[Federal Register Volume 65, Number 146 (Friday, July 28, 2000)]
[Notices]
[Pages 46427-46432]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 00-18965]
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DEPARTMENT OF COMMERCE
Bureau of Export Administration
[Docket No. 000717210-0210-01]
RIN 0694-XX13
Summary of Secretarial Report Under Section 232 of the Trade
Expansion Act of 1962, As Amended, on the Effect of Imports of Crude
Oil on the National Security
AGENCY: Bureau of Export Administration, Department of Commerce.
ACTION: Notice.
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SUMMARY: On March 24, 2000, President William J. Clinton reviewed and
approved the Secretary of Commerce's finding that imports of crude oil
threaten to impair the national security. The President determined that
no action is necessary to adjust imports of petroleum under Section 232
of the Trade Expansion Act, as amended, because on balance the costs to
the economy of an import adjustment outweigh the benefits and that
existing policies to enhance conservation and limit the dependence on
foreign oil be continued. Such policies include, inter alia, proposals
for additional tax credits to promote renewable, more efficient energy
sources and further investments in energy-saving technologies and
alternative energy sources. Included herein is the Executive Summary of
the Department's November 1999 report to the President.
ADDRESSES: Copies of the complete report may be requested from: Bureau
of Export Administration, Office of Administration, U.S. Department of
Commerce, Room 6883, 14th and Constitution Avenue, NW, Washington, DC
20230; (202) 482-0637. This component does not maintain a separate
public inspection facility. Requesters should first view BXA's website
(which can be reached through http://www.bxa.doc.gov). If requesters
cannot access this, please call the number above for assistance.
FOR FURTHER INFORMATION CONTACT: Scott Hubinger, Senior Policy Analyst,
Office of Nonproliferation Controls and Treaty Compliance, Bureau of
Export Administration, U.S. Department of Commerce, (703) 605-4416.
SUPPLEMENTARY INFORMATION: On March 11, 1999, fifteen U.S. Senators, in
a letter to the President, requested that he take immediate action to
address the threat of increasing oil imports to our national security.
Subsequently, on March 12, 1999, eleven U.S. Senators and a member of
the House of Representatives, in two separate letters to the Secretary
of Commerce, raised similar concerns and directly requested that he
initiate an expedited review and investigation into the impact of low
oil prices and ever increasing oil imports on the United States
national security under the authority of Section 232 of the Trade
Expansion Act of 1962, as amended.
On April 28, 1999, the Department of Commerce self-initiated an
investigation under Section 232 of the Trade Expansion Act of 1962, as
amended, to determine the effects on the national security of imports
of crude oil and petroleum products. The investigation focused on two
issues. One, are imports of oil and petroleum products threatening to
impair the national security of the United States and two, if a
positive finding can be found that imports of crude oil and petroleum
products do threaten the national security, is a trade adjustment, as
provided for under Section 232, the appropriate means to address the
threat?
In conducting the investigation, the Department chaired an
interagency working group that included the Departments of Energy,
Interior, State, Treasury, and Defense, the Office of Management and
Budget, and the Council of Economic Advisors. The Department and the
interagency working group drew upon an extensive body of data and
analyses on the current and prospective status of the domestic
petroleum industry and the world oil market. The Department also
utilized written comments solicited from and provided by interested
parties in response to a Federal Register notice published on May 4,
1999. In view of the extensive amount of interagency and public comment
information available to it, the Department determined that an industry
survey or public hearing was not necessary.
On November 2, 1999, Secretary William Daley concluded his
investigation and submitted a report to the President. While concluding
that some improvements in U.S. energy security have occurred since
previous investigations in 1988 and 1994, the Department found that
petroleum imports continue to threaten to impair the national security.
As in previous investigations, the Department did not recommend the
adjustment of oil imports under Section 232 because the economic costs
of such a move outweigh the benefits, but rather recommended continued
efforts to achieve the policy goals set forth in the Department of
Energy's April 1998 Comprehensive National Energy Strategy. The
Executive Summary of the
[[Page 46428]]
Secretary's November 1999 report to the President entitled, the Effect
on the National Security of Imports of Crude Oil and Refined Petroleum
Products, is reproduced below.
Dated: July 18, 2000.
R. Roger Majak,
Assistant Secretary for Export Administration.
