[House Hearing, 107 Congress]
[From the U.S. Government Publishing Office]






 
             BLM AND FOREST SERVICE OIL AND GAS PERMITTING

=======================================================================

                           OVERSIGHT HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                         COMMITTEE ON RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED SEVENTH CONGRESS

                             FIRST SESSION

                               __________

                             April 25, 2001

                               __________

                           Serial No. 107-20

                               __________

           Printed for the use of the Committee on Resources



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                         COMMITTEE ON RESOURCES

                    JAMES V. HANSEN, Utah, Chairman
       NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska,                   George Miller, California
  Vice Chairman                      Edward J. Markey, Massachusetts
W.J. ``Billy'' Tauzin, Louisiana     Dale E. Kildee, Michigan
Jim Saxton, New Jersey               Peter A. DeFazio, Oregon
Elton Gallegly, California           Eni F.H. Faleomavaega, American 
John J. Duncan, Jr., Tennessee           Samoa
Joel Hefley, Colorado                Neil Abercrombie, Hawaii
Wayne T. Gilchrest, Maryland         Solomon P. Ortiz, Texas
Ken Calvert, California              Frank Pallone, Jr., New Jersey
Scott McInnis, Colorado              Calvin M. Dooley, California
Richard W. Pombo, California         Robert A. Underwood, Guam
Barbara Cubin, Wyoming               Adam Smith, Washington
George Radanovich, California        Donna M. Christensen, Virgin 
Walter B. Jones, Jr., North              Islands
    Carolina                         Ron Kind, Wisconsin
Mac Thornberry, Texas                Jay Inslee, Washington
Chris Cannon, Utah                   Grace F. Napolitano, California
John E. Peterson, Pennsylvania       Tom Udall, New Mexico
Bob Schaffer, Colorado               Mark Udall, Colorado
Jim Gibbons, Nevada                  Rush D. Holt, New Jersey
Mark E. Souder, Indiana              James P. McGovern, Massachusetts
Greg Walden, Oregon                  Anibal Acevedo-Vila, Puerto Rico
Michael K. Simpson, Idaho            Hilda L. Solis, California
Thomas G. Tancredo, Colorado         Brad Carson, Oklahoma
J.D. Hayworth, Arizona               Betty McCollum, Minnesota
C.L. ``Butch'' Otter, Idaho
Tom Osborne, Nebraska
Jeff Flake, Arizona
Dennis R. Rehberg, Montana

                   Allen D. Freemyer, Chief of Staff
                      Lisa Pittman, Chief Counsel
                    Michael S. Twinchek, Chief Clerk
                 James H. Zoia, Democrat Staff Director
                  Jeff Petrich, Democrat Chief Counsel
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                    BARBARA CUBIN, Wyoming, Chairman
              RON KIND, Wisconsin, Ranking Democrat Member

W.J. ``Billy'' Tauzin, Louisiana     Nick J. Rahall II, West Virginia
Mac Thornberry, Texas                Edward J. Markey, Massachusetts
Chris Cannon, Utah                   Solomon P. Ortiz, Texas
Jim Gibbons, Nevada,                 Calvin M. Dooley, California
  Vice Chairman                      Jay Inslee, Washington
Thomas G. Tancredo, Colorado         Grace F. Napolitano, California
C.L. ``Butch'' Otter, Idaho          Brad Carson, Oklahoma
Jeff Flake, Arizona
Dennis R. Rehberg, Montana
                                 ------                                
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on April 25, 2001...................................     1

Statement of Members:
    Cubin, Hon. Barbara, a Representative in Congress from the 
      State of Wyoming...........................................     1
        Prepared statement of....................................     2
    Kind, Hon. Ron, a Representative in Congress from the State 
      of Wisconsin...............................................     2
        Prepared statement of....................................     3
        Letter to Independent Petroleum Association of Mountain 
          States and Independent Petroleum Association of America 
          from The Honorable Chip Pickering, et al., submitted 
          for the record.........................................    38
    Otter, C.L. ``Butch'', a Representative in Congress from the 
      State of Idaho, Prepared statement of......................     4

Statement of Witnesses:
    Culp, Peter, Assistant Director, Minerals, Realty and 
      Resource Protection, Bureau of Land Management, U.S. 
      Department of the Interior.................................     5
        Prepared statement of....................................     6
    Murphy, Mark B., President, Strata Production Company........     9
        Prepared statement of....................................    11
    Smith, Marc W., Executive Director, Independent Petroleum 
      Association of Mountain States.............................    18
        Prepared statement of....................................    19
    Watford, Michael D., Chairman, President and CEO, Ultra 
      Petroleum Corporation......................................    27
        Prepared statement of....................................    29
Additional Material Supplied:
    Excerpts from ``Exploring for Reinvention: Dimensions of 
      Customer Satisfaction and Factors Limiting Reinvention 
      within the Bureau of Land Management's Oil and Gas 
      Program'', submitted for the record........................    52

 
             BLM AND FOREST SERVICE OIL AND GAS PERMITTING

                              ----------                              


                       Wednesday, April 25, 2001

                     U.S. House of Representatives

              Subcommittee on Energy and Mineral Resources

                         Committee on Resources

                             Washington, DC

                              ----------                              

    The Subcommittee met, pursuant to notice, at 2:06 p.m., in 
Room 1324, Longworth House Office Building, Hon. Barbara Cubin 
[Chairman of the Subcommittee] presiding.
    Ms. Cubin. The oversight hearing by the Subcommittee on 
Energy and Mineral Resources will come to order.
    The Subcommittee is meeting today to hear testimony on BLM 
and Forest Service oil and gas permitting. Under Committee Rule 
4(g), the Chairman and the Ranking Member can make opening 
statements and all these other members that you see sitting 
here at the dais will have to submit their opening statement 
for the record.

 STATEMENT OF THE HONORABLE BARBARA CUBIN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF WYOMING

    This is the fourth Subcommittee hearing on issues 
surrounding energy supplies from our public lands. To date, we 
have focused on broader concerns of how much oil and gas may 
exist beneath these lands, where and how much is available for 
leasing, and the impact of the roadless rule upon accessing 
potential energy sources. Today, however, our witnesses are 
here to tell us about the nitty-gritty of the permitting 
process for onshore mineral leases. That is, after the BLM 
auctions a tract of an oil and gas lease sale or the parcel is 
picked up over the counter after receiving no bids at auction, 
what happens next? Much argument has gone on over the 
``availability'' for leasing, but unless and until a drill hole 
is placed into the leasehold acreage, there will be no supply 
of crude oil or natural gas for the Nation.
    We have heard uncontroverted evidence from our earlier 
hearings that the energy resource potential is quite large in 
the Rocky Mountain basins, so if these public lands are going 
to provide an exploration and development base, then we need to 
find a way to get leased tracts drilled and online more quickly 
than has happened in the past. I am sure we will continue to 
debate passionately about whether or not certain areas ought to 
be leased at all. But where there is agreement to lease, how do 
we streamline this decision making process on applications for 
permits to drill?
    I want to thank our witnesses today from New Mexico, 
Colorado, and Wyoming who have traveled here to give us their 
views and to welcome our Land Management agency witnesses, as 
well. I am hopeful that, together, we can find ways to expedite 
the necessary review process while retaining the protection of 
the environment which lease stipulations and mitigating 
measures are designed to ensure.
    Natural gas from my own State of Wyoming, be it in the 
Green River Basin or the Powder River Basin, is just waiting to 
be drilled and sent to market. Much of it will be burned to 
generate electricity and to meet Clean Air Act requirements or 
to heat many homes. I think it is in our Nation's best interest 
to ask, ``What can Congress do to make the `fuel of the future' 
the `fuel of today'?''
    [The prepared statement of Ms. Cubin follows:]

  Statement of The Honorable Barbara Cubin, Chairman, Subcommittee on 
                      Energy and Mineral Resources

    This is the fourth Subcommittee hearing on issues related to energy 
supplies from our public lands. To date, we have focused on broader 
concerns of how much oil and gas may exist beneath these lands, where 
and how much is available for leasing, and the impact of the roadless 
rule upon accessing potential energy sources. Today, however, our 
witnesses are here to tell us about the nitty-gritty of the permitting 
process for onshore mineral leases. That is, after the Bureau of Land 
Management auctions a tract at an oil and gas lease sale, or the parcel 
is picked up over-the-counter after receiving no bids at auction, what 
happens next?
    Much argument has gone on over ``availability'' for leasing, but 
unless and until a drill hole is placed into the leasehold acreage 
there will be no supply of crude oil or natural gas for the Nation. We 
have heard uncontroverted evidence from our earlier hearings that the 
energy resource potential is quite large in the Rocky Mountain basins. 
So, if these public lands are going to provide an exploration and 
development base, then we need to find a way to get leased tracts 
drilled and on-line more quickly. I'm sure we will continue to debate 
passionately about whether or not certain areas ought to be leased at 
all, but, where there is agreement to lease, how do we streamline 
decision-making on applications for permits to drill?
    I want to thank our witnesses from New Mexico, Colorado and Wyoming 
who have traveled here to give us their views, and to welcome our land 
management agency witnesses as well. I am hopeful that together we can 
find ways to expedite the necessary review process while retaining the 
protection of the environment which lease stipulations and mitigating 
measures are designed to ensure.
    Natural gas from my State of Wyoming, be it in the Green River 
Basin or the Powder River Basin, is just waiting to be drilled and sent 
to market. Much of it will be burned to generate electricity to meet 
Clean Air Act requirements or to heat many homes. I think it is in our 
Nation's best interest to ask ``what can Congress do to make the `fuel 
of the future' the `fuel of today' ``?
                                 ______
                                 
    Ms. Cubin. So with that, I now recognize the Ranking 
Member, Mr. Kind, for any statement he might have.

   STATEMENT OF THE HONORABLE RON KIND, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF WISCONSIN

    Mr. Kind. Thank you, Madam Chair, and I join you today in 
welcoming the Federal and industry witnesses invited to testify 
on the oil and gas permitting issues.
    As we have heard in the prior sessions that you have 
referred to, some industry witnesses have purported that much 
of the public domain containing oil and gas reserves is off 
limits or unreasonably restricted and, therefore, prevents oil 
and gas production, thus creating a national energy crisis. The 
facts, however, as I understand them, are that oil and gas 
production from public lands increased exponentially under the 
prior administration. It is simply not accurate to conclude 
that a few examples of difficulties with BLM or the Forest 
Service mean that laws, policies, or regulations in these areas 
have arbitrarily constrained or prohibited access to 
economically recoverable oil and gas resources.
    And as we have heard in some of these prior hearings, many 
of these oil and gas resources are found in remote areas, are 
difficult to develop due to terrain, or contain insufficient 
resources to warrant investment in development. Utilizing free 
market principles, we find that most of these areas simply have 
not been economically viable to explore and drill in.
    Further, the vast majority of Federal lands that are 
restricted are off limits only seasonally, for example, to 
protect wildlife. We believe, overall, that wildlife resources 
are important and should not be subservient just to oil and gas 
production.
    Despite the examples provided today, there has been no 
systematic objective review of the oil and gas permitting 
program that would enable us to ascertain whether the BLM and 
Forest Service have been excessive in protecting wildlife 
resources. I would suggest, Madam Chair, that you and I jointly 
request the GAO to undertake such a review.
    And finally, I continue to urge greater consideration in 
our deliberations of conservation options that are available 
today. The United States has less than 5 percent of the world's 
population but consumes 40 percent of the oil and 23 percent of 
the gas. There is much that we as a Nation can do through 
investments in energy conservation, renewable and alternative 
energy sources, and ecological and economic costs associated 
with our consumption levels in order to develop a long-term 
energy policy that will be sustainable and that will strike the 
proper balance between the demand for energy and the supply 
that exists.
    Thank you, Madam Chair, and I look forward to today's 
testimony.
    [The prepared statement of Mr. Kind follows:]

Statement of The Honorable Ron Kind, a Representative in Congress from 
                         the State of Wisconsin

    Madame Chair, I join you today in welcoming the Federal and 
industry witnesses invited to testify on BLM and Forest Service oil and 
gas permitting issues. I would note that the Minority was not informed 
of this hearing prior to the Easter recess and, therefore, was not able 
to provide additional perspectives on this important issue. I would 
hope that in the future, we would do a better job of preparing for 
Subcommittee hearings.
    Today's hearing provides another opportunity for oil and gas 
officials to express their complaints about the Clinton 
Administration's management of the public lands, in particular to cite 
examples of problems they have had securing oil and gas permits to 
drill on the public domain. We have all experienced, or had 
constituents who have experienced, frustration or unfair treatment by 
public servants. However, as we attempt to develop a new comprehensive 
energy policy, we must look beyond anecdotal examples and examine the 
big picture.
    Our witnesses' personal experiences notwithstanding, the facts are 
that oil and gas production from public lands increased exponentially 
under the prior Administration. It is simply inaccurate to conclude 
that a few examples of difficulties with BLM or the Forest Service mean 
that laws, policies and or regulations in these areas have arbitrarily 
constrained or prohibited access to economically recoverable oil and 
gas resources.
    As we have heard in prior sessions, today's industry witnesses 
purport that much of the public domain containing oil and gas reserves 
is ``off-limits'' or unreasonably restricted and therefore prevents oil 
and gas production thus creating a national energy crisis.
    However, as we have learned in these earlier meetings, many of 
these oil and gas resources are found in remote areas, are difficult to 
develop due to terrain or contain insufficient resources to warrant 
investment and development. Utilizing ``free market principles,'' we 
find that most of these areas simply have not been economically viable.
    Further, the vast majority of Federal lands that are ``restricted'' 
are off-limits only seasonally, for example, to provide wildlife 
protection. We believe, overall, that wildlife resources are important 
and should not be subservient to oil and gas production.
    Despite the examples provided today, there has been no systematic 
objective review of the oil and gas permitting program that would 
enable us to ascertain whether the BLM and Forest Service have been 
excessive in protecting wildlife resources. I would suggest, Madame 
Chair, that you and I jointly request the General Accounting Office 
undertake such a review.
    Finally, I continue to urge greater consideration in our 
deliberations of conservation options. The United States has less than 
5 percent of the world's population but consumes 40 percent of the oil 
and 23 percent of the gas. There is much we as a Nation can do through 
investments in energy conservation and renewable energy to reduce our 
consumption, and the ecological and economic costs associated with our 
consumption levels.
                                 ______
                                 
    Ms. Cubin. It seems I am going to have to work more on my 
communications skills, since I guess it is not clear what we 
intended this hearing to do today, and that hearing is to 
devise ways to help the agencies once we have agreed on the 
lands that ought to be permitted and drilled, how to expedite 
that process. The attempt to do this is to help alleviate the 
energy crisis that we face today, not five years from today.
    I cannot let the statement go by that the production on 
public lands has dramatically increased in the last several 
years. Yes, it has, but not from the lower 48 States' 
production. It has been outer continental shelf production 
where that increase has been made up.
    We all understand and believe conservation is a part of the 
energy crisis problem. Conservation, at best, however, under 
today's technology and circumstances, can only provide 2 
percent out of a 20 percent deficit that we have in energy.
    So, I think that there are arguments to be had, but today, 
I think we are talking about areas that we agree on and how we 
can help the agencies and how we can help producers be able to 
get those energy sources to market sooner.
    So with that, I would like to at this point insert into the 
record the opening statement of Mr. Otter.
    [The prepared statement of Mr. Otter follows:]

 Statement of The Honorable C.L. ``Butch'' Otter, a Representative in 
                    Congress from the State of Idaho

    Thank you, Madam Chairwoman, for your leadership in calling this 
very important hearing today. As gasoline prices continue to skyrocket 
at the pump and energy supply in the West becomes more and more tight 
and costly each day, I join you and my colleagues in calling for 
solutions--solutions that are realistic and lasting. 95 percent of all 
the new power plants will operate on natural gas, but where will we 
look for the supply needed to provide affordable energy--from Iraq or 
Wyoming?
    We have trillions of cubic feet of oil and gas resources here in 
the United States now. Unfortunately, the NEPA permitting process 
coupled with the short window has created such a disincentive that new 
exploration and drilling on private and public lands has essentially 
been shut off. Too often when small oil and gas companies complete 
lengthy and expensive feasibility studies on their own, they are told 
by the Federal agencies that the agencies do not have enough resources 
to complete the Environmental Impact Statements that are required to 
begin exploring or drilling for the gas.
    Then there is the ever-present issue of endangered species laws and 
how they interfere with our daily lives. I have heard from 
Intermountain Gas--a small company in the First District of Idaho that 
distributes gas to thousands of people in Idaho--that Federal 
regulations restrict their ability to drill to a mere four months out 
of the year because of Federal agencies are afraid they will disturb 
the mating habits of crickets. This is ludicrous, Madam Chairwoman. We 
are buying more oil from Saddam Hussein than we did a dozen years ago, 
and we're limiting the ability of our domestic producers to drill in 
the spacious and sparsely populated intermountain West because it would 
prevent crickets from mating.
    It's time for common sense to prevail. I applaud Secretary Gale 
Norton's efforts in recent weeks to carefully review the opportunities 
to unlock new resources for energy supply on Federal lands. I also urge 
the Federal agencies to streamline the permitting process to allow 
existing and new leases to move forward.
                                 ______
                                 
    Ms. Cubin. I would like to call up today's witnesses. Mr. 
Peter Culp, the Assistant Director of Minerals, Realty, and 
Resource Protection with the Bureau of Land Management, 
welcome. It is nice to see you again. Mr. Mark B. Murphy, 
President of Strata Production Company; Mr. Marc W. Smith, 
Executive Director of Independent Petroleum Association of the 
Mountain States; and Mr. Mike Watford, CEO of Ultra Resources, 
thank you all for being here.
    The Chair will now recognize Mr. Culp to testify for five 
minutes. The timing lights will be on and they will indicate 
when your time has concluded, so we ask that you keep your 
testimony to five minutes and your entire statement will be 
submitted in the record.
    The Chair now recognizes Mr. Culp.

