ORAL STATEMENT

Mr. Chairman, and members of the Committee, my name is Mike Caskey. I am the Executive Vice President and Chief Operating Officer of Fidelity Exploration & Production Company headquartered in Denver, Colorado.

I would like to thank the Committee for the opportunity to testify at this hearing and ask that my full testimony be submitted for the record.

Fidelity is a subsidiary of MDU Resources Group, Inc. We are an independent oil and natural gas producer engaged in acquisition, exploration and production activities primarily in the Rocky Mountain region and in the Gulf of Mexico.

Fidelity produces coal bed natural gas in Wyoming and we are currently the only producer of this energy resource in Montana.

I am here to discuss the obstacles we have faced in our efforts to produce clean-burning natural gas on private and public lands.

Today in the Rocky Mountains, there is a well-funded, coordinated effort underway to obstruct and delay the development of domestic oil and natural gas. This effort, orchestrated by aggressive special interest groups, is employing whatever means necessary. And the consequences of this activity are significant.

The success of these special interest groups in delaying natural gas production has contributed to the higher costs that homeowners and employers have seen for the past two years. These costs have had a negative impact on our economy and have led to the loss of jobs in our industrial heartland.

Unfortunately, the picture for the future does not improve. The Department of Energy estimates that by 2025 we will need 40% more natural gas to meet our nation’s demand – some of this demand is related to our need to improve the air we breathe.

Today, 98% of our domestic consumption of clean, natural gas comes from North America. With known domestic natural gas reserves either in decline or off-limits, we must look to other areas to meet our needs.

The Rocky Mountain region possesses an estimated 137 trillion cubic feet of recoverable natural gas. This represents enough natural gas to provide approximately 6 years of total, current, domestic energy needs without any other natural gas supply. That means supplying every American home, running every factory, supplying every plant that uses natural gas as a feedstock, producing all electrical power and heating every American school with natural gas from only the Rocky Mountain region.

Unfortunately, the abuse of our legal system and a novel use of the National Environmental Policy Act process have led to delays and the loss of production in this area. A report done by Mr. Bluestein’s company, EEA, found that if the BLM can increase its current drilling permit approval rate from 1,000 permits per year to 3,000 permits per year, that action alone would have the effect of saving $88 Billion over the next 10 years. That is a savings of roughly .53 per 1,000 cubic feet of natural gas consumed.

Here are some examples that highlight the type of activism that has caused these delays.

In 2000, after nearly three years of wrangling over an Environmental Assessment on coalbed natural gas production in Montana, the government recognized the need for a full Environmental Impact Statement. In addition to the nearly 3 years already consumed with the Environmental Analysis process, the new EIS was expected to take an additional 18-20 months to complete. Instead of 18 - 20 months, the EIS took 29 months to complete. In Wyoming, a similar study was initiated at about the same time – this one took 35 months to complete.

Literally HOURS after the Records of Decision on the EIS documents in Montana and Wyoming were released, the special interest community filed no fewer than four lawsuits.

My company – as the only current coalbed natural gas producer in Montana – has been sued repeatedly or has to join regulatory agencies in defense of lawsuits against the environmental analysis process. In total, we face 12 separate lawsuits challenging our ability to produce this resource.

Defending our company against these suits has certainly cost us significant time and money. But this unprecedented amount of litigation has also cost the Federal government untold dollars in addition to diverting human resources from more important tasks.

Bureau of Land Management offices in Wyoming and Montana are charged with protecting habitats for threatened and endangered species, reducing the risk of forest fires, controlling noxious weeds, along with many other responsibilities. As you know, energy regulation is only a small part of their workload yet they are required to expend huge financial and human resources to respond to each and every anti-development lawsuit as frivolous as they may seem.

One interesting aside, the Northern Plains Resource Council recently purchased a new headquarters building in Billings, Montana and in a local news story complained about the high cost of natural gas to heat the building as well as the expense of alternate nonfossil fuel based heating technology. I find it ironic that they failed to recognize that their actions had a direct relationship to these costs.

* * * * * * * * * * * * * * Members of the committee, my company is held accountable by a set of state and federal regulations designed to allow energy production to proceed while protecting against environmental degradation. The regulation has been effective and our nation is a shining example to the rest of the world on the success of environmental regulation. We have the cleanest air of any nation on the earth.

However, the same systems that protect our ability to produce energy while protecting the environment are being misused by aggressive special interest groups. The overriding process of this protectionism is defined in the National Environmental Policy Act. Take NEPA back to its original roots of providing this protection while allowing energy development to proceed. Don’t let special interest groups misuse this process at the expense of the American people and our energy independence.

Members of the committee, thank you for the opportunity to present this testimony. If there are any questions, I will be happy to share any answers I may have.