WASHINGTON, April 28, 2016 - Senate Energy Committee chair Lisa Murkowski called for her colleagues in Congress to take advantage of the current low-price environment surrounding oil and gas development and pass reforms to boost energy production and provide economic benefits across the country.
“Oil and gas prices are low today, but they won’t be low forever,” Murkowski said at a committee hearing on Tuesday to examine challenges and opportunities for oil and gas developments in different price environments. “As oil and gas production is heavily capital intensive, investments must be made well in advance for projects to come online when increased production is needed,” she said, noting that from “decision to production” the process can take upward of 10 years.
The Alaska Republican says Congress needs to provide new access for drillers, to “establish reasonable systems for leasing and development,” and to reform an often cumbersome permitting process, adding that Congress “should be tackling this right now – not the next time oil is at $100 a barrel, or even more.” Oil is currently going for less than half that price.
Current policy often serves as a disincentive to domestic production, said Murkowski, leaving the resources produced in foreign nations more attractive for energy consumption.
A panel witness, Leslie Palti-Guzman, director of global gas with The Rapidan Group, noted that in the “global gas order” there is disappointing demand and a “wait and see approach for new investments.” Regarding U.S. liquefied natural gas (LNG), however, she said that assurance of a stable supply will continue to be attractive to investors. She sees a big increase in U.S. exports after 2017.
Several witnesses told the panel that policies shouldn’t be set by price volatility. “Let the markets work,” said Oren Cass, senior fellow at the Manhattan Institute. “Innovation and exploration has always benefited us,” he told the lawmakers, adding that government must show it supports expanded production
Jason Bordoff, founding director at Columbia University’s Center for Global Energy Policy, agreed that regulations shouldn’t be designed due to short term downturn. He said oil prices may be more volatile going forward, and noted that Iran is ramping up production.
When Sen. Cory Gardner, R-Colo., asked about the consequences a ban on fracking, Bordoff said that along with job losses, production costs would go up and the U.S. would cease to be a low-cost provider to the global market. Still, he said environmental affects need to be understood and regulated and that oil and gas must be produced responsibly, regardless of pricing.
Another witness, Suzanne Minter, manager, oil and gas consulting for Platts Analytics, noted that there is currently an oversupplied global market that must be resolved before prices can recover, although there is concern as to how quickly producers can respond when prices change. The longer the cycle is, the more extreme prices may fluctuate, she said.
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