431 



There is also a field that I just read of in the Mississippi Canyon, 

 in the Gulf of Mexico, an Exxon discovery. It is in a slope and po- 

 tential slump-prone area. MMS has required several years of geo- 

 physical study to make sure that a platform can be installed there. 



Mr. D' Amours. When will they begin producing there? 



Mr. Danenberger. It is still unclear if they ever will because it 

 is a very difficult area to install production platforms. 



As far as the resource estimate business, the only thing I can say 

 concrete about resource estimates is that their degree of accuracy 

 is very low. It is not just the problem with the work that is done by 

 the Department, but industry has shown also in frontier areas that 

 they are incapable of really assessing what is there until some ex- 

 ploratory drilling has been done. 



If you look at all the frontier areas, starting in Alaska, and spe- 

 cifically, the Gulf of Alaska, and the lower Cook Inlet, both of 

 which were thought to be excellent prospects, both have been very 

 disappointing so far. In the Atlantic, all sectors have proved sur- 

 prisingly disappointing. In the eastern Gulf of Mexico, there were 

 single tracts that drew over $200 million in bids and proved to be 

 dry. 



It all just goes to prove that we can get these types of estimates 

 before a sale, but they are really not useful for planning purposes, 

 if you want to really try and project what the ultimate effects will 

 be and what employment opportunities will develop. 



Before the drilling has been done, there are many examples of 

 mistakes in trying to determine what is there. The only real way is 

 to do some exploratory drilling and find out. 



Mr. D' Amours. Well, that is very interesting, because one of the 

 purposes of the OCSLA, the Outer Continental Shelf Lands Act — I 

 think it is in section 18 if I recall — one of the purposes is to weigh 

 the relative good to be obtained from exploration as opposed to the 

 possible harm that might be created by such explorations. 



Now, if what you are saying is correct, we have no way to make 

 that determination and in every case we are going to go ahead and 

 drill to see what is there, without any basis upon which to make a 

 judgment as to whether there is a relative benefit. 



Mr. Danenberger. It is very difficult on the resource side to cal- 

 culate the plus-minus side of the resource versus fisheries source — 

 it is very difficult on the oil and gas resource side because it is so 

 difficult to project what the resources's potential really is for an 

 area until the wells have been drilled. 



Now, you do know which areas may be more environmentally 

 sensitive. So it is easier to make the projection I would say on that 

 side. 



Mr. D'Amours. When do you make the projection it is not worth 

 the risk? Upon what data do you make that projection? 



Mr. Danenberger. It has to be — I guess to date the Department 

 has primarily used the primary source numbers. But it is not a 

 very good tool in making forecasts. Unfortunately 



Mr. D'Amours. Is there another tool? 



Mr. Danenberger. Fortunately, the impacts of doing exploratory 

 drilling in most environments have been found to be very minimal. 

 So during this stage there is a very low likelihood that there will 

 be any detrimental effects. 