Executive Summary
Introduction
On March 11, 1999, Senators Domenici, Hutchinson, Inhofe,
Nighthorse-Campbell, Roberts, Sessions, Crapo, Nickels, Murkowski,
Craig, Burns, McConnell, DeWine, Brownback, and Bunning, in a letter to
the President, requested that he take immediate action to address the
threat of increasing oil imports to our national security. On March 12,
1999, Senators Bingaman, Breaux, Landrieu, Conrad, Enzi, Lincoln, Lott,
Dorgan, Baucus, Murkowski, and Burns, in a letter to Secretary Daley,
raised similar concerns and directly requested that the Department of
Commerce initiate an expedited review and investigation into the impact
of low oil prices and ever increasing oil imports on the United States
national security under the authority of Section 232 of the Trade
Expansion Act of 1962, as amended. Representative Istook made a similar
request.
In their letter to Secretary Daley, the Senators quoted from a 1999
survey by the Independent Petroleum Association of America, which
alleged that, since November of 1997, 193,000 marginal oil and gas
wells have been shut down with a loss in oil production of 360,000
barrels per day. The Senators stated that 24,000 domestic jobs have
already been lost in the oil industry and another 17,000 job cuts are
expected. Finally, the Senators addressed the concern that low priced
crude oil imports could lead to the permanent loss of a significant
portion of the United States domestic oil production capacity and
resource base.
On April 28, 1999, the Department of Commerce self-initiated an
investigation under Section 232 of the Trade Expansion Act of 1962, as
amended, to determine the effects on the national security of imports
of crude oil and petroleum products. The investigation focused on two
issues. One, are imports of oil and petroleum products threatening to
impair the national security of the United States? Two, if a positive
finding is found that imports of crude oil and petroleum products do
threaten the national security, is a trade adjustment, as provided for
under section 232, the appropriate means to address the threat?
Under Section 232, The Department has 270 days from the date of
initiation of an investigation to submit a report of findings and
recommendations to the President. Based upon an initiation date of
April 28, 1999, the Department has until January 29, 2000 to complete
its investigation and submit its report to the President.
Methodology
The Department chaired an interagency working group that included
the Departments of Energy, Interior, State, Treasury, and Defense, the
Office of Management and Budget, and the Council of Economic Advisers.
This report is based on a number of agreed-upon economic assumptions
including, inter alia, crude oil price levels, U.S. crude oil reserves
and production rates, economic growth rates, and inflation.
In determining whether petroleum imports threaten to impair the
national security, the Department reviewed key factors from the 1994
investigation as a starting point to determine whether they improved or
deteriorated. These factors include: (1) Domestic oil reserves; (2)
Domestic oil production; (3) Exploration and industry employment; (4)
Impact of low oil prices on the economy; (5) Current status of the
domestic oil industry; (6) Oil import dependence; (7) Vulnerability to
a supply disruption; (8) Foreign policy flexibility; (9) U.S. military
requirements; (10) Status of OPEC; (11) Transparency of oil markets;
(12); Breakup of the Soviet Union. The Department also reviewed new
factors that have emerged since the 1994 investigation, including: (1)
Temporary economic decline in East Asia; (2) Iraqi oil exports; and
(3). Non-OPEC offshore drilling.
The Department made use of the extensive data and analyses that
were already available regarding the current and prospective status of
the domestic petroleum industry and the world oil market. In addition,
the Department reviewed the Department of Energy's Comprehensive
National Energy Strategy, which, issued in April 1998, outlines five
major energy goals of the Administration. In view of this extensive
body of available data, the Department determined that an industry
survey was not necessary. The Department also drew upon the written
comments solicited from and provided by interested parties in response
to a Federal Register notice published on May 4, 1999.
Review of Key Factors From the 1994 Investigation
1. Domestic Oil Reserves
Since the 1994 investigation, U.S. proven crude oil reserves
declined by an estimated 0.5 billion barrels from 23.0 billion barrels
in 1993 to 22.5 billion barrels in 1998. The underlying physical
reality is that the United States has already developed the bulk of its
known and easily accessible low cost deposits and has decided against
developing other geological prospects such as the Arctic National
Wildlife Refuge and certain portions of the Outer Continental Shelf .
The reserves base reflects the structural geological and geophysical
reality, given present technology and economics.
