If you briefly closed your eyes during a House hearing ondomestic energy policy last week, you would have thought you hadbeen transported back in time to the early 1990s. The cast ofcharacters — former Energy Secretary James D. Watkins and formerCongressman Phil Sharp — were the same, and the issues theyaddressed – opening up the Arctic National Wildlife Refuge (ANWR)to drilling and lifting the offshore moratoria — rang a veryfamiliar tune.

Fast forward to 2000, and ANWR and drilling off the coasts ofFlorida and California are suddenly “in vogue again,” said Rep.Ralph M. Hall of Texas, the ranking minority member of the HouseEnergy and Power Subcommittee.

It’s been eight years since the National Energy Policy Act of1992 was passed, but still the “east and west offshore oil and gas[drilling] moratoria continue. The Arctic National Wildlife Refugeremains closed,” remarked Watkins, now president of the Consortiumfor Oceanographic and Research Education, during a subcommitteeoversight hearing last Wednesday that was called to assess thedomestic oil and gas supply/price situation.

“We went through this [ANWR issue] in agonizing depth 10 yearsago…..We felt very comfortable that we could do” exploration andproduction in the Alaskan region in an “environmentally sound”manner, he said.

“…..I don’t agree with [Rep. Frank] Pallone that we woulddestroy one of the great areas of the world” if drilling wereallowed 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 companiesup there have been responsible. And we ought to get on with it,”Watkins said. “The gas that’s available up there can be broughtback down again through Alaska, and we can either sell it or use itat home.”

He cautioned the House lawmakers on how they should approachANWR. “If we go after the Arctic National Wildlife Refuge byitself, we will lose today politically. But if we put it in thecontext of what else we’re doing…..we can win it.”

Rep. Pallone of New Jersey opposes opening up ANWR. “Themajority 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 theSenate recently introduced an omnibus energy bill that, among otherthings, proposes to open up the Arctic Coastal Plain, a 1.5million-acre section of ANWR, to oil and gas drilling.

Watkins also is a big supporter of removing the bans on drillingoff the coasts of Florida and California. “…[W]ithout newoffshore exploration on either coast, we [have begun] dusting offliquid natural gas depots again. Ten years from now I predict wewill be decrying the fact that we are being held hostage by energysecurity problems to foreign imports of LNG.”

Sharp, who is now associated with the Harvard Electricity PolicyGroup at Harvard University, agreed that it was time for theoffshore bans to go. “I wish [they weren’t] so…..I think[they’re] ridiculous.”

Indeed, Daniel Yergin, chairman of the Cambridge Energy ResearchAssociation (CERA), believes the United States “will need toconnect [to] new frontier of gas development, including …..theArctic” if it intends to meet a 30 Tcf market in the 2015-2020 timeframe.

He estimated in “round numbers” that the U.S. will need toinvest one half trillion dollars in the upstream natural gasbusiness to get the “kind of supply that we need in 10 years.”Henoted that 50% more gas reserves will be required in this decadethan in the previous decade.

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

So far, “we’ve seen a slow supply response partly because of theoil and gas price collapse in the last couple of years. Greaterinvestment is needed,” he noted, adding that he expects gas supplyto begin to pick up later this year. CERA believes “there is[enough] gas supply potential to meet the challenge of increaseddemand from power generation at a price that would not discouragemarket development.”

But Yergin, as well as most of those who testified, cautioned”it is very important to avoid short-term intervention, governmentintervention in the market that would discourage investment.Moreover…..we need to consider how to facilitate natural gasdevelopment in such a way that [it would] support environmentalobjectives.”

Sharp also urged lawmakers not to impose price controls on oilor natural gas, even though the “unsettling price swings” of thisyear raised questions about solely relying on the marketplace.”…[E]verytime we’re turned to that, we’ve made very, very bigmistakes.”

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

Early renewal of the Section 29 tax credit “makes a lot of sensepolitically” because Congress will be letting producers know aheadof time that it doesn’t intend to let them down, Watkins noted. “Inthe same token, it isn’t the answer to everything,” he said, addingthe credit mostly helps “mom and pop” producers, not the majors.

Susan Parker

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