Events from Around Town: National Petroleum Council Report: Prudent Development of North America's Oil & Gas Resources

Yesterday, the Center for Strategic & International Studies (CSIS) hosted key members of the National Petroleum Council (NPC) to discuss its recently released report “Prudent Development of North America’s Oil and Gas Resources.” The panel reported that North America still has huge amounts of natural gas and oil remaining to be produced. This is particularly true for the United States and Canada, with the important caveat that technology must continue to develop to allow for the safe, prudent development and production of those resources from deepwater offshore drilling, the Arctic and unconventional sources such as oil sands, shale and tight oil (fossil fuel resources trapped in rock formations, like shale rock). 

On the natural gas front, NPC members argued that there were enough natural gas resources available to satisfy even the most robust projected natural gas consumption models for the United States for several decades.  After development, the largest variable in projected modeling for natural gas use was related to the amount of natural gas consumed by power plants as a potential replacement for coal.  The demand is likely to depend a great deal on the standards the Environmental Protection Agency settles on for greenhouse gas emissions and the impact this has on the viability for power plants to continue to burn coal. 

Continued development of these resources provides additional security for access to petroleum should supplies from other regions be interrupted, the panel argued. Even more encouraging was the ability to completely satisfy the need for access to natural gas from assets in the United States and Canada.

The report included five key recommendations: support prudent development of North American hydrocarbon resources; better reflect environmental impacts in markets and choices; enhance the efficient use of energy; enhance the regulation of markets; and support needed talent and know how. 

Read the full report at: http://www.npc.org.

While not surprised that the NPC would be touting the benefits of continued development of oil and natural gas, I was surprised at the projected amounts remaining to be developed IF it were technologically and economically feasible. This remains a huge variable. I wonder what the actual price break points are for continued investment in development of economically viable recovery technologies entirely by industry so that these resources can be developed. Will industry bear the costs alone or will it require government assistance of some sort in the form of tax breaks, grants or other mechanisms?   As one of the panelist’s essentially remarked, you can’t wait to develop this technology until you run out of oil from other sources because the lead time is too great. The report intentionally does not address price points.  

Another area related to pricing that I need a better understanding of is sorting out the complex impacts regulation of greenhouse gases, as well as regulation of power plants in general will have on the price of natural gas.  What I took away from today’s panel is that producers are looking for less volatility in potential regulations related to power plants to be able to better forecast the market and potential profit in further development.  

Finally, one other point of note in the presentation was the need for a potential difference in the leasing structure for offshore leases in the Arctic as compared with the Gulf of Mexico.  The argument was made that you needed longer leases in the Arctic to reflect a much narrower window to actually discover, drill and develop the oil and gas.  The Arctic region might currently give you a 90 day weather window a year versus the Gulf of Mexico which is much closer to 365 days.  I found this point interesting and had always assumed that such a factor would be considered when bidding on the lease.  However, if such a change would actually decrease risk of an imprudent decision to force actions within narrow time frames, and it would not significantly alter the income from the lease to the federal government, leasing changes could be an easy win for all. 

To learn more about the event, listen to the audio from yesterday’s panel.

Commander Shannon Gilreath is the Senior Coast Guard Fellow at the Center for a New American Security. The views expressed in this blog post are those of the author and do not reflect the official policy or position of the U.S. Coast Guard, Department of Homeland Security or the U.S. Government.