New Oil and Gas Study: Robust Oil and Gas Resources Could Be Developed for Consumers and Taxpayers (big opportunity for decision makers!)

By Dave Harbour -- February 25, 2010

At the NARUC Winter Meeting in Washington D.C. last week, a Study Group composed of regulatory commissioners, consultants, government and university economists, and non-profit association sponsors released their energy research report: ANALYSIS OF THE SOCIAL, ECONOMIC AND ENVIRONMENTAL EFFECTS OF MAINTAINING OIL AND GAS EXPLORATION AND PRODUCTION MORATORIA ON AND BENEATH FEDERAL LANDS
(Assessment of the Combined Relative Impacts of Maintaining Moratoria and Increased Domestic Onshore and Offshore Oil and Gas Resource Estimates).

The just released study, prepared by Science Applications International Corporation (SAIC) and subcontractor Gas Technology Institute (GTI), makes a resounding case for the federal government to consider exploration and production on land and offshore for the common good.  And far from being an ‘industry group’, the ‘Moratoria Study Group’ represented a formidable national body of public and private energy experts whose study found that consumers, the national economy, vast new employment potential  and national defense could benefit from plentiful, affordable and reliable domestic energy resources.

The study makes several important findings and public-policy points.

1. Increased Estimates of Domestic Oil and Gas Resources

The report increased government estimates of the U.S. domestic natural gas resource base from 1,748 Trillion Cubic Feet (Tcf) to 2,034 Tcf, and increased the estimate of crude oil resources from 186 billion barrels of oil (Bbo) to 229 Bbo.   It also revealed that a multi-trillion dollar impact on American citizens of not developing resources could result in increased energy imports; increased gasoline, natural gas and electricity prices; along with decreased jobs, gross domestic product and family disposable income.

2. Congress and President Removed Moratoria, but Resources Still Unavailable

“The previous Administration and Congress removed oil and gas moratoria on public lands over one year ago,” Study Group chair O’Neal Hamilton said, “but required actions to access the energy resources thought to exist there have not been taken.” (Hamilton is past Chairman of the South Carolina Public Service Commission and Chairman of the National Association of Regulatory Utility Commissioners’ NARUC Committee on Gas, which initiated the study in 2007.)

“Whether additional Federal lands should be leased for energy development–and under what conditions leasing should occur–is a matter for national energy policy decision makers,” Hamilton said.  “Our research allows policy makers to know the extent of the resource base and the effects that maintaining the restrictions would have on the country. Our public interest work is dedicated to giving decision makers information upon which they can rely in developing America’s national energy policy.”

3. Dramatic Negative Effects from Not Developing U.S. Resources

The technical model (see below) determines that maintaining traditional energy exploration and production moratoria on Federal lands would result in an alternative domestic energy future that, “increases the cost and restricts the availability of domestic oil products and natural gas” in all economic sectors and regions of the country.

According to the study, under the “Combined Comparative Case”, which combines the estimated increase in the oil and gas resource base with maintaining moratoria from 2009-2030, model projections show that[1]:

–        Cumulative domestic oil and natural gas production decreases by 15% and 9%, respectively.

–        Average natural gas price increases by 17% and average electricity prices increase by 5%.

–        Cumulative national real disposable income decreases by $1.163 Trillion ($4,500 per capita).

–        GDP decreases cumulatively by $2.36 Trillion ($1.16 Trillion NPV), an average annual decrease of 0.52%

–        Cumulative oil imports from OPEC countries increase by 4.1 Billion barrels.

–        Cumulative national payments to OPEC countries increase by $607 Billion ($295 Billion NPV).

–        If resources within the moratoria areas are not developed, there would be no new environmental effects within the U.S. jurisdiction attributable to development of those resources.  However, as a non-modeled item, the study observes that there could be environmental effects on domestic and international waters as a result of increased tanker transport of oil and gas imports and unknown environmental effects in countries from which the U.S. would import the resources.

Washington: Are You Listening?

Having served as vice-chairman of the Moratoria Study Group, last week I responded to a reporter’s position that “producing more domestic oil and gas would contribute to a higher level of global warming.”

The response was, “probably not.” Regardless of one’s stance on various global warming theories, the United States will continue to need fossil fuel. Indeed, based on supply-demand-statutes-regulations we will use a given number of barrels of oil and volume of natural gas. Not producing domestic fossil fuel will merely have the effect of exporting jobs, government revenue, national wealth and environmental effects to other nations willing to produce resources under milder environmental standards, for our use, in exchange for our national wealth and our jobs. That is an indisputable fact, not a position of advocacy supporting access to domestic energy resources.

When Congress and the President established the moratoria and restrictions against domestic oil and gas exploration and development in various areas over the last four decades, they did so for good reason. Some of those reasons may still be valid and some may not be.

For example: our offshore energy exploration and production technology has vastly improved over the decades; and, at no time over the last half century has the benefit of domestic energy production been so critically important to the survival of our way of life.

Our elected leaders have the responsibility of defending the economy and security of the nation. This new ‘moratoria study’ may be the single most important tool now available to Congress and the President as they balance the trade-offs between developing our own resources, and paying someone else to develop theirs.

Dave Harbour served as a volunteer and Vice Chairman of the Moratoria Study Group but presents this Op-Ed as his own opinion. He is a NARUC Commissioner Emeritus (Regulatory Commission of Alaska-Ret.), a former Chairman of the Alaska Council on Economic Education, the Anchorage Chamber of Commerce and the Hugh O’Brien Youth Foundation-Ak. He served as President of the American Bald Eagle Foundation and Alaska Press Club and is publisher of the blog, Northern Gas Pipelines. He has chaired numerous national energy forums in the U.S. and Canada, written hundreds of magazine and newspaper articles and delivered hundreds of speeches throughout North America.

