OCS Scientific Committee Meeting Summary -
Associate Director’s Presentation
Ms. Carolita Kallaur congratulated Dr. James Coleman on his reappointment to the
Committee by Secretary Babbitt. Dr. Coleman is the first member to be appointed to a new
discretionary, no-term-limits seat on the Committee. His selection was based on his
scientific eminence as evidenced by numerous national and international awards for
professional excellence, induction to prestigious professional academies or societies, and
other highly meritorious recognition for scholarship and research as well as distinguished
prior service to the Committee. Earlier this year, he was awarded one of Russia’s
highest civilian honors, the Kapitsa Gold Medal of Honor, for his outstanding
contributions to the field of Petroleum Sciences.
She also welcomed Dr. Lynda Shapiro, a new member who was attending her first Committee
meeting.
She announced that there are a few important policy initiatives underway:
Natural Gas Initiative. One initiative the MMS continues to
aggressively pursue is the evaluation of the future role of the OCS in meeting the
Nation's natural gas demand in the years to come. The deregulation of electricity and the
conversion of electricity generation plants from coal burning to cleaner burning natural
gas have created an increasing demand for natural gas. Future demand for natural gas has
been estimated by various organizations to reach anywhere from 31.3 to 40.1 trillion cubic
feet by the year 2020. Considering that current natural gas usage is about 22 trillion
cubic feet per year, this is a large increase that the Nation will have to meet, either
through domestic production or from imports. According to the American Gas Association, 87
percent of the U. S. demand today is from domestic production and the remaining 13 percent
is imported from Canada. However, more dire statistics show that during the 1990’s,
total U. S. gas production increased only by 9 percent, while imports from Canada
increased by 111 percent. The MMS will continuously monitor the demand and production
scenarios of natural gas and take necessary steps to ensure an optimized natural gas
production from the OCS. In 1999, 25 percent of the U. S. demand for natural gas was met
by production from the OCS and it is expected that this figure will increase significantly
in the future to help meet the increased demand.
This year, MMS completed a study on natural gas and the role of the OCS. A report on this
study was published in April, 2000, and is available on the MMS website. Because of the
importance of this cleaner burning fossil fuel to the Nation, the OCS Policy Committee
established a subcommittee on natural gas at their meeting last month.
The MMS is presently updating the 1995 National Assessment of the Offshore U. S. and
expects to release the new assessment in early 2001. A significant increase in natural gas
resources is anticipated in the Gulf of Mexico over the previous assessment.
Sustainable Development. This is an issue in which the MMS continues to
have an active role. Hydrocarbon resources, especially natural gas, will continue to play
a vital role in the economic development of the U. S. and the well being of its citizens.
The MMS needs to ensure that these resources are developed in a manner consistent with
conservation and wise use. In 2002, the world will take a critical look back at the UN
Conference on Environmental Development (RIO) that was held in Rio de Janeiro in 1992. The
MMS has offered to assist the Department of State as the U. S. prepares for the RIO+10
meeting. In preparation for RIO+10, the MMS will work with the Department of State as it
prepares for the ninth session of the Commission on Sustainable Development which will be
held in New York next April.
Deepwater Royalty Relief. Ms. Kallaur presented more detail on Deepwater
Royalty Relief. The Deepwater Royalty Relief Act of 1995 sought to encourage new
technological development and increased exploration and production in deep water areas of
the Gulf of Mexico by mandating royalty suspension volumes for new leases in water depths
of 200 meters or more in the Central and Western Gulf of Mexico for all sales held in
these areas from 1996 through 2000. The mandatory relief provisions of the Deepwater
Royalty Relief Act for deep water leases in the Gulf of Mexico expire the end of November.
However, the discretionary authority to include Deepwater Royalty Relief in bidding
systems used for lease sales anywhere on the OCS remains intact and falls upon MMS’s
shoulders to determine and implement. For future leases, the MMS has designed a program
that will allow the use of the existing discretionary authorities to continue
providing automatic and case-specific Deepwater Royalty Relief for Gulf of Mexico leases
to sustain deepwater activity and the successes fostered and accelerated by the Act.
The MMS is now preparing for the next Central Gulf of Mexico sale that is scheduled for
March 2001. The specific elements of the Deepwater Royalty Relief offered for deepwater
leases issued in this sale--the precise size and scope (suspension volumes, water depths,
price thresholds for when suspensions end) will be included in the Public Notice of Sale.
These elements will be targeted to promoting deepwater activity appropriate for the
technological and market conditions in the Gulf of Mexico now. Options are being
considered for offering Deepwater Royalty Relief incentives to promote increased natural
gas development from the Gulf of Mexico shelf areas.
Globalization of Offshore. Another ongoing initiative deals with the
globalization of the offshore industry, both in terms of the mobility of the companies
– independents and majors from one part of the globe to another – and the
growing interest in international guidelines and standards. Up until a few years ago, the
MMS traditionally was an agency with a predominant domestic focus. Today, it needs to
think and act globally and be active in a wide range of international forums ranging from
International Maritime Organization meetings on platform decommissioning requirements to
participating in International Organization for Standards meetings to learning about FPSO
systems from nations which have experience with them. It also has also been found that the
MMS can benefit by partnering with other nations on environmental issues of common
concern, such as the work being done with Norway in partnership with industry on deep
water blowouts and with the United Kingdom on offshore sand and gravel mining.
The MMS has strong working relations with many nations in addition to Norway -- among them
are China, Russia, Australia, and the Caspian Sea countries. Experiences, expertise, and
information need to be shared with these nations to assist them in developing safe and
environmentally sound oil and gas programs. The MMS teams have made numerous trips over
the past year to these and several other countries to share its knowledge and experiences
as well as to learn. And, it seems more nations are interested in working with the MMS.
As was the case in Fiscal Year 1999, the MMS remained committed to assist and supplement
the U. S. Agency for International Development (USAID) contractors in their efforts toward
oil and gas development assistance in the Caspian Basin during Fiscal Year 2000. In
coordination with USAID, Hagler-Bailly, and United States Energy Association, the MMS
participated in training activities during Fiscal Year 2000 with the Republics of
Kazakhstan Turkmenistan and Georgia. Cooperative activities continue under a Memorandum of
Understanding between the MMS and China’s Ministry of Land and Natural Resources as
well as the umbrella of the U. S./China Oil and Gas Forum. This past September, the MMS
organized a simulated lease sale to illustrate principles that apply to the U. S.
conveyance of oil and gas rights offshore and to provide an overview of the functions of
the MMS. In October, MMS representatives traveled to Beijing to participate in a workshop
on Assessing and Maintaining the Integrity of Existing Offshore Oil and Gas Facilities.
The workshop, conducted under the auspices of the Asia-Pacific Economic Cooperation (APEC)
Marine Resources Conservation Working Group was designed to provide practical guidance to
address the issues faced by industry and regulatory authorities in dealing with aging
offshore oil and gas facilities. It allowed for an exchange of information and experience
APEC-wide. Practical and cost-effective solutions were explored with the goal of
understanding the programs currently in effect in the region and avoiding duplication of
effort.
For more information, contact Julie Reynolds.
