Steve,

This article came out last week while I was gone and I wanted to be sure you 
saw it.  Thanks, Ann


			
US AND CANADA: US administration faces crisis over energy policy: Whoever 
gets to inhabit the White House must face up to the fact that he will have to 
address problems not just in oil but in the natural gas sectors, compounded 
by the cut-off of Iraqi crude oil, reports Hillary Durgin:
Financial Times, Dec 6, 2000

			The alarm in world energy markets triggered by the halt in Iraqi crude oil 
exports at the weekend is the latest sign that the new administration - 
whoever leads it - will have to make US energy policy a top priority. 
			Even as the outcome of the presidential election has hung in the balance over 
the last few weeks, energy industry officials have argued that the new 
president will have to address problems not just in oil, but in the natural 
gas and power sectors that reached crisis levels over the past year. 
			The cut-off of Iraqi crude could have serious repercussions for the US, the 
world's largest oil consumer, particularly at a time of exceptionally low 
inventories in the world oil markets and shortage in spare production 
capacity within the Organisation of Petroleum Exporting Countries. That 
situation could easily reach crisis proportions for the US if other 
circumstances, ranging from unrest among Nigerian oil workers to cold winter 
weather across the country, affect supplies. 
			"For the new administration, this whole event is going to raise the question 
of energy security and US energy policy to the very top of the docket," said 
Amy Jaffe, senior energy analyst with the James A. Baker III Institute of 
Public Policy at Rice University in Houston. 
			The Baker institute is working with the Council on Foreign Relations, a New 
York-based think tank, to form a taskforce on US energy policy. "Whenever the 
new president takes office, he is going to have to cope with whatever the 
economic fallout is of this and the economic fallout is going to be huge," Ms 
Jaffe predicted. 
			Opec has only between 1m to 2m barrels per day of spare production capacity - 
far less than it has had during previous oil crises. Put in perspective, in 
the winter of 1989, colder than normal weather boosted US oil demand by 1.5m 
barrels per day. 
			For the first time in more than two decades, energy has become a focus of 
public debate. As energy shortages and high prices stunned the public 
following a long period of adequate supplies and cheap prices, these issues 
became a political rallying point and figured prominently in theelections. 
			"There is a direct correlation between interest in energy policy and prices, 
and energy prices are high, so interest in energy policy is high," said Robin 
West, chairman of the Petroleum Finance Company, a Washington DC-based energy 
consultant. 
			The position of energy secretary has generally been regarded as weak and has 
often been occupied by someone with little knowledge of the industry. Whoever 
becomes the next secretary must have a good understanding of the industry and 
be able to explain the complexities of the regulatory structures and markets 
to Congress, Mr West said. 
			Over the past two years, power shortages and skyrocketing prices have become 
more commonplace. The underlying problem, industry executives say, is the 
lack of a uniform, national policy to provide competitive, open access to the 
nation's electricity power grid. 
			Current regulations, for example, tend to favour regional power authorities 
and utilities in certain regions so that competitors have a harder time 
getting power onto the grid and transmitting it. In 1998 that problem 
triggered, for example, prices of Dollars 7,500 per megawatt-hour in Ohio 
compared with neighbouring states where they were one-fortieth of that level. 
			Another problem is the difficulty of obtaining permits to site and build 
plants in certain states. In California, for example, where shortages have 
become a serious problem and the state imports 25 per cent of its power on 
days of peak demand, 11,000 megawatts of new power has been proposed but 
can't get sited. 
			"The biggest energy policy issue we have is electricity," said Steven Kean, 
executive vice-president and chief of staff at Houston-based Enron, the 
country's largest merchant of natural gas and power. "Natural gas is not even 
close. Oil is not even close." Enron is pushing for legislation to ensure 
open, competitive access on the power grid and initiatives that would enable 
new power generation capacity to be developed faster and easier. 
			Closely tied to the problem of power is that of natural gas, which is the 
feedstock for virtually all new power generation capacity in the US. Prices, 
which are now above Dollars 6 per thousand cubic feet, hit a record high this 
week - three times the price of a year ago - as the energy industry has been 
unable to keep pace with demand. 
			Many in the industry are concerned about how the US will be able to meet 
future power demands unless more gas is developed. Yet while companies are 
busy drilling, they have been hard pressed to increase production. 
			Companies such as UK-based BP Amoco and Calgary-based Nexen, which have gas 
reserves in Alaska and Canada, are hoping that the high prices will make 
development and transport of those reserves profitable, but such projects are 
probably five years away. 
			At the top of the energy industry's agenda in accessing more oil and gas are 
efforts to reopen more federal lands to drilling. In addition, they would 
like to have equal access to oil reserves overseas in places such as Iran and 
Libya where sanctions prevent US companies from doing business. 
			The industry knows that forging a new energy policy will not be easy. But it 
realises it must push it to the top of the new administration's agenda. 
			"It will be a priority," said Chuck Watson, chairman and chief executive 
officer of Houston-based Dynegy, a leading energy merchant with large 
holdings in the natural gas and power sectors. "It has to happen, if they 
don't want Dollars 5 natural gas and Dollars 40 crude and Dollars 50 power." 
			Copyright , The Financial Times Limited