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Industrial, Producer, Utility CEOs Call on Congress to Open Up More Public Land for Drilling

An alliance of five CEOs from major natural gas production companies, industrial gas consumers and gas distributors urged the American public, U.S. Congress and the Bush administration last week to open up more public land in the United States to natural gas drilling and reduce the backlog of gas drilling permit applications at the Bureau of Land Management (BLM).

The country needs a multi-faceted energy strategy, they said at a press conference at the National Press Club in Washington, DC. The coalition of CEOs from Anadarko Petroleum, Devon Energy, Nucor, CF Industries and New Jersey Resources also called on Congress to appropriate more funds to hire additional staff at BLM to accelerate the processing of nearly 5,000 drilling permit applications that are currently stuck in the system.

Dan DiMicco, CEO of Nucor, America's largest steel producer and largest recycler, said high gas prices cost the steel industry an incremental $1 billion last year. "In 2005, there were times when Nucor was paying three to five times as much for natural gas than our competition," DiMicco said. He said each dollar increase in the price of natural gas costs the steel industry an additional $360 million annually.

"We as Americans were urged to use clean-burning natural gas to generate power and heat our homes and run our plants, thereby increasing demand for natural gas dramatically," DiMicco said. "But we were denied the opportunity to increase natural gas supply here at home or bring more in as liquefied natural gas from overseas. We can't have it both ways."

DiMicco called for significantly increasing drilling in the United States. "This is an absolute must," he said. "Congress needs to pass Sen. [Pete] Domenici's [R-NM] Lease Sale 181 bill as a first step to opening the many restricted areas for development. Congress also needs to expedite liquefied natural gas site approvals, and the administration needs to overcome the backlog on the permitting process for drilling on onshore lands."

DiMicco also called for greater energy conservation. "Some say we have a conflict between more drilling and greater conservation. I totally disagree. We need both more gas supply and more efficient use of gas. We also need to fully utilize new safer technology for alternative energy sources, clean coal and nuclear."

He said his company has cut about 80% of the energy cost of producing sheet steel, of which about 60 million tons are consumed per year in the United States.

Devon CEO J. Larry Nichols noted that more than 30% of the land in the United States, including offshore, is owned by the federal government, but only 1.5% of the onshore federal land is available for leasing to the oil and gas industry. "The area that is not available for leasing, according to the U.S. Geological Survey...has over 622 Tcf of natural gas.

"A study done just last fall found that if [BLM] just granted 3,100 of those [5,000 in backlogged] drilling permits in seven pilot offices that they have, in two years gas production would increase by 1,000 Bcf/year. That's enough to heat 12 million homes for 12 years. It's a lot of gas. Natural gas reserves would increase by 2 Tcf. Federal government royalties would increase by $2 billion a year."

What's needed, he said, is a larger permitting budget at the agency and better allocation of those financial resources so that the areas with the greatest permitting demand receive the funds needed to add staff and better manage the problem.

"The U.S. postal service has more workers in big cities where there is more mail," Nichols noted. "Our land management agencies deserve the same treatment. Imagine if a piece of mail sat for six months before being delivered."

Opening up Lease Sale 181 in the eastern Gulf of Mexico offshore Florida and Alabama offers the best near-term opportunity to increase gas supply, said Anadarko CEO James T. Hackett, who also noted that 90% of the Outer Continental Shelf is currently off limits to drilling due to Congressional moratoria. "We applaud Sens. Domenici and [Jeff] Bingaman [D-NM] for their efforts to open the remaining parts of Sale 181 and call on Congress to follow their lead," Hackett added. "Without a doubt, opening up 181 offers the best chance for significant new domestic natural gas production in the next five years. This would be a direct, positive action to increase supply and relieve high prices pressuring American consumers."

Hackett noted that the industry has had 10 major gas discoveries since 2001 on the sliver of the Lease Sale 181 area previously opened for drilling. "It has led to a platform that will be installed this year that will start producing 1 Bcf/d of gas..." only six years after the initial leasing. "This is a dramatic example of what can occur when the industry is actually allowed to try to help America and its competitiveness. But it's not enough."

The alliance of CEOs called on Congress and the administration to take immediate action to help increase U.S. gas supply. Also speaking at the press conference were Stephen R. Wilson, CEO of CF Industries Holdings Inc. and Laurence M. Downes, CEO of New Jersey Resources.

"I believe we are facing an energy crisis of epic proportions and in order to solve it, policy makers must take immediate action," said Downes. "What we need is a multi-faceted strategy that is focused on the environmentally sensitive development of our nation's reserve base, a strong emphasis on conservation and efficiency, and fuel diversity for future electric generation. Together, we need to encourage Congress to pass legislation to provide Americans with the relief they need."

According to House Majority Leader John Boehner (R-OH), there is something already in the works, but it's still too early to pin it down. "I don't think we are ready to proceed yet," Boehner said last Tuesday. "But I do believe that you will see energy legislation, and it is likely that the goal will be energy independence over the next 10 years." He said he had discussed the possibility with House Energy and Commerce Committee Chairman Joe Barton (R-TX) and with the administration.

"I think that the proposals that the administration has, [that] some of our members have, to look at energy independence in the U.S. within 10 years, has a lot of merit. And those things that, those policies that, we need to enact in order to achieve energy independence over the next 10 years ought to be priorities for this Congress," the majority leader told reporters at a Capitol Hill briefing.

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