STATEMENT OF PETER CULP, ASSISTANT DIRECTOR, MINERALS, REALTY, 
       AND RESOURCE PROTECTION, BUREAU OF LAND MANAGEMENT

    Mr. Culp. Thank you, Madam Chairman and members of the 
Subcommittee. I appreciate the opportunity to appear today to 
discuss the Bureau of Land Management's oil and gas permitting 
program. I am accompanied by Larry Gadt, the Director of 
Minerals and Geology for the U.S. Forest Service. In the 
interest of time, I have submitted a longer statement and I 
will briefly summarize that.
    BLM administers oil and gas leasing on about 570 million 
acres of onshore mineral estate, including the BLM lands, 
national forest lands, and other Federally managed lands, such 
as Department of Defense lands. These lands are the source of 
about 11 percent of the natural gas and 5 percent of the oil 
produced domestically.
    The lands contain some world class deposits of energy and 
mineral resources. Places such as the Powder River Basin in 
your home State of Wyoming and in Montana and the San Juan 
Basin in New Mexico and Colorado contain impressive and 
accessible supplies of oil, natural gas, and, I should mention, 
coal.
    In order to respond to our nation's expanding energy needs 
and decrease our dependency on foreign energy sources, the 
administration has placed a priority on the production of 
energy and mineral resources in an environmentally responsible 
manner from these Federal lands. BLM's workload for oil and gas 
leasing, and I might add the workload of our sister agencies, 
as well, is expected to increase significantly.
    Just to provide a brief overview of the process, as you 
stated, public lands are made available for leasing only after 
they have been evaluated through a multiple use planning 
process, which involves procedures outlined under the National 
Environmental Policy Act and our organic act, the Federal Land 
Policy and Management Act. Special stipulations to protect 
other resources through mitigation or restrictions on surface 
uses may be placed on leases. These may include surface 
occupancy restrictions, controlled surface use, and as was 
mentioned, seasonal timing limitations. With respect to other 
agencies, we only approve leases with the consent of those 
agencies.
    All public lands are first offered competitively and then 
they are available non-competitively, if they are not sold at 
competitive auction, for a period of a year.
    Applications for drilling, the subject of the hearing, are 
the second part of the process. They must be submitted by the 
lessees and approved before leasing can commence. In connection 
with these applications, there is a public posting process and 
our target is to process applications to drill, or APDs, within 
a 30- to 35-day period. If there is a delay in meeting that 
target, we provide the applicants with the reasons for the 
delay and an estimate of when final action can be completed.
    Our budget for this year addresses the expected increase in 
workload associated with energy development. There is a $15 
million increase for all aspects of our Bureau's energy 
program. One component of that is $3 million to carry out the 
studies that Congress directed in the Energy Policy and 
Conservation Act (EPCA) of last year. The act calls for studies 
comparing resource estimates to our planning decisions that 
will, I think for the first time, definitively answer this 
question of access to public lands and quantify what the 
restrictions are. We look forward to completing the study.
    And finally, I just want to say we are doing some things to 
try to expedite the permitting process. Over the last year, we 
have implemented an electronic process for submitting APDs over 
the Internet, and that is particularly active in Wyoming. I 
think we received about 1,300 applications by that method last 
year. We also have a very promising activity underway called 
the Federal Leadership Forum to work with the other agencies in 
the Northern Rockies to expedite the process that we use to 
evaluate APDs.
    I will stop there, Madam Chairman. I look forward to 
answering your questions.
    Ms. Cubin. Thank you, Mr. Culp.
    [The prepared statement of Mr. Culp follows:]

   Statement of Peter Culp, Assistant Director, Minerals, Realty and 
Resource Protection, Bureau of Land Management, U.S. Department of the 
                                Interior

    Madame Chairman and members of the Committee, I appreciate the 
opportunity to appear here today to discuss the Bureau of Land 
Management's (BLM) oil and gas permitting program. I am accompanied by 
Larry Gadt, Director of Mineral and Geology Management for the U.S. 
Forest Service.
ENERGY PRODUCTION ON BLM LANDS
    The BLM is a multiple-use agency whose mission includes promoting 
the development of the natural resources on the Federal lands under its 
jurisdiction, as well as protecting the environmental conditions on 
those lands. As such, the BLM administers oil and gas leasing on about 
570 million acres of onshore mineral estate--including BLM, national 
forest, and other Federally-managed lands, as well as private lands 
where mineral rights have been retained by the Federal Government. 
These Federal lands are the source of about 11 percent of the natural 
gas and 5 percent of the oil produced domestically. In Fiscal Year 
2000, revenues from onshore production neared $700 million. A 
significant portion of these revenues are shared with the individual 
states in which the production occurs.
    BLM-managed lands contain some world-class deposits of energy and 
mineral resources. Places such as the Powder River Basin in Wyoming and 
Montana, and the San Juan Basin in New Mexico and Colorado contain 
impressive and accessible supplies of oil, natural gas, and coal. In 
order to respond to our Nation's expanding energy needs and to decrease 
our dependency on foreign energy sources, the Administration has placed 
a priority on the environmentally-responsible production of energy and 
mineral resources from these Federal lands. Thus, BLM's workload of oil 
and gas leasing and permitting is expected to increase significantly in 
the future. For example, in Fiscal Year 2001 BLM expects to process 
about 2,600 Application for Permits to Drill (APDs), representing about 
the average number of APDs annually for the prior six years. In fiscal 
year 2002, we expect to process about 4,100 APDs. To manage this 
workload increase, BLM is engaged in a variety of efforts, including 
analyzing the impediments to accessing available energy resources on 
Federal lands, streamlining the Bureau's leasing and permitting 
processes, and improving coordination among affected parties.
    Madame Chairman, before discussing some of our Bureau's efforts to 
address an increasing domestic energy demand and to streamline its 
work, I will first review BLM's oil and gas leasing and permitting 
processes.
BLM OIL AND GAS LEASING AND PERMITTING PROCESSES
    A ``staged'' decision-making process currently exists for BLM-
managed oil and gas leasing and permitting. The process was designed to 
accommodate the tentative nature of oil and gas exploration and 
development, which can be speculative and costly. The stages generally 
include: 1) determination of lands available for leasing; 2) decision 
to authorize leasing on specific lands; 3) Application for Permit to 
Drill (APD) and 4) analysis of field development if oil and gas are 
discovered. Decisions made at each stage are based on environmental 
analysis in accordance with the National Environmental Policy Act 
(NEPA).
    Public lands are made available for leasing only after they have 
been evaluated through BLM's multiple-use planning process, which 
involves procedures outlined by NEPA and the Federal Land Policy and 
Management Act (FLPMA). Special stipulations to protect other resources 
through mitigation or restrictions on surface use may be placed on 
leases. These stipulations may include no surface occupancy, controlled 
surface use, and timing limitations. The BLM also manages leasing of 
oil and gas on Federal lands administered by the Forest Service and 
other Federal land managing agencies, with their consent.
    Industry may nominate (through an expression of interest) specific 
lands for leasing or may request a lease offering of all available 
lands within a geographic area. Current law requires that all public 
lands available for leasing first be offered through a competitive 
leasing process. Competitive lease size is at least 2,560 acres in the 
lower 48 states and 5,760 acres in Alaska. Non-competitive leases may 
be issued only after being offered competitively at an oral auction and 
not receiving a bid. Such leases represent a small portion of our 
leases. The maximum non-competitive lease size in all States is 10,240 
acres. Both lease types are issued for 10 years and can continue as 
long as oil and gas is being produced.
    Competitive lease sales are offered no less than quarterly when 
parcels are available. A sale notice, which lists the lands and 
specific use stipulations for each parcel, is published at least 45 
days prior to the auction. On the day of the auction, the successful 
bidder must submit a properly executed lease bid form, pay a share of 
the sale cost ($75 per lease), first year's advance rental ($1.50 per 
acre), and not less than the minimum bonus bid of $2.00 per acre.
    Applications for Permit to Drill (APDs) must be submitted and 
approved before commencement of operations. Certain nonproprietary 
information must be posted for public inspection during this period. 
The BLM is required to consult with the appropriate Federal surface 
management agency no later than five days after the 30-day posting 
period, or within 30 days for Indian lands. The BLM is required to 
process the APD within the 35- or 30-day period or advise the applicant 
of the reasons for disapproval or delay. If there is a delay in meeting 
the time-frame, the BLM must provide the applicant with the reasons for 
the delay and when final action can be expected. For operations on 
National Forest System lands, BLM cannot approve APDs without consent 
of the U.S. Forest Service.
RESPONDING TO AN INCREASE IN NATIONAL ENERGY NEEDS
Budget Request
    To address the high-priority energy demands of our Nation, an 
additional $15 million has been requested by the Administration in 
Fiscal Year 2002 for the BLM's energy and mineral programs. This 
includes $2 million to increase oil and gas leasing by 15 percent and 
APD processing by 1,000 to 2,000 wells. The Administration also 
requested $7 million to help ensure that land use plans are updated in 
a timely manner.
Inventory of Oil and Gas Reserves and Resources (EPCA)
    Of paramount importance in responding to our Nation's increasing 
energy needs is the BLM's involvement in a multi-agency effort to 
inventory oil and gas reserves and resources on onshore public lands, 
and to identify the impediments and restrictions to accessing and 
developing those resources. This project was mandated by Congress at 
the end of last year through Section 604 of the Energy Policy and 
Conservation Act (EPCA), and it involves the combined efforts of the 
BLM, U.S. Geological Survey, U.S. Forest Service, and the Energy 
Information Agency. These agencies have had numerous meetings already 
this year to organize and scope the project, and have already 
identified the priority resource areas. The law requires a report to 
Congress by the end of 2002. However, recognizing the value of the 
report during this period of increased focus on energy issues, the 
group is hoping to produce interim reports prior to that final 
deadline. The Administration's 2002 budget includes a funding request 
of $3 million as part of the BLM budget for the agencies to address the 
EPCA requirements in 2002.
MAKING BLM PROCESSES MORE EFFICIENT
    The BLM must comply with the requirements of existing law regarding 
oil and gas leasing and permitting processes. In so doing, the Bureau 
is constantly striving to make these procedures more efficient and is 
currently involved in several initiatives to achieve such results.
Planning Efforts
    Recognizing that out-dated land use plans can result in delays in 
leasing and approval of permits, the Bureau has undertaken efforts to 
update those plans. Plans including areas with high potential for oil 
and gas have been given top priority for updating. We also intend to 
utilize the information from the EPCA report in these planning efforts.
Coordination Among Affected Parties
    One such initiative in which the BLM is involved is the Federal 
Leadership Forum--an interagency cooperative effort to address issues 
relating to oil and gas and geothermal development on public lands. The 
group is comprised of the principal managers of the Federal land 
management and regulatory agencies of the Rocky Mountains, and it is 
responding to issues associated with increasing levels of oil and gas 
development and their potential effects on air quality in the region. 
The Forum is currently developing unified guidance regarding specific 
aspects of the NEPA process used for making decisions on oil and gas 
activities. This type of interagency coordination can assist in 
removing communication barriers, provide an efficient means for dispute 
resolution, and eliminate delays during the NEPA process. Such 
coordination also could be extremely helpful in complying with the 
requirements of the Endangered Species Act.
Use of Electronic Commerce
    The BLM has been utilizing--and is looking to expand the use of--
new technologies to streamline some of its processes and procedures. 
For example, in Wyoming--where the BLM manages leases that produce over 
43 million barrels of oil and nearly 500 million cubic feet of natural 
gas per year--the Bureau has been working with the oil and gas industry 
to improve its business processes through the use of electronic 
commerce technologies. Starting last year, operators could 
electronically submit well permits and reports using BLM's web-based 
electronic commerce capability. This effort is intended to meet 
customer requirements for quicker, less expensive and faster permitting 
and reporting.
    During Fiscal Year 2000, BLM Wyoming processed over 1,600 
electronic well permits and reports from 23 oil and gas operators. This 
technology supports the large scale coal bed methane well permitting 
activity in Wyoming's portion of the Powder River Basin, as well as 
Pinedale Anticline and Jonah natural gas development activity in the 
Green River Basin of southwest Wyoming. These new electronic commerce 
technologies also have been utilized by the BLM in Colorado, Montana, 
New Mexico, and Utah.
    The BLM also is continuing to encourage state regulatory agencies 
to join with us in APD processing using the Automated Fluid Minerals 
Support System. This system will greatly streamline the APD process 
because operators would only be required to submit one APD to the 
Federal and State agencies having approval authority. Implementation of 
this effort is ongoing.
Plans of Development (``PODs'')
    Another example of BLM's streamlining efforts is the so-called Plan 
of Development (or ``POD'') permitting approach that increases BLM's 
processing efficiency by grouping a large number of APDs together in a 
certain geographic area. Again using Wyoming as an example, the BLM has 
used the POD approach in support of the significant coal bed methane 
activities in the Powder River Basin. The BLM processes a POD--
comprising up to 32 APDs--as a group instead of evaluating each APD 
individually. This enables a larger number of applications to be 
processed at once, but still requires the operator to submit complete 
applications on all APDs proposed in the group for this to be 
effective.
CLOSING
    Madame Chairman, I hope this gives the Committee a better 
understanding of the BLM's current oil and gas leasing and permitting 
work. I would be pleased to answer any questions that you or the other 
members of the Committee may have.
                                 ______
                                 
    Ms. Cubin. The Chair would now like to recognize Mr. 
Murphy.

   STATEMENT OF MARK B. MURPHY, PRESIDENT, STRATA PRODUCTION 
                            COMPANY

    Mr. Murphy. Thank you, Madam Chairman, and members of the 
Committee. It is a pleasure and an honor to be here today. My 
name is Mark Murphy. I am President of Strata Production 
Company of Roswell, New Mexico. Strata is a small independent 
oil and gas exploration and production company and most of our 
operations are located on Federal lands in Southeastern New 
Mexico.
    My family has been in the oil and gas industry for four 
generations. We have been involved in projects throughout the 
United States, especially in the Rocky Mountain region. I have 
been a Westerner all of my life. To me, enjoyment of our 
natural wonders and good stewardship of our lands is a way of 
life. Commitment to the environment was taught to me by my 
parents, and if you do not believe me, you can ask them, 
because they are sitting right back here. It is also being 
taught by me to my children.
    I am an avid outdoorsman. I love to hike and camp and fish 
and hunt and I do so at every opportunity. I have to admit that 
I am surprised by those who claim to love the land more than I 
do, or those who claim that the oil and gas industry has or 
intends to harm the environment. I know otherwise, and I 
believe most of you do, too.
    I am not trying to suggest that just because people like me 
live and work and play on these lands that we have all the 
answers. But I do submit that the oil and gas industry has an 
excellent record of developing petroleum and natural gas 
resources in a safe and environmentally sensitive manner. There 
is no single solution to our nation's energy crisis. It will 
take the development of new resources, conservation, and 
utilization of renewables, as well.
    Today, I am testifying on behalf of the Independent 
Petroleum Association of America, the National Stripper Well 
Association, and 32 cooperating State and regional oil and gas 
associations.
    One issue I would like to address right up front is a 
letter from the Congressional Sportsmen's Caucus which was sent 
on April 3. The letter expresses concern about industry's views 
regarding protecting wildlife. On behalf of all independent 
producers, I would like to set the record straight. We are 
careful stewards of the land with the greatest respect for the 
preservation of wildlife. We are sportsmen, so we know that 
sportsmen pay fees that ensure that wildlife remain in 
abundance. As well, we conduct our activities in a way that 
supports wildlife. However, we need to strike a balance, 
allowing us to continue to provide clean, reliable energy for 
many decades to come. One activity should not take precedence 
over the other. They can and they do coexist.
    As I understand it, today's hearing will focus on the oil 
and gas permitting process and delays being experienced with 
the Bureau of Land Management and the Forest Service. The 
predominant area where the Federal Government plays a major 
role in promoting or inhibiting domestic oil and natural gas 
production are providing access to the natural resource base 
and providing access to essential capital. Those are two areas 
that you can help us the most.
    The permitting process to explore and develop resources 
often works to effectively prohibit oil and gas development in 
these areas, and by that I would like to explain that some 
people equate leasing with access. They are two very different 
things, and hopefully we will be able to talk about that more 
later.
    We do have some specific recommendations that we would like 
to make, which we believe will help facilitate access to the 
estimated 350 trillion cubic feet (TCF) of natural gas in the 
Rockies. First off, we would ask that there be support of 
President Bush's and Secretary Norton's fiscal year 2002 budget 
pertaining to improvements in land use planning, an inventory 
of public lands and description of the impediments and 
restrictions to access and development. We thank you, Madam 
Chairwoman, for your support, along with Congressman Skeen's, 
who led the effort in the House for getting this included in 
EPCA. It is a very, very important aspect and it will allow us 
to develop some mid- and long-term solutions to our problems.
    We also ask for increased funding to accelerate leasing and 
to process additional drilling permits in the most promising 
areas.
    There is also the National Energy Security Act, S.388. I 
think that bill contains probably the single most important 
provision for streamlining. There are so many problems 
throughout the permitting process, there is no single solution. 
And so what we are asking is that there be a requirement for 
energy accountability, that Federal land managers must consider 
their actions and their inactions and how they affect energy 
supply. We think this will create an umbrella whereby some 
balance can be restored to the process.
    In conclusion, providing access to the resource base will 
be critical and requires making some new policy changes. 
Providing capital, or accessing capital, getting drilling rigs 
and experienced personnel will also need to be addressed.
    We also believe that a cornerstone of any new policies are 
reasonable, sound energy conservation measures and protection 
of the environment. Thank you.
    Ms. Cubin. Thank you, Mr. Murphy. Your comments about 
coexisting with the wildlife, a few years ago, I took several 
Members of Congress back to Wyoming, Idaho, and Utah and we 
went onto a gas field. A rabbit ran across about two inches 
from Newt Gingrich's foot and there were antelope laying in the 
shadow of one of the tanks that were there on the field. The 
animals were just everywhere. As a matter of fact, we were 
accused of roping them and tying them up so that they would be 
there to show.
    [Laughter.]
    Ms. Cubin. But really, your point is well taken. It is so 
very true that we can develop the minerals in an 
environmentally sound way. I am like you. I am fifth generation 
Wyoming. Nobody loves Wyoming more than I do, maybe some people 
as much, but I will look out for it and I will protect it. So 
thank you for your testimony.
    [The prepared statement of Mr. Murphy follows:]

  Statement of Mark B. Murphy, on Behalf of the Independent Petroleum 
   Association of America and the National Stripper Well Association

    Madam Chairwoman, members of the committee, I am Mark Murphy, 
President of Strata Production Company of Roswell, New Mexico. Strata 
is a small independent oil and gas exploration and production company. 
Most of our operations are located on Federally managed lands in 
Southeastern New Mexico. My family has been in the oil and gas business 
for four (4) generations. We have been involved in projects throughout 
the United States, especially throughout the Rocky Mountain region. I 
have been a westerner all of my life. To me, enjoyment of our natural 
wonders and good stewardship of our lands is a way of life. Commitment 
to the environment was taught to me by my parents and is being taught, 
by me, to my children.
    I am an avid outdoorsman; I love to hike, camp, fish and hunt and 
do so at every opportunity. I have to admit that I'm surprised by those 
who claim to love the land more than I do--or those who claim that the 
oil and gas industry has or intends to harm the environment. I know 
otherwise and I believe most of you do too. I'm not trying to suggest 
that just because people like me live, work and play on these lands 
that we have all the answers. But, I do submit that the oil and gas 
industry has an excellent record of developing petroleum and natural 
gas resources in a safe and environmentally sensitive manner. There is 
no single solution to our Nation's energy crisis. It will take the 
development of new resources, conservation, and utilization of 
renewable sources as well.
    On April 3, 2001, the Congressional Sportsman's Caucus, sent Barry 
Russell, President of IPAA a letter expressing concern that previous 
testimony presented by Neal Stanley, the current President of the 
Independent Petroleum Association of Mountain States, was not 
consistent with a majority of the oil and gas industry who seek to 
minimize the footprint of their developments--especially the temporary 
impacts to the wildlife that inhabit the area. On behalf of all 
independent producers, I would like to set the record straight. We are 
careful stewards of the land with the greatest respect for the 
preservation of wildlife. We are sportsmen, so we know that sportsmen 
pay fees that ensure wildlife remain in abundance. As well, as oil and 
gas men, we conduct our activities in a way that supports wildlife. 
However, we need to strike a balance between development and the 
environment thereby allowing us to continue to provide clean and 
reliable energy for many decades to come while enjoying the abundance 
of wildlife. One activity should not take precedence over the other. 
They can, and do, co-exist. I'll talk more about this later in my 
testimony.
    Today, I am testifying on behalf of the Independent Petroleum 
Association of America (IPAA), the National Stripper Well Association 
(NSWA), and 32 cooperating state and regional oil and gas associations. 
These organizations represent the thousands of independent petroleum 
and natural gas producers that drill 85 percent of the wells drilled in 
the United States. This is the segment of the industry that is damaged 
the most by the lack of a domestic energy policy that recognizes the 
importance of our own national resources. NSWA represents the small 
business operators in the petroleum and natural gas industry, producers 
with ``stripper'' or marginal wells. These producers are the linchpins 
to continued development of domestic petroleum and natural gas 
resources.
    As I understand it, today's hearing will focus on the oil and gas 
permitting process on Federal lands administered by the Bureau of Land 
Management (``BLM'') and the US Forest Service (USFS). This testimony 
will focus first on several key factors that influence future energy 
issues. Second, it will describe issues that are specifically related 
to permitting delays and suggest solutions.

                   A NATION DEPENDENT ON FOSSIL FUELS
    Like it or not, the Nation will be dependent on fossil fuels for 
the foreseeable future. In particular, petroleum and natural gas 
currently account for approximately 65 percent of the nation's energy 
supply--and will continue to be the significant energy source. Natural 
gas demand, for example, is expected to increase by more than 30 
percent over the next decade.

 INDEPENDENT PRODUCERS--THE LINCHPIN TO FUTURE DOMESTIC PETROLEUM AND 
                              NATURAL GAS
    It is important to recognize that the domestic oil and natural gas 
industry has changed significantly over the last fifteen years. The oil 
price crisis of the mid- 1980's and policy choices made then triggered 
an irreversible shift in the nature of the domestic industry. 
Independent producers of both oil and natural gas have grown in their 
importance, and that trend will continue. Independent producers produce 
40 percent of the oil--60 percent in the lower 48 states onshore--and 
produce 65 percent of the natural gas. They are becoming more active in 
the offshore, including the deep water areas that have previously been 
the province of the large integrated companies. At the same time those 
large companies are now mainly focusing their efforts overseas, in 
addition to Alaska and the offshore, because they are aiming their 
investments to seek new and very large fields. Domestic energy policy 
must recognize this reality.

