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IPAA to Push for More Access To Restricted Lands

IPAA to Push for More Access To Restricted Lands

The Independent Petroleum Association of America won an "impressive" victory when Congress amended the Energy Policy and Conservation Act, a victory that may change where exploration and production development takes place in the future. The changes, said IPAA at its recent annual meeting in San Antonio, require the Department of Interior to begin a comprehensive inventory of government-controlled lands on which oil and gas are found.

The EPCA amendments are "an important first step in achieving a key association goal --- better access to natural resources." Part of that access to natural resources already has opened up in the Gulf of Mexico and has improved the bottom line for a lot of independents.

Advocating a continuation of royalty incentives to encourage more drilling in the deepwater Gulf of Mexico, IPAA Offshore Committee Chair Robert S. Boswell of Forest Oil said the expiring Deepwater Royalty Relief Act needs to be extended. His sentiments were echoed by Minerals Management Service director Walter Rosenbusch, who praised the success of the soon-to-expire act, saying it had "turned the Gulf of Mexico from a Dead Sea into a world-class producing province."

But the improved Gulf production has done little so far to solve the tight supply situation. In fact, the high demand for natural gas in the United States has led to a predicted supply shortage and the expectation of continued high energy prices --- both being criticized not just by the public but by government officials as well.

Pointing a long finger at the Clinton Administration, which he said restricted growth by limiting access to public lands, J. Larry Nichols, CEO of Devon Energy Corp., said that for the past eight years, the administration "was able to have its cake and eat it too" and has not had to answer to anyone about restricting exploration by limiting access. However, the public now wants answers --- and solutions --- as energy prices remain high and supplies remain tight, he said.

Dynegy Inc. CEO Chuck Watson painted an even bleaker picture. "When eastern cities with large populations start browning out and blacking out, people are going to start understanding this is a real problem." Watson said that the demand was "real," and predicted it would become "real important politically."

To reduce problems associated with exploration and development both onshore and offshore, the Texas Justice Foundation also is considering a lawsuit to remove several species from the U.S. Endangered Species Act, which make oil and natural gas development difficult.

MMS also is expected to appeal a federal judge's decision in IPAA v Armstrong that a lessee can deduct transportation costs from federal natural gas royalty payments. IPAA's Poe Legette told attendees that the Interior Department royalty program managers may use the U.S. False Claims Act to attempt to find anyone who has tried to either avoid or reduce his royalty liability.

Companies and government leaders from across North America, including Canada and Mexico, were represented at the conference. Anglica Fuentes, Mexico's natural gas IPAA president, said Mexico "likely would not become a net natural gas exporter any time soon." Fuentes said that Mexico's natural gas production cannot keep pace with 4.7 Bcf of new demand, which means the country will have to import 10% of its natural gas needs into the foreseeable future.

On a more positive note, Canada's IPAA president, William Friley, said that his country can supply 15% of U.S. gas demand because there is a "strong reserve base" there. Still, neighboring Alaska's natural gas potential faces problems getting the product to market. Choices still remain on transcontinental routes to ship the gas to U.S. and Canadian markets.

Predicting that natural gas was "going to lead the future for the independent producer," Dynegy's Watson said he expected growth to be in peaking demand in the summer months instead of the winter months. "That's pretty exciting because it allows us to use the existing infrastructure we already have."

Carolyn Davis, Houston

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