Mr MAGUIRE. Thank you, Mr. Chairman.

Mr. Chairman, on page 25 of your testimony you mention that not all wells are reported for the year in which they are drilled.

FURTHER TESTIMONY OF HON. JOHN N. NASSIKAS, CHAIRMAN, FEDERAL POWER COMMISSION; DON S. SMITH, VICE CHAIRMAN; DREXEL D. JOURNEY, GENERAL COUNSEL; J. PAUL DOUGLAS, ASSISTANT TO THE CHAIRMAN; FRANCIS C. ALLEN, CHIEF, BUREAU OF NATURAL GAS; GEORGE P. LEWNES, ASSISTANT GENERAL COUNSEL; WILLIAM D. BRAUN, STAFF ATTORNEY, OFFICE OF THE GENERAL COUNSEL; JOSEPH J. SOLTERS, ASSISTANT TO THE CHIEF, BUREAU OF NATURAL GAS; BILL HERBERT, INDUSTRY ECONOMIST, PLANNING AND DEVELOPMENT DIVISION, BUREAU OF NATURAL GAS; FREDERICK D. CORNELIUS, CHIEF, SYSTEMS OPERATIONS DIVISION, BUREAU OF NATURAL GAS; HASKELL P. WALD, CHIEF, OFFICE OF ECONOMICS; RALPH A. JOHNSON, INDUSTRY ECONOMIST, OFFICE OF ECONOMICS; ELLIS R. BOYD, HEAD, PLANNING AND SPECIAL PROJECTS SECTION, BUREAU OF NATURAL GAS; FRANK E. BAKER, GEOLOGIST, PLANNING AND DEVELOPMENT DIVISION, BUREAU OF NATURAL GAS; WILLIAM L. MONROE, MATHEMATICAL STATISTICIAN, PLANNING AND DEVELOPMENT DIVISION, BUREAU OF NATURAL GAS; WILLIAM L. WEBB, DIRECTOR, OFFICE OF PUBLIC INFORMATION; LUNDY R. WRIGHT, CHIEF, PIPELINE AND PRODUCER RATES DIVISION, BUREAU OF NATURAL GAS; RUSSELL D. THORELL, DEPUTY CHIEF, BUREAU OF NATURAL GAS; GORDON K. ZARESKI, CHIEF, PLANNING AND DEVELOPMENT DIVISION, BUREAU OF NATURAL GAS; LORIN H. DRENNAN, CHIEF, OFFICE OF ACCOUNTING AND FINANCE; ROBERT W. PERDUE, DEPUTY GENERAL COUNSEL; STEPHEN MacGREGOR, ATTORNEY, OFFICE OF GENERAL COUNSEL; PHILIP WELLAND, ATTORNEY, OFFICE OF GENERAL COUNSEL; EMMETT J. GAVIN, ASSISTANT TO THE CHAIRMAN: RICHARD A. FRANDSEN, TRIAL ATTORNEY, OFFICE OF GENERAL COUNSEL; AND SCOTT E. KOVES, TRIAL ATTORNEY, OFFICE OF GENERAL COUNSEL; ACCOMPANIED BY WILLIAM L. SPRINGER, COMMISSIONER

Mr. NASSIKAS. Yes, sir.

Mr. MAGUIRE. These are apparently placed in a "suspense file" pending the availability of certain additional data required for classification and reporting purposes.

According to the American Association of Petroleum Geologists, 410 wells were held in such a file, unreported at the end of 1973. Over half of them were drilled after the end of 1970, according to your testimony, which means, I gather-correct me if I am wrong on this-that a significant percentage of them were drilled during 1970 and before, is that correct?

Mr. NASSIKAS. I believe so, Mr. Maguire, that is correct. Yet, I would like to have that confirmed by Mr. Ralph Johnson, our economist that is making this study.

Mr. MAGUIRE. Is he present?

Mr. NASSIKAS. He should be.

Mr. JOHNSON. Would you restate the question.

Mr. MAGUIRE. I was referring to the so-called suspense file in that wells which are drilled are not necessarily reported in the year in which they are drilled and the testimony of the chairman indicates that a significant percentage of the wells that were unreported at the end of 1973 may have been drilled in 1970 or earlier but he wasn't sure of that.

Would you confirm that; is that the case?

Mr. JOHNSON. That is correct, sir. One-half of the wells referred to in the chairman's testimony is of the 337 offshore wells.

Mr. MAGUIRE. Then, returning to my questioning of the chairmanthank you for your assistance-can you tell me why wells drilled during 1970 and before, that is 5 years ago and earlier, should still be listed "in suspense" and therefore still unreported 5 years or more after they were drilled?

