Statement of
James C. Cobb, State Geologist and Director
Kentucky Geological Survey, Unviersity of Kentucky
for the
Agriculture and Natural Resources Committee
January 12, 2005

I am very happy to have this opportunity to talk to this committee about the Kentucky Geological Survey and our budget needs. I am Jim Cobb, Director of the Kentucky Geological Survey and State Geologist. I became State Geologist in 1999, when Don Haney retired after 21 years as State Geologist.

KGS is administered by the University of Kentucky under the Executive Vice President for Research. We have a twelve member advisory board appointed by the Governor. Our main office and research facility is at UK , we have a sample and core library in Lexington , an office and seismic repair facility in Henderson, and scores of monitoring stations for water and earthquakes across the state. Our staff consists of 50 professional geologists, engineers, and chemists; and 30 administrative, support, and student personnel.

This request is in the UK published list of legislative priorities for the 2006 session. It is not, however, in the UK request to CPE because KGS is a mandated program. Therefore, I am here with the support of UK but am independent of UK 's budget request.

KGS has contributed significantly to the citizens of the Commonwealth through new maps, databases, and public access to information about geologic hazards, natural gas, coal, oil, and groundwater. Since 1999, KGS has produced 269 new publications and maps that have been distributed to industry and the public for various resource and environmental purposes. However, since our last upgrade in staff and equipment, KGS has taken on new activities and programs. These are:

These services provide industries with information they need to better perform their work that ultimately lead to billions of dollars for our state economy. Our planning maps help developers and construction contractors to avoid costly mistakes from sink holes, landslides, and seismic hazards. The cost of these services is small in terms of the state budget but the results to our state are huge.

Although KGS has been successful in obtaining federal and industry grants, its basic facilities and staffing need upgrading in order to stay competitive. Research equipment and staff are a requirement for research grants, it is impossible to use grants to build the basic infrastructure for research at KGS. Therefore, an increase in the KGS budget is needed.

KGS is a state-mandated research and public service program under KRS 151. KGS works closely with state executive branch departments such as the Office of Energy Policy, Commerce Cabinet, Division of Water, Division of Oil and Gas, Finance and Administration, Economic Development, Environment and Public Protection, Military Affairs, Transportation Cabinet, Office of Geographic Information, Mine Reclamation and Enforcement, and other state, local, and university departments.

Under KRS, the Kentucky Geological Survey is responsible for the following state programs: energy and mineral resource investigations, oil and gas data and sample repository, groundwater monitoring network, groundwater data repository, earthquake monitoring network, geologic mapping, and public service related to all of these areas. The demands placed on these programs have increased dramatically over the past twenty years and future needs will be even greater .

In recent months, the Survey has experienced unprecedented requests for energy-related information and concerns about our energy future. High prices for natural gas and even concerns about shortages are on the minds of citizens. Other states are increasing their efforts in energy, and Kentucky has made a great step forward with our Kentucky Energy Strategy and creation of the Office of Energy Policy. KGS is working closely with KOEP and benefits from, and contributes to its programs, but the Survey has needs for new research equipment and staff positions that can not be met by grants, contract, and research awards. These needs can only be met by an increase in our base budget from the State.

Kentucky and the nation are in the midst of an energy crisis whose duration and impact are unknown at this time. Energy is a mainstay of Kentucky 's economy. As a state, Kentucky is a major producer of energy, but maintaining that production will require effort and research. Significant resources of coal, natural gas, oil, tar sands, and oil shale remain in Kentucky , but identifying new plays and reserves will require exploration beyond the current capabilities of most Kentucky energy companies and KGS. KGS has assisted energy companies with geological information, maps, and subsurface data for more than 100 years, contributing to the success of energy producers in the state.

All of these programs have been important for Kentucky , but state funding has not kept pace with the needs for these services. KGS has not had an upgrade in staff or research equipment since 1988. In 1988, KGS obtained through the General Assembly a new building at UK , a wide array of new scientific equipment, and new staff. Because of this investment, KGS grants and contracts went from $250,000 per year to over one million dollars per year. For the past 10 years our grants and contracts have been in the $2.0 to $2.5 million range. That investment back in 1988 has been repaid several times over in new production of resources, federal grants received, avoidance of hazards, and protection of groundwater. We are at another critical point where Kentucky 's mineral resources are again in great demand but producing those resources and protecting our environment require scientific information. We must invest in our ability to do the scientific work to take us to the next level.

To meet the growing demand for our science, products and services, KGS requires six research positions; two each in petroleum geology, groundwater, and hazards. Research equipment including seismic profiling, microscopes, drilling, logging, field equipment, and computer servers are needed. This request for the 2006-2008 biennium is for about $550,000 one-time equipment expenditure, and recurring funds for personnel and operations of about $830,000.

This $1.38 million increase in the KGS budget will assist oil, gas, and coal companies in their exploration efforts to find new resources. KGS provides general geologic characterization and play concepts while companies do their own drilling and exploration. KGS also investigates water issues related to energy production to help ensure our groundwater is protected. New equipment and personnel are needed to meet these new challenges.

To maintain Kentucky 's coal production, low-cost electricity, and clean environment, the disposal of CO 2 into the ground from coal-burning power plants will likely be required in the future. This concept is called carbon sequestration. KGS is working with KOEP, DOE, multistate consortia, and state agencies to determine the best strategies to sequester CO 2 in Kentucky . These projects and the demands of government and private companies for information have over-extended KGS' ability to keep pace. These demands require a broad array of new scientific equipment and expertise.

We are hampered in our efforts by the lack of sufficient research staff and up-to-date equipment. Because KGS participates in competitive federal, university, and industry grants, it is essential to have up-to-date equipment and staffing necessary for the work. Therefore, KGS is requesting new funding for equipment, staff, and operations.

This new funding will allow the Survey to support the growing needs of those who seek to stimulate new drilling in Kentucky for natural gas and oil, identify remaining coal reserves, locate coal bed methane potential, and protect groundwater. It will also allow the identification of deep reservoirs for carbon sequestration. This is a balanced portfolio of new initiatives that will improve the production of Kentucky 's energy resources and safeguard our environment.

This request for approximately $1.38 million is only 4.5 percent of Kentucky 's current oil and gas severance tax receipts of about $33 million annually. If we are as successful as we believe we will be, then increases in oil and gas production will in turn, increase severance tax receipts for the state, and recoup this investment. Also, if Kentucky is to be competitive for the one billion dollar DOE FutureGen program and other advanced technologies for coal utilization with carbon sequestration, then research must be underway now in order to be prepared. Therefore, this request will be revenue neutral and contribute greatly to Kentucky 's economy and environment in the future.

If time allows, I am prepared to show examples of how Kentucky could raise revenues, jobs, and energy production by augmenting the General Assembly's investment in KGS' energy research now.

I would be very happy to take questions about the Survey and this presentation.

Budget

* purchase and/or acquire drilling and seismic profile data for natural gas, oil, coal, and carbon sequestration

James C. Cobb, State Geologist and Director
859.257.5500 ext 130
cobb@uky.edu