                   RECOGNIZING THE ROLE OF THE MARKET
    Future energy policy should rely on market forces to the greatest 
degree possible. For natural gas the market is strong and active. 
Natural gas supply is essentially North American and overwhelmingly 
from two countries that rely on private ownership and the free market--
the United States and Canada. Currently, exploration and development of 
natural gas in both countries is being aggressively pursued when the 
opportunities are there, and can be accessed. In the United States 
drilling rig counts for natural gas are running at rates that are as 
high as they have ever been since natural gas drilling was 
distinguished from petroleum. The principal constraints are finding the 
capital to invest, getting access to the resource base, finding 
competent personnel, and obtaining rigs. If the market is allowed to 
work, it will continue to draw effort to produce this critical resource 
for domestic consumption.
    Oil, however, is a different situation. In making decisions 
regarding developing domestic petroleum resources, the nature of the 
world petroleum market must be recognized. Although the United States 
remains the second or third largest producer of petroleum, it is 
operating from a mature resource base that makes the cost of production 
higher than in competitor nations. More importantly, most other 
significant petroleum producing countries rely on their petroleum sales 
for their national incomes. For them, petroleum production is not 
driven by market decisions. Instead, their policies and their 
production are determined by government decisions. Most are members of 
OPEC, the Organization of Petroleum Exporting Countries. Several are 
countries hostile to the United States like Iraq, Libya, and Iran. Even 
those that are generally supportive of the United States, like Saudi 
Arabia and Kuwait, are susceptible to unrest from both internal and 
external forces.
    Thus, the market price for petroleum will be largely framed by 
production decisions driven not by the market, but by the politics of 
these countries--both by internal issues and global objectives. United 
States domestic policy decisions must reflect this reality--looking to 
this factor in taking actions that can affect domestic production and 
producers. But, more importantly, it must recognize that a healthy 
domestic oil production industry is also essential for a healthy 
domestic natural gas industry, because they are inherently intertwined.
    For example, the failure of the United States to recognize the need 
to respond to the low oil prices of 1998-99 resulted in adverse 
consequences for both oil and natural gas production. The Nation has 
lost about 10 percent of its domestic oil production--most of which has 
been made up by imports from Iraq. And, in addition, the tight natural 
gas supplies this year are partially attributable to the drop in 
natural gas drilling in 1998-99 when oil prices were low and capital 
budgets for exploration and production of both oil and natural gas were 
slashed by producers because drilling under those conditions made no 
economic sense.

                            THE FEDERAL ROLE
    The predominant areas where the Federal Government plays a major 
role in promoting or inhibiting domestic oil and natural gas production 
are: providing access to the natural resource base and providing access 
to essential capital.

                  I. ACCESS AND PERMITTING CONSTRAINTS
    National energy policy must also recognize the importance accessing 
the natural resource base. In 1999 the National Petroleum Council in 
transmitting its Natural Gas study concluded:
    The estimated natural gas resource base is adequate to meet this 
increasing demand for many decades. . . . However, realizing the full 
potential for natural gas use in the United States will require focus 
and action on certain critical factors.
    Much of the nation's natural gas underlies government-controlled 
land both offshore and onshore. Policies in these areas have 
constrained or prohibited access largely based on fears of 
environmental harm. But, these resources can be developed in an 
environmentally sound and sensitive manner. The Department of Energy 
recently released a comprehensive report, Environmental Benefits of 
Advanced Oil and Gas Exploration and Production Technology, 
demonstrating that the technology is available. And, it is being 
employed, when exploration is allowed.
    Without policy changes, the Nation may not be able to meet its 
needs. The NPC study projects demand increasing by over 30 percent 
during the next fifteen years. This will require not only finding and 
developing resources to meet this higher demand, but also to replace 
the current depleting resources. While many analysts are focusing on 
how much more natural gas demand will grow, it is equally important to 
recognize what is happening to existing supply. All natural gas wells 
begin to deplete as soon as they start producing. However, as our 
technology has improved, we now are able to identify probable 
reservoirs more effectively. This allows us to find and more 
efficiently produce smaller fields.
    Onshore, the NPC Natural Gas study estimates that development of 
over 137 TCF of natural gas under government-controlled land in the 
Rocky Mountains is restricted or prohibited. A recent study by the 
Energy Information Administration concludes that about 108 TCF are 
under restriction. Regardless, the amount is significant. An inventory 
of these resources is underway. It is an important first step. But, it 
is equally important to understand that access to these resources is 
limited by more than just moratoria. The constraints differ. Monument 
and wilderness designations clearly prohibit access to some areas. 
Regulations like the Forest Service ``roadless'' policy and 
prohibitions in the Lewis and Clark National Forest are equally 
absolute.
    At the same time the permitting process to explore and develop 
resources often works to effectively prohibit access. These constraints 
range from Federal agencies delaying permits while revising 
environmental impact statements to habitat management plans overlaying 
one another thereby prohibiting activity to unreasonable permit 
requirements that prevent production. There is no single solution to 
these constraints. What is required is a commitment to assure that 
government actions are developed with a full recognition of the 
consequences to natural gas and other energy supplies. IPAA believes 
that all Federal decisions--new regulations, regulatory guidance, 
Environmental Impact Statements, Federal land management plans--should 
identify, at the outset, the implications of the action on energy 
supply and these implications should be clear to the decision maker. 
Such an approach does not alter the mandates of the underlying law that 
is compelling the Federal action, but it would likely result in 
developing options that would minimize the adverse energy consequences.
    While industry has the expertise and technology to develop new 
reserves we can only utilize these tools if permitted access by the 
Federal regulatory and management agencies. Allow me to relay some real 
life situations that I'm aware of in Southern New Mexico.
    As previously stated, I understand that the issue of seasonal 
restrictions on species range has been discussed in previous hearings 
and follow up correspondence. Let me take this opportunity to clear up 
any confusion concerning IPAA's position on this important issue. 
First, we are not aware of any operator who believes that oil and gas 
exploration should interfere with a critical range of any species. We 
think appropriate restrictions should address issues identified by 
scientific and factual investigation. However, industry is concerned 
that Federal land managers generally impose excessively onerous 
restrictions over unnecessarily large geographic areas. A case in point 
involves what are known as Prairie Chickens, which inhabit much of the 
Great Plains including portions of Southeastern New Mexico. The BLM has 
imposed a moratorium on operations from April through June of each 
year. Without any scientific basis the BLM maintains that field 
operations disrupt the Prairie Chicken's mating, or as it is referred 
to ``booming'', season. My personal field experience leads me to 
disagree with that assumption but, be that as it may, BLM has imposed 
this moratorium on approximately 380,000 acres. After industry insisted 
upon a scientific study BLM has now indicated that it may reduce this 
area to approximately 196,000 acres. Industry does not object to 
reasonable restrictions in areas where species are truly being affected 
by its activities. We do object to unfounded restrictions on overly 
broad geographic areas.
    Another example involves my company, which made a significant oil 
and gas discovery at the Nash Draw Unit located just east of Carlsbad, 
New Mexico. We estimate that the field may contain as much as 30 
million barrels of oil and 33 BCF of natural gas. Due to surface access 
restrictions, including the presence of shallow salt water (playa) 
lakes, we were only able to develop a portion of the reservoir with 
conventional vertical drilling. Not being able to fully evaluate the 
extent of the reservoir, we conducted a high resolution 3-D seismic 
survey. The survey revealed that the best, and probably, the most 
prolific portion of the reservoir appears to exist outside the area 
where vertical drilling is allowed. To access this new area requires 
the drilling of directional wellbores that are then further deviated 
horizontally. If successful, the application of this known technology, 
which has yet to be applied in this area, will allow us to fully 
develop this important new source of petroleum. In addition, if 
successful, this process could allow development of tens of thousands 
of acres that are currently off limits to conventional drilling 
practices.
    As we prepared to drill the well we faced what many operators are 
facing today, unavailability of drilling rigs, of experienced 
personnel, and of special equipment. Unfortunately, at the same time, 
our Federally approved drilling permit was due to expire on April 1, 
2001. On March 6, 2001 we requested an extension from the BLM. In the 
alternative, we suggested that we would commence operations by building 
the necessary road and well pad, and we would set surface conductor 
pipe in order to prevent the drilling permit from expiring. The BLM 
office in Roswell told us that, in its opinion, our activities would 
perpetrate the drilling permit. However, we were also told to check 
with the Resource Area office, located in Carlsbad, New Mexico, as it 
was within that office's discretion to approve or disapprove our 
proposal. Upon checking we were told that our proposal was unacceptable 
and, that extension could take up to nine (9) months. The alternative, 
we were told, was to commence drilling operations. Anticipating that a 
deep rotary rig would be available soon, and that we couldn't move it 
on location with an expired drilling permit, we commenced drilling with 
a shallow cable tool rig. Depending upon when the deep rotary rig 
becomes available we estimate this additional, and in our view, 
unnecessary cost will total $25,000 to $50,000. These are funds that we 
could have used to develop additional sources of natural gas and oil.
    Another example of unnecessary and costly delays by the BLM is in 
Southeastern New Mexico, northeast of El Paso, Texas. HEYCO, a local 
operator, initiated exploration work in this rank wildcat area. Areas 
such as this one must be explored if we are going to meet this 
country's natural gas demand. HEYCO began exploration and leasing in 
this area in the early 1980's. In 1996 HEYCO formed a Federal 
exploratory unit in Otero County. An application to drill was approved 
by the district office of the BLM in Roswell, New Mexico, in May 1996 
and an initial exploratory well was drilled and completed as a producer 
on August 3, 1997.
    Subsequently, HEYCO nominated additional Federal lands for leasing. 
The BLM declined to offer those lands for public sale. In January 1998, 
HEYCO applied for additional locations for the purpose of confirming 
its discovery and to determine the size of gathering system necessary 
to transport natural gas to an El Paso natural gas transmission line 
approximately 14 miles to the south.
    Eleven months later, HEYCO was informed by the BLM that the 
drilling permits for the confirmation wells were approved but onerous 
stipulations conditioned this approval. The BLM also informed HEYCO 
that, notwithstanding approval to drill, approval to produce was not 
granted.
    The basis of BLM opposition to development of the natural gas 
resources in the Orogrande Basin has ranged from the suggested presence 
of an endangered species (the Aplamado Falcon) to the resource value of 
native grass. One sighting of the falcon was noted during the last 50 
years until seven sightings were reported by a BLM employee (with no 
witnesses) subsequent to the HEYCO discovery.
    After some 30 months of study the BLM released, in November 2000, a 
draft Environmental Impact Statement/Resource Management Plan (EIS/RMP) 
which, when approved, would become the basis for further oil and gas 
activity on Federal lands in the Orogrande Basin. The document proposes 
three alternatives that severely restrict surface use and would render 
exploration and development of natural gas uneconomic. This planning 
document could potentially deny access to over I trillion cubic feet of 
gas equivalents.
    BLM would deem this land ``accessible.'' Why? Because they propose 
that all wells drilled should be directionally drilled from existing 
roads. However, given the depth of the target formation, it is 
physically impossible to drill directional wells in the area. So, when 
some claim that 95 percent of Federal lands are available for 
development, they may want to drill a little deeper in to the facts and 
determine if drilling can physically occur under the stated 
stipulations. There is a big difference between regulatory defined 
``access'' and practical access. Again, this is why an accurately 
inventory is needed to determine what lands are truly accessible or 
not.
    What is even more frustrating with public lands management, is that 
in many cases, the BLM ignores the views of the state and the people 
who live in the area. This holds true for the Otero County example. 
Based on recent public hearings, it appears local authorities are very 
much in support of drilling in this area and state officials were not 
consulted in the planning process. One quick fix in the area of land 
access is to turn to the states and the people who live in those 
states. They need to be part of the process.
    In Southwestern Lea County, New Mexico, a local BLM geologist has 
determined that operators must now set 700 to 800 additional feet of 
surface casing at an estimated incremental cost of $30,000 to $40,000 
per well. This changes a practice that has been followed in the 
drilling of hundreds, if not thousands, of wells in this area. The BLM 
geologist is apparently concerned that the drilling of wells may 
contaminate water zones in this area. Such zones have not been proven 
to exist nor has the Oil Conservation Division, the New Mexico 
regulatory agency constitutionally mandated to protect ground water, 
stated a similar concern or even proposed modifying its long-standing 
surface casing requirements. Here a single individual can, without 
scientific proof or factual basis, literally cost the industry 
thousands, if not ultimately millions, of dollars.
    It is clear that Federal land managers have not been given clear 
instructions that they must consider the impact of their actions on 
energy development. Therefore, each manager is left to assign his or 
her own value to the importance of energy development on a case-by-case 
basis. The focus of land management practices has been on process not 
on what ultimately is in the best interest of our Nation.
    There are hundreds and hundreds of these unnecessarily leasing and 
approval delays up and down the Rockies. To have meaningful ``access'' 
to even part of the approximately 350 tcf's in the Rockies, IPAA 
recommends the following:
    Support of President Bush's and Secretary Norton's FY 2002 budget 
pertaining the following items:
     LA $7.1 million increase to support improvements in the 
land use planning and accelerate the multi-year process of updating 
management plans. This is a good first step. The entire planning 
process needs to be reviewed, including the funding process.
     LAn $11.8 million increase for oil and gas programs, 
including energy resources surveys, Alaska North Slope oil and gas 
exploration, coal-bed methane permits, and oil and gas inspections.
     LA $3.0 million dollar increase for BLM to work with USGS, 
the USFS, and the Department of Energy to conduct an inventory of 
public lands and describe the impediments and restrictions to access 
and development. Madam Chairwoman, you, along with Chairman Skeen, led 
the effort in the House for getting this included in EPCA, which was 
signed into law late last year.
     LA $2.0 million dollar increase to accelerate leasing by 
15 percent and to process an additional 1,000 to 2,000 drilling permits 
in the most promising areas.
    With respect to improving onshore land access, support of the 
following provisions of the National Energy Security Act of 2001, S. 
388:
     LSection 101 is the single most important section of the 
S. 388. It requires energy accountability when Federal agencies make 
decisions affecting energy supply.
     LSubsection D--Improvements to Federal Oil and Gas Lease 
Management--This section contains a number of very important reforms. 
It allows a state, if willing, to conduct a number of non-environmental 
oil and gas approvals on behalf of the Federal Government. Time and 
time again, we see that the state can perform oil and gas activities at 
a much lower cost and in much more timely fashion than the Federal 
Government. For decisions remaining with the Federal Government, the 
bill establishes reasonable timeframes for processing different 
documents related to oil and gas development. Additionally, it provides 
adequate funding for environmental documents. Timing is capital and if 
there are never-ending delays, this capital will be directed overseas 
or to private lands.
     LSection 310--Program on Oil and Gas Royalties In Kind. By 
giving more tools to the Federal Government to maximize return to the 
American taxpayer when taking in kind, the program can be expanded. 
When royalty in-kind is expanded, more certainty is provided to the 
government and the oil and gas lessees; thereby making Federal lands 
more attractive for development.
    Encourage the Administration to determine which of these provisions 
in S. 388 it could implement immediately. Other administrative 
improvements that the Administration needs to consider include:
     LProhibiting cost recovery regulations that would place 
unnecessary costs on every facet of the oil and gas program. These 
costs will further discourage small independent producers from 
developing onshore Federal lands and are inappropriate given the 
billions of dollars the oil and gas industry pays each year to the 
Federal Government in the form of royalties.
     LStopping all regulation rewrite efforts that were 
mandated by Vice President Gore for the so-called purpose of putting 
things into ``Plain English.'' The drafts issued of the oil and gas 
onshore oil and gas regulations during the Clinton Administration 
proposed significant policy changes and would result in more 
uncertainty. Specifically, smaller independent producers are concerned 
about the proposed increase of bonding amounts. Bonds are rarely called 
for the purpose of reclamation. The vast majority of good operators on 
Federal land should not be punished for the bad behavior of the few. 
Enforcement is the key.

                 ADDITIONAL IPAA ACCESS RECOMMENDATIONS
    Overall:
     LProvide mechanisms to assure that the energy supply 
consequences of Federal decisions be identified early in the decision 
process and made clear to the decision makers.
    Onshore:
     LAccess in the Rockies won't be resolved by a single act. 
The industry must deal with a mosaic of limitations, while any single 
limitation may not in itself prevent reservoir development, their 
collective effort prohibits natural gas and petroleum exploration and 
production. Regulatory actions need to be undertaken to consider the 
energy implications of decisions--both individually and collectively.
    Offshore:
     LIPAA believes it is critical to continue to provide a 
royalty structure that encourages offshore development. IPAA and others 
involved in the offshore are working together with MMS and DOE to 
create a royalty structure that will enhance domestic production.
     LOffshore moratoria policies need to be revisited and 
revised.

                H. PROVIDING ACCESS TO ESSENTIAL CAPITAL
    Because this hearing is primarily focused on the problem of 
permitting delays, this testimony will only touch on the capital issue. 
Because oil and natural gas exploration and production are capital 
intensive and high-risk operations that must compete for capital 
against more lucrative investment choices, much of its capital comes 
from its cash flow. The Federal tax code plays a critical role in 
determining how much capital will be retained. The Administration and 
Congress need to enact provisions designed to (1) encourage new 
production, (2) maintain existing production, and (3) put a ``safety 
net'' under the most vulnerable domestic production--marginal wells. 
Congress has considered a mix of tax reforms that have widespread 
support. They include provisions to allow expensing of geological and 
geophysical costs and of delay rental payments that encourage new 
production, extending the net operating loss time frame and revising 
percentage depletion that assist both new and existing production, and 
a countercyclical marginal well tax credit when prices fall to low 
levels. All of these are programs that independent producers need 
because their revenues are limited to their production
    Beyond these immediately needed policy changes, new tax policies 
must be developed to encourage renewed exploration and production 
needed to meet future demand, particularly for natural gas. In 1999 the 
National Petroleum Council released its Natural Gas study projecting 
future demand growth for natural gas and identifying the challenges 
facing the development of adequate supply. For example, the study 
concludes that the wells drilled in the United States must effectively 
double in the next fifteen years to meet the demand increase. Capital 
expenditures for domestic exploration and production must increase by 
approximately $10 billion/year--roughly a third more than today. 
Generating this additional capital will be a compelling task for the 
industry. As the National Petroleum Council study states:
    While much of the required capital will come from reinvested 
cashflow, capital from outside the industry is essential to continued 
growth. To achieve this level of capital investment, industry must be 
able to compete with other investment opportunities. This poses a 
challenge to all sectors of the industry, many of which have 
historically delivered returns lower than the average reported for 
Standard and Poors 500 companies.
    In fact, as the past year has shown, capital markets have not 
shifted to supporting the energy sector. For the industry to meet 
future capital demands--and meet the challenges of supplying the 
nation's energy--it will need to increase both its reinvestment of cash 
flow and the use of outside capital. The role of the tax code will be 
significant in determining whether additional capital will be available 
to invest in new exploration and production in order to meet the $10 
billion annual target.

               IPAA CAPITAL ACCESS POLICY RECOMMENDATIONS
    Near-Term Tax Reforms:
     LAllow expensing of geological and geophysical costs and 
of delay rental payments.
     LAllow a 5-year net operating loss carry-back for 
independent producers.
     LEliminate the net income limitation on percentage 
depletion for marginal wells and the 65 percent net taxable income 
limit on percentage depletion.
     LCreate a counter-cyclical marginal well tax credit.
    Other Tax Reforms:
     LModify the Alternative Minimum Tax.
     LCreate a plow back or drilling incentive.
     LExpand the Enhanced Oil Recovery tax credit.

           THERE'S NO SHORT-TERM FIX--RECOVERY WILL TAKE TIME
    Any realistic future energy policy will take time. There is no 
simple solution. The popular call for OPEC to ``open the spigots'' 
failed to recognize that the low oil prices of 1998-99 reduced capital 
investment from the upstream industry all over the world. Only Saudi 
Arabia had any significant excess production capacity and no one knew 
just how much or whether the oil was of a quality that it could be 
refined in most refineries. The collateral damage of low oil prices on 
the natural gas industry is affecting gas supply today and will until 
the industry recovers. The producing industry lost 65,000 jobs in 1998-
99. While about 40 percent of those losses have been recovered, they 
are not the same skilled workers. If measured by experience level, the 
employment recovery is far below the numbers. Less obvious, but equally 
significant, during the low price crisis equipment was cannibalized by 
operating and support industries who were decimated. It will take time 
to develop the infrastructure again to deploy new drilling rigs and 
provide the skilled services that are necessary to rejuvenate the 
industry.

                 ADDITIONAL IPAA POLICY RECOMMENDATIONS
     LRestructure the Emergency Oil and Gas Loan Program to 
streamline the application and approval process thereby allowing 
existing debt to be restructured on a less costly basis and for the 
creation of new service providers.
     LConsider Federal financial instruments like the PADDIE 
MAC concept that would create a FANNIE MAE-like program to help lower 
the capital costs to the smaller producers so essential to maintaining 
the nation's marginal wells.
     LCreate initiatives to train oil and natural gas 
production workforce through existing and new education programs
     LContinue Department of Energy Oil Data Transparency 
initiative to develop more accurate information on worldwide supply and 
demand.

