Despite the high commodity prices enjoyed by both natural gas and crude oil producers, John B. Walker, chairman of the Independent Petroleum Association of America (IPAA), said that observers of the E&P sector shouldn’t conclude that all that glitters is gold.

“These high prices are probably masking some trends that are very disturbing in our industry,” said Walker, CEO of EnerVest Management Partners Ltd., which has acquired with institutional investors more than $800 million in oil and gas properties since November 1994.

“I think the immediate impact that I find most disturbing…is that the high natural gas prices are really caused by government and the anti-development forces. As a result of that, we are losing our industrial base to other countries,” Walker said in an interview with NGI. “We are also losing all of those thousands, if not millions of jobs associated with a lot of these industries that are being marginalized by the high price of natural gas.”

He noted that the problem touches almost all manufacturing industries, including glass, plastic, paper and fertilizer.

“We as an oil and gas industry are doing the best that we can, but we simply don’t have access now to where the oil and gas reserves are,” he said, noting that “it is the single most critical issue we are facing.”

He said U.S. oil production peaked in 1970 and natural gas production peaked in 2001. “We are either having to drill much deeper or having to look for much smaller reserve possibilities in both oil and natural gas. I think most of the people in the industry know that, but I am not sure that I think the public in general knows it,” Walker said. “If you sort of peel back the onion, we’ve got some serious problems…”

As for the environmental and anti-industry groups, Walker said, “They are very well funded because they are being backed by very large foundations such as Ted Turner’s foundation, Ben & Jerry’s group and the Rockefeller foundation. They are just randomly saying, ‘we don’t want you drilling anywhere on federal lands.'”

Walker said that if the environmentalists and the government are going to continue to block the industry from drilling for natural gas and oil in the United States, then the industry will have no alternative but to import gas from other countries.

What that boils down to are higher deficits. Oil imports currently represent 25% of the overall federal deficit, he said. “If you look out 20 years from now, oil and gas combined might be 40% or more of our overall federal deficit.”

It also means that approximately $50 billion will need to be spent on LNG infrastructure around the world to get more gas to the United States, he said.

“There are going to be times when [LNG] will cause problems with us as producers in terms of our gas prices and we are not going to like that,” he added. “But as an American, we have to recognize that it is one of the alternatives that we have.

“The sad thing is, we have 215 Tcf of reserves, but if we really look at the potential reserves in all of these federal lands, it’s many multiples of that.”

Walker added that it is possible that the coalbed methane in Alaska alone could account for 1,000 Tcf, while gas from the Rockies and from onshore East and West Coasts is probably 500 Tcf. He said that federally restricted production probably could account for an “80-year supply”, noting that his approximation is probably only a middle-of-the-road estimate of actual restricted reserves.

“There’s a lot of gas out there,” Walker said. “Our industry shouldn’t be suffering. We shouldn’t be having these volatile and high prices.”

Nevertheless, the government still has not learned. “Our leadership is really not far-sighted enough to understand that at least some features of this energy bill are absolutely important in terms of future production of oil and gas. This administration needs to be doing more relative to getting an energy bill out, and it’s not,” Walker said, adding that he doubts the energy bill will be passed by this Congress.

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