By LARRY NATION
AAPG Communications Director

'The Proverbial 'Doo Doo' Is Hitting the Fan'

Senate Panel Hears AAPG Views

AAPG Supply Recommendations

 Improve Petroleum Industry Access To Public Lands

• Lift the moratorium on OCS exploration and development.
• Open the eastern Gulf and Atlantic margin to area-wide leasing.
• Reform Department of Interior policies regarding access to public lands in the Rockies and the permitting process.
• Open ANWR Area 1002 to exploration.
• Amend the Federal Antiquities Act to prevent its misuse in restricting access to public lands.
• Balance the needs of all stakeholders in shaping public lands policy.
• Assure that there is no net loss of state and private land in creating new land restrictions.

 Streamline the Regulatory Process

• Reform the Clean Water Act and Endangered Species acts (especially those sections that pertain to wetlands).
• Limit the ability of the EPA to regulate drilling muds and hydraulic frac fluids as "hazardous wastes."
• Limit the extensive delays of the permitting process.

 Tax Reform

• Restoration of the IDC deduction for passive investors.
• Elimination of the Alternative Minimum Tax.
• Expensing of geological and geophysical costs in year incurred.
• Expensing of delay rentals in year incurred.
• Permanent suspension of net income limit for percentage depletion on marginal properties.
• Raise the depletion allowance provision to previous levels

AAPG's message concerning the abundance of gas resources, the current supply crunch and the need to open public lands to exploration was taken to the halls of Congress for the third time in six months, with the July 26 testimony of the Division of Professional Affairs president before the U.S. Senate Energy Committee.

G. Warfield "Skip" Hobbs, of New Canaan, Conn., was invited to testify by Alaska Sen. Frank Murkowski, chairman of the Senate Committee on Energy and Natural Resources.

Murkowski's letter of invitation read, "Your unique position as an experienced independent petroleum geologist from New England, as well as your AAPG credentials, make you a very credible witness on energy supply matters."

Hobbs' Senate committee testimony was the second time this year AAPG has provided its energy positions to lawmakers, with previous testimony given before the U.S. House Committee on Resources in mid-April.

The message to both committees underscored the need to open additional public lands on the OCS, in the Rockies and on the Alaskan North Slope to access the nation's abundant energy resources, and the ability of the petroleum industry to explore in an environmentally responsible manner.

Accompanying Hobbs was American Geological Institute's David Applegate, who was instrumental in providing statistical information and logistical support. The AGI Governmental Affairs program receives support from AAPG.

In noting that the dynamics of the current supply/demand equation for natural gas have resulted in surging natural gas prices, Hobbs said "some market analysts are predicting that a cold winter this year could result in a gas price spike over $7MMBTU. At current prices, residential gas consumers can expect a $200 to $300 increase in their winter gas-heating bill; and some can ill afford that cost."

He said that "the public must be made aware of the seriousness of the situation, and prepared for significant price increases and possible regional gas curtailments."

Hobbs also pointed out the irony of the price spikes in the face of "abundant natural gas resources able to fuel the country well into the 21^st century," citing resource statistics from the National Petroleum Council and the U.S. Geological Survey. "There is a huge domestic gas resource, yet access to much of this remaining resource is either closed, or so restricted that development is not economic."

Hobbs said, "the public has not had the will to permit access to the huge gas potential of its undeveloped public lands. Additionally, a federal regulatory maze has been created that discourages domestic petroleum exploration operations and investment."

In citing the AAPG recommendations for access to public lands, streamlining the regulatory process, and tax reform, Hobbs also noted "just like the Canadians, British, Brazilians, Norwegians, Qataris, Thais, Australians and many other petroleum-producing nations, Americans likewise can develop their offshore energy resources in environmentally sensitive areas in a safe and rational manner."

Hobbs closed by calling for a National Energy Policy that balances the interests of all stakeholders.

"If this is not done, and soon, some Americans will truly run the risk of 'freezing in the dark,'" he said. "Time is running out! The proverbial 'doo doo' is hitting the fan as we speak."

In responding to questions from Murkowski, Hobbs discussed the difficulty smaller independents have in raising drilling capital, even though commodity prices have risen significantly; the challenge of attracting and retaining skilled workers; and the distinction between declining proven reserves and "resources."

 Downloadable, complete text of the testimony.