                               CONCLUSION
    Providing access to the resource base will be critical and requires 
making some new policy choices with regard to Federal land use. A 
critical first step is to require agencies to measure and document the 
impact of their decisions on the development of energy resources.
    Overall, attracting capital to fund domestic production under these 
circumstances will be a continuing challenge. This industry will be 
competing against other industries offering higher returns for lower 
risks or even against lower cost foreign energy investment options. The 
slower the flow of capital, the longer it will take to rebuild and 
expand the domestic industry.
    These two issues are the ones that are particularly dependent on 
Federal actions, and should be the immediate focus of this Congress and 
the Administration.
    It is time for this country to take its energy supply issues 
seriously and develop a sound future policy. Certainly, there is room 
in such a policy for sound energy conservation measures and protection 
of the environment. But, energy production--particularly petroleum and 
natural gas--is an essential component that must be included and 
addressed at once. Independent producers will be a key factor, and the 
industry stands ready to accomplish our goals, if policies reflect that 
reality.
                                 ______
                                 
    Ms. Cubin. The Chair now recognizes Marc Smith.

  STATEMENT OF MARC W. SMITH, EXECUTIVE DIRECTOR, INDEPENDENT 
            PETROLEUM ASSOCIATION OF MOUNTAIN STATES

    Mr. Smith. Madam Chairwoman, members of the Committee, I am 
Marc Smith, Executive Director of the Independent Petroleum 
Association of Mountain States, IPAMS. Today, I am testifying 
on behalf of IPAMS and Public Lands Advocacy, PLA. I would like 
to thank this Committee for focusing its attention on oil and 
gas permitting on Federal lands.
    Companies exploring for and developing oil and natural gas 
rely on Federal land managers to process their permit requests 
in a timely manner. Without necessary environmental studies, 
permits, and authorizations, access to drill on Federal land is 
prohibited. Throughout the gas-rich basins of the Rocky 
Mountain region, backlogs for permits to drill and rights of 
way are growing at an alarming rate. Many resource management 
plans are outdated and revisions or new planning documents are 
being required before any leasing and development can occur. 
Staffing is short in many offices and the problem seems to get 
worse with time.
    According to recent surveys by both PLA and IPAMS, 
applications for permits to drill in the Rocky Mountain region 
are delayed by as much as seven months in areas where no 
additional environmental analysis is needed. The average delay 
is somewhere around a month, which means a process that is 
mandated to take 30 days often takes in excess of two months. 
Applications for rights of way are similarly delayed, causing 
bottlenecks in supply, where gathering lines and supplies 
cannot be installed. In many cases, APDs and right of ways take 
several years to approve, pending additional environmental 
analysis.
    For example, in 1997, the BLM Vernal District Office in 
Utah decided to prepare a combined environmental assessment for 
all the operating companies who had pending APDs in the area. 
APDs are applications for permit to drill. Despite efforts by 
the State Director to fast track the analysis, it has now been 
50 months and counting. A final decision is not expected before 
late fall.
    The Vernal example highlights a problem that is pervasive 
throughout the Rockies. Many land use plans are out of date, 
causing substantial delays in permitting of new wells until new 
environmental analysis, usually an environmental impact study, 
can be completed. Years of inattention to this growing problem 
have resulted in a situation in which almost every land use 
plan needs to be updated before additional development can 
occur. The process of rewriting or amending land use plans has 
gone from a 1-year process to more than a 3-year average 
process. At the same time, the average length of usefulness for 
these land plans has shrunk from 20 years to less than seven. 
In the Powder River Basin of Northeastern Wyoming, the land use 
plan has been updated two times in the last two years and is 
currently being updated for its third time.
    One of the most glaring examples of how excessive planning 
and environmental analysis have delayed development of natural 
gas can be seen in the Jack Morrow Hills Resource Area of 
Southwestern Wyoming, where leasing decisions have been 
postponed for over 10 years. Land managers must be empowered to 
do a better job with planning, environmental analysis, and 
permitting.
    Madam Chairman, we thank you for your notable efforts in 
this area as Chair of this Subcommittee. We especially 
appreciate your role in the passage of the Energy Policy and 
Conservation Act during the last Congress. We believe that the 
public land resource inventory required under EPCA should 
become a valuable tool to aid Federal and State agencies in 
their planning efforts.
    We do not want to mislead this Committee into believing 
that if all of our permitting woes were cured today, that all 
of our problems as an industry would go away. We cannot flip a 
switch and suddenly turn on all of the supply needed to meet 
the nation's demand for the next decade. The oil and gas 
industry requires long lead times to generate drilling 
prospects, hire personnel, build rigs, pipelines, and other 
infrastructure needed to expand supply. There is no quick fix 
for the problems that have accrued over time.
    Ten years of low prices coupled with dwindling access to 
government land and permitting delays have led many producers 
to abandon the Federal lands in search of more hospitable 
places to do business. Delays associated with environmental 
analysis, planning, and permitting are one of the greatest 
impediments to efficient and economical development of natural 
gas on Federal land. Delays may differ in severity from basin 
to basin, but in the basins where supply could most quickly 
reach markets, delays are often the worst. This trend can and 
should be reversed.
    To improve energy development on Federal lands, land 
managers must be given clear goals and objectives for energy 
development on government land. Land managers must be 
adequately prepared to meet the challenges of increasing 
demand. Federal and State agencies must work more closely to 
share information and avoid delays. And land managers must be 
held accountable for meeting energy development goals.
    Madam Chairwoman and members of the Committee, thank you 
for the opportunity to appear before you today.
    Ms. Cubin. Thank you very much for your testimony, Mr. 
Smith.
    [The prepared statement of Mr. Smith follows:]

  Statement of Marc W. Smith, on behalf of the Independent Petroleum 
        Association of Mountain States and Public Lands Advocacy

INTRODUCTION
    Madam Chairman, members of the committee, I am Marc Smith, 
Executive Director of the Independent Petroleum Association of Mountain 
States (IPAMS). Today, I am testifying on behalf of the Independent 
Petroleum Association of Mountain States (IPAMS), and Public Lands 
Advocacy (PLA). IPAMS is a non-profit, non-partisan trade association 
representing over 800 independent oil and gas producers and related 
service and supply companies in the intermountain west of the United 
States. Independents, such as the companies IPAMS represent, drill 85 
percent of the wells in the U.S., and produce 40 percent of the oil and 
two-thirds of the natural gas.
    PLA is a non-profit organization whose members include major and 
independent petroleum companies and non-profit trade and professional 
organizations that have joined together to foster the interests of the 
oil and gas industry relating to responsible and environmentally sound 
exploration and development on Federal lands.
    At the outset of my testimony, I would like to thank this committee 
for focusing its attention on oil and gas permitting on Federal lands. 
Companies exploring for and developing oil and natural gas rely on 
Federal land managers to process their permit requests in a timely 
manner. Without the necessary environmental studies, permits, and 
authorizations, access to drill on Federal lands is prohibited. Land 
managers have significant control over the amount and rate of energy 
development in the United States and they exercise this control through 
the permitting process.
    Throughout the gas-rich basins of the Rocky Mountain Region, 
backlogs for permits to drill and rights-of-way are growing at an 
alarming rate. Many resource management plans are outdated and 
revisions or new planning documents are being required before any 
leasing and development can occur. Staffing is short in many offices 
and the problem seems to get worse with time. The use of sophisticated 
mapping tools and other technologies could ameliorate some of these 
problems, but as with many other issues, addressing agency priorities 
and goals is a necessary first step.
BACKGROUND
    Despite our best conservation efforts, electricity demand in the 
United States will continue to increase as a function of our growing 
population and the role of computers in the new economy. The role of 
natural gas in meeting this new demand cannot be understated. Ninety-
five percent of all the new power plants now scheduled to be built will 
operate on natural gas. Electricity produced from natural gas fired 
generation will increase from 15 percent to 40 percent by the year 
2020. In 1999, the National Petroleum Council forecasted natural gas 
consumption increasing from 22 trillion cubic feet (TCF) this year to 
35 trillion cubic feet (TCF) in 2020.
    In the United States, the economic expansion over the past fifteen 
years has been fueled by low energy prices. These low prices have been 
good for everyone, except the 500,000 American oil and gas company 
workers who lost their jobs. Since 1981, employment in the exploration 
and production sector alone has decreased from 700,000 to 300,000, a 
decrease of 57 percent. Since the oil price collapse of 1986, the 
domestic oil and gas business has been in a severe depression. In most 
areas, wells could not be drilled economically due to the low oil and 
gas prices. Many companies went broke drilling wells with the hope that 
higher prices would re-appear in the near term. In short, the oil and 
gas industry is a small shadow of its former self.
    Since there was sufficient energy supply during the past fifteen 
years, no attention was paid to the problems facing the oil and gas 
industry. Rules and regulations that further restricted the industry 
were applied with vigor. In 1981, 89,000 wells were drilled in the U.S. 
This declined to 19,000 wells in 1999. It is no wonder that our oil 
production decreased from 8.6 million to 5.8 million barrels per day 
and our gas production decreased from 19.2 to 18.7 trillion cubic feet 
per year over this time frame. With these declines in production, and 
with our expanding economy, it should be no surprise that we consumed 
our surplus energy capacity, and prices have dramatically increased as 
a result. This is basic Economics 101, supply and demand.
    The oil and gas industry can meet the nation's growing demand for 
natural gas, but the price of natural gas will be dependent upon a 
number of factors, most notably, having adequate access to the resource 
in a timely manner.
PROCESSING PERMITS
    A recent influx of permit applications spurred by an increase in 
commodity prices for natural gas and oil has acted to compound existing 
permitting problems on public lands.
    According to a recent survey done by Public Lands Advocacy (PLA) in 
Wyoming, agencies that are mandated to complete Application for Permit 
to Drill (APD) approvals within 30 days often take as long as 60 to 210 
days to process permit approvals. Applications for rights-of-way (ROW) 
are similarly delayed causing bottlenecks in supply where gathering 
lines and pipelines cannot be installed.
    In some cases, APD's and ROW take several years to approve pending 
additional environmental analysis (required under NEPA). Permitting 
backlogs have slowed supply to market in most of the active basins 
throughout the Rockies (Green River, Uintah, Powder, Piceance, San 
Juan, Williston etc.). Permitting delays may differ in severity from 
basin to basin, but in the basins where supply could most quickly reach 
markets, delays are the worst.
    To improve the permitting process: land managers must be given 
clear goals and objectives for energy development on government land; 
land managers must be adequately prepared to meet the challenges of 
increasing demand; Federal and state agencies must work more closely to 
share information and avoid delays; and land managers must be held 
accountable for the meeting energy development goals.
    An internal study by the BLM in 1996 supports these same 
conclusions. The 1996 study identified factors which contribute to 
delays in processing APDs. These factors include: conflicting 
priorities, poor understanding of national APD priority, incomplete APD 
packages submitted by the operator, conflicting resource demands, 
excessive or unnecessary NEPA compliance, poor quality or inadequate 
BLM and FS planning documents, consultation with SHPO, FWS, and other 
SMAs, unclear directives or guidance, and insufficient agency resources 
(BLM, 1996).
    Exhibit 1 demonstrates the time associated with operating on 
private land and Federal land. The table shows the timeframe to get a 
well permitted and drilled. The difference between developing energy on 
private land and Federal lands is 3 months versus 1-5 years.
IMPORTANCE OF CLEAR GOALS AND OBJECTIVES
    With regard to permitting, let me state that we recognize that land 
managers have a difficult job in many respects. Land managers must 
follow a sheer morass of regulations, executive orders, instruction 
memoranda, and other guidance associated with the permitting process. 
To create significant improvements, most would agree that we should try 
to clarify and simplify the permitting process. Even so, there are 
still notable opportunities to improve the permitting process within 
the existing guidelines.
    A natural starting point for improving the permitting process would 
be to examine the goals and objectives of the agencies involved in 
permitting. A lack of clear goals and objectives marks an important 
shortfall in the previous administration's land management policy. 
There was no clear direction for land managers with respect to energy 
development on government land. Accordingly, each land manager assigned 
a relative value to the development of energy with no sense of how his 
or her actions contributed to or detracted from the nation's energy 
sustainability as a whole. Mixed messages and a lack of accountability 
led to a situation in which land managers focus entirely on process 
with no apparent regard for the outcome. If left unattended, this lack 
of direction will become even more disastrous.
    Like any organization, land management agencies need clear long-
term goals and objectives to guide them. Without clear goals and 
objectives, managers will typically focus on the process rather than 
the outcome. This gives rise to many unnecessary delays with arbitrary 
outcomes. In many field offices of the BLM and Forest Service, Federal 
employees often work with no sense of purpose or urgency with regard to 
petroleum development on Federal land. Postponing land use decisions 
through endless analysis may be effective as a risk-aversive tactic, 
but it creates an untenable situation for oil and gas companies 
operating on Federal lands.
    Exhibit 2 is a map showing government lands. The various colors 
represent the different agencies with surface management 
responsibility. A map showing the Federal Government's mineral interest 
in the western United States would encompass an even larger portion of 
the West than is depicted on this map. Timely permitting of oil and gas 
wells on BLM and Forest Service Lands is critical to the nation's 
energy sustainability since a significant portion of the Western United 
States is managed by these agencies and vast amounts of oil and gas 
resources underlie these lands.
    In the Rocky Mountains, where abundant supplies of natural gas 
exist, permitting problems pose a significant impediment to the 
development of natural gas. Long-term sustainable gas production will 
be achievable only through the orderly development of frontier areas 
such as the Rockies. Without improvement in the permitting process, 
industry will not be able to keep pace with growing demand.
ADEQUATE PREPARATION
    Adequate preparation is vital if land managers are to meet the 
needs of current and future generations. Many land use plans are out of 
date, causing substantial delays in the permitting of new wells until 
new environmental analysis, usually an environmental impact study, can 
be completed. Years of inattention to this growing problem have 
resulted in a situation in which almost every land use plan needs to be 
updated before additional development can occur. Development delays due 
to planning are a major factor exacerbating current natural gas 
shortages.
    It should be noted that the process whereby land managers rewrite 
or amend land use management plans has become extremely cumbersome and 
needlessly detailed, and has resulted in marked delays in making 
decisions. In many cases the average length of time to complete the 
analysis has gone from less than a year to more than three years. At 
the same time, the average length of usefulness for these land 
management plans has shrunk from 20 years to seven years. In the Powder 
River Basin of Northeastern Wyoming, the land use plan has been updated 
two times in the last two years and is currently being updated for its 
third time. One of the most glaring example of how excessive planning 
has delayed development of natural gas can be seen the in the Jack 
Morrow Hills Resource Area.
    Exhibit 3 is a map of the Jack Morrow Hills Resource Area in 
southwestern Wyoming. Industry was initially informed that a resource 
management plan would be required prior to allowing any new leasing to 
take place. BLM began preparation of the Green River Resource 
Management Plan (GRRMP) in late 1991. Not only did it take BLM nearly 
six years to issue a Record of Decision on the GRRMP, it withheld its 
leasing decision on 80,000 acres of land in an area known as Jack 
Morrow Hills until a Coordinated Activity Plan (CAP) for leasing could 
be completed, despite the fact that the area already had over 60 
producing wells. Industry was assured that leasing would resume once 
the CAP was completed.
    Despite BLM's further assurance that the Jack Morrow Hills CAP 
would be completed without delay, the agency didn't even begin scoping 
on the process until 1998, and at that time the area withheld from 
leasing was increased to nearly 600,000 acres! Moreover, BLM 
subsequently promised to complete the analysis by December 1999. This 
did not occur; the draft environmental impact statement (EIS) wasn't 
published for public comment until the end of 2000. When the draft EIS 
was issued, the preferred alternative was for ``staged leasing,'' 
effectively postponing leasing decisions indefinitely. To further 
complicate matters, former Interior Secretary Bruce Babbitt directed 
BLM to reopen the analysis to develop and implement a ``conservation'' 
alternative that would prohibit any new leasing in the area.
    The map of the Jack Morrow Hills area shows the BLM-managed mineral 
estate with active oil and gas leases in yellow. Of the 623,000 acres 
within the red boundary of the Jack Morrow Hills area, there are 
239,000 acres of active Federal leases, 36,000 acres that are 
productive. Also note that within the CAP area, there are 137,890 acres 
recommended as Wilderness Study Areas.
    Land managers have a responsibility to ensure that oil and gas 
development is not suspended due to perceptions that impacts surpass 
acceptable levels. For this reason it is critical that agencies to 
routinely monitor activities. It is of particular importance that 
monitoring be done on an annual basis in areas of heightened activity. 
Annual monitoring of activities in these areas will give agencies the 
opportunity to acquire critical information useful for daily and long-
term management flexibility. With advance knowledge of when thresholds 
are being approached, it will be possible for land managers and project 
proponents to develop acceptable measures to mitigate or reduce 
potential impacts to an acceptable level. Similarly, the effectiveness 
of mitigation measures can be tested.
    In order for this concept to work, a system for tracking monitoring 
efforts and results must be developed. In addition, a quality control 
process needs to be implemented to ensure that resource management 
objectives are clearly stated and measurable. Measurable management 
thresholds which, when approached or reached, require a review of 
existing management practices, must also be identified. An extremely 
important element of the monitoring effort is an inventory of resource 
data. Routine monitoring will have the added effect of reducing the 
time necessary to revise Resource Management Plans.
    Another important aspect of agency preparation and readiness 
involves agency staffing. In some field offices of the BLM, there are 
adequate staff, but resources are not directed toward energy 
development, reflecting the manager's priorities. However, most within 
industry believe BLM field offices are inadequately staffed.
    We are encouraged that the BLM is planning to increase its Fluid 
Minerals Program staff by 32 full time employees this year. But we 
question whether it is still far short of meeting existing and future 
needs. To put the staffing issue in 
perspective, it's worth noting that this program has shrunk from 1,800 
employees in the mid 80's to 695 in 2001. If Federal land managers are 
to partner with an industry that needs to double and triple its 
activity on Federal lands, staffing must be increased. In addition, the 
BLM should review its recruiting, training and retention programs so 
that it can compete with industry to hire skilled workers. Enrollment 
in petroleum graduate programs is less than half of what it was in the 
early eighties, and graduates now command a first year salary of up to 
$60,000.
    Land managers also need to keep pace with new technologies that 
will allow them to work more efficiently. New geospatial tools can 
reduce by half the time needed to perform studies. The use of new 
technologies requires planning, training, and rethinking the way the 
agency performs its duties. We are encouraged by initiatives in the 
Buffalo Field Office of the BLM to use GIS technology in the 
development of an Environmental Impact Statement for coal bed methane 
in the Powder River Basin.
    We are hopeful that when the inventory of public lands required by 
the ENERGY POLICY AND CONSERVATION ACT (EPCA, S. 724, 106th Congress, 
relating to the Strategic Petroleum Reserve) is completed, the 
information gathered will become the cornerstone for a comprehensive 
database that land managers and other agencies will use in decisions 
relating to planning, leasing, permitting. Madam Chairman, we thank you 
for your farsightedness and leadership in the drafting and passage of 
EPCA. The inventory that is undertaken under EPCA should eventually 
become a tool for collaboration between Federal and state agencies.
INTER AND INTRA-AGENCY COORDINATION
    Coordination between the various Federal and state agencies with 
authority over oil and gas operations must be greatly improved. In the 
field of ecology, one talks about the cumulative impacts of a Federal 
action on habitat or the sustainability of an ecosystem. The same 
approach must be taken when considering the nation's energy policy. The 
unintended consequences of multiple regulatory changes have crippled 
responsible oil and gas development in many areas. Producing natural 
gas on government land is at times threatened or endangered by 
excessive regulations that result in severe limitations on access to 
public lands for oil and gas exploration and development. It is often 
difficult to reconcile the missions of the various agencies when some 
are multiple-use oriented land management agencies (such as the BLM and 
USFS) and others are single-purpose agencies (EPA and US Fish and 
Wildlife Service) whose focus does not address the need for balance in 
managing Federal lands.
    Agencies, such as the Department of Energy and the United States 
Geological Survey, have valuable information about energy trends that 
would greatly serve land managers as they plan for future development 
activity. It seems a poor use of resources and knowledge to not require 
some coordination at the highest levels between sister agencies. Other 
agencies, such as the EPA, are notorious for holding up the permitting 
process at the eleventh hour for additional consultation. Equally 
troublesome are the individual specialists within the BLM and Forest 
Service offices (such as archaeologists and wildlife biologists) who 
view oil and gas activities as peripheral to their core tasks. A recent 
effort called the Federal Leadership Forum could eventually alleviate 
eleventh hour delays caused by disputes between agencies, but recent 
events show that interagency disputes remain a problem.
ACCOUNTABILITY
    A final aspect of the permitting process that deserves attention is 
the concept of accountability. Along with clear goals and objectives, 
adequate preparation, and coordination, land managers must be held 
accountable for the results or outcomes of their work. This component, 
more than any other, is lacking and should be addressed.
    In an IPAMS report entitled Exploring for Reinvention: Dimensions 
of Customer Satisfaction and Factors Limiting Reinvention Within the 
Bureau of Land Management's Oil and Gas Program (May 16, 1999), IPAMS 
reported its finding on BLM performance and customer satisfaction, 
using the Agency's stated goals as a measure:
         LTesting for perceived customer satisfaction relating 
        to timeliness is important not only because it was identified 
        as an important issue by industry, but also because the Federal 
        Government has issued standards for timely performance. The 
        Customer Service Standards for Natural Resource Management 
        state, ``Your applications will be processed in a timely 
        manner.--
         LAccording to a 1995 BLM survey of all resource users, 
        ``72 percent of respondents were satisfied that the Bureau of 
        Land Management processed their applications in a timely 
        manner'' (Customer Service Standards for Natural Resource 
        Management). This finding varies significantly from the 
        performance ratings given by the oil and gas industry (a subset 
        of natural resource users). The industry's rating of BLM both 
        for overall timeliness in processing documents and timeliness 
        in processing applications revealed poor performance. 
        Approximately 75 percent of industry respondents were not 
        impressed with the BLM's overall performance in processing 
        documents in a timely manner, and 58 percent were dissatisfied 
        with BLM's performance in timely processing of applications.
         LOne of the key recommendations for producing results 
        in the Federal Government's reinvention plan is to ``streamline 
        processes'' (Blair House Papers, 1997). According to industry 
        survey results, only six percent of respondents believe the BLM 
        has taken advantage of opportunities to streamline its 
        operations. Approximately half of industry believes the BLM has 
        not pursued opportunities to streamline operations to reduce 
        costs and time delays.
         LThe findings of the survey revealed that most of 
        industry perceives the BLM as an agency troubled by 
        inconsistency, contributing to a lower level of overall 
        customer satisfaction. Only 17 percent of the industry 
        respondents were satisfied with the extent to which BLM 
        consistently implemented its policies and regulations. 
        Consistency by government officials is not only a national 
        reinvention standard, but also a procedural trait that appears 
        to be highly valued by members of industry.
    As seen in the result above, industry gave the BLM low grades in 
the areas of document processing, permitting, streamlining, and 
consistency. Despite industry efforts to make the findings of this 
report available to the past Secretary of Interior, little has been 
done to improve agency performance and, in most cases, the problems 
have increased due to expanded activity on Federal land.
    Another example of how the BLM is failing to meet agency goals for 
permitting timeframes, streamlining, and consistency can be seen in a 
planning effort that is taking place in northeastern Utah. In 1997 the 
BLM Vernal District Office decided to prepare a combined Environmental 
Assessment for all the operating companies (Resource Development Group, 
or RDG) who had pending APDs in the area. BLM assured the company that 
once the NEPA analysis was completed, they would get their permits. 
Combining separate and distinct development projects into one EA is not 
a common practice within BLM field offices, but industry had little 
choice but to go along.
    In early 1999, ENSR (an independent contractor approved by the 
Vernal District office that was hired by RDG) issued its Final 
Environmental Assessment and the BLM issued a Record of Decision (ROD). 
BLM then issued a Finding of No Significant Impact (FONSI) with several 
Conditions of Approval (COAs) that were protested by industry and Uinta 
County.
    The State Director determined the proposal was ``so controversial'' 
that BLM would have to do a full-blown Environmental Impact Statement 
(EIS), even though the proposal complied with the existing Resource 
Management Plan for the area. The APDs had now been delayed for over 20 
months, with costs for environmental documentation topping $250,000. 
Despite the fact that the State Director ``fast-tracked'' the EIS, it 
has now been 50 months and counting. The draft EIS is not expected to 
be issued before the end of this summer. This will be followed by 
another three month public comment period before the Final EIS can even 
be drafted.
CONCLUSION
    We don't want to mislead this Committee into believing that if all 
our permitting woes were cured today that all of our problems as an 
industry would go away. There is no quick fix to the problems that have 
accrued as a result of mismanaging development on Federal lands. We 
cannot flip a switch and suddenly turn on all of the supply needed to 
meet the nation's demand for the next decade. The oil and gas industry 
requires relatively long lead times to build rigs, pipelines and other 
infrastructure needed to expand supply. Ten years of low prices coupled 
with dwindling access to government land and permitting delays have led 
many producers to abandon the Rocky Mountain Region in search of more 
hospitable places to do business.
    The uncertainty surrounding exploration and development on Federal 
land has increased the risk of investment to unacceptable levels for 
many companies and their investors. And this, in and of itself, is 
amazing when you consider that many of these pioneering individuals are 
willing to take a 50 percent or higher risk of drilling a dry hole. In 
other words, the risk associated with unexpected and costly delays due 
to environmental studies, permitting delays, and processing of rights-
of-way has become the greatest limiting factor in this industry's 
effort to supply energy to the nation. This trend can and must be 
reversed. Public lands hold enormous potential to fuel this Nation with 
clean, reliable, and affordable energy. Accordingly, we should take 
every necessary action to improve the process that regulates the flow 
of energy from public lands to communities and businesses.
    In closing, I would like to say that industry stands ready to 
partner with the BLM, Forest Service and Congress to help identify 
opportunities and strategies for improving the permitting process.
    Madam Chairman and members of the committee, thank you for the 
opportunity to appear before you today.
                                 ______
                                 
