Remarks of T. J. Glauthier
Deputy Secretary of Energy
to the
National Petroleum Council Meeting
December 15, 1999
Secretary Richardson would have liked to have been here, but scheduling conflicts made that impossible. As many of you know, he has been chairing a meeting of African energy ministers for the last two days in Tucson, and I believe at last count, we had 44 ministers from different African countries meeting together to deal with the issues of energy and development in Africa. So, the Secretary sends his greetings.
We are very interested in the report that you have just concluded and appreciate the opportunity to accept it from you.
The question you are addressing in this report -- whether the gas industry can respond to projected demand growth...and at the same time, keep supplies reliable and prices affordable -- goes to the very foundation of our future energy and environmental strategy.
Given that so much is riding on the future development of our country's natural gas potential -- and the substantial time and senior level attention that has been given to this report -- it is clear that this is one of the most significant studies this Council has ever conducted.
I want to convey the Secretary's personal thanks to members of the Committee, the task groups, and others who invested considerable time over the last year to conduct the analyses and prepare the study.
I particularly want to acknowledge:
- Peter Bijur, who headed the Committee and took on this task with both enthusiasm and commitment to produce a quality product.
- Joe Foster, your outgoing chairman, who demonstrated his personal interest in this effort by participating in several of the subcommittee meetings;
I also want to acknowledge the two vice chairs of the Natural Gas Committee:
- Leighton Steward and his team from Burlington Resources, and Bill Wise and his staff from El Paso Energy Corporation. They put not only their time but their companies' resources behind this effort.
I particularly want to thank Rebecca Roberts, from Texaco, who picked up Subcommittee Chair in midstream and did an excellent job in pushing the group toward your final product.
I want to also acknowledge the three task group leaders:
- in supply, Tommy Nusz
- in demand, Matt Simmons, and
- in distribution, Sue Ortenstone.
The effort that was carried out on this report was truly impressive, with the number of people who participated in each of these groups and the amount of time and attention and devotion that they put into it.
I also want to recognize the contribution of our Federal agency team members:
- Bob Kripowicz, who was the Federal cochair.
- Tom Frye and John Northington from the Department of the Interior, who participated very actively.
The Administration has been working hard to support your industry over the last 7 years. We have passed financial incentives, such as royalty relief for deepwater, heavy oil and marginal oil wells. We supported the Federal Oil and Gas Royalty Simplification and Fairness Act, which the President signed in 1996. We lifted the ban on exports of Alaskan oil. We've carried out the largest privatization of government property in history, the Elk Hills Reserve in California, the nation's tenth largest oil field.
In fact, I was honored to be part of all of those efforts when I was at the White House at OMB, and I know the effort that went into them on the part of both the Federal officials and industry representatives.
And this year, we've managed to put through a royality-in-kind program. In fact, just a few days ago we signed the final contracts for transferring the last of the 28 million barrels of royalty oil from offshore production in the Gulf to the Strategic Petroleum Reserve. This, as many of you remember, was one of the Secretary's initiatives back in February when oil prices were at historically low levels.
We have also made a strong commitment to gas R&D -- increasing our support for gas-related research by 57% over the last 6 years. And we're beginning to see the benefits of many of our joint efforts with industry.
For example, in south Texas, we've seen success rates in locating and producing gas average something like 78 percent because new seismic and drilling technology has allowed wells to be strategically targeted. In fact, our "secondary gas" program has identified drilling and production strategies that have added more than a billion dollars in new gas reserves in south Texas and have helped revitalize gas production in portions of the midcontinent region.
In the past year, we have expanded this program to one of the world's most prolific gas-producing regions -- the Northern Gulf of Mexico. This effort could be particularly important given that your study estimates that the Gulf could account for more than half of all new domestic gas production over the next 10 or 15 years.
In Wyoming, we have helped develop fracture imaging and drilling technologies that have led to the first commercial production of unconventional gas from deep, overpressured, tight sands in the Greater Green River Basin.
We haven't ignored the demand side of the equation.
We are on the verge of producing a revolutionary natural gas turbine for electric utilities that will break through the 60 percent efficiency threshold, long considered the "4-minute mile" in gas turbine efficiency.
We're continuing our support for fuel cells, micro- and mid-size turbines, and gas-fired reciprocating engines...all of which can increase the role of natural gas in meeting our future energy demands, especially for distributed power applications. And last week, the Secretary made a major announcement that will help us build on these accomplishments: He was in Morgantown, West Virginia, to announce that our Federal Energy Technology Center will be elevated to the full status of a National Laboratory. It will be called the National Energy Technology Laboratory.
He indicated his intent not only to boost the center's reputation, but also its responsibilities. And chief among the new responsibilities will be a bigger role in natural gas research.
The Secretary announced his intention to formally establish, within the new laboratory, a Center for Advanced Gas Studies....an organization that will lead the Department's efforts to bring together a strategic program for natural gas across all Departmental lines of organization.
The Secretary was quite clear in his intent. And all of you who know Bill Richardson know how clear he can be when he wants to be very clear.
He said that we need one place that looks out for the future of natural gas -- from borehole to burnertip, one place that understands the innovations needed to produce tomorrow's gas. We need a single focal point that knows how it moves from the wellhead to the consumer, one organization that can fill the gaps in our natural gas portfolio -- for example, to ensure that our gas infrastructure remains reliable.
To make this Center for Advanced Gas Studies a reality, staff from the laboratory and from other offices within the Department will begin working on a coordinated effort with industry to develop a vision for the gas industry of the 21st century.
They will build on the study you are presenting today....looking not only at technological issues, but policy matters. The effort will identify gaps, based on your assessments, cross-walked against initiatives already underway in the Department or in industry. And it will develop efforts to fill those gaps.
We were pleased to see that the American Gas Association's President and CEO, David Parker, has already endorsed this new center and the commitment we are making to develop the full potential of our gas resources.
Getting the Department's act together is one major step forward. But it is only a step. That's why we appreciate the effort you have put into this report, especially your recommendation for establishing a high-level interagency working group on natural gas.
The Secretary is prepared to take this recommendation to the National Economic Council.
We also agree that a balanced, long-term approach should be developed that addresses the full potential of the nation's natural gas resource base. That is why we will commit to expanded the work we're doing in the Rocky Mountain region with BLM [the Bureau of Land Management] to analyze the extent and impact of access restrictions.
We agree with the need to maintain the momentum of technology R&D. We will be working with the industry to develop a better, more complete technology roadmap. And we will be including several natural gas-related initiatives that fill important gaps in our R&D portfolio when we submit our FY2001 budget in February, particularly in the area of gas infrastructure.
In short, we are committed to working with the industry to build toward a 30-plus TCF gas economy in the first decade of the 21st century.
We agree with you that such growth in gas demand can be achieved....but we also share your view that it will take hard work and coordination among our public and private sectors.
We want to ensure that this industry has the best chance to reach its full potential and to contribute its full share to our energy and environmental future.
As we work together over the coming months, we want to be sure that we take action on these recommendations. This is more than just a report. It's been referred to as a road map, which is only useful if you're going somewhere. As we move forward, we need to continue the effective public-private partnership that has produced this study. Let us work together to translate these recommendations into real actions.
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