1. America’s Energy Coast Leadership Forum The Woodlands, Texas July 24, 2008 America's Energy Coast: Critical to U.S. Energy Security Commissioner Victor G. Carrillo Railroad Commission of Texas

2. Texas Railroad Commission Established: 1891 3 statewide elected officials No rail issues since 2005 Regulate: oil & gas pipelines surface mining natural gas utilities “TX Energy Commission”

3. “There is no greater issue facing our world over the next century than energy.” U.S. Congressman Joe Barton Energy & Commerce Committee Principal author, EPACT 2005

4. “Energy independence is the No. 1 national security issue … No matter how we ask the question, that’s what comes up.” James Carville Democratic political pundit

5. Oil TOPS $145 /barrel! U.S. oil imports > 60%!

6. OPEC Oil Export Revenues (2001- 2008) $1.18 T (est.) Billions $$

7. 2007 U.S. Natural Gas Imports Source: U.S. Energy Information Administration.

8. National Petroleum Council July 18, 2007 A Comprehensive View to 2030 of Global Oil & Natural Gas “There is no single, easy solution to the global challenges ahead. Given the massive scale of the global energy system and the long lead-times necessary to make material changes, actions must be initiated now and sustained over the long term.”

9. 1)Moderate decline of conventional domestic oil & gas production 2) Increase access for development of new resources 3) Expand and diversify production from: Unconventional oil & natural gas Clean coal Nuclear Renewables (wind, solar, biomass) To Meet Future Energy Challenges, the U.S. MUST:

11. Active Gulf of Mexico Leases

12. U.S. Crude Oil Resources (Est. Undiscovered Technically Recoverable)

13. Currently Inaccessible Natural Gas Resources

14. Outer Continental Shelf Policy Committee (Chair, Commissioner Victor Carrillo, Texas) Advise Interior Secretary Kempthorne on leasing, exploration, development, & protection of OCS resources Increase OCS Access Expand/Enhance Refinery Capacity Permit Exploration in ANWR Develop Oil Shale

15. President Bush Lifts Executive Ban on Offshore Drilling (July 14, 2008) Issued Memorandum to Interior Secretary Removes Executive Restriction to OCS Drilling (in place since 1992) Congressional Moratoria still in place (Began in 1981 with offshore California) COINCIDENCE? Crude oil price drops $16 (11%) in one week!

16. Deepwater Offshore Gulf: L. Tertiary Potential Recoverable Reserves for L. Tertiary Trend: 5 – 15 billion barrels

17. UltraDeep Offshore Gulf Potential: Chevron/Devon/Statoil Jack-2 Well 270 miles SW of New Orleans 7,000’ water depth (drilling technology) Subsalt (seismic imaging technology) 28,175’ TD (production technology) 6,000 b/d light, sweet crude Potential Recoverable Reserves for L. Tertiary Trend: 5 – 15 billion barrels

19. ~4,000 Platforms 25% of U.S. Oil Production (465 mmbo) 14% of U.S. Gas Production (2.8 Tcf ) GOM: America’s Energy Coast 2007 Production Stats TX: 33% of U.S. Gas Production (6.7 Tcf) LA: 7% of U.S. Gas Production (1.33 Tcf) Fed OCS + TX/LA/MS/AL = 55% U.S. Gas!

20. 2007 U.S. Natural Gas Production Total: 20.15 Tcf America’s Energy Coast: 55%!

21. 2007 U.S. Oil Production Total: 1.86 BBO

22.  TX:26 -- 4.8 mmbopd  LA: 19 -- 3.0 mmbopd  MS: 3 -- 0.4 mmbopd  AL: 3 -- 0.1 mmbopd U.S. REFINERY OVERVIEW 150 U.S. Refineries 17.6 mmbopd capacity Gulf Coast: 51 with 8.2 mmbopd capacity = 47%

23.  Largest pipeline infrastructure in nation  27% total U.S. refinery capacity  > 312,000 employed in sector (2006)  Oil & gas & petrochemicals = $160+ Billion  ~15% of gross state product (2006) TEXAS OVERVIEW “Mature” Producing Province: ~ 7,100 active operators Total Active Producing Wells: 144,973 oil 84,376 natural gas #1 producer of oil & natural gas in the U.S ~340 million barrels oil (2007) ~ 6.7 Tcf natural gas (2007)

24. Producing Gas Wells June 2008

25. Texas Natural Gas Production * 2008 Production Annualized 20.2 Bcf/d 7.37 Tcf/yr 1972 Peak

26. U.S. much less dependent on natural gas imports U.S. imports ~ 20% of natural gas 2007 U.S. Consumption: 23 Tcf Without TX, U.S. would import ~50% nat. gas Natural Gas TX Produced 7.0 Tcf 33% of U.S. domestic production 30% of U.S. consumption

27.  RRC oversees operations of 138 intrastate pipelines  Largest pipeline infrastructure in nation TX GAS PIPELINE OVERVIEW  140,000 miles of intrastate pipes (oil & gas)  57,000 miles of natural gas pipelines in TX  43,000 miles (75%) are Intrastate pipelines  Significant growth in capacity due to Barnett Shale & E. TX Bossier expansion ( >25% 2007 U.S. pipeline infrastructure growth)

29. 1985: Last year RRC issued as many permits!

30. Up 29% in 2008 * Highest since 1985! *

32. Unconventional Resources Technology Advisory Committee Advises Energy Secretary Bodman on technologies related to onshore unconventional natural gas & other petroleum resources Unconventional shale gas Barnett Shale Technology driven horizontal drilling hydraulic fracturing multi-well drills 20+ counties 185 operators USGS: ~26 Tcf

33. Perryman Study: 100,000+ jobs $10+ billion annual output Perryman Study: 100,000+ jobs $10+ billion annual output

34.  3.8 Tcf Since 2000!  15% of total TX Gas Production  3.8 Tcf Since 2000!  15% of total TX Gas Production Barnett Shale Natural Gas Production (1997- March 2008) BCF1 st Q

35. TX PUC Approves Plan (7/19/08) New Transmission Lines $5.9 billion investment 18,456 MW in 5 years Texas Wind Capacity 1995 = 0 MW Mid-2006 = 2,300 MW July 2008: 5,519 MW TX #1 in NATION!

36. Up 59% in 2007!

37. TRADITIONAL ENERGY SOURCES Oil Gas Coal Nuclear RENEWABLE ENERGY SOURCES Wind Power Biomass Solar Energy Geothermal Fuel Cells LNG Clean Coal D I V E R S I F I C A T I O N

38. Encourage responsible, sustainable development Emphasize domestic oil & gas & infrastructure Explore in OCS, ANWR, Rockies: “Our own backyard!” Support technology advances to minimize environmental footprint & impact Encourage diversification: Clean coal, nuclear, renewables (wind/solar/biomass) This is NATIONAL IMPERATIVE! If we do this … Oil & natural gas supply will stabilize & even grow Price volatility may be attenuated Domestic Energy Security will be enhanced CONCLUDING THOUGHTS

39. Sustaining economic development & environmental stewardship are not mutually exclusive activities; They can & must move forward together The importance of linking energy, environment, and economic sustainability must be a regional voice with a collective national vision