House Starts Debate on Energy Security Bill

Warning that "the impacts of the current energy crisis are just now beginning to be felt in places all across the country," House Resources Committee Chairman James V. Hansen, R-UT, opened hearings last Wednesday on energy legislation (H.R. 2436) that centers on tapping between five and ten billion barrels of oil from the Arctic Natural Wildlife Refuge (ANWR).

There is too much at stake, in economic terms, to emotionalize the debate "about how we as a nation can reach a balance between responsible development of our known, proven resources and the environment," Hansen said. "We have a responsibility to the small business owners, the farmers and ranchers, to those that ship our goods, teach our kids and protect our streets to make sure that their hard-earned dollars are not eaten up by skyrocketing fuel costs."

"American farmers across the country have suffered because of our lack of an energy policy," the committee chairman said, pointing to higher costs for fertilizers and diesel fuel. Also, it has become cost prohibitive to irrigate in many areas of the west. "Dairy farmers in the San Joaquin Valley have been forced to dump hundreds of thousands of pounds of milk because no cheese plants had the power to take delivery of their milk. While we can live without radios, tv's and air conditioning, we can't live without food. We should remember this as we discuss the energy policy of this nation."

Hansen noted the political and financial focus on high tech industries in recent years. "We are now witnessing the direct results of relying solely on a high-technology and service-based economy, while ignoring other sectors such as the agricultural and extractive industries which are the true creators of wealth in our society." He recommended "a dose of reality that includes admitting to ourselves that until the promises of clean, cheap abundant energy materializes from whatever source that may be, solar, wind or hydrogen, the engine that drives the world's economies will continue to rely almost entirely on fossil fuels."

Interior Secretary Gale Norton, the lead-off witness at the hearing for the proposed Energy Security Act which was unveiled Tuesday, pointed to the growing gap between consumption and production. In natural gas, for instance, while consumption is projected to grow by more than 50% over the next 20 years, production is only expected to grow by 14%. She said the ANWR leasing program, a key feature in the bill, would be carried out under the strictest environmental controls.

Other provisions of the bill would offer producers additional incentives to squeeze out every last drop of oil and natural gas from the maturer regions of the Gulf of Mexico, and would keep intact the moratoria that currently exists for certain Outer Continental Shelf regions in the United States.

The legislation makes clear it does not attempt to open any national park, monument or wilderness area to drilling or mining, nor does it attempt to lift the existing moratoria on offshore leasing along the Atlantic and Pacific coasts, and in the eastern Gulf of Mexico and North Aleutian Basin.

But it does propose to re-establish royalty-relief incentives to further spur development of deepwater leases in the central and western Gulf, and calls for the National Academy of Sciences to analyze the oil and gas resources in the Gulf and recommend incentives to "optimize" oil and gas supplies from the moratoria-free areas of the Gulf. The bill also seeks expedited reviews for onshore leasing, more flexible royalty-in-kind programs, and royalty relief for stripper oil and gas wells.

The bill, sponsored by Committee Chairman Jim Hansen (R-UT), Vice Chairman Don Young (R-AK) and Rep. W.J. "Billy" Tauzin (R-LA), also addresses energy transportation issues. It calls for a study of existing rights-of-way across federal lands to determine the capability to support new pipelines or other transmission facilities. In addition, it would create a task force to develop an interagency agreement to expedite the environmental review and permitting of interstate natural gas pipeline projects. The legislation contains several provisions aimed at increasing the use of renewable energy in the production of electricity. The committee has put off until the fall any attempt to pass electricity restructuring legislation.

Norton said she had "concerns about the potential cost of extending the Deepwater Royalty Relief Act provisions for two years. I understand that the Minerals Management Service has stated that there is no longer any need to provide incentives for production of oil and gas in water depths of less than 800 meters. I have also heard from industry that those incentives are, in fact, needed to sustain and increase the production levels of oil and gas that we have seen since enactment of the Deep Water Royalty Relief Act in 1995. Whatever is done in the short run, it does appear appropriate to ask the National Academy of Science to look into this issue, so that we can do what is best for the nation's long-term energy security."

