I2fi 



Comparing the height of this large rig with a modem 

 office building indicates the tremendous depths in 

 which the offshore platforms are nmc operating. 



The uncertainty that surrounds the leasing 

 schedules of the Federal Government makes 

 it difficult for the industry to plan ahead. 

 Earlier notice of lease sales would help the 

 industry to plan its exploration and develop- 

 ment programs in a more orderly and effec- 

 tive fashion. 



Determination of the proper rate of domes- 

 tic offshore oil development requires con- 

 sideration of highly complex factors affecting 

 national defense and conservation programs 

 designed to prevent too rapid exploitation. At 

 present, import quotas are used on the 

 grounds that they are necessary to encourage 

 the exploration and development of domestic 

 supplies in order to prevent undue reliance on 

 foreign supplies that might be cut off at any 

 time. 



Conservation considerations and the desire 

 to balance supply and demand have led to the 

 prorationing of production in some States. 

 Similar systems have been used by the Fed- 

 eral Government with respect to oil produc- 

 tion from offshore areas in the Gulf beyond 

 State jurisdiction. To eliminate prorationing 

 of production on such offshore lands would 

 add an incentive to explore and develop these 

 sources. However, it would also pose difficult 

 adjustment problems for the industry and the 

 oil producing States and might result in an 

 unsound depletion of reserves. By the same 

 toi^en, there are longer range and complex 

 implications for the national security of a 

 program that stimulates rapid development 

 and production from domestic sources. It may 

 be wise to consider new methods for em- 

 phasizing incentives for exploration that do 

 not concurrently produce pressures for un- 

 duly rapid, short-term exploitation. 



The petroleum industry operates within a 

 complex framework of law and regulation 

 which compels thorough analysis of all as- 

 pects of the national interest — economic, 

 political, and military — in projecting long- 

 term programs for development and leasing 

 of subsea oil and gas bearing lands on the 

 continental margins. In particular, very care- 

 ful attention must be given to the broader 

 public interest in maintaining a national 

 reserve. 



The Commission has not been equipped to 

 make such an analysis. Recognizing that en- 

 ergy policy is an object of continuing public 

 concern, the Commission, nonetheless, urges a 

 thorough new assessment of the adequacy of 

 the Nation's offshore and land oil reserves. 

 Only such an assessment can provide the 

 foundation for shaping the incentives to ex- 

 plore and develop subsea oil reserves and for 

 establishing an orderly, rational leasing pol- 

 icy pacing development at a rate that is in the 

 public interest. 



