petroleum industry may have great value for other purposes

and users. The report only addresses the interests of the offshore petroleum

industry. The Petroleum Panel is also cognizant of the fact that the setting

of priorities of government agency activities is a matter solely to be

20.

decided by government. Nevertheless, it hopes that a lack of provision by

government of information which would be of use to the industry will not

0 ~~result in the postponement or impedance of planned offshore petroleum efforts.

This is to say that industry is not solely dependent upon government data or

assistance for successful offshore activities but that the additional inf or-

mation may make for safer and more economical operations. The petroleum

industry feels that the government's primary emphasis should be on activities

traditionally performed for the benefit of broadly based user groups.

0 ~~~~The following list of government marine activities is divided into two

categories. These are activities considered by the industry to be: 1) both

appropriate and important to the offshore petroleum industry; and 2) activities

0 ~~considered to be less important to marginal as far as use to the offshore

Industry is concerned. It will be noted that some items represent data which

have been made available in some form in the past. Others represent information

which may be new, improved or extended in scope. In this connection it should

be observed that industry has many offshore structures which offer in a number

of instances the opportunity to improve the gathering of data or to make

possible the obtaining of new information heretofore inaccessible or not

feasible to acquire. Many companies have a standing policy of permitting

and encouraging use of these platforms by qualified government and academic

representatives for selective scientific and research purposes. The primary

conditions upon their use are that the additional activity will not endanger

lives or property and that it not unduly interfere with the principal purpose

S ~~of the structure.

Activities Considered Appropriate and Important

* ~~~~Following are those activities considered by the Petroleum Panel of

OSTAC to be both appropriate and important to the offshore petroleum industry.

21.

1. Pate and effects of oil in the marine environment.

The fate and effects of oil discharged into the world's oceans is

one of the most pervasive environmental concerns facing the petroleum industry

and the U. S. government. It is an inter-regional matter and one that affects

many segments of government, industry, and society. Even though we have learned

a lot about the effects of oil in the marine environment, there is much more

to know.

It is essential to determine as rapidly as possible the facts with

regard to the fate and effects of oil in the ocean so that all concerned can

make decisions which truly represent what is in the best national interest.

Based on inadequate information and sheer speculation, a number of individuals

have predicted very dire consequences of oil entering into the sea. These

conclusions which we believe to be largely premature or unfounded, coupled

with adverse publicity given to major spills, have greatly exaggerated the

proportions of the problem and have unduly aroused the concern of the public,0

industry, and government. In response, government and industry have adopted

new regulations and expensive procedures in the conduct of marine oil operations

without adequate knowledge that they are either necessary or justifiable. These0

regulations, plus those currently being formulated, will have far reaching effects

on the petroleum industry's marine operations. Not only do they deprive the

country of much needed petroleum but they greatly increase its cost.

Government and industry should cooperate in determining the total

overall needs and the extent to which they are currently being met. A

possible effective way to do this might be to compile a list of needs as

seen by both government and industry. It would be possible then to determine

whether these needs were being satisfied on the basis of currently available

knowledge and ongoing research. If not, programs and optimum means of

implementing them could be recommended to fill in the gaps or extend the

range of knowledge.
22.

Two big question marks here that need to be answered are what

* ~~parameters or items to measure and then what techniques, standards, and

equipment should be employed for those measurements. Investigations

should be conducted and compared for coastal areas with and without

* ~various types of petroleum activity and with the open oceans. Determination

of petroleum inputs by source and activity should be developed including the

location of natural seeps. Inexpensive and accurate techniques for distin-

* ~guishing man-associated petroleum hydrocarbons versus naturally occurring

petroleum hydrocarbons and biologically produced hydrocarbons must be

developed.

* ~~~~It would be valuable if government were to increase its research

emphasis on the long-term sublethal effects of low level petroleum hydro-

carbons rather than concentrating predominately on the well-known, short-term

* ~consequences of oil spills. Specific emphasis should be placed on determining

whether or not and to what extent and for what duration of time oil pollution

poses a hazard. Needed projects under category of fate of oil include studies

* ~dealing with natural bacterial degradation, weathering, solubilization, and

mass balance investigations of oil in the oceans.

The scope and importance of the subject of fate and effect of oil

* ~in the marine environment require the utmost of cooperation, coordination,

and planning among and between the various segments of industry and government.

Each aspect of the problem should be considered in light of how it can best

* ~be handled and every effort should be made to enlist the services of those

best able to carry out the various specific parts of the undertaking.