Technical Note 1: Updated Oil and Gas Resource Estimates

In updating the resource base, the report estimated that:

• The domestic natural gas resource base on federal lands should be increased over previous estimates by 132 Tcf onshore and by 154 Tcf offshore – – a total estimated increase in domestic natural gas from 1748 Tcf to 2034 Tcf.  To give that number perspective, in 2009 the United States consumed 22.8 Tcf and, of that amount, imported 2.7 Tcf.
• The domestic crude oil resource base is estimated to increase, offshore, by 37 Bbo (excluding parts of Alaska); onshore, the crude oil resource base is estimated to increase by 6 Bbo for the Arctic National Wildlife Refuge (ANWR), with no estimated increase in the Lower-48 resource base – – a total estimated increase in domestic oil from 186 Bbo to 229 Bbo.  In 2009 the United States consumed 5.2 Bbo oil, produced 1.9 Bpo at home and imported 3.3 Bbo.

Technical Note 2: Study Based on National Energy Modeling System (NEMS)

In July 2007, NARUC’s Gas Committee and Board of Directors adopted a resolution authorizing the Association’s participation in a public-private partnership to study the impact of existing moratoria against energy exploration and production on federal lands, both on-shore and within the 200 mile limit around the Country’s coasts.[2]

The “Moratoria Study” used a Federal government modeling program relied upon by Congress and the Administration for analyzing the energy outlook under existing laws and projecting the impacts of new energy policy proposals.  The “NARUC-National Energy Modeling System (NARUC-NEMS)” version of the model was employed by the Study Group’s contractor, Science Applications International Corporation (SAIC)[3].

Study Group Chairman O’Neal Hamilton said SAIC’s report provides a comprehensive review and update of domestic oil and natural gas resources, and using the new resource estimates, projects the relative social, economic and environmental effects on the nation of maintaining various moratoria and restrictions on domestic oil and gas exploration and production through 2030.

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[1] Where financial impact is described, “actual” as opposed to “nominal” dollar estimates are used.

[2] See attached resolution, entitled: Developing Reliable Research Regarding the Social, Economic and Environmental Effects of Maintaining Domestic Energy Exploration and Production Moratoria On and Beneath Federal Lands.

[3] SAIC is a Fortune 500 scientific, engineering and technology applications company that uses its deep domain knowledge to solve problems of vital importance to the nation and the world in national security, energy and the environment, critical infrastructure and health.

NARUC Study Participants/Sponsors/Observers

NARUC, founded in 1889, is a nonprofit organization composed of governmental agencies engaged in the regulation of utilities and carriers (communications, energy, and water utilities) in the fifty States, the District of Columbia, Puerto Rico and the Virgin Islands. NARUC represents the interests of state public utility commissions before the three branches of the Federal government.

Moratoria Study Group Participants: Chairman G. O’Neal Hamilton (Chairman of NARUC’s Gas Committee and Past Chairman, South Carolina Public Service Commission); Vice Chairman Dave Harbour (NARUC Commissioner Emeritus, Regulatory Commission of Alaska-Ret.); Commissioner Victor Carrillo (Chairman, Texas Railroad Commission, NARUC/IOGCC); NARUC Executive Director Charles Gray; Commissioner Colette D. Honorable (Arkansas Public Service Commission, NARUC); Commissioner Bob Pickett (Chairman, Regulatory Commission of Alaska, NARUC); Marshall Johnson (NARUC Commissioner Emeritus, Public Service Commission of Minnesota-Ret.); Bob Keating (NARUC Commissioner Emeritus, Massachusetts Department of Public Utilities-Ret.); Don Mason, (NARUC Commissioner Emeritus, Public Utilities Commission of Ohio-Ret.); Doug Mood (NARUC Commissioner Emeritus, Montana Public Service Commission-Ret.); Commissioner Dan Seamount (Chairman, Alaska Oil and Gas Conservation Commission, IOGCC); Commissioner Timothy Simon (California Public Utilities Commission, NARUC); Commissioner Stan Wise (Georgia Public Service Commission, NARUC).

Moratoria Study Group Sponsors: National Association of Regulatory Utility Commissioners,  Interstate Oil and Gas Compact Commission, American Chemistry Council, American Gas Association, American Public Gas Association, American Petroleum Institute, BP America Production, Consumer Energy Alliance, Dominion Resources, DTE Energy, Edison Electric Institute, El Paso Natural Gas, EnCana Corporation, Independent Petroleum Association of America, Institute for 21^st Century Energy (U.S. Chamber of Commerce), Interstate Natural Gas Association of America, National Fuel Gas Co., Natural Gas Supply Association, National Petrochemical and Refiners Association, Noble Energy, Marathon Oil Company, Piedmont Natural Gas, Questar Corporation, Shell Exploration and Production Co., TECO Peoples Gas System.

Moratoria Study Group Official Observers: Michelle Michot Foss, PhD (Chief Energy Economist and Head, Center for Energy Economics, Bureau of Economic Geology, University of Texas), John Cogburn (Economist, AGL Resources), David E. Dismukes, PhD (Center for Energy Studies, Louisiana State University), Edward O’Brien (Economist), Richard P. O’Neill (Federal Energy Regulatory Commission), John Pyrdol (Department of Energy), A. Michael Schaal (Energy Information Administration), John W. Broderick (Senior Economist, Minerals and Realty Management, US Bureau of Land Management), Sam Fraser (Minerals Management Service). (Federal agency economists provided essential public service guidance and information contributing to the excellence and objectivity of the process but were deemed “non-voting observers” due to their public employment).

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