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U.S. Oil, Natural Gas Producers Express Support For Offshore Drilling Legislation

Washington, D.C. (June 21, 2006)

The Independent Petroleum Association of America - representing over 5,000 companies that drill 90 percent of the nation's oil and natural gas wells, produce 85 percent of America's natural gas and 60 percent of domestically produced oil - expressed support for offshore drilling legislation that would open America's deep sea to oil and natural gas exploration and production.

House Resources Committee Chairman Richard Pombo (R-CA) struck a bipartisan compromise on legislation titled the Deep Ocean Energy Resources (DOER) Act that is a balance between Outer Continental Shelf legislation authored by Reps. John Peterson (R-PA), Neil Abercrombie (D-HI), Bobby Jindal (R-LA) and Charlie Melancon (D-LA). DOER ends the existing federal moratoria on offshore drilling with a system that allows states to decide if deep sea exploration should be allowed within 100 miles of its shore. The bill would open oil and natural exploration and production 100 miles and beyond. The Resources Committee approved the bill by a vote of 29 - 9.

"We salute Chairman Pombo and the House Resources Committee for reaching a bipartisan compromise to move this country forward towards greater energy security. The environmentally safe development of urgently needed oil and natural gas supplies through access to the deep sea is a vital component of an effective national energy strategy," said Barry Russell, president of the Independent Petroleum Association of America.

Continued development of the nation's offshore areas is needed to meet the country's demand for energy resources. Unfortunately, ninety percent of the deep sea is off-limits, including 300 trillion cubic feet of natural gas and 50 billion barrels of crude oil. According to resource estimates made by the American Petroleum Institute, this alone, could replace current levels of oil imports from the Persian Gulf for the next 59 years.

According to Russell, "By allowing American energy companies to do their jobs and produce American energy, Chairman Pombo is taking an important step to improve the lives of American consumers, strengthen our economy and improve national security."

Although the IPAA supports any effort to open additional areas of the OCS to exploration and production, it does not believe DOER needs to include an arbitrary 100 mile buffer from the coastal states. The House should open the entire region for exploration and production. Through the use of advanced technology, the offshore oil and natural gas industry has compiled an outstanding record for operating safely in the OCS. The best offshore safety measures ensured that virtually no oil was spilled as a result of the devastating Hurricanes of Katrina and Rita last year.

As well, IPAA is concerned with language in the bill that seeks to compel American energy producers to renegotiate deep water leases signed in the late 1990's and repay royalties that at the time, provided a very important incentive for deep water production. The economics of royalty relief encouraged production, thereby enhancing American energy supply. This would penalize American energy companies for taking a risk at a time when the economics otherwise might have lead to limited activity in deep water areas. According to the U.S. Minerals Management Service (MMS), since 1996 deepwater natural gas production increased 407 percent and deepwater oil production is up 386 percent. There are now about 150 deep water discoveries of which more than 107 are producing. IPAA is pleased the committee is engaged in a serious effort to increase access to America's deep sea energy resources. Deep sea oil and gas development has and can occur while accelerating the protection and improvement of the environment, and increase America's energy security.

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IPAA is the national trade association representing oil and natural gas producers that drill 90 percent of the nation's oil and natural gas wells. These companies account for 68 percent of America's oil production and 82 percent of its natural gas production.