Comment: "Public Information Act" probably means the "Freedom of Information Act" (5 U.S. Code § 552). It is not true that "oil companies are exempted". The Freedom of Information Act requires, in general, that a great deal of information in United States Government files be available to the public. One general exception is trade secrets and commercial or financial information which is privileged or confidential. Another is geological and geophysical information and data. Thus, anyone's "trade secrets" are protected. And anyone's geological and geophysical information is protected because it is normally privately obtained, and obtained at very great expense. If it were available to the world at large, there would be little motive to pay for doing the work in the first place. The idea that a person who has, at his own expense, done valuable research should get the fruits of that research, is not particularly unAmerican. Statement: The Administration wants to speed the sale to obtain funds to offset 1974-75 budget deficits and to fight inflation. Comment: The objective of both the Federal Administation and the oil industry in opening up the Southern California Outer Continental Shelf for production is to help decrease the continuing dependence of both the nation and the West Coast on imported oil. President Ford, in his press conference on August 28, again stressed the importance to the country of "Project Independence." The development of production from the OCS will be a significant contributor to the success of that Project. Certainly the revenue to the Federal Government from the OCS lease sale will help offset projected budget deficits and fight inflation. The development of production in this area will also help to fight inflation by providing a domestic source of crude oil to replace a part of the required foreign oil imports, over whose price the United States has little or no control. These are not primary objectives, but they are collateral benefits which we believe the Administration and all citizens support. Statement: Isn't it true that the need for offshore drilling is not established because: (a) there is no national energy policy; (b) oil resource information upon which governmental decisions are based, is furnished primarily by oil companies; (c) studies evaluating the effect of conservation techniques (planning, building codes, transportation methods and patterns, production of longlasting materials, etc.) are inadequate ; (d) adequate attention is not being given to the funding and development of alternative energy resources to decrease our dependency on oil; (e) according to Interior Secretary Rogers C. B. Morton, some of the forthcoming Alaskan oil may be exported to Japan because of insufficient demand for it in the Western States. Comment: The free enterprise system works because businessmen see a need and try to fill that need in a way that uses the least economic resources. If business is successful, the country obtains the maximum national output from given resources. Coincidentally, business makes a profit. Thus profits are the driving force in our economic system, sending out signals-potential profit-which tells us what products consumers want produced and where to invest. Is there a need for offshore drilling? Regardless of whether politicians have decided upon an energy policy, the American consumers says yes and our economic analysis says yes. Given the economic environment we live in, there are only two reasons why the oil industry should not be allowed to drill offshore. First, the oil industry and everyone else could have misjudged demand, making it unnecessary to find oil offshore. Second, potential danger to our environment may be so great that no one should be allowed to drill offshore. Has the oil industry misjudged demand? Do we really need to drill offshore? No one can know the future, but surely it is reasonable to think oil companies made the most careful, complete forecast we could-otherwise, oil firms would not risk paying the government billions of dollars in lease bonuses. What happens if industry is wrong? If we've underestimated future demand, price will be higher than otherwise, so there's even more reason to allow drilling. If we've overestimated demand and end up with an oil surplus, the public will benefit at the expense of oil companies. Either way, the public benefits. Many opponents of OCS drilling are really opposed to pollution. The oil industry dislikes pollution, and we've usually cleaned up oil spills because we've felt a moral responsibility. Currenty, there are other reasons why oil drillers will be very careful to avoid spilling oil. Federal law makes it illegal to spill oil or fail to report oil spills. If an oil spill does occur, the spill must be cleaned up at the expense of the company that spilled the oil. In short, if an oil company spills oil, it costs the company money-lots of it. The industry has incentive to avoid pollution, but if some does occur, we'll see it's cleaned up. What more could you ask? Well, opponents might ask that we not export oil found offshore. Indeed, most companies have agreed not to export this oil (or oil from the Alaskan pipeline). And before we could export oil discovered offshore or, for that matter, any oil transported across federal rights-of-way, the President would have to order a study of the impact, approve the study, and have Congress approve the action. Thus, the federal government and the oil industry offer the public substantial guarantees that oil will be produced cleanly, safely, and for the benefit of the American consumer. Mr. MANNING. And now I would like to introduce Mr. Sherman Clarke who will discuss petroleum supply and demand. Thank you. Mr. CLARKE. On behalf of the Western Oil and Gas Association, we prepared a report relating to the potential petroleum supplies from Federal offshore California lands. This report dealt with costs and benefits, as well as the pertinent energy framework involving supplyand-demand projections by form of energy. There is always a question as to the regional limits to place upon such an analysis, and while we believe the pros and cons of developing any indigenous energy supply should most properly be viewed within the context of the total national situation, we have also prepared an energy balance for the localized area of southern California as well as for the essentially discrete oil marketing area of district V, the five far Western States plus Alaska and Hawaii. Let me begin with the situation in southern California. Both oil and gas have been produced in the region throughout this century, but the annual rates of production for both