March 29th, 2006 18:16 EST
Remarks Prepared for Energy Secretary Samuel Bodman
Thank you. It’s good to see all of you here.
And I’m glad to see M-I Swaco being recognized for innovative technical work that has made offshore drilling a safer endeavor.
We have all been through quite a lot together in the seven months since Mother Nature decided to restructure the oil and gas industry in the Gulf of Mexico. And, I think we have learned a lot as well.
The blows from Hurricane Katrina—the most damaging storm ever to hit the U.S.—and Hurricane Rita’s visit just three weeks later fell heavily on those of you who do the drilling and production work that supplies a large and growing share of our national energy needs.
The destruction and dislocation they left behind have taught us some painful but important lessons about what we here in Washington and at all levels of government must do to be better prepared for the next large-scale disaster that strikes our shores.
But I have also been deeply impressed by the way your industry has bounced back from these disasters. Thanks to your hard work and improvising, much of the damage the hurricanes did to the oil and gas infrastructure has already been set right. The oil and gas is flowing again. We have gone from having more than 90% of our oil production and more than 80% of our gas production in the Gulf shut in to bringing those numbers down to 23% for oil and 10% for gas. That is a dramatic improvement over seven months and it means that more than 1 million barrels a day of oil and close to 9 billion cubic feet of natural gas are now moving each day to the U.S. market.
I applaud all of you for pulling off a remarkable comeback.
It is even more remarkable that your employees pulled this off at a time when many of them had lost their homes and were struggling to take care of their families. The nation owes all of these hardworking men and women its sincere thanks for the sacrifices they made to get our energy supplies moving again.
The incremental gains are still coming, week by week, and I expect them to continue in the months ahead. I was particularly pleased to see that the ConocoPhillips and Murphy Oil refineries in Louisiana and the BP refinery in Texas City, Texas, are all now restarting, or in the process of restarting, operations. Having them back on line should help bring us back to full refining capacity in the Gulf for the first time since Katrina landed last August.
Not all of the capacity is back, and I know that some of you have had to deal with the fact that it may not be economically feasible to restart some damaged wells. But I believe that as bad as they were, last year’s disasters may also have some longer-term benefits for the nation’s energy outlook and for your industry as well. The damage and human suffering Hurricanes Katrina and Rita inflicted on the Gulf brought a spotlight to the region that also highlighted just how important it is to meeting the nation’s energy needs and how much the rest of the nation depends on it.
That is something all of you know well, but now the rest of the nation, I believe, is starting to become aware of it too. The Gulf now produces almost 30% of our oil, 20% of our natural gas and the area is home to nearly half of our national refining capacity. So any disaster that hits the Gulf is a national disaster.
Americans learned that lesson when gasoline prices spiked nationwide when the normal flow of supplies from the Gulf was cut off by the hurricanes. As a result, I think the ongoing debate over how much of our outer continental shelf should be open to new exploration efforts may now be viewed differently by many people.
I think Americans appreciate that the oil and gas fields in the Gulf and those that lie elsewhere along the outer continental shelf of the U.S. are national assets. Enhancing our nation’s energy security by reducing our reliance on unstable foreign sources of gas and oil has long been a cornerstone of the President’s energy policy. In the State of the Union address, the President took that a step further by announcing the Advanced Energy Initiative, a program that calls for a 22-percent increase in funding next year for clean-energy technology research at the Department of Energy. The money will go to develop technologies that will allow us to make greater use of clean coal, solar, wind and nuclear energy to meet our electric power needs. It will also go to develop hybrid batteries, hydrogen fuel cells and new ways of making ethanol to meet our transportation needs.
To free up the money to pursue these new technologies in a tight budget environment, difficult choices had to be made. One of them, as you know, was not to seek funding to support research and development projects for the oil and gas industry. President Bush and I both believe that at current price levels, there is enough incentive for companies in this industry to fund these projects on their own.
The overall goal of the President’s Advanced Energy Initiative is to cut our reliance on importing oil and gas from unstable parts of the world to meet our energy needs. Two very important ways to do that are by allowing environmentally responsible drilling in the Artic National Wildlife Reserve and along the Outer Continental Shelf adjacent to states that are willing to host it. Opening up access to resources is critical to ensuring that we continue to have a strong and productive oil and gas industry in America.
I know that all of you are closely watching the new five-year lease program the Department of the Interior is now putting together that will set the parameters for oil and gas exploration along the Outer Continental Shelf from 2007 through 2012. You’ll be hearing about that in more detail from Ms. Burton in a little while.
From my perspective as Energy Secretary I can say that I want to see producers like you gain as much access as possible to the 86 billion barrels of oil and 420 trillion cubic feet of gas we believe are out there and can be recovered.
Since 2000, when the Interior Department launched the last five-year leasing program, the average price of natural gas has more than doubled and at times last year it climbed much higher than that. Any steps we can take to expand our future access to nearby supplies will have an immediate, positive impact on markets and should help hold down future price increases. This will strengthen our economy over the long run.
Finally, all of us hope the coming hurricane season will be less punishing than last year’s epic events. But if our wishes are not granted, I want to assure you that we at the Energy Department have been absorbing lessons from last year’s experience and have been working to improve our response to future disasters that disrupt the nation’s energy supplies.
In January, we held a leadership forum in Mississippi that brought together representatives of federal, state and local government as well as private sector organizations that were directly involved in the response to the hurricanes. We compared notes about our experiences and identified areas that we must address to make sure that our response to future disasters on this scale will be better.
Let me share a few of those lessons with you. There was a general consensus that within the oil and gas sector, there needs to be more cooperation across company lines to repair shared infrastructure. The electric power industry has long relied on mutual aid agreements to restore essential facilities and services in the aftermath of storms and other natural disasters and last year’s hurricanes highlighted the value of those arrangements.
Within government, we need to better coordinate federal disaster response efforts with those of state and local government agencies as well as the private sector. We need better communications across all platforms. We need to do some very practical, logistical things like assuring there are adequate supplies of gasoline available under supply contracts to meet the demands of large-scale evacuations and getting emergency services where they are needed. We need to do the same with other essentials, like ice, food, generators and lodging. We need to do more training exercises. And we must think big. Both plans and exercises must include scenarios for future disasters that match or exceed the scale of Hurricane Katrina.
If the Gulf’s energy infrastructure is damaged by hurricanes this year, we stand ready to again tap the Strategic Petroleum Reserve to ease temporary market dislocations. We also will provide waivers of fuel-blend standards, such as those we agreed to with the Environmental Protection Agency, if circumstances make that action appropriate. And, like last year, our people will be on the scene doing everything they can to help ease a difficult time.
But I know the best weapon of all in overcoming the kind of challenges a hurricane leaves behind is the know-how and can do spirit all of you always bring to taking on impossible jobs and making them look routine.
Source: The DOE
Thank you all for having me.