Mr. Speaker, the Congress has passed and the President has signed the Energy Policy Act of 2005, a historic bill that will put America on course for more energy independence. We now need to move as quickly as possible to increase…
Mr. Speaker, the Congress has passed and the President has signed the Energy Policy Act of 2005, a historic bill that will put America on course for more energy independence. We now need to move as quickly as possible to increase production and distribution of energy supplies in the United States. The disruption of supplies and spiraling gasoline costs as a result of Hurricane Katrina--combined with the threat of disruption from other natural disasters or terrorist attacks--underscore the need to increase our energy supplies and reduce our dependence on foreign sources.
One provision in the Energy Act that will increase supplies is my provision for Ultra-deepwater and Unconventional Natural Gas and Other Petroleum Resources. I want to share with my colleagues the letter and attachments that I sent to Secretary of Energy Samuel Bodman last week. These provide further analysis and clarification of this program to develop the technologies needed to drill in ultra-deep and unconventional areas. This program will improve our energy and national security, increase natural gas and oil production, increase royalty revenues, and help lower energy costs for consumers. I urge the Department of Energy to take steps to implement the program as soon as possible.
Washington, DC, September 14, 2005.
Hon. Samuel W. Bodman,
Secretary of Energy, Department of Energy, Independence Ave.,
SW., Washington, DC.
Dear Mr. Secretary: I want to congratulate you and your
colleagues at the Department of Energy for your fine work in
helping with the enactment of H.R. 6, the Energy Policy Act
of 2005. There are many important provisions in the new law,
and in this letter I want to draw your attention to
``Subtitle J--Ultra-deepwater and Unconventional Natural Gas
and Other Petroleum Resources.''
As you may know, I first introduced this legislation in
2001 when it was included in H.R 4, the comprehensive energy
bill that passed the House that year. Since that time I have
shepherded this legislation through three separate
Congresses. The provision has been the subject of
Congressional hearings and much legislative debate. On the
way to enactment in August, the provision was passed by
either the House or Senate eight times in the last four
years. The final version contained in the Energy Policy Act
of 2005 embodies many improvements that were made throughout
this long process and the important compromises that were
reached during the Conference Committee meetings this past
July. Since there was no detailed Conference Committee Report
to accompany the bill, I am sending this letter to provide
some additional context and clarification of legislative
intent for this new program.
My purpose for introducing this legislation was to enhance
the ability of the Department to conduct well-funded, multi-
year, resource based natural gas and oil R&D activities to
accelerate the development of new technologies and increase
domestic natural gas and oil production in the near and mid-
term. This new program is intended to complement the work of
the Department and allow the current Oil and Natural Gas
Program to focus its ongoing efforts on solving the more
basic production and environmental issues that challenge our
collective ability to increase production and to transition
to a hydrogen based energy system in the longer term. For
example, the vast methane hydrate and oil shale resources in
the U.S. could make a substantial fossil fuel contribution to
the ultimate evolution of a hydrogen based energy system for
the country. The Oil and Natural Gas Program should also
continue its important work analyzing the consequences of
past and potential actions by other federal agencies on
domestic natural gas and oil production, conducting public
interest analysis and fostering the education of the next
generation of American oil and gas technologists.
This new program will receive an assured, multi-year
funding source from the Ultra-deepwater and Unconventional
Natural Gas and Other Petroleum Research Fund to pay for
research, development, demonstration and commercial
applications to create and deploy the technologies needed to
bring these vital natural gas resources to the consumers of
this country. This Fund and the authorities established in
the law provide the tools to ``the Department of Energy to
work through its National Energy Technology Laboratory to
accomplish these objectives and to work to develop the
technologies for lowering the cost of drilling to formations
in the Outer Continental Shelf to depths greater than 15,000
feet and to address the technology challenges of small
producers.
