Executive Committee U.S. Oil & Gas Assn. Board of Directors

Good morning. I would like to thank Alby Modina for inviting me to be here. It is a pleasure to be speaking before the executives who day in and day out produce much of the energy that this nation runs on; energy that used to be taken for granted.

Clearly at current prices, Americans are no longer taking energy for granted.

Unfortunately, while the public appears to be mad about what they’re paying, their anger is likely to be directed toward those who produce the energy rather than those who have strongly contributed to the high prices by blocking access to domestic energy resources on public lands, from OCS areas off of Florida and elsewhere to ANWR, as well as oil shale zones in the West.

All of us have to do more to help Americans constructively funnel their frustration in a way that is actually going to help, and not hurt, domestic energy production.

 High prices really have been a two-edged sword for the industry.

In the past six months you have had to fight off efforts to single out multinational oil producers for nearly $18 billion in tax hikes.

You have had to fight off a host of proposals in last year’s House energy bill to restrict access to federal lands, add more red tape to gain drilling permits, and fight off efforts to take away your oil and gas leases.

You have had to fight off a proposal in the Senate and House to coerce you to “voluntarily” renegotiate the terms of your Gulf of Mexico leases paid for from 1995 to 2000.

And there are strong rumors that sometime very soon Democratic leaders will be unveiling a new bill as the majority’s answer to drive down oil prices at the pump, but which may be paid for by driving up your taxes.

The list seems endless. And the truth is that all of these proposals and many more will likely be back, either as additions to appropriation bills later this year, or next year when a new President is in the White House and a new Congress is in office. The only question is whether there will be the votes to permit more of these ideas to pass.

You also may face the fallout from the EPA-Massachusetts decision on whether to regulate carbon as a pollutant, and the fallout from an Interior Department decision on whether to list polar bears, walruses, right whales, yellow loons, every seal species known to Alaska Eskimos, even slugs, as threatened or endangered species under the Endangered Species Act.

If the polar bear listing is based on carbon’s impacts on Arctic Sea ice, the permit and court challenges the energy industry , and other industries, are likely to face are considerable.

On top of those issues, you have climate change legislation and the Lieberman-Warner carbon cap and trade proposal to deal with. That measure may come up for debate in the Senate in June. I doubt that it has any chance of actual passage this year. The House seems unlikely to take action on a bill this year, and the Lieberman bill, if somehow it passed in its current form, would be vetoed by the President and the chances for override this year are slim to none. And the chances of making major modifications in the bill probably will be unacceptable to many environmental groups and constituencies.

But the debate and the discussion over amendments to the Lieberman-Warner bill will be important, because with all three Presidential candidates on record as supporting some level and type of carbon cap and trade limitation legislation, whatever happens to Lieberman-Warner this year might mark the start of discussions early next year.

Clearly many environmental groups want to “strengthen” Lieberman Warner and are pledging to do that next year. When you have a bill that mandates a 5% reduction in carbon emissions in 2012, calls for a roll back to 1990 levels by 2020 and for a roughly 75% reduction from 2006 levels by 2050, it is hard to see how technology will allow this country to meet those standards, much less tougher ones.

But common sense may be hard to find in the debate that may soon start.

So what should we all be doing about this?

Beating back bad legislation and regulations are an obvious task.

But I believe that this period of record high oil prices actually offers the industry an opportunity. Americans are finally listening about energy. Either we tell our side of the story, or Americans will listen to others who want to blame you for the high prices, who want to accuse you of price gouging and whose sole answer seems to be greater energy conservation and use of alternatives – worthy goals as part of the solution- but it is hard to power a truck delivering groceries on wind or to fly aircraft powered by biomass.
I encourage you to encourage us, to encourage Congress to share Outer Continental Shelf oil and gas revenues with more states, five more states at least, to entice them to permit OCS development off their shorelines.

Obviously, coming from Alaska I have parochial motives for getting Alaska cut in on OCS revenue sharing. I am facing considerable and growing opposition to offshore development near Bristol Bay from fishermen, in the Beaufort Sea off northern Alaska from whalers, and in the gas-rich Chukchi Sea from both as well as other environmentalists who believe that oil development will contribute to the demise of polar bears.

 Anything the industry can do to help gain support for revenue sharing to entice state residents to support oil and gas development -- because they will see immediate economic benefits -- would be greatly appreciated.

Also I encourage the industry to devote real resources to push for greater oil and gas development domestically on public lands. I know for years you have tried not to inflame the public by having “Big Oil” in the forefront of efforts to expand energy developments on public lands, especially into controversial areas like the Arctic Coastal Plain -- ANWR. And I am here to tell you your efforts to lay back and avoid controversy have NOT worked.

The industry has attracted just as much opposition, just as many picketers at your annual shareholder meetings, just as much unfair press because you have been blamed for pushing to open ANWR, or promoting oil shale in the Mountain West anyway.

At a time when prices are this high, when Al Gore is launching a $300 million campaign to pass climate change legislation, why not fund a major public campaign to open more areas in America to environmentally sensitive oil and gas exploration? The campaign might also counter the growing hysteria over fossil fuels use and carbon.

Sometimes a good offense is your best defense.

 Most Americans know nothing about ice road construction or the real appearance of Alaska’s Prudhoe Bay oil field.

A major campaign to explain directional drilling and how it prevents surface disruption over a hundred square miles, how new technology makes Santa Barbara wellhead blowouts impossible, and how the Gulf platforms survived Hurricanes Karina, Rita and Wilma with no major spills, might finally get the attention of Americans when they are spending more than $1 billion a day to buy oil from overseas, and when OPEC countries continue to reduce output to keep prices too high.

Rather than duck and run, I encourage the industry to launch an offensive at this time of record prices, not just in ads in D.C. to explain high prices inside the Beltway, but in ads nationwide to actually explain why producing more energy at home, where the government hopefully won’t expropriate your leases and profits, might actually help to reduce global energy prices.

 I support alternative energy and energy efficiency and conservation, but I also support doing all we can to produce more energy at home, and everyone in Congress needs a lot more help to sell that message.

Look at how environmentalists have started with pre-schoolers and grade schoolers to sell the importance of the environmental ethic, which often is accompanied by an attack on the use of all fossil fuels. If we in Congress and you in industry don’t launch a counter attack on the nation’s young, not counting college-age students, explaining why we need energy production and what it takes to run your car, or what happens when you flip your light switch on, we will soon wake up to an electorate which will not know what a balanced energy policy is and won’t elect anyone to allow it to come about.

I am next in line to be ranking member, or if November’s election goes differently than most pundits predict, chairman of the Energy Committee next January.

I want to listen to your needs and attempt to craft a reasonable agenda for energy policy in this country. I am willing to work hard to lay the groundwork to bring that agenda about – although it may take  more than one election cycle to accomplish. And in the interim we may have to make strategic retreats to avoid defeats. It certainly will have to be a truly balanced policy, because as the National Petroleum Council Report of two years ago makes clear, we will need all the energy we can get from most every source to maintain our economy and standard of living.

But I am here to also encourage your industry to come out of the foxholes and to fully join the battle. Because it is clear that if you don’t mobilize all your resources, no one else is going to be successful in delivering the message that we need a balanced, rational energy policy in this country, and we need it right now. 

Sorry for preaching.

I would love to take questions … may not answer them, but at least take them.