have been declining since the late sixties. Excluding the Federal offshore lands we forecast a continuing decline even at higher producer prices, although the rate of decline will be slowed. In 1973, the total input to petroleum refineries in southern California was a little over 1 million barrels per day, of which crude oil produced in California accounted for about 60 percent. By 1985, we expect the output from present fields to have declined by 200,000 barrels per day or one-third. Federal offshore production in relatively shallow waters could reach 600,000 barrels per day in the same year, so that total indigenous production could approximate the refinery requirement if there were no expansion in refining capacity. On the same basis, the total State would need several hundred barrels per day of crude oil supply from outside the State. The first conclusion, therefore, is that Federal offshore oil production would only help to meet local requirements, and that there would be no excess of local production even if there were absolutely no growth in demand. But we do anticipate a modest growth in oil demand and in refinery capacity related to that demand, rather than to the magnitude of local production. Thus, for both southern California and the total State, substantial movements of crude oil into the State will continue to be required in all future years even with Federal offshore production. The natural gas outlook is quite different because no growth in total supply-and therefore consumption-is achievable for many years and in fact, the supply has been declining and almost certainly will continue to decline for several more years at least. The indigenous supply in southern California represents a small fraction of the total supply, less than 10 percent, and is declining along with all other sources. Federal offshore gas production alone could not offset the anticipated decline from all present sources; out-of-State supplies of gas from coal and liquified natural gas from Alaska and abroad will also be needed. This leads to a second conclusion, that the natural gas potentially available from the Federal offshore lands will help, as will any new source of gas, but even with no growth in local use of gas, indigenous supply will account for only a small fraction of the total. Let me emphasize that these conclusions with respect to the southern California gas-and-oil balances are not predicated on a huge growth in demand, or even on any growth. But we do foresee growth albeit at a quite low rate of only 2.5 percent per year between 1973 and 1990. The outlook in district V is somewhat different because of Alaskan oil, and ultimately gas. Counting on both Alaska oil and Federal offshore California oil, we believe that district V will in effect be just about in balance; that is, for 1980 and thereafter, district V production will be essentially equal to district V requirements. Whether all North Slope and other Alaskan oil will be used within district V is another matter. There are no laws, rules, or regulations which require that oil produced within district V be used within district V. Therefore, it is entirely possible that a portion of the new Alaskan production will be shipped to other districts, with a counterbalancing import of crude oil and petroleum products, principally low-sulfur fuel oil, from abroad. The natural gas balance in district V, once North Slope gas becomes available, is still highly speculative because we do not know when that gas will become available to consumers and we do not know the direction of flow or regional disposition. However, the North Slope gas will be under the jurisdiction of the Federal Power Commission, and with gas supply expected to continue to be extremely tight through the country, I believe it is safe to assume that no one region will receive the entire supply or be able to satisfy all of its gas markets. Therefore, it is anticipated that even with Federal offshore California gas production plus Alaskan gas and all other sources, the total gas supply and use within district V through 1990 will not be significantly higher than it is today, and may well be lower. This leads to our third conclusion, that on the broader regional basis of district V, indigenous oil and gas supplies from all potential sources will not be surplus to the district's requirements. The development of any localized supply of energy today is actually far more of a national issue than it is a local one. While our conclusions from the regional analysis support the need for increased local production, the national analysis provides the basis for demonstrating the absolutely critical need for increased domestic supplies of all forms of energy. The tables at the end of my submission provide our projections, but on the basis of any supply and demand projections we have seen, there appears to be no way that the Nation can be fully self-supporting in energy through 1990. In fact, we believe that oil and gas imports will increase further before a peak is reached, and it will be difficult to reduce the ultimate level of imports, which could be about 9 million barrels of oil per day and several trillion cubic feet of gas-if we can obtain such suppliesversus our current imports of 6 million barrels of oil per day and one Tef of gas. So far, all I have discussed is the volumetric need for the Federal offshore California oil and gas supply. But the volumetric characteristics only become meaningful when translated into their broader economic significance: 1. We cannot be sure of the adequacy of energy supplies from foreign sources. Therefore, this domestic supply will help to support the basic economic activity of the country. 2. The average prices of domestic oil and gas are below the prices of foreign sources. Energy users in southern California will save a significant amount of money by having access to this offshore supply; we estimate the savings at $10 to $20 billion over the life of the field. 3. The offshore production will yield lease payments, royalties and taxes to governments that will amount to almost $20 billion. 4. The less we rely on our own resources, the greater will be our reliance on oil and gas from OPEC. This could force even higher prices for supplies from them; in any event, the Nation's balance of payments will be that much more difficult to maintain on a reasonable basis. The need for the petroleum supply from Federal offshore California lands is based on the many different considerations described above, which in my judgment combine to create a most imperative and urgent need. Senator TUNNEY. Thank you, Mr. Clarke, Mr. Anderson? [The attachments follow:] |