On January 23, 1974, President Nixon again addressed the Nation on proposals to deal with the energy crisis. He outlined an extensive legislative program which he urged Congress to act on in 1974. Included were measures both to meet the short-term emergency and to achieve long-term self-sufficiency in energy. Among these legislative proposals were: establishment of a Federal Energy Administration market pricing of new natural gas mandatory reporting of information by private industry Federal licensing of deepwater port facilities offshore elimination of depletion allowances for foreign oil and modernization of the Mineral Leasing Act facilitation of the site selection, approval, and licensing In addition to his legislative program, the President announced a "I am directing the Secretary of the Interior to increase One that the proper competitive bidding procedures are followed and that environmental safeguards are observed. program. OCS in the Atlantic and in the Gulf of Alaska until the Council on Environmental Quality completes its current environmental study of those areas." To implement this accelerated leasing program, the Department of the Interior has developed a new two-tier nomination system to help ensure that the most promising offshore areas be made available for development first, if environmentally acceptable. 1/ Under this system, industry will first rank the regions that they think are most favorable. The public will be invited to identify environmental conditions and problems in these regions. The Interior Department will use the industry and environmental rankings of regions, along with its own evaluations of resource potential and need to protect environmental values, to select the most promising regions for early development. Subsequently, within designated sale areas, industry will nominate individual tracts as is currently being done. The two-tier system will help ensure that our scarce oil exploration and development resources can be employed on the most promising tracts, and that major areas of environmental concern will not be touched. A notice related to the two-tier nomination system appeared in the Federal Register on February 20, 1974, and is included as Attachment M. To protect the environment while significantly expanding the leasing program, the Department is planning to begin environmental analysis of promising areas even before industry nominations of regions have been received. Later, as region nominations are received, study will begin on those areas not already being analyzed. In addition, the program will provide for monitoring environmental effects of exploration and development. Baseline studies will provide a profile of the regional environment prior to the beginning of any exploratory activity. Then, any subsequent ecological disruptions can be detected and necessary remedial steps taken. To increase lease sale competition, the Department will require more rapid disclosure of geologic and geophysical data on leased tracts. This policy will increase available information about general regions prior to subsequent sales within the same region. and gas. The acceleration of OCS leasing and other measures to increase domestic energy development reflect declining availability of oil Reports submitted by interstate pipeline companies to the Federal Power Commission show a deteriorating gas supply situation and declining proven gas reserves of these companies. declines are due to the fact that new additions to reserves have not been sufficient to offset production volumes. Interstate pipelines imposed curtailments of firm requirements totaling 1.39 trillion These cubic feet during the period September 1972 through August 1973. These curtailments amounted to 7.32 percent of the firm requirements of those interstate pipeline companies reporting deficiencies. For the period September 1973 through August 1974, curtailments of firm service are projected to total 2 trillion cubic feet, or about 10.42 percent of the firm requirements reported by 36 major pipelines (Class A and B) and one Class C pipeline. 1/ Federal Power Commission, News Release No. 20019, Washington, D.C., January 31, 1974. 1/ Proposed Five-Year Schedule - Provisional OCS Leasing The proposed schedule was issued in July 1973. 1/ In the development of the schedule, the Department considered its three leasing objectives: orderly resource development, protection of the environment, and receipt of fair market value. These objectives constitute overall policy parameters for the OCS program. An analysis was made in broad terms of when, where, and how much oil and gas acreage to offer for lease. This was done through a review of the national energy situation and the identification of future supplydemand imbalances. Deficits were identified by matching projections of future non-OCS supplies of oil and gas and future OCS production from existing leases with future projected demand. Demand forecasts were made on a regional basis, using the regions of the Future Requirements Committee for gas and the Petroleum Administration for Defense districts for oil. One of the tools available for analysis of the effect of various leasing options on regional supply is a computer model for natural gas. This model allocates future natural gas supplies on the basis of least cost and identifies national and regional supply gaps. It gives an indication of what regions OCS natural gas production serves, the effect of regional price changes on the allocation system, and where large deficits will exist. A 1/ See Attachment B. |