2. Coastal Zone Planning and Management

Regardless of the degree to which it actually impacts its surroundings,

the effect of any activity in the coastal zone is greater than it would be

23.

in the open sea simply because it is within the scope of the concentrated

number of people who live in the coastal zone. Thus, state and local coastal

zone legislation and regulation against onshore and nearshore petroleum-

related endeavors can dramatically affect federal and industry offshore plans

and operations. While the states in cooperation with their local communities

are the logical entities to research, plan and manage their valuable and

limited resources of the coastal zone, it is in the interest of all segments

of our country that the regional and national interests not be ignored.

Thus, the federal government has here a significant role to play. The time

has long since passed when an isolated community can satisfy the needs of

its citizens without recourse to supplies and services beyond its pale.

Thus, all must cooperate, each making some sacrifice, so that everyone will

be better served. In ascertaining the regional and national interests that

must be incorporated into the state planning and management programs, the

various federal agencies must work together to assure a balanced input of

social, environmental, technical, economic, defense, etc., considerations.

The federal government should also cooperate fully with the states in the

collecting, sharing and interpreting of the oceanographic and environmental

data collected in the coastal and offshore areas.

A specific effort that logically falls within the scope of federal

government activity that could be very useful in high use offshore areas is

the compilation of all principal uses and intensities by month or season.

Potential conflicts between users of the sea might thus be avoided if patterns

of use could be established. For instance, the petroleum industry could

schedule geophysical surveys to avoid overlap as to area and season for

specific fishing activities. Likewise, activities undertaken by others

might reasonably be rescheduled by them with little or no loss to permit

optimization of petroleum industry activity.
24.

3. Measuring and forecasting marine conditions in frontier areas.

Oceanographic data currently used by or of greatest potential

0 ~~use to industry for design and planning are as follows:

a. Sea states. Sea state, including swell and waves, giving

significant heights, significant periods, and energy spectra.

b. Winds. Sustained winds at 10-meter height including speed and

direction.

c. Currents. Surface and vertical profiles of speed and direction

of tidal, wind driven, and general circulation currents.

d. Tides. Sea surface elevation changes caused by astronomical

and storm tides.

e. Other meteorological data. Air temperature, precipitation,

visibility, humidity, icing tendency.

f. Water temperatures. Surface and bottom temperatures (recording

frequency to be daily or weekly, as appropriate).

g. Reliability of communication. Data on ionospheric conditions

and guidance in selecting radio communication frequencies.

h. Sea ice. Occurrence, motion, strengths, salinities, and

dimensions. This should cover bergs, pack ice, large ice ridges, and

shore-fast ice.

i. Ice scour and bottom sediment scour. Occurrence and intensity

on sea floor in applicable places such as the offshore North Coast of Alaska.

J. Seismic activity. Occurrence and magnitude of earthquakes;

associated geologic information in seismic active regions.

k. Data atlas. Assemble for specific areas historical and new

information covering all items above and make available in summary form,

either by computer filing and recall or by frequently updated "encyclopedias."

25.

The frequency of obtaining the readings above on a three-or six-hour

basis would be most useful unless rates of change are slow. The extremes

of storms should be based on 1, 2, 5, 10, 25, 50, 75, and 100 year occurrences.

Such data as those listed above are essential to baseline studies

if valid results are to be obtained. Future efforts should primarily be

directed towards filling gaps and in extending knowledge rather than

duplicating prior data, unless there is reason to believe that such data

are significantly in error. This data will not only aid industry in their

planning and daily operations but it is essential to understanding biological

relationships and the development of environmental baseline studies.

Forecasts and warnings of hurricanes and severe storms and or

critical values of other parameters mentioned above are required to support

safe day to day operations of all ocean users.

4. Bathymetry, surface geologic mapping of the sea floor using
grab samples, shallow core data, reconnaissance gravity,
magnetic, seismic surveys, regional geologic mapping, and
broad basin type mineral resource potential studies.

The government can be of great assistance if it collects and

assimilates accurate bathymetric data. Where these data do not now exist,

or could be justifiably improved, they should be obtained and compiled.

The scale mapping of bathymetry should be correlated to diversity and

intensity of map usage. Normally, areas around population centers and other

areas of high use should receive priority attention and greater detail.

