[House Hearing, 108 Congress]
[From the U.S. Government Publishing Office]




 
       ``THE ABILITY OF FEDERAL LANDS TO MEET OUR ENERGY NEEDS''

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

                           OVERSIGHT HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                         COMMITTEE ON RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED EIGHTH CONGRESS

                             FIRST SESSION

                               __________

                         Tuesday, June 24, 2003

                               __________

                           Serial No. 108-32

                               __________

           Printed for the use of the Committee on Resources



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                         COMMITTEE ON RESOURCES

                 RICHARD W. POMBO, California, Chairman
       NICK J. RAHALL II, West Virginia, Ranking Democrat Member

Don Young, Alaska                    Dale E. Kildee, Michigan
W.J. ``Billy'' Tauzin, Louisiana     Eni F.H. Faleomavaega, American 
Jim Saxton, New Jersey                   Samoa
Elton Gallegly, California           Neil Abercrombie, Hawaii
John J. Duncan, Jr., Tennessee       Solomon P. Ortiz, Texas
Wayne T. Gilchrest, Maryland         Frank Pallone, Jr., New Jersey
Ken Calvert, California              Calvin M. Dooley, California
Scott McInnis, Colorado              Donna M. Christensen, Virgin 
Barbara Cubin, Wyoming                   Islands
George Radanovich, California        Ron Kind, Wisconsin
Walter B. Jones, Jr., North          Jay Inslee, Washington
    Carolina                         Grace F. Napolitano, California
Chris Cannon, Utah                   Tom Udall, New Mexico
John E. Peterson, Pennsylvania       Mark Udall, Colorado
Jim Gibbons, Nevada,                 Anibal Acevedo-Vila, Puerto Rico
  Vice Chairman                      Brad Carson, Oklahoma
Mark E. Souder, Indiana              Raul M. Grijalva, Arizona
Greg Walden, Oregon                  Dennis A. Cardoza, California
Thomas G. Tancredo, Colorado         Madeleine Z. Bordallo, Guam
J.D. Hayworth, Arizona               George Miller, California
Tom Osborne, Nebraska                Edward J. Markey, Massachusetts
Jeff Flake, Arizona                  Ruben Hinojosa, Texas
Dennis R. Rehberg, Montana           Ciro D. Rodriguez, Texas
Rick Renzi, Arizona                  Joe Baca, California
Tom Cole, Oklahoma                   Betty McCollum, Minnesota
Stevan Pearce, New Mexico
Rob Bishop, Utah
Devin Nunes, California
VACANCY

                     Steven J. Ding, Chief of Staff
                      Lisa Pittman, Chief Counsel
                 James H. Zoia, Democrat Staff Director
               Jeffrey P. Petrich, Democrat Chief Counsel
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

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

W.J. ``Billy'' Tauzin, Louisiana     Eni F.H. Faleomavaega, American 
Chris Cannon, Utah                       Samoa
Jim Gibbons, Nevada                  Solomon P. Ortiz, Texas
Mark E. Souder, Indiana              Grace F. Napolitano, California
Dennis R. Rehberg, Montana           Tom Udall, New Mexico
Tom Cole, Oklahoma                   Brad Carson, Oklahoma
Stevan Pearce, New Mexico            Edward J. Markey, Massachusetts
Rob Bishop, Utah                     VACANCY
Devin Nunes, California              Nick J. Rahall II, West Virginia, 
Richard W. Pombo, California, ex         ex officio
    officio



                                 ------                                
                            C O N T E N T S

                              ----------                              
                                                                   Page

Hearing held on June 24, 2003....................................     1

Statement of Members:
    Cubin, Hon. Barbara, a Representative in Congress from the 
      State of Wyoming, Prepared statement of....................     1
    Kind, Hon. Ron, a Representative in Congress from the State 
      of Wisconsin...............................................     4
        Prepared statement of....................................     6
    Markey, Hon. Edward J., a Representative in Congress from the 
      State of Massachusetts, Prepared statement of..............    13
    Rehberg, Hon. Dennis R., a Representative in Congress from 
      the State of Montana.......................................     1
    Souder, Hon. Mark E., a Representative in Congress from the 
      State of Indiana...........................................    20
        Prepared statement of....................................    21

Statement of Witnesses:
    Bower, Dru, Vice President, Petroleum Association of Wyoming.    42
        Prepared statement of....................................    43
    Eppink, Jeffrey, Vice President, Advanced Resources 
      International, Inc.........................................    23
        Prepared statement of....................................    31
        Oil & Gas Journal article submitted for the record.......    23
    Johnson, Arthur H., Chairman and Chief Executive Officer, 
      Hydrate Energy International...............................    32
        Prepared statement of....................................    33
    Knopman, Debra, Associate Director, RAND Science and 
      Technology.................................................    35
        Prepared statement of....................................    37
    Watson, Rebecca, Assistant Secretary for Land and Minerals 
      Management, U.S. Department of the Interior................     7
        Prepared statement of....................................     8


OVERSIGHT HEARING ON ``THE ABILITY OF FEDERAL LANDS TO MEET OUR ENERGY 
                                NEEDS''

                              ----------                              


                         Tuesday, June 24, 2003

                     U.S. House of Representatives

              Subcommittee on Energy and Mineral Resources

                         Committee on Resources

                             Washington, DC

                              ----------                              

    The Subcommittee met, pursuant to notice, at 10:02 a.m., in 
room 1324, Longworth House Office Building, Hon. Dennis R. 
Rehberg presiding.
    Present: Representatives Rehberg, Kind, Cannon, Gibbons, 
Souder, Pearce, Bishop, and Nunes.

 STATEMENT OF THE HON. DENNIS R. REHBERG, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF MONTANA

    Mr. Rehberg. The oversight hearing by the Subcommittee on 
Energy and Mineral Resources will come to order. The 
Subcommittee is meeting today to hear testimony on the recent 
estimates of oil and gas resources on Federal lands and the 
impediments to their development. Under Committee Rule 4(g), 
the Chairman and the Ranking Minority Member can make opening 
statements. If any members have other statements, they can be 
included in the hearing record under a unanimous consent.
    Mrs. Cubin regrets she cannot be here today. She headed out 
to Wyoming this morning, so you get the junior varsity in 
charge today, and I welcome you and thank you for giving this 
opportunity to give an opening statement.
    [The prepared statement of Mrs. Cubin follows:]

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

    The Subcommittee meets today to consider several pressing issues 
surrounding the natural gas resource base on Federal lands and the 
impediments to those resources. Last Thursday we examined the natural 
gas supply situation and established that 1) a crisis is looming due to 
a lack of supply to meet demand and it threatens jobs and the economy; 
2) future supply shortages will have to be made up by domestic natural 
gas supply; and 3) other fuels, such as our vast coal and geothermal 
resources will have to be utilized to meet future energy demand.
    We have vast natural gas resources in the U.S., about 1,400 
trillion cubic feet in the U.S. and another 1,000 Tcf in North America. 
This is enough natural gas to fuel our nation for over one hundred 
years. But while we have adequate gas resources, it is becoming 
increasingly difficult to access those resources, especially those on 
Federal lands from which the majority of our future gas supplies will 
come. Numerous impediments exist to developing oil and gas resources on 
Federal lands.
    In 2000, Congress passed the Energy Policy and Conservation Act, or 
EPCA, which called for an inventory of oil and gas resources on Federal 
lands and the impediments to leasing those lands for energy 
development. The assessment is to be updated periodically to reflect 
changes in the resource base and to the leasing impediments.
    The results of the first round of that assessment, which surveyed 
five major producing basins in the Rockies, was released last winter. 
It inventoried approximately 138 trillion cubic feet (Tcf) of natural 
gas resources and reserves on Federal lands in the Rocky Mountains. It 
stated that about 60 percent of natural gas resources in the five 
producing basins were found to be under standard lease terms. Another 
40 percent are either off-limits to drilling or under such strict terms 
as not to be economically feasible.
    Several environmental groups responded to the release of the EPCA 
study by stating that it showed that the Rocky Mountains are largely 
open to oil and gas development. What the EPCA study really shows is 
that an alarming percentage of the resources in the region are in fact 
off-limits. Once a lease is obtained, it does not follow that 
development is under way. EPCA does not currently address post leasing 
restrictions such as the long and arduous process for receiving 
drilling permits or rights-of-way. However, language was included in 
H.R. 6, the energy bill that passed Congress earlier this year, that 
would expand the EPCA study to include an analysis of post leasing 
impediments and their impact on energy production.
    Some environmental groups have objected to the methodology used in 
the EPCA study, which studies technically recoverable resources. These 
groups, in an effort to curb production of the natural gas resource, 
have argued that such assessments should include economic factors and 
should inventory economically recoverable resources only.
    With grants from the Hewlett Foundation, RAND, a research and 
development think tank, released an assessment of the economically 
recoverable resources, rather than technically recoverable resources, 
in the Greater Green River Basin. That assessment exposed some of the 
flaws associated with making an assessment based on economics. For 
instance, the RAND assessment classified Wyoming's Jonah Field as 
``uneconomic,'' despite the fact that hundreds of millions of cubic 
feet of economically viable natural gas are produced there each day. 
Had the RAND assessment been done ten years ago, it would have shown 
the vast gas reserves in the Coal Bed Methane play in Wyoming's Powder 
River Basin not to be economically recoverable. In the future, the same 
could likely be said for the Methane Hydrate resources in the Outer 
Continental Shelf and below the frozen tundra of Alaska.
    The bottom line is that we cannot pre-determine what reserves will 
be economically recoverable in the future. That is a factor that 
changes over time, from company to company, from process to process, 
relying heavily on technological developments. The purpose of the EPCA 
resource assessment is to give policy makers a look at the potential 
resources on public lands and the impediments to their production.
    The economics of resource development is determined by companies 
and financiers. It is frightening to think that during a time of high 
natural gas prices, hydrocarbon bearing lands could be theoretically 
withheld based on economic determinations made by technocrats in 
Washington. That's just down right bad policy, and does not serve the 
American people.
    I look forward to the testimony, and welcome all of our witnesses 
today. I'd especially like to welcome Dru Bower, who is currently 
serving as the Vice President of the Petroleum Association of Wyoming. 
She is a fine woman and a dear friend.
                                 ______
                                 
    Mr. Rehberg. The Subcommittee today meets to consider 
several pressing issues surrounding the natural gas resource 
base on Federal lands and the impediments to those resources. 
Last Thursday, we examined our natural gas supply situation and 
established that a gas supply crisis is looming, threatening 
jobs in the economy. Future supply shortages will have to be 
made up by increasing domestic natural gas supply and other 
fuels such as our vast coal and geothermal resources will have 
to be utilized to meet future energy demand.
    The U.S. has vast natural gas resources--over 1.4 trillion 
cubic feet in the U.S. and another trillion cubic feet in North 
America. That is enough natural gas to fuel our nation for over 
100 years. But while we have adequate gas resources, it is 
becoming increasingly difficult to access those resources, 
especially on Federal lands, from which the majority of our 
future gas supplies will come. Numerous impediments exist to 
developing oil and gas resources on Federal lands.
    In the year 2000, Congress passed the Energy Policy and 
Conservation Act, which called for an inventory of oil and gas 
resources on Federal lands and the impediments to leasing those 
lands for energy development. The assessment is to be updated 
periodically to reflect changes in the resource base and the 
leasing impediments. Last winter, the Department of Interior 
released the results of the first round of that assessment, 
which surveyed five major producing basins in the Rockies.
    The study inventoried approximately 138 trillion cubic feet 
of natural gas resources and reserves on Federal lands in the 
Rocky Mountains. It stated that about 60 percent of natural gas 
resources in the five producing basins were found to be under 
standard lease terms, another 40 percent are either off limits 
to drilling or under such strict terms so as not to be 
economically feasible.
    Several groups responded to the release of the study by 
stating that it showed that the Rocky Mountains are largely 
open to oil and gas development, but what the study really 
shows is that an alarming percentage of the resources in that 
region are, in fact, off limits. Once a lease is obtained, it 
does not mean that development is underway. The Act does not 
currently address post-leasing restrictions, such as the long 
and arduous process for receiving drilling permits or right-of-
ways.
    However, the House included language in H.R. 6, the energy 
bill that passed Congress in April, that would expand the study 
to include an analysis of post-leasing impediments and their 
impact on energy production. Some environmental groups have 
objected to the methodology used in the study, which studies 
technically recoverable resources. These groups, in an effort 
to curb production of the natural gas resource, have argued 
that such assessment should include economic factors and should 
inventory economically recoverable resources only.
    With grants from the Hewlett Foundation, RAND, a research 
and development think tank, released an assessment of the 
economically recoverable resources rather than technically 
recoverable resources in the greater Green River Basin. That 
assessment exposed some of the flaws associated with making an 
assessment based on economics. For instance, the RAND 
assessment classified Wyoming's Jonah Field as uneconomic, 
despite the fact that hundreds of millions of cubic feet of 
economically viable natural gas are produced there each day.
    Had the RAND assessment been done 10 years ago, it would 
have shown the vast gas resources in the cold bed methane plate 
in the Powder River Basin not to be economically recoverable. 
In the future, the same could be likely said for the methane 
hydrate resources on the outer continental shelf and below the 
frozen tundra of Alaska.
    The bottom line is that we cannot predetermine what 
reserves will be economically recoverable in the future. That 
is a factor that changes over time from company-to-company, 
from process-to-process, relying heavily on technological 
developments. The purpose of the Energy Policy and Conservation 
Act Resource Assessment is to give policymakers a look at the 
potential resources on public lands and the impediments to 
their production.
    The economics of resource development is determined by 
companies and financiers. It is frightening to think that 
during a time of high natural gas prices, hydrocarbon-bearing 
lands could be theoretically withheld based on economic 
determinations made by technocrats in Washington. That is bad 
public policy and does not serve the American public well. We 
are experiencing an energy crisis and must look at other ways 
to develop enough energy to meet the demands of today. I look 
forward to the testimony and welcome all of our witnesses 
today.
    The Chair will now recognize Mr. Kind, the Ranking Minority 
Member.

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

    Mr. Kind. Thank you, Mr. Chairman, and I want to thank Ms. 
Watson for her presence and her testimony here today, as well 
as the other witnesses. I do have a written statement I would 
like to submit for the record at this time.
    Mr. Rehberg. Without objection.
    Mr. Kind. This, I believe, now is the tenth hearing that we 
are having on natural gas supply in the country and also the 
natural gas issue, which is fine. In fact, we have had about 20 
hearings on just the energy policy over the last couple of 
years, which is fine. I mean, these are very important issues 
that need to be delved into, but we have heard a lot of the 
similar type of testimony. We have covered a lot of the ground 
over the course of the last couple of years with the various 
hearings that we have had. And we know that there are tough 
market conditions right now, but we also know that there are 
market corrections taking place because of supply and demand 
and price volatility, and that has always been the case, the 
free-market system.
    We know that we have infrastructure issues that need to be 
addressed, permitting issues that need to be addressed, access 
issues, and we are going to get into that a little bit in 
today's hearing in regards to public lands. We have NIMBY 
issues that need to be addressed. It would be interesting if 
this Committee were to have a hearing on the West Coast of 
Florida, for instance, and call the Governor down there to 
testify in regards to their view of some of the drilling that 
has been proposed off the coast of Florida and some of the 
other sensitive regions around the country, and these are 
important issues.
    But in order for us, I believe, to develop a sustainable 
long-term energy plan, we need to take a comprehensive 
approach. Yes, natural gas is going to be an important piece of 
that. It is a preferable piece of that, given it is one of the 
cleaner-burning fossil fuels that are available, and we have 
access to still more resources within our own country, but it 
can't be the sole answer. I mean, there is going to have to be 
a mosaic of different options available for the country in 
order for us to develop greater energy independence and to wean 
ourselves off from the dependence on foreign sources, 
alternative and renewable energy supplies, biofuels and the 
fuel of the future, fuel cell development.
    I think we need to be much more aggressive in regards to 
our energy policy, in regards to the incentives and the 
investments that need to take place there, but natural gas is 
the subject of the hearing today. We are going to be looking 
forward to the testimony, but I just wish that we would have 
more well-rounded, balanced approach to this discussion, and 
this isn't a partisan issue.
    I mean, we have heard a lot of conversations from private 
landowners out West, from outdoor sports organizations, hunters 
and fishermen alike who want to see us take a balanced approach 
in regards to access issues involving the public lands. They 
don't want to see the scale tipped too heavily on one side. 
These are important issues. We will look forward to the 
testimony today, but it is a little disingenuous when the Chair 
last week claims that there is not a lot of interest on our 
side on this topic.
    We have been engaged in debate. We have tried to engage in 
a meaningful dialog on it. People do come from time to time in 
and out of these hearings when they take place. In fact, we had 
five or six members last week that were here at least for part 
of the testimony that took place, and yet the Chair somehow 
found fit to level some criticism that more members weren't 
here during the entire course of the hearing.
    But we will look forward to Ms. Watson's testimony today, 
as well as the other witnesses, and hopefully try to come up 
with some further answers or maybe some new ideas on how we can 
approach this issue. But unless or until this Committee, this 
Congress in the country starts developing the political 
leadership to do what we really need to do to become energy 
independent, which is going to be good not only for our 
economic growth potential, but in regards to foreign policy 
implications.
    We are going to be having more and more hearings with not a 
whole lot being accomplished because of a single-set 
ideological mind-set that we can somehow just drill our way out 
of the situation we find ourselves in. Conservation and energy 
efficiency has to be a part of the equation as well.
    It was a little ironic that at the time the Vice President 
was criticizing those who were advocating more energy efficient 
and conservation approaches, given the high energy prices just 
a couple of years ago, the State of California was approving it 
with a 15-percent decline, in 1 month alone, on energy 
consumption because of the energy price spike that they were 
experiencing, and now we were discovering that there was market 
manipulation giving rise to a lot of what took place in 
California. But it showed the flexibility and the 
responsiveness of the American people and what truly can be 
accomplished if we develop this comprehensive energy framework 
and don't become too fixated and too focused on just one aspect 
of it.
    So thank you, Ms. Watson, for your presence here today. 
Thank you, Mr. Chairman. We look forward to the testimony.
    [The prepared statement of Mr. Kind follows:]

        Statement of The Honorable Ron Kind, Ranking Democrat, 
              Subcommittee on Energy and Mineral Resources