2. Domestic Oil Production
The production outlook remains essentially the same as in the 1994
investigation. The United States is a high cost producer compared to
other countries because it has already depleted its known low cost
reserves. U.S. production of crude oil declined by 0.42 million barrels
per day (MMB/D) between 1994 and 1998 (from 6.66 to 6.24 MMB/D) and
fell below 6 MMB/D in early 1999. To offset this decline in production
and increasing consumption, imports have increased dramatically since
1994, rising by 1.64 MMB/D (1998 basis).
3. Exploration and Industry Employment
The Department did find some change in U.S. drilling and in oil and
gas industry employment between 1994 and early 1999. Levels of
employment in the extraction industry varied from a high of 337,000 in
1994 and a low in 1995 of 320,000, but increased again to 339,000 in
1997 and 338,000 in early 1998. Industry commenters provided anecdotal
information showing additional steep drops in employment and drilling
activity during 1998 and early 1999 due to the oil price decline. In
addition, Department of Labor statistics indicate a decrease in
extraction industry employment starting in the last half of 1998
(falling from 325,000 to 308,000) and continuing into 1999 (229,000 in
January and 291,000 in February). However, the total footage of
exploratory drilling, the number of well completions, and the number of
rotary rigs in use for oil and gas exploration increased between 1994
and 1998, albeit with significant variations from year to year.
Low oil prices are not the only reason for the long term historical
decline in industry employment, exploratory
[[Page 46429]]
drilling, and well completions. U.S. companies are drilling less
because they have made substantial gains in total productivity by
employing new exploration and drilling technology and by focusing on
the most promising geological sites based upon improved geological
science and technology. In addition, the high cost of off-shore
exploration and drilling, where most of the domestic exploratory
activity is occurring today, strongly favors the development and use of
advanced seismic mapping and analysis techniques in order to maximize
drilling productivity. Companies are also continuing to realize
productivity gains due to improvements in operations management.
4. Impact of Low Oil Prices on the Economy
The Department found that the economic consequences of low prices
resulted in positive benefits to the U.S. economy. Because the United
States is a net importer of oil, lower prices on balance helped the
economy. The public benefitted from lower prices for transportation
fuels and heating oil. For the economy as a whole, low oil prices
contributed to a reduction in inflation, a rise in real disposable
income, and an increase in the Gross Domestic Product.
5. Current Status of the Domestic Oil Industry
Low oil prices starting in November of 1997 and continuing through
early 1999 exacerbated the chronic cost-price squeeze problems faced by
independent producers who account for the largest share of lower 48
states oil production (40 percent). Consequences for the 7000
independents who operate in the U.S. include: assuming more debt;
scaling-down exploration activities; reducing their work force of
skilled labor; and shutting-in temporarily or abandoning certain oil
and gas producing wells.
The impact of low oil prices is particularly hard on small
producers operating stripper or marginal wells with an average
production of 15 barrels per day or less. These wells, which represent
over 300 million barrels of annual production, could be permanently
lost during a sustained period of low oil prices and high operating
costs.
The Department's efforts to analyze the impact of the 1998 price
decline on the smaller producers was complicated by the commenters'
failure to provide specific economic and technical information. Various
commenters argued strongly for the U.S. Government to provide financial
incentives to smaller producers, but no company or trade association
submitted economic and financial data regarding levels of profitability
and tax burden under various oil price scenarios. Nevertheless, the
1998 through early 1999 price drop, although temporary, did have a
severe impact on marginal oil and gas wells and raised concerns about
the ability of the United States to stabilize domestic oil production
and to achieve its natural gas expansion goals. Since the November 1997
price collapse, 136,000 oil wells are believed to have been shut-in
(non-producing), representing about 24 percent of all producing oil
wells. In addition, 57,000 gas wells are believed to have been shut-in,
about 19 percent of all gas wells. This data is based on anecdotal
information provided by industry (Independent Petroleum Association of
America). Note: About 20 percent of the U.S. gas supply (``associated
gas'') is associated with oil production and is therefore also impacted
by low oil prices.
