James D. Watkins
Secretary
Department of Energy
Washington, D.C.
As many as 200 federal lawmakers will meet later this summer to settle differences in House and Senate passed energy bills.
The outcome will benefit the U.S. oil and gas industries and the nation's consumers well into the next century.
This legislation, together with more than 90 administrative initiatives contained in President Bush's National Energy Strategy (NES), will lessen our dependence on foreign oil, stimulate an array of clean, domestic energy supply sources, guard against future oil price shocks, and give consumers more choices.
Among the U.S.'s abundant energy resources is a 35 year supply of clean natural gas and as much as 300 billion bbl of oil left underground by conventional technology.
To everyone concerned that the U.S., the world's third largest oil producer, imports 42% of its oil from potentially unreliable suppliers half a world away, those are resources begging to be utilized. To an industry that has lost over 470,000 jobs in the last decade, forsaking these resources makes no sense at all.
ADMINISTRATION'S ACTION
Taking full advantage of our ample supplies of domestic oil and gas is critical to meeting our need for secure energy sources while protecting the environment. The Bush administration is taking action to make this happen.
The president was instrumental in defeating a $15 billion tax on oil producers, importers, refiners, and consumers proposed by lawmakers who wanted to fill the Strategic Petroleum Reserve while avoiding hard budget decisions.
He prevailed in providing $1 billion in alternative minimum tax relief to independent oil and gas producers, part of the energy bill now before lawmakers that will help preserve domestic jobs and energy production.
The administration has launched a major program of reducing federal royalties for onshore stripper oil wells. Similar action is under consideration for high cost deepwater and Outer Continental Shelf oil and gas production.
In addition, the administration strongly supports rational deregulation of oil pipelines.
Last month, the Department of Energy announced selection of 14 winners in a $113 million cost shared program with industry aimed at getting more oil out of aging domestic oil fields. This program is one of the highest priority initiatives for boosting energy supplies identified in the president's NES.
With the same objective in mind, a second class of high priority reservoirs was designated for competition for $40 million in federal matching funds.
The entire program will target up to 10 classes of U.S. reservoirs for up to $1 billion of cost shared research and development by 2000. If the program is fully successful, it will increase domestic oil production by more than 2 million b/d.
GAS MARKET
To take greater advantage of natural gas, one of the president's first initiatives was the passage of legislation deregulating the sale of natural gas at the wellhead.
The NES proposed, and Congress essentially agreed, to improve natural gas transportation regulation by expanding access to pipeline services and moving toward competitive, market based rates. In addition, the approval process governing gas pipeline construction would be streamlined substantially.
With the administration's NES recommendations, natural gas use can increase by about 25%, from about 19 tcf in 1991 to more than 24 tcf in 2000. This increase is especially dramatic in the use of natural gas for generating electricity, doubling from about 3 tcf to 6 tcf in the next decade.
Greater competition in the generation of electricity will open important new opportunities for natural gas powered technologies.
A broader market for natural gas also can be expected thanks to the administration's strong support for alternative fuels in vehicles. For example, the federal government has already purchased more than 3,000 alternative fuel vehicles and thousands more will join the fleet in the next 2 years. Increased use of natural gas is one of the strategies for reducing air pollutants to comply with the Clean Air Act.
NATURAL GAS R&D
In April, the administration released for comment its Natural Gas Strategy which establishes a framework for federal natural gas research and development investments that are now well above $100 million/year.
This R & D program is designed to develop and demonstrate technologies that, if successful, will increase the amount of recoverable gas from certain reservoirs by as much as 25%. This work also could convert 45 tcf of currently unrecoverable gas resources into proved reserves and upgrade an estimated 70 tcf of low quality shut-in gas to pipeline quality gas.
Finally, the administration continues to work closely with the oil and gas industry to transfer our nation's excellent scientific skills to the industry.
Sound oil and gas policy can be built only on a foundation of regulatory and tax reform, better technology, and creation of conditions that will allow our energy industries to deliver competitively priced domestic energy while maintaining a clean environment.
The substantial benefits of the president's NES will become increasingly evident to energy producers and energy consumers in the years ahead.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