    Today we meet for the tenth time to discuss natural gas issues. In 
fact, we have had about 20 hearings on just the energy policy over the 
last couple of years, which is fine. These are very important issues 
that deserve scrutiny, nevertheless, most of the testimony has been 
similar.
    The Subcommittee has covered a lot of ground throughout the course 
of these oversight hearings. We know that there are tough market 
conditions right now, but that market corrections are happening because 
of supply and demand and price volatility, which has always been the 
case with the free-market system.
    We know that there are infrastructure and permitting issues that 
need to be addressed, and we will touch on those issues during today's 
hearing in regards to public lands. There are also NIMBY issues that 
need to be addressed. It would be interesting if this Committee were to 
have a hearing on the West Coast of Florida, for instance, and call the 
governor down to testify on his view of some of the drilling that has 
been proposed off the coast of Florida and other sensitive regions 
around the country. After all, these are important issues.
    However, in order for us to develop a sustainable long-term energy 
plan, we need to take a comprehensive approach. Granted, natural gas is 
going to be an important factor in such a plan. It is a preferable 
piece of the approach, given it is one of the cleanest-burning fossil 
fuels that are available, and we have access to even more resources 
within our own country, but it cannot be the sole answer. There must be 
a mosaic of different options available for the country in order for us 
to develop a greater energy independence and wean ourselves from our 
dependence on foreign sources. Alternative and renewable energy 
supplies, biofuels and the fuel of the future, fuel cell development, 
must all play a role.
    We need to be much more aggressive in regards to our energy policy 
and the incentives and investments that need to take place, but natural 
gas is the subject of the hearing today. We are looking forward to the 
testimony, but I just wish that we could have a more well-rounded, 
balanced approach to this discussion because this is not a partisan 
issue.
    We have been witness to conversations from private landowners out 
West, outdoor sports organizations, and hunters and fishermen alike who 
want to see us take a balanced approach in regards to access issues 
involving public lands. They do not want the scale tipped too heavily 
on one side. We look forward to the testimony today because these are 
important issues, however, to be clear, it was disingenuous when the 
Chair last week claimed that there is not a lot of democratic interest 
on this topic.
    The Subcommittee Democrats have been engaged in debate. We have 
tried to engage in a meaningful dialogue on this subject. Members walk 
in and out of these hearings when they take place. In fact, we had five 
or six Members last week that were here for at least part of the 
testimony that took place, yet the Chair somehow found fit to level 
criticism that more members were not here during the entire course of 
the hearing.
    Regardless, we look forward to Ms. Watson's testimony today, as 
well as the other witnesses, and we will try to come up with some 
further answers, or maybe some new ideas, on how we can approach this 
issue. But unless, or until, this Committee and this Congress begins 
developing the political leadership necessary for achieving energy 
independence, which will be good not only for our economic growth 
potential but also in regards to foreign policy implications, expect to 
see these issues persist.
    We will hold more hearings with little accomplishment due to a 
single-set ideological mind-set that believes we can somehow drill our 
way out of our current situation. Conservation and energy efficiency 
has to be a part of the equation as well. The Vice President criticized 
advocates of energy efficient and conservation-oriented programs, in 
spite of high energy prices just a couple of years ago. Even so, the 
State of California, entrenched in a massive energy crisis, approved 
efficiency measures that, in one month alone, resulted in a 15-percent 
decline in energy consumption. The residents of California reflected 
the potential of the American people to respond to adversity and what 
can be accomplished if we develop a comprehensive energy framework to 
avoid becoming too fixated and too focused on just one aspect of it.
    So thank you, Ms. Watson, for your presence here today. Thank you, 
Madame Chairman. We look forward to the testimony.
                                 ______
                                 
    Mr. Rehberg. Thank you, Mr. Kind.
    Ms. Watson, I know you understand the drill by now. You 
have been here many times. Thanks for being in Montana last 
week and your good work.
    The timing light is in front of you. We have asked you to 
give a 5-minute statement, and if you would please stand, raise 
your right hand and repeat after me.
    [Witness sworn.]
    Mr. Rehberg. Thank you. You may proceed.

 STATEMENT OF REBECCA WATSON, ASSISTANT SECRETARY FOR LAND AND 
      MINERALS MANAGEMENT, U.S. DEPARTMENT OF THE INTERIOR

    Ms. Watson. Representative Rehberg and members of the 
Subcommittee, I am pleased to come before you today to discuss 
the findings of the Energy, Policy and Conservation Act, EPCA, 
and what the Bureau of Land Management is doing to integrate 
the inventory's findings into how oil and natural gas are 
developed and natural resources are protected on Federal lands.
    As you noted in your opening remarks, our Nation faces 
great challenges in meeting its energy needs. Energy is the 
cornerstone of our American economy. The fact is that we 
consume more than we produce. We know that it is particularly 
acute for oil. Right now we are importing 55 percent of our 
oil. That is expected to grow to 68 percent by 2025.
    Recently, we have had the issue of natural gas supply come 
to our attention with the testimony of Chairman Greenspan. 
Natural gas demand has grown. Typically, we have been able to 
meet our demand, eighty-six percent of our demand from our own 
domestic resources, and importing the rest from Canada. That 
has now changed. The demand for clean-burning natural gas to 
fuel electricity is growing. Ninety percent of the new power 
plants will be run on natural gas. We expect that demand will 
grow by more than 50 percent, but supply will only grow by 14 
percent.
    One solution that Chairman Greenspan talked about is again 
turning to the solution of imports, and this time it won't be 
imports from Canada because Canada is facing the same 
challenges we are. We will be moving into a situation where we 
have the same political and security challenges as we face in 
oil with our natural gas.
    This Administration believes that we need to protect the 
quality of life in our country by increasing our ability to 
produce more of our energy domestically and to close the gap 
between the amount of energy we use and the amount we produce.
    I have a poster up here that demonstrates the problem that 
we face. The dark green line on the bottom shows the supply 
curve, and you see it drastically declining for natural gas. 
The light green demonstrates what we think we can produce 
reasonably with the current development we have right now in 
natural gas. The lighter color of yellow and the top line shows 
the gap, the demand skyrocketing up, and that yellow gap 
growing year-by-year that needs to be filled with Alaska gas, 
imported LNG, and unconventional gas.
    Chairman Greenspan highlighted the importance of natural 
gas to our economy. He testified on that issue because he sees 
it impacting our economic recovery and our economy. Just last 
week, there was an article in the Wall Street Journal, 
``Natural Gas Cooks the Chemical Sector''; New York Times, 
``Short Supply of Natural Gas Raises Economic Worries.'' This 
is a problem that should be a concern of all members.
    But this energy challenge is not new, and in order to 
provide for our energy needs, President Bush's national energy 
policy did establish a comprehensive long-term energy strategy. 
As Representative Kind suggested was needed, the President's 
plan recognizes conservation, more efficient use of energy, 
diversification of our energy supply, and increased production 
of all domestic energy resources, renewable and nonrenewable.
    This Congress directed us to perform the EPCA inventory, to 
inventory our domestic oil and gas resources on Federal lands 
and to identify any kind of constraints to their development. 
The national energy policy supported the direction of Congress 
and directed that this study be expedited.
    The next poster shows the study areas, and we selected, 
with the assistance of Congress, what five basins we would 
begin our study with. And these five basins contained the 
largest supply of oil and natural gas on shore. As you can see, 
it is the Paradox/San Juan Basins in Colorado, Utah and New 
Mexico; the Unita/Piceance Basins in Colorado; basins in 
Wyoming and the Montanan Thrust Belt.
    My time is rapidly running out, and I will just say that 
what we are doing to integrate this is we have set up two 
committees to integrate the EPCA information into both planning 
and the issuance of applications for permit to drill. We expect 
these two committees that we have set up internally within BLM 
to come with specific guidance to BLM very shortly. Again, that 
would be how we integrate this information into our planning 
process and applications for permit to drill.
    What the study found is that there is redundancy in lease 
stipulations, and there is inconsistency, and those are the two 
problems we are going to try and focus on to have the 
restrictions on leasing, protect the resource values that need 
to be protected, but not to overprotect them or be redundant 
and inconsistent.
    We found that as you looked at how restrictions were 
applied, artificial jurisdictional boundaries would change the 
restriction from one place to another. In other words, you had 
the same elk herd. It was treated one way in Wyoming, the elk 
herd was treated a different way in Colorado, and it was not 
based on any resource protection need, but simply a change in 
jurisdictional boundaries, and we want to remove some of that 
confusion and treat the resource in a holistic way.
    So thank you, and I will take questions.
    [The prepared statement of Ms. Watson follows:]

Statement of Rebecca Watson, Assistant Secretary for Land and Minerals 
              Management, U.S. Department of the Interior

    Madam Chairman and members of the Subcommittee, I am pleased to 
appear before you this morning to discuss the findings of the Energy 
Policy and Conservation Act (EPCA) Inventory and what the Bureau of 
Land Management (BLM) is doing to integrate the inventory's findings 
into how oil and natural gas are developed and natural resources are 
protected on Federal lands.
    As you know, our Nation faces a great challenge in meeting its 
energy needs. Energy is the cornerstone of the American economy. We 
consume much more than we produce; this is especially true for oil. 
This imbalance causes us to rely increasingly on foreign oil. According 
to the Department of Energy's Energy Information Administration (EIA), 
we are currently importing about 55% of our oil from foreign sources--a 
percentage that is expected to increase to 68% by 2025. Relying on 
these foreign sources of oil make us dependent on unstable parts of the 
globe, creates uncertainty and anxiety at home, and threatens our 
quality of life.
    Historically, we have been able to satisfy most of our natural gas 
demand through the production of our domestic resources, and nearly all 
of our imports come from Canada. We currently supply 86% of our own 
demand. However, that is beginning to change as demand for clean-
burning natural gas to produce electricity continues to accelerate, 
mature basins decline, and access to new basins fails to keep pace with 
demand.
    According to the EIA, over the next 20 years, U.S. natural gas 
consumption is projected to grow by more than 50 percent, while 
production, if it grows at the rate of the last 10 years, will grow by 
only 14 percent. The EIA also projects an increasing need for natural 
gas imports from Canada at a time when Canada's gas exports are 
declining. Increased imports of liquefied natural gas (LNG) are an 
important component of natural gas supply and, as Federal Reserve 
Chairman Alan Greenspan recently pointed out, are likely to become an 
even more important source of supply in the future.
    We need to protect our economic and national security by increasing 
our ability to produce more of our energy domestically, and close the 
gap between the amount of energy we use and the amount of energy we 
produce.
    On May 21, 2003, Chairman Alan Greenspan testified before the Joint 
Economic Committee of Congress and stated, ``I'm quite surprised at how 
little attention the natural gas problem has been getting, because it 
is a very serious problem.'' He also said, ``If on the one hand we have 
encouraged, as we have, very significant growth in domestic demand for 
natural gas--but are very readily constrained by our ability to 
increase supply--then something has got to give, and what is giving, of 
course, is price.'' More recently, on June 10, 2003, Chairman Greenspan 
spoke before the House Committee on Energy and Commerce about the 
natural gas crisis. Again, Chairman Greenspan warned Congress that 
short supplies and rising costs of natural gas could eventually 
contribute to ``erosion'' in the economy.
    The energy challenge we find ourselves in is not new. In order to 
provide for our Nation's growing energy needs, President Bush's 
National Energy Policy established a comprehensive, long-term energy 
strategy. The President's plan recognizes that conservation and more 
efficient use of energy, diversification of our energy supply, and 
increased production of all of our domestic energy resources--renewable 
and nonrenewable--are critical to our energy future.
    The National Energy Policy recognized the Congressionally-mandated 
EPCA inventory of domestic oil and gas resources on Federal lands as an 
important part of that strategy. The inventory identifies the oil and 
natural gas resources in five energy-rich basins of the western United 
States and analyzes the impediments to accessing those resources. The 
National Energy Policy directed that the EPCA inventory be expedited 
and that constraints to Federal oil and gas leasing be reassessed and 
modified ``where opportunities exist (consistent with the law, good 
environmental practice, and balanced use of other resources).'' The 
National Energy Policy further directed that any reassessment of 
constraints be conducted ``with full public consultation, especially 
with people in the region.''
    On April 18, 2002, BLM Director Kathleen Clarke testified before 
this Subcommittee about the status of the EPCA inventory and the 
methodology to be used in developing the report. The Departments of the 
Interior, Energy, and Agriculture released the EPCA inventory in 
January 2003. With the inventory now completed, the BLM is taking 
several steps to ensure the report's integration into the land use 
planning process, applications for permits to drill, and other use 
authorizations.
EPCA Overview & Key Findings
    As directed by Congress in the Energy Policy and Conservation Act 
of 2000 (Public Law 106-469), the Secretary of the Interior, in 
consultation with the Secretary of Agriculture and the Secretary of 
Energy, initiated a national inventory of oil and natural gas resources 
beneath Federal lands and the constraints that may limit the 
development of those resources. The report, entitled ``Scientific 
Inventory of Onshore Federal Lands Oil and Gas Resource and Reserves 
and the Extent and Nature of Restrictions and Impediments to Their 
Development,'' evaluated five areas in the West that contain the bulk 
of the natural gas and much of the oil resources under Federal 
management in the onshore United States.
    The basins are: the Paradox/San Juan Basins in Colorado, Utah and 
New Mexico; the Uinta/Piceance Basins in Colorado and Utah; the Greater 
Green River Basin in Wyoming, Colorado and Utah; the Powder River Basin 
in Montana and Wyoming; and the Montana Thrust Belt. These five basins 
encompass nearly 104 million acres, 59 million acres of which are 
managed by the Federal Government. The EPCA directed us to look at all 
onshore Federal lands and, thus, the inventory includes lands managed 
by the BLM, the National Park Service, the Bureau of Reclamation, the 
U.S. Fish and Wildlife Service, the USDA Forest Service, and the 
Department of Defense. It also includes split estate lands--those 
privately owned lands where the Federal Government owns the subsurface 
minerals. The EPCA inventory does not include American Indian lands.
    These five basins contain the largest reservoirs of natural gas 
after the Outer Continental shelf--almost 140 trillion cubic feet of 
natural gas on Federal lands. According to the Natural Gas Supply 
Association, some 56 million U.S. homes use natural gas. The amount of 
natural gas on public lands in these 5 basins could satisfy the needs 
of these 56 million homes for nearly 30 years. These same lands, 
however, are also important for a variety of multiple uses, including 
wildlife habitat, grazing, recreation, historical and cultural 
resources, and renewable and nonrenewable energy and mineral 
development. The EPCA study sought to address both dimensions of public 
land oil and gas development--the resource values and the constraints 
posed by other values.
    In the inventory, the USGS analyzed undiscovered technically 
recoverable resources. Technically recoverable resources are those 
resources that are currently producible using existing technology. The 
estimates do not address whether it is currently economically 
profitable to recover these resources. The USGS resource numbers were 
then added to EIA's proved oil and natural gas reserves for the United 
States. Proved reserves calculations include consideration of current 
economics. The EIA annually collects proved-reserve information from 
operators. Thus, the EPCA inventory is more comprehensive than simply 
using technically recoverable resources. The USGS estimates that it 
will take approximately 2 years to determine economically recoverable 
resources for these 5 basins.
    The EPCA inventory further breaks these data down by the five 
Basins identified above. The inventory next provides a basin-by-basin 
comprehensive summary of the constraints to oil and natural gas 
development resulting from various existing lease stipulations. The BLM 
and the U.S. Forest Service supplied lease stipulation data, which was 
then overlaid on the resource numbers using Geographic Information 
System (GIS) technology. Some 1000 lease stipulations were classified 
into 10 broad categories. It is important to note, however, that the 
EPCA inventory only addresses the leasing stage and whether lands 
containing oil and natural gas resources are open or closed to leasing, 
and the degree of constraint on development resulting from lease 
stipulations on open lands. The EPCA inventory did not address other 
potential constraints to development that may result from the permit 
process and other post-lease conditions of approval. These potential 
constraints are the subject of the work of the White House Task Force 
on Energy Project Streamlining, as created pursuant to Executive Order 
13212, and the work of the National Petroleum Council, among others.
    The key findings of the EPCA inventory are as follows:
     In these 5 basins, an estimated 57 percent of the oil and 
63 percent of the natural gas are available under standard leasing 
stipulations, and only 15 percent of oil and 12 percent of natural gas 
are totally unavailable. The remaining oil and natural gas are 
available with increasing restrictions on development. Generally, land 
that is completely closed to development contains comparatively little 
oil and natural gas potential.
     Within these five basins, the total estimated Federal 
reserves and undiscovered technically recoverable oil totals 3.9 
billion barrels (Bbbl), and the total estimated undiscovered 
technically recoverable natural gas totals 138.5 trillion cubic feet 
(Tcf). Of this amount, 2.2 Bbbl of oil and 86.6 Tcf of natural gas are 
available for leasing with standard stipulations. Additionally, 1.1 
Bbbl of oil and 36 Tcf of natural gas are available for leasing with 
restrictions on oil and natural gas operations beyond standard 
stipulations. The EPCA inventory also identified 0.6 Bbbl of oil and 
15.9 Tcf of natural gas that is not currently available for leasing due 
to pending land use planning or various prohibitions established by 
laws, Executive Orders, or status as set by a land management agency.
    While I have discussed our findings related to the issue of access 
to oil and gas resources beneath Federal lands, from a management 
perspective, there is an additional significant finding.
     Numerous examples were found in which lease stipulations 
were being applied inconsistently. These inconsistencies included 
differences in protective stipulations that resulted from 
jurisdictional boundaries--state line, agency boundaries, BLM Field 
Office areas--rather than a resource protection need.
    We found that requirements on oil and gas operators to protect a 
resource could be significantly different between adjoining political 
jurisdictions and agency management units. A seemingly arbitrary 
invisible line could separate two entirely different management 
practices for the same resource in the same setting. The reasons for 
such differences in management practices were usually unclear.
    Because BLM is the DOI bureau primarily responsible for 
implementing changes as a result of the EPCA study, I'll now turn my 
attention to what BLM is doing in response to the report. One of BLM's 
first tasks is a review of such conflicting management practices for 
similar resources in similar settings. Sound science has to be the 
critical factor in the design of operating restrictions. Operators 
should have a single prescription for a specific resource in a specific 
setting throughout that setting regardless of how many state or 
management unit boundaries that setting crosses. Prescriptions should 
not change at invisible boundaries. We must define appropriate 
practices for settings which may extend across numerous political 
jurisdictions or agency management unit boundaries. Where appropriate, 
we must incorporate those prescriptions in all of the management plans 
for which the resource and setting occur.
    As a result of the EPCA inventory, BLM is asking field managers to 
look beyond the boundaries of their units to ensure that the 
restrictions they impose on oil and gas operators for a specific 
resource are similar, if not identical, to those imposed in neighboring 
units with the same setting.
    As noted earlier, our restrictions must be based on the best 
available science. We must recognize the value of adaptive management. 
That is, the ability to modify or adjust restrictions to ensure 
adequate resource protection. We must determine whether or not our 
prescriptions are effective without being overly restrictive. We must 
respond to new scientific information and use it to make appropriate 
changes to our prescriptions. This is the real promise of the EPCA 
inventory. Consistency based on sound science will benefit both our 
resources and our domestic oil and gas producers.
    It is important to note that any reassessment of these restrictions 
on oil and gas activities will occur in the public-land use planning or 
legislative processes, both of which are fully open to public 
participation and debate over the appropriate balance between resource 
protection and resource development.
Integrating EPCA into Land Use Planning / Resource Use & Authorization
    In accordance with the President's National Energy Policy, it is 
the goal of the BLM to provide optimal access to the resources from the 
public lands consistent with sound land stewardship principles and full 
public involvement. The information developed in the EPCA inventory 
will play an important role in advancing this strategy.
    On April 3, 2003, BLM Director Kathleen Clarke issued guidance to 
BLM State Directors regarding integration of the EPCA inventory results 
into land use planning and energy use authorizations. Four EPCA 
integration principles were transmitted to the field offices. They are:
    1. Environmental protection and energy production are both 
desirable and necessary objectives of sound land management practices 
and are not to be considered mutually exclusive priorities;
    2. The BLM must ensure the appropriate amount of accessibility to 
the energy resources necessary for the nation's security while 
recognizing that special and unique non-energy resources can be 
preserved;
    3. Sound planning will weigh relative resources values consistent 
with The Federal Land Policy and Management Act;
    4. All resource impacts, including those associated with energy 
development and transmission, will be mitigated to prevent unnecessary 
or undue degradation.
    The BLM established two national teams led by State Directors to 
develop strategies to integrate the EPCA inventory into the land use 
planning and use-authorizations processes. The Land Use Planning Team 
is responsible for developing guidance which will guide the BLM in 
integrating EPCA into land use plans (especially those designated as 
time-sensitive). In the long term, the team will be responsible for 
looking at ways to improve the planning process and allow for 
flexibility in making decisions which take into account current land 
conditions and scientific knowledge. Additionally, the process 
developed by the team will insure bureau-wide consistency in the 
application of stipulations. The other team, the Resource Use 
Authorization Team, is responsible for developing guidance that will 
(1) direct how the EPCA results can provide flexibility and consistency 
in the use of stipulation waivers and exceptions to facilitate oil and 
gas development, where appropriate, and (2) use of the EPCA results to 
improve communications with operators on the timing requirements for 
Applications for Permit to Drill (APD) submissions as related to 
seasonal restrictions and where the EPCA results can be used to 
facilitate our APD streamlining efforts. The teams are proposing to 
incorporate adaptive management principles using the most current 
science and information available. Stipulations would be more outcome-
based instead of prescriptive. This means that the desired results 
would be stated and various approaches could be utilized to accomplish 
resource protection.
    Finally, to ensure the successful and timely implementation of 
these efforts and to stress the importance of using the EPCA inventory 
as a key component of the President's National Energy Policy, the BLM 
organized a national telecast for all BLM field managers on May 14, 
2003. The telecast provided a forum to discuss the importance of this 
effort and to explain how the BLM will fully integrate the information 
in the EPCA inventory into the way the agency does business.
Additional EPCA Inventories
    In consultation with the other Federal agencies that prepared the 
first phase of EPCA, the BLM is considering the next phase of EPCA 
inventories. Areas for study could include the Eastern Great Basin in 
Nevada; the Bighorn Basin in Wyoming; the Wind River Basin in Wyoming; 
and the Wyoming Thrust Belt.
Conclusion
    Completion of the first EPCA inventory is an important step toward 
implementing the President's National Energy Policy and improving the 
way BLM does business. We look forward to working with the Subcommittee 
as BLM continues to integrate the data from this and future EPCA 
inventories into its management plans. Thank you for the opportunity to 
testify before you today. I welcome any questions the Subcommittee may 
have.
                                 ______
                                 
