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[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]

 
ESTIMATED OIL AND GAS RESOURCE BASE ON FEDERAL LAND AND SUBMERGED LAND

=======================================================================

                           OVERSIGHT HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                         COMMITTEE ON RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             March 22, 2001

                               __________

                            Serial No. 107-7

                               __________

           Printed for the use of the Committee on Resources

 Available via the World Wide Web: http://www.access.gpo.gov/congress/
                                 house
                                   or
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                                 ______

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                         COMMITTEE ON RESOURCES

                    JAMES V. HANSEN, Utah, Chairman
       NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska,                   George Miller, California
  Vice Chairman                      Edward J. Markey, Massachusetts
W.J. ``Billy'' Tauzin, Louisiana     Dale E. Kildee, Michigan
Jim Saxton, New Jersey               Peter A. DeFazio, Oregon
Elton Gallegly, California           Eni F.H. Faleomavaega, American 
John J. Duncan, Jr., Tennessee           Samoa
Joel Hefley, Colorado                Neil Abercrombie, Hawaii
Wayne T. Gilchrest, Maryland         Solomon P. Ortiz, Texas
Ken Calvert, California              Frank Pallone, Jr., New Jersey
Scott McInnis, Colorado              Calvin M. Dooley, California
Richard W. Pombo, California         Robert A. Underwood, Guam
Barbara Cubin, Wyoming               Adam Smith, Washington
George Radanovich, California        Donna M. Christensen, Virgin 
Walter B. Jones, Jr., North              Islands
    Carolina                         Ron Kind, Wisconsin
Mac Thornberry, Texas                Jay Inslee, Washington
Chris Cannon, Utah                   Grace F. Napolitano, California
John E. Peterson, Pennsylvania       Tom Udall, New Mexico
Bob Schaffer, Colorado               Mark Udall, Colorado
Jim Gibbons, Nevada                  Rush D. Holt, New Jersey
Mark E. Souder, Indiana              James P. McGovern, Massachusetts
Greg Walden, Oregon                  Anibal Acevedo-Vila, Puerto Rico
Michael K. Simpson, Idaho            Hilda L. Solis, California
Thomas G. Tancredo, Colorado         Brad Carson, Oklahoma
J.D. Hayworth, Arizona               Betty McCollum, Minnesota
C.L. ``Butch'' Otter, Idaho
Tom Osborne, Nebraska
Jeff Flake, Arizona
Dennis R. Rehberg, Montana

                   Allen D. Freemyer, Chief of Staff
                      Lisa Pittman, Chief Counsel
                    Michael S. Twinchek, Chief Clerk
                 James H. Zoia, Democrat Staff Director
                  Jeff Petrich, Democrat Chief Counsel
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                    BARBARA CUBIN, Wyoming, Chairman
              RON KIND, Wisconsin, Ranking Democrat Member

W.J. ``Billy'' Tauzin, Louisiana     Nick J. Rahall II, West Virginia
Mac Thornberry, Texas                Edward J. Markey, Massachusetts
Chris Cannon, Utah                   Solomon P. Ortiz, Texas
Jim Gibbons, Nevada,                 Calvin M. Dooley, California
  Vice Chairman                      Jay Inslee, Washington
Thomas G. Tancredo, Colorado         Grace F. Napolitano, California
C.L. ``Butch'' Otter, Idaho          Brad Carson, Oklahoma
Jeff Flake, Arizona
Dennis R. Rehberg, Montana
                                 ------                                

                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on March 22, 2001...................................     1

Statement of Members:
    Cubin, Hon. Barbara, a Representative in Congress from the 
      State of Wyoming...........................................     1
        Prepared statement of....................................     2
        Article ``Oil rig sinks in Atlantic'' submitted for the 
          record.................................................    46
    Inslee, Hon. Jay, a Representative in Congress from the State 
      of Washington, Articles submitted for the record...........    84
    Kind, Hon. Ron, a Representative in Congress from the State 
      of Wisconsin...............................................     2
        Prepared statement of....................................     3
        Report ``Bush Energy Budget'' submitted for the record...     5
    Thornberry, Hon. Mac, a Representative in Congress from the 
      State of Texas, Letter from Dwayne Cochran submitted for 
      the record.................................................    49

Statement of Witnesses:
    Kallaur, Carolita, Associate Director, Offshore Minerals 
      Management, Minerals Management Service, U.S. Department of 
      the Interior...............................................    22
        Prepared statement of....................................    23
    Kumar, Dr. Naresh, Growth Oil and Gas, on behalf of the 
      American Association of Petroleum Geologists...............    30
        Prepared statement of....................................    31
    Leahy, Dr. P. Patrick, Associate Director for Geology, U.S. 
      Geological Survey, Department of the Interior..............    12
        Prepared statement of....................................    13
        Response to questions from Congressman Kind submitted for 
          the record.............................................    44

ESTIMATED OIL AND GAS RESOURCE BASE ON FEDERAL LAND AND SUBMERGED LAND: 
             HOW MUCH OIL AND GAS CAN THESE LANDS PRODUCE?

                              ----------                              

                        Thursday, March 22, 2001

                        House of Representatives

              Subcommittee on Energy and Mineral Resources

                         Committee on Resources

                             Washington, DC

                              ----------                              

    The Subcommittee met, pursuant to call, at 2:20 p.m., in 
Room 1334, Longworth House Office Building, Hon. Barbara Cubin 
[Chairman of the Subcommittee] presiding.

 STATEMENT OF THE HONORABLE BARBARA CUBIN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF WYOMING

    Mrs. Cubin. The oversight hearing by the Subcommittee on 
Energy and Mineral Resources will please come to order. The 
Subcommittee is meeting today to hear testimony on the 
estimated oil and gas resource base on Federal land. How much 
oil and gas can these lands produce?
    Under Committee rule 4(g), the Chairman and Ranking 
Minority Member can make opening statements. If any other 
Members have statements, they can be included in the hearing 
record under unanimous consent.
    The Subcommittee meets today in our second oversight 
hearing on issues concerning public lands, energy and mineral 
resources. Last week we heard testimony on the extent to which 
public lands and the outer continental shelf may be accessed to 
explore for and produce oil and natural gas supplies. Today we 
hear from the two Federal agencies who are charged with making 
objective estimates of the U.S. oil and gas resource base both 
onshore and offshore. These are the U.S. Geological Survey and 
the Minerals Management Service respectively. An expert 
representing a professional society of oil and gas geologists, 
which has examined the methodology of these agency assessments, 
will testify as well.
    As Congress and the Executive Branch deliberate and develop 
a national energy strategy, it is fundamental that we 
understand the potential of our Nation's own energy resources 
to meet forecasted demand. And for the Resources Committee, 
with jurisdiction over public lands and minerals, we must 
understand the potential of BLM and Forest Service-administered 
lands to host oil and gas deposits. If prospectively valuable 
lands are made available for seismic work to be followed by 
exploration drilling, what is the potential to discover 
reserves and actually supply domestic demands from these public 
lands?
    Last week we spent a lot of time on the dais arguing with 
each other about the availability of BLM lands for oil and gas 
leasing. You will recall the infamous 95 percent discussion. I 
truly believe that that figure is wrong, but that is beside the 
point. I think that what we did last week was a fool's errand, 
because no one can deny the simple truth we face today: our 
constituents' natural gas bills are too expensive because the 
demand for the commodity is outstripping the long-term supply. 
That fact is not in dispute.
    These available public lands, including the outer 
continental shelf, are not producing sufficient gas supply to 
meet demand. But what is the likelihood these public lands 
could meet our increasing demands if barriers to exploration 
and development were minimized or eliminated, resulting in 
cheaper energy for all our constituents? That is what we hope 
to find out today.
    [The prepared statement of Mrs. Cubin follows:]

  Statement of The Honorable Barbara Cubin, Chairman, Subcommittee on 
                      Energy and Mineral Resources

    The Subcommittee meets today, in our second oversight hearing, on 
issues concerning public lands energy and mineral resources. Last week, 
we heard testimony on the extent to which public lands and the outer 
continental shelf may be accessed to explore for and produce oil and 
natural gas supplies.
    Today, we shall hear from the two Federal agencies who are charged 
with making objective estimates of the U.S. oil and gas resource base 
both onshore and offshore. These are the U.S. Geological Survey and the 
Minerals Management Service, respectively. An expert representing a 
professional society of oil and gas geologists, which has examined the 
methodology of these agencies' assessments will testify as well.
    As Congress and the Executive Branch deliberate and develop a 
national energy strategy, it is fundamental that we understand the 
potential of our nation's own energy resources to meet forecasted 
demand. And for the Resources Committee, with jurisdiction over public 
lands and minerals, we must understand the potential of BLM and Forest 
Service-administered lands to host oil and gas deposits. If 
prospectively valuable lands are made available for seismic work to be 
followed by exploration drilling, what is the potential to discover 
reserves and actually supply domestic demand from these public lands?
    Last week, we spent a lot of time on the dais arguing with each 
other about ``availability'' of BLM lands for oil and gas leasing. You 
will recall the infamous 95 percent discussion. I truly believe it was 
a fool's errand to do so because no one can deny the simple truth we 
face today: our constituents' natural gas bills are too expensive 
because the demand for the commodity is outstripping the long-term 
supply. That is a fact not in dispute.
    These ``available'' public lands, including the Outer Continental 
Shelf, are not producing sufficient gas supply to meet demand. But what 
is the likelihood these public lands could meet our increasing demand 
if barriers to exploration and development were minimized or 
eliminated, resulting in cheaper energy for all our constituents? That 
is what we hope to find out today.
                                 ______
                                 
    Mrs. Cubin. The Chair now recognizes Mr. Kind, the Ranking 
Member, for any statement he might have.

   STATEMENT OF THE HONORABLE RON KIND, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF WISCONSIN

    Mr. Kind. Thank you, Madam Chair. And I want to welcome the 
witnesses for your testimony here today. We are looking forward 
to it.
    This afternoon we do plan on taking testimony on the 
estimated oil and gas resource base on Federal lands and 
submerged lands. During the Subcommittee hearing last week, it 
became clear that there is a great need in our debate on 
national energy policy for, as one witness put it last week 
during the testimony, for an intellectual honesty in 
determining what those reserves are, the potential for oil and 
gas energy on Federal lands.
    In this regard I do welcome your testimony here today, both 
USGS and the Minerals Management Service, on your estimates of 
the oil and gas potential. But having said that, I remind my 
colleagues that oil and gas and our increased reliance on 
fossil fuels generally will not solve our long-term energy 
needs in this country. For instance, solar power, wind 
turbines, geothermal sources can and should contribute to 
meeting our energy needs. We need to get serious about 
developing these alternative and renewable energy sources for 
our long-term energy needs in this county.
    Harnessing more of the Earth's own heat could offer one 
solution to our energy crunch. Geothermal energy is abundant, 
clean and virtually inexhaustible. According to a recent 
article in the Christian Science Monitor, geothermal energy 
development in the U.S. is at a virtual standstill today. 
However, in other less developed parts of the world where 
geothermal resources are more competitive with other energy 
alternatives, its use is on the rise. Developing our geothermal 
resources could lessen damage to forests and thereby reduce air 
pollution and the greenhouse gas effect.
    And most geothermal scientists believe that the annual heat 
emitted or otherwise lost from the Earth is enormous, 
equivalent to 10 times the annual energy consumption of the 
United States, and more than enough power, more than enough, to 
power all the nations of the world combined, if it can be 
harnessed and harnessed cost-effectively.
    And so I again welcome the witnesses here today. I would, 
Madam Chair, take this opportunity to introduce for the record 
with unanimous consent a report that Minority Leader Dick 
Gephardt released today offering an alternative long-term 
energy proposal in the country. That report is titled The Bush 
Energy Budget: The Edsel Plan for the 21st Century. So without 
objection, I would like to include that in the record today.
    Mrs. Cubin. Without objection, so ordered.
    [The prepared statement of Mr. Kind follows:]

Statement of The Honorable Ron Kind, Ranking Democrat, Subcommittee on 
                      Energy and Mineral Resources

    This afternoon we meet to take testimony on the estimated oil and 
gas resource base on Federal Land and submerged lands. During the 
Subcommittee hearing last week, it became clear that there is a great 
need in our debate on a national energy policy for, as one witness put 
it, ``intellectual honesty'' in determining the potential oil and gas 
energy resources of the Federal lands.
    In this regard, I welcome the testimony of and opportunity to 
question the US Geological Survey and Minerals Management Service on 
their estimates of oil and gas potential.
    That said, I remind my colleagues that oil and gas and our 
increased reliance on fossil fuels will not solve our energy crisis. 
For instance, solar power, wind turbines, and geothermal resources can 
and should contribute to meeting our energy needs. We need to get 
serious about developing alternative and renewable energy sources for 
our long-term needs.
    Harnessing more of the earth's own heat could offer one solution to 
our energy crunch. Geothermal energy is abundant, clean, and virtually 
inexhaustible. According to a recent article in the Christian Science 
Monitor, geothermal energy development in the US is at a virtual 
standstill. However, in other, less developed, parts of the world, 
where geothermal resources are more competitive with other energy 
alternatives, its use is on the rise. Developing our geothermal 
resources could lessen damage to forests and thereby reduce air 
pollution and the greenhouse-gas effect. Most geothermal scientists 
believe that the annual heat emitted or otherwise lost from the earth 
is enormous, equivalent to ten times the annual energy consumption of 
the United States and more than enough to power all of the nations of 
the world if it can be harnessed.
    So I would hope that the Chair schedule as soon as possible an 
oversight hearing on alternative energy resources that can be obtained 
from our Federal lands.
                                 ______
                                 
    [The ``Bush Energy Budget'' follows:]
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    Mrs. Cubin. Now I would like to recognize the panel of 
witnesses. Our first witness will be Dr. P. Patrick Leahy, an 
Associate Director for Geology with the United States 
Geological Survey; second, Ms. Carolita Kallaur, who is the 
Associate Director of Offshore Minerals Management with the 
Minerals Management Service. It is nice to see you again. And 
our third witness, Dr. Naresh Kumar--I want to say it right, 
okay--from Growth Oil and Gas, on behalf of the American 
Association of Petroleum Geologists.
    As I explained in our first hearing, it is the intention of 
the Chairman to place--no, I am not going to do that.
    So now I am happy to recognize Dr. Patrick Leahy to testify 
for 5 minutes. The timing lights are on the table, and they 
will indicate when your time has concluded. Your entire written 
statement will be included in the record.
    Dr. Leahy.

STATEMENT OF P. PATRICK LEAHY, ASSOCIATE DIRECTOR FOR GEOLOGY, 
       U.S. GEOLOGICAL SURVEY, DEPARTMENT OF THE INTERIOR

    Mr. Leahy. Thank you, Madam Chairman and distinguished 
members of the Subcommittee. Thank you very much for this 
opportunity to present, on behalf of the U.S. Geological 
Survey, testimony regarding our assessment of oil and gas 
resources nationally, our assessment of the 1002 area of the 
Arctic National Wildlife Refuge, and our assessment strategy of 
Federal lands as called for in the recently enacted Energy Act 
of 2000. I will summarize my written statement in the interest 
of time.
    Within the Federal Government, the USGS is responsible for 
assessing undiscovered oil and gas resources of all onshore and 
State offshore areas of the Nation. In February 1995, the USGS 
released the National Assessment of the United States Oil and 
Gas Resources. We are updating that assessment in selected 
regions thought to have high potential for undiscovered natural 
gas, including coal-bed methane and gas hydrate. This update 
will be completed in 2004, with interim products available in 
early 2002. The updated assessment will include allocations of 
undiscovered oil and gas resources to Federal lands.
    Additionally the USGS is completing a National Coal 
Resource Assessment during 2001. And, in fact, some of these 
assessments of selected areas have already been released. The 
1995 USGS assessment of the Nation's undiscovered oil and gas 
was conducted in collaboration with the State geological 
surveys, the Minerals Management Service, and other Federal 
agencies and industry geologists under auspices of the American 
Association of Petroleum Geologists. Assuming existing 
technology, there are approximately 112 billion barrels of 
technically recoverable oil onshore and in State waters.
    The technically recoverable conventional natural gas equals 
716 trillion cubic feet. When one includes the unconventional 
gas in the estimate, the total increases to 1,074 trillion 
cubic feet. The total technically recoverable oil and gas 
resource base onshore and in State waters of the United States 
is displayed in the table on page 2 of my written statement.
    In 1998, the USGS published a report that provided 
estimates of volumes of undiscovered oil and gas on Federal 
lands based on the 1995 USGS Assessment. Estimates of oil in 
undiscovered conventional fields range from 4.4 to 12.8 billion 
barrels, with a mean value of 7.5 billion barrels.
    Estimates of technically recoverable gas in undiscovered 
conventional fields range from 34 to 97 trillion cubic feet, 
with a mean value of 58 trillion cubic feet. As before, when 
unconventional gas resources are included, the volume 
increases.
    These estimated volumes are also listed in my written 
testimony on page 3.
    To my left is a poster that shows the 112 billion barrels 
of oil and the 1,074 trillion cubic feet of gas. This is a pie 
chart demonstrating the percentage that is provided from the 
four sources, the proved resources shown in green, the reserve 
growth in known fields shown in the darker green, the 
undiscovered oil on Federal lands shown in red, and the 
undiscovered oil in non-Federal lands shown in the blue.
    The Alaskan National Interest Lands Conservation Act, 
ANILCA, established the Arctic National Wildlife Refuge in 
1980. In section 1002 of this Act, Congress deferred a decision 
regarding future management of the 1.5-million-acre coastal 
plain, the so-called 1002 area, in recognition of the area's 
potential for oil and gas resources and its importance as a 
wildlife habitat.
    USGS released a petroleum resource assessment of the 1002 
area in 1998. Based on this assessment the total quantity of 
technically recoverable oil within the 1002 area is estimated 
to be between 4.3 and 11.8 billion barrels, with a mean value 
of 7.7 billion barrels. In the Energy Act of 2000, section 604 
requires the Secretary of the Interior to conduct an inventory 
of energy resources and restriction or impediments to their 
development on Federal lands.
    It is our understanding that the role of the USGS will be 
to assess the oil and gas resources of basins with Federal land 
ownership using USGS assessment methodology. Then USGS 
geologists will allocate the resource estimates to those 
specific land parcels owned by the Federal Government. The USGS 
resource estimates will be combined with reserve volumes from 
the Department of Energy and will be incorporated into a 
geographic information system.
    This in turn will be integrated into a GIS of restrictions 
and impediments constructed by BLM and the Forest Service. The 
inventory shall be provided to this Committee within two years 
of enactment of the legislation, which was last November.
    Madam Chairman, thank you for the opportunity to testify. I 
would be happy to respond to any questions you and the 
Subcommittee members have.
    Mrs. Cubin. Thank you, Dr. Leahy.
    [The prepared statement of Dr. Leahy follows:]