6. Oil Import Dependence
The Department found that net U.S. imports have grown from 8.1 MMB/
D in 1994 to 9.7 MMB/D in 1998 and currently account for 51 percent of
domestic consumption compared to 45 percent in 1994. Imports from
Persian Gulf countries, which increased from 1.7 MMB/D in 1994 to 2.1
MMB/D in 1998, currently account for 22 percent of all U.S. petroleum
imports. The majority of U.S. imports, over 50 percent, are sourced
from reliable Western Hemispheric countries such as Canada, Mexico, and
Venezuela.
The Department found that the energy provisions of the recent trade
agreements between the United States and Canada have enhanced U.S.
energy security. Specifically, Article 605 of the North American Free
Trade Agreement (NAFTA) provides a number of reciprocal benefits that
provide for energy security in the event of a supply interruption.
These mutual benefits include: (1) Each country will not impose
restrictions on the delivery of energy and basic petrochemical supplies
during a supply interruption; (2) any shortfall in supply will be
shared equally among U.S. and Canadian markets based on historical
percentages; (3) each party will not impose higher export prices than
those charged domestically; and (4) there will not be a disruption of
the prevailing proportion of energy goods supplied, such as, for
example, between crude oil and refined products and among different
categories of crude oil and refined products. This unprecedented energy
cooperation provides significant security benefits for both nations,
and clearly demonstrates that the United States and Canada are
developing an integrated and secure North American energy market.
U.S. demand for imported oil is expected to continue growing
because of declining production by high cost small producers, who
account for the largest share of lower 48 states oil production, and
continued economic growth. The Energy Information Administration of the
U.S. Department of Energy (EIA/DOE) projects that, based on current
forcasts, net imports should increase to 12.2 MMB/D by 2005 and account
for approximately 58 percent of domestic consumption.
To the extent that the United States and other countries import
more oil in the future, EIA/DOE projects that they will turn
increasingly to OPEC countries located in the Persian Gulf which have
the largest amount of known low cost reserves and excess production
capacity. The OPEC producers in the Persian Gulf region, representing
42 percent of world crude oil exports in 1994, will account for
approximately 49 percent by 2010.
7. Vulnerability to a Supply Disruption
The Department found that unresolved socio-political and economic
issues in some Persian Gulf countries increase the probability of
future supply disruptions in the Persian Gulf region. However, the
Persian Gulf's largest producer, Saudi Arabia, has pursued oil
policies, including diversification of export routes and maintenance of
considerable excess production capacity, that serve to mitigate some of
these risks. Disruptions are possible in other regions, but the risks
to the United States and other importing countries are comparatively
less severe given the magnitude of Persian Gulf production and because
oil production facilities elsewhere are not as concentrated as they are
in the Persian Gulf.
The capability of the United States and the OECD countries to
offset a major oil supply disruption has not improved since 1994. The
U.S. is still vulnerable because: (1) Most of the spare production
capacity is still in the Persian Gulf region; (2) U.S. and OECD
government oil stocks today provide less protection from an
interruption than was the case in 1988 or 1994; and (3) There is
currently no substitute for liquid transportation fuels which account
for approximately two-thirds of all oil consumption in the United
States. During a major oil supply disruption, there could be
substantial economic austerity as a result of the decreased
availability of oil. This, in turn, could pose a hardship for the U.S.
economy.
[[Page 46430]]
8. Foreign Policy Flexibility
In both the 1988 and 1994 investigations, the Department found that
the dependence of our allies and trading partners on potentially
insecure sources of oil might affect their willingness to cooperate
with the United States during a major supply disruption. Some of these
concerns are mitigated by the participation of the United States in the
International Energy Agency (IEA), which groups together 24 members of
the Organization for Economic Cooperation and Development (OECD). The
principle purpose of the IEA is to fashion a collective response to
energy emergencies, which may include the coordinated release of the
emergency oil stocks that all IEA members are required to maintain.
However, increased market share forecasted for some OPEC countries, and
some Persian Gulf States, over the next 20 years, could make
cooperation by some oil consumers more difficult.
9. U.S. Military Requirements
The Department of Defense advises the Department that, under
current planning scenarios, the United States will be able to meet both
its direct and indirect military requirements for petroleum products in
the event of two nearly simultaneous major regional conflicts or a
major peacetime supply disruption.