    Mr. Rehberg. Thank you, Ms. Watson.
    I guess I would like to dwell a little bit on the 
difference between economically feasible and technically 
feasible and have your opinion of the importance of the 
distinction between the two and do you believe an assessment, 
from this point forward, should dwell more heavily on technical 
feasibility or is there a place for economic feasibility?
    Ms. Watson. Well, I think that it is not an either/or 
situation. First, in the EPCA study, we were directed, again, 
in consultation with the committee, to look at technically 
recoverable resources. We modified that by adding into USGS's 
technically recoverable resources the EIA's proved resources. 
So that is an element of economic recoverability that we laid 
over our USGS resource numbers. So it gives us a little bit 
more refined analysis.
    Secondly, the problem with using economic reserves was 
highlighted in your opening statement. Those are a snapshot in 
time. EPCA was designed to be a planning tool, and for planning 
you need to look out quite a long ways. And so we felt the 
technically recoverable resources was what we were asked to do 
and that they were the more appropriate technique.
    At the same time, USGS is performing an economically 
recoverable analysis, as they do always, and that should be 
ready in about 2 years.
    Mr. Rehberg. Do you feel enough has been done to consider 
the post-leasing problems that exist, the delays or the 
inability to get the projects going once they have been leased?
    Ms. Watson. Well, I thank you for that question. It is 
important to realize that the EPCA study focused only on pre-
leasing conditions, conditions at the lease, and it analyzed 
some 1,000 different stipulations that exist and categorized 
them into 10 categories and rated how open it was to leasing. 
It did not address at all what happens at the post-leasing 
stage.
    And it is very important to realize that there is a lot, of 
course, that happens at that stage. You have to continue to do 
NEPA analysis. While you may have done a plan NEPA analysis, 
you have to do a site-specific NEPA analysis. You have to do 
cultural resource surveys, national historic preservation 
compliance, Endangered Species Act compliance, consultation 
with tribes over cultural resources, Clean Water Act permits. 
So there are innumerable processes that take place afterwards. 
This study did not analyze those.
    There are two studies that I know of that are addressing 
that: One is the President's Task Force on Energy Streamlining, 
and more immediate will be the results of the National 
Petroleum Council's Study on Post-Lease Constraints and Natural 
Gas Supply that should be issued in September.
    Thank you.
    Mr. Kind?
    Mr. Kind. Thank you, Mr. Chairman. Thank you, Ms. Watson 
for your presence and your testimony here today.
    Mr. Chairman, I would ask unanimous consent at this time to 
have another member of the Resources Committee statement, 
Representative Ed Markey's, submitted into the record at this 
time.
    Thank you.
    [The prepared statement of Mr. Markey follows:]

   Statement of The Honorable Edward J. Markey, a Representative in 
                Congress from the State of Massachusetts

    Today the Subcommittee is examining the proposition that Federal 
lands have the ability to meet America's energy needs.
    We are going to hear a lot of numbers during the hearing. Let me 
put the two crucial numbers before the Committee: 75 and 3. The former 
is the percentage of global oil reserves that OPEC countries hold; the 
latter is the percentage of global oil reserves that America controls. 
No matter how much we produce from our Federal lands, we will not be 
able to make up this gap.
    But we can cause a lot of damage trying.
    We have set aside Federal lands to protect our nation's resources. 
Most are governed by the doctrine of multiple-use and despite 
industries' claims, oil and gas development gets more than its fair 
share of use. According to the Department of Interior's own study, 85% 
of the technically recoverable oil and gas on Federal lands in the 
Rocky Mountain region are available for development. Granted sometimes 
these lands require environmental lease stipulations, but these are 
mostly during the exploration stage and are seasonal in nature in order 
to protect wildlife during critical times of the year. Furthermore, 
even these basic stipulations are routinely waived if a company finds 
them too onerous, removing what little protection wildlife might 
otherwise enjoy.
    There are some Federal lands that are too precious to disturb, but 
much of our Federal lands has and will continue to be used for a 
variety of activities, including oil and gas production. We have had a 
number of hearings in which industry has been able to pose the 
question: ``Why do we have put up with seasonal restrictions for 
wildlife?'' This Committee should also be asking the corollary 
question: ``What are the impacts to wildlife as a consequence of the 
BLM's frequent waiver of stipulations designed for their protection?''
                                 ______
                                 
    Mr. Kind. Ms. Watson, two areas to delve into.
    You testified earlier we need to somehow close the gap 
between the energy use, the energy consumption we now have and 
the production that is available in getting that to market. I 
am just curious as to whether or not there is an important role 
for increased energy efficiency and conservation practices from 
individuals to businesses alike for them to play a role in our 
energy policy as well and where you see that fitting in.
    Ms. Watson. Yes. As I said, the President's energy policy 
looks at both domestic production and also conservation and 
energy efficiency. If you look at the NEPA, it demonstrated 
that industry has responded very dramatically with energy-
efficient techniques. Where we fall down is individually and 
our need to address conservation in our own homes, in our small 
businesses, in our driving habits, et cetera, and conservation 
does play a role.
    But I think what we need to be concerned about, as 
policymakers, is that in the next 5 years, we have a very 
critical natural gas supply shortage. Natural gas is key to 
many of our fundamental industries. In Representative Markey's 
State of Massachusetts, the chemical industry is a direct 
employer and is a multi-billion dollar industry. And as these 
articles that I raised pointed out, that industry is fleeing 
our shores, and this is something that needs to be addressed in 
5 years. And natural gas has to play a role because the plan is 
to use natural gas to supply power.
    Mr. Kind. I would agree with you. In fact, there was a lot 
of outreach just a few years ago encouraging conversion to 
natural gas, usually, because it is a cleaner burning fuel. And 
a lot of individuals, through their homes and otherwise, made 
that conversion. Businesses did as well, and now we face these 
supply and demand issues, the price fluctuations, the urgency 
that you are describing here today, but there has also been a 
public campaign to do a better job of educating the general 
public about increased efficiency and conservation.
    Is enough being done in that area or do we need to ramp up 
efforts, as far as public education, in regards to conservation 
practices, and things that can empower individuals to have a 
little bit more control over this?
    Ms. Watson. I think that education on the energy issue is 
critical. I received a study in my office this fall that is 
entitled ``Energy IQ,'' and it basically shows Americans flunk 
knowledge of energy, where it comes from, what we use it for, 
the role of conservation and efficiency, and just how important 
it is to economy. And it is fundamental, and there is a great 
deal of information that should, and could, be imparted on all 
issues, whether it is conservation, natural gas, renewables. 
There is a need to educate the American public, and again I see 
that as a role for policymakers, people in industry, in our 
schools. It is something we haven't done and we need to do.
    Mr. Kind. Do you have any ideas? Has your idea been 
focusing on this, what type of public outreach campaign might 
work?
    Ms. Watson. We have been talking about it. I try to do that 
personally when I speak to groups. I have been focusing on this 
issue for the last 18 months. I have been working with 
Assistant Secretary Mike Smith at the Department of Energy, who 
is the assistant secretary over fossil fuels. This is a 
particular area of expertise and love of his. He did it 
effectively in Oklahoma, and I have been trying to work with 
him on ideas he has that are principally focused on schools.
    Mr. Kind. Well, we would certainly like to work with you 
further on that. If you have any ideas that you want to share 
with us, this Committee, what we might be able to do, as far as 
policymakers to extend the outreach and the information 
available to the general public, I think it is crucial, 
especially there will be a more receptive audience if these 
price issues continue in the future. It seems the public is 
very responsive to the price fluctuations, and will be looking 
for some answers.
    Yes, we have the supply issue that we are dealing with 
primarily in this hearing, but also the demand, and the 
consumer issue, too, that I think needs to be focused upon.
    Let me just ask you quickly in regards to the permitting 
process. There are a lot of the public lands currently 
available for development for exploration. I think somewhere as 
much as 85 percent of the Rocky Mountain basin area is 
currently available for development for exploration. I think 
somewhere as much as 85 percent of the Rocky Mountain Basin 
area is currently available for exploration, but we have taken 
testimony in the past, heard from various industry officials 
that the permitting process could be streamlined or made more 
efficient. Is this just a matter of resources and additional 
personnel that is needed in this area or are there other things 
that we need to be looking at?
    Ms. Watson. I think, in part, it is always a question of 
resources, how many people you have to attack a problem. But I 
think more fundamentally is we have so many multiple layers of 
both State and Federal, and in some cases now tribal laws, that 
address many of the same resource questions and how do you 
coordinate the permitting process.
    I remember being involved in a project where we prepared a 
huge chart with velcro tags about how we would do the historic 
preservation consultation, the ESA, the Clean Water permit, 
various other State requirements in the right sequence, so we 
would end up at the right time with all of our permits in order 
when the EIS was finished. It is not easy, and I think that is 
an area that the Bureau of Land Management has focused on. Just 
in April, they have issued five instruction memorandum on how 
to better coordinate some of these permitting processes. But I 
think more can and should be done.
    Mr. Kind. Great. Thank you.
    Thank you, Mr. Chairman.
    Mr. Rehberg. Mr. Gibbons?
    Mr. Gibbons. Thank you very much, Mr. Chairman. And, 
Secretary Watson, welcome to the Committee. We are happy to 
have you here testifying in front of us.
    During the energy crisis in California about 18 months ago, 
there was of course a move to look for alternative energy 
capability; in other words, production of electrical energy in 
California by building natural gas-fired electrical plants.
    In the State of Nevada, California came over to Nevada 
looking for sites to locate these gas-fired electrical plants 
in Nevada because they could not or would not permit them in 
California. Obviously, it was impermissible to pollute the air 
of California, so they came to Nevada looking for that.
    The real problem was not the fact they could not find a 
site to locate it. The problem was they did not have the 
capacity in the gas pipeline to deliver the gas needed to fire 
the gas-fired power plants for California. One of the issues, 
of course, is how are we going to address the issue of 
distribution and the logistics of moving gas around the country 
once it is discovered? Because if the demand is growing, 
capacity in our pipeline system needs to grow commensurately to 
supply those areas. What are your suggestions with that?
    Ms. Watson. Well, this is actually under the purview of 
FERC, these larger pipelines, but it is also a function of 
individual companies confidence in the natural gas market for 
them to construct the gathering pipelines. And our role as 
Bureau of Land Management is granting rights of way for those 
pipelines, and that is something we work on again to be more 
efficient. The White House has a task force on infrastructure, 
building that necessary infrastructure, and it is really a 
problem that faces not just natural gas, but also renewable 
energy.
    How do you distribute the power to where it is needed? Much 
of it is produced in areas that are low population, yet it is 
the population centers on the East and West Coast that need the 
energy. So you have highlighted a good problem, and I think 
FERC feels that it is working toward getting the necessary 
pipeline infrastructure there, but we need a response from the 
natural gas industry to build the pipes to connect up with 
those pipes.
    Mr. Gibbons. Let me ask how long it takes today to permit a 
drilling operation for natural gas. What is the length of time 
a company comes in, makes an application to do a drilling 
permit to the point of time that that permit is issued by the 
Bureau of Land Management?
    Ms. Watson. It is a complicated issue, but the simple 
answer is it could be as little as 30 days or it could be 
longer than a year. I think if you look at the Powder River 
Basin, you see that before any wells could be permitted, they 
had to go through a 2-year plan NEPA process. That NEPA process 
is completed, and immediately five lawsuits were filed.
    Then, you have your individual NEPA compliance and 
permitting for these individual wells. So it could be any 
amount of time, but at least the quickest would be 30 days.
    Mr. Gibbons. Yes, but it is not likely that you would get 
one in the say, say, Rocky Mountain region, where there is a 
natural gas supply, issued within 30 days, is it?
    Ms. Watson. I think in some places in Wyoming, especially 
at the Buffalo Field Office that they are sort of the center of 
some of these APD processing streamlining techniques, and they 
have been able, with additional resources and streamlining 
techniques, to increase the speed. We do have a backlog of 
permits, but we have reduced that, and so you can't get around 
the fact that post-leasing there are permitting hurdles, time 
delay, money to wind your way through that process, and it can 
add a lot of time, which adds uncertainty to investment.
    Mr. Gibbons. Let me ask one final question before my time 
is up. In looking at the fact that Alan Greenspan has 
indicated, among others, including the industry, that there 
will be a natural gas shortage sometime this winter, what is 
the likelihood that if everything went swimmingly, everything 
was on time, that you could actually bring on-line, with the 
current regulatory system that we have, the needed gas supplies 
to solve the gas crisis that is pending or predicted for the 
end of the year? What is the likelihood of that?
    Ms. Watson. I think the likelihood, under the current 
regulatory structure, is very challenging. To up demand in the 
time that it is needed by the winter with the current structure 
that we have, I think that would be difficult.
    Mr. Gibbons. Thank you.
    Mr. Rehberg. Mr. Pearce?
    Mr. Pearce. Thank you, Mr. Chairman.
    I appreciate that we are engaged in one of the discussions 
that is most difficult to balance; that is, the need to 
preserve our environment and the lack of desire to see people 
suffering from the inability to pay the heating bills, that we 
need a reasonable price. Even our entire economy, as Ms. Watson 
has suggested, is based on affordable energy, and so constantly 
that balance between our environmental needs and the needs of 
people have to be balanced.
    As we deal with BLM in our State, we find that one of the 
great impediments is that no matter what the rules say, that 
the lowest level of bureaucrat can intercede and stop an entire 
process, sometimes without legal standing, sometimes without 
regulatory standing, and I just wonder what the management does 
in those circumstances where projects are held up, where the 
desires of the upper-level management are just ignored. What 
does the BLM do?
    Ms. Watson. Well, I think that is something I am concerned 
about. I can tell you that in the Washington office, Kathleen 
Clark, at the BLM, and I, and other policymakers have been 
working very hard to come up with these instruction 
memorandums, to address some of these permitting problems, also 
to address conflicts with surface estate and mineral estate.
    And we intend that the lowest level of the bureaucrat, as 
you describe it, would implement those, and one of the things 
Kathleen and I were just talking about on Monday was that we 
want to have a conference, and we want to personally involve 
all of our field staff in that and make it very clear that 
these instruction memorandums are to be followed, that they are 
not optional, as was reported recently in some of the trade 
press. That is a concern of ours. We take a lot of time and 
thoughtfulness to come up with policies that we think will 
address problems on either side of the issue, and we intend 
that they be implemented.
    Mr. Pearce. I think that in the case of the instruction 
memorandum, there is concern what happens to them after you 
issue them. What are you finding does happen to those 
instruction memorandum? Because the feeling among people who 
have to deal with it on the other side of the issue is that 
they are very arbitrary and that they can be ignored. So what 
do you find, as a management person, is occurring with an 
instruction memorandum?
    Ms. Watson. Well, that issue was highlighted for me this 
week in the Public Lands newsletter. I read it there, and I 
immediately talked to Kathleen Clark about that issue. Again, I 
intend to make it clear to BLM that these instruction 
memorandum are not optional, that they are directives from the 
Director, and that they are to be implemented. There seems to 
be some confusion that they are optional, and that is not how 
we view instruction memorandums. They are guidance that is 
binding on BLM employees, and I was troubled when I read that, 
and I plan to address it.
    Mr. Pearce. Do you foresee any particular management 
action? And the reason I ask this is because the greatest 
complaint I have from constituents in the West, we have a lot 
of constituents, about 60 percent of our land is publicly 
owned, and we have a lot of constituents who always interact 
with Government officials, Fish and Wildlife, Forest, BLM, and 
it is the arrogance, it is their ability to walk away from any 
rule, any common sense that really offends people and is 
causing the inflammatory things that happened last year in 
Klamath Falls.
    Even the Government employees who fabricated the entire 
story about the lynx, wherever that deal came, Fish and 
Wildlife, my question to their highest level of supervision 
was, ``Exactly what did you do to those people? Did you give 
them a cut in pay? Did you bump them down a personnel category? 
Did you transfer them? What exactly did you do to these people 
that fabricated a hoax that was really intended to cause great 
difficulties?''
    And my question I guess to you, as my time wraps up, is 
what management things can we look back a year from now and say 
that the BLM did take some actions so that the arrogance of the 
lowest-level employee who wanted to just ignore orders, who 
wanted to just implement their own desires, what management 
action a year from now can I say, ``Well, I heard that in 
Committee, and then it came about''; what do you foresee?
    Ms. Watson. Well, I can just tell you, again, I had this 
conversation with Kathleen yesterday at lunch. We made a 
decision together that we are going to hold a conference 
involving the lowest level of field managers to discuss this 
very issue and indicate that these directives will be followed, 
and then I will look to Kathleen to enforce the fact that they 
be followed, and how she does that will be something that we 
will discuss, but I take it very seriously.
    Mr. Pearce. Thank you, Mr. Chairman.
    Mr. Rehberg. Mr. Nunes?
    Mr. Nunes. Thank you, Mr. Chairman.
    Last year, the BLM issued an instruction memorandum on the 
statement of adverse energy impact, and due to some confusion 
in the field, BLM indicated it would put together additional 
guidance as to how to prepare such a statement, and the 
Committee was wondering what is the status of this guidance.
    Ms. Watson. I think, unfortunately, it is still underway. I 
think the same personnel that would be addressing that have 
been addressing this EPCA study, completing the some 43 tasks 
under the national energy plan and then developing these five 
APD instruction memorandums, and the instruction memorandum on 
surface owners. We are also looking at instruction memorandum 
on bonding, some of the issues out there, and we have not 
followed up as rapidly as we would have wished on the statement 
of adverse energy impacts.
    But I see that as a topic that I would like to include in 
this conference that I mentioned to Representative Pearce, 
where we bring together the oil and gas field staff, and we 
will see if we can address the confusion in the meantime.
    Mr. Nunes. So at what point do you think we could assume 
there would be some type of resolution to this issue? Can you 
give me a date?
    Ms. Watson. I think what staff has advised in the first 
part of the next fiscal year, so late fall.
    Mr. Nunes. Late fall?
    Ms. Watson. That is what I have been told. I don't have any 
personal knowledge of it, but--
    Mr. Nunes. Thank you.
    I have no further questions, Mr. Chairman.
    Mr. Rehberg. Thank you.
    A couple of follow-up questions if I might. The APO is 
supposed to, by statute, take 30 days. Currently, I believe, if 
my numbers are correct, were about over 3 months beyond that 
time for the permitting process. I guess my question is what 
specifically are you doing administratively that will, in fact, 
shorten that timeframe.
    Ms. Watson. Well, we came out with instruction memorandum 
and revisions to existing guidance that provide for batch 
processing. Rather than looking at it well-by-well, we will 
look at a pot of wells and analyze the cultural resource 
issues, the NEPA issues, and the Endangered Species Act issues 
as a group. That will add a lot of efficiency to it and will 
also give us a better ecosystemwide view.
    Rather than a snapshot of one well, look at it in an 
ecologically significant manner. So that we think we get some 
efficiencies, and we get a better job by doing that, and we 
have added better guidance for conditions of approval for 
permit applications, and we have revised the on-shore oil and 
gas order. It was quite dated, the language was dated, some of 
the provisions needed to be made more clear, and again all of 
those things should help.
    We are looking to Centers of Excellence, and one of the 
Centers of Excellence is the Buffalo field office in Wyoming. 
They have processed a number of permits. They have had to deal 
with the high volume, and they have come up with some good 
efficiencies, and that formed the basis, from the field level 
up, on how we can do things better. I think the White House and 
others are looking at further steps yet on improving 
processing.
    Mr. Rehberg. Based upon all of that, then, can you give us 
a best estimate a year from now, agencywide, what will the 
timeframe be? Will it be 30 days? Can we get an assurance that 
the APO process will take, from start to finish, a 30-day 
limit?
    Ms. Watson. I am a lawyer. I would never give such an 
assurance. No.
    Mr. Rehberg. You are also under oath.
    Ms. Watson. I am under oath, that is right, and I don't 
think I could give you that assurance. I think there are too 
many unknowables. I think that that is a goal we strive for, 
but as I said, the permitting process is incredibly complex, 
and there is, as you know, opposition, and there is many 
opportunities for people that are opposed to oil and gas 
development to express that opposition through appeals and 
through litigation. All of that can add time, and delay, and so 
I don't think we can provide that certainty.
    But are we aware of the problem of delay? Are we taking 
steps to address it? Yes, we are.
    Mr. Rehberg. If there was one thing that you could wave 
your wand and get a bill passed through Congress that would 
make that process simpler, what would you suggest we do or do 
you have the tools in place already, and it is just a matter of 
administratively working your way through the glitches and 
making it more efficient?
    Ms. Watson. I think there is a lot we can do 
administratively. I think it is a very difficult challenge 
because natural gas is part of our quality of life, but 
likewise environmental values are part of our quality of life. 
Those environmental values are expressed through enumerable 
statutes. Many times they add layers of complexity and 
confusion.
    The best thing I think industry would probably tell you is 
if there would be some way to have a better-coordinated process 
to make those permitting decisions more efficient. Much of the 
same information is required in some of the other permit 
requests. You could reduce duplication that way, but it is a 
result of many value decisions that have been made over the 
years, and then how you coordinate them and get them addressed 
in a meaningful timeframe is the difficulty.
    Mr. Rehberg. Can you give me an indication, and this is my 
final question, of when the coalbed methane memorandum will be 
finalized and published?
    Ms. Watson. I believe that that will be done late this 
summer. We are actually addressing it this week. It is being, 
again, developed from the field from the bottom up, and then it 
will be reviewed in the Department and we anticipate by late 
summer.
    Mr. Rehberg. Mr. Souder?