Primary use by the petroleum industry of this data would be associated with

seismic line layout, gravity corrections, pipeline laying, and determination

of unstable conditions. Specific areas of interest are dictated by offshore

fields and deep water terminals and onshore facilities. Detailed surveys

of bathymetry for specific projects and single users such as deep water

oil terminals and offshore pipelines should be the responsibility of the user.

26.

Specific geophysical and geological assessments by government

* ~~would be of greatest use if it provided general regional information with

respect to the following: location, general outline, and configuration of

sedimentary basins; determination of age and thickness of stratigraphic

0 ~~sections; location of major intrabasin structural features such as rift

zones and arches; surface faults; subsea soils characteristics and location

of geologically unstable sea floor conditions. Determination of these various

* ~~features can be provided by regional reconnaissance gravity, magnetic, and

seismic surveys, bathymetric mapping, and ocean bottom sampling. Such

programs will provide government with the information necessary to outline

* ~~potentially productive areas and to determine the problems associated

with the exploitation of those areas. Government-conducted and government-

supported regional geologic mapping and broad basin-type mineral resource

potential studies are of interest and use to many scientific, governmental,

and commercial interests.

The exact point of demarcation between regional reconnaissance

0 ~~surveys and detailed prospective surveys is irrelevant as long as the

terms are conceptually compatible among interested parties. Petroleum

industry companies generally agree that geophysical grid surveys of 20 miles

by 20 miles or greater are reconnaissance and everything as dense as 5 by

5 miles is prospective. Industry recognizes and encourages the efficiencies

that may be obtained by government conducting several scientific and

* ~~oceanographic shipboard investigations concurrently. The net values derived,

however, are dependent upon associated needs, benefits, and costs. For

example, the required density of line spacing for bathymetry, gravity and

S ~~magnetics, and deep seismic data surveys differ considerably. Industry needs

detailed geophysical data for prospective evaluations while government

27.

uses geophysical data f or outlining regional geology including the definition

of large sedimentary basins, general management decisions, and for filing

environmental impact statements. The different needs by different users

require varying degrees of data accuracy and completeness and do not signify

inherent incompatabilities.

Because of the inherent risks and uncertainty in determining the

potential of exploration ventures, even with extensive geological and

geophysical work, individual members of the offshore industry interested

in acquiring leases must of necessity conduct their own detailed surveys.

One need only consider the wide range in bidding at lease sales now to

recognize the great latitude for differences in interpretation that

exists within the framework of the best obtainable data. The necessity

to acquire reserves to continue to stay in business and the high degree

of competition existing among oil and gas producers will assure that bonus

bids on sales tracts will provide the government more than adequate rennneration

for the value of the federal leases. Thus, it would appear that the optimum

use of the limited available funds, both federal and private, would be made

if the effort continues to be divided. Accordingly, it appears the national

interests would be best served if the government programs were directed

primarily to reconnaissance of the vast reach of the U. S. continental

margins, leaving the detailed prospecting to the individual companies.

There is little if any chance that the government will lose by this

policy and by minimizing the duplication of effort more funds should be

available for the needed reconnaissance and other needed oceanographic

data.

Much offshore geologic and geophysical data collected by the

petroleum companies is also valuable for achieving national goals. While

28.

some of this data is exceptionally confidential to individual companies,

other data fall into categories of lesser confidentiality and nonconfidentiality.

Efforts by industry are being increased to transfer data of these latter

categories to government archives such as NOAA's Environmental Data Services.

5. Measuring and locating the mean low-water line along
the shore, charting of offshore areas tied into geodetic
markers, and establishment of precise positioning capability.

Geodetic markers placed offshore are a logical extension of

* ~~~government responsibility traditionally performed onshore. It is highly

desirable that the government take whatever steps it can at the earliest

date to establish or bring about settlements of all boundaries between

* ~~~private citizens, local, state, and federal, and/or international governments.

Under present procedures this will require measuring and locating of the

mean low-water line along this shore and the charting of offshore areas.

It would be highly desirable if a more permanent base system for boundary

lines and offshore charting could be adopted.

In 1963, the former U. S. Coast and Geodetic Survey established

* ~~~some horizontal control off the Louisiana coastline. The financing of this

effort was done jointly by the government and the petroleum industry.

Since 1963, the system has been extended by industry to include virtually

all platforms. This supplemental control, while not as accurate as the

USC&GS work, is adequate for drilling operations.

Although the industry system is available to most users, additional

* ~~~surveys and placement of markers by government would be of great value.

