While it should be lauded as an achievement, the reality is that the recent Energy Policy Act of 2005 fails to adequately promote and expand the use of U.S. domestic energy resources. More must be done! The act contains some modest incentives to assist with domestic oil and gas production and refining capability, but by and large, industry and government efforts to profoundly improve the U.S. energy situation were thwarted by unfounded fears about the impact of offshore E&P. Now, Hurricane Katrina has made it abundantly clear that the nation is not doing enough to expand oil and gas production, increase refining capacity and ensure adequate supplies at the lowest possible cost to consumers. This does not mean we should ignore environmental stewardship or fail to constantly reduce the industry's environmental footprint, but it does mean we must strive for a balance that protects both consumers and the environment. The reality is that the U.S. continues to under-utilize and under-invest in domestic resources and infrastructure, especially offshore. With natural gas and crude oil prices now higher than ever, and the U.S. appetite for oil exceeding 20 million barrels a day, now is the time to invest in U.S. resources, capability and infrastructure. Increased media focus on high gasoline and natural gas prices has made consumers more aware that growing U.S. and global demand have not matched supplies. There is intense global competition for oil and gas resources, particularly from burgeoning nations such as China and India. Unless domestic supply can be increased, prices for all products in the U.S. will likely continue to rise. For example, about 85% of the U.S. Outer Continental Shelf (OCS) is currently off-limits to oil and gas production. Many offshore areas in which drilling is allowed are nearing the end of their life expectancy. Industry needs-and government should grant in a thoughtful, environmentally considerate way-access to new areas. Federal offshore waters hold the greatest potential for finding new energy resources. Bringing them to market in the next five to 10 years would be tremendously beneficial. Geographically diversifying our domestic oil and gas supplies is more vital than ever. According to the Department of Interior, oil and gas produced from the OCS in the Gulf accounts for 29% of domestic oil and 21% of domestic gas production. After Hurricane Katrina struck last month, 92% of the Gulf's oil output and 83% of its natural gas production were shut in. For more on this, see the October issue of Oil and Gas Investor. For a subscription, call 713-993-9320, ext. 126.

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