Interior Secretary Gale Norton had good and bad news for the natural gas industry Tuesday. She said the department plans to take steps to speed up the permitting process for natural gas producers in the Rocky Mountain region, but she doused any flickering hope that producers might be given access to the off-limit regions of the Outer Continental Shelf (OCS) amid the concerns about gas supply and prices.

“The reality [is] that people are very concerned about offshore production. The political consensus has not been there for most states to support” lifting the existing moratoria to allow producers to drill off their coasts, Norton told energy policymakers and executives at the Natural Gas Roundtable in Washington, DC.

She noted the Bush administration has been “working closely” with the states towards this aim. “As technology changes and improves, there may be some opportunities for change in the future. But at this time I think it gets back to the need for industry…to do a better job of communicating” with the states and general public to change the current mind-set on offshore drilling, Norton said.

The existing Congressional moratoriums, which have been in place for almost 20 years, bar drilling in the gas-rich eastern Gulf of Mexico, and off the West and East Coasts.

Although existing prohibitions on OCS drilling likely would remain, she noted the agency was taking other actions to address the existing gas supply concerns. “We face a crisis as a nation because we’ve seen a sea change in the use of gas” over the past years.

In the drilling-active western Gulf, she noted that Interior expanded royalty relief for deep gas produced from shallow waters. “We believe significant gas resources exist more than three miles deep below existing shallow-water platforms in the Gulf of Mexico,” Norton said. She estimated that gas found from the deep underground formations could fuel the 56 million gas-dependent homes in the United States for four years, and could start flowing as early as 2005.

Pointing to Interior’s current five-year OCS program (2002-2007), Norton said it was expected to result in enough gas production to heat and cool the 56 million gas-reliant homes for two years.

Onshore, Norton said the department “[was] working to reduce the backlog” of applications for drilling, particularly in the Powder River Basin. It will be forming teams comprised of members from the Bureau of Land Management (BLM), U.S. Forest Service and the White House Council on Environmental Quality (CEQ) to specifically clear out the backlog of requests for drilling permits on federal lands.

Western producers earlier this year complained to Congress that they had to wait up to 137 days to get their permits, a process that should only take 30 days. Producers also claimed that significant restrictions on their leases prevented them from drilling. But Norton said that about 63% of the natural gas in the five western basins was available for drilling under standard leasing stipulations.

She noted an interagency study conducted earlier this year found the five western basins contain enough gas to fuel the 56 million gas-dependent homes in the U.S. for approximately 30 years.

Norton also believes a big source of supply in the future could be methane hydrates, which she described as frozen natural gas that is found in permafrost deep on the ocean floor. While the technically recoverable reserves of undiscovered traditional gas is estimated at 1,100 Tcf, she said the potential reserves of methane hydrates are 200,000 Tcf, or over 175 times more than traditional gas sources.

There are “still many technological hurdles” to be overcome with respect to methane hydrates, but Norton said some believe production could begin within a decade.

With respect to domestic gas, the issue is not one of supply, according to Norton. The U.S. Geological Survey estimates the United States has at least a 50-year supply of technically recoverable gas reserves, with more than half located on federal lands and waters, she said.

The existing challenge is to implement “reasonable policies for access” to these lands for producers. “We must work to build a new harmony” between the nation’s energy needs and environmental concerns, she said. Too often the public takes sides on these issues, but they “are not competing priorities.”

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