www.indystar.com Staff and News Services January 20, 2003

A combination of soaring crude oil prices and uncertainty associated with situations in Venezuela and Iraq are equating to higher than normal gas prices, according to AAA Hoosier Motor Club.

"Typically, because there is less of a demand for gasoline during the winter, we're accustomed to seeing relatively low, stable gas prices at this time of the year," said spokesman Greg Seiter. "But the ongoing strike in Venezuela and the increasing possibility of war with Iraq have helped drive prices up in recent weeks."

The nationwide average price of self-serve regular gasoline is now $1.47 per gallon. In mid-December gasoline prices had declined to $1.37. One year ago, the nationwide average price of self-serve regular was $1.13 per gallon.

Gas prices in Indiana were averaging $1.44 last week.

Recently, the Organization of Petroleum Exporting Countries (OPEC) agreed to increase crude oil production quotas by 6.5 percent. That decision, and an increase in production by Mexico, is intended to help offset the drop-off in production from Venezuela and help reduce the price of crude oil to levels below $30 per barrel. OPEC officials have openly said they prefer to maintain a crude oil price range between $22 and $28 per barrel.

"Something else to keep in mind is that Indiana began experiencing cold temperatures earlier this year than in previous years. Even though we haven't had many excessively cold days, the temperatures have remained consistently low, resulting in a prolonged demand for heating oil," Seiter said. "Increased heating oil demands mean that more oil out of every given barrel is needed to produce it. That means less oil per barrel for gasoline."

www.planetark.org USA: January 20, 2003

WASHINGTON - About two-thirds of federally owned land in key areas of the U.S. West is available to lease for oil and natural gas drilling, more land than expected by officials, according to a Bush administration report released.

Environmental groups said the widely anticipated study by the Interior Department's Bureau of Land Management could add momentum to the administration's efforts to streamline the leasing process and promote energy exploration in Western wilderness areas.

The analysis of federal land spanning 59 million acres in Colorado, Utah, Wyoming, Montana and New Mexico estimated the area contains 3.9 billion barrels of oil and 138.5 trillion cubic (Tcf) feet of gas that is technically recoverable.

The data is of great interest to energy companies, which have long pressed for the Bureau of Land Management to streamline and reform its leasing procedures.

While the report stopped short of proposing new energy policies, Rebecca Watson, assistant secretary for Interior's land management, said there were fewer restrictions to block energy development than had been previously thought.

"This report does identify that, at least from a leasing stage, the stipulations that land management agencies put on resources still allow a majority of those oil and gas resources to be leased," Watson told reporters.

Of the land inventoried, 2.2 billion barrels of technically recoverable oil and 86.6 Tcf of technically recoverable gas are in areas covered by standard leasing procedures.

However, 21 million acres of the area cannot be leased because of environmental restrictions. That puts off limits about 600 million barrels of oil and 16 Tcf of natural gas.

Energy that is technically recoverable may not be economic to develop, depending on market prices and the costs of drilling and transporting production.

The U.S. consumes about 23 Tcf of natural gas and 7.3 billion barrels of oil annually. Half the oil must be imported from countries such as Venezuela, Saudi Arabia and Iraq.

GREEN GROUPS NOT IMPRESSED

The study was ordered by the Clinton administration in 2000 and funded by Congress to assess the energy potential on lands in the Western United States.

President George W. Bush, a former Texas oilman, made energy exploration in the Western U.S. a focal-point of his energy plan to help reduce U.S. dependence on foreign oil and to meet future demand for natural gas.

Conservation groups said the new report will boost support for energy exploration because it outlines all oil and natural gas reserves that can be recovered, not just those that are profitable for energy companies to remove.

Pete Morton, an economist with the Wilderness Society, said that because most of the land is already available for leasing, the administration has no grounds to further ease environmental rules for energy exploration.

"This report completely undercuts any agenda (by the Bush administration) for waiving any environmental laws to pursue oil and gas development," said Morton who authored an oil and gas assessment in the West last year.

In its report, the Wilderness Society estimated that if more drilling was allowed in key national forests and monuments in the West, the combined areas would produce only enough natural gas to meet U.S. demand for about 11 weeks, and crude oil to satisfy consumption for about 3 weeks.

