X If OCS oil and gas production is permitted, offshore construction, development of related onshore facilities, and petroleum-related operations should be unitized to the maximum extent possible. Such cooperative sharing by more than one company should apply to all types of offshore platforms, subsurface production systems, transportation facilities and rights-of-way, and storage facilities whenever technically and economically feasible. ΧΙ All exploratory and production data should be submitted to the appropriate State agency (i.e. the Division of Oil and Gas) and should be made public no later than one year from the date on which it was compiled. ! Senator TUNNEY. We now have representatives of Western Oil & Gas Association. There will be four men appearing as a panel; Richard L. Manning, Sherman Clarke, Gordon Anderson, and Stark Fox. It is my understanding, gentlemen, you are prepared to limit your initial statements to 5 minutes each with the understanding any of you can submit a further statement for the record. Please proceed. STATEMENT OF RICHARD L. MANNING, ASSISTANT TO THE GENERAL MANAGER, WESTERN OIL & GAS ASSOCIATION; ACCOMPANIED BY SHERMAN CLARKE, CONSULTANT, WESTERN OIL & GAS ASSOCIATION; GORDON ANDERSON, PRESIDENT, SANTA FE DRILLING CO.; AND STARK FOX, INDEPENDENT OIL & GAS PRODUCERS OF CALIFORNIA Mr. MANNING. We appreciate the opportunity to be here today. We had not intended to appear as a panel but I think at least two of the members up here are not testifying for Western Oil & Gas but for their company and association. However, I think in being helpful in terms of time, this may be a way to go. Senator TUNNEY. Feel free to make your statements, of course, independent of one another. We did have on our witness list, Mr. Clarke, who was to be the person representing the Western Gas & Oil Association and we were planning to give him 10 or 15 minutes but if we have that for everybody, that will push us back timewise. So, if you will limit your initial statements to 5 minutes, that would be a rule of thumb. Please try to recognize we didn't anticipate there would be four witnesses. We were anticipating one. Mr. MANNING. My name is Richard L. Manning, and I am assistant to the general manager of Western Oil & Gas Association. Western Oil & Gas Association is a regional oil industry trade association. We have about 100 members varying in size from small independent operators to integrated large oil companies. Our membership includes producers, manufacturers, and wholesale marketers of petroleum and its products. Our area includes Alaska, where we operate as Alaska Oil & Gas Association, Arizona, California, Hawaii, Nevada, Oregon, and Washington. We want to emphasize at this hearing today our deep concern for the environment of this area, both offshore and upland. I will tell you during the next few minutes what we at Western Oil & Gas Asso ciation are doing on behalf of and with the assistance of interested companies to prepare what we call an environmental assessment of the southern California Outer Continental Shelf area. This is the area the Bureau of Land Management of the Department of the Interior has announced its intention to offer up to 1.6 million acres for lease offshore of southern California subject to its procedures including publication of a draft environmental impact statement, a public hearing on that draft, and publication of a final environmental impact statement. It should be pointed out that this entire project would not be under consideration if there were not a domestic energy supply problem. In a few moments, Mr. Sherman Clarke, an economist and consultant to Western Oil & Gas Association, will present a statement covering in detail supply and demand projections affecting the west coast and United States. We feel it so our industry's responsibility to do everything possible and to demonstrate to the thinking public that the offshore area can be developed and the environment safeguarded at the same time: Here is what we are doing to get ready: 1. Publishing an environmental assessment to be available to all the public including the Bureau of Land Management early next month. This document which I will outline will run more than 2,000 pages and be printed in three volumes plus an appendix. 2. Informing interested persons and groups of the results of this assessment so that they may speak knowingly on hearing of the draft environmental impact statement to be held by the Bureau of Land Management. It is a modeling of what we think the procedure should be offshore and the environmental problems and what to do with them. We set up an industry study and work group made up of about 50 experts in the fields of exploration, production, transportation, environments, and containment and cleanup offshore, and economics. Subcommittees were created, and a steering committee was made up of chairmen of each of the subcommittees. WOGA's geologists have concluded that it is reasonable to believe that 6 billion to 19 billion barrels of oil may be found and eventually produced from the sale area. For production purposes, these geologists have estimated that a most reasonable figure of 14 billion barrels may be recovered. The 14 billion barrels should be found in 4 oilfields containing 1 billion barrels or more; 8 oilfields containing between 500 million and 1 billion barrels; and 14 oilfields of 100 to 500 million reserve. Natural gas should be produced along with the oil in the ratio of 2,000 cubic feet per barrel. Accordingly, natural gas reserves are estimated to be 28 trillion cubic feet. It is estimated that the first production will arrive at California refineries in 1979, and the first significant production of 270,000 barrels per day should occur in 1981. Peak production from early development is predicted in 1987, when more than three-quarter