Statement of Dr. P. Patrick Leahy, Associate Director for Geology, U.S  
             Geological Survey, Department of the Interior

    Madame Chairman and members of the Subcommittee, thank you for this 
opportunity to present, on behalf of the U.S. Geological Survey (USGS), 
testimony regarding our assessment of oil and gas resources nationally, 
in the 1002 Area of the Arctic National Wildlife Refuge, and of Federal 
lands as called for in the recently enacted Energy Act of 2000. My 
testimony will address these subjects in this order.
    Within the Federal Government, the USGS is responsible for 
assessing undiscovered oil and gas resources of all onshore and State 
offshore areas of the Nation. The Minerals Management Service (MMS) 
provides estimates for Federal offshore crude oil and natural gas 
resources. In February 1995, the USGS released the National Assessment 
of United States Oil and Gas Resources. Currently, we are updating that 
assessment in selected regions thought to have high potential for 
undiscovered natural gas, including coal-bed methane and gas hydrate. 
This update will be completed in 2004, with interim products available 
in early 2002. The updated assessment will include allocations of 
undiscovered oil and gas resources to Federal lands. Additionally, the 
USGS is completing a National Coal Resource Assessment during 2001. To 
date, coal resource assessments of the Colorado Plateau and of the 
Northern Rocky Mountains and Great Plains have been released, and coal 
resource assessments of the Appalachian and Illinois Basins, and Gulf 
Coast Region will be available later in 2001. USGS coal assessments 
also identify volumes of coal under federally owned lands, and of 
federally owned coal under privately owned lands, where present.
1995 National Assessment of United States Oil and Gas Resources
    The 1995 USGS assessment of the Nation's undiscovered oil and gas 
was published in digital format on a CD-ROM (USGS Digital Data Series-
30) and in a non-technical summary, as USGS Circular 1118. The 
Assessment was conducted in collaboration with State Geological 
Surveys, with MMS, and with industry geologists under the auspices of 
the American Association of Petroleum Geologists. Additional 
cooperation with the Bureau of Land Management, National Park Service, 
U.S. Forest Service, and Bureau of Indian Affairs was essential for the 
USGS to generate information regarding oil and gas resources on Federal 
lands. The current update of the 1995 assessment is being conducted 
with many of the same partners.
    Assuming existing technology, there are approximately 112 billion 
barrels of technically recoverable oil onshore and in State waters, 
according to the USGS's most recent assessment.
    Technically recoverable resources are those that may be recoverable 
using current technology without regard to cost. Economically 
recoverable resources are that part of the technically recoverable 
resource for which economic factors are included and which can be 
recovered at a given market price. This includes measured (proved) 
reserves, future additions to reserves in existing fields (reserve 
growth), and undiscovered resources. The technically recoverable 
conventional resources of natural gas in measured reserves, future 
additions to reserves in existing fields, and undiscovered 
accumulations equal approximately 716 trillion cubic feet of gas.
    In addition to conventional gas resources, the USGS has made an 
assessment of technically recoverable resources in continuous-type 
(largely unconventional) accumulations. We estimate about 308 TCFG 
(trillion cubic feet of gas) of technically recoverable natural gas in 
continuous-type deposits in sandstones, shales, and chalks, and almost 
50 TCFG of technically recoverable gas in coal beds. The total 
technically recoverable oil and gas resource base onshore and in State 
waters of the United States is displayed in the table below.
[GRAPHIC] [TIFF OMITTED] T1289.040

    The estimates presented in this testimony reflect USGS 
understanding as of January 1, 1994, and are shown on a map of the 
United States in Figure 1. They are intended to capture the range of 
uncertainty, to provide indicators of the relative potential of various 
petroleum provinces, and to provide a useful guide in considering 
possible effects of future oil- and gas-related activities within the 
United States.
    The geographic information system (GIS) coverages contained in this 
assessment and related data bases provide the capability to estimate 
oil and gas resource potential on specific tracts of land, including 
those owned and/or managed by the Federal Government. This process is 
called allocation, based on expert opinion, and is accomplished using a 
methodology that takes into consideration all geologic information 
available about the basin.
1995 National Oil and Gas Assessment and Onshore Federal Lands (1998)
    In January 1998, the USGS published an Open-File Report (OFR 95-
0075-N) that reported estimates of volumes of undiscovered oil and gas 
on Federal lands. Estimates of oil in undiscovered conventional fields 
range from 4.4 to 12.8 billion barrels (BBO), with a mean value of 7.5 
BBO. Estimates of technically recoverable gas in undiscovered 
conventional fields range from 34.0 to 96.8 trillion cubic feet (TCF), 
with a mean value of 57.9 TCF. Almost 85 percent of the assessed 
natural gas in undiscovered conventional accumulations was non-
associated gas, that is, gas in gas fields rather than gas in oil 
fields. Estimates of technically recoverable resources in conventional 
(continuous type) accumulations for oil are from 0.2 to 0.6 BBO, with a 
mean value of 0.3 BBO, and for gas, from 72.3 to 202.4 TCF, with a mean 
value of 127.1 TCF. These ranges of estimates correspond to 95 percent 
probability (19 in 20 chance) and 5 percent probability (1 in 20 
chance) respectively, of a least those amounts occurring.
    An economic evaluation was applied to these technically recoverable 
estimates. Our study concluded that at $30 per barrel for oil and $3.34 
per thousand cubic feet of gas, 3.3 BBO oil and 13.6 TCF in 
undiscovered conventional fields can be found, developed, and produced. 
In addition, at these estimated prices, 0.2 BBO oil and 11.4 TCF in 
continuous-type accumulations and 11.8 TCF of coalbed gas can be 
developed.
[GRAPHIC] [TIFF OMITTED] T1289.041

Applications of the USGS 1995 National Oil and Gas Resource Assessment
    The results of the USGS National Oil and Gas Resource Assessment 
have been used by the Energy Information Administration for its Annual 
Energy Outlook, by the California Energy Commission and Canadian Energy 
Board to model inter-regional natural gas supply and demand and the 
resulting economic impacts, and by numerous petroleum companies as a 
basis for evaluating risk associated with exploration and development 
of domestic oil and gas resources.
    Many Federal agencies use the information in the USGS National Oil 
and Gas Assessment for land-use planning, energy policy formulation, 
and economic forecasting. Customers include the Department of the 
Interior, Bureau of Land Management, National Park Service, U.S. Forest 
Service, Bureau of Indian Affairs, Energy Information Administration, 
and the Department of Energy, among others. In addition, most State 
Geological Surveys and/or State Divisions of Oil and Gas use the USGS 
assessment for regional and local resource evaluation and lease 
planning purposes. Many private sector organizations also use the 
digital oil and gas assessment results, including environmental 
protection advocacy groups, petroleum exploration companies, and 
utility companies (including natural gas and electricity utilities).
USGS Resource Assessment of the 1002 Area of the Arctic National 
        Wildlife Refuge
    The Alaska National Interest Lands Conservation Act established the 
Arctic National Wildlife Refuge (ANWR) as a wildlife refuge in 1980. In 
section 1002 of that Act, Congress deferred a decision regarding future 
management of the 1.5-million-acre coastal plain ( 1002 Area ) in 
recognition of the area's potential for oil and gas resources and its 
importance as wildlife habitat. A report on the resources (including 
petroleum) of the 1002 Area was submitted in 1987 to Congress by the 
Department of the Interior (DOI). Since completion of that report, 
numerous wells have been drilled and oil fields discovered near ANWR on 
State lands, new geologic and geophysical data have become available, 
seismic processing and interpretation capabilities have improved, and 
the economics of North Slope oil development have evolved.
    Anticipating the need for scientific information and considering 
the decade-old perspective of the petroleum resource estimates included 
in the 1987 Report to Congress, the USGS reexamined the geology of the 
ANWR 1002 Area and prepared a new petroleum resource assessment that 
was released in 1998.
    Based on this 1998 USGS assessment, the total quantity of 
technically recoverable oil within the entire assessment area is 
estimated to be between 5.7 and 16.0 billion barrels (95-percent and 5- 
percent probability range), with a mean value of 10.4 billion barrels. 
The entire assessment area includes Federal, State, and Native areas. 
Technically recoverable oil within the ANWR 1002 Area (excluding State 
and Native areas) is estimated to be between 4.3 and 11.8 billion 
barrels (95- and 5-percent probability range), with a mean value of 7.7 
billion barrels. These estimates reflect new data and techniques and 
thus should not be directly compared to results of the 1995 National 
Oil and Gas Resource Assessment.
    According to the 1998 USGS assessment, volumes of oil are expected 
to occur in a number of accumulations rather than a single large 
accumulation, such as the giant Prudhoe Bay field. However, most of 
that oil is estimated to occur in accumulations that are sufficiently 
large to be of potential economic interest. At the mean, nearly 80 
percent of the oil is thought to occur in the western part of the 1002 
Area, which is closest to existing infrastructure developed on State 
lands. We estimate that the western portion of the 1002 Area contains 
between 3.4 and 10.2 billion barrels of oil (BBO) (95- and 5-percent 
probability), with a mean of 6.4 BBO. We estimate that the eastern area 
contains between 0 and 3.2 BBO (95- and 5-percent probability), with a 
mean of 1.2 BBO.
    As part of our 1998 assessment, the USGS conducted an economic 
analysis that considers the cost of producing estimated technically 
recoverable volumes of oil from the 1002 Area. Our study estimates the 
market price that would have to be paid to find, develop, produce, and 
transport a specific volume of oil to the West Coast of the United 
States. Figure 2 summarizes estimated volumes of economically 
recoverable oil as a function of the market price of that oil. This 
graph assumes constant 1996 dollars and the expectation that production 
will repay all operating costs, including taxes and transport to 
market, all investment expenditures, and provide an after-tax rate of 
return of at least 12 percent on the investment.
Comparison with Previous Assessments
    Among previous assessments of ANWR 1002 Area petroleum resources, 
only the 1987 USGS assessment of in-place resources is directly 
comparable to our 1998 assessment. The technically and economically 
recoverable petroleum resource estimates cannot be compared directly 
because different methods were used in preparing those parts of the 
1987 Report to Congress. The current assessment shows an overall 
increase in estimated in-place oil resource when compared to the 1987 
assessment. Ranges are 11.6 to 31.5 BBO versus 4.8 to 29.4 BBO, (95- 
and 5-percent probabilities) and mean values are 20.7 BBO versus 13.8 
BBO (current assessment compared to 1987 assessment). The increase is a 
consequence of improved resolution of reprocessed seismic data, which 
allowed the identification of many more potential petroleum 
accumulations in parts of the area, as well as information available 
regarding recent nearby oil discoveries.
    Another significant change is in the geographic distribution of 
resources. In the 1987 assessment, about 75 percent of the mean 
estimated in-place oil was thought to occur in the southeastern section 
of the 1002 Area and only 25 percent was thought to occur in the 
northwestern area. In the current assessment, nearly 85 percent of the 
in-place oil is thought to occur in the northwestern area and only 
about 15 percent is within the deformed area. The reason for this 
change in interpretation is largely related to improved resolution of 
the seismic data, especially in the northwestern area where, in various 
plays, it allowed the identification of many more potential petroleum 
accumulations than were previously thought to exist. The southeastern 
area with only a single well offshore and complex geology onshore 
carries great uncertainty. Further, part of that area considered oil 
prospective in 1987 is now considered prospective only for gas because 
of new understanding of the thermal history of the rocks.
Sec. 604 Energy Act of 2000
    The Secretary of the Interior is charged with conducting an 
inventory of energy resources and the restrictions and impediments to 
their development on Federal Lands in Section 604 of the Energy Act of 
2000, signed into law on November 9, 2000. The exact text is given 
below:

SEC. 604. SCIENTIFIC INVENTORY OF OIL AND GAS RESERVES.

    (a) IN GENERAL. The Secretary of the Interior, in consultation with 
the Secretaries of Agriculture and Energy, shall conduct an inventory 
of all onshore Federal lands. The inventory shall identify:
        (1) the United States Geological Survey reserve estimates of 
        the oil and gas resources underlying these lands; and
        (2) the extent and nature of any restrictions or impediments to 
        the development of such resources.
    (b) REGULAR UPDATE. Once completed the USGS reserve estimates and 
the surface availability data as provided in subsection (a)(2) shall be 
regularly updated and made publicly available.
    (c) INVENTORY. The inventory shall be provided to the Committee on 
Resources of the House of Representatives and to the Committee on 
Energy and Natural Resources of the Senate within two years after the 
date of the enactment of this section.
    (d) AUTHORIZATION OF APPROPRIATIONS. There are authorized to be 
appropriated such sums as may be necessary to implement this section.
    It is our understanding that the role of the USGS will be to assess 
the oil and gas resources of oil and gas-bearing basins with Federal 
land ownership, consistent with the USGS assessment and allocation 
methodology. Then, USGS geologists will allocate resource estimates to 
those specific land parcels owned by the Federal Government. The USGS 
resource estimates will be combined with reserve volumes from the DOE/
EIA, and will be incorporated into a geographic information system 
(GIS) that shows the spatial distribution of those potential resources 
and known reserves. The resource and reserve GIS will be integrated 
with a GIS of restrictions and impediments constructed by BLM and USFS. 
The USGS has met several times with representatives of the Bureau of 
Land Management (BLM), the US Forest Service, the US Department of 
Energy and their Energy Information Administration and the staff of 
this committee to discuss plans to produce this inventory.
    The USGS intends to use some of the resource estimates from the 
1995 National Oil and Gas Assessment, for which there are not 
significant new data, and will update resource estimates for the gas-
prone areas of the country for which we have new data and are 
developing improved assessment methods.
    Madame Chairman, this concludes my remarks. I would be happy to 
respond to any questions.
                                 ______
                                 

    [Maps and charts accompanying Dr. Leahy's testimony 
follow:]
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[GRAPHIC] [TIFF OMITTED] T1289.038

[GRAPHIC] [TIFF OMITTED] T1289.039

    Mrs. Cubin. The Chair now recognizes Carolita Kallaur to 
testify.

  STATEMENT OF CAROLITA KALLAUR, ASSOCIATE DIRECTOR, OFFSHORE 
    MINERALS MANAGEMENT, MINERALS MANAGEMENT SERVICE, U.S. 
                   DEPARTMENT OF THE INTERIOR

    Ms. Kallaur. Thank you, Madam Chair and distinguished 
members of the Subcommittee. Thank you for allowing me to 
present information on our nation's OCS oil and gas resource 
potential.
    I will start again. Madam Chairman and distinguished 
members of the Subcommittee, thank you for allowing me to 
present information on the oil and gas resource potential of 
the outer continental shelf. With your permission, I will 
submit my formal testimony, the MMS 2000 resource assessment, 
and maps which display our current estimates for the record.
    I will use the time this afternoon to touch upon the major 
points in my testimony. While the focus of today's hearing is 
the future, I think it is informative to first review where we 
are today in terms of providing energy for our Nation. The 
outer continental shelf is an important contributor to domestic 
energy production. It currently accounts for 25 percent of oil 
production and 26 percent of natural gas production. It is the 
major source of oil and gas from Federal lands. The majority of 
the production comes from the central and western Gulf of 
Mexico. The success of the Gulf's deepwater regime has allowed 
the OCS to maintain this level of contribution over the past 
few years.
    We are, however, beginning to be concerned about the 
ability of the OCS to maintain its current level of gas 
production. Historically the OCS has been much more of a gas 
province than an oil province, and clearly today natural gas is 
viewed as the fossil fuel of choice.
    What we are beginning to witness is a steady decline in 
shallow water natural gas production. While deepwater activity 
has been very successful to date, it is primarily an oil 
province with significant amounts of associated gas, a 
different mix than what has been the case historically in the 
Gulf.
    I raise this issue because the National Petroleum Council 
study on natural gas looks to the OCS to increase gas 
production to between 7 and 8 TCF a year by 2012 from its 
current level of 5 TCF. We are not confident at this point that 
we can achieve that goal. At the same time I recognize on an 
historical basis government estimates tend to be more 
conservative than those of the private sector.
    Now, let me talk about our recent estimates of undiscovered 
conventionally recoverable resources. I have provided each of 
you with a map of the United States with our current estimates 
for each OCS planning area. Of the remaining U.S. conventional 
resources on a barrel-of-oil-equivalent basis, the offshore 
contains 63 percent. So, the OCS clearly will continue to play 
an important role in our energy future.
    The 2000 resource update resulted in an increase of 29.4 
billion barrels of oil and 94.2 trillion cubic feet of gas from 
our 1995 assessment. The increase occurs almost entirely in the 
Gulf of Mexico based on deepwater exploration results and 
additional areas being assessed.
    The mean numbers for these estimates for the OCS are 75 
billion barrels of oil and 362.2 trillion cubic feet of gas. We 
also provide information on what percentage of the resources 
are under moratoria and which ones are available for leasing. 
The estimated oil under moratoria are 16 million barrels of 
oil, or about 21 percent, and 56 trillion cubic feet of gas, or 
about 17 percent.
    In reviewing these moratoria estimates, one needs to 
recognize there is a higher degree of uncertainty because of 
the limited level of activity in these areas. These numbers 
might go up or down if drilling were to occur.
    The experience of our neighbors to the north in Canada is 
interesting in this regard. For many years drilling occurred in 
the Scotian Basin offshore Eastern Canada. Companies had found 
a small oil field that they were about to abandon. A rig became 
available, and they decided to use it and drill deeper, 
resulting in a major natural gas discovery called the ``Deep 
Panuke.'' The ``Panuke'' discovery will have a significant 
impact on Canada's ability to produce natural gas for their own 
use as well as export gas to the United States.
    It is interesting to note that the same geologic trends 
continue along the U.S. Atlantic shelf. But whether ours is as 
prospective as the Canadians can only be confirmed through 
drilling.
    In conclusion, while there may be uncertainty about some of 
our resource estimates, clearly the bottom line is that the 
outer continental shelf of the United States will continue to 
play an important role in providing energy for our Nation. For 
those areas that are available for development, our primary 
focus is to ensure that any activities conducted offshore are 
done without harm to the environment and to offshore personnel. 
We believe that through this approach there will be a greater 
chance that the contribution of the OCS can increase in the 
years ahead.
    Thank you, and I would be pleased to answer any questions.
    Mrs. Cubin. Thank you, Ms. Kallaur.
    [The prepared statement of Ms. Kallaur follows:]