                                 [GRAPHIC] [TIFF OMITTED] T1930.003
                                 
                                 [GRAPHIC] [TIFF OMITTED] T1930.004
                                 
    Ms. Cubin. The Chair now recognizes Mr. Mike Watford, the 
CEO of Ultra Resources.

   STATEMENT OF MIKE WATFORD, CHIEF EXECUTIVE OFFICER, ULTRA 
                     PETROLEUM CORPORATION

    Mr. Watford. Thank you very much. I appreciate the 
opportunity and the privilege to visit with you today.
    I think Ultra Petroleum must be the case study amongst the 
people visiting with you today. We come at the permitting and 
the NEPA process from one of a successful perspective, one 
where it did work, but time was a problem, and the time can 
make or break many projects.
    We, several years ago, identified an opportunity in 
Southwestern Wyoming near the Jonah field on the Pinedale 
Anticline. The Jonah field is a very rich natural gas resource. 
We think the Pinedale Anticline area is equally as rich, 
probably several times the size of Jonah in terms of estimated 
ultimate recoveries, and it is an area that Ultra, a very small 
company with little other cash flow or production, was waiting 
on this to satisfy this NEPA process and EIS and the ROD in 
order to move forward to try and grow a successful company.
    So we have a situation where we have a concept, we have 
risk takers putting up capital, putting up time, and standing 
between this is the daunting task of navigating the National 
Environmental Policy Act and acquiring this EIS on this 200,000 
acre area, which happens to be adjacent or near the Tetons and 
Yellowstone area, while sharing none of their physical 
characteristics, but certainly in that area.
    And here is what we knew about the prior and existing EISs 
being conducted in the area at the time. We watched the 
neighboring Jonah EIS be delayed by over a year over a 
threatened EPA appeal to the Council on Environmental Quality 
for unresolved bureaucratic opinions about air quality impacts 
and appropriate mitigation. We watched the Continental Divide 
EIS in South Central Wyoming stretch out to become a 5-year 
process as the land boundaries expanded and the study elements 
compounded. We watched the Jack Morrow Hills EIS in Wyoming's 
Red Desert come to a screeching halt at the directive of 
Secretary Babbitt, to start again with a new conservation-
oriented alternative to be analyzed.
    Ultra is a small company with no other significant income 
or operations, as I just mentioned, and we did not have the 
time to wait one year, let along five years.
    In addition, for the first time in the State of Wyoming, 
the BLM had exposed a limit on the number of exploratory and 
developmental wells that could be drilled on our proposed EIS 
project area by any operator until the EIS was finalized.
    We started the Pinedale Anticline EIS process in June 1998. 
It was finalized, a record of decision issued by July of 2000, 
some 25 months later, and we were very excited with that. The 
final document received the highest possible acceptance rating 
from the EPA. Most notably, the record of decision was not 
appealed by any environmental organization, local or national, 
and today, several operators, including Ultra, are actively 
drilling on the Pinedale Anticline with good success.
    The primary problem we have today is permits. Much of the 
area we have under development is limited, limited access for 
only six months out of the year. So a 1-month delay may 
ultimately mean a 1-year delay in terms of drilling wells and 
getting the natural gas on production to serve this nation's 
needs.
    Let us talk about specifics. How did the BLM, Forest 
Service land management, and the EPA air permitting processes 
result in completion of this EIS in only two years? First, the 
BLM assigned a specific seasoned employee from its district 
office to be solely dedicated to overseeing the development of 
this EIS.
    Secondly, the EPA and Forest Service were brought into the 
process early to develop the scope of the document and they 
continually were engaged in the process throughout its 
development, which avoided last-minute concerns and rewrites.
    Ultra hired a full-time environmental specialist whose sole 
responsibility was to negotiate and complete the EIS within a 
2-year time frame. We also agreed to efforts that were above 
and beyond the required minimum level of environmental 
protection, as long as they made sense economically.
    The database used, whether it was air quality modeling or 
habitat impacts, were created in the EIS in the most 
conservative manner possible in order to avoid the time 
consuming and often appealable positions of having to defend 
conclusions questionable to the environmental community. We 
worked diligently with local environmental groups who have a 
track record of legally appealing other EISs in the State. We 
promoted public input into this process, and for the first time 
in Wyoming, this ROD included an adaptive environmental 
management process, which has instituted an annual public 
participation review process designed to ensure that what was 
predicted in the EIS is, in fact, what occurs.
    Let us talk just one brief moment about the areas of 
disappointment. Ultra voluntarily committed and spent over 
$580,000 in collaboration with the Wyoming State Game and Fish 
Department, University of Wyoming, and the BLM in order to 
collect and provide important baseline wildlife data for mule 
deer, prong horn antelope, and sage grass activities prior to 
significant drilling to later compare against data collected 
for the same species during intense drilling in order to 
determine real or perceived impacts.
    The Pinedale Anticline field lies downwind from a major 
grandfathered power plant operated by Pacific Corp. The field 
also lies within an airshed of concern to the State of Wyoming 
and is consequently highlighted by input from the Southwest 
Wyoming Technical Air Forum in order to ensure compliance with 
the regional haze and visibility requirements of the Clean Air 
Act.
    Given the way the EPA air permitting process works, the EIS 
document was going to model future projected natural gas 
industry emissions from this project collectively with current 
cumulative emissions, and if exceedance were revealed, as they 
had been in the previous Jonah EIS in the area, expensive 
mitigation or emission reductions would be imposed on our 
industry, as the last activity in the door causing the 
proverbial straw that broke the camel's back, regardless of the 
significance.
    In an effort to ensure no adverse impact to the air 
quality, Ultra voluntarily invested $2.5 million to help 
Pacific Corp. purchase and install a low NOx burner 
on one of its uncontrolled grandfathered units at the Naughton 
Power Plant in order to significantly reduce the amount of 
NOx emissions.
    Effectively, we reduced NOx by about 10,000 tons 
per year, offsetting at full field development industry 
emissions of some 1,000 tons per year. The air quality 
improvements were undeniable, but expensive. Ultra sought from 
the State of Wyoming and EPA to develop Statewide 
NOx emission trading programs and we were 
unsuccessful in all of that.
    Finally, upon achieving a successful completion of the EIS, 
we face a daily struggle with an overwhelmed and understaffed 
BLM field office that is responsible for issuing all of the 
permits. There appears to be no mechanism within the BLM to 
review the changing workloads and treat the various field 
offices as business centers, thereby better aligning necessary 
staff and support needs with the resource activity level.
    Thank you very much for your time.
    Ms. Cubin. Thank you very much.
    [The prepared statement of Mr. Watford follows:]

    Statement of Michael D. Watford, Chairman, President and Chief 
             Executive Officer, Ultra Petroleum Corporation

    Ladies and Gentlemen:
    Thank you for the privilege of appearing before you today. As the 
President and CEO of an independent energy company primarily active in 
Wyoming, I can attest to the tremendous impact that Federal laws and 
regulations have on our domestic oil and gas industry, particularly in 
the western states where so much of the land and minerals are owned by 
the Federal Government. Obtaining a bureaucracy's permission for 
exploration and development activity is an essential business component 
to a successful oil and gas company--literally as important as 
obtaining the best geophysical data, conducting the most precise 
drilling activity, and completing the wells with the greatest 
engineering expertise. Complying with governmental regulations is a 
daily part of our business that can and does have a tremendous impact 
on the bottom line and I applaud you for taking the time to listen to 
us today and to learn our perspectives on what works--and what could 
stand some improvement.
    Ultra Petroleum is the quintessential success story of a small, 
independent oil and gas company. Started by a geophysicist who believed 
in a play and some investors who took the risk--Ultra came on the 
industry scene in 1996. The original management was a group of risk-
takers, believing far more in the possibility of finding natural gas in 
a wildcat area than reality was anywhere near ready to bear forth. 
Standing between this aggressive group of risk-takers and investors and 
any chance of proving the success of their instincts stood the daunting 
task of navigating the National Environmental Policy Act (NEPA) and 
obtaining an Environmental Impact Statement (EIS) that would allow full 
field exploration and development in a 200,000 acre area that is nearer 
than any other major oil and gas field to the Teton and Yellowstone 
National Parks in Wyoming, three wilderness areas within the Bridger-
Teton National Forest, and a Class I Airshed as defined by the Clean 
Air Act Amendments of 1990--all during the last two years of the 
Clinton/Gore Administration.
    We heard all of the horror stories of the EIS process and a 
Clinton-era, ``pro-green'' BLM. We watched the neighboring Jonah EIS be 
delayed by a year over a threatened EPA appeal to the Council on 
Environmental Quality for unresolved bureaucratic opinions about air 
quality impacts and appropriate mitigation. We watched the Continental 
Divide EIS in south-central Wyoming stretch out to become a 5-year 
process as the land boundaries expanded and the studied elements 
compounded. We watched the Jack Morrow Hills EIS in Wyoming's Red 
Desert come to a screeching halt, at the directive of Secretary 
Babbitt, to start again with a new conservation-oriented alternative to 
be analyzed. Ultra is a small company with no other significant income 
or operations and we did not have I year--not to mention 5--to be 
delayed. In addition, for the first time in the State of Wyoming, BLM 
had imposed a limit on the number of exploratory and developmental 
wells that could be drilled in our proposed EIS project area, by any 
operator, until the EIS was finalized. When I joined the company 
through a major management reorganization early in 1999, Ultra's 
financial future as a company was literally held hostage to the 
successful--and timely--completion of this EIS.
    The Pinedale Anticline EIS process officially began in June 1998. 
The Final EIS and Record of Decision were issued by the BLM 25 months 
later in July 2000. The final document received the highest possible 
acceptance rating from the EPA. Most notably--the Record of Decision 
was not appealed by any environmental organization--local or national. 
Today, several operators including Ultra are actively drilling on the 
Pinedale Anticline with good success and our current geologic 
interpretations indicate that potential reserves are perhaps as much as 
6 TCF. To put this in perspective, 10.2 TCF of reserves are estimated 
in Wyoming's Powder River Basin in the coalbed methane fields. Over 120 
Applications for Permits to Drill (APDs) are pending in the 
understaffed BLM Pinedale field office as operators rush to prove up 
their leases in this promising area. Pipeline capacity exists and will 
be expanded and we are all poised to do our share to contribute to 
supplying this Nation with its demands for natural gas.
    So, specific for your topic today, how did the BLM land management 
and USFS air permitting processes result in completion of this EIS in 
just two years, particularly in such a tremendously sensitive resource 
area including regional air quality concerns and crucial winter range 
and habitat impacts for mule deer and sage grouse? The answer is not 
simple and the credit is to be shared by many who took part in setting 
precedents for doing things differently--and it paid off, as evidenced 
by the active drilling today. Some things that come to mind:
    1 . BLM assigned a specific, seasoned employee from its District 
Office to be solely dedicated to overseeing development of the EIS.
    2. EPA and USFS were brought into the process early to develop the 
scope of the document and they continually were engaged in the process 
throughout its development which avoided last minute concerns and re-
writes.
    3. Ultra hired a full-time Environmental Specialist whose sole 
responsibility was to negotiate and complete the EIS within two years. 
We also considered and agreed to efforts that were above and beyond the 
required minimum level of environmental protection, as long as they 
made sense economically and truly resulted in a quantifiable 
environmental benefit.
    4. The data used--be it air quality modeling or habitat impacts--
was treated in the EIS in the most conservative manner possible in 
order to avoid the time-consuming and often appeal able position of 
having to defend conclusions questionable to the environmental 
community.
    5. Ultra worked diligently with the local environmental groups who 
have a track record for legally appealing other EIS's in the state to 
better understood their concerns and we worked to address these by 
proposing creative operational alternatives to be considered in the 
EIS.
    6. In addition, the BLM actively promoted the public input intended 
by NEPA and regularly held field trips and open houses throughout the 
EIS process--not just during the original scoping period. Although this 
was not the normal process, it has served to reduce controversy and 
improve the public's understanding of what is now being allowed.
    7. Finally, the ROD required, for the first time in Wyoming, an 
``Adaptive Environmental Management Process'' which has instituted an 
annual public participation and review process designed to ensure that 
what was predicted in the EIS (and consequently drove the mitigation 
requirements) is in fact, what is happening. The Adaptive Management 
process is intended to provide a framework in which the BLM and the 
operators will be able to respond to unpredicted environmental concerns 
or necessary management challenges without having to go back and 
develop a Supplemental EIS.
    Through flexibility and many precedent setting decisions, the BLM 
(and the Forest Service to a lesser extent regarding its 
responsibilities for air quality), worked through their respective NEPA 
permitting processes to provide timely permission to the natural gas 
industry for 700 producing wells in a 200,000 acre project area. We 
believe the Pinedale Anticline EIS is a success story that illustrates 
how Federal permitting agencies can work with the states, industry and 
environmentalists within the confines of NEPA without causing unduly 
delays to our business activities. Would I like to have started 
drilling two years earlier? You bet. Would I like the permits to drill 
be guaranteed within the 30 day regulatory period instead of the 60 day 
reality? Yes! But today, the reality is that Ultra and several other 
operators are now successfully doing our business which is drilling 
natural gas wells, we are earning a return on our invested capital and 
time, and we are working with the bureaucratic agencies and the public 
in a minimally conflictive, controversial environment. The local 
affected community fully participated in the NEPA process and 
acknowledged our right to be there and to drill wells. And we have 
acknowledged our responsibility to ensure that this is done in the most 
prudent manner with the least possible impact on the co-existing 
natural resources and other multiple use activities in the area 
including ranching, hunting, recreating and tourism.
    Lest I paint too rosy of a picture, don't let me leave you today 
with the impression that it was always smooth and that all is well in 
the hinterlands with no room for improvement in the NEPA and permitting 
process for oil and gas activities. Nor let me leave you with the 
impression that Ultra was not disappointed on several occasions by 
bureaucratic inflexibilities and regulatory restrictions that we 
believe hindered the process and missed some important precedent 
setting opportunities for future EIS across the nation.
     LUltra voluntarily committed and spent over $580,000 in 
collaboration with the Wyoming State Game and Fish Department, the 
University of Wyoming, and the BLM in order to collect and provide 
important baseline wildlife data for mule deer, pronghorn antelope and 
sage grouse activities prior to significant drilling activity, to later 
compare against data collected for the same species during intense 
drilling in order to determine real or perceived impacts--and formulate 
appropriate mitigation. Although appreciative, and it was widely 
recognized that the data provided was invaluable to enhancing 
management of these species, the BLM was unable to give us any 
regulatory incentives or subsequent APD permitting ``credit'' for this 
investment.
     LThe Pinedale Anticline field lies downwind from a major, 
grand fathered power plant operated by PacifiCorp. The Anticline field 
also lies within an airshed of concern to the State of Wyoming and 
consequently highlighted by input from the ``Southwest Wyoming 
Technical Air Forum'' in order to ensure compliance with the Regional 
Haze and Visibility requirements of the Clean Air Act. Given the way 
the USFS air permitting process works, the EIS document was going to 
model future projected natural gas industry emissions from this project 
collectively with current cumulative emissions and if exceedances were 
revealed--as they had been in the previous Jonah EIS in the area--
expensive mitigation or emission reductions would be imposed on our 
industry, as the last activity in the door causing the proverbial straw 
that broke the camel's back, regardless of the insignificance of our 
emissions when compared to other regional, grand-fathered sources. This 
is the issue that delayed a previous EIS by almost a year because of 
concern by the EPA. In an effort to ensure NO ADVERSE IMPACT to the air 
quality of the area, Ultra voluntarily invested $2.5 million to help 
PacifiCorp purchase and install a low-NOx burner on one of 
its uncontrolled, grand fathered units at the Naughton Power Plant in 
order to significantly reduce the real amount of NOx 
emissions upwind that would adversely affect the air quality models for 
the Pinedale Anticline project. Because of this investment, we not only 
avoided procedural EIS delays from concerns over any adverse modeling 
results, but we actually cleaned up the airshed for the Wind River 
Mountains by about 2,000 less tons of NOx emissions from the 
Naughton power plant per year. The NOx emissions reductions 
and consequent air quality improvements are undeniable, but expensive. 
Ultra sought from the State of Wyoming and the EPA to develop a 
statewide NOx emissions trading program, similar to that 
which is utilized nationwide for control of Acid Rain, which would have 
allowed us to recoup part of our investment from the other producers 
and pipelines in the area as they actually created emissions. The idea 
was new, precedent setting, and regulatory difficult--and neither the 
State nor EPA created a program to accomplish this, thereby missing the 
opportunity to incentivize similar emission reduction behavior from 
other industries or, at a minimum, even allow us economic reward.
     LAt the beginning of the EIS, after discussions with the 
BLM and the Wyoming State Game & Fish Department, we realized that some 
of the greatest benefits to the affected wildlife would come from 
protecting habitat in areas away from our project area--namely other 
critical wintering areas or riparian areas that were under a high 
probability of sub-division which would have a greater adverse impact 
on the species than oil and gas development. We offered to institute an 
``off-site'' mitigation fund for use by the BLM and Wyoming Game & Fish 
to actually spend industry dollars, on a per well drilled basis, to 
mitigate impacts to affected species in the locations that would render 
the greatest environmental bang for the buck, even though those 
locations may be outside of the EIS project area boundary (which was, 
in fact, determined more by the relevant leasehold and assumed geology 
situations than by any ecosystem considerations). The BLM informed us 
Interior's Solicitor Leshy issued an opinion prohibiting any off-site 
mitigation--regardless of the potential environmental benefit. This 
seemed like a great missed opportunity to us, for no reason but 
regulatory inflexibility.
     LFinally, the data gathered during the EIS process showed 
that reducing disturbance to the surface and the habitat was going to 
be one of the best ways to minimize the significant impacts from our 
operations. Drilling several wells directionally from the same well pad 
was analyzed as one possible option to accomplish this. The cost of 
directional drilling is significantly higher than a traditional well 
bore, and directional drilling has traditionally been used by the 
industry for offshore operations or to access a location that for 
whatever reason cannot be reached by a straight hole from the top. To 
my knowledge, there is no EIS in the State of Wyoming that would 
require expensive directional drilling solely to minimize surface 
disturbance. A few years earlier, the BLM had initiated a ``Green River 
Basin Advisory Committee'' process, referred to as GRBAC, which 
considered various scenarios for streamlining NEPA, including using 
royalty reductions for incentives. We sought a legal interpretation to 
determine if royalty rate reductions could be applied to the Pinedale 
Anticline circumstances. Under the authority of the Mineral Leasing 
Act, 30 U.S.C. Section 209 (1988), the Secretary of the Interior is 
authorized to grant reductions in production royalties as follows:
          L``The Secretary of the Interior, for the purpose of 
        encouraging the greatest recovery of . . . oil, gas . . . and 
        in the interest of conservation of natural resources (emphasis 
        added) is authorized to . . . reduce the rental, or minimum 
        royalty on an entire leasehold, or on any tract or portion 
        thereof segregated for royalty purposes, whenever in his 
        judgment it is necessary to do so in order to promote 
        development, or whenever in his judgment the leases cannot be 
        successfully operated under the terms therein provided.''
    We made a case to the BLM that this authority could be applied to 
the Pinedale Anticline to incentivize directional drilling which, under 
normal regulatory circumstances, was significantly more expensive and 
significantly more risky from a technical feasibility standpoint. 
Again, the BLM informed us that Solicitor Leshy had issued an opinion 
prohibiting the department's ability to utilize an eco-royalty relief 
program in such a way to incentivize such environmental protection. 
[Let me add, in the ROD the BLM did not hesitate to impose a command 
and control type restriction on drilling in certain critical areas on 
the Pinedale Anticline and did, in fact, require directional drilling 
from limited surface locations OR required the utilization of 
centralized production facilities in order to minimize surface 
disturbance. This decision is the subject of an appeal of the EIS by 
one of the operators. Although the appeal has not delayed the ROD or 
subsequent industry activity, we believe the BLM could have avoided 
this costly legal battle by being receptive to an eco-royalty relief 
provision or some other creative incentive program that would reward 
companies for doing unconventional practices in the name of 
environmental protection, instead of mandating them.]
     LAnd finally, upon achieving the successful completion of 
this EIS, we face the daily struggle with an overwhelmed and under-
staffed BLM field office that is responsible for issuing all of the 
permits to drill in this highly productive area. First of all, there no 
mechanism in the permitting process to incentivize a company to strive 
for environmental protection beyond standard operating practices, 
thereby missing an opportunity to encourage companies to ease or 
expedite the process. And additionally, there appears to be no 
mechanism within the BLM to review the changing work loads and treat 
the various field offices as ``cost centers'', thereby better aligning 
the necessary staff and support needs with the resource activity level. 
Consequently, offices like that in Pinedale, have been barraged by 
industry activity in this newly developing area, but suffer from being 
grossly understaffed to handle the new oil and gas activity, not to 
manage continuing with its other responsibilities for managing grazing 
allotments and recreational use. Subcommittees like this one today look 
for causes for procedural delays from NEPA and other environmental 
regulations when we believe many such delays could be adequately 
addressed by more flexible and appropriate staffing in the active field 
offices. I would like to encourage this subcommittee to work with your 
colleagues on the Appropriations Committee to ensure that the Pinedale 
BLM Field office is more adequately staffed and funded in this fiscal 
year and into the foreseeable future to ensure that they can continue 
timely issuance of permits pursuant to the FEIS/ROD.
    In summary, it has been Ultra Petroleum's experience that the 
National Environmental Policy Act works, albeit in a frustrating manner 
at times, and does provide for effective and sufficient resource 
extraction at the same time the environment is protected and public 
participation is allowed. It has also been Ultra's experience that the 
idea of capitalizing on or creating incentives in the marketplace or 
within the bureaucracy to better ease or quicken the NEPA process is 
grossly neglected by the Federal Government and that valuable 
opportunities for improvement are foregone.
    I thank you for your time today and look forward to any questions 
you may have. I also offer my time in the future and that of my staff 
to work closely with you and your staffs to pursue any of the market-
based incentives that I have highlighted here or any others that could 
be possibly institutionalized to ease NEPA and the Federal permitting 
process for the oil and gas industry.
                                 ______
                                 