It is the intention of Congress that the Department will
take steps immediately to implement this new program in
accordance with the schedule established in the statute. We
expect that the Department will use existing program
direction management funds to conduct the solicitation and
select the program consortium. It is critical that this new
program be implemented as quickly as possible. Most recently,
the Energy Information Administration forecast that natural
gas prices in the Midwest will be 71 percent higher this
winter than last. That means that gas prices during the
coming heating season will top $12. Work needs to begin
immediately to accelerate the development of the new
technology needed to increase domestic natural gas production
to avoid such high prices in the future.
The Ultra-deepwater and Unconventional Natural Gas and
Other Petroleum Resources Program has been designed to foster
the development of additional natural gas from the vast
resources of technically recoverable natural gas in the
United States. The 2003 National Petroleum Council study on
natural gas estimated that there are 1969 Tcf of technically
recoverable natural gas reserves in North America--equivalent
to 90 years of gas supply at current rates of consumption.
The lower-48 contains 1240 Tcf, about 56 years of supply, of
which only about 210 are unavailable to be developed due to
moratoria or other restriction. The balance is in Alaska and
Canada. Some of the Alaskan resource is technically
challenged, but the predominant problem there is with price
due to the high cost of pipelines to transport the gas to
market. Much of the Canadian technically challenged resource
would become productive with the application of the new
technologies developed by this program.
It is the intention of this legislation that the Department
will carry out this program through two entities:
1. A single program consortium selected by the Secretary
through a competitive solicitation will administer the
programmatic activities as prescribed in the law and make
awards to research performers to carry out research,
development, demonstration, and commercial application
activities under the program; this program consortium, which
will operate with significant oversight of the Department,
should provide much needed industry and academic expertise to
the program as well as ensure that the cross-cutting
technologies for both the ultra-deepwater and unconventional
onshore research are coordinated, developed and deployed.
Selecting a single consortium for this program will render
the greatest benefit for consumers by ensuring that R&D
activities that are applicable to multiple gas provinces
are well coordinated and the results of the work are
effectively disseminated. Of the funds made available for
this program, 75% shall be administered by the program
consortium. Up to 10% of that amount should be adequate
for the program consortium to administer the program.
Significant authority has been provided for the National
Energy Technology Laboratory on behalf of the Secretary:
to issue a competitive solicitation for the program
consortium; evaluate, select, and award a contract or
other agreement to a qualified program consortium; and,
have primary review and oversight responsibility for the
program consortium. Up to 5% of program funds to be
administered by the program consortium are allocated in
the law for NETL to perform these activities. The review
and oversight responsibility includes review and approval
of research awards proposed to be made by the program
consortium. NETL may use the allocated funds for program
direction and to establish a site office if it is
necessary to carry out the program, which I encourage; and
2. The Secretary has been provided 25% of the total funds
for the National Energy Technology Laboratory to carry out a
program of research and other activities, including program
direction, overall program oversight, contract management,
and the establishment and operation of a technical committee
to ensure that in-house research activities funded are
technically complementary to, and not duplicative of,
research conducted under this new program. While it is
contemplated that the NETL may contract out some of this
work, the intent of the legislation is to encourage NETL to
build internal research and development capabilities with
this portion of the program funds.
To ensure that this program is implemented as soon as
possible, the legislation requires the Secretary to select
the program consortium not later than 270 days after the date
of enactment. That time line should provide sufficient time
for a final contract with the selected program consortium to
be completed and for work to commence when funds for the
program consortium become available on October 1, 2006. In
the preparation of the solicitation of proposals for the
program consortium that will administer the program, I
encourage the National Energy Technology Laboratory to seek
broad public comment prior to the issuance of a final request
for proposals.
I look forward to working with you to see that this program
is successful. If it is effectively administered in
accordance with the direction and timelines provided in the
statute, I feel confident that it will improve energy and
national security and achieve the additional natural gas and
oil production, increased royalty revenues and lower energy
costs for consumers as described in 2004 analysis by the
Energy Information Administration.
I am attaching further analysis of the policy basis and
thrust of the new program and plan to submit this letter and
attachment for inclusion in the Congressional Record. Should
you need additional information, please let me know. Again, I
look forward to working with you on this important
initiative.
With best personal regards, I am
Sincerely,
Ralph M. Hall,
Member of Congress.
Attachment.