10. Status of OPEC
Low world oil prices are only partially due to the fact that OPEC
members have been unable, until very recently, to coordinate production
levels among themselves. The urgent financial requirements of some OPEC
members has led them to compete for revenue and market share even if
this has meant accepting a lower per-unit price for their oil. However,
by mid-1998, declining prices set in motion renewed OPEC efforts to
reduce excess oil supplies. For the remaining months of 1998, announced
and realized production cuts were not clearly synchronized, and efforts
to reduce production had only modest success. More recently, OPEC
members have been more effective at reducing world production to
increase prices. Ten members of OPEC, excluding Iraq, pledged in March
1999 to cut production by 2.1 MMB/D. The compliance of these ten OPEC
members with announced production cuts was about 89 percent in July
1999. Oil prices have steadily increased since then due to these
production cuts and stronger overall worldwide demand. The Department
of Energy's Energy Information Administration projects that the cost
for imported oil (Refiner Acquisition Cost) will be $22.50 and $23.50
per barrel, respectively, for November and December of 1999 and average
$21.85 per barrel in 2000.
11. Transparency of Oil Markets
The growth of the futures market into a full-fledged commodity
market has made crude oil prices more transparent and less subject to
manipulation by foreign governments or OPEC. Prices are now determined
by the New York Mercantile Exchange (NYMEX), the International
Petroleum Exchange (IPE), the Singapore Mercantile Exchange (SIMEX),
and other commodity markets. The use of computerized trading, options,
and forward contracts has connected crude oil and refined product
markets and suppliers more closely than was the case in 1988 or 1994.
However, commodity markets, like all markets, are subject to volatility
and have the potential to react in ways which can harm U.S. oil
production.
12. Breakup of the Soviet Union
The end of the Cold War and the breakup of the Soviet Union has
reduced tensions around the world, including the Middle East. The
advancement of the Middle East Peace Process has also contributed to a
reduction of tensions in the region. Both of these developments have
reduced the probability of a conventional war that could have
jeopardized access to Middle East oil. In addition, oil production in
the former Soviet Union, primarily in the Caspian Sea area, is expected
to reach 7.6 MMB/D by 2005 and 13 MMB/D by 2020. Based on projected
demand, the region could become a net exporter of oil at approximately
7.9 MMB/D by 2020. These additions to the world oil supply and as well
as reduced tensions in the Persian Gulf region help to assure that
there will be stable supplies of oil and reasonable oil prices into the
future.
Review of New Factors Since the 1994 Investigation
The Department also evaluated several new factors which have or
will significantly affect worldwide petroleum supply and demand since
the 1994 investigation. Foremost among these factors are the following:
1. Economic Decline in East Asia
An economic crisis in East Asia started in the summer of 1997 and
continued to deepen throughout 1998. This, in combination with the
already weak economy in Japan, significantly reduced worldwide demand
for crude oil and petroleum products. The economic decline in turn led
to sharply reduced worldwide oil prices in 1998 and early 1999 and a
significant oversupply of crude. These factors contributed to the
decrease in U.S. production seen during the same time period.
2. Iraqi Oil Exports
As of August 1, 1999, the United Nations Security Council, within
the framework of UN-imposed sanctions on Iraq (mandated by UNSCR 661,
August 1990), has established the ``Oil-for-Food'' program ``as a
temporary measure to provide for the humanitarian needs of the Iraqi
people'' (UNSCR 986, April 1995). Thus, the United Nations Security
Council, within the framework of UN-imposed sanctions on Iraq, allows,
since February 1998, Iraq to export up to $5.256 billion worth of oil
in a six month period, up from $2 billion per six month period prior to
that date. Increased Iraqi oil exports, in total on the order of 2.0
MMB/D, were among the supply and demand variables which led to
appreciably lower oil prices for much of 1998 and early 1999. However,
the U.S. supports UN efforts to meet the identified humanitarian needs
of the Iraqi people and neither the U.S. nor the UN attempt to
influence world oil prices or markets via sanctions regimes.
3. Non-OPEC Offshore Drilling
Offshore oil exploration and production projects off the coasts of
the United States, South America, Mexico, Eastern Canada, and Western
Africa, and in the Gulf of Mexico, the Caspian Sea, and the South China
Sea are expected to produce significant volumes of oil and natural gas
early in the next century. Because drilling platforms are reserved so
far in advance, most of the worldwide projects are proceeding on
schedule even at relatively low oil prices. These increased sources,
while harmful to U.S. domestic production to the extent that they
increase world supplies and therefore possibly lower worldwide oil
prices, increase U.S. energy security by broadening the mix of possible
exporters beyond the control of individual countries or coalitions.