 Statement of Carolita Kallaur, Associate Director, Offshore Minerals 
    Management, Minerals Management Service, U.S. Department of the 
                                Interior

    Madam Chairman and Members of the Subcommittee, I appreciate the 
opportunity to appear before you today to present testimony on the 
Minerals Management Service (MMS) estimates for the United States Outer 
Continental Shelf (OCS) crude oil and natural gas resource base and the 
underlying methodology used by the MMS in creating these estimates.
Background
    As you are aware, MMS's mission consists of two major programs: 
Offshore Minerals Management and Minerals Revenue management. The 
leasing and oversight of mineral operations on the OCS and all mineral 
revenue management functions for Federal (onshore and offshore) and 
American Indian lands are centralized within the bureau. In 2000, OCS 
oil and natural gas production accounted for roughly 25 and 26 percent, 
respectively, of our nation's domestic energy production oil production 
was over 500 million barrels and natural gas production was over 5 
trillion cubit feet. The amount of oil and natural gas production in 
2000 was the most ever produced on the OCS. In addition, in fiscal year 
2000, MMS collected and distributed about $7.8 billion in mineral 
leasing revenues from Federal and American Indian lands.
    In its role as manager of the Nation's OCS energy and nonenergy 
mineral resources, the bureau's long-term strategy is to assess those 
resources; determine, in consultation with affected parties, if they 
can be developed in an environmentally sound manner; and, if leased, to 
regulate activities to ensure safety and environmental protection. This 
long-term strategy affects the way MMS manages OCS resources and the 
way MMS faces the challenge of maintaining a balance between providing 
energy and protecting the Nation's unique and sensitive environments 
and other natural resources.
    An integral element in this long-term strategy is the ability to 
identify the most promising areas of the OCS for the occurrence of 
crude oil and natural gas accumulations and to quantify the amounts of 
oil and natural gas that may exist in these areas. However, since much 
of the OCS has not been thoroughly explored, we must deal with the 
uncertainty that these resources may or may not exist in these most 
promising areas.
    We must also develop indicators of the economic viability of these 
resources under a variety of economic and price scenarios and costs 
associated with exploration, development, and production activities for 
the specific areas where the resources may occur. Within MMS, these 
functions are performed through the Resource Evaluation (RE) Program 
component of the Offshore Minerals Management Program.
MMS Resource Evaluation (RE) Program
    The RE Program is focused upon the acquisition and analysis of 
geologic, geophysical, petroleum engineering, and economic data and 
information related to the mineral potential (predominately crude oil 
and natural gas) of OCS lands. The primary source of these data and 
information is the oil and natural gas industry, which conducts 
exploration, development, and production activities on OCS lands. The 
MMS acquires these data under terms of lease agreements or permits. 
Hence, the data and information are considered proprietary by MMS 
regulations and generally not available for public release.
    The RE Program functions encompass all cycles of OCS program 
activities and provide technical data and information supporting a wide 
array of program and regulatory decisions affecting Offshore Minerals 
Management including OCS leasing decisions, bid adequacy 
determinations, environmental analyses, royalty-relief considerations 
and a myriad of related issues and decisions that must incorporate 
specific knowledge about the amounts of oil and natural gas resources 
and reserves.
    In performing these functions, MMS personnel must constantly update 
the information data bases to reflect new data produced by current 
drilling and seismic activities performed by industry as well as update 
production data from known fields as crude oil and natural gas are 
produced from these fields. There are several by-products that result 
from our ongoing geologic, economic, and engineering analyses. For 
example, MMS publishes annual reports that update the estimates of 
proved reserves for Gulf of Mexico and Pacific OCS fields, and the Gulf 
of Mexico are all valuable information sources to the industry, the 
States, and the public. These annual reports are located on the MMS 
Internet website under the Gulf of Mexico and Pacific Region webpages. 
In April 2000, the MMS held a Natural Gas Symposium in Houston, Texas, 
where the participants discussed and identified the role of the Federal 
OCS in supplying the future natural gas demand of the U.S. The 
information presented at the Symposium is available on our MMS 
homepage.
OCS Resource Assessments
    As background to discussing any resource estimates of crude oil and 
natural gas accumulations on the OCS, it is important to understand the 
differences between the terms undiscovered resources and known reserves 
proved and unproved.
    Undiscovered resources are quantities of crude oil and natural gas 
that geologic data and information suggest may exist in areas outside 
of known oil and natural gas fields. However, verification of the 
existence of crude oil and/or natural gas can only be determined from 
exploratory drilling activities and verification of the ultimate number 
and sizes of fields is only truly known after an area has been 
thoroughly explored, developed, and all discoveries produced a 
timeframe generally covering decades.
    Known reserves are those crude oil and natural gas accumulations 
that have been discovered and determined to be economically viable to 
develop and produce. Estimates of known reserves are reported in two 
categories by MMS: Proved reserves are those accumulations that have 
existing production and transportation facilities or regulatory 
commitments for installation of such facilities. Unproved reserves are 
those accumulations that have been discovered, but lack sufficient 
geologic and economic studies by MMS and OCS lessees to determine 
whether such discoveries can be commercially developed.
    Of note, MMS reserve and resource estimates address conventionally 
recoverable crude oil and natural gas quantities that is, estimates do 
not include accumulations of heavy oil, oil shales, gas hydrates, 
coalbed methane, or similar continuous-type hydrocarbon occurrences.
OCS Known Reserve Estimates
    Based on the most recently published report as of December 31, 
1998, MMS estimates of proved reserves for the OCS are 3.8 billion 
barrels of oil (Bbbl) and 31.3 trillion cubic feet (TCF) of natural 
gas. Additionally, MMS estimates of unproved reserves for the OCS are 
2.3 Bbbl of oil and 6.0 TCF of natural gas.
OCS Undiscovered Resources
  Previous OCS Resource Assessments
    Since its creation in 1982, MMS has completed four systematic 
assessments of Federal OCS undiscovered oil and natural gas resources, 
including the 2000 update. The results of the first resource assessment 
and the methodologies used to develop these estimates were published in 
a 1985 MMS report entitled Estimates of Undiscovered, Economically 
Recoverable Oil and Natural Gas Resources for the Outer Continental 
Shelf as of July 1984. Following release of the MMS report in 1985, MMS 
agreed to join the U.S. Geological Survey (USGS) in conducting a joint, 
concurrent resource assessment of the United States (both onshore and 
offshore) to provide the Department of the Interior, Congress, and 
other public and private organizations with estimates reflecting 
consistent timeframes. A National Academy of Sciences (NAS) panel 
reviewed the 1985 resource assessment and its resource estimate 
methodologies and recommended certain changes for future assessments.
    The second MMS assessment was conducted using improved methodology. 
The results of this National Assessment were published in 1989 in a 
joint MMS/USGS publication entitled Estimates of Undiscovered, 
Conventional Oil and Gas Resources in the United States A Part of the 
Nation's Endowment. Subsequently, MMS reported a more detailed set of 
results from this joint assessment in 1990 in an MMS report entitled 
Estimates of Undiscovered Oil and Gas Resources for the Outer 
Continental Shelf as of January 1987.
    Similarly, an NAS panel also reviewed MMS procedures employed in 
its second resource assessment and additional recommendations were 
published.
    In view of the importance of such estimates to outside private and 
public interest groups, additional reviews of the MMS (and USGS) 
methodologies and report procedures were conducted by the Association 
of American State Geologists (AASG), the Energy Information 
Administration (EIA, U.S. Department of Energy), and the American 
Petroleum Institute (API). The AASG and EIA reviews resulted in 
published reports with technical recommendations for enhancing the 
methodologies employed by both MMS and USGS, while the API review 
resulted in private recommendations to the Department.
    In preparation for conducting its third systematic OCS resource 
assessment (1995), MMS not only took into account the technical 
recommendations of NAS and others but also looked internally at other 
ways to improve on its past efforts. Because the results of the 
resource assessment would be used by different customers, each with 
different information needs and levels of technical sophistication, the 
bureau devoted considerable time and attention to improving on the way 
the estimates are made and how they are reported. Customers (user 
groups) surveyed include:
     LMMS/DOI decisionmakers;
     LFederal and State Agencies and Congress;
     LOil/Gas and related industries;
     LGeologic and scientific communities and academia; and
     LThe general public.
Methodology
    Armed with the technical recommendations and the realistic 
conclusion that the needs of our customers (including ourselves) could 
be better met, MMS embarked on an effort in 1991 to revise our resource 
estimation and reporting procedures. Our specific goals were to 
establish a method for estimation that:
     LMaintained the strong points of earlier methodologies;
     LUtilized the extensive amount of proprietary geological 
and geophysical data within MMS data bases to the fullest extent; and
     LProvided MMS geologists flexibility to use their judgment 
to capture a broad range of possible geologic interpretations to 
address specific areas.
    In addition, we wanted to:
     LProduce functional/understandable results;
     LReflect the high quality science inherent in the MMS 
activities addressing resource assessment and estimation;
     LEnsure that estimates reflect geologic potential (known 
and unknown) as well as reflect risks and uncertainties;
     LSeparate determinations of economic viability from the 
process of estimating geologic potential; and
     LReport estimates and related information to a broader 
audience.
    The Petroleum Exploration and Resource Evaluation System 
(PETRIMES), a probabilistic play analysis model which was used by the 
Geological Survey of Canada, was chosen as the basic platform for the 
present assessment of geologic resources. Most of the resource 
assessment models currently in use, by either industry or other 
government agencies, provide estimated resources in aggregated numbers 
representing total resources as a distribution. However, PETRIMES can 
also provide an estimate of the number and size of oil and natural gas 
pools that remain to be discovered. That information is very useful for 
planning and decisionmaking processes related to exploration and 
development of OCS resources.
    One drawback to PETRIMES, however, is that it was designed to 
assess a single commodity play, such as an oil play or a gas play. In 
reality, OCS plays are (in most cases) mixed plays containing both oil 
and gas pools. To utilize PETRIMES for the assessment of OCS resources, 
MMS implemented a number of changes to the original PETRIMES program. 
The most important change made to the program was to provide the 
ability to separate estimation of both liquid (condensates and oil) and 
gas (associated gas and nonassociated gas) phases required for an 
accurate economic evaluation of the OCS. The modified version of 
PETRIMES developed by MMS is called the Geologic Resource Assessment 
Program (GRASP).
    The Probabilistic Resource Estimation Offshore (PRESTO) model, 
developed by MMS and used in its 1987 assessment, was modified to 
accept the assessed output of GRASP at the pool level to determine the 
economically recoverable resources at the geologic basin level and 
higher. Unlike the 1987 resource assessment, where economic resources 
were estimated for only two sets of distinct oil and gas prices 
inflated over time, the present assessment depicts the uncertainty of 
assessed results by providing a continuous series of resource values 
over a range of prices (price supply curves) for each geologic basin, 
province, and area.
    In addition to adopting revised geologic modeling approaches and 
computer models in its 1995 resource assessment, the MMS also opened up 
the process of developing estimates for the OCS by holding public 
workshops for industry, academia, and other interested parties to 
discuss MMS geologic interpretations and assumptions to be used in the 
estimation process. We also retained the services of two outside 
experts in the petroleum assessment community both of which had served 
on NAS panels reviewing previous MMS assessments to provide technical 
advice to MMS scientists.
    Finally, the results of the 1995 OCS resource assessment were 
published in a format that allow for more openness in OCS resource 
management decisions reporting maps of the most promising plays, 
estimates of the number and sizes of accumulations that may exist 
within these areas, price-supply curves for examining the impacts of 
uncertain future oil and natural gas prices on the economic viability 
of the resources, and a substantial amount of supporting assumptions 
and underlying geologic information. Industry can use this information 
for prioritizing plays to be explored; plays that will benefit from 
further development and plays that need cost improvements.
    The 1995 OCS resource assessment also contained both a geologic 
assessment section and an economic viability section. In view of the 
extensive amount of data and information available, MMS issued an 
Executive Summary of its OCS resource estimates as well as technical, 
in- depth results through three regional reports (Gulf of Mexico/
Atlantic Region, Pacific Region, and Alaska Region).
2000 OCS Resource Assessment
    This assessment represents an estimation of the undiscovered 
hydrocarbon potential of the OCS was done to support staff work and 
analysis needed in formulating the next 5-Year Oil and Gas Leasing 
Program covering the timeframe 2002-2007. It should be noted that the 
methodology for the 2000 assessment has not changed significantly from 
that used in the previous 1995 assessment.
    The assessment also is used by MMS in the decisionmaking process on 
many programmatic issues. Further, it provides important information 
when conducting environmental studies and the analysis of options on 
numerous offshore issues. Industry uses the assessment as another piece 
of scientific information in formulating its business strategies, and 
the States and interest groups do the same.
    While previous assessments were performed concurrently with an 
effort by the USGS, the current assessment was not a joint effort. This 
is due to the fact that the USGS does continuous assessments and 
updates specific areas all the time. In contrast, the MMS 2000 OCS 
assessment covers a specific time period, often targeted to meet 
specified regulatory requirements, such as preparation of a 5-Year 
Leasing Program. Therefore, it was not practical to conduct a joint 
assessment.
    The 2000 assessment presents the updated assessment results since 
the 1995 assessment for the Alaska, Atlantic, and Gulf of Mexico OCS 
Regions. In the Alaska Region only the Beaufort and Chukchi Seas, Hope 
Basin and Cook Inlet areas were updated, as other planning areas lacked 
new data and changes since the last assessment. The Pacific OCS Region 
was not updated for the same reasons. The Atlantic OCS Region was re-
evaluated to reflect recent exploration results offshore Nova Scotia, 
current exploration and production technologies, and to make the water 
depth divisions compatible with the ones now being used in the Gulf of 
Mexico.
    The MMS has recently made public the 2000 assessment, and I have 
included a copy of the assessment with my written testimony for the 
hearing record. The total mean undiscovered, conventionally recoverable 
resources for the United States OCS are 75.0 billion barrels of oil and 
362.2 trillion cubic feet of natural gas. Within that total, MMS 
determined that the undiscovered conventionally recoverable resources 
foregone by the 1998 moratoria (i.e., the President's June 1998 OCS 
decision) would be approximately 16 billion barrels of oil and 62 
trillion cubic feet of gas.
    The total mean undiscovered economically recoverable resources for 
the United States OCS are 26.6 billion barrels of oil and 116.8 
trillion cubic feet of gas at prices of $18 per barrel and $2.11 per 
thousand cubic feet, respectively, and 46.7 billion barrels of oil and 
168.1 trillion cubic feet of gas at prices of $30 per barrel and $3.52 
per thousand cubic feet, respectively.
A Comparison of the 1995 and 2000 Assessments
    The current assessment resulted in an increase from the 1995 
estimates of 29.4 billion barrels of oil and 94.2 TCF of gas in OCS 
undiscovered conventionally recoverable resources. The increase occurs 
almost entirely in the Gulf of Mexico based on deepwater exploration 
results and additional areas assessed. These new areas include the 
deep, older section of the Central and Western Gulf shelf below 20,000 
feet, the Cenozoic section beyond the Sigsbee Escarpment, and the 
deepwater Mesozoic section not on the Florida Platform. Of the three 
areas, the last is the most significant. Regional reports are also 
being prepared that highlight the findings of the 2000 assessment.
Conclusion
    By building on our past efforts and methodologies, we believe our 
current resource assessment, and thus the resulting information, is 
superior to previous MMS assessments. We also believe that the 
extensive amount of materials to be released through our regional 
reports and the format of such reports will more readily meet the needs 
of the extensive public and private audiences for such information 
thereby contributing to efforts to develop balanced resource management 
policies with regard to OCS resources. While reliable resources 
estimates are only one of many factors to be considered when making OCS 
resource management decisions, they are an important component and 
should be based on high quality science. We are confident that our new 
assessment produced results that met that high standard.
    Madam Chairman, this concludes my prepared remarks. However, I will 
be pleased to answer any questions Members of the Subcommittee may 
have.
                                 ______
                                 

    [Maps accompanying Ms. Kallaur's testimony follow:]
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    [GRAPHIC] [TIFF OMITTED] T1289.004
    
    Mrs. Cubin. The Chair now recognizes Dr. Naresh Kumar to 
testify.

