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Online Story (Oct 24, 2000)

Panel: Consumers face a 'perfect storm' of energy problems

The United States is facing the energy equivalent of "the perfect storm" that threatens to constrain deliverability of all fuel supplies, not just oil and natural gas, industry analyst Matthew R. Simmons said Tuesday morning at an Oklahoma energy forum hosted by Gov. Frank Keating and The Heritage Foundation. "We are entering the perfect energy crisis," said Simmons, president of Houston-based Simmons & Co. International. That means that it will not only be "impossible to grow energy demand to any significant degree" in the near future, he said, but that key energy supplies such as oil and gas may even be rationed. Simmons has long warned that US producers are having a tougher time keeping up with growing demand for oil and gas while coping with the rapid depletion of new reserves. He and four other industry representatives opened the day-long forum with a panel discussion of an emerging energy crisis that could have consumers "starving in the midst of plenty." "America, if not starving, is at least experiencing hunger-pains for natural gas," largely as a result of a constrained pipeline infrastructure to move supplies from the wellhead to the burner-tip, said Cuba Wadlington Jr., president and CEO of Williams Gas Pipeline. The current gas transportation and marketing system was originally designed to run at full capacity during the winter peak and then refill gas storage facilities during the summer. However, Wadlington said, "The system now is running at capacity both winter and summer." To supply the rapidly growing US demand for gas, industry officials estimate some $7.7 billion of new pipelines and storage facilities must be added in the next five years. And that means the construction process must be started soon, "not five years from now when the regulatory process has run its course," Wadlington said. "It takes too longBover 5 years in some casesBto conceive, certificate, permit, and build new pipelines. We need to reexamine that process," he said. The construction process could be speeded up if federal and state regulators would cooperate in a "single-window" approach for considering and issuing necessary permits and certificates, said Wadlington. Erosion of the US energy infrastructure "has reached alarming proportions," said Red Cavaney, president and CEO of the American Petroleum Institute. Since the early 1970s, he said, US oil production has plummeted 39% and gas production has dropped 14%. Half of the country's previous refineries have closed during that period, with no new grassroots facilities built in 25 years. Moreover, Cavaney said, there have been no new nuclear power plants constructed since 1978, and now there's talk of dismantling some dams that furnish hydroelectric power. Federal officials should remove barriers to exploration and development of oil and gas supplies, both foreign and domestic, he said. Industry access to federal lands in western states has declined more than 60% in recent years, while unilateral US sanctions against unfriendly oil-producing countries have crippled the ability of US companies to compete in world markets, Cavaney said. Panelists agreed that the industry has done poorly in its attempts to win public and political support. Simmons also blamed some analysts for convincing the public that a surplus of energy supplies are readily available for market. As a result, he said, consumers are as unprepared for the next energy crisis as the US and Europe were for the start of World War II.

-- (in@energy.news), October 25, 2000