Executive Q&A: New NOIA head urges national energy policy debate

Thomas Fry III, the new National Ocean Industries Association president, says the US government should review its energy policy options next year.

Thomas Fry III, a former director of both the Minerals Management Service (MMS) and the Bureau of Land Management in the Clinton administration, recently resigned his BLM post to become president of the National Ocean Industries Association. Before his latest government service, Fry was a vice-president of American Natural Resources Inc., Dallas. He talked recently with OGJ Online Managing Editor Patrick Crow about challenges facing the industry.

OGJ Online: You've worked on both sides of the street on offshore issues, both with industry and at and the Department of Interior. How will this experience help you in your new job?

Fry: I don't really look at it as both sides of the street as much as the fact I have had the opportunity to spend some time at the MMS and learn a lot about the federal offshore, and what its issues and concerns are, and quite frankly the importance of the federal offshore as it relates to energy supply and energy issues in this country. The short answer is that I hope that experience stands me in good stead in this job.

OGJ Online: In recent years I don't recall anyone joining an oil industry association from the government, someone who had current, first-hand knowledge of how things work inside the government, how the winds are blowing, and what can be done as opposed to what cannot be done.

Fry: I wasn't aware of that. I have a background in the oil and gas industry having participated in parts of it, both in the private sector and the public sector in Texas and other states. While I didn't have any experience prior to my government experience in the federal offshore, I certainly have had private experience in oil and gas issues. Hopefully between the business experience, the oil and gas experience, and the MMS experience I can serve our members well.

OGJ Online: How many years were you MMS director?

Fry: I was at MMS for about 18 months. I'm not sure all of that was as director; it takes a while to get confirmed. I was at BLM 3 years, two of those as acting director or Senate-confirmed director. I resigned the day after Thanksgiving and I've been on the job here for a week. I retired from the federal government and had 1 week of retirement, and now I'm back at it.

OGJ Online: What are some of the issues facing NOIA?

Fry: NOIA has always been interested in the question of access to the federal outer continental shelf and the ability of industry to look at the shelf as a place where the energy demands of this nation can be met. As we look at the energy challenges for the future, one of the places any administration or any Congress is going to have to consider is the federal offshore. And I think that is going to be an issue we're going to be greatly involved in. There are always other kinds of issues, such as incentives and disincentives, but our primary interest is to make sure that as an industry we can be a positive force in America in trying to provide for the increasing energy needs of this country.

OGJ Online: Is there any chance of reversing or significantly improving the US policy of restricting offshore development in the next administration, whomever the president might be?

Fry: Having been down this road on the question of moratoriums back in my MMS days, I know that's a difficult issue both on Capitol Hill and within the administration. This year prices for natural gas are starting to increase and there are shortages of supply. We know we're delivering all the natural gas right now that can be delivered. We have prices in the $8-9/Mcf range in New York and prices in California that are even higher. The striking thing is that it is not just a question of the price being high. There is a real question whether there is enough natural gas available to run generators to create electricity. So I think as a nation we have to face up the fact that we do have shortages and we have to start replacing capacity for future generations. We're probably going to have a national debate on energy and where energy fits into those priorities of the future. I would not predict the outcome of that debate. I don't know how long that debate would last. But I think it's time to have a national debate about this to determine where we are going to find sources of energy for not only this generation but also for future generations.

OGJ Online: Do you think there will be any enthusiasm in Congress or the administration to open an energy debate?

Fry: It will be interesting to see. I would hope we could have a debate that is not about finger pointing, and a debate that doesn't blame this group or that group, whether it is industry or government. I hope we can take a very sober look at what the true facts are about the availability of pipelines, tankers, and oil and gas resources. We should look at those in a hard way and determine what's the best course for the future. As we look at a lot of these issues, we might be able to put a quick Band-Aid on some of them. But I think the responsible thing to do would be to try to look long-term so we don't have price spikes in the future and we don't have the threat of lost supplies. Maybe we can have that kind of debate as opposed to a finger-pointing debate.

OGJ Online: Do you see any particular challenges facing NOIA's member companies?

Fry: Of course, there is the challenge that the industry has to replace dwindling reserves. We have to take care of the decline of production and meet anticipated future needs. I think there is a real challenge facing this industry, not just from the technological standpoint of drilling and exploration in the deepwater Gulf of Mexico, but also in the transportation and storage of those resources. I think the next 10-15 years will be a very challenging time for our industry.

OGJ Online: MMS announced plans for Sale 181 last week. How did your membership react to the sale area and sale terms?

Fry: This sale has been long anticipated. It was part of the 5-year plan, so we have been aware of this sale for a good while. We are pleased that MMS has chosen to offer this sale. It is in compliance with some of the concerns that have been raised by Florida politicians. All of the leases that are off Florida are more than 100 miles from the shoreline. The area is very natural gas-prone. The need for additional natural gas reserves is very important to the country and I think it is important for the industry to have the opportunity, in an environmentally sensitive way, to go out and look for those reserves. We will be very supportive of this sale and some other sales like it.

OGJ Online: MMS is like a supertanker. Once it gets going in one direction it has a hard time changing course quickly. What are some of the things that you anticipate they'll be doing in the next few years?

Fry: They operate in terms of their 5-year leasing program. While there can be some tweaking around the edges relative to the structure of individual sales, their calendar is pretty well set for them in terms the kind of sales they will be having. One of the other issues the MMS is now working on, and will continue to work on, would appear to be the question of royalty relief in the Gulf of Mexico. The Deepwater Royalty Relief Act provisions have expired and obviously every lease that occurred prior to expiration is under that law. MMS is looking to ensure that the proper incentives are there for future lease sales. They think they can do that administratively without additional legislation. They think they can continue to encourage the kind of development that is necessary in the Gulf of Mexico. We look forward to working with them on that over the next few years. Also, very shortly, MMS will come out with a notice opening the debate on their recommendations for the next 5-year leasing plan, covering 2002 to 2007.

OGJ Online: Do you anticipate any significant changes or new directions at NOIA under your leadership?

Fry: No. The members have indicated to me their great pleasure with the very professional, seven member staff that NOIA has. I've had the chance to meet and start to get to know all of them. I'm most impressed with their capabilities, their energy, and their foresight. I would like all the people here to continue to do what they're doing. The only change around here is me. The policy of this office will not be changing and the people doing the job will not be changing if I can help it.

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