    Ms. Cubin. I just want to start off with a couple things 
for the record. My observation has been through the years that 
I have been in Congress that the land managers are trying to do 
their job in the best way they can, considering the constraints 
that they have to work under. That would be money, that would 
be number of personnel, and that would be conflicting direction 
from different levels of the Interior Department, and that 
would be conflicting orders from different laws or different 
rules and regulations.
    So I have come to think that Congress has helped contribute 
to this problem through the last few years because we would be 
angry at the administration or at the BLM or at the Forest 
Service because they were not permitting or they were not 
moving at a pace that we thought they ought to do, so instead 
of helping them do that by getting them more resources, because 
we did not like some of the decisions, we would actually do 
less. I think the situation we are in now makes that clear.
    So I just want to say, Mr. Culp, that there are things I 
know that the BLM could have done, would have done, should have 
done, but there is plenty of blame to go around, if that is 
what someone wants to do. Frankly, I think we need to, as I 
said earlier, just regroup and figure out how we can help the 
land managers process those APDs.
    Another thing I wanted to say, Mr. Culp, in your written 
testimony on page four, you stated that Wyoming's annual 
production of natural gas from Federal lands is nearly 500 
million cubic feet. But in truth, it was well over 577 billion, 
and I just wanted that correction made for the record because I 
would not want anyone to think Wyoming was like Wisconsin or 
Arizona or something like that, or Idaho.
    [Laughter.]
    Ms. Cubin. So anyway, I just wanted to make sure it was 
with your permission that that was changed in the record or 
noted in the record.
    Mr. Culp. Absolutely, Madam Chairman.
    Ms. Cubin. This is to you, Mr. Culp. What bottlenecks in 
the oil and gas leasing and permitting process do you see that 
are caused by conflicting requirements of different laws? Are 
there any that come to mind quickly?
    Mr. Culp. I am not sure the term ``conflicting 
requirements'' exactly fits, but there are certainly a lot of 
laws that we have to reconcile with each other and comply with 
in the process of approving permits.
    Ms. Cubin. And there is not, is there, from office to 
office a standard by which you all know this is how we do that? 
Like in my office, we have instructions for when this situation 
arises, this is how we proceed. What I have observed from BLM, 
one office to another, is that one office can interpret 
something exactly the opposite of the way another office 
interprets it and there are no guidelines that are 
standardized.
    Mr. Culp. We do have manuals and handbooks for how we do 
land use planning, and how we process APDs. But I am sure you 
are right. There are different interpretations that can occur 
from field office to field office. We try to avoid that and 
work hard at avoiding it, but it does happen sometimes.
    Ms. Cubin. Does the BLM have any national guidelines, then, 
on how regional managers should handle prospective oil and gas 
lands in the planning process? Are those published guidelines?
    Mr. Culp. Yes, there are.
    Ms. Cubin. And so if there are differences, then those are 
based on interpretation of the field office, is that right? 
Would you say that was right?
    Mr. Culp. They are based on interpretation. One of the 
things we need to gear back up is an evaluation program of our 
field operations that has fallen by the wayside the last few 
years, and that is one of the ways where we work at consistent 
interpretation of the manuals and the handbooks. We are working 
on that today.
    Ms. Cubin. But we did increase the appropriation for 
permitting in the Powder River Basin to the BLM last year and 
the President's budget, as you said, asks for an additional $15 
million this year. Is that enough?
    Mr. Culp. This--it is such a volatile--
    Ms. Cubin. Well, we have to do it to the generals and 
admirals all the time, so go ahead.
    Mr. Culp. It is such a volatile situation, so I would 
almost have to say it changes day to day, but it significantly 
addresses our shortfall.
    Ms. Cubin. Frankly, you probably could not spend it all at 
one time anyway. I know in Wyoming last year that 
appropriation--I mean, the people were not in place. The things 
were not in place to get those permits done quickly anyway, so 
it did turn out to be enough money by the time it was all 
stretched out.
    This is my last question. We continue to hear claims that 
95 percent of the public lands in the Rocky Mountain Basin are 
available for oil and gas leasing. Given your position with the 
BLM, do you agree with that?
    Mr. Culp. I believe strongly that we need to go through the 
EPCA process and analyze basin by basin the resources and the 
planning decisions that have been made to really answer that 
question. Personally, I doubt that it is 95 percent.
    Ms. Cubin. I completely agree with you, but we have heard 
that over and over. Again, you are right. We need to arm 
ourselves with information, not opinions, and hopefully--did 
you say $2 million of that $15 million would be dedicated to 
that purpose?
    Mr. Culp. It is $3 million.
    Ms. Cubin. Oh, $3 million. Okay. And that is separate from 
the $15 million?
    Mr. Culp. It is part of the $15 million.
    Ms. Cubin. Okay. Thank you very much. I have other 
questions, too, that I would like to ask other members of the 
panel, and maybe we can have a second round of questions.
    The Chair now recognizes Mr. Kind.
    Mr. Kind. Thank you, Madam Chair. I appreciate your 
testimony here today.
    Mr. Culp, let me start with you. Apparently, there was a 
public lands advocacy survey that indicated it could take as 
long as 60 to 120 days before the application for permit to 
drill is approved by BLM. Does that sound accurate to you?
    Mr. Culp. As I indicated, our standard is 30 days. We meet 
the standard about 25 percent of the time. I wish it was 
better. Regarding 60 to 120 days, I have not done a survey 
recently, but it is probably reasonably accurate for an 
average.
    Mr. Kind. Clarify me if I am wrong, but in recent years, 
has the number of applications, the permits that BLM has issued 
on public lands, has that, in fact, gone up?
    Mr. Culp. It has gone up.
    Mr. Kind. And just for the record, to clarify it, you do 
not have any type of inherent hostility at BLM against oil and 
gas interests on public lands, do you?
    Mr. Culp. No. As others have indicated, we have a multiple 
use responsibility and we have to reconcile various laws.
    Mr. Kind. That is right.
    Mr. Culp. But we do not have any built-in hostility toward 
oil and gas.
    Mr. Kind. And help me understand your decision making 
process in regards to the granting of permits and how long it 
is. I assume there are competing interests that you have to 
take into consideration. I get the sense that we are not 
talking about a very centralized decision making process, but 
you have to weigh a lot of different interests, some different 
regulations and concerns into consideration before you make a 
determination, is that correct?
    Mr. Culp. That is correct, and it is very much a local 
process. You are really talking about the land use planning 
process.
    Mr. Kind. So you are going to be including some local 
officials, sportsmen's groups, for instance, fishing groups, 
for instance, in regards to the application process?
    Mr. Culp. A very open public process with lots of public 
input.
    Mr. Kind. All right. Do you have any recommendations on 
how, if at all, that can be streamlined, other than just with 
the addition of resources to you in the application process?
    Mr. Culp. There are several things that we can do and we 
are--
    Mr. Kind. Without, of course, losing the local input that 
you currently have to take under consideration.
    Mr. Culp. Right. I think we are doing much better than we 
did, say, two, three, four years ago. We are coordinating with 
other Federal agencies such as EPA and our friends from the 
Forest Service and the Fish and Wildlife Service. But there is 
room for much more improvement in that coordination. It is an 
issue like Endangered Species Act consultation, or a similar 
coordination issue that causes us to miss the 30-day processing 
time for applications to drill. So across agencies, there is 
lots of work to be done.
    Mr. Kind. Would you recommend here today against the use of 
or against the practice of consulting with local officials and 
outside groups in regards to the application process, or do you 
think that is important to be retained?
    Mr. Culp. I think it is very important to retain the public 
input to all of our processes.
    Mr. Kind. Mr. Murphy, let me turn to you briefly. I stepped 
out just at the moment when you were addressing the concern 
that many of us shared within the Sportsmen's Caucus in 
Congress, of course, the April 3, 2001, letter that we had 
submitted to Mr. Neal Stanley of the Independent Petroleum 
Association of Mountain States and Mr. Barry Russell of the 
Independent Petroleum Association of America in light of their 
testimony that was given on March 7 of this year, implying, if 
not overtly stating, that it was Mr. Stanley's belief that 
hunting is a cause of high energy prices and that consumers 
somehow subsidize elk hunters. Naturally, that got the 
attention of myself, as a member of the Sportsmen's Caucus, and 
250 of my colleagues in this Congress in regards to that 
testimony and the basis of that testimony.
    You touched upon it briefly, but let me give you an 
opportunity to expand upon that a little bit. Certainly I, and 
I know others in the Sportsmen's Caucus, do not want to believe 
that the oil and gas industry is inherently in conflict with 
these sports groups that exist throughout the country. Correct 
me if I am wrong, but hopefully, there is a way that your 
interest and the interest of sports groups can coexist in light 
of sometimes the competing interests at stake on these public 
lands.
    Mr. Murphy. Thank you for that question. I could not agree 
with you more. As a matter of act, many of us in the oil and 
gas industry are sportsmen. I did not hear the precise 
testimony. I have heard a lot about it and I have read the 
letter.
    I think that probably, like most things, it comes as a 
result of a real misunderstanding and the best way for me to 
illustrate that is a situation that has happened down in 
Southeastern New Mexico, one that I am familiar with. We have 
down there what is known as prairie chickens. They are a type 
of grouse, basically. From April through June, field activities 
are limited. The BLM had proposed that these field activities 
would be limited to an area of about 380,000 acres, I believe 
was the initial number. That is a lot of land anywhere.
    The industry got very concerned about that and we said, 
where is the scientific and factual data that supports this 
limitation on activity, and quite frankly, it was pretty 
sketchy. So we worked with BLM and we came up with a study done 
by some very professional biologists, I believe it was Auburn 
University was involved, and that area was actually then 
whittled down to about 190,000 acres.
    All I am trying to say here is that the oil and industry 
does not have, in my view, any problem with restrictions on 
critical range of any species. What we are concerned about is 
that in some cases, there are very onerous restrictions over 
very broad areas, and just as this Committee has supported the 
land inventory, these sorts of things need to be looked at in a 
scientific and factual way on the ground on a case-by-case 
basis.
    I do believe that we can coexist. I spent a lot of my time 
in the field. When I was not sitting on a rig, I was hunting 
quail. I was enjoying the area around the rig activity. So I 
know from personal experience that these activities can 
coexist.
    Mr. Kind. I thank you for your response. Perhaps you could 
help get a response from Mr. Russell and Mr. Stanley for 
clarification. It is a little unfair for me to be asking you to 
respond to testimony that they gave, but we are still awaiting 
their response to our letter.
    Madam Chair, I would like to offer at this time, without 
objection, a copy of the April 3 letter that we have just been 
talking about, for the record.
    Ms. Cubin. Without objection.
    [The letter follows:]
    [GRAPHIC] [TIFF OMITTED] T1930.001
    
