worldwide energy woes compounded, AAPG twice provided invited testimony
before Congress in March, with AAPG President Marlan W. Downey telling
the U.S. House Resources Committee the United States has an ample
supply of natural gas -- provided lawmakers take action positive
testifying later in the month was Naresh Kumar, vice chair of the
AAPG Committee on Resource Evaluation. Kumar testified before the
Subcommittee on Energy and Mineral Resources. Kumar was invited
to address the validity of the U.S. Geological Survey's resource
Kumar told the committee that since its formation,
CORE has consulted with the USGS on its 1995 National Assessment
of U.S. Oil and Gas Resources, the 1999 Arctic National Wildlife
Refuge 1002 Area assessment and the 2000 World Petroleum Assessment.
For all of these, Kumar told the committee that AAPG,
on the recommendation of CORE, "has not endorsed specific resource
numbers generated by the assessments, but has endorsed the sound
scientific process used to generate the probability distributions.
"Resources assessments are a vital planning tool
for policymakers and industry," Kumar said. "The agencies that perform
these assessments and track oil and gas resources and reserves need
continued support. They have done a good job to date."
Kumar also took advantage of the opportunity to underscore
Downey's earlier testimony concerning abundant energy resources.
David Applegate, of the American Geological Institute,
accompanied Kumar in his presentation before the subcommittee, along
with G. Warfield "Skip" Hobbs, president of the AAPG Division of
Professional Affairs. Applegate said Kumar answered questions from
congressmen for about an hour following his testimony.
At one point, Rep. Barbara Cubin, (R-Wyo.), chair
of the committee, made a comment on Kumar's comments on ample supply
and lack of access to prospective areas, citing Downey by name and
recalling the comments he made the week before.
Downey, invited on Rep. Cubin's behalf, told the
committee of ample U.S. onshore and offshore natural gas resources,
and the need for access to federal public lands.
Accompanied by Applegate and others, Downey told
the committee of studies showing a "more than adequate" resource
base to meet the projected needs. Downey, however, also told the
committee of roadblocks to access to the U.S. resources.
"Areas of highest immediate potential are in the
Gulf of Mexico, the Rocky Mountain basins and the deep basins in
Texas and Oklahoma. Other areas of importance include the offshore
East Coast, South Florida Basin and the North Slope of Alaska.
"Unfortunately," Downey's written testimony noted,
"not all of these areas are currently available for exploration
While Downey's written testimony provided specifics
of the natural gas situation, it was his brief, opening comments
spoken without notes that seemed to carry most impact with the committee,
according to observers.
He told the panel that the United States needs an
additional 1,000 rigs to be operating to meet future gas demand
estimates, approximately doubling the present number of active rigs.
"The good thing is that we do have enormous (gas)
resources undiscovered, unproduced but estimated in the U.S.," Downey
told the panel. "That is the good news. The bad is that we do not
get to go to Saudi Arabia or Quatar or Mexico or Venezuela for any
of those supplies as can do for oil.
"America has to solve its gas problems all by itself,
within its own boundaries, with possibly a little help from Canada."
In noting that it takes putting rigs to work to produce
the gas needed for the future, Downey said "we have another subtlety
to the problem. Shell won't help us, ExxonMobil won't help us, Arco
and BP Amoco won't help us. All the majors have left the domestic
onshore. The problem is going to be almost entirely with the small
mom-and-pop operators, the independent producers that are drilling
most of those thousands of rigs -- using those thousand rigs currently."
As to the mom-and-pop operators' ability to provide
the supply, Downey said "there is a world of difference in how they
need to operate in a tax system than the large companies. They are
capital short. They need to get their money back from each well
they drill before they can drill another one. Currently you have
to wait seven years to recover your expenses, your general expenses,
from drilling a well.
"That doesn't bother Shell or Exxon, but it does
bother small companies," he continued. "And something that allows
small companies to recover their cost the same year they start recovering
revenue would make a world of difference.
"No less tax to the government, no greater benefit
to the small company, but cash flow -- little companies live on
Rep. Cubin asked Downey about the gas potential in
the OCS off the northeast U.S. coast.
"Sure," Downey replied, "there is potential because
we haven't been allowed to explore there, but all you have to do
is go across the state line into Canada. They are finding all sorts
of gas in that same setting -- and thanks to Canada, they are keeping
the northeast U.S. warm with offshore Canadian gas while (the) U.S.
refuses to allow it to be drilled and produced from our own offshore.
I hope Canada stays friendly."
Downey's written comments said that action needs
to be taken to permit expanded exploration and development of these
currently restricted public lands.
"These lands were established to serve all of our
nation's citizens ...," Downey said. "The best way to serve the
interests of all citizens is to permit the development of vitally
needed natural gas resources on these lands, under careful registration."
Concerning taxation, the written comments stated
"It will take several years to mobilize the efforts of the oil and
gas companies, but Congress can assist by reviewing the 1986 Tax
Reform Act and addressing repeal of the Alternative Minimum Tax
and the restoration of the ability off the passive investor to expense
Intangible Drilling Costs against a revenue stream."
Those actions, Downey said "would go a long way in
assisting small companies and independents to generate the needed
capital to finance expanded exploration activities."