   STATEMENT OF THE HON. MARK E. SOUDER, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF INDIANA

    Mr. Souder. Thank you, Mr. Chairman.
    I wanted to just make a brief comment to take this back as 
you meet with your lower-level employees that you were talking 
about and, in general, in BLM and for the record. I am not a 
Westerner. I represent an area in Indiana. We use the natural 
gas, and I am being informed by our companies that we are going 
to have another huge increase this winter. people who can ill 
afford those increases at a time of economic slumps, and it is 
extremely irritating to listen and hear about the roadblocks in 
developing natural gas, when people were told that this was the 
direction to go.
    It was the suggestion that companies and individuals should 
move toward this because it is a better form of energy, and 
then to have some of the people who tried to argue that it was 
a better form of energy hold up that development in the United 
States is extremely irritating to those of us in the Upper 
Midwest and the Great Lakes Region.
    We also constantly hear about American jobs moving 
overseas. What kind of pressure is this going to put on the 
industrial belt of the United States if they see production 
costs which are, in my area, were second or third in foundries, 
were fifth in steel? We make all sorts of automobiles, trucks, 
SUVs, parts for all kinds of industrial America, of which 
energy is one of the most expensive costs in that, that when 
they hold up the ability for us to get reasonably priced 
natural gas, and oil, and other forms of energy, whether it be 
in the coastal zones, whether it be in the mountain zones or 
other places, what they are doing is either increasing the 
energy costs and the product costs of every American through 
these delays and blocks or they are pushing those jobs 
overseas.
    And many of the same people who we constantly hear say, 
``Well, everybody can't work at McDonald's.'' Well, this is one 
way to make sure that everybody either is going to work at 
McDonald's or nowhere if you push American industry overseas 
because we don't have the ability to meet our energy capacities 
here in the United States because of our cost of delivery 
systems.
    And it is not just the actual getting it off the ground. It 
becomes a pipeline in the refineries and everything else, as 
well, and we have to get a handle on this. And the anger level 
this coming winter from the industrial belt, from the 
homeowners and the manufacturers, is they potentially have to 
simultaneously lose their jobs and be laid off, and not be able 
to make their home heating payments.
    And if this is going to continue a number of years, I think 
the political consequences of this are out down a couple of 
years, and I hope people understand the anger level that is 
going to hit by the inability to have planned ahead. And I say 
that as a nonproducer State. I have a totally different agenda 
than most of them here, but we have the same common interests.
    With that, I yield back.
    [The prepared statement of Mr. Souder follows:]

Statement of The Honorable Mark E. Souder, a Representative in Congress 
                       from the State of Indiana

    Madam Chairman: I want to express my appreciation for your calling 
this timely series of oversight hearings on natural gas. One aspect of 
the natural gas problem we are facing is an emerging one: getting 
needed gas pipeline infrastructure into the ground and then delivering 
gas to expanding markets. It has come to my attention that Coastal Zone 
Management Act (CZMA) consistency challenges to interstate gas pipeline 
projects already determined by the Federal Energy Regulatory Commission 
(FERC) as required ``by the public interest'' are now impeding the 
certainty and timeliness necessary to get needed gas pipelines into the 
ground, and operating.
    As you well know, since the late 1980s, certain coastal States have 
increasingly used ``CZMA consistency determinations'' to thwart energy 
projects involving leasing, exploration and production in the Federal 
Outer Continental Shelf (OCS). These environmentally-evaluated energy 
projects would provide consumers needed oil and gas resources owned, 
not by those objecting coastal states, but by all Americans. Yet many 
exploration projects have been cancelled, due to costly delays and 
uncertainty while the appeal record in controversial cases remained 
open at the National Oceanic and Atmospheric Administration (NOAA) for 
years.
    Now, the CZMA ``consistency'' process has entered a new, disturbing 
phase. Coastal States are attempting to block two interstate natural 
gas pipeline projects that would cross the coastal zone, even though 
FERC approved those projects after multi-year, comprehensive 
examinations. Under the Natural Gas Act and NEPA (National 
Environmental Policy Act), Congress long ago directed FERC to decide 
licensing of interstate gas pipelines, only after preparing full 
environmental impact statements (EISs). FERC's congressional mandate is 
to consider fully coastal impacts, and public, state and relevant 
Federal agencies' participation and consultation under current Federal 
law. FERC must also evaluate in detail the need for the projects, 
alternative routes, and explain its analysis as part of its written 
decision. Congress mandated FERC's preemptive jurisdiction to authorize 
gas pipelines over 60 years ago, and the Supreme Court has upheld 
FERC's authority many times.
    I must note that FERC has had a very good track record in the 
courts defeating challengers contending that its decisions to approve 
pipeline routes were somehow not well supported, unnecessary or 
environmentally defective. But now, significant new gas infrastructure 
that FERC has determined is critically needed to heat homes and 
generate clean-fired electricity is on hold at NOAA due to these CZMA 
``consistency appeals.''
    Numerous congressional directives in the CZMA, which, of course, is 
within the jurisdiction of the Resources Committee, mandate 
decisionmaking efficiency, coordination and consultation among Federal 
and state agencies with an interest in a project affecting the coastal 
zone. However, the CZMA unequivocally states: ``Nothing in this chapter 
shall be construed...as superseding, modifying, or repealing existing 
laws applicable to the various Federal agencies'' (6 USC Sec. 
1456(e)(2)).
    In enacting the CZMA, Congress imposed an important limitation on 
States in conferring participation and consultation regarding Federal 
activities affecting States' coastal zones. In encouraging ``'timely 
and effective notification of, and opportunities for public and local 
government participation in, coastal management decision making'' (16 
USC Sec. 1452 (2)(H)), Congress did not give a coastal State the power 
to block proposed Federal permit activities in interstate commerce that 
could affect a State's coastal zone.
    Congress limited a coastal State's challenge of a proposed 
Federally-permitted activity to be consistent, to the greatest extent 
practicable, with the ``the enforceable policies of the state's 
approved program'' (6 USC Sec.1456(c)(3)). Yet, in CZMA consistency 
challenges, States have requested that NOAA conduct more scientific 
studies, hold additional public meetings, and consider alternative 
pipeline routes once again. That is hardly the ``coordination and 
simplification of procedures in order to ensure expedited governmental 
decision making for the management of coastal resources'' that Congress 
declared must be a CZMA imperative (16 USC Sec. 1452 (2)(G)).
    The glaring fact is that when NOAA considers a state CZMA 
challenge, FERC has already conducted exhaustive multi-year hearings, 
public town hall meetings, and comprehensive scientific, engineering, 
and environmental reviews, all with the participation of the affected 
coastal States, and all Federal and state agencies with 
responsibilities for particular aspects of the proposed pipelines. 
FERC's detailed examination must range from wetlands and endangered 
species, to coastal zone impacts, Environmental Protection Agency (EPA) 
Clean Air permits, and Corps of Engineers Clean Water Act permits.
    The type of delay caused by NOAA's view of its appeal mandate can 
cause needed energy projects to be cancelled, as litigation costs and 
large amounts of capital allocated to these projects remain idle, or 
are directed elsewhere due to lengthy uncertainty. And all of this 
delay and redundancy provides no additional environmental benefits, 
since all had already been fully considered at FERC, the lead Federal 
agency that prepared and defended the environmental impact statement as 
part of its evaluation.
    If opponents of an energy projects believe the environmental data 
does not support the project, they have the right to challenge the 
reasons for the decision in court. But opponents cannot insist that a 
CZMA consistency record remain open, killing needed energy projects 
through lengthy time delays.
                                 ______
                                 
    Mr. Rehberg. Ms. Watson, thank you for your testimony, and 
I will, at this time, call up Panel No. 2.
    Ms. Watson. Thank you.
    Mr. Rehberg. Good morning. Welcome. By way of introduction, 
Panel No. 2, Jeffrey Eppink, Vice President, Advanced Resources 
International, Inc.; Art Johnson, Chairman and CEO, Hydrate 
Energy International; Debra Knopman, Associate Director, RAND 
Science and Technology, RAND; and Dru Bower, Vice President, 
Petroleum Association of Wyoming.
    Now, that you are all comfortably seated, would you please 
stand. Raise your right hand.
    [Witnesses sworn.]
    Mr. Rehberg. Thank you. Please be seated.
    Again, I will remind the folks that we have a 5-minute rule 
here on your testimony. The lights indicate the time available. 
I believe it is yellow when it is like wrap it up and red when 
you are a done deal, and if you would please respect that as 
closely as you possibly can.
    We will begin with Mr. Eppink.

STATEMENT OF JEFFREY EPPINK, VICE PRESIDENT, ADVANCED RESOURCES 
                      INTERNATIONAL, INC.

    Mr. Eppink. Good morning, Chairman Rehberg and members of 
the Subcommittee. My name is Jeffrey Eppink. I am a vice 
president with Advanced Resources, International, an energy 
consulting firm based in Arlington, Virginia.
    At Advanced Resources, we have conducted a number of 
Federal lands assessments in recent years. Under the guidance 
of a Federal steering committee, Advanced Resources conducted 
the EPCA inventory, and consequently we have a solid 
familiarity with its strengths and weaknesses.
    Published in yesterday's Oil and Gas Journal is an article 
concerning the inventory that I, along with BLM, DOE and four 
service colleagues wrote. I would like to submit a copy of that 
article for the record.
    [The Oil and Gas Journal article follows:]

              Oil & Gas Journal Article Submitted May 2003

                                  By:

Jeffrey Eppink
Vice President
Advanced Resources International, Inc.

William Hochheiser
Manager, Oil and Gas Environmental Research
Office of Fossil Energy
U.S. Department of Energy