STATEMENT OF NARESH KUMAR, GROWTH OIL AND GAS, ON BEHALF OF THE 
          AMERICAN ASSOCIATION OF PETROLEUM GEOLOGISTS

    Mr. Kumar. Thank you. Madam Chairman and members of the 
Subcommittee, I am honored to be here as a representative of 
the 30,000-member American Association of Petroleum Geologists. 
Let me state I also feel it is a personal honor to be here. Our 
association is the largest professional geological society in 
the United States and has membership worldwide.
    Our members study the Earth and deeply care for the 
environment. Our membership is engaged directly and indirectly 
in searching and looking for the hydrocarbons and the economic 
development of hydrocarbon deposits. And so our membership is 
keenly interested in understanding the amount and distribution 
of those resources.
    I have been invited here to make an independent comment on 
the estimate that is provided by the U.S. Geological Survey and 
the Mineral Management Service. Let me state right in the 
beginning that these agencies have done a good, if 
conservative, job in assessing the undiscovered sources of the 
United States.
    Our committee was formed by the executive committee of the 
AAPG in 1993. It was a committee that I am vice chairman of. 
Since inception, we have followed the methodologies of both of 
these agencies since our committee was formed.
    We have consulted with the U.S. Geological Survey on the 
1995 national assessment, 1998 Arctic National Wildlife Refuge 
assessment, and also the 2000 world petroleum assessment. All 
of these, our committee reviewed their methods, and we made 
recommendations to the AAPG executive committee to endorse the 
scientific methodologies and techniques used by USGS, and we 
publicly stated so. However, we have not endorsed the specific 
numbers, but have endorsed only the sound scientific process 
through which these numbers were acquired.
    I would like to take a minute here just to point out the 
difference between reserves and resources. The figure that you 
see was developed jointly by the American Association of 
Petroleum Geologists, Society of Petroleum Engineers, and World 
Petroleum Congress. On the top part of the figure, which is the 
reserves which have been discovered, volumes that are 
commercial in nature, are planned, undergoing development, or 
currently producing. The bottom part of this figure is the 
undiscovered assessed resources. And we see that the public 
confuses sometimes between these two.
    One example is that we have heard statements such as the 
Arctic National Wildlife Refuge is the biggest oil field left 
in North America on the one side, but ANWR only has six months 
of oil on the other side. Actually ANWR is only a large 
estimated resource that will not become an oil field with 
quantifiable reserves unless exploration takes place. The truth 
is ANWR will not supply anything unless something is done 
there. Depending on the size of discovery, ANWR could account 
for 15 to 20 percent of our Nation's supply for 15 to 20 years.
    I would like to mention a couple other terms here, which 
are supply and demand. Again, I want to emphasize that supply 
is limited only to existing wells, whereas demand is the amount 
that can be drawn from their supply to meet the energy needs.
    On the far left of this figure, we start with these 
prospective resources. If the size is sufficient, the economy 
prices, technology favorable, then they become--resources 
become reserves, and then from reserves, if we have some of 
those--some other factors favorable, only then they can become 
supply and provide the Nation's energy needs. Over the last few 
years our industry has been wrenched when supply exceeded 
demand, and the Nation has suffered when supply failed to meet 
demand.
    One of the characteristics that I want to point out on our 
next chart, that these assessments, the sizes, tend to grow in 
size through time. This is only for gas, but to some extent 
that would apply to oil as well. We see a trend as additional 
drilling takes place, as additional technology develops, in 
most of the producing areas we see the estimates continue to 
increase.
    The resource assessment of USGS and the Mineral Management 
Service, National Petroleum Council, they all confirm the 
United States has large remaining oil and gas resources. The 
agencies have done a good job in using the geological data, 
scientific knowledge available, and also they have scrutinized 
the techniques and methods soundly. However, these agencies do 
not have access to all the necessary data. Exploration thrives 
and succeeds on the philosophy of multiple hypotheses. We keep 
finding surprises that were considered played out. Only an 
active and vigorous exploration and production industry can 
truly assess the remaining resources through the drilling and 
discovery, and deliver those surprises to the Nation.
    The most prospective resources for natural gas are in the 
public lands in the Rocky Mountain sedimentary basins, offshore 
Gulf of Mexico, eastern Gulf of Mexico, and on the Atlantic and 
Pacific outer continental shelf.
    In summary, let me state that our country has abundant 
energy resources. In order to assure that our way of life is 
not dramatically impacted, AAPG suggests that the United States 
must develop a national energy policy that provides dependable, 
affordable and uninterruptible energy for the public. The 
resources estimate is a wide planning tool. The agencies that 
perform the assessments and track oil and gas resources, they 
have done a good job today, and they deserve our support.
    We would also like to state that energy resource 
development can be accomplished in an environmentally 
responsible manner. The technology is available to do this.
    I thank you for your time, and I will be delighted to 
answer any questions.
    Mrs. Cubin. Thank you.
    [The prepared statement of Dr. Kumar follows:]

Statement of Naresh Kumar, Ph.D., Vice Chairman, Committee on Resource 
        Evaluation, American Association of Petroleum Geologists

    A fundamental aspect of any energy policy is a credible assessment 
of the Nation's energy natural resources. As a representative of the 
30,000 member American Association of Petroleum Geologists (AAPG), I 
have been invited here today to testify as to the credibility of the 
oil and gas resource estimates of the United States Geological Survey 
(USGS) and Minerals Management Service (MMS).
    Based on events this winter, there is clearly a critical need to 
address energy policy if our nation hopes to preserve its economic 
might, and continue to create jobs and wealth across our great land. A 
reliable supply of affordable energy is vital to our continued 
prosperity. The ability to access estimates of oil and gas supplies, 
reserves, and resources is essential for development of a sound energy 
policy and strategy by the Federal Government.
    Let me begin with a few statistics prepared by the Department of 
Energy's Energy Information Administration (EIA), to put sources of 
energy supply in the proper perspective with regard to consumer demand:
[GRAPHIC] [TIFF OMITTED] T1289.042

    I would like to emphasize that fossil fuels supply fully 88 percent 
of the Nation's primary energy requirements.
    In its Annual Energy Outlook (2001) Report, the EIA made the 
following projections regarding energy supply and demand over the next 
20 years (1999-2020).
     LGDP is expected to increase by 86 percent.
     LTotal energy consumption will increase by 32 percent. 
Energy demand grew 20 percent since 1979, yet domestic supply increased 
by only 4.3 percent.
     LPetroleum demand will increase by 62 percent.
     LNatural Gas demand will increase by 45 percent.
     LCoal demand will increase by 22 percent.
     LElectricity demand will increase by 45 percent.
     LNuclear power will decline by 11 percent.
     LDespite a 37 percent increase in energy efficiency, crude 
oil imports will increase 40 percent to a total 64 percent of domestic 
supply, and petroleum product imports will increase by 148 percent.
    Given these significant increases in projected energy demand, and 
the electricity curtailments and natural gas price spikes of this past 
winter, the public must be assured that the Nation can indeed supply 
the energy required to fuel our economy in the 21st Century. It is the 
job of the USGS and MMS to quantify the Nation's energy mineral 
resources.
              AMERICAN ASSOCIATION OF PETROLEUM GEOLOGISTS
    The American Association of Petroleum Geologists was founded in 
1917. It is the largest professional geological society in the United 
States, and has members worldwide. The membership is dedicated to the 
geological study of the earth and its environment, and the exploration 
and development of hydrocarbon resources and other energy minerals. 
Because much of the membership is engaged, either directly or 
indirectly, in the search for hydrocarbons and the economic development 
of hydrocarbon deposits, the AAPG is keenly interested in understanding 
the amount and geographic distribution of hydrocarbon reserves and 
resources. AAPG advocates a comprehensive national energy policy based 
on sound science and knowledge of the Nation's resources and reserves.
                    COMMITTEE ON RESOURCE EVALUATION
    In 1993, the AAPG Executive Committee chartered the Committee on 
Resource Evaluation (CORE) to provide input and facilitate U.S. 
Government agencies in performing assessments of U.S. hydrocarbon 
resources. The charter was amended in 1997 to include international 
assessments so CORE would have a worldwide view of hydrocarbon 
resources. Since inception, CORE has reviewed the methodologies and 
scientific methods used for assessments by the U.S. Geological Survey 
(USGS) and the Minerals Management Service (MMS). In several instances, 
CORE has made individual AAPG members with specific knowledge of 
certain geological provinces available to the agencies. To a lesser 
degree, CORE has offered opinions and technical information to the 
Energy Information Administration (EIA). For example, CORE supplied 
feedback to the EIA regarding its study of the economic impacts of the 
Kyoto Protocol on U.S. energy markets and made members with Deepwater 
Gulf of Mexico knowledge available to the EIA for consultation.
    The Committee membership consists of employees of major petroleum 
companies, independent geologists, two directors of state geological 
surveys, three past AAPG Presidents, a member of the Potential Gas 
Committee (Colorado School of Mines), the Canadian Potential Gas 
Committee (University of Calgary), and the USGS. Although the 
membership is diverse, all are advanced in their careers and have a 
great deal of expertise in the science and technology of reserve and 
resource estimation. At most of its meetings, CORE has invited guests 
from the USGS, MMS, and other experts who can contribute to our 
knowledge of the nature, amount, and geographic distribution of 
potential petroleum resources, and yet to be discovered resources. CORE 
does not restrict its interest to conventional hydrocarbons but 
includes basin-center gas in continuous reservoirs, coalbed methane, 
shale gas, and some level of interest in gas hydrates.
    Since its formation, CORE has consulted with the USGS on its 1995 
National Assessment of United States Oil and Gas Resources, the 1999 
Arctic National Wildlife Refuge 1002 Area assessment, and the 2000 
World Petroleum Assessment. For all of these, the Committee on Resource 
Evaluation has recommended to the AAPG Executive Committee that AAPG 
endorse the scientific methodologies and techniques used by the USGS, 
and the AAPG has publicly done so. AAPG has not endorsed specific 
resource numbers generated by the assessments but has endorsed the 
sound scientific process used to generate the probability 
distributions.
                         RESERVES AND RESOURCES
    Often people confuse or use interchangeably the terms reserves and 
resources . Reserves are known, somewhat measurable, economic 
accumulations of hydrocarbons, and are readily available as supply to 
meet demand. Resources are potential, undiscovered, estimated 
hydrocarbons. The estimates are based on our current state of 
geological knowledge and existing technology. Whether resources are 
ever converted to reserves is dependent on economic conditions, policy 
decisions, and incentives for companies to perform exploration 
activities. As exploration proceeds and more geological data is 
collected, our ability to make better estimates of resources increases. 
Also, as resources are converted to reserves, supply increases and the 
ability to meet demand improves.
[GRAPHIC] [TIFF OMITTED] T1289.043

    This figure was developed jointly in 2000 by AAPG, the Society of 
Petroleum Engineers (SPE), and the World Petroleum Congress (WPC), and 
published by SPE. At the top of the figure, we define reserves as 
having been discovered, are commercial in nature, and are planned, 
undergoing development, or currently producing. We discuss them as 
being proved; proved plus probable; and proved plus probable plus 
possible; thus conveying a degree of certainty about the quantity.
    At the bottom of the figure we define resources as undiscovered, of 
higher risk, and as plays, leads, or prospects. We discuss them in 
terms of low estimate, best estimate, and high estimate. These levels 
of estimation are driven by our geological knowledge, available data, 
and technology available to assess them. In order for resources to be 
converted to reserves and ultimately to supply, exploration has to take 
place. The exploration process consists of leasing acreage, acquiring 
and interpreting seismic and subsurface data, and drilling. Depending 
on location and the required permitting, this process can be conducted 
over a matter of months or even years.
    In the middle portion of the chart is a category named Contingent 
Resources. These are defined as hydrocarbons which have been 
discovered, but for which a commercial market does not exist. In 
earlier years of low natural gas prices, the gas cap at Prudhoe Bay 
could be considered a contingent resource.
    As the debate over energy policy has developed we often see people 
confusing reserves and resources. An example is ANWR is the biggest oil 
field left in North America. ANWR is actually a large estimated 
resource that will not be an oil field with quantifiable reserves (and 
part of the U.S. supply) unless the exploration process takes place.
                           SUPPLY AND DEMAND
    Two other terms that need to be better understood are Supply and 
Demand as they pertain to oil and gas. In a New York Times article (10/
17/00), Daniel Yergin said I concluded that there were really just two 
characters who dominated the industry over a century and half: one 
named supply, and the other demand. In a 1997 AAPG position paper 
entitled Energy Data and Analysis For a Sound Energy Policy, prepared 
by CORE, we defined supply as that quantity of hydrocarbons that is 
produced from existing wells in a given period of time. Demand is the 
amount of hydrocarbons that can be drawn from supply to meet existing 
energy needs.
    The key idea to capture is that supply is limited to existing 
wells. As described earlier, it can take months or years to add new 
wells to bolster the supply. That is why it is so important for 
policymakers to understand the difference between reserves and 
resources. Resources cannot be converted to reserves, and hence supply, 
by merely flipping a switch--the process takes time. That is why 
industry needs reasonable access to Federal lands to keep exploration 
moving forward.
    We've all heard the argument that ANWR would only satisfy six 
month's of U.S. energy needs. This is a fallacious argument that 
ignores the fact that, depending on size of a potential discovery, it 
might supply 15-25 percent of U.S. energy needs for 15-20 years. The 
truth is, it won't supply anything unless exploration takes place and 
resources are converted to reserves.
    The figure below is an attempt to show those relationships. At the 
far left of the figure is where we start with Contingent and 
Prospective Resources. If the size of the resource is sufficient, and 
other factors such as the economy, prices, and technology are 
favorable, then industry is motivated to conduct exploration and 
convert the resources to reserves. Then if other factors are favorable, 
reserves are developed and become the supply. Hopefully, supply is 
sufficient to meet demand. Over the last few years, our industry has 
been wrenched when supply exceeded demand, and when supply failed to 
meet demand.
[GRAPHIC] [TIFF OMITTED] T1289.044