     [GRAPHIC] [TIFF OMITTED] T1930.002
    
    Mr. Murphy. I would be happy to follow up and encourage 
that response as quickly as possible.
    Mr. Kind. Thank you.
    Ms. Cubin. The Chair now recognizes Mr. Otter.
    Mr. Otter. Thank you, Madam Chair. For the record, Madam 
Chair, I do have an opening statement, but so that I can get on 
with the questioning and perhaps be enlightened even more 
beyond these gentlemen's testimony, I would like to offer this 
for the record, without objection.
    Ms. Cubin. Without objection.
    Mr. Otter. Thank you, Madam Chairman.
    Mr. Watford, I am very impressed with your ability to raise 
money in the climate, I guess it was 1997, is that right, that 
you first started raising money for exploration?
    Mr. Watford. Nineteen-ninety-six, 1997, yes, sir. When we 
did not enjoy near the price that we enjoy today on natural 
gas. And I say that because I am an old gas and oil driller 
from the Kentucky, Tennessee, and Ohio, southern Ohio region, 
about 500 wells. But we only went to the Knox zone, so we are 
not talking about the kind of depths that I am sure that you 
folks go to.
    It was my experience that unless you either married the 
boss's daughter or inherited a fortune from your in-laws or 
your grandfather, it was pretty tough to raise money for 
exploration unless there was a known body of gas or oil. Would 
you briefly go through the process of how you got folks to 
provide you the investment capital to file the EIS statements 
and to comply with all the rules and regulations that NEPA and 
BLM and everybody else had?
    Mr. Watford. I will try. The oil and gas business tends to 
be as very high-risk business, especially on the exploration 
side. Ultra was a small cap company that was started up with 
speculative capital, folks who were willing to invest capital 
either assuming probably no return or hundreds of percent rate 
of return.
    Mr. Otter. Was there any tax incentive for that?
    Mr. Watford. Yes, there are, with the intangible drilling 
costs, yes.
    Mr. Otter. Okay.
    Mr. Watford. The company went through--I mean, I actually 
did not join Ultra until early 1999, so there were some folks 
prior to me that raised the initial capital and then I have 
raised subsequent capital going forward, and the company was 
able to put together a unique land base in southwestern 
Wyoming, basically on a concept that some geologists and 
geophysicists had who had been involved with a much larger 
company years before and had watched the Jonah field. And the 
Jonah field came into its own, I do not know, four years ago or 
so, in a very unique way, but the success of Jonah just helped 
amplify, I guess, the concept that the anticline was more of 
the same and that you had to have people who had invested in 
oil and gas before, who had had some success and could 
understand the geology of the field to put up some risk dollars 
to give you a chance to succeed.
    Now, Ultra almost failed. Ultra literally almost failed in 
early 1999, and that is part of the reason why the board 
brought me in, to help fix it. It was literally a train wreck 
and we got it turned around, changed out a lot of staff, had to 
sell some assets off to save it, et cetera, but we got it 
moving forward.
    But the final issues that we had to have were a couple of 
regulatory items, one of which was this Pinedale Anticline EIS, 
that if it had gone on for five years, Ultra would have failed 
and you would not have any drilling going on up there today and 
you would not have that natural gas resource coming that is 
largely going to California to serve some of their problems 
with the power industry.
    So it was a lot of confidence people had in the upside, 
that once you were able to gain access and do your exploration 
drilling, that you come behind it with the developmental 
drilling.
    Mr. Otter. Thank you, sir.
    Mr. Murphy, as I explained my very short tenure as a 
wildcatter, I actually found out that finding the reserve and 
then drilling it, getting into it and producing the well was 
only part of it. Then it was getting onto a pipeline, and then, 
of course, you also had to get somebody to buy it, and if you 
could not find somebody to buy it, you capped the well and you 
waited until either the price adjusted or the supply ran down. 
So we ended up with a lot of capped wells. I suspect most of 
those are gone today.
    But my question of Mr. Watford and of you really goes to 
the heart of inadvertently, the extreme environmentalists and 
folks who want to shut down this speculation and this 
exploration are, in fact, creating one of the greatest 
monopolies for the big oil companies, the big gas companies, 
because they are the only ones that can really afford all these 
regulations, all these EIS statements, unless you are a good 
enough talker, like Mr. Watford, in order to talk pretty hard-
earned bucks into filing a government report. Would you agree 
or disagree with that, Mr. Murphy, and if so, why?
    Mr. Murphy. Well, I think I certainly would agree with it. 
I think what you find is that, first off, the independents are 
the wildcatters. We drill 85 percent of the wells. The typical 
cycle that you have seen so often is that a guy like me and my 
colleagues will risk a lot to go out and test a feature that we 
have an idea. Someone told me one time that oil is discovered 
in the minds of men and women, and that is, I think, where you 
start from, and it is a long road after that.
    I think one of the reasons that you hear so much from 
independents about the frustration that we feel is that we are 
small business owners, and like every small business owner, you 
have to wear a lot of hats. In other words, I have to know 
something about accounting and land and geology and engineering 
and permitting and everything else, so I see the breadth of 
this process from beginning to end, from cradle to grave.
    I think in the larger companies, there is probably not as 
big of a sense of frustration because they have people doing 
segments of it, and so there is very few individuals that 
experience this whole process of, many times, years and years 
and lots of money that goes into it. And so that is probably 
why you hear from independents, because we see that and it is 
an incredibly frustrating process.
    Mr. Otter. I guess just a yes or no, Madam Chairman, if I 
might, just a yes or no to this one. Would you agree or 
disagree that the process, the regulatory process, as extensive 
and as tough as it is, has a tendency to keep players out of 
that market?
    Mr. Murphy. Absolutely.
    Mr. Otter. Thank you.
    Ms. Cubin. Thank you. The Chair now recognizes Mr. Inslee.
    Mr. Inslee. Thank you, Madam Chair.
    First, I want to thank Mr. Murphy for having the courage to 
come before a House Committee from Roswell, New Mexico, and 
expect the penetrating questions about our secret programs at 
the area near Roswell, but we will defer our questions in honor 
of your attendance here today.
    [Laughter.]
    Mr. Inslee. I would like to ask a question to any of the 
members of the panel of any of your participation--I would like 
to ask about any of your participation in the administration's 
energy task force that is chaired by the Vice President. Let me 
ask first, have any of you been involved in any of the meetings 
with the task force chaired by the Vice President?
    Mr. Culp. The quick answer for me is no. However, there was 
a wide net put out for ideas for submission to the task force, 
and BLM people, including myself, did provide ideas. Larry?
    Mr. Gadt. We did the same. The Forest Service, USDA, we did 
the same through the same group that Pete referred to. I have 
not gotten that high up to be at that other level yet, but we 
have been participating with Interior in sharing those ideas.
    Ms. Cubin. Mr. Gadt, would you identify yourself for the 
record, and I will give you extra time, Jay.
    Mr. Gadt. I am sorry. I am Larry Gadt. I am the Director of 
Minerals and Geology for the U.S. Forest Service, USDA.
    Mr. Inslee. Mr. Gadt, could you tell us what 
recommendations were made to the task force regarding the 
roadless policy by the Forest Service?
    Mr. Gadt. I am sorry, Congressman. Would you repeat the 
latter part of that?
    Mr. Inslee. Could you tell us what recommendations to the 
task force were made by the Forest Service in regard to the 
roadless area policy?
    Mr. Gadt. The recommendations of the task force that I was 
involved with, there were many administration initiatives that 
are going to be taken as part of that. I do not have privy to 
what the final recommendations are going to be, but we did 
provide input as to recent regulatory and administrative 
policies that have taken place that were going to be laid on 
the table.
    Mr. Inslee. Let me ask, just tell us what knowledge you 
have as to what recommendations were made, if any, regarding 
the roadless policy. In other words, did the Forest Service 
suggest that the roadless policy be abandoned? Did they suggest 
it be modified? Did they suggest it be maintained in the form 
proposed by the Clinton administration? What could you tell us 
about that?
    Mr. Gadt. I was not asked that question in that way. I was 
asked what recent initiatives had been taken on that the 
administration was going to look at. I do not know if I am 
getting your question, but we did not recommend one way or 
another about the roadless policy, but it was one of the 
initiatives that would be reviewed.
    Mr. Inslee. What did you say about it? If you did not 
recommend, what did you say about it?
    Mr. Gadt. Well, they have not asked me yet, but just that 
it is being reviewed.
    Mr. Inslee. Okay. I am really sorry, maybe I did not 
understand, but I would assume the White House asked for some 
input from the Forest Service about the roadless policy, and if 
that is true, what did the Forest Service tell the White House 
or the task force?
    Mr. Gadt. Well, to the best of my knowledge, the Forest 
Service has not told the White House anything. We did recommend 
that the roadless policy be one of the initiatives that the 
energy policy group take a look at.
    Mr. Inslee. And did they ask for your recommendation 
whether it should be implemented or not?
    Mr. Gadt. To date, they have not.
    Mr. Inslee. So they have got an energy task force, but they 
never asked the Forest Service whether that should be 
implemented, is that your understanding?
    Mr. Gadt. They have not asked me. I do not know about the 
rest of the Forest Service, but no one has asked me yet as a 
representative on that policy group.
    Mr. Inslee. Okay. The other three gentlemen, have you 
participated in the task force, or anyone from your 
organization, to your knowledge? They are all shaking their 
heads in the negative.
    I wanted to ask, and I am trying to remember which 
gentleman talked about this issue--Mr. Murphy, I was reading 
one of your testimonies and someone was talking about 
incentives for royalty reduction to incentivize certain 
environmentally friendly activity. Was that Mr. Murphy? I was 
reading--
    Mr. Murphy. It might be contained in my written testimony. 
I do not believe I--
    Mr. Inslee. Yes--
    Mr. Watford. I think it was in my written testimony.
    Mr. Inslee. Mr. Watford?
    Mr. Watford. Yes.
    Mr. Inslee. Yes, I believe it was. I am sorry. In your 
written testimony, as I understand it, you were suggesting that 
the Federal agencies consider creating royalty reduction 
programs to incentivize certain environmentally friendly 
activity and drilling. For instance, you suggested that there 
be a royalty reduction to consider asking producers to have one 
directional well instead of several non-directional wells, if I 
understand what you were saying.
    As I understand it, that would essentially be asking the 
taxpayers to pay the producer to do something in an 
environmentally friendly way, and I just wonder, does that not 
really put the shoe on the wrong foot as far as responsibility 
for acting in an environmentally responsible manner? In other 
words, why should that be the taxpayers' burden? Why should it 
not be the applicant's for the permit to do the drilling?
    Mr. Watford. I think the concept here was looking for 
alternative ways to, at the end of the day, end up with a 
balanced use of public lands which would allow the natural 
resources to be developed and also allow all the environmental 
issues to be addressed and everyone to live easily with each 
other.
    So the intent, whether it is that example or not, is to 
create incentives where it is not just a, you can do this or 
you cannot do that, where there is some gray area where, hey, 
if we can also include it in the written testimony, I think was 
the concept that was offered to the BLM and the Forest Service 
at the time, that we will pay an additional fee per well that 
you can use to mitigate environmental issues elsewhere and we 
will pay that here in this area where we are going to drill 
wells and you can have some cash here to go do something else, 
because one of the issues is fencing in the areas and 
subdivisions being built and things like that, closer to the 
parks, not necessarily where we are. But we are trying to come 
up with additional ways that they could have cash to help in 
the overall mitigation and resolution of some of the larger 
environmental issues and not just try and be totally black and 
white on this small amount of land that we are dealing with.
    So I think that is my issue in a larger scheme, more so 
than whether royalty relief itself is the issue. I think the 
concept was, are there other incentives that we can bring to 
bear here that, at the end of the day, is win-win for both 
sides.
    Mr. Inslee. Thank you. Thank you, Madam Chair.
    Ms. Cubin. Thank you. The Chair now recognizes Mr. Flake.
    Mr. Flake. Thank you, Madam Chair, and thank you, 
panelists. I suspected I was sitting next to a former 
wildcatter when he uttered the phrase, ``the price of gas that 
we now enjoy.'' I grew up on a ranch and we used to enjoy high 
beef prices, but we do not enjoy the price of gas.
    But on that subject, Mr. Culp, could you tell me, is there 
any process, given the high price of gas at the moment and the 
need that we have to explore, is there any fast track authority 
or is there any process by which to expedite requests? Has that 
been proposed, perhaps, by your organization, or is that 
contemplated at all?
    Mr. Culp. There are a series of complicated statutory and 
regulatory requirements that we have to meet in order to lease 
and to approve applications to drill, and a lot of that is 
irreducible in terms of its complexity and time frames.
    I think there are a number of things that we can work on 
and can improve, particularly, as I said before, coordination 
between the Federal agencies where we have to work together on 
things like the Endangered Species Act consultations. There are 
business processes where we are trying to make improvements. 
Electronic processing of permits was put in place last year. We 
are not doing that everywhere yet, but we would like to expand 
it all over the country.
    Mr. Flake. Along those lines, you mentioned that the major 
holdup is interagency cooperation, when you have to go to other 
agencies. Could legislation be fashioned or an executive order 
or whatever else that requires or sets time limits on other 
agencies responding to your request during these times, or how 
can we expedite it?
    Mr. Culp. Certainly, that is something that could be done, 
yes.
    Mr. Flake. Others have suggested that in States, where 
States are already conducting evaluations of permitting on 
private land or State trust land or what not, that you could 
possibly contract some of the valuation out. Is that a 
possibility?
    Mr. Culp. That is something we have the authority to do. It 
is complicated, however, because most States are organized 
differently than the Federal Government. Most States have an 
organization like an oil and gas commission that does not have 
the range of multiple use management responsibilities that we 
have. So if you are going to contract out to a State, we would 
probably need to work out an agreement with the Department of 
Natural Resources and the oil and gas commission to do all the 
kinds of work that we do. It is a possibility.
    Mr. Flake. But that is possible?
    Mr. Culp. Yes.
    Mr. Flake. Thank you.
    Ms. Cubin. Since this hearing actually was scheduled from 
two to four, I would like to start a second round of questions.
    Mr. Watford, how soon do you believe that staff additions 
are necessary in the Pinedale office to avoid unnecessary 
delays?
    Mr. Watford. Yesterday would be the answer in one word.
    Ms. Cubin. Yesterday would be good.
    Mr. Watford. But the real issue here is, even with the EIS 
behind us and record of decision allowing up to 700 surface 
locations on the Pinedale Anticline, that is 200,000 acres, 
some two-thirds of the Anticline acreage is still limited to 
access during the wintertime. It is set aside as winter 
protection for big game coming back down. And so we are really 
restricted, and we have sage grass restrictions in another part 
of the acreage.
    So, effectively, it is almost a May-June to end of November 
drilling season for two-thirds of this acreage, which is very 
difficult to try and get in and drill a significant number of 
wells, get them completed, get the pipelines built, get them on 
production to serve our growing energy needs here. So when we 
get a delay of 30 or 60 or 120 days, as someone mentioned 
before, then it throws us a year later in terms of access and 
the ability to drill the well and get the gas on. So, again, 
time is killing us. You run your economics and you just add 
another year there for lack of access and lack of drilling.
    So anything we could do to expedite that, if it is just 
whether you subcontracted it to the State of Wyoming, as was 
suggested over here, or whether you have a team of folks you 
can put in there just for the summer, because again, in this 
unique situation, it is a summertime activity, effectively, 
summer and fall where we can get in. So if you could bring in a 
team and just address the APDs and permits for 90 days during 
the summer, that could help the staff on the ground now, that 
would certainly be very helpful to us.
    Ms. Cubin. Well, you can see how BLM is between a rock and 
a hard place in trying to get the employees necessary, to get 
the people on the ground necessary to do it. And while you 
would think the Pinedale Anticline ought to have the priority, 
move people over there, well, they might think that over in 
Powder River Basin, as well. So the labor pool or the pool of 
people of experts is, I would think, limited, and Mr. Culp, 
help me with that.
    What sort of a time are you having even with the increased 
appropriations hiring people to do these jobs, and have you 
guys thought out of the box, like Mr. Flake suggested, some 
ways to speed this up other than just hiring more BLM 
employees?
    Mr. Culp. I think you put your finger on a big part of the 
problem. It is not just Pinedale. It is Pinedale and Buffalo 
and Rock Springs and other offices in Wyoming. So our ability 
to move people around to solve the problem is limited. We just 
need more people, as you said, and that is why the budget for 
next year is really important. Even in terms of an option like 
contracting with the State, it would still be a budget question 
as to how that would be covered.
    So I think the principal thing we need is support for the 
budget increase so that we can deal with it. It is a bigger 
workload, and frankly, we do not see it going away. We see it 
being there for at least the next 10 years.
    Ms. Cubin. Yes. I suspect that is very true. As far as 
support for the appropriations, I have made the point to the 
White House, maybe unnecessarily, and to the Vice President 
that the Interior Department is really one of the only agencies 
in government that actually generates any sort of significant 
revenues, and so it is a good investment to get the people on 
the ground, to get the permitting done in areas that we already 
know can be explored and produced.
    I wanted to ask Mr. Watford, as well, do you think that all 
the other operators in the Pinedale Anticline share your 
viewpoint that the EIS was a success story?
    Mr. Watford. Well, I think they agree that it was a success 
story. I do not think they all agree with the manner in which 
we went about it. I think the fact that we tried to go above 
and beyond the minimal standards to comply with the 
environmental laws probably alienated some of them. We 
definitely had a goal. I mean, we are driven by what the long-
term benefit was to the company and--
    Ms. Cubin. That is what I was going to say. Here you are, 
producing.
    Mr. Watford. That is right.
    Ms. Cubin. So there you go. Would you expand for me on what 
the adaptive management process is and how it works?
    Mr. Watford. Why do you not answer, Laurie.
    Ms. Cubin. Would you please identify yourself?
    Ms. Goodman. Yes. My name is Laurie Goodman and I am an 
environmental specialist for Ultra Resources. The adaptive 
environmental management process is actually state of the art 
in the Pinedale Anticline. It came to the BLM from the 
Environmental Protection Agency as an example or a prototype to 
see how it would work, and what it basically is is a very 
public process. It is a group of task groups and working groups 
assigned that draws together State officials, county officials, 
the road and bridge workers, the environmentalists, the 
industry people, and we meet regularly to set up processes to 
determine if the impacts that were estimated in the 
environmental impact statement are actually what is happening.
    So it is an on-the-ground, on-time process to keep that in 
check, whereas typically, once you finish an EIS, unless some 
other major action happens, there is no way to go back and--
    Ms. Cubin. It is over.
    Ms. Goodman. --and reassess the goals, and this was 
something that EPA thought would give the public an extra 
degree of comfort in being able to say, yes, we did get it 
right. From the industry's point of view, where we oftentimes 
think that the required mitigation is more severe than will 
ultimately be required, the adaptive management process is a 
tool to keep that in check, also, and say if, in fact, the 
amount of drilling that we estimated is not really that high, 
the area did not turn out to be quite what it was, so perhaps 
the additional environmental protection required will not be 
necessary, we could go back through the adaptive management 
process and make some adjustments that way.
    I can tell you, Congresswoman, it ultimately, I think, is 
viewed to have great success. It is pretty bumpy right now. It 
is a public process that everybody is just getting used to and 
is taking a huge amount of resource time of the BLM staff, and 
it is one more reason why I think when people want to go above 
and beyond in the environmental process, the agencies have to 
be given staff support to be able to do that, because this 
requires them to have monthly meetings, it requires them to do 
field trips, it requires them to send out e-mails, all things 
that are above and beyond their normal workload.
    Ms. Cubin. Well, I think that demonstrates that if 
politicians will stop politicizing the issue and everybody 
agree to a few things, we are in an energy crisis, we have fuel 
supply in the lower 48 that we could use, that we need to get 
to it in the most environmentally friendly way we can, and we 
need to get it out. If we could all work together to do that, I 
think this adaptive management policy, it is another way to do 
it and I would just hope that, as politicians and as leaders, 
that we try to get our country out of this crisis as quickly as 
possible instead of arguing over whether 60 million acres of 
roadless is appropriate or whether it is not. Let us just look 
at the facts and get with it.
    The Chair now recognizes Mr. Kind.
    Mr. Kind. Thank you, Madam Chair.
    Mr. Culp, getting back to you, BLM is anticipating what, 
approximately 2,600 APDs for the current fiscal year?
    Mr. Culp. Correct.
    Mr. Kind. And that is roughly an average of the six prior 
years, but in 2002, you are anticipating a significant jump, up 
to 4,100 APDs, is that correct?
    Mr. Culp. That is correct.
    Mr. Kind. And you are taking some steps right now in order 
to analyze whatever impediments might exist in regards to 
accessing these energy resources on public lands or trying to 
streamline the process. But in light of such a significant 
short-term increase in APDs that you are contending with, do 
you have a high degree of confidence you are going to be able 
to address this huge plus-up in APDs that is coming in the next 
year or so, given the fact that you are already facing a 
backlog on a lot of these applications today?
    Mr. Culp. We feel reasonably confident that we can achieve 
those numbers. An awful lot of the 4,100 that you mentioned are 
APDs in the Powder River Basin that we have not been able to 
process because we have not yet completed the environmental 
work. In March we completed an environmental analysis for 
drainage that is going to allow us to process up to 2,500 more 
APDs there in the Basin. We are also working on ways to group 
the APDs in pods to simplify the process. So, yes, I feel 
pretty confident that we will be able to hit the 4,100 with the 
budget for next year.
    Mr. Kind. We are not going to be facing an even more 
significant backlog or a delay in the application process?
    Mr. Culp. You have to remember that this is a very rapidly 
developing situation. Just two years ago, we were talking about 
using the Powder River Basin as an example, a cumulative 
development of 5,000 coal bed methane wells. That has jumped up 
now to 50,000 wells that we are examining in the new EIS plan 
amendment process. So it has been a very, very volatile 
situation. And so for me to say that we will not have another 
backlog develop is pretty tough in this environment.
    Mr. Kind. Thank you. That is all I have, Madam Chair. Thank 
you.
    Ms. Cubin. Thank you. Mr. Otter?
    Mr. Otter. Thank you, Madam Chairman. Mr. Gadt, I would 
like to follow up on a couple of questions that Mr. Inslee 
asked you relative to your involvement with the present 
administration and any questions or input that you may have 
been asked for by the administration on the energy policy and 
the public lands involvement in solving part of our energy 
policy.
    In your normal course of work, would you be required to 
provide input to the administration for this kind of an effort 
to resolve the energy policy?
    Mr. Gadt. Yes.
    Mr. Otter. And did you file an official report with the 
Clinton administration when they established both the monuments 
and the roadless areas?
    Mr. Gadt. Well, I will differentiate between the monuments 
and the roadless areas. On the monuments, no.
    Mr. Otter. You did not on the monuments?
    Mr. Gadt. We did not file an official report. If you are 
referring to me as the staff director, no, I did not on the--
    Mr. Otter. And what about the roadless?
    Mr. Gadt. And on the roadless, I had members of my staff 
that served on the EIS team providing input during that whole 
process for--I had two staff members that served on that, a 
professional geologist and a support staff person.
    Mr. Otter. And was this official input? Was this written 
testimonies and reports?
    Mr. Gadt. We provided written information. We had a 
geologist on the team and he provided written information to 
address the different issues that the roadless team was dealing 
with. Did I answer that question?
    Mr. Otter. What I was trying to pursue there is that it 
would seem like there was a lot being made of the fact that 
here you are, quote-unquote, the ``professional'' on public 
lands for this specific thing, and yet, this administration had 
not asked you for your input. I wanted to know, prior to 
establishing 50-some million acres and locking up some 50-some 
million acres of roadless area away from potential production, 
possibly, how much input did you have into that in the 90-day 
period that was provided, and if you did have that input, Madam 
Chairman, I would ask that that information be made available 
to this Committee.
    Mr. Gadt. Congressman, we provided information to the team 
regarding the location and the quantity of our estimates of the 
minerals and energy resources that was associated with the 
areas that we knew of where there were resources there on the 
ground. We provided that information to the analysis team, made 
them aware of where the location was, our estimates of the 
quantity, that we worked with USGS and DOE on those estimates, 
and we made that aware to the team and the policy makers made 
the decision that the other values that were associated with 
those areas--and I am giving you my interpretation--the policy 
makers made the decision that the values that were in excess of 
what it is that we portrayed to them the values of the 
resources.
    Mr. Otter. Would you draw that same opinion today?
    Mr. Gadt. On the values?
    Mr. Otter. Three years ago, we did not have an energy 
crisis.
    Mr. Gadt. Okay. On the values?
    Mr. Otter. Yes.
    Mr. Gadt. I will continue to encourage--I did the previous 
administration and I will do the same with this 
administration--I will encourage them strongly to consider 
those values in making whatever revisions, if any, are made, to 
make sure that that consideration is done. And I will continue 
to insist it. I do not know how else to do that as a 
professional.
    Mr. Otter. I understand that, and I appreciate your 
professionalism in answering those questions.
    Mr. Culp, I am interested in response to Mr. Flake's 
question about the State maybe not having the same mission or 
the same direction in making its decisions about its land use. 
When Idaho became the 43rd star on that flag, we got Section 16 
and 36--out of every 36 square miles--we got two sections, and 
so we have a lot of public lands in Idaho.
    Mr. Culp. Right.
    Mr. Otter. I would hope that the BLM would share the 
opinion that the State of Idaho cares just as much about its 
lands as the BLM might care about the land that it oversees. 
Did you have some question in your mind about whether we have 
recreation and we have habitat and we have all other kinds of 
activities on our State lands and we share, I think, the same 
enthusiasm for maintaining these lands in the best and highest 
possible use and environmental status as possible?
    Mr. Culp. I certainly would not dispute that. I was simply 
making the point that organizations in some States are 
considerably different, particularly where there is an oil and 
gas commission and a separate Department of Natural Resources. 
Our mission is multiple use management, whereas these oil and 
gas commissions tend to have a mission of optimizing 
development of the oil and gas resource only and do not have a 
responsibility to look out for other resource values.
    So what we would probably have to do, is look to a 
combination of State agencies that would have similar 
responsibilities to ours and could do that kind of work. But I 
did not at all mean to question whether States have the same 
mission for their public lands that we have for the Federal 
public lands.
    Mr. Otter. Thank you, sir. Thank you, Madam Chairwoman.
    Ms. Cubin. Thank you.
    I have one last question, because I forgot to ask it 
before. I am talking about, again, thinking out of the box to 
try to get things accomplished that under other circumstances 
we could not get accomplished. Entrance fees at the national 
parks are now 80 percent dedicated to the park in which they 
were collected. It used to be that all of the fees for the 
parks went into the general fund and then we appropriated the 
money back to the parks. But now 80 percent of that goes to the 
parks where it is generated.
    Is it feasible, and would you--I would like to ask all of 
you this question--would you support a process whereby to help 
solve the problem of personnel in the BLM offices where a 
portion of the Federal royalty collected would be dedicated to 
that office? Do you see what I am asking? In other words, where 
the most work is and where the most production comes, then that 
would go to that office instead of to an office where there was 
not so much activity.
    I do not know if that is reasonable with the BLM. It has 
worked out very well with the Park Service. Big parks like 
Yellowstone had very expensive backlog maintenance. They needed 
new sewer systems. They needed major maintenance projects, and 
because they cost so much money, they were always pushed to the 
back so we could get a whole bunch of little things off the 
books.
    Just offhand, if each one of you would give me your opinion 
on that sort of a possibility.
    Mr. Murphy. Congresswoman, I think it is an excellent idea, 
and I think it not only would help with some of the practical 
problems, but it would also help to provide an incentive for 
local offices to consider energy development and a very real 
way of funding that development. I think that is one of the 
major problems in the system, is that the managers have only so 
many resources and they have to listen to the priorities that 
are being expressed from above. I think one of our frustrations 
is that it does not seem to us on the ground that energy has 
been one of those priorities and we think it should be.
    Quickly making one other point is that State transfer, the 
concept of transferring some of these things to the State, is 
not a new idea. It has been around for a number of years. We 
think it ought to be done legislatively for a number of 
reasons. We tried to encourage the last administration to at 
least begin that process. It never really got any traction. It 
does not necessarily mean that all of the functions have to be 
transferred to the State. Most of the NEPA process is on the 
surface. The downhole approval process can be accomplished very 
well by the State agencies that do it on State lands and fee 
lands, and like the State, the oil conservation division. So it 
does not have to be an all or nothing thing. It seems to me 
that you could break that process up and transfer some of it, 
at least initially, and see how that works.
    Ms. Cubin. Thank you.
    Mr. Watford. I think your idea is outstanding. I think the 
concept of basically making each field office a business center 
sort of mirrors a business model and then that helps them 
prioritize what they are doing. Now, I naturally would 
prioritize in economics. They are not going to be able to do 
that all the time to meet all their full range of 
responsibilities. But clearly, if they had a sense of the 
revenue that the effort their team was putting forth was 
creating on behalf of their area and the Nation at large, it 
would be very beneficial and it will help them allocate 
resources and see what they are doing and drive the 
accountability down.
    I think the answer that Laurie gave you for your question 
about that ongoing management process is the same sort of 
concept, one of ongoing accountability, and that is what you 
need to have.
    Ms. Cubin. Mr. Culp? There you are, you poor thing.
    [Laughter.]
    Mr. Culp. Well, this is an idea where I cannot speak for 
the administration.
    Ms. Cubin. Right. I understand that.
    Mr. Culp. But I would point out that we would be back to 
the complication of how mineral revenues are distributed. 
Basically, the formula requires that half are returned to the 
States.
    Ms. Cubin. Right, and this would be out of the Federal 
share.
    Mr. Culp. There clearly would be an issue if we tried to 
tap the State share.
    Ms. Cubin. Thank you.
    Mr. Gadt. Madam Chairman, I would like to respond to that.
    Ms. Cubin. Please.
    Mr. Gadt. I will reiterate what Pete said. I will not speak 
for the administration here, but I am very enthused about that. 
That is something that has been in my mind for a couple years 
and we are in the process now of trying to get the skills that 
I need available to me to kind of craft that to see what it is 
that we can do with that and start running that through some 
traplines to see what we can do with that. But I think that is 
a wonderful opportunity to do things, like the workforce on the 
ground as well as do some reclamation work and I think that 
would be good for the communities. Most of those are rural 
communities where these resources are at. So I am very 
enthusiastic about that.
    Ms. Cubin. I would ask you, then, that we will be in touch. 
We would like to coordinate some efforts on that. I do not know 
if it will work. No, Mr. Smith, you are not escaping this. But 
it is worth looking into and I would just encourage all of you 
to submit any other ideas that you have. We all have the same 
goal and let us figure out how to get there.
    Mr. Smith, would you like to answer?
    Mr. Smith. Sure. I was just going to respond, and without 
saying what everyone else has said, I think that just simply 
throwing more money at it is not going to solve the problem. I 
think there are huge structural issues within the BLM that need 
to be addressed before money starts being thrown at field 
offices.
    For one, staffing reflects field offices' priorities. A 
great deal of power is vested in the field office. State 
offices have very little influence over what the field offices 
do in many ways. I think until field offices and the agency as 
a whole have some clear direction with regards to oil and gas 
development, that just simply throwing more money at it could 
result in bigger problems than what we currently have.
    As a point of reference, though, in the mid-1980's, there 
were 1,800 oil and gas professionals in BLM's fluid minerals 
program. Today, there are 695. That represents a very small 
fraction of the whole agency, and so I think before a funding 
device is figured out, the bigger picture of how you reshape 
the organization to use new technologies, to use new processes 
is the first step.
    Ms. Cubin. Thank you. And were you not the lucky one that 
Mr. Kind did not ask to repudiate what the President of IPAMS 
said about wildlife mitigation.
    Mr. Smith. I would have really enjoyed responding to that, 
actually.
    [Laughter.]
    Ms. Cubin. Next time, speak up.
    [Laughter.]
    Ms. Cubin. We sincerely thank you for your time. We thank 
you for your testimony and your thoughtful answers to 
questions. I am sure that the members will have some written 
questions that they would like to submit and we would ask you 
if you would not mind doing that.
    This hearing is adjourned.
    [Whereupon, at 3:36 p.m., the Subcommittee was adjourned.]
    [Additional material supplied for the record follows:]