Richard L. Watson
Physical Scientist
USDI-Bureau of Land Management

Dean Crandell
U.S. Forest Service
Minerals and Geology Management

Federal Lands Access in the Rockies: Is the Glass 40% Empty or 60% 
        Full?
    As the nation's energy needs grow, basins in the West have been 
identified as a significant future supply source to help meet these 
needs, especially for natural gas. Of the 23 tcf of natural gas that 
the U.S. uses annually, about 4 tcf are imported. The Energy 
Information Administration (EIA) in its Energy Outlook 2003 projects 
that the demand for natural gas will raise to about 35 tcf by 2025. 
Basins in the Rocky Mountains represent the second largest natural gas 
resource in the United States after the outer continental shelf and can 
help meet this demand. While the resource base in the West is 
substantial, it is dominated by unconventional natural gas, primarily 
tight sands and coalbed methane.
    At the same time, the Rocky Mountain region is one where multiple-
use interests and environmental concerns often intersect. Multiple uses 
of the Federal lands, including grazing, forestry, recreation, wildlife 
habitat, open space, wilderness, rights-of-way, often conflict with 
exploration and production. The restrictions and leasing stipulations 
that govern access to Federal lands in the region are a patchwork of 
requirements that can act to increase costs and delay activity. Access 
restrictions range from areas unavailable for leasing, to areas where 
leasing can occur although the land surface cannot not be occupied, to 
limitations on drilling activities due to a variety of environmental 
considerations.
NPC Assessment
    In their landmark 1999 study 1 the National Petroleum 
Council (NPC) provided a first-time assessment of natural gas resource 
impacts associated with Federal land use designations and related 
environmental stipulations in the Rocky Mountain region 2.
---------------------------------------------------------------------------
    \1\ ``Natural Gas, Meeting the Challenges of the Nation's Growing 
Natural Gas Demand'', National Petroleum Council, December 1999.
    \2\ Ibid, Vol. III, Appendix J.
---------------------------------------------------------------------------
    The NPC assessment was based on a limited sample of Federal lands 
in the region. In that study, five specific areas were studied in 
detail and those results were extrapolated to all Federal lands in the 
Rocky Mountains. The NPC assessment characterized access to natural gas 
resources as ``off-limits'', ``high cost'' or ``standard lease terms'' 
(Fig. 1). About 60 percent of natural gas resources were shown to be 
under standard lease terms. The NPC study recommended that the issue of 
land access be studied in more detail.
Mandate for EPCA
    Recognizing the access situation, Congress directed that a 
scientific inventory of the Nation's Federal onshore lands be conducted 
to assess the impact of environmental considerations on the potential 
for recovery of oil and gas resources. In November 2000, Congress 
passed (and President Clinton signed) the Energy Policy and 
Conservation Act Amendments of 2000 (EPCA). Congress required that the 
analysis identify any restriction or impediment that might inhibit 
development of resources. Its purpose was to add clarity to the debate 
and assist energy policymakers and Federal land managers in making 
decisions concerning oil and gas resource development.
    Subsequently, President Bush's National Energy Policy recognized 
the then-ongoing EPCA inventory and endorsed environmentally 
responsible oil and gas development based on sound science. Following 
the September 11th attacks, on October 11, 2001, Congress provided its 
sense of priority for EPCA by stating:
        ...In light of recent attacks on the United States that have 
        underscored the potential for disruptions to America's energy 
        supply, the managers believe this project should be considered 
        a top priority...
    EPCA requires that all onshore Federal lands be inventoried with 
provision for periodic updating. Shirley Neff, former staff economist 
with the Senate Energy and Natural Resources Committee who worked on 
the legislation, recently commented:
        The intention for EPCA was for the agencies to upgrade their 
        overall systems for tracking oil and gas leasing, permitting 
        and development. The intent was not to have the agencies 
        conduct a one-time study of the situation. The idea was to have 
        a systematic way to review on an ongoing basis not only 
        leasing, but actual development.
EPCA Inventory
    The recently released 2003 EPCA inventory 3 partially 
fulfills the Congressional mandate. The inventory is a comprehensive 
review of Federal oil and gas resources and constraints on their 
development in high-priority basins of the Rockies (Fig. 2). These 
basins were selected for study for three reasons: (1) they contain most 
of the onshore natural gas and much of the oil under Federal ownership 
within the 48 contiguous states, (2) the rapidly growing population in 
the West and (3) public lands in this region face increased demands for 
their use as sites for recreation, livestock grazing, forestry, open 
space, wildlife habitat, mining, and oil and gas production.
---------------------------------------------------------------------------
    \3\ See http://www.doi.gov/epca for the full 2003 EPCA inventory 
report.
---------------------------------------------------------------------------
    The 2003 EPCA inventory was accomplished through a cooperative 
effort of Federal agencies, including the Bureau of Land Management 
(BLM), U.S. Geologic Survey (USGS), the Forest Service (FS), and the 
Department of Energy (EIA and the Office of Fossil Energy). Advanced 
Resources International of Arlington, VA, and Premier Data Services of 
Denver, CO, conducted the inventory.
    The 2003 EPCA inventory examined 138 tcf of natural gas resources 
4 including reserves 5 on Federal lands in the 
Rocky Mountain basins. In addition to analyzing Federal lands, the 
inventory also examined extensive split estate lands in which private 
surface lands are underlain by Federal subsurface mineral rights. About 
59 million acres of Federal lands (including split estate), present 
among the almost 104 million acres in these study areas, were analyzed. 
Federal lands and mineral split estate comprise over 60 percent of the 
natural gas resources in the EPCA study areas.
---------------------------------------------------------------------------
    \4\ EPCA mandated the use of USGS resource estimates. USGS 
estimates of technically recoverable resources were used in the 
inventory.
    \5\ Consideration of reserves was mandated by the EPCA legislation. 
Proved reserves estimates were provided by the Energy Information 
Administration.
---------------------------------------------------------------------------
    Stipulations are conditions issued for a lease, usually for reasons 
of environmental protection, and are subject to change from time-to-
time 6. For this reason, the 2003 EPCA Inventory represents 
a ``snapshot'' in time for conditions present at the time the inventory 
was conducted. The inventory entailed the geospatial modeling of oil 
and gas resource data in a compatible GIS format with land use 
designations 7 and leasing stipulations. There are 
approximately 1,000 discrete lease stipulations being applied by the 
land managing agencies (primarily the BLM and FS) in over 70 field 
offices in the basins studied.
---------------------------------------------------------------------------
    \6\ In fact some of the BLM and FS offices are in the process of 
revising their management plans, but those revisions and stipulations 
were not yet available for the EPCA studies.
    \7\ Land use designations include wilderness areas, wilderness 
study areas, etc.
---------------------------------------------------------------------------
    To focus the EPCA analysis on constraints on oil and gas 
development, a hierarchy of ten categories of access was developed to 
cover the complete range associated with oil and gas leasing in the 
studied basins (Fig. 3). The hierarchy was formulated based on the 
accessibility of the lands for leasing and drilling. For areas in which 
drilling is permitted, it was formulated to assess the impacts relative 
to the costs and delays to operators for conducting drilling.
    In addition, the analysis included consideration of exceptions to 
stipulations, principally seasonal restrictions, and the use of 
technologies such as directional drilling. Figure 4 shows the results 
of the EPCA inventory.
Response to the Analyses--NPC and EPCA
    If we focus on natural gas, the dominant resource type in the 
Rockies, the 1999 NPC report and the 2003 EPCA inventory appear similar 
in overall results. When the EPCA results are recast according to 
nomenclature used by the NPC, where NPC ``off limits'' areas are 
correlated with EPCA categories 1 to 5 and ``high cost'' correspond to 
EPCA categories 6 through 9, (Fig. 5), both studies show that about 40 
percent of the natural gas resources in the Rockies are either off 
limits or high cost.
    Interestingly, the response to the two studies is a contrast. The 
1999 NPC Report results have been generally characterized in terms of 
restrictiveness--40 percent of natural gas resources is either off 
limits or restricted. Conversely, the 2003 EPCA inventory has been 
characterized in terms of the complement--accessibility to the drill 
bit, where 60 percent is accessible. Ironically some environmental 
groups such as The Wilderness Society have indicated a preference for 
the EPCA results.
The Devil Is In The Details
    Nominally, at least, 1999 NPC and 2003 EPCA do appear to be 
opposite sides of the same coin. The reality is more complex and Table 
1 helps to sort out some of the differences.
     Resources. The studies covered similar areas (although 
there are some Rocky Mountain basins that EPCA has yet to address). 
Likewise, the resource bases are comparable, but there are some 
important differences--the EPCA inventory categorized about 26 tcf of 
proved reserves as accessible, placing them in the standard lease terms 
category. Further, the 2003 EPCA inventory did not account for reserves 
growth, although there are plans to do so in the future.
     Stipulation Exceptions. Generally, exception rates to 
stipulations were higher in the 2003 EPCA inventory leading to an 
increased access depiction. In the EPCA inventory, input on this issue 
came from over 70 BLM and FS offices.
     Inventoried Roadless Areas (IRAs). In the EPCA inventory, 
IRAs were not considered off limits because of an injunction blocking 
the roadless rule by a Federal judge in Idaho. However, with an April 
14, 2003 mandated refusal to review the recent 9th U.S. Circuit Court 
of Appeals panel decision ordering that the injunction be lifted, the 
roadless rule is in effect. In keeping with the intent that the EPCA 
inventory capture the practical aspects of access, roadless areas 
effectively should be considered off limits; the 2003 inventory does 
not reflect this.
     Split estate. With inclusion of split estate, the EPCA 
inventory makes for a more accurate depiction, especially in the Powder 
River Basin where almost 70 percent of the resources are estimated to 
be in split estate.
     Methodology. Because the EPCA inventory completely mapped 
the surface restrictions in the five areas study, it more accurately 
portrays access to resources under Federal land than does the NPC 
study.
    Recognizing these differences between the two studies, especially 
regarding resource type, estimations of exceptions and consideration of 
roadless areas, it is safe to say that, had the 2003 EPCA inventory 
been analyzed using 1999 NPC study parameters, it would show more 
restricted access.
Important Additional Issues
    Neither the 1999 NPC study nor the 2003 EPCA inventory 
quantitatively treat a number of additional issues that impact access 
to resources. These additional factors can be significant for oil and 
gas exploration and development on Federal lands. They are not easily 
quantified statistically or geographically and include:
     Protection for threatened and endangered species and 
surveys to determine whether a lease contains habitat for such species;
     Archaeological reviews required by the National Historic 
Preservation Act, and related issues involving cultural resources 
including consultation with Native American tribes;
     Air quality impacts, especially visibility 
considerations, and resulting restrictions on activities that may 
affect air quality;
     Water quality impacts, especially discharge permits for 
CBM
     Visual impacts of oil and gas operations;
     Noise from oil and gas operations;
     Conflicts between oil and gas and other mineral 
operations, such as coal and potash;
     Suburban encroachment on oil and gas fields and county 
government restrictions;
     ``Sense of Place,'' i.e., an emotional or spiritual 
attachment to certain locations which has been used as justification 
for designating certain areas as off limits to drilling;
    Typically, these requirements manifest themselves as conditions of 
approval attached to drilling permits following analysis under the 
National Environmental Policy Act (NEPA). Conditions of approval can 
delay or modify a planned oil and gas development activity at the 
permit stage and in some cases preclude it altogether.
    Because these requirements are not easily quantifiable, they were 
not included in the EPCA inventory, and further work would be needed to 
incorporate them. Their inclusion would provide a more accurate 
depiction of the difficulties for developing those resources.
    The BLM and FS, aware of the strengths and limitations of the EPCA 
inventory, are beginning a process of integrating the results to help 
prioritize and guide their planning processes. The EPCA results allow 
the Federal land management agencies to focus their efforts on those 
land use issues that most affect oil and gas resources, and that these 
efforts are supported by good data and sound science. Expansion of the 
inventory to include additional Federal lands and resources is planned.
    With the recognized, decreasing quality of prospects generally in 
the U.S., the proper question may not be whether the glass is full or 
empty, but what is the quality of the production that can developed and 
at what level of difficulty. The EPCA inventory has contributed a 
measure of clarity to the access issue, but more work remains to be 
done.
Acknowledgments
    The authors thank the Departments of Interior, Agriculture and 
Energy for supporting the EPCA study and the DOE for supporting this 
review and comparison with the NPC study.
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    Mr. Eppink. The EPCA inventory to date has concentrated on 
Rocky Mountain basins. Basins in the Rocky Mountains represent 
the second-largest natural gas resource in the U.S. after the 
outer continental shelf, and can help meet growing natural gas 
demand.
    The EPCA inventory addresses the issue of access. However, 
access is a bit of a misnomer for the Federal lands and the 
Rocky Mountains. While access is an obvious term for off-shore 
areas under moratoria, the situation is more complex than the 
Rocky's. For generating natural gas supply from the Rocky's, 
the issue decidedly does not revolve around access to such 
areas as national parks and wilderness areas. Rather, it 
concerns the degree of difficulty for generating supply from 
lands that can be leased and from areas that are 
administratively off-limits.
    The 2003 EPCA inventory is groundbreaking in that it is the 
most comprehensive examination of Federal land access issues 
that has been performed to date. Its purpose is to add clarity 
to the access debate and assist energy policymakers and Federal 
land managers in making decisions concerning oil and gas 
resource development.
    As the inventory results have been presented previously, I 
would like to spend the remainder of my time providing some 
context for those results. There has been criticism from some 
quarters that the EPCA inventory uses only technically 
recoverable resources and, further, that it should exclusively 
use economically recoverable resources. This can be misleading 
for a number of reasons.
    The 2003 EPCA inventory, in fact, was mandated to include 
proved reserves, where they are placed in the category with 
highest access. Proved reserves are the quintessential economic 
resources, having already been discovered and developed. 
Production comes from proved reserves.
    For undiscovered resources, however, it is inappropriate to 
use for land use planning solely those resources that are 
economically recoverable. One reason is that there is 
widespread disagreement regarding the appropriate prices on 
which to base the economics, but the compelling reason is more 
fundamental. Use of economically recoverable resources can 
overlook the geology, specifically the fact that the rocks 
exist in the ground, and contain hydrocarbons that may be 
recoverable with technology in the future.
    An example here is appropriate. If an EPCA-style inventory, 
focusing solely on economical recoverable resources had been 
conducted in 1990, it would have generally dismissed coalbed 
gas resources as unviable. In only 13 years, production of gas 
from coalbeds has grown to over 1.5 tcf per year and is growing 
still.
    I am confident that there are other similar resource types 
which will be significant contributors to production in 2020, 
but which cannot be considered economic today. Additionally, 
the 2003 EPCA inventory is a snapshot in time, and it should be 
considered as part of a dynamic process. A prime example is 
that of the so-called roadless rule for certain for-service 
lands. Due to the status of court decisions at the time, 
roadless areas were not considered off-limits in the inventory. 
However, the most recent court action leaves the roadless rule 
in effect. Were the inventory to be conducted today, it would 
have considered roadless areas as off-limits.
    Finally, the 2003 EPCA inventory does not quantitatively 
treat a number of additional issues, primarily post-leasing in 
nature, that impact access to resources. These factors can 
delay, significantly increase costs for or altogether preclude 
drilling.
    In closing, with the recognized decreasing quality of 
prospects generally in the U.S., the question remains, What is 
the quality of future natural gas production that can be 
developed and at what level of difficulty?
    The 2003 EPCA inventory has contributed a measure of 
clarity to the access issue, but more work remains to be done. 
The ability of our Federal lands to help meet our energy needs 
is there. This ability needs to be streamlined and expedited.
    I appreciate the opportunity to testify here before you and 
would be glad to answer any questions you might have.
    [The prepared statement of Mr. Eppink follows:]

             Statement of Jeffrey Eppink, Vice President, 
                 Advanced Resources International, Inc.

    Good afternoon, Chairwoman Cubin and members of the Subcommittee. 
My name is Jeffrey Eppink. I am a vice president with Advanced 
Resources International, an energy consulting firm based in Arlington, 
Virginia.
    At Advanced Resources, we have conducted a number of Federal lands 
assessments in recent years. We participated in the National Petroleum 
Council's 1999 study on natural gas, the study of Federal lands in the 
Greater Green River Basin (performed for the Department of Energy), and 
most recently the Energy and Policy Conservation Act (EPCA) inventory 
(more properly entitled ``Scientific Inventory of Onshore Federal Lands 
Oil and Gas Resources and Reserves and the Extent and Nature of 
Restrictions or Impediments to Their Development''), which is the 
subject of today's hearing.
    Because Advanced Resources was highly involved in the EPCA 
inventory, having collected the requisite data and performed the 
analysis under the guidance of the DOI, DOA and DOE, we have a solid 
familiarity with its strengths and weakness. Recently I have written an 
article, along with BLM, DOE and DOA colleagues, concerning the 
inventory, published in yesterday's Oil and Gas Journal. I would like 
to submit a (pre-print) copy of that article for the record.
    The EPCA inventory to date has concentrated on Rocky Mountain 
basins. It evaluates those basins that contain most of the natural gas 
and much of the oil resources under Federal ownership onshore in the 
United States. Basins in the Rocky Mountains represent the second 
largest natural gas resource in the U.S. after the outer continental 
shelf and can help meet growing natural gas demand.
    The EPCA inventory addresses the issue of ``access''. However, 
access is a bit of a misnomer for the Federal lands in the Rocky 
Mountains. While access is an obvious term for offshore areas under 
moratoria, the situation is more complex in the Rockies. For generating 
natural gas supply from the Rockies, the issue decidedly does not 
revolve around access to such areas as National Parks and Wilderness 
areas, rather it concerns the degree of difficulty for generating 
supply from lands that can be leased and areas that are 
administratively off-limits.
    The 2003 EPCA inventory is groundbreaking in that it is the most 
comprehensive examination of Federal land access issues that has been 
performed to date. It examined nearly 1000 discrete leasing 
stipulations and provides a meaningful categorization of Federal lands 
and resources. Its purpose is to add clarity to the access debate and 
assist energy policymakers and Federal land managers in making 
decisions concerning oil and gas resource development.
    Unconventional natural gas (primarily tight sands and coalbeds) is 
the dominant resource type in the Rockies. The 2003 EPCA inventory 
examined 138 tcf of natural gas resources including proved reserves on 
59 million acres of Federal lands (including split estate) in the Rocky 
Mountains. As the inventory results have been presented already, I 
would like to spend the remainder of my time providing some context for 
those results.
    There has been criticism from some quarters that the EPCA inventory 
only uses technically recoverable resources and, further, that it 
should exclusively use economically recoverable resources. This can be 
misleading for a number of reasons.
    The 2003 EPCA inventory, in fact, was mandated to include proved 
reserves, where they are categorized under ``standard lease terms,'' 
the category with highest access. Proved reserves are the 
quintessential economic resources, having already been discovered and 
developed. Production comes from proved reserves.
    For undiscovered resources, however, it is inappropriate to use 
(for land use planning) solely those that are economically recoverable. 
One reason is that there is widespread disagreement regarding 
appropriate prices on which to base the economics. But the compelling 
reason is more fundamental. Use of economically recoverable resources 
can overlook the geology, specifically the fact that rocks exist in the 
ground and contain hydrocarbons that may be recoverable with future 
technology.
    An example here is appropriate. If an EPCA-type inventory, focusing 
solely economically recoverable resources, had been conducted in 1990, 
it would have generally dismissed coalbed gas resources as unviable. In 
only 13 years, production of gas from coalbeds has grown to over 1.5 
tcf per year and is growing. I am confident that there are other, 
similar resource types, which will be significant contributors to 
production in 2020 but which cannot be considered economic today.
    The 2003 EPCA inventory is a snapshot in time and should be 
considered part of a dynamic process. A prime example is that of the 
so-called ``roadless rule'' for certain Forest Service lands. Due to 
the status of court decisions at that time, roadless areas were not 
considered off limits in the inventory. However, the most recent court 
action leaves the roadless rule in effect. Were the inventory to be 
conducted today, it would have considered roadless areas as off limits.
    Finally, the 2003 EPCA inventory does not quantitatively treat a 
number of additional issues that impact access to resources. These 
factors can delay, significantly increase costs for, or altogether 
preclude drilling. They are not easily quantified statistically or 
geographically and include:
     Archaeological reviews,
     Air and water quality impacts,
     Protection for threatened and endangered species,
     Noise and visual impacts of oil and gas operations, and
     ``Sense of place,'' which is an emotional or spiritual 
attachment to certain locations.
    With the recognized, decreasing quality of prospects generally in 
the U.S., the question remains: What is the quality of future natural 
gas production that can be developed and what is the level of 
difficulty. The 2003 EPCA inventory has contributed a measure of 
clarity to the access issue, but more work remains to be done.
    The ability of our Federal lands to help meet our energy needs is 
there; this ability needs to be streamlined and expedited. I appreciate 
the opportunity to testify before you and would be glad to answer any 
questions you might have.
                                 ______
                                 
    Mr. Rehberg. Thank you.
    Mr. Johnson?

