As the U.S. girds for war with Iraq, domestic energy producers are quietly warning Congress and the Bush Administration about a looming crisis in domestic energy supplies. The problem stems not from a dearth of supply, but from environmental policies that have restricted access to resource-rich federal lands.
According to the Natural Gas Supply Association (NGSA), though gas inventories this year are relatively high, expected increases in demand for the 2002-2003 winter season could lead to a 60% increase over last year in wellhead gas prices.
Bill Transier, chairman of NGSA, sees price spikes ahead principally because of “roadblocks to supply” and restrictions on access to natural gas. “What were warning is that users out there may have to incur higher prices,” he said. “Economics 101 is telling this country to get its house in order.”
Matthew Simmons, a highly respected natural gas consultant, said the prospects for gas supply in the U.S. are “scary.” By Simmons calculations, restrictions on natural gas production could cause a drop to 45 billion cubic feet per day (bcfd) from the current rate of 53 bcfd. The U.S. economy soon will need about 70 bcfd. “At this point, I dont see how we get there,” he said.
The access problem is particularly acute in the West, where, since 1983, access to federal and state mineral reserves has declined by more than 65%. Today, nearly 40% of the potential natural gas in the Rocky Mountain region (dubbed by gas producers as the “Persian Gulf of gas”) is either closed to exploration or under heavy restrictions.
Earlier this year, the Senate rejected opening the Arctic National Wildlife Refuge to drilling. ANWR, according to the U.S. Geological Survey, holds between 6 to 16 billion barrels of recoverable oil and 34 tcf of natural gas. The new oil production could replace 30 years of American imports from Saudi Arabia.
Even when producers are granted access, they face an array of overlapping federal agencies, including the Bureau of Land Management, the Fish and Wildlife Service, and the National Park Service, all of which impose their own burdensome regulatory requirements. Moreover, producers are required to undergo time-consuming environmental reviews, which can delay lease approval for years.
The examples of obstruction can be downright silly, according to Diemer True, chairman of Independent Petroleum Association of America. Recently, a forest manager in the Lewis and Clark National Forest (designated a “multiple use” area, which by law can incorporate oil and gas drilling) concluded that natural gas drilling was inconsistent with development of the forest because it violated ones “sense of place.” New leasing was denied.
The same ridiculousness is inhibiting development of the so-called Outer Continental Shelf (OCS), or coastal waters of the Gulf of Mexico, the Eastern seaboard, and California. Congress has cordoned off 610 million acres in these areas. An estimated 52 trillion cubic feet of gas has been put off limits.
Last December, the Bush Administration, under pressure from environmentalists and the Presidents brother, Gov. Jeb Bush of Florida, drastically curtailed Lease Sale 181, a tract in the eastern Gulf of Mexico holding nearly 9 tcf of natural gas. In response to complaints that part of the leasing area was too close to the coastline, the Interior Department reduced the sale boundaries by 75%.
As a result, producers agreed to move into “deepwater” 100 miles offshore. Yet environmentalists werent content. They complained that sperm whales would be endangered by the seismic sonars drillers use to survey the ocean floor.
Sure enough, the Minerals Management Service, the federal agency that regulates oil and gas exploration in the OCS, began circulating drafts of rules in August to protect the whales. The rules included barring seismic tests if sperm whales are observed in the area and hiring government-approved staff to watch for whales.