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Wednesday, March 22, 2006
PART Strikes Again
Independent oil and gas producers are joining the chorus of voices criticizing the White House's political performance measurement tool, PART. From the industry source, here's a look at what's at stake:
Independent producers are back fighting what has become an annual spring battle to preserve federal support for domestic oil and gas research and development. But the stakes are much greater than a few tax breaks, an Independent Petroleum Association of America official said.
"This has become an ongoing dispute between the Bush administration and Congress," said Lee O. Fuller, IPAA's vice-president for government affairs. . . .
Major oil companies' R&D is targeted where they're spending money, which is mostly overseas and largely proprietary, he explained. Service companies also do a lot of research, but again it's directed to regions where their biggest customers work.
"Independent producers generally aren't structured with an R&D component. They reinvest what they earn in exploration and production," Fuller said.
The US Department of Energy's oil and gas R&D program's main contribution has been to create a structure for research, about 85% of which is directed at independent producers and 65-70% toward smaller producers in programs such as reducing environmental footprints and extending reservoirs, he said.
"It's a cooperative effort that also involves universities, which use it for petroleum engineering graduate programs. This has been steadily reduced the last 5 years," said Fuller.
How does PART figure in? By providing a quantified but otherwise meaningless basis to justify a pre-determined decision:
This leads to questions from the White House Office of Management and Budget, which historically has had an aversion to DOE's oil and gas R&D program. "It has perceived it as corporate support for the majors. We have tried to explain that it isn't, but it's a heavy lift," said Fuller.
OMB also uses the Program Assessment Rating Tool, which the IPAA official said uses metrics that emphasize present benefits and don't recognize future contributions. Oil and gas R&D, by its nature, produces real but longer-term benefits, he observed. "The results of 3D and 4D seismic, horizontal drilling, and coalbed technologies all had their roots in 1980s R&D," he said.
"Gas hydrates, which everyone hopes will contribute to supplies in another 25 years, need to be worked on now. Yet their R&D program has been zeroed out in DOE's budget request. So has deep well data evaluation research," Fuller said.
He suspects that there's also pressure within DOE to support hydrogen and other future-fuel initiatives while meeting OMB spending reduction goals.
Sound familiar? PART is so consistently problematic we could probably send journalists a Mad Lib form and tell them to pick a program at random.
Posted by Robert Shull
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