STATEMENT OF ART JOHNSON, CHAIRMAN AND CHIEF EXECUTIVE OFFICER, 
                  HYDRATE ENERGY INTERNATIONAL

    Mr. Johnson. Thank you. I am Arthur Johnson, chairman and 
CEO of Hydrate Energy International, Kenner, Louisiana.
    Given that there is a looming supply issue, we see three 
options. First, would be opening additional areas to 
exploration, streamlining the permitting process, and also, for 
that matter, including a pipeline from the North Slope of 
Alaska, which would have some serious impact.
    The second approach would be imports of natural gas using 
LNG. We have problems with that one and what volume of LNG 
could reasonably be imported. Probably more important for me, 
though, is, as a Nation, we have been self-sufficient in 
natural gas, and I am concerned about a vision where 20 years 
from now or 15 years from now we are importing natural gas to 
the same extent that we are currently importing oil.
    So that third alternative, then, is to pursue 
unconventional resources of natural gas, deep gas, tight gas, 
shale gas, coalbed methane and gas hydrates, and this has 
already begun with coalbed methane, our model for how to 
proceed. CBM is now 8 percent of America's production, and that 
is our model for how we could see proceeding with gas hydrate.
    Gas hydrate is a crystalline substance composed of water 
and natural gas, under conditions of low temperature and 
moderately high pressure. It forms a solid. The conditions 
where that forms are found under the permafrost in Alaska and 
along America's continental margins. The advantage with gas 
hydrate is when it is either warmed or depressurized, it 
reverts back to very large quantities of natural gas. A cubic 
foot of methane hydrate yields approximately 160 cubic feet of 
natural gas.
    We are still at an early stage of assessing how much gas 
hydrate we have, but it appears that we have on the order of 
hundreds of thousands of tcf on Federal acreage. The question 
of how much of that is recoverable by any means, much less 
commercially, is one of those areas being investigated. We 
currently have programs, and I chaired the Methane Hydrate 
Advisory Committee that is overseeing some of this.
    We are making good progress, but rather slow. It is a 
program that is only funded at about $10 million a year through 
DOE, although the U.S. Geological Survey, Bureau of Land 
Management, the Navy, also have very solid, but I would say, 
from a funding standpoint, fairly minor programs, but have made 
some good progress.
    We are currently involved in drilling operations in Canada. 
We are hoping to have some drilling coming up to the next 18 
months on the North slope of Alaska, where we have identified 
approximately 100 tcf hydrate in place in a form that should be 
recoverable, given the nature of the reservoirs.
    From the industry standpoint, hydrates have had a bad 
reputation. They have always been viewed as a very futuristic 
resource. And with the DOE program goals looking for production 
in approximately the year 2020, what we find from industry is a 
lot of industry folks saying, well, get back to me in 2019, and 
we can talk. What we are looking at doing is how can we 
accelerate a program like this. Are there some ways that we 
could determine exactly where commercial deposits are, work 
with industry to assess that.
    Again, we see Federal research funding is the key to 
proving the commerciality of hydrates and accelerating the time 
line. We will need continuity in programs. This year DOE has 
only asked for $3.5 million in the budget for gas hydrates, 
which will have a dramatic negative impact on the program.
    We have identified hydrate potential on all coasts, 
particularly in the Gulf of Mexico, but also on the North 
Slope. They appear to be abundant, and while there are many 
uncertainties regarding their total resource potential, that 
potential appears to be significant. There are a lot of 
technical challenges remaining, but I don't believe that these 
are insurmountable. I believe that we know enough to move 
forward with hydrate programs.
    [The prepared statement of Mr. Johnson follows:]

 Statement of Arthur H. Johnson, Chairman and Chief Executive Officer, 
                      Hydrate Energy International

    Madam Chair and Members:
    I am Arthur H. Johnson, Chairman and CEO of Hydrate Energy 
International. I will discuss the potential for gas hydrates as an 
energy resource for the United States. I have 25 years of industry 
experience in oil and gas exploration and have served for the past two 
years as chair of the Department of Energy's Methane Hydrate Advisory 
Committee. I am also co-chair of the Gas Hydrate Committee of the 
American Association of Petroleum Geologists.
    The United States is entering an era of natural gas shortages 
during periods of peak demand. These supply shortfalls will be 
accompanied by significantly higher natural gas prices that, in turn, 
will have a serious impact on our nation's economy. In the years ahead, 
the shortages and price increases may become increasingly severe. 
Increasing the supply of natural gas from domestic sources should be a 
primary objective for the nation. A number of options for increasing 
gas supply should be considered.
    First, additional areas could be opened to exploration and 
development, and the permitting process streamlined.
    Second, imports of natural gas can be increased. Canada continues 
to supply a portion of America's natural gas and that volume will 
increase. Additional imports would require liquefied natural gas (LNG), 
an expensive process that is currently in use in many parts of the 
world. LNG imports are becoming economically feasible at current 
natural gas prices and a number of new domestic LNG receiving terminals 
are currently being designed. LNG imports have several negative 
aspects. Safety is an immediate concern, both with the LNG tankers and 
with the terminals. Gas for LNG would be supplied from fields in areas 
such as the Middle East, West Africa, and the Former Soviet Union; and 
there are concerns about America depending on the stability of these 
regions for its economic well-being. Beyond these issues is the 
fundamental observation that America is evolving from a nation that has 
been self-sufficient in natural gas to one that has become dependent on 
foreign sources. It is quite possible that in ten or fifteen years 
America could be importing natural gas to the same extent that it is 
now importing oil.
    The third alternative is to pursue unconventional sources of 
natural gas such as deep gas, shale gas, coaled methane, and gas 
hydrates. This has already begun, with coalbed methane (CBM) already 
supplying 8% of America's natural gas production. The role of CBM is 
continuing to increase, especially in Wyoming, and serves as an 
excellent analogy for the possible development of gas hydrates. Twenty 
years ago, CBM was a drilling hazard and the government was criticized 
for conducting research in it. That effort has definitely paid off.
    The best advice is to pursue all three alternatives.
    This brings us to gas hydrates. Gas hydrate is a crystalline 
substance composed of gas and water. It forms when water and natural 
gas combine under conditions of moderately high pressure and low 
temperature. If gas hydrate is either warmed or depressurized it will 
revert back to water and natural gas, a process termed 
``dissociation''. Natural gas is concentrated in hydrate so that the 
dissociation of a cubic foot of hydrate will yield 0.8 cubic feet of 
water and approximately 160 cubic feet of natural gas. The conditions 
where hydrates occur are common in sediments off the coasts of the 
United States in water depths greater than approximately 1600 feet and 
at shallower depths in sediments associated with deep permafrost in the 
Arctic. Preliminary investigations indicate that considerable volumes 
of gas hydrate are present in at least some of these areas.
    The total volume of gas hydrate in the United States is not known, 
although the results of a wide variety of investigations conducted over 
the past thirty years indicate that the volume is very large, on the 
order of hundreds of thousands of TCF. More important, however, is the 
amount of hydrate that can be commercially recovered. Characterization 
of hydrate resources that has been carried out, for example in the 
MacKenzie Delta of Canada, the North Slope of Alaska, offshore Japan, 
and elsewhere indicate that the total in less explored areas of the 
U.S. hydrate province is likely in the range of many thousands of TCF.
    Gas hydrate investigations have been undertaken by many Federal 
agencies during the past 30 years. These include the U.S. Geological 
Survey, Naval Research Laboratory, National Science Foundation, and 
Department of Energy. The Methane Hydrate Research and Development Act 
of 2000 initiated a new program to study several aspects of gas 
hydrates, including seafloor stability, global climate change, and the 
potential of gas hydrate as a commercial resource. The resource target 
has been for production in the year 2020. Funding for the new program, 
which is managed by the DOE, has typically been on the order of $10 
million per year.
    The new program has enabled the United States to participate in a 
number of recent cooperative international investigations that have 
increased our understanding of gas hydrates. These include an 
experimental well in the Canadian Arctic last year that resulted in 
significant new data for use in modeling hydrate production and 
actually produced some gas from hydrate. A joint effort of the DOE and 
Anadarko Petroleum has an on-going project to drill and evaluate Arctic 
sediments to better understand hydrate occurrence. A joint effort of 
the DOE and BP Exploration Alaska is preparing a hydrate production 
test in approximately 18 months that should greatly improve our 
understanding of the commercial viability of Arctic hydrates. The U.S. 
Geological Survey has played a dominant role in guiding the geological 
and geophysical aspects of these projects. Successful results in Alaska 
will encourage the domestic industry to pursue hydrate opportunities in 
the Gulf of Mexico. It is conceivable that commercial production of gas 
from gas hydrate could begin, on at least a limited basis, in just a 
few years.
    In the Gulf of Mexico, a Joint Industry Program (JIP) is engaged in 
characterizing gas hydrate occurrences there with matching funds 
provided by the DOE. The JIP is led by ChevronTexaco and includes 
several other U.S. and foreign oil companies, as well as the U.S. 
Minerals Management Service. While the stated goal of the JIP involves 
ensuring the safety of existing facilities, the results of the JIP 
program will assist in characterizing the commercial hydrate potential 
of the Gulf.
    Other nations are also investigating gas hydrates as part of their 
energy security initiatives. The most significant programs are in 
Japan, India, and Canada. These programs are making great progress and 
the U.S. is benefiting from their results.
    Industry interest in gas hydrates as a resource has been growing 
over the past year. In the past hydrates were viewed as strange and 
futuristic, always to be twenty years into the future. Many of the 
production schemes envisioned for hydrates involved exotic and 
expensive approaches to production that are far removed from any 
company's core business. Hydrate development was viewed as requiring 
high operating expense, while nearly every company was striving to 
reduce operating expense. Hydrates also had a credibility problem, with 
many proponents making unrealistic projections of hydrate production 
capabilities.
    These negative perceptions are changing as research efforts begin 
to show the commercial viability of hydrates. The drilling results last 
year at the Canadian site have led to studies showing that hydrate 
production need not involve high operating expense. On the North Slope 
of Alaska, where initial U.S. production is most likely, there is a 
growing industry interest in natural gas. In addition, the recent 
changes in the domestic gas market have encouraged companies to seek 
additional sources. Yet, industry is not yet ready to pursue hydrates 
its own.
    Federal research funding is the key to proving the commerciality of 
gas hydrates and accelerating the development timeline. Such funding 
must be focused on the critical questions that need to be resolved. In 
addition, there needs to be continuity from one budget cycle to the 
next so that multi-year projects can be maintained. Incentives such as 
royalty relief and unconventional resource tax credits will encourage 
industry participation.
    Recent models indicate that hydrate resources can be developed by 
producing gas from adjacent free-gas reservoirs. The drop in pressure 
will cause dissociation of the hydrate which then feeds additional gas 
into the reservoir. The critical questions that need to be answered 
involve the ultimate amount of gas that can be recovered from hydrates 
by each well, the daily production rate of each well, and the expenses 
involved in drilling and producing the wells.
    Gas hydrate deposits have been identified on the North Slope of 
Alaska and in deep water locations off the Pacific, Atlantic, and Gulf 
coasts of the U.S. In the near term, hydrate prospects will only be 
viable in areas where there is existing conventional production so that 
infrastructure (platforms, pipelines, etc.) may be leveraged. This will 
make the North Slope of Alaska and the deepwater Gulf of Mexico the 
primary focus of commercial hydrate development in the U.S. for the 
foreseeable future. In these areas, gas hydrates have the potential to 
add significantly to America's natural gas production.
    In summary, gas hydrates appear to occur in abundance in Arctic and 
U.S. territorial waters. While there are many uncertainties regarding 
their total resource potential, that potential appears to be 
significant. Technical challenges remain but are not insurmountable. We 
know enough to move forward.
                                 ______
                                 
    Mr. Rehberg. Thank you.
    Ms. Knopman?

 STATEMENT OF DEBRA KNOPMAN, ASSOCIATE DIRECTOR, RAND SCIENCE 
                      AND TECHNOLOGY, RAND

    Ms. Knopman. Thank you, Mr. Chairman, for the opportunity 
to testify before the Subcommittee. I would like to request my 
full written statement be included in the record.
    Mr. Rehberg. Without objection.
    Ms. Knopman. I am associate director of RAND Science and 
Technology, a senior engineer at RAND and also a member of the 
study team for RAND's recently released final report, 
``Assessing Natural Gas and Oil Resources: An Example of New 
Approach in the Greater Green River Basin.'' This study was 
funded by the William and Flora Hewlett Foundation.
    I just would like to point out the views expressed here are 
my own and do not necessarily reflect those of either RAND or 
its research sponsors. Further, I would like to state RAND has 
no position on whether oil and gas exploration and development 
should proceed on currently restricted Federally managed lands. 
Institutionally, RAND's interest is in the quality, relevance, 
and transparency of the technical information that surrounds 
the public debate.
    Our main point can be summarized as follows:
    Existing resource assessments focus on the amount of 
technically recoverable resource. Our new approach builds on 
these assessments by including economic and environmental 
considerations. We believe that this additional information can 
help Federal and State land managers and policymakers at all 
levels better plan for long-term resource use.
    The rapid increase in domestic natural gas demand has 
heightened the need for land management agencies to take a 
strategic view of Federal land-use planning. It is vital for 
land managers and, indeed, energy policymakers in and out of 
Government to have some understanding of how much resource is 
likely to come into the market under various conditions.
    For example, the balance between market prices of natural 
gas and drilling and transportation costs, highly dependent, as 
others have pointed out, on geologic and topographic conditions 
will clearly affect the rate of development and technology as 
well, I should add.
    If land management agencies were directed to increase 
production on Federal lands, they would clearly benefit from 
using economic and environmental information to set regional 
priorities. Indeed, Federal law already requires strategic 
planning and priorities for land use. An open question is the 
basis for the priorities. What should be the breadth and scope 
of technical information that is available and used to inform 
the planning process?
    In our study, we demonstrated our approach for the Greater 
Green River Basin in Southwestern Wyoming, estimated to contain 
about 9 percent of the Nation's future natural gas supply.
    Our analysis found that, depending on the technically 
recoverable resource base estimate used, approximately 35 to 45 
percent of natural gas in the basin could be profitably 
produced at less than $3 per million Btu. Up to 65 percent 
could be profitably produced if the market price were $5 per 
million Btu.
    More significantly, the fraction of technically recoverable 
gas that is economically recoverable at a given price varies 
substantially from place to place. When we looked at 
environmental measures associated with the lands overlying the 
resource, such as various ecosystem and water quality factors, 
we found that concentrations of economically recoverable gas 
exist predominantly in areas of relatively lower environmental 
concern. For instance, 18 percent is found in areas with 
predicted species richness above the median value in that basin 
and 11 percent is in aquatic or riparian areas. Less than 8 
percent is within close proximity of human settlements.
    Our methodology does, however, have limitations. Most 
particularly, it is limited by the quality and spacial 
resolution underlying the assessments we use as our base. Those 
are not our assessments. They are the USGS or NPC assessments. 
More detailed information may be needed to make decisions at 
the smaller scale.
    We have emphasized the use of our approach on the regional 
scale and subregional scale. As we were developing our method, 
the EPCA study of the special distribution of access 
restrictions in the Rocky's, including the Greater Green River 
Basin, was released. While the overall goal of the two studies 
is the same to improve the information base for strategic 
decisionmaking, the studies differ in the way they ask the 
question about potential limits on development.
    The EPCA study looked at access restrictions as the key 
variable indicating development potential. We looked at 
estimates of wellhead and transportation costs associated with 
gas resources in different areas as a useful indicator of 
development potential.
    We also looked at a set of measurable environmental 
indicators associated with land overlying the resource, in 
contrast to the EPCA's study's focus on access restrictions 
which, as has been pointed out, are often variably designated 
from one BLM office or State to another.
    While we see great value in our new assessment approach, we 
are not suggesting it be the sole tool in any decisionmaking 
process, nor is it meant to replace existing tools, such as 
detailed lease-specific analyses or environmental impact 
assessments.
    RAND's interest in this issue, as it is in all of our work, 
is to improve decisionmaking through research and analysis. We 
are independent, nonprofit, dedicated to producing objective, 
nonpartisan analysis. The research upon which this testimony is 
based has been through Rand's quality assurance process.
    This concludes my testimony. Thank you.
    [The prepared statement of Ms. Knopman follows:]

            Statement of Debra Knopman, Associate Director, 
                       RAND Science & Technology