OILMEN WANT PERMITS STREAMLINED

The Independent Petroleum Association of America, which represents thousands of oil and natural gas producers, praised the Bureau of Land Management report.

Diemer True, chairman of the group, said producers have been reluctant to develop federal land in parts of the United States because of a cumbersome permit process, excessive environmental reviews and litigation that makes it too time consuming and costly.

Watson said the administration has made little progress to streamline the permit process during the last few years.

"Now we know that these resources in the inter-mountain West should be available for leasing," said True. "We need to make sure it happens."

The new report studied the San Juan Paradox in New Mexico, the Montana Thrust Belt, Colorado's Uinta Piceance, and Wyoming's Green River Valley and Powder River Basin.

The Bureau of Land Management said it would begin similar reviews of oil and gas on other Western federal lands, including the Wind River Basin in Wyoming and the Eastern Great Basin in Utah and Idaho.

Story by Christopher Doering

www.indianastatesman.com By Beth White Indiana Statesman January 15, 2003

Gasoline prices are predicted to reach an average $1.54 a gallon by mid-spring; however, current prices are already putting a dent into students' wallets.

Gas prices currently average $1.36 a gallon in Terre Haute, but over the past three weeks, prices have risen around six cents per gallon.

"I think it's ridiculous," Shaquanda Allen, a junior criminology major, said. Allen said that, as a commuter student, she puts at least $10 of gas in her car every three days.

Allen has already cut out unnecessary driving and has eliminated driving at night to attempt to save on gas money.

"I only drive to necessary places, such as to school, to take my daughter to school and to the grocery store," Allen said.

Although Terre Haute' s prices are below the national average price for a gallon of gasoline - currently $1.48 - the Midwest region traditionally has higher gas prices than the rest of the United States.

The Midwest uses ethanol gasoline, made primarily of corn, instead of methyl tertiary butyl ether, used by the rest of the United States.

The price-hike can be attributed to a few factors. One is the six-week oil strike in Venezuela, depleting 1.5 million barrels a day from U.S. imports. OPEC's boost of 1.5 million barrels a day in attempt to help will not reach the United States for another 45 days, according to the Energy Information Administration. Another factor is the threat of war in Iraq .

"If we go to war with Iraq, I know (higher gas prices) are going to happen," said Chris Snyder, junior management information systems major. "I remember when prices went up during the last war."

Snyder is from the Buffalo, N.Y., area, and he said that although gas prices are high in Terre Haute, he noticed a big difference between the two cities. He said gas is around $1.65 a gallon in Buffalo.

Snyder commutes from south Terre Haute and says the drive takes around 20 minutes. He said he has already begun limiting driving and purposefully scheduled his classes only on Tuesday and Thursday so he wouldn't have to drive to campus every day.

Mike Potts, freshman criminology major, commutes 95 miles from Washington, Ind., to and from ISU.

Potts said he notices a price variation from county to county, and gas is about a dime cheaper in Terre Haute than Washington. He also said that although his car gets fair gas mileage, he has limited his excess driving "a lot." The excess money Potts has had to spend on gas has put a strain on other financial freedoms, such as eating out.

What the money for each gallon of gasoline pays for, according to the U.S. Department of Energy Web site:

18 percent pays for distribution, marketing costs and benefits.

30 percent pays taxes, including federal excise tax, which averages 18.4 cents a gallon; state excise tax, which averages 19.96 cents a gallon; and other taxes.

11 percent pays for refining costs and profits.

41 percent pays crude oil suppliers.

(Due to rounding, percentages do not add up to 100%.)

ogj.pennnet.com Maureen Lorenzetti Washington Editor

WASHINGTON, DC, Jan. 14 -- New York state Jan. 6 formally asked the US Environmental Protection Agency to waive a federal clean air rule that requires fuel suppliers to sell reformulated gasoline (RFG) with an oxygenate, typically ethanol or methyl tertiary butyl ether .

"In order to continue with the progress already being made in reference to the removal of MTBE contamination, New York wants to remove the minimum oxygen requirement in RFG," wrote New York Department of Environmental Conservation Commissioner Erin Crotty to EPA Administrator Christine Whitman.

