[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
Available via the World Wide Web: http://www.access.gpo.gov/congress/
house
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______
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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
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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
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C O N T E N T S
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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
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Wednesday, April 25, 2001
U.S. House of Representatives
Subcommittee on Energy and Mineral Resources
Committee on Resources
Washington, DC
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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.