John Mulligan

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Rhode Islanders tell senators, congressmen: It’s all about oil

10:08 AM EDT on Sunday, July 13, 2008

BY JOHN E. MULLIGAN

Journal Washington Bureau

WASHINGTON — Sen. Jack Reed heard it on the Fourth of July parade routes and other members of the local congressional delegation have detected a similar message from Rhode Island constituents worried about the soaring price of gasoline and other oil products: “Drill. Drill. Drill.”

The legislators have a simple answer that echoes the line emerging from their Democratic congressional leaders: The oil industry already holds leases on many millions of acres that should be exploited for potential deposits before any more public lands are explored for petroleum reserves.

The industry replies, in turn, that the Democratic claims about existing leases betray a fundamental misunderstanding of the economics of oil production.

But on one energy-related proposition there is broad agreement. Prospects are dim for any legislative action this year that will bring the customer swift relief from the price of gasoline and other energy products.

Nevertheless, the call for more domestic oil exploration — somewhat surprising from a local electorate that has by and large opposed such a step in the past— was only one note in a popular outcry that rang loud and clear in the ears of the legislators as they marched in parades from Bristol to Chepachet and met with constituents at political and social events around the state during their recent congressional recess.

Rep. Patrick J. Kennedy said energy prices were easily the top concern among voters who greeted him during the Bristol parade. “It must have been 30 times along the two-mile route” that constituents raised the topic. “They are saying the most about that over any issue in the 15 years” he has been in the House, Kennedy said.

As for the calls for drilling, “No question about it,” Kennedy said, “people are so stressed about energy that they want to go for anything that they think might be a solution to this. The question is how much of a real solution is it?”

The informal soundings of the Rhode Island House and Senate members echo what is in the wind nationally. The Republican presidential candidate, Sen. John McCain, of Arizona, recently shifted his position to favor a search for new petroleum reserves on still-unexplored land. He argued that the damage of the price spiral to the economy and to the pocketbooks of millions of Americans warrants new approaches.

Some congressional Democratic leaders have become more receptive to the idea but they have sounded the skeptical note that Kennedy, Rep. James R. Langevin, Reed and Sen. Sheldon Whitehouse all echoed in interviews last week.

“I think we have to find a way to get the oil companies to exploit the 67 million acres in existing leases offshore in the Gulf of Mexico and on federal lands in the West,” Reed said.

Kennedy reiterated his support for what he called a “use it or lose it” policy that would cancel unexploited oil industry leases after a certain period of time.

John C. Felmy, an economist for the American Petroleum Institute, a Washington-based industry group, said such criticism from Democratic legislators shows a “basic lack of understanding” about how oil and gas exploration works. Felmy said companies continually conduct expensive exploration of the lands under lease, drawing petroleum products from some and failing to find economically exploitable deposits in a significant fraction of the lands.

Felmy said there already is an effective “use it or lose it” policy because industry leases have fixed terms, often 10 years.

API President Red Caveney said in a recent letter to federal legislators, “Just as Congress would not dream of requiring farmers to plant crops in the portion of their acreage that is marshland, it should not force our companies to spend millions of dollars on nonpromising leases to qualify to bid on new leases.”

Caveney said, “When a company buys a lease, it does not buy oil and natural gas; it buys the right to explore whether there is oil and natural gas on that block. If every lease had oil and natural gas, we wouldn’t need to explore. One could simply pay for a lease, punch a hole in the ground and start pumping oil.”

All four Rhode Islanders expressed the view that drilling for new domestic reserves will not in any event provide quick relief for high gasoline prices because, in Reed’s words, “it takes a long time to develop these resources.”

Whitehouse said he would flatly oppose any effort to open up the Outer Continental Shelf to exploration off the New England coast. “It’s too important to other industries,” such as fishing, Whitehouse said.

Like his colleagues, Whitehouse stressed the view that a national energy policy must include major federal support — either in tax breaks or subsidies — for development of alternative energy sources such as wind and solar power.

“This has to be one of the top agenda items for the next president,” Reed said

On this point, Kennedy called for “treating Big Oil like the other public utilities,” with government regulation of price increases and mandates for plowing a certain portion of profit into development of alternative resources.

The Rhode Islanders also called for legislative and executive action to beef up the government’s power to dampen market speculation in oil products, which in their view plays a significant role in the rising prices. Langevin called speculation “one of the primary factors driving up oil prices and gas prices.”

Langevin spoke for his colleagues when he said that rising energy prices are contributing through a “trickle-down effect” to other cost hikes that have alarmed his constituents — rising food prices and a newly approved rate hike for electricity.

Langevin also said Rhode Islanders — especially low-income people — are already fearful about the household budget crunch that will come next winter with the rising cost of heating homes. He called for early action to bolster federal spending on emergency energy assistance for needy households.

Langevin called, too, for what he described as a comprehensive energy policy with a wide range of long- and short-term options “on the table.” Options potentially include more nuclear power plants.

Langevin cautioned, however, that “a lot of questions still have to be answered” about whether nuclear plants can be kept safe and where to store spent nuclear fuel.

Kennedy differed from his colleagues in saying he believes the energy situation is so dire that Republicans may join with Democrats to pass major legislation to begin to solve the problem.

jmulligan@belo-dc.com

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