Conclusion
Since the previous Section 232 petroleum finding in 1994, there
have been some improvements in U.S. energy security. The continued
erosion of external threats to the Middle East and the continued
increase in non-OPEC production have enhanced U.S. energy security.
Additional discoveries of both inland and offshore oil reserves outside
[[Page 46431]]
of the Persian Gulf region have at least slowed OPEC's market share
growth.
Lower oil prices on balance benefit the U.S. economy. However,
reduced oil reserves, falling domestic production, and the relatively
high cost of U.S. production all point toward a contraction in the U.S.
oil extraction industry and increasing dependence on foreign imports.
Growing import dependence, in turn, increases U.S. and OECD
vulnerability to a supply disruption because non-OPEC non-Persian Gulf
sources lack significant excess production capacity. Furthermore, there
are at present no substitutes for oil-based transportation fuels.
Finding
The Department finds that petroleum imports threaten to impair the
national security.
Recommendations
The Department does not recommend that the President use his
authority under Section 232 to adjust oil imports. Ongoing programs and
activities crafted by the Administration to improve U.S. energy
security based upon other statutes and executive authorities are more
appropriate and cost effective than an import adjustment.
Section 232 requires the Secretary of Commerce and the President to
recognize the close relationship between the economic welfare of the
Nation and U.S. national security. As energy security affects the
economic welfare of the United States, energy security must be
considered in determining the effects on the national security of
petroleum imports.
The Department concurs with the conclusions of the 1994 and 1988
studies that, on balance, the costs to the national security of an oil
import adjustment outweigh the potential benefits. For example, an oil
import adjustment such as a tariff could result in the loss of a
significant number of jobs in many non-petroleum sectors. This, in
turn, would reduce real Gross Domestic Product (GDP). An import
adjustment would also diminish the competitiveness of our energy-
intensive export companies and strain relations with our close trading
partners who would most likely seek relief under North America Free
Trade Agreement (NAFTA) or World Trade Organization (WTO) rules.
The Clinton Administration recognizes the importance of U.S. energy
security. Since 1993, it has pursued the energy policy of reliance on
markets to allocate resources with selective government intervention to
ensure that certain highly valued societal needs--including the need
for energy security, environmental quality, and energy research--are
met. The policy recognizes that no cost-effective government action
could eliminate U.S. dependence on foreign oil entirely, but that the
following supply enhancement, energy conservation, and critical
research policies help to preserve our current oil and gas productive
capacity and limit that dependence. Accordingly, the Department
recommends continuing the policy goals set forth in the Department of
Energy's April 1998 Comprehensive National Energy Strategy as described
below.
Goal #1--Improve the efficiency of the national energy system by
making the most productive use of energy resources, enhance overall
economic performance, and protect the environment: The Administration
is working to achieve a more productive and efficient use of energy
resources, including electricity infrastructure, fossil fuel reserves,
and productive capacity for clean alternative fuels. The twin goals of
comprehensive electricity reform, as detailed in the Comprehensive
Electricity Competition Act (CECA) submitted to Congress on April 15,
1999, and increasing energy efficiencies in the transportation,
industrial, and housing sectors and in the generation and distribution
of electric power maximize the productive use of energy through market
competition and technological innovation. When implemented, these
measures will result in a more productive and efficient use of energy
and a decreased U.S. consumption of oil.
Goal #2--Prevent the disruption or decline of world energy supplies
and protect the U.S. economy from the harmful effects of a short-term
supply interruption or infrastructure failure: The Administration is
continuing its strong emphasis on emergency preparedness efforts and
the need to stabilize domestic oil production, including: arresting the
decline in domestic oil production by 2005; maintaining the readiness
of the Strategic Petroleum Reserve (SPR) to respond to threats of
disruption in world oil supplies; making unutilized SPR storage
capacity available for the mid-to long-term storage of commercial oil;
coordinating responses to supply disruptions through continued
cooperation with the member countries of the International Energy
Agency (IEA); diversifying sources of oil by working with industry to
increase the supplies of oil available to the world market; and
ensuring the integrity of the oil and natural gas supply infrastructure
with respect to emergency response capabilities.