Most of the testimony at last week's hearing was directed to the ANWR leasing program. Taking the opportunity to rebut the massive campaign by environmentalists against drilling in ANWR, Roger Herrera, representing Arctic Power, a grassroots, citizen's organization composed mostly of Alaskans, said the potential production is in the range of five to ten billion barrels of oil. Taking into account the conservative nature of the 5.7 billion barrel estimate by the U.S. Geological Service, "it is easy to believe that 10 billion or more barrels might be producible from the area. Such an amount would represent the largest new oil province found in the world in the past 30 years. The Caspian Sea area might prove the single exception to that, but it remains to be fully proven."

The problem with the USGS estimate "is not in the geological assessment of how much oil might be present, but rather in the economic and technical parameters which impact the figures." Herrera said the $25 oil price USGS used is "much too high. It does not take into account the huge cost efficiencies of the new arctic drilling technology already discussed. However, even more important, is the USGS estimate of how much oil can be taken out of a given geological reservoir. The expectation that only 37-38% of the oil present can be extracted is too low. The Prudhoe Bay field is now calculated to have 60-65% of its oil eventually produced. The Endicott field producing from a different, more difficult, geological horizon, will give up more than 55% of its oil, and the Alpine Field, which is the beneficiary of state of the art, 2001 technology, and which taps a "tight" reservoir, will produce over 50% of its oil."

Much of the technological change that can be recognized in the oil industry's operations over the past 30 years has resulted from ideas initiated on the North Slope of Alaska, Herrera said. These ideas include the treatment of waste materials, long step-out horizontal wells, coiled tubing drilling, use of ice pads and ice roads, and new light-weight drilling rigs.

He also pointed out that 75% of Alaskans, including the native Alaskans that live on the Coastal Plain, favor development."It is remarkable that the Coastal Plain area, despite the rhetorical superlatives used inaccurately to describe it, is one of the few federal land areas where the NIMBY syndrome does not apply. If the local viewpoint is so important in making decisions against drilling beneath the Great Lakes or offshore Florida, surely it should be the dominant consideration in opening the Coastal Plain!"

Environmentalists have focused on protecting the Porcupine herd of caribou that use the Coastal Plain, but Herrera pointed out that the herd has suffered massive declines in population even when it has been actively protected and managed by agencies dedicated to their survival. "The point about these huge statistical variations in caribou numbers is that neither oil development nor wildlife management has much influenced them. It is quite relevant, therefore, to worry about the Porcupine Caribou Herd decline, but it is probably quite irrelevant to suggest that a Coastal Plain oil field will in any way affect the population trends. The trend is clearly down for this herd, as it is clearly up for the adjacent Arctic Herds. Bearing in mind that there are almost twice as many caribou in Alaska as people, it is difficult to justify jeopardizing the nation's energy balance by excessive worry about the Porcupine Herd."

He commented, however, that "unfortunately the rules of engagement on this issue are more often emotional rather than factual.

Arguing against opening ANWR, Adam Kolton, Arctic Campaign Director of the Alaska Wilderness League, said the area afforded "the best opportunity to protect a complete range of arctic and sub-arctic ecosystems. It is the only place where, in one conservation system unit, America's northernmost forest, the highest peaks and glaciers of the Brooks Range, and the barrier islands, lagoons, braided rivers, and rolling tundra of the Coastal Plain could be protected."

Kolton said the Wilderness designation of the Coastal Plain will afford permanent protection to the more than 200 species that call the Coastal Plain home, including musk oxen, polar bears grizzlies, wolves and wolverines, and migratory birds that fly to or through four continents and nearly every state." Besides preserving the caribou herd, Kolton pointed out the United States is also party to a treaty on the conservation of polar bears, that obligates our nation to protect polar bear ecosystems with special attention given to denning and feeding sites. The Coastal Plain has the highest density of land-denning polar bears on Alaska's North Slope.

Meanwhile, on the Senate side, a western senator last week urged Capitol Hill lawmakers not to waste too much time on the issue of ANWR drilling. "I hope we don't get caught up dancing on the head of this [pin] called ANWR," because "frankly ANWR isn't going to happen in this Congress," said Sen. Byron L. Dorgan (D-ND) during a Senate Energy and Natural Resources Committee hearing Thursday.

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