The East Main Pass, South Extension of West Cameron, East Cameron, Vermilion,

South Marsh Island, and Eugene Island areas of Louisiana are areas of great

29.

need at present. Other areas of prime importance would be the Texas,

Mississippi, Alabama, and Florida offshore areas, as well as other areas

previously mentioned and under consideration for tract sales. Ideally,

the sequence of plotting the frontier areas should generally coincide with

but adequately precede in time the tract sales. Geodetic control along

the continental shelf of all prospective areas will be a necessity in order

to properly operate beyond the shelf in deeper water and long distances from

shore.

In all probability, there will be many significant differences

in future petroleum operations in frontier areas than in those of the Gulf of

Mexico in the past. The Gulf of Mexico petroleum development was an

evolutionary stepping stone occurrence starting from the shore utilizing

onshore techniques and equipment. Frontier areas will probably begin

development 50-100 miles or more offshore employing specialized equipment.

Geodetic control of platforms in the Gulf of Mexico went seaward from

known onshore positions. Each fix is believed to be at least + 50' in accuracy.

While the compounded error of several fixes may be potentially large, the

significance of the error can be easily minimized. To avoid any possible

illegal drainage of hydrocarbons from adjacent tracts, platforms are placed

within the boundaries of the tracts to compensate for possible errors of

positioning. Most tracts are either 5,000 or 5,760 square acres. Navigation

hazards due to errors in plotting are minimized by establishing shipping

fairways as well as platform warning devices such as lights and horns. The

Geneva Convention on the Continental Shelf stipulates that ships in transit

allow at least 500 meters clearance from the periphery of artificial islands.

The ability to determine precise locations with low-cost, on-board

equipment will be of substantial benefit to petroleum exploration efforts

30.

as well as to sports and commercial fishing vessels, aircraft, pleasure

craft, and commercial transport vessels. Such an ability could add greatly

to rescue and safety-at-sea efforts, too. Ultimately, a traffic control

computer system would greatly enhance safety and operations by providing

detailed information at the time of need relative to all vessels and fixed

structures in a particular area.

