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ANWR, Offshore Are Hot Political Topics Again

ANWR, Offshore Are Hot Political Topics Again

If you briefly closed your eyes during a House hearing on domestic energy policy last week, you would have thought you had been transported back in time to the early 1990s. The cast of characters --- former Energy Secretary James D. Watkins and former Congressman Phil Sharp --- were the same, and the issues they addressed - opening up the Arctic National Wildlife Refuge (ANWR) to drilling and lifting the offshore moratoria --- rang a very familiar tune.

Fast forward to 2000, and ANWR and drilling off the coasts of Florida and California are suddenly "in vogue again," said Rep. Ralph M. Hall of Texas, the ranking minority member of the House Energy and Power Subcommittee.

It's been eight years since the National Energy Policy Act of 1992 was passed, but still the "east and west offshore oil and gas [drilling] moratoria continue. The Arctic National Wildlife Refuge remains closed," remarked Watkins, now president of the Consortium for Oceanographic and Research Education, during a subcommittee oversight hearing last Wednesday that was called to assess the domestic oil and gas supply/price situation.

"We went through this [ANWR issue] in agonizing depth 10 years ago.....We felt very comfortable that we could do" exploration and production in the Alaskan region in an "environmentally sound" manner, he said.

".....I don't agree with [Rep. Frank] Pallone that we would destroy one of the great areas of the world" if drilling were allowed in ANWR. "I have been up to Prudhoe Bay.....It can be done. We have the modern technology to do it. The oil and gas companies up there have been responsible. And we ought to get on with it," Watkins said. "The gas that's available up there can be brought back down again through Alaska, and we can either sell it or use it at home."

He cautioned the House lawmakers on how they should approach ANWR. "If we go after the Arctic National Wildlife Refuge by itself, we will lose today politically. But if we put it in the context of what else we're doing.....we can win it."

Rep. Pallone of New Jersey opposes opening up ANWR. "The majority leadership's idea of an energy policy [is drilling in] ANWR," a move which he said "will do nothing to increase [our] energy security."

The House hasn't proposed an ANWR-related measure yet, but the Senate recently introduced an omnibus energy bill that, among other things, proposes to open up the Arctic Coastal Plain, a 1.5 million-acre section of ANWR, to oil and gas drilling.

Watkins also is a big supporter of removing the bans on drilling off the coasts of Florida and California. "...[W]ithout new offshore exploration on either coast, we [have begun] dusting off liquid natural gas depots again. Ten years from now I predict we will be decrying the fact that we are being held hostage by energy security problems to foreign imports of LNG."

Sharp, who is now associated with the Harvard Electricity Policy Group at Harvard University, agreed that it was time for the offshore bans to go. "I wish [they weren't] so.....I think [they're] ridiculous."

Indeed, Daniel Yergin, chairman of the Cambridge Energy Research Association (CERA), believes the United States "will need to connect [to] new frontier of gas development, including .....the Arctic" if it intends to meet a 30 Tcf market in the 2015-2020 time frame.

He estimated in "round numbers" that the U.S. will need to invest one half trillion dollars in the upstream natural gas business to get the "kind of supply that we need in 10 years." He noted that 50% more gas reserves will be required in this decade than in the previous decade.

The nation "is making a very big bet on the adequacy of future gas supplies without realizing it," Yergin said. "Fifty percent of our electricity today is generated with natural gas. In terms of proposed new capacity, that number goes up to 96%."

So far, "we've seen a slow supply response partly because of the oil and gas price collapse in the last couple of years. Greater investment is needed," he noted, adding that he expects gas supply to begin to pick up later this year. CERA believes "there is [enough] gas supply potential to meet the challenge of increased demand from power generation at a price that would not discourage market development."

But Yergin, as well as most of those who testified, cautioned "it is very important to avoid short-term intervention, government intervention in the market that would discourage investment. Moreover.....we need to consider how to facilitate natural gas development in such a way that [it would] support environmental objectives."

Sharp also urged lawmakers not to impose price controls on oil or natural gas, even though the "unsettling price swings" of this year raised questions about solely relying on the marketplace. "...[E]verytime we're turned to that, we've made very, very big mistakes."

Rep. Rick Boucher (D-VA) called for lawmakers to renew the Section 29 tax credit, which expires in late 2002, not only for oil, but for gas produced from unconventional sources. He urged that the credit be renewed prior to its expiration. If Congress fails to take this action, he warned that a lot of wells will be abandoned.

Early renewal of the Section 29 tax credit "makes a lot of sense politically" because Congress will be letting producers know ahead of time that it doesn't intend to let them down, Watkins noted. "In the same token, it isn't the answer to everything," he said, adding the credit mostly helps "mom and pop" producers, not the majors.

Susan Parker

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