Crotty said that New York is concerned that smog levels may increase if fuel suppliers are forced to replace MTBE with ethanol to meet the oxygen standard.

The commissioner also cited ethanol transport as an additional burden to suppliers. She said that regional clean air officials estimate that transporting 22.9 million bbl/year of ethanol to New York and surrounding Northeast states could require as many as 34,000 miles of barge travel and as many as 3 million miles of truck travel.

History In June 2001, EPA rejected California's petition to obtain a waiver of the 2wt % oxygen requirement for RFG.

Both New York and California next year are banning MTBE because of groundwater contamination concerns. Connecticut has an MTBE ban that will take effect in October. Washington state's ban is also scheduled for this year. An earlier MTBE ban in Arizona expired in 2001. Five other states— Colorado, Nebraska, South Dakota, Minnesota, and Iowa—already have bans on MTBE. Meanwhile, Kansas, Illinois, and Indiana, like California and New York, have bans that will activate in 2004. By 2006, a total of 16 states plan to have bans in place, according to American Petroleum Institute data.

EPA rejection Shortly after EPA rejected California's request, the state filed a lawsuit against the agency. The National Petrochemical & Refiners Association also filed an amicus brief in support of California.

NPRA's brief says that the "real-world impact" of EPA's decision to deny the California waiver request "is to establish an ethanol mandate for RFG within California. NPRA officials also reminded the court of the decision in API and NPRA vs. EPA, which struck down EPA's 1994 attempt to impose a nationwide ethanol mandate in RFG.

Fuel suppliers in both the Northeast and California have told EPA that they are worried about the impact of MTBE bans on fuel supply if they must use ethanol to comply with current clean fuel rules.

Ethanol suppliers meanwhile say there will be enough product to replace MTBE and that EPA should reject New York's waiver request.

"We would oppose the waiver because the only way EPA can grant a waiver is if it determines in this case ethanol blends would prevent New York from meeting air quality (standards) and that's not accurate," said Monte Shaw, a spokesman for the Renewable Fuels Association.

California picture According to the California Energy Commission, most refiners in that state have started early MTBE phase-outs. ConocoPhillips, they said, has already been producing the majority of its gasoline for blending with ethanol. Royal Dutch/Shell Group, ExxonMobil Corp., BP PLC, and Kern Oil Co. earlier said they planned to stop blending MTBE and switch to ethanol a year before the current Dec. 31 deadline.

Meanwhile, ChevronTexaco Corp. announced this week that it would be producing gasoline with ethanol in Southern California. Valero Marketing & Supply Co., Tesoro Refining & Marketing Co., and ChevronTexaco in Northern California are the only refiners who have decided to adhere to the governor's revised phase-out date, although limited production of gasoline for blending with ethanol may occur, CEC said.

Ethanol marketers say shipments began arriving in December, and production of a specially tailored California clean fuel is already under way at 9 of the 13 refineries that produce RFG. CEC says that 60-70% of the state's gasoline production is expected to contain ethanol by the end of January, which would represent an ethanol demand of 37,000-43,000 b/d.

MTBE bans A recent API analysis shows that current and anticipated state MTBE bans could put undue pressures on fuel delivery systems in the coming years, creating temporary fuel shortages and price spikes.

Barring a legislative fix by Congress or a change of heart by EPA, more than half of the estimated 159,000 b/d of ethanol production (2.7 billion gal/year) will have to be shipped to either coast later this year.

Currently, the Midwest uses nearly all of that capacity, according to API. Without that ethanol volume, Midwest refiners will have to replace missing barrels in a market that could be facing other supply pressures because of disruptions in Venezuela and Iraq.

Suppliers are hoping that, given the unsettled short-term nature of world oil markets these days, the White House may step in and encourage EPA to reverse itself on California and allow Northeast states the same flexibility. California fuel marketers recently urged the agency to consider allowing them to use both MTBE and ethanol in fuel for an unspecified period while the state makes the transition to all ethanol-blended RFG.

Contact Maureen Lorenzetti at Maureenl@ogjonline.com.