Industry is most interested in the positioning test project now

being undertaken by NOAA's Satellite and Marine Applications Section of

the National Geodetic Survey. Hopefully, the test will result in the ability

to locate platforms or other objects anywhere offshore to at least six

feet of true position. Further, this accuracy may be obtainable at less

costs then current methods of surveying. Markers of this accuracy in frontier

petroleum areas would be of tremendous assistance and benefit.

* ~~~6. Intensify efforts on the possibilities and
consequences of weather mociification.

Prediction, alteration, and modification of the physical elements

are of considerable interest to the offshore industries. Better prediction

of path and intensity of hurricanes could significantly reduce operational

costs where these are prevalent, particularly on the East and Gulf Coasts.

The Petroleum Panel strongly supports NOAA's hurricane research programs

and especially Project STORMFURY which was developed to explore the structure

and dynamics of hurricanes, potential for modification, and verification

of results after seeding with silver iodide. Due to the potential benefits to

our industry as well as to all society accruing from hurricane modification,

we would encourage substantial amplification and intensification of this project.

Another project to be considered would be the fixing or control

of the location of the ice sheer zone offshore the Alaskan North Slope.

31.

The development of a means for predicting and modifying the direction of

movement of large ice islands and ridge formations in the same area would

also be of benefit. Likewise, rerouting or destruction of icebergs in any

higher latitude area would aid in the design and operation of any platform

expected to be exposed to icebergs.

Activities Considered to be of Less Importance,,
of Marginal Value,or More Appropriately Performed by Others

It has been recognized earlier in this report that the Petroleum Panel

is not in a position to assess the relative value of all government activities

to all users. Hence, it must consider the value of government-provided services

within the framework of its own expertise and experience. From this viewpoint

and with a sincere desire to put forth recommendations which it believes to be

in the best national interest it makes the following observations:

1. Individual tract evaluation

The opinion has already been expressed above that the detailed

surveys necessary for individual tract evaluation are best left up to

industry. The only method of accurately ascertaining the presence of

petroleum hydrocarbons in an underground formation is by exploratory

drilling. Preliminary efforts utilizing geophysical interpretations, while

they give some idea of structure, provide at best only educated guesses

as to the real worth of a tract. For the government to gather the detailed

information to duplicate that obtained by the industry would not only be

expensive and drain away funds from more useful government enterprise, it

would not really satisfy the purpose for which it is claimed that it is

needed. The principal justification advanced for its collection is that

it would permit government to independently assess the value of the tract and

thus keep industry from getting a parcel for less than its worth. The

thought being here that if bids did not equal or exceed the value placed

32.

on the tract by government it would be withheld. There is very little

chance, if any, that this will increase the government's revenue over that

which it now gets. Indeed, this practice has a good chance of being contrary

to the national interest. There are several reasons for this. First, in

view of the limitations of the data, the government's evaluation is as likely

to be as erroneous as that of any of the individual bidders. If the government

appraisal places a higher value on the tract than that of even the most

optimistic bidder, as has often been the case, the individual tract will

not be sold. While this tract might subsequently be sold in some future sale,

the odds are good that it will not unless government places a lower value

on it in a future sale. In either case, the government loses or postpones

receipt of money it could have received and, more important, the opportunity

for early development of much needed petroleum reserves. Second, since

the fair market value of any item being sold is what the market will bear,

the government's appraisal, being unknown to the bidders, does not protect

the nation's citizens from any "loss of heritage." The prevention of this

theoretical loss of value is the rationale for the tract evaluation.

2. Production and drilling technology

Experienced research personnel know that the closer the research

and development problems approach operations the more they require actual

experience with operations for their optimum solution. Thus, as a matter

of policy and experience, it has been found advantageous in the development

of such things as new and improved exploration, drilling, and production

equipment to encourage the suppliers to perform the research and development.

In those instances when for one or another reason it has seemed appropriate

to pursue such research within the petroleum industry laboratories, the

knowledge and experience of those intimately acquainted with the operation

33.

have been heavily drawn upon. In fact, the required research and development

have been of such a magnitude that many companies, both operators and suppliers,

have jointly sponsored the R & D projects.

Often suggested projects require major auxiliary research requiring

intimate knowledge of the significance of the many variables involved. As an

example may be cited the development of a system for use of continuous

drill pipe. Variables to be satisfied range all the way from space limitations

which must be met to development of new metallurgy. Ultimately such develop-

ments must be tested under actual operating conditions usually with a prolonged,

extensive and costly pilot stage.

For these reasons, the Petroleum Panel would recommend against0