Goal #3--Promote U.S. domestic energy production and use in ways
that respect national health & environmental values and improve public
health and local, regional, and global environments: The Administration
has pursued a balanced program to increase domestic energy production
in an environmentally responsible manner by: supporting policies to
allow the annual domestic natural gas supply to increase by as much as
6 trillion cubic feet (2.9 MMB/D oil equivalent) by 2010; supporting
research, design, and development to promote the use of advanced
technologies to recover more oil and gas from existing reservoirs
without environmental degradation; supporting the suspension, by the
Department of the Interior, of production requirements for stripper
wells producing less than 15 barrels per day on federal onshore lands
when oil prices are extremely low (this suspension temporarily expired
on July 26, 1999, when West Texas Intermediate (WTI) crude stayed above
$15/bbl for 90 days); supporting the Petroleum Technology Transfer
Council's ten regional centers and their December 1998 Industry Crisis
Action Plan to teach independent operators strategies for improving
cost efficiencies and identifying best practices; and accelerating the
development and market adoption of environmentally friendly
technologies through a combination of increased investments in
research, development, and early deployment programs.
The combination of increased natural gas utilization, the increased
use of renewable electrical technologies, the accelerated development
of biomass liquids fuel technology, and the recovery of more oil and
gas from existing reservoirs and the preservation of those reservoirs
will collectively reduce oil consumption and limit our dependence on
imported oil.
Goal #4--Expand future energy choices by pursuing continued
progress in science and technology to provide future generations with a
portfolio of clean and reasonably priced energy sources: Advances in
science and technology are essential in terms of the United States
achieving its economic, environmental and energy security objectives.
Technological innovation can significantly decrease the domestic
finding and development costs for natural gas and oil, thereby
preserving and expanding the domestic resource base and improving the
economics of extraction. These programs include: accelerating the
advanced oil recovery
[[Page 46432]]
program; increased support for the natural gas supply program,
especially for the new emerging resource program in methane hydrates;
conducting basic research to provide the foundation for technological
breakthroughs that are beneficial to energy development and
environmental protection; and continued budgetary increases over
current levels for technology partnerships with the private sector.
Goal #5--Cooperate internationally on global issues and develop the
means to address global economic, security, and environmental concerns:
The United States should continue its active and sustained
participation in multilateral and regional forums as well as bilateral
contacts with key suppliers, such as our NAFTA partners Canada and
Mexico, Norway, Nigeria, Venezuela, Saudi Arabia, and other major oil
producers. Achievement of this objective requires: promoting the
development of open, competitive international energy markets through
U.S. participation in multilateral groups such as the International
Energy Agency, the Summit of the America's Hemispheric Energy
Initiative, and the Asian Pacific Economic Council (APEC) energy
working group; working with our reliable neighbors in Canada and Mexico
to establish an efficient and integrated North American natural gas and
electricity system; promoting the development of worldwide crude oil
and natural gas transportation networks to move South American, Caspian
Basin, and Central Asian oil and natural gas, for example, to world
markets to further diversify world energy supplies; and emphasize free
trade and the promotion of American exports to help develop the world's
free market economy and prevent over reliance on any single region of
the world.
Other Issues
Regulatory Reform
The Department of Commerce's Bureau of Export Administration (BXA)
is in the process of reviewing its crude oil short supply regulations
and identifying reforms that would allow U.S. firms to be on equal
footing with their foreign competitors. BXA is reviewing a number of
changes, including: (1) Creating a license exception to allow the
export of crude oil to Canada and Mexico without an individual license;
and (2) establishing a license exception to allow the export of
California heavy crude oil sold, as part of bunker fuel oil mixtures,
to foreign ships visiting U.S. ports. The interagency group recommends
that BXA proceed expeditiously with its short supply reform package.
Industry Proposals
During the review, the Department received comments from oil
companies and trade associations about several possible modifications
to the Federal Tax Code that the commenters believe would provide
support for the domestic oil industry. The Department did not evaluate
these proposals as part of its Section 232 investigation. Instead, the
Department recommends that the National Economic Council evaluate the
industry proposals.
[FR Doc. 00-18965 Filed 7-27-00; 8:45 am]
BILLING CODE 3510-JT-P