API President Optimistic About Prospects for Drilling

A top oil industry representative today expressed confidence that Congress would open the Arctic National Wildlife Refuge to energy leasing through the budget reconciliation process, claiming a new Congressional Budget Office increase in projected leasing sale revenues would boost the effort.

The nonpartisan CBO said this week that if industry bidders assume long-term oil prices are $50 a barrel ($45 in today's dollars) in 2010, ANWR lease sales could generate about $10 billion in revenues. That is twice the previous estimate -- completed in March -- which modeled bids using lower oil prices and concluded ANWR would bring in about $5 billion in 2008-2010. Sen. Ted Stevens (R-Alaska) had asked for a new assessment using the higher price assumption.

Red Cavaney, president of the American Petroleum Institute, said the higher assessment would help make the case for ANWR drilling. Senate spending cut legislation allows ANWR leasing, a competing House bill does not. "Congress is looking for offsets as they try to put together a budget. That [new estimate] makes this all that much more attractive," he told reporters at a briefing.

The Energy Information Administration is issuing a new forecast Monday that is expected to raise its estimate of where oil prices will be in two decades by nearly $20 per barrel over the current forecast of $30 to $35 per barrel. An EIA official at today's briefing suggested the higher price forecasts would also apply to the shorter term. "It's not just at the end of the path. It's all along the path," said Howard Gruenspecht, EIA's deputy administrator.

Cavaney and David Parker, head of the American Gas Association, said they also see strong prospects for legislation allowing new access on the outer continental shelf soon after Congress returns next year -- Parker said that the high heating bills people will face this winter will help put pressure on lawmakers to increase natural gas supplies.

On another issue, Cavaney said industry-announced refinery expansions of 1.5 million barrels per day in capacity between now and 2011 will "be more than enough to keep up with anybody's most aggressive projections of demand, so in other words we will be creating some surplus capacity as we go forward." But he said legislation to spur new refinery construction is still desirable to help reduce the need to import refined products.

"There is a great deal of concern that we have more American production here ... rather than have to rely on world markets," Cavaney said. He said that right now, as Europeans are converting increasingly to diesel cars, refineries there have surplus capacity. But that will eventually change, he said, reducing the number of options for finding refined product if there are supply upsets here.

"Over time those refineries are not going to sit there waiting for a crisis to be able to use gasoline," Cavaney said. "They are either going to convert over to diesel-ization or they will go after other products. That then means we will have less flexibility."

"What you get from a number of elected officials is they would like us to have more production capacity here because it gives us more assurance we can handle upsets ... that is one of the principal reasons they [lawmakers] are looking to new refineries," Cavaney added. He also said it was important that refinery legislation reduce the number of so-called boutique fuels.

Reprinted from E&E News PM with permission from Environment & Energy Publishing, LLC. www.eenews.net. 202/628-6500.