Mr. NASSIKAS. I don't believe I can give you a definitive answer as to why that is so. Our staff is reviewing this. Part of the answer I know lies with the U.S. Geological Survey information which would have to be compared with the information supplied by the American Association of Petroleum Geologists.

I put this into my statement in the interest of a complete and comprehensive statement. We believe this is an area that warrants further review by our Commission staff.

Mr. MAGUIRE. I should say so, Mr. Chairman.

We are talking here about 410 wells drilled 5 years and longer ago and we have in that time developed an energy crisis in this country. Let's pursue this a little further.

What kind of additional data is necessary for classification and reporting of these wells and why would it take such a period of time to develop such additional data?

Mr. NASSIKAS. Here again, if I may refer this to Mr. Johnson, who is an expert in this area, with the indulgence of the Chair.

Mr. JOHNSON. Mr. Maguire, my information is that the respondent for API, the person who reports offshore drilling for the publication indicates he is not able to determine whether or not these wells will be gas wells or oil wells until such time as the production commences from these wells.

In many cases because of the unique drilling operations required offshore, it may take as long as 2 years to complete a drilling program and to bring on certain supplies of gas or oil, whatever is found.

In many cases they may be waiting on facilities, pipeline facilities. In other cases

Mr. MAGUIRE. Wait a minute, the pipeline people are telling us they are waiting on producers to produce the gas. Are you saying the producers are waiting on pipelines?

Mr. JOHNSON. It is my understanding there are platforms that are waiting for the construction of pipeline attachment facilities or gathering facilities in an offshore area in order to allow production to

commence from the particular platform, or area, in which drilling has been completed.

Mr. NASSIKAS. Mr. Chairman and Mr. Maguire, Mr. Frank Baker, geologist with our Planning and Development Division in the Bureau of Natural Gas for many years has concentrated in this area of expertise and, if you wish, he is also here. He could elaborate on the remarks which have just been made by Mr. Johnson, if you wish to hear from Mr. Baker.

Mr. MAGUIRE. I would be delighted to hear from Mr. Baker.

Mr. BAKER. The American Association of Petroleum Geologists have a data series in which they determine whether oil and gas discoveries are significant or not.

The offshore area is a particular problem because the AAPG cannot determine whether the discovery wells are significant until all of the information is released on the wells. This is one of the reasons for the suspense file.

It is my understanding that all of the wells that are drilled from a platform are tested before the oil companies allow the USGS to release part of the information. After this is done the information can be used by the AAPG to determine the proper classification of each well.

At this time the AAPG respondent in charge of that information will also evaluate the information and determine the significance of each.

At the proper time the information will be included in the AAPGAPI statistical series and the related wells will be removed from the suspense file.

Mr. Moss. I wonder if we might suspend and respond to the quorum call.

When we return, Mr. Maguire, you will be allowed to continue with your time.

At this time we will recess to respond to the quorum call. [Brief recess.]

Mr. Moss. The subcommittee will be in order.

Before recognizing Mr. Maguire, I ask unanimous consent that Congressman John Breckinridge of Kentucky be permitted to place a statement in the record at the conclusion of today's session of the subcommittee [see p. 1662]. Is there objection?

Hearing none, such will be the order of the committee.

Mr. Maguire, you are recognized.

Mr. MAGUIRE. Mr. Chairman, I believe my last question had been answered but I am not entirely sure.

That question is what is the time factor here that generally, after all of the steps that have been described by your staff, can be counted on in terms of the time between a well is drilled and the time that it is reported and comes out of the so-called suspense file. Is it 5 years, is it 10 years? What is it?

Mr. BAKER. Mr. Maguire, I would imagine that it is probably on the average of 2 to 3 years, it may be less or it may be more. Mr. MAGUIRE. Two to 3 years?

Mr. BAKER. Yes, sir.

Mr. MAGUIRE. And at a time of critical national need, presumably there would be an interest in accelerating that process or at least mak

ing sure that the average times are typical rather than exceptional, wouldn't that be generally the case?

Mr. BAKER. Yes, sir.

Mr. MAGUIRE. How can we explain these several hundreds of wells that are now 5 years as compared to the average 2 or 3 year periods of time between the time the well is drilled and the time it is brought off the suspense file?

Presumably the reserves lying beneath these wells would be very vital to the Nation to alleviate the shortages and he.p in the ratemaking process?