                         U.S. ENERGY RESOURCES
    AAPG believes the U.S. still has a large energy resource remaining 
to be tapped. We believe the techniques and scientific methods used by 
both the MMS and USGS are sound and provide a good basis for discussion 
of a national energy policy.
    The most recent resource assessments of the USGS, MMS, EIA, and the 
National Petroleum Council (NPC) all confirm that the United States has 
huge remaining oil and gas resources.
    According to the USGS, the technically recoverable onshore U.S. oil 
resource base is 110 billion barrels. This is five times our onshore 
and offshore proven reserve of 21 billion barrels. The United States 
consumes about 7 billion barrels of petroleum liquids per year.
    The 1995 USGS assessment concluded that the United States has a 
remaining gas resource base in the Lower 48 States of 1,074 trillion 
cubic feet of gas (TCFG). It should be noted that only 135 TCFG, or 
just under 13 percent of the estimated resource, is considered proven. 
There are an additional 261.2 TCFG in Alaska; however, this gas is 
useless without a pipeline to the lower 48 markets. We presently 
consume about 22 TCFG/year. Even at a projected 32 TCFG/year 
consumption by 2020, there is more than a 33-year potential supply. 
Cumulative domestic production over the past hundred plus years is 
estimated to be about 890 TCFG.
    The United States has the potential to be self-sufficient in 
natural gas supply well into the 21st Century. We have significant oil 
resources, but they are not likely to be adequate to satisfy future 
demand. However, unless the petroleum industry is allowed access to the 
areas where the remaining resources are located, the domestic energy 
crisis will become worse.
                      DISTRIBUTION OF THE RESOURCE
    There are significant remaining known oil and gas resources in the 
traditional onshore producing areas of the Gulf Coast, West Texas, and 
in the Mid-Continent. However, these areas are now intensely drilled 
and blanketed with 3-D seismic, and are not yielding the large new 
discoveries required to replace the Nation's depleting proven reserves. 
Major oil companies and large independents have been exiting onshore 
exploration, and moving their operations into the sparsely drilled 
waters of the Deep Gulf of Mexico and overseas. However, recent actual 
and proposed acquisitions by BP and Shell may indicate a return to the 
onshore U.S. by the majors driven by the value of natural gas.
    Many small oil and gas companies and the majority of the 
independent prospect originators are having trouble finding partners, 
as well as the capital, to drill the smaller reserve exploratory 
prospects that remain in the traditional producing areas. Higher oil 
and gas prices have significantly increased the drilling rig count; 
however, over 90 percent of the current drilling activity is for the 
development of known reserves.
    Studies by the USGS and NPC have concluded that the most 
prospective areas for major new discoveries, particularly natural gas, 
are on public lands in the Rocky Mountain sedimentary basins, offshore 
in the Gulf of Mexico, in the Eastern Gulf of Mexico, and on the 
Atlantic and Pacific Outer Continental Shelf. The AAPG concurs with 
this assessment. Despite the huge potential of these areas, Federal law 
presently prohibits exploration on the Atlantic and Pacific OCS and in 
the Eastern Gulf of Mexico. Access to much of the remaining resource 
potential of the Rocky Mountain basins is restricted or closed. The 
total estimated gas resource of these areas is 213 TCF (per NPC 1999 
study) or a 9-year supply at current rates of gas consumption. It is 
likely that with further exploration, these resource figures would 
increase significantly.
    The total area of the U.S. Federal offshore, including Alaska, to 
the 200-mile economic limit, is about 2 billion acres. Only 2 percent 
has been leased. In its 1995 study, the MMS assessed a mean 
undiscovered recoverable resource of 46 billion barrels of oil and 268 
TCF of natural gas in the Federal OCS. This is 2.5 times the offshore 
reserve found to date. However, by a 1998 Presidential directive, there 
is presently a Federal moratorium on any exploration of the Lower 48 
OCS outside of the Central and Western Gulf of Mexico until 2012.
    In its 1995 National Oil and Gas Assessment of Onshore Federal 
Lands, the USGS estimated that the Northern Alaska province accounts 
for more than half of the of the undiscovered conventional gas assessed 
on onshore Federal lands. As previously stated, Alaska's total gas 
resources were cited in the USGS report as 261.2 TCFG. This represents 
a 12-year supply at current demand!
    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 economically feasible or timely. As part of the policymaking 
process, the public must understand that the United States actually has 
the gas resources to meet future demand. Congress then must determine 
if the public will support continued access restrictions, and if so, is 
the public then prepared to accept significantly higher gas prices and 
possible regional supply curtailments during times of peak demand.
                ACCESS TO GAS RESOURCES ON FEDERAL LANDS
    Natural gas is cited as a cleaner, more environmentally benign, 
energy resource to fuel our economy. However, access to the huge gas 
potential of undeveloped public lands is limited, in the Western states 
and on the OCS. Additionally, the Federal regulatory maze hinders 
domestic petroleum exploration operations and investment.
    With more than a decade of U.S. neglect in developing and 
implementing a comprehensive National Energy Supply Policy, and the 
environmental protection priority of the public, gas demand has caught 
up with, and probably overtaken, peak supply. This situation cannot be 
blamed on Big Oil and Gas , nor the distribution companies.
    The U.S. cannot depend on gas imports from OPEC to meet rising 
demand. Natural gas is a North American commodity that is locked into a 
pipeline delivery system. Imports from Mexico will be minimal. The 1999 
NPC study projected LNG imports of less than 1 percent of supply 
through 2015. That same study projected U.S. gas demand in 2010 to be 
29 TCFG on an annual basis and projected U.S. production to be 25 TCFG/
yr. The shortfall, according to the NPC, will be made up by 4 TCFG of 
imports from Canada. What happens if the Canadian imports do not 
materialize? The United States must develop its own gas resources to 
meet future demand. This requires access to the public lands that are 
deemed most prospective for natural gas.
    Conservation and renewable energy resources often are cited by as 
the solution to our energy requirements. This is not a realistic 
expectation if one appreciates the actual tiny magnitude of current 
alternative energy, and that fossil fuels supply 88 percent of our 
primary energy. Energy conservation has been effective in certain 
areas, particularly in regard to increased miles per gallon for 
automotive engines. Nevertheless, demand for transportation fuels 
continues to skyrocket.
    Despite DOE expenditures of over $9 billion since fiscal year 1980 
on solar and other renewable energy research, alternative energy 
resources provided only 0.3 percent of primary energy supply in 1999, 
exclusive of traditional hydroelectric power (3.8 percent). Obviously 
time and effort for research must continue on alternate energy 
resources.
    The AAPG does not advocate any reduction in alternative energy 
research. However, the fact is, that our economy will continue to 
depend on fossil fuels for the majority of the Nation's primary energy 
requirements for at least another generation. On April 18, 2000 at the 
AAPG Annual Meeting in New Orleans, Jay E. Hakes, Energy Information 
Administrator, presented a paper entitled Long Term World Oil Supply . 
One of the conclusions in that paper was that with an estimated mean 
ultimate recovery of 3.0 trillion barrels worldwide, and production 
growth rates of 0-3 percent, the estimated peak year of world oil 
production would range from 2030-2075. That is over another century of 
hydrocarbons being a significant part of the energy mix.
                 NATURAL GAS FOR ELECTRICITY GENERATION
    The rise in demand for natural gas for electricity generation has 
increased dramatically. The Gas Research Institute (GRI) in 1999 
estimated gas consumption for electricity generation would increase 
from 3.8 quadrillion BTU's in 1985 to 5.2 quadrillion BTU's in 2000. 
They projected the 2015 level to be 9.1 quadrillion BTU's. For purposes 
of this discussion we can equate 1.0 quadrillion BTU's to 1.0 trillion 
cubic feet of gas. Over a 30-year period, gas consumption for 
electricity generation will increase about 239 percent!
    The Gas Research Institute also projected the share of natural gas 
production that would be used for electricity generation to increase 
from 23.2 percent in 1998 to 33.1 percent in 2015. A full third of all 
gas produced and imported in the U.S. would go to electricity 
generation.
    These projections are based on normal growth rates of supply and 
demand. Although the 1999 NPC study concluded that a U.S. demand of 29 
TCFG in 2010 could be met, it required massive increases in capital, 
manpower, and infrastructure. The NPC study estimated $1.5 trillion 
would be needed to fund the industry from 1999-2015, the number of 
wells drilled annually would have to double from 24,000 in 1998 to 
48,000 by 2015, and that 2,100 onshore and 180 offshore drilling rigs 
would have to be built. These figures would indicate a massive effort 
is needed to meet normal projected growth rates of natural gas demand 
between now and 2015.
    However, lurking in the background is the proposed Kyoto Protocol 
agreed to by 160 countries to limit greenhouse gas emissions. Binding 
limits for emissions were set for 40 developed nations, with no limits 
imposed on the remaining countries. The U.S. goal is a 7 percent 
decrease in emissions relative to our 1990 levels. In order to achieve 
this reduction in emissions, a significant reduction in the use of 
petroleum liquids and coal is required. Natural gas will have to 
replace these fuels. The Energy Information Administration in its 1998 
Impacts of the Kyoto Protocol on U.S. Energy Markets and Economic 
Activity projected natural gas demand for electricity generation with 
the Kyoto Protocol in place at 12.7 TCF. Compare that with the 7.5 TCF 
estimated for 2010 without the Kyoto Protocol.
    The EIA study also projected the gas price in 2010 with Kyoto in 
place to be $3.30 per thousand cubic feet ($/mcf). As consumers 
painfully experienced this winter, gas prices quadrupled, soaring over 
$10/mcf at one point. Implementation of the Kyoto Accord will put 
significant additional pressure on gas supply. Accordingly, a sound 
national energy policy must provide access to additional gas resources, 
and is going to have to promote the use of all fuels, including coal 
and nuclear energy, to meet projected energy demand.
                          RESOURCE ASSESSMENTS
    The ability to access estimates of oil and gas supplies, reserves, 
and resources is essential for development of a sound energy policy and 
strategy by the Federal Government. In addition, many companies use 
these estimates to plan exploration and development strategies in the 
United States. Some of the agencies engaged in preparing such 
assessments also estimate international reserves and resources that can 
have an impact on foreign policy, national security, and understanding 
global supply and demand.
    The agencies for the most part do a good job on these assessments 
using the geological data, scientific knowledge, and tools available to 
them. At times the agencies have been behind industry's thinking, 
especially in the area of new or evolving exploration plays (a play is 
a geological concept for exploration in a particular rock formation or 
geographic location). Examples of hot new exploration plays with huge 
oil and gas potential include: drilling beneath thick regional salt 
deposits in the Gulf of Mexico; production of natural gas from coal 
seams in the Powder River Basin of Wyoming; and drilling in the ultra-
deep waters of the Gulf of Mexico OCS. As a result the assessments have 
sometimes been too conservative and have required subsequent revisions. 
Until these new trends were proven, the agencies assigned limited 
resources to them, and probably rightly so. Once these kinds of 
frontier plays have been discovered and proven by the risk takers of 
industry, the total resource impact can be assessed.
    One of the characteristics of assessments we have discovered is 
their tendency to grow in size over time. This is due to increased 
exploration and gathering of subsurface data, improvements in 
geological knowledge, and acquisition of additional seismic data. As 
our knowledge of a basin increases, so does our ability to estimate its 
resources; which generally results in an increase in the size of the 
resource. That also is why exploration is so competitive. Different 
interpreters can look at the same data set, and draw dramatically 
different conclusions about exploration prospects. The figure below 
illustrates this point. It also illustrates the growth in reserve or 
field size as production occurs over time.
[GRAPHIC] [TIFF OMITTED] T1289.045

    Note the early 1970's estimates by M. King Hubbert of about 250 
TCFG, and the almost ten times increase to 2,000 TCFG in 2000.
                            ANWR ASSESSMENT
    In 1999 the USGS completed an assessment of the Arctic National 
Wildlife Refuge. The AAPG Committee on Resource Evaluation reviewed the 
methodologies and scientific techniques used by the USGS. The Committee 
did not review, nor have any input into the actual resource estimates 
ultimately generated by the USGS. We concluded that the work of the 
USGS was scientifically sound, and that they had done a very good job 
of locating and wisely using all of the available data. This was the 
first ANWR assessment where the USGS had access to proprietary seismic 
data. Although the AAPG does not routinely generate resource estimates, 
a 1991study chaired by AAPG past-president Robert Gunn predicted a mean 
resource for ANWR of 7.0 billion barrels of oil. This compares very 
favorably with the USGS 1999 estimate of 6.4 billion barrels for the 
undeformed portion of the ANWR 1002 Area.
                    CONTINUOUS RESERVOIR ASSESSMENT
    In the 1995 National Assessment of United States Oil and Gas 
Resources, the USGS assigned 358 TCFG to gas accumulations in 
continuous reservoirs. Continuous reservoirs are defined by the USGS as 
pervasive accumulations throughout a large area, which is not 
significantly affected by hydrodynamic influences, and lack well-
defined down-dip water contacts. In other words, these deposits appear 
to be somewhat stratigraphic in nature, with little or no structural 
trapping, and produce gas with very little or no associated water. 
These reservoirs tend to be relatively impermeable sandstones, shales, 
coals, and chalks.
    Such tight sandstone reservoirs are very prominent in many basins 
of the Western U.S. In its 1995 study, the USGS assigned 200 TCFG of 
recoverable resource to this type of reservoir in the Rocky Mountain 
Basins. The USGS is currently embarking on a reassessment of resources 
in this type of reservoir.
    Given the recent events in California and the spotlight on natural 
gas for electricity generation, this could be one of the most important 
assessments the USGS will perform. A Subcommittee of the Committee on 
Resource Evaluation has already held meetings with the USGS to share 
ideas on the nature of continuous reservoirs, and probability 
distributions to best characterize the resource they contain.
                   AAPG ENERGY POLICY RECOMMENDATIONS
    The United States has abundant energy resources. However we are now 
faced with a real energy crisis, because the Nation has not developed 
and implemented a comprehensive energy policy. In order to assure that 
our way of life is not dramatically impacted because of energy 
shortages, the AAPG recommends the following:
     LThe U.S. must develop a national energy policy that 
provides dependable, affordable, and uninterruptible energy for the 
public and commerce, and is based on a sound scientific assessment of 
the Nation's resources and reserves.
     LEnergy policy must address the needs of all-stakeholders 
especially the consumers, and not over react to the demands of the 
shrillest interests with the most money for publicizing a particular 
position.
     LEnergy policy must be strategic and long-term, not quick 
fixes to short-term crises.
     LEnergy policy must include a role for all energy sources, 
including coal and nuclear energy.
     LResources assessments are a vital planning tool for 
policymakers and industry. 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.
     LA major, long-term, and capital intensive energy industry 
effort is required to explore for, develop, produce, and build the 
infrastructure necessary to deliver the energy supplies required to 
meet projected demand. Energy policy must facilitate the process of 
capital formation and energy development, without creating costly and 
time-consuming regulatory roadblocks.
     LIndustry access to public lands, which contain 
hydrocarbon resources, should be a priority to encourage exploration 
for and production of domestic natural energy sources. We cannot become 
dangerously dependent on unreliable foreign energy imports.
     LThe public must be assured that energy resource 
development can be accomplished in an environmentally responsible 
manner. The technology is available to do this.
     LThe impact of the Kyoto Protocol on the ability of the 
Nation to supply the energy needed to fuel our economy without major 
disruptions must be carefully evaluated.
    We look to the House Committee on Resources to take a leadership 
role in formulating a sound national energy policy, and thank you for 
giving the AAPG the opportunity to present its recommendations.
                              APPENDIX I.
ENERGY DATA AND ANALYSIS FOR A SOUND ENERGY POLICY
    Energy is critical to all sectors of our economy and way of life. 
Data and analyses on supplies, reserves, and resources are critical to 
a prudent energy policy that provides for needed supply, wise use, and 
affordable prices. The American Association of Petroleum Geologists 
supports the continued efforts of the Federal agencies responsible for 
collecting and analyzing such data.
    The U.S. Government, appropriately, collects, maintains, and 
analyzes data to support the assessment of reserves and resources of 
energy commodities on an objective basis, chiefly through the Energy 
Information Administration of the Department of Energy, and the U.S. 
Geological Survey and Minerals Management Service of the Department of 
the Interior.
    In times of budget constraints, some suggest that these basic data 
collection, assessments, and analyses can be eliminated, deferred, or 
significantly reduced from their current modest funding levels. Such 
action, however, would eliminate or severely reduce our national 
capability and adversely affect good energy policy.
    Crude oil and natural gas are particularly important because they 
are the source of 65 percent of the Nation's total energy supply. These 
sources can be described as follows:
     LSupply: That quantity that is produced from existing 
wells in a given period of time.
     LReserves: The estimated amount that eventually can be 
recovered from existing reservoirs and fields under current technology 
and pricing conditions.
     LResources: The estimated amount that remains to be 
discovered based upon geological knowledge and exploration and 
development technologies.
    Information about supply is available from both public and private 
sources. Regulatory agencies in producing states and Federal regulatory 
agencies concerned with public lands commonly collect production data 
and make them available. At a national level, these data are collected, 
aggregated, and analyzed, and made available by the Energy Information 
Administration of the U.S. Department of Energy. Private companies also 
provide selected data organized in ways convenient for client usage.
    Information about reserves is important to be able to estimate the 
quantity of future supply from existing production. Historically, the 
American Petroleum Institute (API) and the American Gas Association 
(AGA) developed this information on an annual basis. The blue book , 
jointly produced by a committee of these trade associations, was 
considered a standard reference for such information.
    Following the energy crisis of 1973, the Executive Branch and the 
Congress determined that information on supply, reserves, and resources 
was so vital to the development of sound public policy in meeting the 
Nation's energy needs that the collection and analysis of such data 
should be done by a public entity. Accordingly, in the creation of the 
U.S. Department of Energy at that time, a quasi-independent agency, the 
Energy Information Administration (EIA), was established to collect, 
analyze, and disseminate a broad range of energy information to aid in 
the development of national energy policy.
    The EIA developed a program that was implemented in 1978 to 
estimate annually the U.S. reserves of crude oil, natural gas, and 
natural gas liquids. This program was operated in parallel with the 
API/AGA blue book for 5 years to establish a connection with historical 
data for time-series analyses. The EIA reserves estimation program has 
served the Nation well for almost 20 years. The data collected and 
reserves estimated by this program are the only comprehensive source of 
such data for the U.S. As such, these data are used extensively by both 
public and private entities for a broad range of applications. 
Continuation of this program of developing estimates of reserves on an 
annual basis is a vital component of a sound public policy that 
addresses the Nation's future energy needs.
    Over the longer term, estimates of crude oil and natural gas 
remaining to be discovered are important for both public-policy 
decisions and private-sector business considerations. Such estimates 
provide policymakers with a view of the quantities of crude oil and 
natural gas that might be discovered through future exploration to meet 
a part of the Nation's growing need for transportation fuel and other 
energy requirements. These data can be factored into policies that 
could encourage domestic exploration or the development of alternative 
energy supplies. These data also are important for the private sector 
in considering long-term plans for domestic versus international 
operations.
    Estimates of resources have been made by various public and private 
sector organizations over the past several decades. Because of the 
important policy considerations attendant to such estimates, the 
Congress has requested that the U.S. Geological Survey and the Minerals 
Management Service provide such estimates on a periodic basis for the 
onshore lands and in state waters, and the offshore public lands, 
respectively. The U.S. Geological Survey recently completed a national 
assessment, and the Minerals Management Service will soon release a 
report on their area of responsibility.
    Resource estimates conducted by the U.S. Geological Survey and the 
Minerals Management Service are important activities that need to be 
continued in future years. Likewise, reserve estimates conducted 
annually by the Energy Information Administration also are important in 
support of sound public policy. This nation's energy policy can be no 
better than the basic data and analyses on which it is based. 
Therefore, the American Association of Petroleum Geologists urges that 
the Congress and the Administration continue to support these important 
activities.
                                 ______
                                 
