US political changes pose challenges for oil and gas producers

Denver (Platts)--27Apr2007

The Democratic takeover of Congress is posing new challenges for
producers trying to access natural gas and oil reserves in the US West,
current and former regulatory officials said Thursday.

"This is a very tough environment. It's no secret that the oil-and-gas
industry is not viewed favorably by the 110th Congress," said Rebecca Watson,
a former assistant Interior secretary who is now a partner in the Washington
law firm of Hogan and Hartson.

Speaking at the Platts Rockies Gas and Oil Conference in Denver, Watson
said several members of the Democratic-controlled Congress have expressed a
desire to gut provisions of the Energy Policy Act of 2005 aimed at boosting
gas and oil production, particularly in the West. EPAct "is under assault,"
she added.

The exploration-and-production industry is under increasing pressure at
the state level as well, where Watson said lawmakers have "diminished"
producers' right to develop minerals beneath split estates. She cited recently
passed surface-owner protection laws in Wyoming and New Mexico that are making
it more onerous for E&P companies to access the wealth of gas beneath split
estates.

Watson also said some Western states have beefed up their
wildlife-protection efforts at the expense of maintaining the nation's energy
supply. She cited a bipartisan move in Wyoming to slow gas drilling in the
Bridger-Teton National Forest and a bill in the Colorado legislature to dilute
the E&P industry's influence on the Colorado Oil and Gas Conservation
Commission.

"I think balancing energy and the environment, and balancing energy and
lifestyle, is not a simple task," said Watson, who worked for Interior during
President Bush's first term. "These are difficult, fundamental value issues we
see playing out right here in the Rockies."

James Hughes, acting director of Interior's Bureau of Land Management,
echoed many of Watson's sentiments. At oversight hearings in Congress, "we
continue to hear this chatter about revoking or repealing a whole host of
issues included" in EPAct, he said.

Hughes said that as the population of Western states has surged, hunting
and fishing interests, along with environmentalists and wildlife advocates
have increased their influence over land-use policy. That pressure has put
state and federal officials in the position of thinking they must choose
between energy development and recreation.

"We want to make sure we don't have to make a choice between the hunters
and the oil- and-gas industry, and we don't think we have to," Hughes said.
He pointed to BLM's Healthy Lands Initiative, which is aimed at ensuring that
E&P and recreational interests coexist in the West. As part of that program,
he said BLM has reached out not only to energy companies but to conservation
groups, ranchers, local governments and other stakeholders to "make sure they
are involved" in developing good land-use policy.

"We are ready to partner with just about anybody out there," Hughes said.

--Mark Davidson, mark_davidson@platts.com