501 



In addition, I have read reports that the exploration budgets of 

 major oil companies have been dramatically reduced. Is the indus- 

 try convinced that the payoff in Georges Bank is worth proceeding 

 with development? 



Mr. Ayers. I guess we will hold the sale and find out. I just don't 

 know. There may be some companies that think yes, some that 

 think no. I don't believe anybody is going to go out there and drill 

 unless they think there is a good chance they will have some suc- 

 cess. 



Mr. D' Amours. Is Exxon going to be bidding? 



Mr. Ayers. I don't know. 



Mr. D' Amours. I am ready to conclude. Ms. Chapman. 



Ms. Chapman. Could I simply add something to that comment, 

 which I don't think has been really explored today, because it 

 doesn't really relate to the BTF. But one of the questions that has 

 been consistently brought up over the last year about the offshore 

 sales is the question of fair market value price. 



It would be of great concern if lease sales were allowed to go for- 

 ward that resulted in extremely low prices for tracts. But that ap- 

 pears to be a possibility under the way that the Interior Depart- 

 ment is holding — is conducting lease sales. 



Perhaps it would not cost an oil company a great deal to go out 

 and buy up a huge number of tracts, if the fair market value is 

 allowed to drop to very low levels, because of the low resource esti- 

 mates. So I remain unconvinced that we can simply trust to the 

 fact that the oil companies will not bid on these tracts if they do 

 not believe there is a significant amount of oil there. I think there 

 could be an attempt to simply buy up the tracts for the future at a 

 low price. 



Mr. D' Amours. Thank you very much. I don't want to get this 

 into a debate. Did you want to say an5d:hing about that. Dr. Ayers? 

 It sounds like a pretty good point, to me. 



Mr. Ayers. You have to realize when you get a tract, you have to 

 drill on it within a certain length of time. Drilling cost alone is 

 going to be in the order of $15 million. So I don't believe people are 

 going to buy up tracts and then just go drill for the heck of it. They 

 are not going to do that unless they feel they can make a signifi- 

 cant return. 



And the point that Bud made earlier is certainly true. There is a 

 big lag in time between the time you find a field, delineate it, and 

 build a platform and start producing. Certainly, I think the horror 

 story that we had at the Hondo field in California is an extreme 

 case, where we went and discovered the field in 1967 and didn't 

 start producing until 1980. 



I think that is an extreme case. But you are still going to have a 

 few years, even if ever5rthing runs perfectly smooth, and you don't 

 run into any kind of lawsuits or problems — you are still going to 

 spend several years. It is going to be 4 or 5 years before you can get 

 a platform in and start producing oil and gas. 



Mr. D' Amours. Is there a level of resource estimate below which 

 the industry will not explore? 



Mr. Ayers. Sure, of course there is. 