    Mrs. Cubin. I thank the panel for their valuable testimony.
    I would like to start with Dr. Leahy on the questioning 
round.
    In your written statement you referenced the inventory 
required in section 604, the Energy Act of 2000, and I am very 
pleased to see that the USGS and other agencies have begun to 
scope out the work necessary to comply with this mandate. As 
you know, that provision became law after the fiscal year 2001 
Interior appropriations act was passed. Can you give me any 
notion at this time of the cost that the Department needs to 
budget for this work?
    Mr. Leahy. We are in the process of defining those numbers, 
and, frankly, I think we need to work with the Department 
before we move them forward because they do involve other 
bureaus as well as the USGS.
    Mrs. Cubin. So at this time do you have any idea if--I 
guess you probably wouldn't--if a reprogramming request would 
be sent to the appropriators to get it done?
    Mr. Leahy. Yes. That is correct.
    Mrs. Cubin. Okay. What level of detail--I will just not ask 
that question, because if you don't know what you are going to 
need yet, you can't answer what level of detail is going to be 
incurred.
    Mr. Leahy. We certainly would define the Federal lands in 
more detail than we did in our earlier assessments. So that the 
information is more usable in terms of the purposes of act.
    Mrs. Cubin. Good. And in your testimony I think you said it 
would be 2004 before that would be complete?
    Mr. Leahy. No. I believe the legislation actually calls for 
it to be completed two years after enactment.
    Mrs. Cubin. Right. So that would be 2002.
    Mr. Leahy. That is right.
    Mrs. Cubin. Do you think it will take the full two years to 
do that? Certainly I think this is a place that we really need 
to begin with this issue, and at the IPAA convention last week 
or the week before, Dan Yergin stated that he thinks that is 
something that should be done right away. But you do think it 
will take the full two years to do that?
    Mr. Leahy. We are in the planning stage, and certainly two 
years is moving right along. And I think the two years was 
identified because whoever wrote the legislation realized this 
was a big order.
    Mrs. Cubin. Big task. That is right. Actually that was my 
amendment. It is a big task, but I think that it will be 
certainly useful in the time to come.
    Ms. Kallaur, six offshore fields with estimated reserves of 
3-1/2 trillion cubic feet of natural gas are being developed 
near Sable Island off Nova Scotia in the Canadian waters. Have 
these developments impacted MMS estimates for the North 
Atlantic area at the OCS?
    Ms. Kallaur.  When we did our 2000 assessment, we did look 
at the drilling results in Canada and updated our numbers from 
the 1995 assessment.
    Mrs. Cubin. Would you repeat that? I am not sure I 
understood your answer.
    Ms. Kallaur.  The answer is that we did take into account 
the drilling in eastern Canada in developing the numbers for 
our own 2000 assessment.
    Mrs. Cubin. Okay. Is it within the Secretary's authority to 
acquire seismic data in areas which are off limits by reason of 
annual appropriations riders or Executive Order?
    Ms. Kallaur. I believe it is, because I know we are able to 
acquire environmental information, so I believe that we would 
also be able to acquire seismic information.
    Mrs. Cubin. Thank you.
    Mr. Kumar, what level of drilling in the United States do 
you think would be required to stabilize all production at 
current levels?
    Mr. Kumar. One of the estimates that was published by the 
National Petroleum Council, it addressed primarily gas, and I 
believe for the gas the estimate was that from 24-, 25,000 
wells per year, we would have to go to 40- to 50,000 wells per 
year to maintain the level needed to supply the gas.
    Mrs. Cubin. You said 25,000 wells?
    Mr. Kumar. Yeah.
    Madam Chairman, we would have to essentially double the 
number of wells we are drilling right now for the last few 
years in order to stabilize the available supply.
    Mrs. Cubin. Okay. I would like to ask each one of you--then 
I am sure my time will be up even though the clock isn't 
working--based on the USGS oil and gas assessment, what--this 
is for each one of you in your areas--what do you think the 
most promising frontier area is for finding new oil reserves 
and gas reserves? Dr. Leahy, do you want to start?
    Mr. Leahy. Yes. Certainly in my opening remarks I said our 
assessment was targeting some areas that showed potential for 
natural gas, and coal-bed methane--the Rocky Mountain area is 
an area that is of interest. Alaska is clearly an area of 
interest as well. We are actively doing an assessment of the 
National Petroleum Reserve up there as we speak.
    Ms. Kallaur. Clearly the Gulf of Mexico, central and 
western Gulf of Mexico, continue to be viewed as being highly 
prospective. As I mentioned in my testimony, it is the oil 
production that is increasing more so than the natural gas 
production. Industry's number one priority at this point is 
having access to the Eastern Gulf of Mexico, both for the near-
shore natural gas potential as well as having access to the 
deep water, where they expect to find some large oil fields 
because the area straddles the very prolific central Gulf of 
Mexico.
    Mrs. Cubin. Thank you.
    Mr. Kumar, do you have anything to add?
    Mr. Kumar. Yes. I concur with the areas that have been 
mentioned, and, as I mentioned in my oral presentation, the 
Rocky Mountain sedimentary basins, offshore Gulf of Mexico, the 
eastern Gulf of Mexico, Atlantic, Pacific outer continental 
shelf, north slope of Alaska. I would like to mention again for 
the record that on the north slope of Alaska, the total gas 
resource was cited in the range of 260 trillion cubic feet of 
gas. That represents a 12-year supply at the current demand.
    Mrs. Cubin. Twelve years?
    Mr. Kumar. Twelve years. Because currently we use 22 to 23 
TCF per year, and this is 260 trillion cubic feet on the north 
slope of Alaska.
    Mrs. Cubin. I think you touched on a very important point, 
because every time an area is brought up, whether it is ANWR, 
wherever it is, someone jumps up and says, oh, well, that is 
only 18 minutes' supply, so we don't need to open that up. That 
is only six months supply, so we don't need to open that up. 
But cumulatively there has to be--all of those minutes or days 
or hours or months or years or whatever, it has a big effect.
    So, okay. Thank you for your answers.
    The Chair now recognizes Mr. Kind.
    Mr. Kind. Thank you, Madam Chair.
    Thank you again for your testimony. I really believe it is 
helpful for us to have as accurate a picture as possible in 
regards to the resources that are available on the public 
lands.
    But, Dr. Leahy, let me start with you, and following up on 
my opening statement with regards to some of the comments I 
made with geothermal potential and that, are you aware, has 
USGS done any studies or reports in the past exploring the 
potential of geothermal sources on public lands in this 
country?
    Mr. Leahy. We did an assessment of geothermal resources, I 
think, in about 1979, so it is quite dated.
    Mr. Kind. Do you have the potential under the existing 
budget right now to do a more modern update of that study 
looking into the potential? If not, what resources would you 
need in order to conduct such a study, and do you have the 
expertise in the Department to carry out such a study?
    Mr. Leahy. We certainly have the expertise. It is a 
question of priorities and funding.
    Mr. Kind. Are you saying that you don't have the resources 
right now in your existing budget to conduct such a study, and 
would you need some authorization from us and some 
appropriation from us?
    Mr. Leahy. That is correct.
    Mr. Kind. I certainly appreciate the concern, the need to 
look at our short-term managing needs and what already exists 
and the potential for extraction given our current energy 
consumption, but it is astounding to me when you have such an 
abundant and clean and inexhaustible source of geothermal 
energy, and we are at virtual standstill in this country in 
exploring this potential, and you have a country like Kenya 
that is way ahead of the curve even in relation to this as 
tapping into this, why more attention isn't being devoted in 
this area as well.
    With your permission I would like to follow up and see what 
we may do to explore this in a little bit greater detail, and 
find out what we can accomplish here to get you those resources 
so we can start looking into this in a much more comprehensive 
fashion.
    On an unrelated subject we were informed, or we discovered, 
actually, from Greenwire, which is an online news service, 
which reported that USGS finds 16 new national monuments have 
energy potential. And apparently this came from a request from 
some members, Republican members, on the Parks and Public Land 
Subcommittee of the Resources Committee for USGS to conduct 
this report. But also apparently we didn't receive an original 
copy of that report. We have since been able to obtain an 
original copy. But I wonder if we could have an understanding 
whenever you are supplying reports, whether they are official 
or unofficial, to the Majority, can you can shoot a copy our 
way, too?
    Mr. Leahy. We would be happy to do that. This was--as you 
very accurately stated, a request from a Subcommittee staff, 
and, frankly, having a National Assessment of resources allowed 
us the ability to do these qualitative appraisals very quickly. 
And we are more than happy to satisfy the needs of individuals 
in Congress.

    [Provided below is a response to Representative Kind's 
request of Dr. Leahy for follow-up information on geothermal 
energy)

    The Geothermal Energy Research, Development and Demonstration Act 
of 1974 (P.L. 93-410) assigned responsibility for the evaluation and 
assessment of geothermal resources to the USGS through the U.S. 
Department of the Interior (DOI). The assessment efforts initiated 
under this Act led to the publication of USGS Circular 726, Assessment 
of Geothermal Resources of the United States - 1975 and USGS Circular 
790, Assessment of Geothermal Resources of the United States - 1978. 
These reports established the methodology for geothermal resource 
assessments and provided estimates of potential electric power 
generation that have guided geothermal energy research and development 
for the past 22 years.
    With USGS staff working in collaboration with universities, BLM and 
the Department of Energy, the USGS can deliver a new geothermal 
resource assessment of the Great Basin and adjoining areas within 3 
years. After completion of the Great Basin assessment, continued 
geothermal studies would focus on other regions with the significant 
geothermal potential. The USGS has the expertise to help reduce 
uncertainties in the assessment of domestic geothermal resources and to 
participate in research efforts in geothermal science and technology to 
benefit the development of geothermal energy. In order to accurately 
assess the geothermal resources of the western U.S., significant 
progress needs to be made on understanding the processes responsible 
for the formation of geothermal systems, particularly in the Great 
Basin. Recent investigations of the interrelationships among heat flow, 
ground-water circulation, active faulting, volcanism, and geochemical 
fluid-rock interactions suggest that the Earth Science community is on 
the verge of developing a new, comprehensive understanding of 
geothermal systems. The resulting models for the nature and extent of 
geothermal systems would not only improve the accuracy of any new 
assessment but also enable the development of more economical 
exploration and development strategies for geothermal energy.
    What is the geothermal energy resource base? For the potential 
geothermal electric power yield from identified systems, estimates vary 
from 6300 to 27,400MW, depending on the analysis of specific systems 
and assumptions regarding the impact of new technologies. The electric 
power potential from undiscovered resources is far less certain. The 
estimates in Circular 790 range from 72,000 to 127,000 MW, although 
these are almost certainly overstate the extent of undiscovered 
resources.
    What is USGS doing now in geothermal resources? The USGS conducts 
research into the nature of volcano-hosted geothermal systems as part 
of the Volcano Hazards Program. This research is focused on volcanic 
systems posing a significant hazard and only involves existing or 
potential geothermal reservoirs in three places - Long Valley and 
Medicine Lake in California and Kilauea in Hawaii. The USGS also 
continues to monitor the thermal features contained within Yellowstone 
National Park.
                                 ______
                                 
    Mr. Kind. Apparently the report I am referring to was an 
unofficial report, not an official. Can you tell me the 
difference?
    Mr. Leahy. Basically it is a request for information. It is 
not a published report. It would be much like someone calling 
in and asking a question, a citizen, in terms of what are the 
Appalachian Mountains made out of. It was not a major effort to 
put together a response to that request.
    Mr. Kind. I believe we do have copies of that report. I 
would ask unanimous consent to have that included in today's 
hearing as well.
    Mrs. Cubin. Without objection. We haven't seen this either.

    [The aforementioned report was too lengthy to be included 
in the printed hearing. It has been retained in the Committee's 
files.]