    Thank you, Madam Chairman, for the opportunity to testify before 
the Subcommittee on Energy and Mineral Resources about methods of 
assessing oil and gas resources.
    I am Associate Director of RAND Science and Technology, a Senior 
Engineer at RAND, and a member of the study team for RAND's recently 
released final report ``Assessing Natural Gas and Oil Resources: An 
Example of a New Approach in the Greater Green River Basin.'' This 
study was funded by the William and Flora Hewlett Foundation.
    In April 2002, I appeared before this Committee with interim 
findings. In our testimony, I reviewed existing resource assessment 
methods and presented a general framework for a new approach to 
assessing natural gas and oil resources. Today, on behalf of my co-
authors, I offer our completed research, including the results of 
applying this new approach to the Greater Green River Basin in 
southwestern Wyoming.
OVERVIEW
    Natural gas and oil resource assessments have historically focused 
on the amount of resource in the ground that could be extracted, based 
on assumptions about available drilling technologies. Our new 
methodology builds on these traditional assessments by adding economic 
and environmental considerations, such as how much resource might be 
recoverable at what cost, and how much resource is associated with 
lands having different environmental values.
    The primary objective of our research is to help governmental 
officials and other stakeholders make more informed choices related to 
land use planning, design of energy policies, and energy development 
and fuel utilization planning. For example, the additional economic and 
environmental information generated by our approach B overlaid on maps 
of the technically recoverable resource B can help public land managers 
distinguish energy potential among different areas and set priorities 
among areas based on multiple B and often competing--public objectives.
    This new approach can help Federal and state land managers and 
policymakers at all levels plan strategically for long-term resource 
use. It is worth noting that current law requires that this planning 
take place; it just happens to take place now in the absence of this 
richer source of information. We are suggesting that the existing 
planning process could be substantially improved by systematically 
introducing economic and environmental criteria consistent with the 
same geological framework used to represent the technically recoverable 
resource.
RAND'S PERSPECTIVE ON THIS RESEARCH
    As in all our work, RAND's interest in this issue is to improve 
decision-making through research and analysis. We are an independent 
non-profit organization, dedicated to producing objective, non-partisan 
analysis. Our publications are subjected to rigorous peer review and 
quality assurance during which we actively seek internal and outside 
experts to critique our work. The research upon which this testimony is 
based has been through this quality assurance process.
    RAND does not have a position on whether oil and gas exploration 
and development should proceed on currently restricted Federally 
managed lands. Instead, our interest is in the quality, relevance, and 
transparency of the technical information that surrounds the public 
debate on future development. We also seek to encourage an expansion of 
the discussion regarding prospective exploration and development beyond 
the particular access restrictions applied to Federal lands. We believe 
that improved public understanding of the range of estimated costs and 
impacts of development and associated infrastructure, under different 
technology and economic assumptions, will contribute significantly to 
the debate on national energy and land management policies.
    We fully recognize that there are legitimate questions about the 
appropriate Federal role in examining the economics of exploration and 
development scenarios. Our proposed approach is not meant to replace 
industry's detailed, site-specific economic evaluations or Federal land 
managers' existing environmental assessment and permitting processes. 
Rather, it is meant to provide decisionmakers with a more comprehensive 
assessment of bounding ranges of resource availability at the regional 
and subregional scale. We believe our proposed methodology would 
enhance current efforts by the BLM and other Federal land managers to 
communicate more effectively and clearly the economics and 
environmental implications of their actions. We are simply making a 
case for more comprehensive information in the policy process.
OVERVIEW OF FINDINGS
    Our chief point can be summarized as follows: There is an ongoing 
need for improvements in the way we think about how to value energy 
resources and ways we can incorporate this valuation into land use and 
other decisionmaking. Our study focuses on this need, specifically for 
natural gas and specifically for Federal land in the Rocky Mountain 
West.
    Decisions about potential development of oil and gas resources are 
particularly relevant now. Natural gas demand in this country has been 
increasing for the last 15 years and is expected to increase 
substantially in the next 20 years. Most states and regions are 
currently in the process of planning for considerable future dependence 
on natural gas as their dominant electricity-generating fuel. With 
demand rising, much attention has focused on strategies to increase 
domestic production. As a result, decisionmakers and the public would 
benefit from a more comprehensive view of prospective costs and 
availability of long-term domestic supplies of natural gas and oil.
    Further, as domestic production of gas increases, Federal land 
managers, particularly the Bureau of Land Management and the Forest 
Service, confront with increasing frequency complex and sensitive 
development decisions--decisions that can have far-reaching and long-
term effects. As they approach future land use questions, an assessment 
approach that allows for more strategic decisionmaking is highly 
desirable. We thus propose a methodology that incorporates a fuller 
array of the issues Federal land managers must face, including costs 
associated with production as well as environmental considerations that 
may have an impact on additional costs of exploration and development.
A MORE COMPREHENSIVE ASSESSMENT ALLOWS FOR MORE STRATEGIC AND LONG-
        RANGE DECISIONMAKING
    The rapid increase in domestic natural gas production has 
heightened the necessity for the country's land management agencies to 
take a strategic view of Federal land use decisionmaking--one that 
allows them to understand the differences between resources in 
different areas and thus to prioritize lands being evaluated for 
development. Under current practices by the Bureau of Land Management 
and the Forest Service, resource management plans required by the 
Federal Land Management and Planning Act may remain in place for on 
average about 15 years before being updated. In the meantime, many 
small-scale decisions related to individual applications to drill are 
made based on out of date planning assumptions about the status of the 
energy and other resources throughout the region. Current practice 
leaves little room for land managers to set internal priorities on 
deploying their own resources to further public objectives, including 
increased domestic energy production. Our primary goal was to develop a 
consistent and technically defensible means of bringing in new 
information about economics and environmental measures into the 
strategic planning process for the purpose of improving the long-range 
and large-scale view of public land use decisions.
    This new approach is designed to offer a larger picture than 
traditional gas and oil resource assessments. The function of current 
assessments is to provide decisionmakers with a scientifically informed 
estimate of the quantity and spatial extent of the resource. These 
assessments focus on what is commonly called the ``technically 
recoverable resource,'' or the amount of the resource that is estimated 
to be recoverable given certain assumptions about exploration and 
production capabilities. Resources are evaluated in terms of geological 
criteria and technical feasibility of recovery, but without economic or 
other considerations. These estimates, therefore, are not intended to 
indicate how much resource will likely be developed and at what cost.
HOW THE NEW APPROACH WORKS: THE GREATER GREEN RIVER BASIN CASE STUDY
    As a means of demonstrating how our new methodology works, we used 
it to assess natural gas resources in the Greater Green River Basin. We 
believe these results are instructive for developing the methodology 
further and providing insights that may help inform strategic energy 
resource planning in this basin. We chose this region because its 
characteristics apply to multiple areas throughout the intermountain 
areas of the Rocky Mountains. Due to its relative richness in 
hydrocarbon resources, particularly natural gas, this region has been 
under intense scrutiny in recent years as efforts increase to find 
domestic sources of gas and oil.
    National resource assessments indicate that the Rockies contain 
approximately 15 percent of the nation's technically recoverable future 
natural gas supply. Further, in the Rockies, 60 percent of the 
technically recoverable gas underlies Federal land, compared to just 
two percent in the onshore areas of Texas and the Gulf Coast states. 
Thus, growth in production in the Rockies means that energy-related 
land use decisions will increasingly become the responsibility of 
Federal land managers. Likewise, in this region, gas occurs in diverse 
range of deposit types and depths, resulting in a large range of costs 
and demonstrating the need for--and value of--a more comprehensive 
assessment approach.
    As a first step, we mapped the spatial distribution of the 
technically recoverable resource in the Greater Green River Basin. We 
looked at three different estimates: the 1995 U.S. Geological Survey 
Assessment, the ``conventional technology'' estimate from the National 
Petroleum Council (NPC), and the ``enhanced technology'' estimate from 
the NPC. For mapping purposes, we disaggregated the geological units 
identified by USGS as containing substantial resource (known as 
``plays'') into smaller ``subplays.'' This enabled us to provide a more 
refined estimate of costs, particularly capturing differences in 
drilling costs related to the depth of the deposits. Then, we generated 
production cost curves for proved reserves, reserve appreciation, and 
undiscovered resource in each subplay in order to determine the 
resource available at different costs. We estimated separate costs for 
each resource unit, resource category, resource type, and depletion 
increment, eventually formulating separate costs for over 1,200 
distinct analysis units throughout the basin. Using continuous cost 
curves, we summed up the amount of gas that could be produced at costs 
beginning with zero and extending up to different discrete prices.
    Our analysis found that, depending on the base technically 
recoverable resource estimate used, approximately 35 to 45 percent of 
natural gas in the Greater Green River Basin could be produced 
profitably produced at less than $3 per million British Thermal Units 
(MMBtu), which is similar to recent prices in Wyoming. Up to 65 percent 
could be profitably produced if the market price were $5 per million 
MMBtu.
    Importantly, our analysis showed that the fraction of technically 
recoverable gas that is economically recoverable at a given price 
varies substantially from place to place; for example, concentrations 
in some areas drop off much more quickly than in others as the price 
decreases. Such a result highlights the usefulness of combining 
economic and spatial analyses: When looking at specific areas, the 
concentrations of economically recoverable resources do not necessarily 
correlate directly with the concentrations of technically recoverable 
resources. In other words, what is technically recoverable is not 
always economically desirable under assumed market conditions.
    This spatial-economic analysis thus provides information not 
currently available to help Federal land managers distinguish gas 
resources in different areas. By using transparent economic and other 
quantitative criteria, the methodology enables decisionmakers to 
establish a credible basis for more spatially refined priorities.
    The next stage in our approach overlays these findings with 
environmental considerations. Specifically, our next analytical step 
seeks to factor in the environmental attributes of the resource by 
distinguishing resources according to the characteristics of the land 
it occupies. It is important to point out that this part of the 
methodology does not function as, or substitute for, an environmental 
impact assessment. Rather, it is a first attempt at what we call an 
environmental characterization: a description of some relevant 
environmental measures and a classification of the lands and associated 
resources according to these measures. Eventually, an environmental 
impact assessment would have to occur before actual drilling activities 
begin, but this characterization provides an initial framework for the 
process, both at a larger scale and at an earlier stage in the planning 
process.
    In this analysis, we examined seven environmental measures: 1) 
Terrestrial vertebrate species richness; 2) Proximity to sensitive 
species observed locations; 3) Surface water and riparian habitat 
zones; 4) Proximity to human settlements; 5) Aquifer recharge rate; 6) 
Depth to groundwater; 7) Surface slope. The first three measures 
address primarily ecosystem quality, the fourth represents issues 
related to human use of the area, and the final three measures examine 
primarily water quality. We also considered existing Federal land 
access restrictions. Measure values were grouped or ``binned'' and maps 
of the spatial distribution of the lands with different measure values 
were then generated. It is important to note that the cut-offs between 
different bins are statistically rather than empirically based. The 
relationship between environmental measures and sensitivity to 
environmental impact is complex and developing this relationship is 
beyond the scope of this approach. Our statistically derived bin values 
do, however, provide a relative sense of environmental concern and so 
do offer some useful guidance. However, because these values are not 
based on empirically-derived relationships between gas and oil 
development activities and potential environmental impacts, they say 
little about actual environmental risk and in that sense the 
environmental measures need to be developed further as the methodology 
becomes more comprehensive.
    Our analysis indicates that, for the most part, the concentrations 
of economically recoverable gas exist in areas of relatively lower 
potential environmental concern--at least in terms of the environmental 
measures we considered. For instance, 18 percent of the economically 
recoverable natural gas is in areas with predicted species richness 
above the median value and 11 percent is in aquatic or riparian areas. 
Less than eight percent of the gas occurs within close proximity of 
human settlements. Of the water quality measures, only eight percent 
occurs in areas with slopes greater than 25 percent, and areas with 
high aquifer recharge rates and shallow groundwater contain, 
respectively, nine percent and 12 percent of the gas in the basin.
    I should note that in the specific case of the Greater Green River 
Basin, the measures related to ground water quality may not be as 
important as in other areas. This would be the case as long as the 
state of Wyoming enforces their current requirement that no drilling 
waters in the basin are discharged at the surface, but rather are 
reinjected into the subsurface. However, for purposes of illustrating a 
broader range of environmental attributes, we included these ground 
water measures in our analysis.
    As with the economic evaluation, however, environmental overlay 
results for certain areas within the basin differ from the basin-wide 
average values. Indeed, we found some areas with relatively high gas 
densities that do coincide with riparian habitats, high terrestrial 
vertebrate species richness, and shallow groundwater. Such findings may 
be particularly relevant in areas such as north of the LaBarge 
Platform, which may appear promising judging by the economic analysis 
alone but may present more complexity--and hence more cost--when one 
considers its environmental attributes.
    Of course, the fact that an area has specific environmental 
characteristics does not necessarily mean these characteristics will be 
negatively affected by development. Still, our results suggest that 
some lands might be less attractive than other lands for development. 
For example, there may be more costs associated with mitigating 
potential impacts on lands close to surface water resources. This 
information would be useful to public land managers who may need to 
prioritize their efforts in permitting lands for exploration and 
production.
    We have highlighted aspects of natural gas resources in the Greater 
Green River Basin that may not be directly evident from technically 
recoverable resource assessments. However, the value of this approach 
is expected to be even more evident when it has been applied to all the 
basins in the Rocky Mountains and eventually to all basins in the 
country. Just as a basin-wide evaluation using a consistent methodology 
allows Federal land managers to compare and prioritize areas within the 
Greater Green River Basin, a Rockies-wide evaluation will allow these 
managers to make the same type of comparisons and prioritizations among 
areas within different basins.
    Ultimately, we believe the results generated from this approach can 
provide decisionmakers with more robust information about natural 
resources that can help guide strategic resource planning, help 
prioritize difficult decisions that are being made about access to 
Federal lands, and help understand the potential consequences of 
decisions.
    As with any type of spatial analysis, the appropriate level of 
interpretation depends critically on the resolution of the underlying 
data. This is particularly evident in our study which is fundamentally 
limited by the quality and spatial resolution of the underlying 
geologic framework establishing the estimates of technically 
recoverable resource. The USGS and NPC estimates are not sufficiently 
resolved spatially to identify small, but possibly productive deposits. 
The Jonah field in Wyoming is frequently cited as an example of a 
small, but highly productive area that was ``missed'' by the experts. 
Our analysis, as any analysis at a similar resolution, must therefore 
be used with the understanding that more detailed information may be 
needed to make decisions at the smaller scale.
RELATIONSHIP OF THE RAND METHOD TO THE EPCA STUDY
    During the time we were developing our method, an interagency work 
group completed their study of the spatial distribution of access 
restrictions in the Rockies, including the Greater Green River Basin. 
The work group's report, known as the Energy Policy and Conservation 
Act (EPCA) study, took a fundamentally different approach from our 
study. The EPCA study pulled together a spatial analysis of access 
restrictions as they applied to the technically recoverable resource. 
These access restrictions are typically associated with environmental 
concerns, but they are inconsistently applied from region to region and 
state to state. Hence, they are a highly variable B and unreliable B 
measure of environmental assets. Further, by design, the EPCA study did 
not address issues associated with the costs of resource development at 
the wellhead or the infrastructure costs of transporting the resource 
to market.
FINAL COMMENTS
    Given its capabilities, we believe our new methodology enhances the 
array of tools currently available. By linking economics and 
environmental characteristics with spatial analysis, it allows 
decisionmakers to consider relative priorities for development. It is 
also a flexible methodology that is applicable to other regions. For 
Federal land use planners, it provides more information to weigh energy 
resource values, while also helping to identify areas with higher 
production potential. In turn, for energy planners, it offers 
information to help in the comparison of policy options and can guide 
fuel choices and import planning. Indeed, if this information were 
available for all basins in the region, electric utilities or state 
energy planners could plan their long-term resource use more 
effectively by having a more realistic view of availability based on 
production costs. Likewise, the Energy Information Administration could 
use this information in its price and supply forecasts. For other 
stakeholders, such as state authorities, utilities, and natural gas and 
oil producers, it can assist in estimating energy availability and in 
planning for power plant and transmission infrastructure investment. 
Finally, this approach can be used on the local level to forecast 
economic impacts, such as projected revenues and jobs brought about by 
these land uses.
    It is important to note that this new approach is not meant to be 
the sole tool in any decisionmaking process. Instead, it is intended to 
be a part of a broader set of information sources that decisionmakers 
might use. Further, it is not intended to replace detailed economic or 
environmental analyses on specific leases. What it does offer, however, 
is a new means to treats economic costs and environmental 
characteristics as integral attributes of energy resources. We believe 
this approach will contribute to a richer debate and assist in the kind 
of long-term strategic planning needed to tackle these areas of growing 
concern.
    This concludes my testimony. I welcome any questions you may have. 
Thank you.
                                 ______
                                 
    Mr. Rehberg. Thank you.
    Ms. Bower?

            STATEMENT OF DRU BOWER, VICE PRESIDENT, 
                PETROLEUM ASSOCIATION OF WYOMING

    Ms. Bower. Mr. Chairman, members of the Subcommittee. My 
name is Dru Bower, and I am the vice president for the 
Petroleum Association of Wyoming, specializing in public land 
issues.
    In 1996, Wyoming supplied the Nation with 3.4 percent of 
the total U.S. output of natural gas. In 2002, natural gas 
production for our State rose to 7.1 percent. Noteworthy is the 
fact that a significant percentage of Wyoming is managed by 
Federal agencies, approximately 49 percent of the surface and 
66 percent of the mineral estate.
    The Federal Government plays a significant role not only in 
Wyoming, but in many other Western States. Industry commends 
Congress for its foresight in requiring the Energy Policy and 
Conservation Act study. We have already been presented with the 
results of that study. And while some groups claim that EPCA 
results suggest that there is no access problem, this couldn't 
be further from the truth. The EPCA study is a solid beginning. 
However, the analysis does not go far enough to assess the full 
situation. Even on leased lands subject to only standard lease 
terms, conditions of approval are imposed in accordance with 
land-use decisions made by the agencies. While a lease may not 
be subject to additional stipulations, conditions of approval 
identified through project-level or site-specific environmental 
analysis may be required for proposed projects. Each condition 
of approval limits access to the lease, to some extent, whether 
through added cost or delay.
    While the petroleum industry uses the word ``access'' as a 
``catch-all'' term, the term is not limited to the availability 
of Federal lands for leasing. Access also encompasses the 
industry's ability to develop new wells in existing fields.
    The National Petroleum Council is in the process of 
updating its 1999 Natural Gas Supply and Demand Study. It is 
our understanding that MPC is adding an access section which 
will analyze, for high gas potential, basins to determine the 
effects, lease stipulations, surveys for threatening an 
endangered species and conditions of approval have on 
industry's ability to explore for and develop resources. The 
report is due out in September of this year.
    The Roadless Conservation Rule prevents road building on 
more than 58 million acres of National Forest System, a move 
that will place 11.3 trillion cubic feet of economically 
recoverable natural gas off-limits to exploration and 
development. According to the Department of Energy report, 83 
percent of the natural gas resource found in the Rocky Mountain 
region is located in slightly less than 5 percent of the total 
proposed inventoried roadless areas nationwide.
    The Petroleum Association and Public Land Advocacy urge 
Congress to support modification of the Roadless Conservation 
Rule. Removal of the 5 percent of inventoried roadless areas 
that overlie these important natural gas resources would still 
allow for the majority of inventoried roadless areas to be set 
aside, while providing for development of the critically 
important natural gas resource base.
    The Federal regulatory process is exhaustive and 
cumbersome. It should be noted that once a lease has been 
issued, it becomes a contractual agreement between the Federal 
Government and the lessee. While the lease contract gives the 
lessee the exclusive right to develop the lease, it does not 
give the lessee the green light to start exploration or 
development activities.
    There are several different processes and several different 
layers of NEPA analysis which must occur before and after 
leasing; primarily, at the resource management plan stage, also 
a determination of NEPA adequacy indicates whether additional 
analysis is necessary before leasing can occur, and there is 
also project-level and site-specific level NEPA analysis.
    Consultations with other agencies also must occur, and each 
agency may require new restrictions that directly impact access 
and the economic viability of the project. BLM has implemented 
several new instruction memoranda designed to make the process 
more efficient. These IMs are a positive step in the right 
direction, and industry looks forward to their immediate 
implementation in the field. There are additional measures that 
must be taken to ensure timely and cost-effective access to 
Federal lands, and these recommendations are outlined in my 
written testimony.
    Another important factor to consider in the Federal 
Regulatory process is litigation by environmentalist groups 
whose sole purpose is to delay or deny development of natural 
resources. In Wyoming, virtually all lease sales and most 
project-level environmental assessments and environmental 
impact statements, including geophysical projects, have been 
protested, appealed or challenged in Federal Court.
    Unfortunately, NEPA has become a tool that is used as the 
primary impediment to oil and gas development on Federal lands. 
The cost of NEPA abuse is high. Litigation is paralyzing 
agencies' field and State offices from making decisions as 
their focus is shifting from land management and processing of 
permits to responding to frivolous litigation. Therefore, the 
burden of the agency's management responsibilities frequently 
shifts to the operators. All of these new obligations that have 
been historically the agency's responsibility put a tremendous 
burden on industry's ability to economically develop the 
resource for the benefit of this country.
    In conclusion, the Petroleum Association of Wyoming and 
Public Land Advocacy appreciate Congress's recognition of the 
important role access to Federal lands plays in meeting the 
energy needs of this country through its efforts to pass an 
energy bill. However, many of the additional measures discussed 
in this testimony can also be easily addressed through the 
regulatory process.
    Mr. Chairman and members of the Subcommittee, thank you for 
this opportunity to testify.
    [The prepared statement of Ms. Bower follows:]

   Statement of Dru Bower, Vice President, Petroleum Association of 
              Wyoming, on behalf of Public Lands Advocacy

    Madam Chairwoman and members of the Subcommittee, my name is Dru 
Bower and I am the Vice President of the Petroleum Association of 
Wyoming (PAW), specializing in public land issues. I am here today 
representing not only PAW, but also Public Lands Advocacy. We would 
like to thank the Subcommittee on Energy and Mineral Resources of the 
Committee on Energy and Commerce for the opportunity to testify at this 
Oversight Hearing regarding ``The Ability of Federal Lands to Meet our 
Energy Needs.''
    PAW is Wyoming's oldest and largest trade organization, the members 
of which account for over ninety percent of the natural gas and over 
eighty percent of the crude oil produced in the State. PAW is 
recognized as Wyoming's leading authority on petroleum industry issues 
and is dedicated to the betterment of the state's oil and gas industry 
and public welfare.
    Public Lands Advocacy (PLA) is a non-profit organization whose 
members include major and independent petroleum companies as well as 
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.
    In 1996, Wyoming supplied the nation with 3.4% of the total U.S. 
output of natural gas. In 2002, natural gas production for our state 
rose to 7.1% of the total U.S. output. Noteworthy is the fact that a 
significant percentage of Wyoming is managed by Federal agencies.
    Wyoming is a uniquely rural state comprised of 97,914 square miles 
and is the ninth largest state in the Union. Lands in the state, which 
are owned and controlled by the Federal Government equate to 
approximately forty-nine percent (49%) of the surface and sixty-six 
percent (66%) of the mineral estate. These Federal lands are managed by 
agencies such as the National Park Service (NPS), United States Forest 
Service (USFS) and the Bureau of Land Management (BLM). The remaining 
51% of the surface and 34% of the mineral estate are owned by private 
entities, the State of Wyoming and the Tribes.