  Excerpts from: ``Exploring for Reinvention: Dimensions of Customer 
Satisfaction and Factors Limiting Reinvention within The Bureau of Land 
Management's Oil and Gas Program'' by Marc W. Smith, Doctoral Student, 
    University of Colorado at Denver; Director of Public Lands and 
   Environment, Independent Petroleum Association of Mountain States

Abstract
    The management of public lands in the United States has seen a 
major paradigm shift in the last decade. Conservation, in the 
traditional utilitarian sense, has been replaced by preservation as the 
underlying normative assumption guiding policy decisions. In light of 
this shift, scholars have noticed changes in management priorities, 
which some claim have displaced the quality of services to the more 
traditional users of public land (such as oil and gas companies). 
However, under the same Administration which ushered in many of these 
policy changes for land use, a new management directive was also issued 
to improve customer service for all users of public lands. This 
movement was of course, the ``Reinventing Government'' movement 
embodied in Vice President Al Gore's National Performance Review.
    The purpose of this study is to ask: Has reinvention occurred in 
the Bureau of Land Management's Oil and Gas program? And, if not, why? 
The specific objectives of this are study threefold: 1) to gauge the 
perceived level of customer satisfaction for oil and gas companies 
operating on Bureau of Land Management (BLM) managed public lands; 2) 
to explore how various dimensions of customer service affect overall 
customer service; and 3) to identify factors limiting reinvention. In 
the first (I) section, a brief background is provided on the BLM effort 
to reinvent its oil and gas program. Section II examines the 
shortcomings of the BLM's reinvention through analysis of a regional 
survey of oil and gas companies that operate in 13 western states. In 
this section, dimensions of customer satisfaction (Cultural, 
Structural, Procedural, Ethical, and Environmental) are explored to 
identify the relationship between customer-identified issues (elements 
of customer satisfaction) and overall customer satisfaction. Section 
III focuses on internal and external factors limiting reinvention. 
Following this discussion, some conclusions are offered in Section IV. 
Section V provides suggestion for reviving the reinvention effort.
Conclusion
    The findings of this study point to both barriers and possibilities 
for reinvention. A frank discussion of these barriers and opportunities 
is a necessary starting point and one that should include the customers 
and citizens the BLM serves. The Agency is faced with factors both 
inside (internal) and outside (external) of its control that must be 
addressed before reinvention can occur. It is also faced with an 
increasingly complicated mission that demands a thoughtful strategy and 
leadership to steer.
    Many possible conclusions could explain the low customer 
satisfaction ratings the BLM received on its reinvention effort. The 
most obvious explanation is that shifts in policy away from multiple 
use and toward preservation and recreation have impacted the quality of 
service provided to the oil and gas industry. Changing priorities and 
reallocation of resources can be seen affecting timeliness, costs of 
environmental documentation and other aspects of the oil and gas 
program. Budget burdens have been addressed in reinvention, but not 
through increased efficiency. Instead, reinvention has meant a transfer 
of financial burdens from the agency to the industry intended to be 
served. It is difficult to overlook these changes, especially when new 
programs for species recovery, wilderness study, and recreation 
continue to take up larger portions of Interior's budget. If this 
direction continues unaltered, the oil and gas program may become 
increasingly understaffed, existing only to fund preservation 
activities through the mechanism of cost recovery.
    Internal and external factors limiting reinvention are difficult to 
tease apart; for every issue identified in this report, both sets of 
factors were effecting customer satisfaction. A BLM report (1996) 
describing the barriers to timely processing of APDs [Application for 
Permit to Drill] is good example of issues (internal and external) that 
the Agency determined were limiting its ability to meet customer 
expectations.
    Issues were identified by the Team which result in delays in 
processing APDs. These include conflicting priorities, poor 
understanding of national APD priority, incomplete APD packages 
submitted by the operator, conflicting resource demands, excessive or 
unnecessary National Environmental Policy Act compliance, poor quality 
or inadequate BLM and Forest Service planning documents, consultation 
with State Historic Preservation Offices, Fish and Wildlife Service, 
and other Surface Management Agencies, unclear directives or guidance, 
and insufficient agency resources (Bureau of Land Management, 1996).
    External factors that limit reinvention and lower customer 
satisfaction represent a good starting point for agency/industry 
partnering. Solutions to regulatory hurdles such FACA [Federal 
Administrative Committees Act] and the Government Performance Review 
Act should be sought jointly by industry and the Agency. External 
factors relating to multiple stakeholders with diverse interests should 
be the object of ongoing discussion; policies should stress improving 
performance and ensuring equity. Executive leadership must provide 
direction and accountability for the problems that arise when multiple 
agencies with multiple jurisdictions are steering in opposite 
directions.
    In addition to external factors, the BLM has the opportunity to 
create improvements within many of the internal factors influencing 
customer satisfaction. Explaining how these factors interact with one 
another is a natural starting point for understanding the significance 
of the findings.
    The survey showed that dimensions of customer satisfaction can be 
understood in layers (visualize an onion), with the core functioning as 
a nucleus and each successive layer interacting with the ones preceding 
and following it. Therefore, while each layer could be examined and 
treated individually, a more holistic approach is preferable for 
understanding the internal dimensions of customer satisfaction.
    The core dimension of customer satisfaction is ethical in nature. 
The ethical dimension can influence the cultural, structural and 
procedural dimension. Ethical issues such as fair and unbiased 
treatment of customers influence customer satisfaction directly, but 
also indirectly, as ethical issues become widely apparent in the 
cultural dimension. It is in the organizational culture that ethical 
traits become manifest in attitudinal traits such as helpfulness and 
attentiveness to complaints. Ultimately, the energy to produce 
structural and procedural change comes from an ethical core that 
emphasizes right conduct. This study suggests that BLM's reinvention 
would profit from placing greater effort upon enhancing the capacity of 
Federal employees to attend to their special ethical responsibilities. 
The benefit from this effort, as Zajac (1997) points out, is that 
``right conduct in government translates into well-founded respect for, 
and trust of government on the part of the citizenry.''
    As an integral part of customer satisfaction, findings related to 
the cultural dimension are also worth mentioning. Although this study 
showed that BLM employees are perceived as professional, they do not 
receive the same high marks on helpfulness and attentiveness to 
complaints. It is evident that the BLM would see important gains in 
customer satisfaction by internally reinforcing the importance of being 
helpful and attentive to complaints.
    Structurally, the agency is perceived as understaffed and failing 
to provide choices of services and means of delivery. Budgetary 
constraints explain why new services have not been widely noticed. 
However, offering various means of delivery is not bound to the same 
restraints and one must question why these efforts have not been more 
actively pursued. Creative delivery mechanisms such as outsourcing and 
in- sourcing have been shown to improve efficiency while alleviating 
budgetary concerns (Osborne and Gaebler, 1992). Examples of creative 
delivery mechanisms, including the transfer of duplicative functions 
(such as permitting and inspection and enforcement) to states, has been 
shown to be cost effective (Fretwell, 1998).
    Within the procedural dimension of customer satisfaction, 
timeliness of document processing and cost containment in environmental 
documentation are prominent issues lowering customer satisfaction. Both 
issues show promise for improvement through streamlining operations. A 
third issue, consistency, exposes a paradox inherent to reinvention. On 
one hand, industry seeks improved performance from BLM employees. The 
proposed solution to improving performance, as put forth in 
reinvention, is empowerment of employees. But, if more empowered 
employees are likely to produce decisions less consistent with one 
another (between state and field offices), reinvention has created one 
problem in fixing another. Therefore, the unpredictability and 
uncertainty associated with reinvention and empowerment causes both 
optimism and anxiety. Even so, efforts to improve timeliness, reduce 
costs to customers, and streamline operations should eventually have a 
positive impact on customer satisfaction.
    In literally all dimensions of customer satisfaction, the BLM would 
be hard pressed to justify such low ratings unless a different 
framework of logic were applied, such as the notion that government is 
sufficiently different from business that principles of management 
(including the use of customer satisfaction as a standard) which apply 
to business are not transferable to government. Before concluding, it 
may be useful to address this often-stated contention.
    Some would claim that it is disingenuous for the NPR [National 
Performance Review] to offer private sector models for the development 
and reform of public organizations (Mintzberg, 1996). Indeed, some 
would say that if government is to function as business, it would 
logically be forced to neglect many of the special purposes for which 
it was created. Since many governmental activities relating to public 
lands can be seen as a response to failure and indifference on the part 
of the private sector, why would government want to hold itself to this 
standard if the basic assumptions fail to capture government's role?
    While these arguments hold merit, customer satisfaction is no less 
useful in measuring government's performance in meeting the 
expectations of those citizens it directly serves. Using customer 
satisfaction as a basis for assessing performance outputs does not 
negate the argument that the private sector does not face the range of 
demands and expectations placed upon government to advance the common 
good. Neither does it imply that citizens not directly served, 
especially in the case of public lands, have any less right to expect 
performance from government. Those who use customer service ratings 
must recognize the reality that there is generally no wholly adequate 
private sector substitute for bureaucracy and, at best, solutions 
should be advanced which improve government performance while promoting 
the public good. While the public good is difficult to define and 
impossible to measure, measuring customer satisfaction is a recognized 
and well-developed means of assessing performance. As Kettl (1994) 
explains, ``if empowering employees is the `how' of the NPR, customer 
service is the `why'.''
    In conclusion, the findings of this study show that BLM's 
reinvention effort has been both selective and incomplete. Survey 
results, policies, and actions taken by BLM over the last five years 
point to a selective reinvention guided by agency centered priorities. 
In selective reinvention, issues which were easily fixed, or 
advantageous to the Agency's well-being were addressed first. Other 
issues, potentially of greater significance, were sidelined because of 
internal and external factors limiting reinvention.
    In order for government to holistically reinvent, it must consider 
both internal and external factors which inhibit the process.
    Reinvention may prove to be more difficult than anyone expected, 
but recent efforts by the BLM indicate a renewed emphasis toward 
customer service. Examples of recent BLM efforts in this direction 
include: (1) a BLM organized public forum (scheduled for summer 1999) 
to focus on nationwide public land issues in a regular and recurring 
fashion; (2) BLM cooperation in an Access Task Force commissioned by 
the Secretary of Energy to look at concerns regarding the availability 
and use of natural gas located on Federal lands; and (3) BLM leadership 
and employee responsiveness relating to industry concerns with the 
recently proposed Oil and Gas Comprehensive Rule.
    Government claims that through reinvention it has been listening to 
customers and this is what they have heard, ``You want services that 
are timely and efficient; (You) want to save money; and, (You) are 
willing to partner with us to help make changes'' (Putting Customers 
First 97', 1997). According to the findings of this report, government 
has heard correctly. However, the real proof of reinvention is not in 
the rhetoric government produces, rather it is in the ability of 
agencies like the BLM to maintain an ongoing effort to improve customer 
satisfaction.
Recommendations
    Based on the analysis of BLM's reinvention effort, several 
recommendations are offered for reviving the reinvention effort and 
producing noticeable improvements across all dimensions of customer 
service.
    (1) Revive the BPR [Bureau Performance Review], along with many of 
its uncompleted objectives as set forth in its Final Report (Bureau of 
Land Management, 1995).
    (2) Empower members of the BPR to set agency priorities, 
participate in the budget process, and develop accountability 
mechanisms.
    (3) Recognize reinvention as an ongoing effort to monitor results 
and identify emerging issues. Establish an ongoing petroleum forum to 
facilitate direct and meaningful communication among the oil and gas 
industry, the BLM, members of the regulatory community, and other 
interested parties.
    (4) Identify where Agency priorities and customer priorities may be 
in conflict, and clearly define the nature of those conflicts. Through 
``partnering with customers,'' understanding and trust can be 
developed. In this atmosphere, creative solutions to many ongoing 
conflicts can be creatively addressed.
    (5) Work with customers to develop legislative remedies to hurdles 
such as FACA that prevent constructive and meaningful discussions. A 
great deal of money and time could be saved through better 
communication.
    (6) Coordinate with other agencies to develop a strategy for 
meeting national energy and environmental goals.
References
    Bureau of Land Management, U.S. Forest Service, Minerals Management 
Service, and Department of Energy: APD Project Team. May 17, 1996. 
Applications for Permit to Drill: Report on Problem Identified with 
Processing Timeframes and Recommendations to Resolve Identified Issues.
    Bureau of Land Management. April, 1995. Onshore Oil and Gas 
Performance Review Final Report.
    Fretwell, Holly L. 1998. Public Lands: The Price We Pay. Political 
Economy Research Center. Bozeman, MT.
    Kettl, D. Reinventing Government? Appraising the National 
Performance Review. August 19, 1994. Brookings Institution. Washington, 
D.C.
    Mintzberg, Henry. Managing Government, Governing Management. 1996. 
Harvard Business Review. May/June: 75-83.
    Osborne, David and Gaebler, Ted. Reinventing Government: how the 
entrepreneurial spirit is transforming the public sector. 1992. 
Addison-Wesley Publishing Co. Reading, MA.
    Putting Customers First 97': Standard for Serving the American 
People. October, 1997.
    Zajac, Gary. 1997. Reinventing Government and Reaffirming Ethics: 
Implications for Organizational Development in the Public Service. 
Public Administration Quarterly. Vol. 20:4.


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