    Mr. Kind. All right. I appreciate that. Thank you, Dr. 
Leahy.
    Dr. Kumar, let me move to you. Within the last week 
obviously many of us are aware of the reports of the Brazilian 
oil rig that has sunk now in the South Atlantic due to fire and 
explosion, and one of the pillars collapsing, and it going 
down. There appears to be every effort being made in order to 
contain any type of spill that may result from the sinking of 
that oil rig, but what we are looking at is a potential of 
312,000 gallons of diesel fuel and 78,000 gallons of crude oil 
that could potentially be released into that environment. Do 
you have any more information perhaps in regards to what 
happened down there resulting in this sinking of the oil rig, 
and could you speak to the potential off our own shores of such 
an accident occurring here?
    Mr. Kumar. Congressman Kind, I am not personally aware of 
exactly what happened. I haven't seen the reports myself. I do 
know the country of Brazil quite well. I have done a lot of 
geology there. I have published papers on the geology of 
Brazil.
    In this particular incident we don't know whether it was a 
human error or a machine failure or something else. Obviously 
these kinds of things are possible in Brazil. Each incident has 
to be looked at in its own way, and the incidents that have 
happened in the past, many times they have been related to 
transportation. Exploration and production accidents are 
actually much, much less than the transportation errors. In 
transportation things happen over many years.
    Mr. Kind. Perhaps, Madam Chair, I may suggest that might be 
an appropriate area for future hearing exploring into what 
happened down there with that Brazilian oil rig, and also 
exploring in a little more detail the potential here off our 
own coast, because obviously when you are exploring and 
drilling, you also have to transport it. I think we need to be 
sensitive to those safety concerns as well. So I thank you, and 
I appreciate your testimony.
    Mrs. Cubin. The gentleman's time has expired. I ask 
unanimous consent to insert into the record an article about 
that spill from the Chicago Sun Times where the article says 
that this spill poses minimal threat to the environment, that 
there is a plan in place to protect the environment. 
``scientists''--this is a quote--``Scientists said the 
environmental impact would likely be negligible. The lighter 
diesel fuel oil tends to evaporate in just a few days.'' so, we 
just need both sides of the story on that.
    [The article referred to follows:]
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    Mrs. Cubin. The Chair now recognizes--I don't know who was 
here first.
    Mr. Thornberry. Thank you, Madam Chairman.
    I would like to ask unanimous consent, Madam Chairman, that 
a letter I received from a constituent, Mr. Dwayne Cochran, who 
is an engineer with some considerable expertise with ANWR, be 
considered as part of the record. It is a very detailed 
discussion of some of those issues. I think it would be 
important to include as part of the record.
    Mrs. Cubin. Without objection.
    [The letter from Mr. Cochran follows:]
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    Mr. Thornberry. Dr. Kumar, I think you started out your 
testimony in a way that is helpful to kind of put these 
discussions in a bigger context. You cite the energy 
information statistics that now 88 percent of our energy comes 
from fossil fuels, and their estimate is that over the next 20 
years, total energy consumption is going to go up by about a 
third. The petroleum demand is going to go up by about twice 
that fast. Natural gas demand will go up faster than total 
energy demand will go up. And they also find that even if we 
get a 37 percent increase in energy efficiency, crude oil 
imports will increase to about 64 percent of our domestic 
supply. And so not only are we going to continue to be 
dependent upon oil and gas--and actually it seems like grow 
more dependent upon oil and gas--our dependence upon foreign 
sources of oil and probably gas are also going to increase.
    I think that is what makes these assessments important as 
we try to figure out how we can keep from sinking as fast into 
greater dependency.
    I thought it was interesting in your testimony you, as I 
understood it, said that as we do these various assessments 
along, they tend to increase. In other words, the more we are 
out there drilling, exploring and surveying, the more we seem 
to find.
    You know, we have all heard over a number of years that we 
are running out of oil and gas. We are running out of oil and 
gas. But it doesn't seem to work out that way. You say we keep 
finding surprises. Is that what is happening, that the more we 
are out there finding, the more supply we tend to discover?
    Mr. Kumar. Congressman, my State, which was one of the 
earliest States to produce oil and gas in the United States, 
there are basins that have been producing for 70 years, and yet 
we are finding new significant reserves in the east Texas basin 
and Fort Worth basin, in Oklahoma. These are places that have 
people been studying and producing for 60, 70 years, and yet we 
are finding new reserves, new discoveries that are commercial 
and making money for people today. In the north slope of 
Alaska, Prudhoe Bay, giant field, major work has been done 
there, and yet in the 1980's Point McIntyre was discovered, 
which was a 500-million-barrel field, the largest discovery of 
the 1980's for the United States, and that was primarily a 
surprise because a few years earlier, few wells had been 
drilled through it without recognizing a 500-million-barrel 
field until ARCO and partners went back and drilled there.
    Yes, sir, the technology has improved. Technology has 
provided an additional efficiency. So between surprises and 
technology, and attempts to keep doing things and having 
different ideas from different people working the same area, 
those are all the things that contribute to our resources.
    Mr. Thornberry. You don't have any reason to believe that 
we are at the end of technological development for finding new 
supplies of oil and gas, do you?
    Mr. Kumar. No, sir.
    Mr. Thornberry. Ms. Kallaur, let me ask you, as I look at 
your map and your assessment around the country, it looks to me 
like the highest numbers are the places where there is the most 
drilling. So I listen to what we have just been talking about, 
and I wonder, you know, those places that have for whatever 
reason been placed off limits, isn't it difficult for you to 
make your assessments where there is not the kind of activity 
that there is down in the Gulf of Mexico? It looks to me like 
where there is the most drilling, the most work, the most 
surveying, that is where we have the most reserves.
    Ms. Kallaur.  I agree with you, Congressman, because even 
in my testimony I say our numbers for the moratoria areas are 
much more uncertain because of the lack of activity. I think 
those who are familiar with the Gulf of Mexico realize that in 
the late 1980's, it was viewed as the ``Dead Sea'', and then 
companies began to develop prospects in deeper water. Now it is 
a world-class production province.
    So things do change with additional activity, even though 
there are some areas companies have spent a lot of money 
drilling dry holes. But generally, particularly now with the 
new technology, more prospects are found if there is further 
drilling activity.
    Mr. Thornberry. Dr. Leahy, would you agree with this point 
that generally everybody else has agreed with: As we explore 
more and survey more and drill more and find out more 
information, generally there is more available?
    Mr. Leahy. I would just like to refer to the chart I had up 
before, and this is our 1995 Natural Oil and Gas Assessment. If 
you look at the dark green pieces of the pie, which is reserve 
growth, that is really what we are talking about here. The 
development of technology, 3-D seismic and directional 
drilling, has improved the amount of our estimate in terms of 
what may be in these known fields.
    Mr. Thornberry. Thank you.
    Mrs. Cubin. The Chair now recognizes the gentleman from 
Oklahoma Mr. Carson.
    Mr. Carson. Thank you so much, Madam Chairman. I just have 
a couple of questions to the panel about the proven reserves 
versus the prospective resources, a distinction that Dr. Kumar 
so eloquently presented to us in the testimony.
    A couple of you mentioned that we are consuming, if I am 
not correct, about 7.5 billion barrels of petroleum liquids per 
year. Dr. Kumar, would that be roughly correct?
    Mr. Kumar. Yes, sir.
    Mr. Carson. And about 22 trillion cubic feet of gas per 
year are being consumed as well; is that correct?
    Mr. Kumar. Yes.
    Mr. Carson. Now, the estimates from the USGS as well as 
your organization a few years ago talk about the prospective 
oil reserves or resources. If you could clarify which of those 
it was, in the studies in ANWR, that talks about a mean value 
of about--I think it was between 6 and 7 billion barrels of oil 
in ANWR; is that roughly correct? Or perhaps Dr. Leahy from the 
USGS.
    Mr. Leahy. In terms of the USGS 1998 Assessment, in the 
1002 area, there was a mean estimate of 7.7 billion barrels of 
oil.
    Mr. Carson. And that would be seen as resources or reserves 
in Dr. Kumar's distinction?
    Mr. Leahy. This would be resources.
    Mr. Carson. Understood.
    It is probably an elementary question. In the testimony you 
talk about the amount of resources there, Dr. Kumar, and you 
emphasize how highly contingent these are. What is the 
likelihood of realization of a resource into a reserve?
    Mr. Kumar. I can refer to that chart here, Congressman 
Carson. These assessments that MMS and USGS does, they are 
based on the data that is available and yet they are only 
estimates. The only way the resource can be converted to a 
reserve would be through exploration activity, actual drilling 
and proving that resource.
    So at ANWR today, the numbers that Dr. Leahy just 
mentioned, that is still the resource, and in their publication 
there is a whole range and that 6.8 billion barrels is the 
means of that estimated resource. There is no way that is going 
to be considered a reserve until that has been drilled and 
meets the definition of the Security and Exchange Commission on 
what the reserves are, which has to be commercially producible 
with the current technology.
    Mr. Carson. I am sympathetic to opening up ANWR for 
exploration production, but it seems under the predictions of 
USGS and what you present in your testimony that our 
consumption is 7 billion barrels of petroleum liquids per year. 
The mean value of resources at ANWR is roughly 7 billion 
barrels of oil. We are talking about, under the mean value, 
ANWR might produce about 1 year's worth of petroleum liquids 
consumption for the country? Is that an accurate statement?
    I know that obviously if the reserves in ANWR prove to be 
far above the mean value that that could change.
    Mr. Kumar. Congressman, the way I look at it, Prudhoe Bay 
has produced almost 10 billion barrels of oil so far, and all 
of these oil fields, as you know in your own State, they stay 
producing and contributing to the national mix for a long, long 
time. So ANWR, if it produces roughly one million barrels a 
day, we are looking at 15 percent of national production for 
the next 10, 15, 20 years. I think that is probably the more 
appropriate way to look at a resource because I hope it never 
happens that everything else in the country would be shut down 
and there would be only one field in the whole area that will 
be supplying the rest of the country.
    Mr. Carson. Right. Understood. Understood. Across the 
country, what is the natural gas production per year? How many 
trillion cubic feet of natural gas production do we have in 
this country right now? Perhaps Dr. Leahy from the USGS, you 
could answer that question.
    Mr. Leahy. I believe you mentioned 22 trillion cubic feet, 
and I believe of that about 4 trillion cubic feet is imported. 
The rest is domestic.
    Ms. Kallaur. I believe the OCS produces 5 TCF, and that is 
approximately 25 percent of domestic production. So I am 
assuming it is about 20 TCF that are produced domestically with 
the remainder imported from Canada.
    Mr. Carson. For all of the major areas of Federal lands 
that were discussed here, the Rocky Mountain Sedimentary Basin, 
the Eastern Gulf, Alaska, the Central and Western Gulf, what 
are the mean values of predicted resources there for both gas 
and oil? Do you have that information at your disposal?
    Ms. Kallaur. In terms of the offshore, the mean 
conventional resources is 362.2 trillion cubic feet of natural 
gas.
    Mr. Carson. That would be between both Pacific, Atlantic, 
as well as the Gulf?
    Ms. Kallaur. Yes it includes moratoria areas as well as 
nonmoratoria areas.
    Mr. Carson. Thank you very much, Madam Chairman.
    Mrs. Cubin. The Chair now recognizes the gentleman from 
Nevada, Mr. Gibbons.
    Mr. Gibbons. Thank you very much, Madam Chairman.
    I was very interested in the statement of the Ranking 
Member when he opened his comments about the need for 
developing geothermal. I come from Nevada, a State that has 
very little oil and gas, although it does have some, but it has 
a great deal and a great potential for geothermal energy.
    One of the big problems we have, however, in the State of 
Nevada is the continual attempt at the restrictions of areas 
that have these potentials. In fact, just last year the 
creation of the Black Rock National Conservation Area put off 
limits one of the largest geothermal producing areas in the 
State of Nevada, with about 1.3 million acres in Nevada off 
limits to geothermal.
    If we continue to go in this direction where we restrict 
the development of geothermal, we will at some point find that 
the development of those geothermal resources is nonexistent, 
that we cannot make that difference.
    I want to get back to the testimony of Dr. Leahy and Ms. 
Kallaur. The USGS--and this is one where I would ask you to 
help me--the USGS and the Minerals Management Service use two 
different terms. One of them is technically recoverable 
resources and the other, Minerals Management, is 
``conventionally recoverable resources.'' .
    Will each of you tell me what you mean by that? Are they 
the same terms and, if they are, why are you using two 
different terms?
    Ms. Kallaur. Let me try to answer that question, sir. They 
are the same terms, and I think if we had to do it over again 
we might use the same terms. I think the one difference is that 
when USGS comes up with a number for what they call 
``technical'', they include coalbed methane, tar sands and some 
of what I would consider more exotic fuels; whereas, our 
``conventional'' number only includes oil and gas.
    Mr. Gibbons. So would there be a difference then in the 
definition of total reserves available to the United States, 
based on your terminology versus USGS?
    Ms. Kallaur. No, I think we can do a comparable chart so 
you would be able to see what the total amount is for 
conventional resources, both onshore and offshore, as long as 
we were able to do it from the USGS resource estimates, 
including tar sands and coalbed methane.
    Mr. Leahy. I would agree with Ms. Kallaur on the 
comparability of the numbers.
    Mr. Gibbons. Okay.
    Mr. Leahy. Also, I would like to state that the definition 
of ``technically recoverable'' is in my written testimony, but 
the way I guess I would characterize it very simply, it is the 
quantity that can be extracted with current technology.
    Mr. Gibbons. Very good. Would you, for the record, submit 
to this Committee the refined estimates based on a common 
terminology for the use of reserves?
    Ms. Kallaur. Yes.
    Mr. Gibbons. Just submit it for the Committee. I would 
appreciate it.
    Ms. Kallaur. Yes, sir.
    [The information referred to follows:]
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    Mr. Gibbons. Mr. Leahy, the crude oil, the estimated 
resources that are based on the USGS studies, presented in 
testimony to this Subcommittee on March 21st, in 1996, appears 
to differ significantly from that presented in Circular 1118, 
and indeed your testimony here today, which is different. 
Specifically the 1996 testimony, total estimated technically 
recoverable reserve, crude oil reserves were 142 billion 
barrels versus the 112.3 billion barrels in Circular 1118 in 
your testimony. Can you explain this difference to us?
    Mr. Leahy. Yes, I can. The results of the USGS 1995 
National Oil and Gas Assessment, I believe it is on page 2 of 
my testimony, what we did in that earlier assessment is to 
combine the estimates for oil, which is 112 billion barrels, 
with the natural gas liquids; and these are liquids. They call 
them condensates, too. When the pressure in the reservoir is 
reduced, they go from a gas phase to a liquid phase, and we 
included them with the oil estimate. That estimate is about 30 
billion barrels. So if you add them together, the number is the 
same as that earlier testimony.
    Mr. Gibbons. Dr. Kumar, you indicated in your testimony and 
state that we have very large natural gas and oil reserves in 
the United States. If this is the case, why aren't we using, 
drilling, producing these resources today? What is the barrier? 
What are the limitations that you see?
    Mr. Kumar. Well, one of the main barriers, Congressman, is 
access. We just heard how many of the areas that have 
significant potential are off limits, the East Coast of the 
United States, Arctic National Wildlife Refuge, the Pacific 
OCS, and the resources can never be converted to reserves and 
supply unless the industry can go and have access.
    In addition, since the 1980's, while in our own country oil 
companies were having trouble getting access, the permitting 
process was getting more and more onerous year after year after 
year. I personally dealt with that in Alaska for almost 10 
years. At the same time the rest of the world was opening up, 
and companies found going outside the United States sometimes 
they could find bigger targets to look at and the climate was 
sometimes more welcoming to them outside the country than in 
their own country.
    Mr. Gibbons. I see my time is up, Madam Chairman.
    One last statement or question. Dr. Kumar, could you for 
the Committee and for the record submit to us your estimate, 
your agency's or organization's estimate, of what oil and gas 
reserves or resources are precluded, locked up and unavailable 
out of the total that this country may possess? Can you give us 
that kind of an estimate on paper at a later date?
    Mr. Kumar. We can provide a summary of what has been 
already generated by various agencies. Our association, as I 
mentioned in my testimony, we do not generate numbers, and the 
reason is that our thousands of entities in the United States 
are actively working for oil and gas, and we thrive on having 
differences of opinion. So we would be happy to submit a 
summary that was published actually by the National Petroleum 
Council recently, which actually right now in front of me there 
is a map that shows the areas that have been locked up and that 
are not available. So we will be very happy to submit our AAPG 
position on that.
    Mr. Gibbons. That would be fine.
    Thank you, Madam Chairman.
    [The information referred to follows:]
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    Mrs. Cubin. The Chair now recognizing the gentleman from 
Massachusetts, Mr. Markey.
    Mr. Markey. Thank you, Madam Chair.
    Dr. Leahy, ``technically recoverable'' is a term of limited 
usefulness in the real world. Don't you agree?
    Mr. Leahy. Yes.
    Mr. Markey. Since it presumes that you have infinite money 
to spend. So, for example, if I ask you to tell me how many 
technically recoverable kilowatts of solar energy fall in 
California each day, it is a lot. I mean, it is technically 
recoverable, every single ray of sun that hits in California, 
but it is not available at a reasonable price.
    So proponents of drilling in ANWR often use the number 16 
billion barrels of technically recoverable oil, citing the USGS 
as their authority. If you were trying to give Congress an 
accurate idea of what ANWR might contribute to our energy 
supply, would you use that number?
    Mr. Leahy. What you raise is an interesting issue, and, of 
course, the economics are a key element here.
    Mr. Markey. Would you call that number misleading?
    We need help here. We are trying to make big decisions.
    Mr. Leahy. I think the number, as stated, as technically 
recoverable, is correct.
    Mr. Markey. But, again, solar energy is technically 
recoverable. We are talking about--remember now, there has been 
an EIS that has been approved for 18 years to bring the natural 
gas down from Prudhoe Bay. That is economically recoverable 
under your definition, is that not true?
    Mr. Leahy. Technically.
    Mr. Markey. Technically, I mean technically recoverable?
    Mr. Leahy. Yes.
    Mr. Markey. Yes, okay. So we need a little bit of help now 
as we are looking over at this other issue.
    Mr. Leahy. I think, again, I will go back to my earlier 
statement that the economics come to play here. Frankly, one 
has to add that economic piece in terms of cost.
    Mr. Markey. That is not your job?
    You would agree with me that there is a tendency for that 
term ``technically recoverable'' to be misleading, though, 
would you not?
    Mr. Leahy. Well, we have attempted in our assessments to 
add the economic piece. In my testimony, I believe there is a 
chart at the end that demonstrates how these estimates change 
as a function of the market price of oil.
    Mr. Markey. What is economically recoverable at $30 a 
barrel?
    Mr. Leahy. I will use the mean value--.
    Mr. Markey. Yes, please.
    Mr. Leahy. --in terms of the probability. Approximately six 
billion barrels.
    Mr. Markey. Six billion, okay; not 16.
    Okay. Thank you.
    Now have you ever done a study such as the one you have 
done on the refuge for the National Petroleum Reserve?
    Mr. Leahy. Excuse me?
    Mr. Markey. Have you ever done a study such as the one you 
have done on the refuge, the Arctic Refuge, for the National 
Petroleum Reserve?
    Mr. Leahy. We have one in progress as we speak.
    Mr. Markey. When was the last one you conducted? Have you 
ever conducted one?
    Mr. Leahy. Approximately 20 years ago.
    Mr. Markey. Now, the National Petroleum Reserve, that is 
not a refuge, is it?
    Mr. Leahy. No, it is not.
    Mr. Markey. It is a wilderness in the legal sense, is it 
not?
    Is it a wilderness in the legal sense, the National 
Petroleum Reserve?
    Mr. Leahy. No.
    Mr. Markey. No, absolutely not. It is intended to provide a 
source of oil and gas for our country, is it not?
    Mr. Leahy. That is correct.
    Mr. Markey. Democrats and Republicans, as far as you know, 
agree on that?
    Mr. Leahy. Yes.
    Mr. Markey. So why have you spent so little time analyzing 
what is legally approved by Democrats and Republicans instead 
of spending so much time on what is legally prohibited in terms 
of your analysis of technically recoverable oil and gas?
    Mr. Leahy. Well, I think we try to look at frontier areas 
across the board.
    Mr. Markey. But why would you look at them before you have 
looked at the National Petroleum Reserve where we all agree 
that there should be drilling?
    That doesn't make a lot of sense to me, sir.
    Mr. Leahy. We look at areas that have potential. As I 
stated in my testimony, this issue--.
    Mr. Markey. But there is a prohibition on the refuge, as 
this Committee is well aware, and there is none in--what I am 
saying is I don't think you have been providing the right focus 
for your agency in terms of what would have been useful for 
Congress and for the private sector.
    Now, BP recently announced that they are looking at a very 
large structure in the NPRA. Are you familiar with it?
    Mr. Leahy. Yes.
    Mr. Markey. Now BP says it is the same size as Kuparuk 
Field structure. Kuparuk is the second largest field in the 
North Slope, second only to Prudhoe Bay, is that correct?
    Mr. Leahy. I will have to check.
    Yes, that is correct.
    Mr. Markey. It is. Okay. Good.
    Mrs. Cubin. Would the gentleman yield if I make up the time 
for him?
    Mr. Markey. Yes.
    Mrs. Cubin. The reason they did ANWR was because in a lame 
duck session in 1980, when Jimmy Carter was the President, the 
Congress told them they had to do it, told USGS they had to do 
it. So that is why they did it.
    Mr. Markey. Has there been any updating since 1980 in the 
Arctic Refuge?
    Mr. Leahy. 1998 was the recent one.
    Mr. Markey. Was that because of a Jimmy Carter lame duck 
session or request, do you know?
    Mr. Leahy. No. There had been some seismic information 
collected on ANWR. There was new information on drilling in 
State lands adjacent to ANWR.
    Mr. Markey. All right. I appreciate it, but not in the 
National Petroleum Reserve, yes.
    People are still blaming Jimmy Carter for the energy 
crisis. They are giving Ronald Reagan credit for the entire 
1990 economic recovery, which I appreciate.
    Do the economics of searching for natural gas on the North 
Slope change once a pipeline is built?
    Mr. Leahy. They certainly will.
    Mr. Markey. They would. So all of that oil that has now 
been a by-product of--all of that natural gas that has 
historically been a by-product of looking for oil takes on a 
different light, does it not, once a pipeline is built?
    Mr. Leahy. That is correct.
    Mr. Markey. We approved the building of a natural gas 
pipeline back in 1982, but it has never been built. Democrats 
and Republicans agreed on that. Now I am told by those who hold 
the permits that it is now econometrically likely that it could 
be built and a full return could be given.
    How much more gas could we expect to find up there if there 
was a pipeline in place to bring it out?
    Mr. Leahy. Technically recoverable, and this is--the only 
numbers I have are the ANWR 1002 area, but there are other 
numbers for more of Alaska and we would be glad to share those 
with you, but in terms of ANWR it would be about 3.5 TCF at the 
mean value.
    Mr. Markey. Okay. Let me ask one final question. BP, the 
largest player in the North Slope, recently sent me an estimate 
of oil dependence in the year 2010. It was based on the 
estimates of a leading consultant whom they respect. The 
estimate is that assuming no significant change in current 
policies our oil dependence will fall, not increase, over the 
next 10 years. Instead of rising to 61 percent, as estimated by 
EIA, it will fall to 50 percent. Fifty percent is the 10-year 
goal in the Senate energy bill, as you know, that we would 
basically reach if we drilled in the ANWR.
    In other words, if BP and their consultant are correct, are 
we already going in the right direction and would we reach the 
Senate goal even if we don't touch the Arctic Refuge? Do you 
agree with that analysis?
    Mr. Leahy. That is a policy issue and, frankly, our role is 
to provide the estimates of the resource.
    Mr. Markey. Mr. Kumar, could you give me your view on that? 
Do you agree with BP?
    Mr. Kumar. I have not seen that report or the statement or 
the consultant that provided that, but I personally think it 
would be very unlikely that we can reduce our dependence on 
foreign oil.
    Mr. Markey. I have the BP report here, Madam Chair, and I 
would like to get permission to put it into the record.
    Mrs. Cubin. Without objection.
    Mr. Markey. I think it would be very helpful to our 
discussion.
    [The information referred to follows:]
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    Mrs. Cubin. Last week Mr. Downey testified in front of the 
Committee that if you take the gas out of the ground first then 
you can't get the oil out so you are wasting the oil resource, 
and that is one of the biggest reasons why it hasn't been 
economically feasible to do that because they don't want to 
waste the oil that is in there.
    The Chair now recognizes Mr. Tancredo.
    Mr. Tancredo. Thank you, Madam Chairman.
    Ms. Kallaur, the MMS revised its estimates upward, 
significantly upward, on conventionally recoverable resources 
in the Gulf of Mexico.
    Ms. Kallaur. Yes.
    Mr. Tancredo. Could you give us a little more detail as to 
why these estimates increased and perhaps where the identified 
resources exist?
    Ms. Kallaur. Yes. The majority of the increase is 
attributable to the new finds in the deep water, and in 
addition there were several new prospects that were analyzed in 
the 2000 assessment that were not analyzed in the 1995 
assessment.
    Mr. Tancredo. If you can segregate the data, how about in 
Sale Area 181; if you could identify it specifically how would 
the resource estimates compare to the NPCS estimate of 7.9 
trillion cubic feet of gas?
    Ms. Kallaur. The numbers that we are currently using for 
Sale 181 are 396 million barrels of oil and 2.9 trillion cubic 
feet of natural gas. And I note that the NPC numbers, or the 
industry numbers, I have seen are much higher.
    Mr. Tancredo. Thank you. That is all the questions I have.
    Mrs. Cubin. The Chair now recognizes Mr. Inslee.
    Mr. Inslee. Thank you, Madam Chair.
    I have some articles from the New York Times about the 
sinking of the oil rig, the Brazilian rig. If I may enter these 
into the record, I would appreciate that opportunity.
    Mrs. Cubin. Without objection.
    [The articles referred to follow:]
                 WIDOWS OF OIL WORKERS MOURN IN BRAZIL
               BY MICHAEL ASTOR, ASSOCIATED PRESS WRITER
    MACAE, Brazil (AP)--Widows of oil workers tossed rose petals from a 
helicopter Wednesday over a mile-long oil slick in the South Atlantic 
where the world's biggest floating oil rig sank Tuesday, taking eight 
bodies with it.
    Meanwhile, the president of Brazil's Environmental Protection 
Agency, Hamilton Casara, flew over the site of the spill to assess the 
damage, and an 11-boat flotilla worked to contain the oil.
    According to the state oil company, Petrobras, some 80,000 gallons 
of mostly diesel fuel already had leaked but thanks to cleanup efforts 
and evaporation only 3,000 gallons remained on the surface.
    ``The slick is moving northeast out to sea but there is absolutely 
no risk whatsoever that it will hit beaches,'' said Petrobras' 
Environment and Safety Superintendent Irani Varela.
    An overflight of the area revealed a slick about a mile-and-a-half 
long and a half-mile wide along with scattered debris from the 
platform, which sank about 75 miles off the coast.
    ``It's not a disaster. But the oil could affect migrating species 
and possibly ecosystems near the coast, like banks of coral,'' said 
Roberto Kishinami, the head of Greenpeace in Brazil. ``This will have 
an impact on the environment and Petrobras is glossing over it.'' 
Petrobras President Henri Phillipe Reichstul said he believed 
containers holding 312,000 gallons of diesel fuel would collapse under 
water pressure on the sea bottom at a depth of 4,455 feet.
    The rig also had 78,000 gallons of crude--most of it in hoses 
between the wells and the rig. Those hoses were attached when the rig 
went down and could break, he said.
    The 40-story-tall rig began sinking on Thursday after three 
unexplained explosions ripped through it. Two of the 175 workers were 
killed, and eight others are missing, presumed dead inside the sunken 
rig. Rescue workers wept as the rig sank beneath the waves on Tuesday.
    Petrobras said it had done everything possible to recover the 
bodies.
    Relatives of the victims, however, believe otherwise.
    ``I won't leave here without his death certificate, and I won't 
stop fighting to get his body back,'' said Rita Araujo.
    ``They can turn the rig upside down, do anything they have to. I 
want Charles's body. Even if it's just the bones, I want them,'' said 
Vanusi Oscar, widow of oil worker Charles Oscar.
    Varela, the Petrobras safety official, said recovering the bodies 
would be almost impossible given the depth of the water of about a 
mile.
    Built in Italy and later modified in Canada, the rig was the top 
producer in the oil-rich Campos Basin, which accounts for most of the 
1.5 million barrels of oil Brazil produces daily. The platform was 
pumping about 83,000 barrels of oil and processing 1.3 million cubic 
meters of gas daily, but the company had plans to raise its production 
to 180,000 barrels a day.
    Oil workers plan to stage a 24-hour work stoppage to protest safety 
conditions and honor the dead on Thursday.
                                 ______
                                 
