A critical driver of energy challenges "is a U.S. energy policy somewhat detached from reality," said Thomas A. Petrie, vice chairman of Merrill Lynch & Co. Inc., at the IPAA's annual Oil & Gas Investment Symposium in New York.

Current energy policy embraces the notion of introducing alternative forms of energy with no realistic timeline and shows a disturbing lack of cohesive, comprehensive planning.

"It's hard to open a newspaper without seeing another article about today's energy challenges," said Petrie. "These challenges are enormous, well beyond anything I've seen in decades past."

The modern resurgence of environmentalism is exemplified by the popularity of Al Gore's movie An Inconvenient Truth, he said. Some scientists have suggested that the movie may have stopped somewhat short of scientific fact, he quipped.

Nonetheless, global warming and environmental alarmism are a political reality, typified by the recent U.S. Supreme Court decision on C02 emissions regulations. Both corporate and national energy companies are taking into account a new generation of politically savvy constituents. They should be prepared with acceptable conservation and alternative fuel ideas, he said.

Nuclear power isn't any quick fix. "It's capital-intensive and timeframe-intensive, and hasn't been as seriously considered in the U.S. as it has been in other nations such as France."

So is there any good news? Yes, there is.

The Federal Energy Regulatory Commission "gets it," he said. "FERC's flexible, timely actions have encouraged new (liquefied natural gas) terminals for the U.S. Within 10 years, an additional 10- to 12 billion cubic feet per day of gas may enter the system, which is very good news. By contrast, it seems unlikely that an Alaskan gas pipeline will be built in the near future. This sort of policy drift in Washington is disturbing."

E&P companies must do all they can to develop both conventional and nonconventional gas and oil in an environmentally responsible manner. "There is no silver bullet, no energy source that can immediately replace or substantially reduce dependency on hydrocarbons. But improved efficiency through technology can help."

The Pinedale play in Wyoming is one example. First discovered in 1929, the discovery was set aside for decades as being too geologically difficult to produce. Now, enhanced technology and higher gas prices have moved many trillions of cubic feet to the proved-reserve column.

"Let's go back and look at those types of fields with new technology and ask ourselves what we can do now that we couldn't do then."

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