million barrels per day are expected. The latter production rate should be sustained and perhaps even increased to approximately 1 million barrels per day as a consequence of oil well completions in the very deep waters of the sale area. All of this development, of course, would take place over a period of 70 to 75 years. The first system of transportation would consist of pipelines carrying both oil and gas from the 24 platforms described above to onshore gathering facilities. Such has been the historical pattern for platforms currently operating off southern California. The other principal kind of transportation arrangement would be floating facilities to accommodate deepwater production. In this case, tankers capable of loading 100,000 barrels of crude would be used for oil transportation and LNG modules constructed aboard ships or barges would be used for natural gas. If exploration should be eminently successful in the remote regions of the sale area, deepwater pipelines would be installed and an onshore terminal would be needed to receive these hydrocarbons probably in Ventura County. All of the work and estimates made by the committees have been for the purpose of providing guidelines and basic information for the members of the Environmental Subcommittee to consider in their appraisal of the kinds of environmental consequences which will likely occur from operations. Our Environmental Subcommittee has retained the consulting engineering firm of Dames & Moore, an organization skilled in assessing estimates of environmental impacts and describing alternatives which might be contemplated. It is the responsibility of Dames & Moore to outline all of the possibilities for environmental damage flowing from these operations and to provide us with a comprehensive description of these impacts. In order to furnish Dames & Moore with broad information and significant detail for their studies, WOGA has retained a number of other consultants skilled in particular disciplines. We have hired Dr. Frank Hester to report upon the fish and mammal life found in the sale area, and a group has been hired to catalog all of the birdlife within the area. Of particular importance is the disposition and behavior of an oilspill, should it occur as a result of operations in the area and WOGA has hired a firm to make studies of the probable trajectories of such a spill. We also recognize that there may be important emissions to the atmosphere from power sources used in connection with the operations and to estimate the effects of these emissions we have retained a meteorological firm to make appropriate studies. We have another group working on development of the latest technology in the manufacture of booms and skimmers and training of personnel to be able to contain and clean up an oilspill in the unlikely event there should be one. In fact, last July our board of directors adopted the following resolution: That member companies of WOGA agree that the most modern technology available to contain and clean up oil spills in the ocean will be made available for use in all operations on leases granted at the 1975 lease sale offshore of Southern California, and the companies will continue to work on improvement of present technology. In closing, I would like to submit to the committee two additional items. The first is a recent article by Ernest Conine, a member of the Los Angeles Times editorial board. In this particular article by Mr. 46-037-75-7 Conine he discusses some of the alternatives the United States has in relationship to the Arab countries. I submit this so you can read this at your leisure but let me quote his concluding paragraph: One thing is sure. If things go on as they are, dependence on the Arab-run oil cartel will grow, prices of gasoline and everything else will climb higherand the jobs and prosperity of every American will become more vulnerable with every passing month to another Arab oil embargo. The second item I have for your committee is a document prepared by Western Oil & Gas Association in which we have analyzed statements made by the Seashore Environmental Alliance in their recent newsletters. In this document we comment on their statements. I think the committee will find this document of interest as it sets forth the salient views of the opponents of the proposed southern California lease sale and contains the industry's response to these criticisms. [The attachments follow:] [From the Los Angeles Times, Sept. 18, 1974] WHAT CAN OIL-CONSUMING NATIONS Do To PRESSURE ARAB PRODUCERS? (By Ernest Conine) How does the prospect of paying 80 cents a gallon for gasoline grab you? If President Ford's thinly veiled warning to the oil-rich Middle Eastern countries in his speech to the United Nations is to be effective, it is not an idle question. The bald fact is that no amount of wisdom emanating from next week's economic summit is really going to bring inflation under control as long as the Arabdominated oil cartel keeps world petroleum prices at their current outrageous levels. Unfortunately, the 13 member-nations of the Organization of Petroleum Exporting Countries are not impressed. In the past 18 months they have forced a quadrupling of world oil prices. Last week they agreed on a 5% increase in oil taxes an increase that inevitably will be passed on to consumers. And they are talking about a hefty new price increase in January. If this frame of mind persists, the whole structure of international economic relationships that have been built up since World War II will be threatened with collapse as one industrialized country after another scrambles to protect itself from a politically explosive deterioration in the living standards of its people. Paradoxically, in the view of a large body of government experts, the only way to force down the price of Arab oil is