Mr. BAKER. Yes, sir, I imagine the reserves have been included in certificate applications before the Federal Power Commission. The reporting system of the API-AAPG strictly depends on when the USGS releases the information so they can make the determination of the type of well it is. The gas supply may in some cases already be coming to the interstate pipeline companies.

Mr. MAGUIRE. While the well is still in the suspense file?

Mr. BAKER. That is a possibility.

Mr. MAGUIRE. It is a possibility gas may be coming out of those wells?

Mr. BAKER. Yes, sir.

Mr. MAGUIRE. Is that typical or unusual?

Mr. BAKER. I would say that is probably unusual.

Mr. MAGUIRE. So for the most part the wells in the suspense file are not producing gas for American's needs?

Mr. BAKER. That is possible, sir.

Mr. MAGUIRE. In your testimony on page 40, Mr. Chairman, you indicate that the Secretary of the Interior directed that the National Research Council be requested to conduct an evaluation of the Federal Power Commission analysis of OCS shut-in leases?

Mr. NASSIKAS. Yes, sir.

Mr. MAGUIRE. That FPC analysis was done last year. The Secretary's directive was issued in January of this year, I believe. Mr. NASSIKAS. That is correct.

Mr. MAGUIRE. Has such an evaluation been in fact undertaken?
Mr. NASSIKAS. As we understand it, evaluation has been undertaken.
As I say on page 41, a Panel on Gas Reserve Estimation to carry it
out has been established.

Mr. MAGUIRE. What have been the results of that investigation?
Mr. NASSIKAS. We don't have the results yet.

Mr. MAGUIRE. This is 6 months later and we have no results?
Mr. NASSIKAS. No, we don't.

Mr. MAGUIRE. Six months after the worst gas shortage "in the history of the country" and the issuing of a directive for investigation of shutin leases and yet we have no results?

Mr. NASSIKAS. I don't believe my comments at pages 40 and 41 make that statement.

Mr. MAGUIRE. The question is when are we going to get some answers on the basis of the evaluations you indicated were to be done pursuant to a directive issued in January?

Mr. NASSIKAS. If you could do something about prodding the National Resources Council to conduct their investigation of the reserves, we would appreciate it.

There is not much we can do to direct another agency to conduct an investigation they said they would undertake.

Mr. MAGUIRE. When do you think we might receive the results? Mr. NASSIKAS. May I refer that to Mr. Zareski, Chief of the Planning and Development Division of the Bureau of Natural Gas. He is in charge of that.

Mr. ŽARESKI. The National Academy of Science has indicated to us they would have their study done this fall. I would point out to you that the results of our own staff study are available and the results are set forth on page 40.

Mr. MAGUIRE. Nevertheless, it was felt there was a need for the Council to undertake the study or it would not have been requested? Mr. ZARESKI. Yes, this need was felt on the part of Interior, apparently.

Mr. MAGUIRE. You felt no need for such a study?
Mr. ZARESKI. We felt no need.

Mr. MAGUIRE. Is there any procedure for establishing whether or not a well is shut in legitimately, as opposed to being shut in for phony reasons? I understand there has been an alarming number of shut-in wells for the reason of tools falling into the well. Can anyone explain that to me and what procedure you have for evaluating whether a well is shut in legitimately or for phony reasons?

Mr. BAKER. This is based on the information a company had available on any particular well?

Mr. MAGUIRE. That is not a very helpful answer.

What criteria are used? Who is in charge of checking, what do your checking procedures reveal?

Mr. BAKER. I have not been involved in that investigation so I am not sure I can answer the question.

Mr. MAGUIRE. Can anybody else answer the question?

Mr. ZARESKI. The USGS classifies producible wells according to various categories of problems. In some places the wells have been sanded in and sometimes there are pipeline problems and sometimes. they are shut in for other reasons. The USGS has classified wells as shut-ins, not the Federal Power Commission.

Mr. MAGUIRE. You figures indicated there was some problem in this area. Didn't your studies indicate some problem in this area and something about 8 trillion cubic feet last year and so on?

Mr. ZARESKI. Yes, the results of our staff study on page 40 of the Chairman's statement indicated there were 8 trillion cubic feet of proved and probable gas reserve on OCS leases which the USGS classified as producible shut-ins.

We know why they were classified as producible shut-ins, that is in the records of the USGS.

We have summarized the reasons in the reports issued last year. Mr. MAGUIRE. Are there ever any cases where it is not done legitimately, Mr. Chairman?

Mr. NASSIKAS. I would suspect there are instances where producible shut-in leases were not done legitimately, but that would be up to USGS to advise us whether this is so or not.

Mr. MAGUIRE. Your job is to get gas into people's hands, is that right?