      OIL RIG SINKS; SOME LEAKING IS ``INEVITABLE,'' OFFICIAL SAYS
                            BY LARRY ROHTER
    The New York Times Company, March 21, 2001
    RIO DE JANEIRO, March 20, 2001--After 5 days of frantic efforts to 
keep it afloat and recover the bodies of nine workers left onboard, the 
world's largest offshore oil platform sank into the South Atlantic this 
morning.
    Henri Philippe Reichstul, president of the state-controlled oil 
company, Petroleo Brasileiro, or Petrobras, which operated the rig, 
said today that it was ``inevitable'' that at least some of the nearly 
400,000 gallons of oil stored on it would spill into the ocean.
    Brazilian television showed the platform, which was 40 stories high 
and weighed more than 31,000 tons, tipped over sideways and almost 
entirely submerged this afternoon, with little more than a helicopter 
pad still above water.
    The giant rig, known as P-36, was built in Italy and later modified 
at shipyards in Canada and Singapore before Petrobras acquired it 
through a Bolivian intermediary; it was insured for $500 million.
    It began operating a year ago this month in the oil-rich Campos 
Basin in the South Atlantic, about 78 miles off the coast of Rio de 
Janeiro state. Drilling to a depth of more than one mile, the platform 
had been producing 83,000 barrels of oil a day, about 5 percent of the 
total output of Petrobras.
    But early on March 15, the rig was shaken by a series of explosions 
and began to list.
    With fires raging and one firefighter already dead, all but 9 of 
the 175 workers were evacuated to another platform, and then to the 
mainland. Petrobras workers immediately began to try to stabilize the 
platform and find their missing co-workers, who are presumed dead.
    Rough weather and high waves have hampered their work. ``Sea 
conditions undoubtedly complicated the work of the divers and 
contributed to the sinking of Platform P-36,'' Mr. Reichstul said today 
at a news conference. ``Certainly the bad weather accelerated its 
sinking.'' He also said that the rig's oil and gas wells had been 
sealed before it was evacuated. But oil and diesel fuel were stored in 
tanks aboard the rig, and industry experts said the tanks would almost 
certainly be ruptured by mounting water pressure as the platform sank. 
The ocean is about 4,400 deep at the site of the rig.
    Petrobras officials said that more than a dozen vessels equipped 
with floating barriers have been sent to try to contain any spill.
    Meteorologists said today that prevailing winds were blowing to the 
south, away from the coast, but that high winds were also preventing 
effective use of the barriers.
    ``There is a plan in place to protect the environment,'' Mr. 
Reichstul said. ``We are not terribly worried about the environmental 
question.'' The demise of P-36 is the latest in a series of problems 
for Petrobras, whose stock price fell more than 2 percent as soon as 
the sinking was announced.
    Two major oil spills in 14 months have led to large fines and heavy 
criticism of the company, Brazil's largest, which produces nearly all 
the country's oil and reported a profit of $5.2 billion in 2000.
    The platform disaster is also a setback for Brazil's drive to 
become self-sufficient in oil.
    Petrobras had been producing about 1.5 million barrels a day and 
hoped to raise its output to 1.8 million barrels by 2005. But now, the 
company will need to spend an estimated $500 million importing oil to 
replace P-36's lost production until a new rig can be bought and put in 
place.
    ``We're going to increase oil production this year, despite the 
accident, `` Mr. Reichstul said. ``Production in 2001 will exceed that 
of last year.''
                                 ______
                                 
                   STRICKEN RIG ADDS TO PETROBAS WOES
                          BY JENNIFER L. RICH
    March 20, 2001, The New York Times Company
    SAO PAULO, BRAZIL, March 19, 2001--With its largest offshore oil 
platform still listing after a series of deadly explosions last week, 
Brazil's state- owned oil company, Petroleo Brasileiro, or Petrobras, 
is struggling to ease the damage to its bottom line and to the 
international reputation it has painstakingly built.
    The accident is the latest in a string of problems, including 
environmental disasters, that Petrobras has had to answer for.
    ``It has been a pretty bad last 14 months, and clearly the company 
has suffered as a result of that,'' said Myles McDougall, senior 
petroleum analyst at ABN Amro in Sao Paulo.
    After three explosions crippled one of the oil platform's support 
pillars on Thursday, causing the 40-story rig to sink more than 13 
feet, Petrobras has been frantically working to keep the $350 million 
rig afloat. Ten of the platform's 175 workers are presumed to have died 
in the explosions and one is seriously injured, making the accident the 
deadliest on a Brazilian oil rig since 1984. Petrobras today named a 
commission to investigate the cause of the explosions.
    The platform, situated in the oil-rich Campos Basin, 120 miles off 
the coast of the state of Rio de Janeiro, had stopped sinking by 
Sunday, but a storm front brought larger waves today, causing the rig 
to lean further.
    Petrobras is hoping that the rig, which is covered by $500 million 
in insurance and is one of the world's largest platforms, can be saved. 
If so, the company said it would take at least a year to repair the 
structure, resulting in a loss of production worth $450 million this 
year.
    If the rig sinks, the 400,000 gallons of crude and diesel fuel on 
board will probably spill, increasing clean-up costs and leaving the 
company open to fines for environmental damage.
    Analysts say that the financial damage to Petrobras, while 
significant, should account for only about 6 percent of the company's 
earnings. Last year, the company reported net profit of $5 billion, up 
from $880 million in 1999.
    More damaging, the analysts say, may be the short-term effect of 
having to import additional oil on Brazil's already precarious trade 
deficit. At present prices, the imports could cost as much as $40 
million a month.
    The platform, called P-36, has been in production since March 2000, 
processing around 80,000 barrels of oil a day, or slightly more than 5 
percent of Brazil's daily production of about 1.3 million barrels. 
Production on the rig was to reach 180,000 barrels a day by 2003, 
helping the country, which consumes about 1.8 million barrels of oil a 
day, reach oil self-sufficiency by 2005. Such production was also 
expected to increase Petrobras's oil and gas exports, currently a tiny 
portion of its business.
    Analysts say that the accident should not affect Brazil's long-term 
oil plans. But to resume production as soon as possible, Petrobras is 
considering subcontracting P-36's oil processing to smaller production 
ships or diverting a new platform, which recently arrived in Brazil and 
was going to be used elsewhere, to replace the damaged one.
    After a 50-year monopoly, the Brazilian oil industry recently 
opened to private and foreign companies. To compete with the 
multinational newcomers, Petrobras has been modernizing and 
streamlining domestic operations, cutting staff to 33,000 from around 
70,000 the last 7 years while stepping up development and production.
    Employee unions say that in Petrobras's rush to expand production, 
it has overlooked security precautions that could have prevented last 
week's accident. And they say that the downsizing and the hiring of 
contract laborers have resulted in 82 deaths nationwide at company 
facilities the last 3 years, including the deaths earlier this year of 
two workers on a natural gas platform also in the Campos Basin.
    ``For Petrobras to outsource these jobs creates a certain level of 
risk for us, since these workers are often not as prepared as we are,'' 
said Coaracy Guimar es, a director at Sindipetro, the Brazilian 
petroleum workers union.
    The unions organized protests last Friday, demanding stricter 
attention to workers' safety.
    Analysts say a combination of faulty technology and human error has 
caused two major oil spills the last 14 months, the worst of which 
dumped 325,000 gallons of oil in Rio de Janeiro's Guanabara Bay in 
January 2000, two months before the Carnival holidays filled the city 
with international tourists.
    Petrobras denies the union's arguments and says that the spills 
were caused by years of neglect that will take time to rectify. In 
response to the Guanabara Bay spill, the company's president, Henri 
Philippe Reichstul, announced a 3-year, $900 million program to improve 
operational security and lessen environmental impacts.
    ``The Brazilian market has only been open for 5 years, and this 
type of evolution is normal to the process,'' said Jean-Paul Prates, a 
petroleum lawyer in Rio de Janeiro. ``Things are going to be learned 
little by little.'' In the meantime, he said that last week's accident 
should have little or no effect on foreign business interest in Brazil.
    ``The amount of investment in the sector is unprecedented and that 
opening is not going to close because of this,'' Mr. Prates said. ``You 
have 20 more operators that are beginning to enter into the Brazilian 
scene. It's a boom.''
                                 ______
                                 
    Mr. Inslee. These are broad-based questions. I was looking 
at a national assessment of undiscovered conventionally 
recoverable resources on the outer shelf, and it includes two 
outer shelves, one around Florida that I am interested in and 
one off Washington and Oregon. It is my understanding, just if 
you can tell me if you know the administration's position on 
this, that at the request of the Governor of Florida, the 
President of the United States has decided to take those areas 
off limits, that he intends--of all the offshore areas, the 
Governor of Florida has requested those not be subject to 
exploration. It is my understanding that in honoring that 
specific request the President of the United States is not 
going to seek exploration in those areas.
    Is that your understanding?
    Ms. Kallaur. Congressman, the Minerals Management Service 
has responsibility for leasing and regulating all offshore oil 
and gas activity. We are completing the final EIS on Sale 181 
in the Eastern Gulf. It is scheduled to be released in June of 
this year and then we would be issuing a proposed notice of 
sale in July. We have received no direction from the President 
to stop our work.
    Mr. Inslee. I am sorry. Which?
    Ms. Kallaur. Sorry. We have received no direction from the 
President to stop doing the work we are currently doing right 
now on Sale 181 in the Eastern Gulf of Mexico.
    Mr. Inslee. That would include waters off Florida, then?
    Ms. Kallaur. That is correct, sir. Sale 181 is principally 
offshore Alabama, Mississippi, but there is also a portion that 
is offshore Florida.
    Mr. Inslee. So you are telling me you are not sure what the 
Administration's position is regarding Governor Bush's 
suggestion?
    Ms. Kallaur. All I know is what my staff is working on 
right now, sir.
    Mr. Inslee. I see. Well, assuming that the President honors 
the Governor of Florida's request not to drill off his shores 
in Florida, if the Governor of the State of Washington 
requested that you don't drill off the Washington shores or, in 
fact, national monuments like the Hanford Reach in Washington, 
is there any reason not to honor those other Governors' 
requests that you are aware of?
    Ms. Kallaur. I can speak to the offshore, and there is 
currently both a presidential withdrawal that was issued by 
President Clinton that goes through the year 2012, and 
congressional moratoria language that precludes any type of 
leasing activity along the West Coast, the East Coast and a 
portion of the Eastern Gulf of Mexico and one area in Alaska.
    Mr. Inslee. But with recent experience, we can't be 
entirely confident that those environmental policies will 
remain standing, unfortunately.
    So I guess this is a question I have, if President Bush 
honors Governor Bush's request for Florida, is there any 
geological or economic reason you can see why he shouldn't 
honor other Governors' requests about territory in their areas?
    Ms. Kallaur. That really isn't an issue before the Minerals 
Management Service. As I previously said, there are 
congressional restrictions currently in place for all of the 
areas that I cited.
    Mr. Inslee. Okay. Thank you.
    Can you tell us about any assessments that have been done 
about the potential energy that could be obtainable through 
conservation or efficiency measures taken by the United States, 
those from a whole gamut of sources, energy savings that would 
be obtained, essentially free oil, if you will, by having more 
efficient cars and trucks, by having more efficient light 
bulbs, by having more efficient refrigerators, by having more 
efficient heating systems in the home? Do you have any 
assessments of the available energy to the United States of 
America from those sources?
    Ms. Kallaur. That work is done by the Department of Energy 
and not prepared by the Department of Interior.
    Mr. Inslee. Do you have any information of how those relate 
to one another? Which one is larger? Do we have larger 
potential through conservation and energy efficiency or do we 
have larger potential through drilling in offshore, national 
monument areas, do you know?
    Ms. Kallaur. The one thing I do know is when the National 
Petroleum Council did a study of future natural gas needs for 
our Nation, they also took into account estimates of 
conservation. They said that the OCS would need to produce 7 to 
8 TCF of natural gas in the year 2012 in order to allow 
consumption of natural gas to go from 22 TCF to 30 TCF, and I 
believe they took into account conservation in coming up with 
those numbers.
    I think you know in this area reasonable people can 
disagree.
    Mr. Inslee. Thank you. That is something I totally agree 
with.
    Ms. Kallaur. Yes.
    Mrs. Cubin. The Chair now recognizes Mr. Rehberg.
    Mr. Rehberg. Thank you, Madam Chairman.
    I apologize for coming late. This is something I am 
particularly interested in, representing the State of Montana 
and the entire Rocky Mountain front.
    I get a little sweaty-palmed when we talk about wells 
because having been a rancher and having drilled dry wells, I 
don't think I could ever be in the oil and gas business. But we 
all know there is uncertainty in estimating undiscovered oil 
and gas resources. How is the uncertainty, and this is for the 
entire panel, how is the uncertainty for making the estimates, 
in your assessments, how can they be reduced, in your mind?
    Mr. Leahy. Why don't I start? More information. Our 
assessments are based on geologic information, and the more 
geologic information we have, the more we can reduce the 
uncertainty.
    Ms. Kallaur. I would agree with that. I mean, clearly you 
don't know what is out there until you either acquire 
additional seismic information and then the only definitive way 
to know whether or not oil and gas is present is through 
exploratory drilling.
    Mr. Kumar. Congressman, in all of these areas, as 
assessments are made, they are made on the basis of existing 
data and we have seen significant revisions. As a certain play 
becomes more economic, more drilling is done, more information. 
That is one of the things when I mentioned surprises, we are 
all good at assessing what is known. It is the unknown part 
that sometimes becomes the most important play in a given area, 
and that can only happen with additional seismic and drilling 
information.
    Mr. Rehberg. Okay. Ms. Kallaur, I understand that the MMS 
has recently sought the comments of the coastal state Governors 
with respect to the next OCS 5-year plan. Were any comments 
received suggesting that areas currently under the moratoria 
should be studied further by your agency as to the natural gas 
potential, even if they are not to be considered for leasing 
before 2002?
    Ms. Kallaur. We are in the process of developing the next 
OCS 5-year program, and we did not receive any comments from 
Governors at this time suggesting that we relook at the 
moratoria issue. Even so, we do have in place an advisory 
committee that is an advisory committee to the Secretary of the 
Interior that has coastal state members, and they have formed a 
Subcommittee to look at the question of the role of natural 
gas--of the role of the offshore in providing natural gas to 
our Nation. They are going to be setting forward some 
recommendations to Secretary Norton at a meeting that is 
scheduled for late May. They are coming up with some innovative 
approaches. They are looking to the success that has occurred 
in Eastern Canada, particularly with respect to natural gas, 
and thinking sort of broadly as to whether or not there might 
be a way to target small U.S. areas along the Atlantic, perhaps 
to see whether or not we could develop some OCS natural gas 
resources offshore in the United States.
    Mr. Rehberg. Thank you.
    Dr. Kumar, from your perspective, what will be required in 
order for the United States to meet projected natural gas 
demand over the next 5 years?
    Mr. Kumar. We mentioned earlier that we would probably need 
to double the number of wells being drilled currently. That 
would require significant capital commitment.
    One of the things our industry is also facing is the lack 
of trained personnel. The oil industry has not been an area 
where a lot of students are wanting to go. So we will need to 
make a major national commitment to developing our resources, 
making the areas available and creating the drilling and 
providing the access.
    Mr. Rehberg. Thank you. Thank you, Madam Chairman.
    Mrs. Cubin. We thank you very much for your valuable 
testimony and for your patience in answering our questions.
    Some of the Subcommittee members may have some additional 
questions and if you would answer those in writing, the record 
of the hearing will be open for 10 more days.
    If there is no further business, this Subcommittee on 
Energy and Minerals is adjourned.
    [Whereupon, at 3:40 p.m., the Subcommittee was adjourned.]

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