government undertaking of this type of work. Both industry as well as

government experience gained in defense, NASA and Atomic Energy agencies as

well as others indicate it is better to arrange for experienced people and

firms to perform such research. It should also be mentioned that industry

itself has always been willing to provide the necessary technology as its

potential need has become apparent. Were it not for technology developed by

the U. S. petroleum industry many of the 70 countries around the world now

enjoying the fruits of petroleum developments in their offshore waters

would not even know they had such a resource. Almost every country has

benefited from the petroleum produced from these foreign areas including the

United States. It is unfortunate to say the least that the technology

the petroleum industry has exported has not been as effectively used to

develop domestic offshore resources because of inhibitions imposed upon

the industry at home.

The industry supports the need of government to confirm the fact

that new techniques and equipment employed on OCS platforms are in the

34.

nation's best interests. Since various government agencies must inspect OCS

drilling and production operations for safety, reliability, pollution, and

L ~~~other factors, they must be aware of new industry developments prior to
WJ1 ~~ adoption for proper evaluation. For this reason, the appropriate federal

bodies are generally consulted by industry during the research and development

stages.

3. Performance of studies and acquisition of data, the purposes
for which and/or the manner in which the results can be
effectively used are not known or poorly delineated.

It is very easy under pressure from poorly conceived legislation

or public emotionalism to mount studies which appear to have potential

value if successfully pursued but which in fact, even if successful,

have little value or little chance to provide the answer to the problem

that needs be answered. While many instances can be cited, a number of

current ones fall into a class which might be called ecological or

environmental. Some of these fall into a subcategory which might loosely

be called baseline studies. The importance of establishing unequivocably

the impact of petroleum in the ecosphere has been covered earlier. Unless

a project for this purpose considers all of the significant variables and

provides for their quantitative accountability in the system under study,

the results of the study are almost certain to be inconclusive. Thus,

studies of only a limited portion of such a system are doomed to be of

little value unless they have been carefully planned to provide conclusive,

useful results or are designed to usefully fit into a comprehensive

framework of similar useful researches. In future research on ecological

matters it is hoped that all sources of existing valid knowledge and ongoing

research will be used as a base upon which to build projects which augment

35.

the base and extend the frontier of useful knowledge as opposed to replication.

Such studies would be of greatest help if they were conceived and executed

in anticipation of lease sales and preceded them sufficiently as to not

interfere with their timely availability.

The petroleum industry supports the purposes of the National Environ-

mental Act of 1969 which are in part: "To declare a national policy which

will encourage productive and enjoyable harmony between man and his environ-

ment; to promote efforts which will prevent or eliminate damage to the

environment and biosphere and stimulate the health and welfare of man;

to enrich the understanding of the ecological systems and natural resources

important to the Nation ..." Conversely, we are opposed to those endeavors

that do not support this balanced viewpoint of which there are an unfortunately

significant and growing number.

For many reasons, the Petroleum Panel feels it is imperative that

the government soon develop guidelines concerning baseline studies. This

effort is needed to help eliminate the current confusion which now surrounds

this subject. These guidelines should insure the satisfaction of NEPA's

concern for the balance between man, nature, and the Nation.

36.

FIGURE 1

UNITED STATES FOSSIL ENERGY RESOURCES (1973)

QUADRILLION BTU
RECOVERABLE TOTAL*
RESOURCE BY TODAY S YEARLY
IN PLACE TECHNOLOGY RESERVES PRODUCTION

COAL 74,400 3,600 3,600 14.56

OIL SHALE 10,440 313 - -

CRUDE OIL 4,100 415 226 20.12

NATURAL GAS 1,510 295 295 22.66

TAR SANDS 162 29*

0~~~~~~~~~~~~~~~~~~~~~~~~~

* ESTIMATED

JES 3/73

FIGURE 2

C21~~~~~

LLJ

0~~~~~~~0

FIGURE 3

*~PIMR EEGCOSMTION BY SECTORS

200 -

0~~~~~~~~~~~~~~~~~~~~0

100 -

* 5O~~~~ TRANSPORTATI O - -

ELECTRICITY

20INDUSTRIL mo-o

~20
5 -~~~~~~~~~~~~~~~o

0~~~~~~~~~~~~~~~~~~~0

FIGURE 4

COMPARISON OF UNITED STATES CRUDE OIL
RESOURCES, RESERVES, AND PRODUCTION

BILLIONS OF BARRELS OF OIL IN PLACE

DISCOVERED PRODUCED RESERVES
ULTIMATE TO TO AT
DISCOVERABLE 1-1-73 1-1-73 1-1-73

UNITED STATES 810.4 434.0 99.9 36.3

ONSHORE 633.9 409.1 94.6 32.3

OFFSHORE 176.5 24.9 5.3 4.0

OFFSHORE

ALASKA 73.9 2.7 0.5 0.6

ATLANTIC COAST 14.4 0 0 0

GULF COAST 38.6 12.6 3.4 2.6

PACIFIC COAST 49.6 9.7 1.4 0.9

SOURCE: NPC, API, CALIFORNIA CONSERVATION COMMITTEE.

JES 10/73

FIGURE 5
0 ~00
0 (

0~~~~W0i

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FIGURE 6

COMPARISON OF UNITED STATES NATURAL GAS
RESOURCES, RESERVES, AND PRODUCTION

TRILLIONS OF CUBIC FEET

DISCOVERED PRODUCED RESERVES
ULTIMATE TO TO TO
DISCOVERABLE 1-1-73 1-1-73 1-1-73

UNITED STATES 1857.3 698.8 432.7 266.1

LOWER 48 ONSHORE 963.1 603.6 408.1 195.5

LOWER 48 OFFSHORE 260.1 63.1 24.0 39.1

LOWER 48 OFFSHORE:

ATLANTIC COAST 54.5 0 0 0

GULF COAST 201.8 62.6 23.8 38.8

PACIFIC COAST 3.8 0.5 0.2 0.3

ALASKA 277.4 32.1 0.6 31.5

ASSOCIATED AND DISSOLVED 356.7 217.7 * 75.5

� NO SEPARATE RECORD PRIOR TO 1966.

SOURCE: AMERICAN GAS ASSOCIATION

JES:11/73

FIGURE 7

PROJECTED CRUDE OIL IMPORT REQUIREMENTS

MILLIONS OF BARRELS PER DAY

1975 1980 1985

TOTAL IMPORT REQUIREMENT 8.5 9.5 11.7

POTENTIAL SOURCE OF IMPORTS

CANADIAN OVERLAND 1.3 1.9 2.8

FOREIGN WATERBORNE 7.2 7.6 8.9

JES 11/26/73