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OCC's Bode Calls for Domestic Energy Policy

OCC's Bode Calls for Domestic Energy Policy

Oklahoma Corporation Commissioner Denise Bode is waiting for someone to be politically incorrect --- at least when it comes to setting up a domestic energy policy. She readily admits, however, that the problems that basically eliminated natural gas drilling for nearly two years in her state won't be solved overnight.

Encouraging Oklahoma's producers to drill, helping them to train new workers with tax incentives and above all, putting a strong energy policy in place at the national level so that prices don't fall off again are issues that weigh on Bode's mind every day.

Though oil production in Oklahoma is up slightly this year, Bode is more concerned about the drop in the state's natural gas production. OCC reported that while its oil production had increased 4.2% in April and May, natural gas production for the same period dropped nearly 11.4%.

"Obviously, we can't turn something around overnight," said Bode. "These problems started two years ago, and we didn't address it then, and now we're seeing the fallout."

Bode said that OCC is now beginning a "three-to-six-month process" to plan a course of action to encourage more drilling in the state, with tax incentives leading the laundry list of ideas.

"We want to be thoughtful about what we might do," she said, and OCC now is considering a plan to encourage more deep gas drilling. "It's a balancing act, because we've got the shallow guys drilling, who don't want to have the deep drilling and then be put at a disadvantage. So we have to work out a fair way so that no one is at a disadvantage."

Oklahoma currently has 21 gas-powered generating facilities on the drawing board, but Bode said that the state has to ensure there's enough supply before they are built. She worries, though, that without the facilities, the state could fall into a situation like California is in now, where demand is high but there is not enough supply.

"We (the state) are at a great advantage because right now, we export 70% of our gas to other states, so we have tremendous excess capacity," said Bode. "We have the gas, but we also have to consider at what price will we have the gas."

In May, natural gas prices averaged $2.34 Mcf, down 36 cents from April. It still was well above the May 1999 price of $1.71.

"While both crude oil and natural gas prices are up from last year, we still haven't overcome our infrastructure losses from the devastation of 1998's low prices," she said.

OCC also is concerned about the high depletion rate, which Bode called "fairly dramatic" in the state. "We really need to sit down and take the gloves off and plan correctly. Gas is in the ground, but we can't allow two years to go by without drilling."

For the first time, Bode thinks that the public sector is finally on the same page as the private sector. Though low energy prices appealed to consumers, they discouraged new investment, which in turn discouraged production. Eventually, the prices jumped when supply was low and demand shot through the roof. Industry has finally convinced consumers that they want natural gas, but "now we can't give it to them," she said.

"The consumers, and the producers, interests are absolutely identical now."

How can the problem be solved? With states doing what they can to encourage production, Bode puts a lot of what happens to level out supply and demand on national leadership, which she said has been lacking n its energy policies.

"We need national leadership, and we need someone who's willing to not necessarily be politically correct to say that the prices may have to go up to encourage more activity. There's so much we could do and several years ago, the industry started talking about this but nobody listened. They are listening now, especially after what we're seeing in California."

Oklahoma's energy sector also has been hard hit by a labor shortage, which Bode called "atrocious."

She said she sees "white collar petroleum engineers retraining for the telecommunications and dotcom industries." The rigs are there, too, but without qualified workers to run them, they sit idle. "Less than two years ago, some of these companies were borrowing money to make payroll. Now they've lost those guys they had, and they can't encourage anyone else to work. It's a huge issue."

Carolyn Davis, Houston

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