Oil and gas in Washington

Action on Endangered Species Act; Positive outlook for oil services

January 1998 Vol. 219 No. 1
Washington

Charles D. Matthews,
Contributing Editor

Deja vu – All over again

The first session of the 105th Congress adjourned sine die at 10:44 p.m. on Thursday, Nov. 13, 1997. It took them several days longer than their original goal because of the excessive partisan bickering, particularly over the final appropriations agreements necessary to keep the federal government open and operating.

Following the longest recess in three decades, the House and Senate will convene the second session of the 105th Congress at noon on Tuesday, Jan. 27, 1998. They then will meet again in joint session at 9 p.m. to receive President Clinton's sixth State of the Union Address.

From the beginning of September when the members of Congress returned from their summer recess, they spent the next two and one-half months displaying the results of their old very partisan attitudes and interests; and the impact on output of legislation and policies the public expects to be in the public good was not positive.

Too many committee hearings, floor sessions and other activities related to Congress were carried out that were more like donnybrooks, without the slightest thought by members of adhering to their own official rules. One of those, Rule XLIII, Code of Official Conduct, No. 1, says "A member, officer, or employee of the House of Representatives shall conduct himself at all times in a manner which reflects creditably on the House of Representatives." Many representatives apparently haven't read that one.

Endangered Species Act still offensive. For many years, a growing number of aggrieved people have been trying to get Congress to do something constructive about the abominable Endangered Species Act (ESA). Some of these people are coalescing into action groups in efforts to protect themselves, their personal lives and private property from excessive federal intrusions.

Finally, a group of more than 200 people representing businesses, land owners, labor unions and trade associations really got behind S.1180, a bill to reauthorize and reform ESA. Obviously, these various organizations account for large numbers of irate, affected persons.

In frustration at the lack of positive actions as the first session of the 105th Congress was rapidly running downhill, this group of 200 jointly signed a letter to Senate Majority Leader Trent Lott (R-Mississippi) urging his help in getting Senate passage of the bill this session. The letter said, "Our organizations have been calling upon Congress to reauthorize and improve the Endangered Species Act for many years. Finally, as a result of many months of hard work by a bipartisan group of your colleagues, the Environmental and Public Works committee has reported, by an overwhelming margin of 15–3, legislation that will update the current operation of the Endangered Species Act."

ESA reform has been controversial during the past three legislative sessions that the Republicans have been in the majority. The letter from the group of 200 urged the Majority Leader for passage the first session—they did not get it. The second session of the 105th Congress is almost under way. The group of 200 is still fighting and it can use some more help from back home.

Babbitt joins the Clinton frying pan. It looks more and more likely that Interior Secretary Bruce Babbitt is a sure candidate for full investigation by an independent counsel for his role in denying a gambling casino license to three impoverished Indian tribes in Wisconsin following complaints by other, more wealthy, Indian groups with existing casinos. Reportedly, these groups later contributed $270,000 to the Democratic party.

Such an investigation, unless Attorney General Reno sweeps it under the rug, could be the one scandal to turn the frying pan over and pour several White House staff and members of the Democratic National Committee into the fire.

Outlook for oil services industries? Gushers! The companies in the oil service sector of our industry that survived the devastating depression of the past 15 years or so are going to get very good news. This is according to the Oil Service Industry Research group of the highly esteemed Simmons & Company International. In a recent report, this Houston-based investment banking firm called attention to the fact that the oil service industry today is as tight as an industry can get, with virtually every aspect of the business out of spare capacity. Backlogs are soaring for rigs, seismic crews, logging units, supply boats and most other products.

Matthew R. Simmons, president of the company, told a recent National Ocean Industries Association meeting that, over the next ten years, his analysis indicates production will have to increase by 42 million bpd to meet expected demand. The cost to add that much new production would be roughly $2.5 trillion. With the oil service industry currently out of spare capacity, it will need to expand even more to meet that demand.

An additional 450 offshore drilling rigs would be needed to achieve what Simmons calls "rig equilibrium." The cost of those rigs including deepwater rigs, semis and jackups, would be around $88 billion, at today's prices. That number would increase to $123 billion assuming 5% annual inflation, plus an additional $12 billion for offshore service vessels and another $12 billion for drilling equipment. Simmons concludes, "It is clear that the industry is going to need a lot of money to finance expansion, and that the winners and losers will be determined by who gets the right mix of financing sources."

Charles D. Matthews is president of Charles Matthews & Co., consultants and advocates on government relations, Arlington, Virginia.