President George W. Bush and his administration share part of the blame for the US not having increased its domestic oil and natural gas supplies, the chairman of the US Senate Energy and Natural Resources Committee said May 2.
Sen. Jeff Bingaman (D-NM) also disputed Bush’s contention in an Apr. 29 press conference that Congress has impeded efforts to add new production. He cited the 2006 Gulf of Mexico Security Act, which he said made an estimated 4.74 tcf of gas and 1.26 billion bbl of oil available.
“Ironically, Congress needed to pass this law because of steps taken by the Bush administration,” Bingaman continued.
He said then-US Interior Secretary Gale A. Norton, during her first year in office in 2001, cut the size of a scheduled lease sale in the area by 75%. “With the stroke of a pen, she put off limits over 6 tcf of natural gas and over a billion bbl of oil from an area that had been proposed for leasing by the Clinton administration,” he said.
Bingaman suggested that while this was a politically popular stance for the administration of then-Florida Gov. Jeb Bush, the president’s brother, it did not increase domestic oil and gas production. “In fact, large areas of the OCS are currently off-limits to oil and gas development, not just because of congressional moratoria but also because of presidential withdrawals—first put in place in 1990 by then-President [George H.W.] Bush,” the senator said.
Taking the first step
“This President Bush could exercise real leadership by eliminating those presidential withdrawals. As it stands now, some 574 million acres of the [Outer Continental Shelf] are unavailable for leasing.” These contain “estimated undiscovered, technically recoverable resources of approximately 18 billion bbl of oil and 76 tcf of natural gas. The president could take the first step toward making these resources available any time he chooses by simply issuing the appropriate order revoking the presidential withdrawals,” Bingaman maintained.
Although Bingaman’s extended May 2 statement was framed as a response to Bush’s statements 4 days earlier, it also presented likely arguments against the bill that the Energy and Natural Resources Committee’s ranking minority member Sen. Pete V. Domenici (R-NM) and 17 cosponsors introduced May 1 to increase domestic oil and gas supplies. Its provisions include authorizing leasing within the Arctic National Wildlife Refuge as well as making more of the OCS along the Atlantic and Pacific coasts available.
“If opened for development, not one drop of oil will come from the Arctic Refuge for 10 years, and we will have to wait 20 years for maximum production,” Bingaman said. “The Energy Information Administration (EIA) has estimated that production from the Arctic Refuge would, at its peak, reduce our reliance on imports by only 4%, from 68% to 64%.”
Other federal acreage can and should be drilled, he argued, noting that of the 45.5 million onshore acres currently leased, more than 31 million acres are not producing. “Likewise, there are 33 million acres of the federal OCS that are under lease but not producing. Processing of federal drilling permits has surged over the past several years, more than doubling from 2001 to 2006. At the same time, the administration reported that in five key basins in the Rocky Mountain states, 85% of oil resources and 88% of natural gas resources are available for leasing and development,” he said.
“Congress has also funded important research and development programs to enhance domestic production. It is simply inaccurate finger-pointing to say that Congress is impeding oil and gas development and production in our nation,” Bingaman said.
Short-term actions
He said the US could take a number of short-term actions to reduce upward pressure on oil prices, starting with suspending crude oil purchases for the Strategic Petroleum Reserve. “It simply makes no sense to be putting $120 oil underground,” he observed.
Consumers also need to understand that they increase their motor vehicle’s fuel efficiency by about 7.5% for every 5-mph reduction in speed, by about 4% when the vehicle’s tires are properly inflated, and by about 2% with regular maintenance, according to Bingaman.
“Americans could use about 10-15% less gasoline just by adopting these common-sense measures. But they won’t ever do so unless there is a lot of publicity that makes clear that they can save the equivalent of 50¢/gal by taking these simple steps,” he said.
Bingaman outlined two medium-term steps he said would ensure adequate government oversight of oil markets. First, he said, the US Secretary of Energy should have a role. “It troubles me that the people at the New York Mercantile Exchange, on which oil is traded, and the Commodity Futures Trading Commission, which regulates that exchange, seem to be the only people who think that speculators are not influencing oil prices,” Bingaman said.
The energy secretary and the more than 500 employees at EIA who analyze data and develop forecasts should at least provide market insights and advice to CFTC regulators, he suggested. “Perhaps this could help the CFTC come to understand the role of speculators in the market in a manner that is more in line with conventional thinking among oil analysts,” he said.
Second, said Bingaman, markets that trade US oil or are located in the US should be subject to US regulation. “It is unacceptable that an exchange based in Atlanta, Ga., [trading] US crude oil that is delivered in Oklahoma is regulated in the United Kingdom [and is] not subject to the laws and regulations that we in Congress put in place to regulate the futures industry. It is also unacceptable that over-the-counter markets are regulated neither here in the US nor in the UK. There is no regulatory body that can see these over-the-counter transactions,” he said.
He said the proposal initially offered by Sen. John McCain (R-Ariz.) to suspend federal gasoline and diesel fuel taxes through the summer would come at the expense of fiscal common sense and sound energy policy. “We need to get serious about energy policy. It is an election year, and while there is a tendency to take rhetorical stands in the run-up to an election, the American people understand that. That’s one reason why they don’t always hold Congress in the highest esteem. Proposals that are mostly feel-good propositions will not fool voters for long, if at all,” Bingaman said.