to bring up the price to American consumers. And on close examination the logic is not so topsy-turvy as it first appears. For a time Washington hoped that Saudi Arabia, whose officials talked in favor of lower prices, would use its leverage to force the cartel price of oil down by perhaps $2.50 or $3 below the present level of some $10 a barrel. It now seems clear that this will not happen. Thus pressures have been growing for the Administration to assert itself more forcefully than it has until now. Mr. Ford's speech to the U.N. General Assembly Wednesday suggested that he is now prepared to do so. Not too subtly, he warned the Arabs that they cannot expect to use oil as a weapon of political and economic extortion, threatening entire nations with bankruptcy, without provoking counteraction from the United States and other consuming countries. In the view of many people inside and outside the government, Mr. Ford's warning was overdue. But what leverage do we actually have? The uncomfortable answer is: not very much. The President hinted at the possible use of food as a weapon. The Arab countries are big grain-importing nations, but they could buy what they needed from elsewhere possibly even from the Soviet Union, which would in turn buy it from the United States. We could cut off projected exports of plants and equipment to the cartel member-countries, but that would only mean that we would continue buying their over-priced oil without generating any partly compensating business for ourselves to ease the economic burden. An embargo could be imposed on arms sales to Iran, Saudi Arabia and other countries, or they could be threatened with a simple refusal to guarantee the safety of their massive deposit in U.S. and European banks. But the requisite unity does not exist among consuming nations to make such a threat credible; support from our allies would not be forthcoming. Washington could threaten to withdraw its good offices from the effort to achieve a settlement with Israel satisfactory to the Arab states, but the danger of a wider war involving the United States is too real to permit such brinksmanship. Which brings us back to 80-cent-per-gallon gasoline. In the view of many experts inside and outside the government, the only real leverage we have on Middle Eastern oil producers is to cut back our imports and make it clear that we are dead serious about Project Independence. Once that point was made, the cartel's rigging of oil prices would come under growing strain as mounting world surpluses of producible petroleum increased pressure for competitive price cuts. Obviously, however, domestic U.S. oil production cannot be stepped up rapidly enough to avoid a steadily increasing dependence on Middle Eastern oil if demand keeps growing. Thus, the first necessity is a dramatic reduction in the amount of gasoline and other petroleum products that Americans use. And the only practical way of bringing about such a reduction is through joltingly higher prices. Two strategies are being bandied about. One is to increase the gasoline tax 10 to 20 cents per gallon, with partly offsetting reductions in income taxes. The other is to remove price controls on oil produced from so-called "old" wells in this country letting the price drift upward. A side benefit of such a move would be a substantial increase in the domestic oil reserves that can be economically exploited. Some combination of the two approaches is likely to be proposed in the Project Independence energy blueprint that will be presented to President Ford in November. Both, obviously, are political dynamite at a time when the American people are already suffering so much from inflation. The strategy of conservation through higher taxes and/or higher prices indeed shouldn't be acepted unless the experts can make a nearly air-tight case that it will achieve the stated goals: effective pressure on the Arabs and progress toward greater U.S. self-sufficiency. Even if the case can be made, it will take an awfully brave and persuasive President to sell Congress and the people on a proposal that will, at least temporarily, lower the living standards of Americans even further. One thing is sure. If things go on as they are, dependence on the Arab-run oil cartel will grow, prices of gasoline and everything else will climb even higherand the jobs and prosperity of every American will become more vulnerable with every passing month to another Arab oil embargo. WESTERN OIL AND GAS ASSOCIATION, SUBJECT: STATEMENT MADE BY SEASHORE ENVIRONMENTAL ALLIANCE, AND COMMENTS MADE BY WESTERN OIL AND GAS ASSOCIATION Statement: The area (Southern California offshore) is noted for its seismic instability. The USC Graduate School of Seismology reported that in one day, recently, over 60 earthquakes occurred in this area, registering from 2.0 to 4.5 on the Richter scale. Comment: In the 39-year period of recording in the 26,622 kilometer square Los Angeles area (which includes the USC Campus), the average level of seismic activity is only 10 earthquakes per year for those greater than 2.0 on the Richter scale. The offshore area west of Los Angeles is relatively more quiet seismically. It may be true that USC has recorded as many as 60 earthquakes in one day, approximately 2.0 on the Richter scale, but such shocks are not strong enough even to be perceptible except on sensitive measuring instruments. For further details, reference is suggested to "Seismicity of the Southern California Region, 1 January, 1932, to 31 December, 1972, J. Hileman, C. Allen, and J. Nordquist, Seismological Laboratory, California Institute of Technology, 1973.” As a matter of interest, the July 5, 1968 earthquake in the Santa Barbara channel of magnitude 5.2, occurred in an area where 7 platforms were in operation in the eastern channel and no problems resulted. |