ENERGY POLICY AND CONSERVATION ACT
    Industry commends Congress for its foresight in requiring the 
Energy Policy and Conservation Act (EPCA) Study, an assessment of 
Federal lands available for leasing in the most promising basins in the 
west and the obstacles to development of those resources. Released in 
January of 2003, the Study addressed constraints on development with 
respect to two factors affecting access to oil and gas resources. Those 
factors included: 1) whether the lands are ``open'' or ``closed'' to 
leasing, and 2) the degree of access afforded by lease stipulations on 
leased lands. The study found that approximately 39 percent of the 
Federal lands were available for oil and gas leasing, 25 percent is 
available for leasing with restrictions on operations beyond standard 
lease terms, and 36 percent of the Federal lands are unavailable for 
leasing. While some groups claim that the EPCA results suggest there is 
no access problem, this couldn't be further from the truth.
    The EPCA study is a solid beginning; however, the analysis does not 
go far enough to assess the full situation. In addition to addressing 
leased lands, their associated stipulations and lands unavailable for 
lease, other important factors must be considered. For example, even on 
leased lands subject to only standard lease terms, conditions of 
approval (COA) are imposed in accordance with land use decisions made 
by the agencies. In other words, while a lease may not be subject to 
additional stipulations, conditions of approval identified through 
project level or site-specific environmental analysis may be required 
for proposed projects. Each condition of approval limits access to the 
lease to some extent whether through added cost or delay. Therefore, in 
reality, it is safe to say that all leases issued under standard lease 
terms are still subject to the same constraints imposed on stipulated 
leases. Further, some conditions of approval may be more of an 
impediment to exploration or development than lease stipulations.
    While the Petroleum Industry uses the word ``Access'' as a catchall 
term, the term is not limited to the availability of Federal lands for 
leasing. Clearly, leasing is an important aspect of access to Federal 
lands for purposes of exploration and development; however, access also 
encompasses the industry's ability to develop new wells in existing 
fields. As such, expansion of existing production often faces numerous 
impediments including:
     High cost to industry and long delays for NEPA 
compliance;
     Delays in land use plan revisions;
     A wide variety of surveys and inventories on most 
projects for cultural, wildlife and other resource values that may or 
may not be present in a project area;
     Delays in obtaining drilling and rights-of-way permits 
due to a lack of adequate Federal staffing and funding in high volume 
leasing and development areas;
     Financial burdens placed upon industry who may have to 
pay for contract personnel to work on permits in field offices;
     The same restrictive management imposed to protect 
species listed as threatened or endangered under the Endangered Species 
Act are applied to unlisted species (i.e. sensitive, proposed and 
candidate species);
     Endless petitions to the U.S. Fish and Wildlife Service 
(FWS) to list plant and animal species without supporting scientific 
data; but, which cause Federal agencies to change their management 
objectives from multiple-use to restricted use; and
     Further, environmental groups are not only filing 
petitions with FWS to list a particular species with limited supporting 
scientific data; petitions are concurrently being filed by the same 
parties with BLM to manage the species habitat as an Area of Critical 
and Environmental Concern (ACEC). An area with an ACEC designation 
carries additional restrictions for mineral development.

NATIONAL PETROLEUM COUNCIL NATURAL GAS STUDY UPDATE
    The National Petroleum Council (NPC) is in the process of updating 
its 1999 Natural Gas Supply and Demand Study. It is our understanding 
that NPC is adding an access section which will analyze four high gas 
potential basins (Powder River, Greater Green River, Uinta/Piceance, 
and San Juan) to determine the effects lease stipulations, surveys for 
threatened and endangered species and conditions of approval have on 
industry's ability to explore for and develop resources from these 
Rocky Mountain basins. The report is due out in September of this year.
    Federal lands must play a growing role in future U.S. energy 
supplies. Prior to 1980, only 9% of all domestic oil and gas production 
came from Federal land. According to the American Petroleum Institute 
(API), today Federal lands produce about one third of domestic oil and 
gas, but are estimated to contain 77% of the oil and 60% of the natural 
gas resources to be found in the US. In the short period from 1995 to 
2003, there has been an increase of at least 75% in estimates of 
remaining undiscovered domestic oil resources and over 23% in estimates 
of undiscovered natural gas on Federal lands. Despite greater knowledge 
of the occurrence of gas resources and increased demand for energy, 
Federal policy toward energy development has become increasingly 
restrictive. PAW and PLA urge members of this Committee to take steps 
to reverse this trend as outlined in the recommendations below.

ROADLESS CONSERVATION RULE
    The Roadless Conservation Rule prevents road building on more than 
58 million acres of the National Forest System--a move that will place 
11.3 TCF of economically recoverable natural gas off limits to 
exploration and development. Ironically, this decision coincides with 
Administration warnings of shrinking gas supplies. The Bush 
Administration sees only ``limited opportunities'' to increase 
dwindling natural gas supplies over the next 12 to 18 months, calling 
for conservation to head off a summer shortage. Moreover, Federal 
Reserve Chairman Alan Greenspan has publicly stated that dwindling 
supplies could add serious pressure to the U.S. economy.
    According to the Department of Energy Report, Undiscovered Natural 
Gas and Petroleum Resources beneath Inventoried Roadless and Special 
Designated Areas on Forest Service Lands, November 2000, 83 percent of 
the natural gas resource found in the Rocky Mountain Region is located 
in slightly less than 5 percent of the total proposed Inventoried 
Roadless Areas (IRA) nationwide. PAW and PLA urge Congress to support 
modification of the Roadless Conservation Rule. Removal of the 5% IRAs 
that overlie these important natural gas resources would still allow 
for the majority of the IRAs to be set aside while providing for 
development of the critically important natural gas resource base.

FEDERAL REGULATORY PROCESS
    The Federal regulatory process is exhaustive and cumbersome. To 
comply with requirements of the Federal Land Policy and Management Act 
(FLPMA), agencies are required to prepare land use plans. The National 
Environmental Policy Act (NEPA) requires agencies to evaluate how 
proposed Federal actions will affect the human environment. 
Environmental Assessments (EA) must demonstrate that impacts associated 
with a proposed action can be mitigated and that the net effects are 
not significant. If the EA shows a project has significant impacts, an 
Environmental Impact Statement (EIS) must be prepared which identifies 
and discloses the potential effects of the project, along with 
identified mitigation measures to be used if the project is approved.
    Resource Management Plans (BLM) or Land and Resource Management 
Plans (USFS) have been developed for all Federal lands. Each plan is 
subject to an extensive EIS process; the plans identify what areas will 
be available for oil and gas leasing and the stipulations to be applied 
to those leases (i.e. No Surface Occupancy (NSO), seasonal restrictions 
for wildlife protection, etc.). In addition, the plans establish 
operating standards, which must be met before proposed projects are 
implemented.
    BLM also conducts a ``Determination of NEPA Adequacy'' (DNA) before 
a lease parcel is actually included in a Federal lease sale. This 
determination indicates whether additional analysis is necessary before 
leasing occurs. (Similar DNA analyses are typically prepared before a 
project is allowed to proceed.)
    It should be noted that once a lease has been issued, it becomes a 
contractual agreement between the Federal Government and the lessee. 
However, while the lease contract gives the lessee the exclusive right 
to develop the lease, it does not give the lessee the green light to 
start exploration or development activities. Every proposed project is 
subject to a site-specific NEPA analysis before a permit is approved by 
the agency. In addition, consultation with other agencies must occur. 
For example, consultations with the U.S. Fish and Wildlife Service 
(USFWS) or a State Historic Preservation Office (SHPO) may be required 
if listed threatened and endangered species or cultural resource issues 
are involved, respectively. Each agency may require new restrictions 
that directly impact access and the economic viability of the project.
    BLM has implemented several new Instruction Memoranda designed to 
make the process more efficient. These include:
     Enhanced Consistencies in Conditions of Approval;
     Cultural Resources Management (block clearances of 40 
acres and modeling);
     Revision of Onshore Order 1;
     Revision of the Gold Book on Operations; and
     Plans of Development (POD) Requirements (master POD 
addressing two or more proposed wells in close geographic proximity to 
one another that share common Drilling and Surface Use Plans).
    These IMs are a positive step in the right direction and industry 
looks forward to their immediate implementation in the field. In fact, 
industry hopes to work closely with BLM in its revisions of the Onshore 
Order No. 1 and the Gold Book on Operations. However, there are 
additional measures that must be taken to ensure timely and cost 
effective ``access'' to Federal lands. We recommend that new 
Instruction Memoranda be issued to address the following:
     In order to eliminate costly and time-consuming redundant 
NEPA analyses, the agencies must utilize existing NEPA documentation by 
either tiering or incorporating by reference all existing NEPA analyses 
to avoid reanalyzing issues that have already been addressed and for 
which decisions have already been made. In other words, in areas where 
expanded development is proposed, no new resource data collection is 
necessary; simply a new cumulative effects analysis is required; and
     Additionally, no new cumulative effects analysis is 
necessary if a project proponent wishes to increase recovery of the 
resource by directionally drilling new wells from existing locations 
that were already approved and drilled under a previous decision 
document. Since no new surface disturbance will result, no further NEPA 
analysis is necessary.

FRIVOLOUS LITIGATION
    Another important factor to consider in the Federal regulatory 
process is litigation by ``environmentalist groups'' whose sole purpose 
is to delay or deny development of natural resources. In Wyoming, 
virtually all lease sales, and most project level EAs or EISs, 
including geophysical projects, have been protested, appealed, or 
challenged in Federal court. The same is true for the other Rocky 
Mountain States.
    Unfortunately, NEPA has become a ``tool'' that is used as the 
primary impediment to oil and gas development on Federal lands. PAW and 
PLA support without qualification the Act's provisions for public 
comment, identification of alternatives to the proposed action, and 
consideration of impacts and mitigation measures to be used. 
Unfortunately, some groups view these same provisions as opportunities 
to stop proposed projects without regard for cost and delay impacts on 
land management agencies, the U.S. taxpayer, or multiple users of the 
public lands.
    The cost of ``NEPA abuse'' is high. For example, the burden of 
agencies' management responsibilities frequently shifts to operators; 
such as preparation of NEPA documentation, resource inventories and 
species surveys, monitoring activities and ensuring adequate staff is 
available to process permits. All of these new obligations put a 
tremendous burden on industry's ability to economically develop the 
resource for the benefit of the country.

RECOMMENDATIONS
    In conclusion, PAW and PLA appreciate Congress' recognition of the 
important role access to Federal lands plays in meeting the energy 
needs of this country through its efforts to pass an energy bill. 
However, many of the additional measures discussed in this testimony 
can also be easily addressed through the regulatory process.
    PAW and PLA recommend the following:
     Reiterate the importance of Federal lands in meeting the 
nation's energy needs;
     Provide adequate funding for BLM staffing to specifically 
address APD and Rights-of-Way backlogs;
     Require timely issuance of leases in areas determined to 
be available for oil and gas leasing;
     Require timely issuance of APD and Rights-of-Way;
     Eliminate the 5% of Inventoried Roadless Areas in the 
Rocky Mountain Region that encompass 83% of the natural gas resources 
found within the areas covered by the Roadless Conservation Rule;
     Encourage aggressive implementation of recently issued 
BLM Instruction Memoranda (IM) that provide field guidance for 
improving processing of APDs and Rights-of-Way; and
     Recommend issuance of new IMs that eliminate redundant 
NEPA analyses.
    Madam Chairwoman and members of the Subcommittee, thank you again 
for the opportunity to share with you our perspective regarding the 
``Ability of Federal Lands to our Meet Energy Needs''.
                                 ______
                                 
    Mr. Rehberg. Thank you.
    Mr. Eppink, could you explain to me real quickly what is 
Advanced Resources International, just so I have a basis of 
knowledge of your background, are you in business or are you--
    Mr. Eppink. Yes, we are a medium-sized consulting firm, 
about 28/25 professionals, and we concentrate on energy, 
largely natural gas. Our client base is both Federal agencies, 
the industry and Governments and industry overseas.
    Mr. Rehberg. So you provide what kind of consulting?
    Mr. Eppink. Technical and strategic consulting.
    Mr. Rehberg. As to whether they, let us say, the companies 
actually go in, and lease, and develop or lease, develop?
    Mr. Eppink. Well, to be honest, we are a little bit removed 
from the actual leasing per se. It is more of the strategy of 
going after what technologies and what strategy is appropriate 
for coalbed methane or tight gas in the U.S.
    Mr. Rehberg. Do you, in your consulting business, then, 
make a determination of the technical opportunities that might 
be coming up? Again, I guess I want to ask you the question 
what do you think is going to happen in the year 2020? What 
level of production or what areas do you use your crystal ball 
and make a determination we are going to be able to move into 
that we don't currently know now? And then I will follow that 
up with a question--
    Mr. Eppink. That is a very good question. In fact, part of 
our practice, one of my partners does quite a bit of work in 
that area.
    It is clear that in the future the makeup of natural gas, 
especially with the depletion rates that we have now, is going 
to be different than it is today. We are moving, in the U.S., 
we are moving to more marginal portions of the resource. They 
are harder to get at, and the actual amounts of resources 
proved up per individual well is less than it has been in the 
past. So to stay in the same place, you have to peddle twice as 
fast.
    But by the same token, there is quite a bit of resource in 
the U.S., in the Rockies in particular. The issue is not so 
much resource. It is the difficulty of getting at it from a 
number of factors, from an operator's point of view, 
technology, price, access, all of these sorts of issues 
contribute. So you ask me in 2020 what the picture is going to 
look like, it is clearly going to be different than it is 
today. We will be using much more unconventional natural gas. 
Speaking about natural gas, in particular, we will be using 
much more unconventional natural gas. Coalbed methane will not 
be unconventional any more. It is clearly mainstream.
    There will be much more tight gas. Hydrates I think will be 
something that will be ramping up, and gas shales, gas shales 
as well.
    Mr. Rehberg. This panel is a reflection of a problem that I 
have long felt, and I warn people about, I am an advocate of 
peer review and sound science, but there are different peers 
and different science. Could you compare your consulting 
opinion and methodology with RAND's approach?
    Mr. Eppink. Yes. Sure.
    Mr. Rehberg. And then use the Jonah field in Wyoming as an 
example of why you may think it makes good sense, where their 
recommendation is it is uneconomic.
    Mr. Eppink. Well, a number of things come to mind on that. 
We do an awful lot of economic studies, and my contention is 
not that economic studies shouldn't be done, it is that you 
have to be careful about what you conclude from economic 
studies.
    As you go further down the resource chain from gas in 
place, to technically recoverable, to economic, each item 
becomes more and more tenuous. And economics in particular can 
be unstable, depending on what price you use. If you had done a 
study in 1999, compared to when prices were low, compared to 
what they are now, your economics would be advised a little bit 
differently.
    I reviewed the RAND study, and I think, to be honest, I 
don't find the RAND approach particularly new, in all deference 
to Debra and her group. We have done studies for the DOE that 
are similar on a township-by-township basis of the Greater 
Green using GIS overlays previous to EPCA.
    One of the criticisms that I did have of the RAND study is 
that it puts the environmental filter after the economics, and 
I think properly, to make a proper assessment, you need to 
bring--it is the operators who face these environmental 
constraints--and so they have to work them into their 
economics. And so if you are going to put an environmental 
filter on, it really needs to go before the economics and how 
it impacts the economics.
    We did a study just recently published for the Department 
of Energy on the Powder River Basin, coalbed methane, looking 
at seven options for water disposal associated with development 
of the coalbed resources. And we did a resource assessment, we 
did technically recoverable resource assessment, and then we 
did economics scenario based on the seven methods of disposal. 
But we put the environmental costs associated with those into 
the economics. So I think the RAND study, it should have put 
the environmental filter before the economics.
    I think economics can be useful, but they can't be the 
pivotal decision point. The issues are too complex, and 
economics, it can suffer from the prices of the day, depending 
on what price are you going to use; are you going to use $3? 
$5?
    Mr. Rehberg. Mr. Kind?
    Mr. Kind. Thank you, Mr. Chairman.
    Thank you, panelists, today for your testimony.
    Ms. Knopman, let me ask you, in regard to the RAND study 
and the calculation with regards to economically viable 
methods, now, just so I am clear, is RAND advocating the 
consideration of economically viable resources as the sole 
consideration that should be calculated under the equation or 
just part of the mix as a factor in determining what viable 
sources make economic sense to go out and produce?
    Ms. Knopman. We have been very clear that this is one 
factor, among several, but it is an important factor.
    There are quite a number of points I would like to clarify 
if I may just use this opportunity to do so. There are multiple 
uses of economic forecasting in the resource area. One can sort 
of go up the chain to a macrolevel analysis, precisely what Mr. 
Greenspan was concerned about. How much resource is likely to 
be available at what cost. The only way that he can get answers 
to that question is if he has tools to draw on to give him a 
sense of what the nature of our resource base is and how much 
it may cost, given what we know now. It is a snapshot, 
absolutely, but that is how he gets a sense of what is 
available.
    The kind of analysis that we have done is intended to be 
used for that kind of purpose. It is intended to be used by 
State energy planners who are trying to get a sense of what Mr. 
Souder was concerned about in his State. It is also a tool that 
can be used in Federal land use planning to set priorities, but 
it is one consideration when you look at the economics among 
several.
    Mr. Kind. So I guess economically viable considerations is 
another way of saying cost benefit in regards to the other 
costs that are calculated into the equation, transportation 
infrastructure matters, things of that nature?
    Ms. Knopman. Well, we didn't do a cost-benefit analysis. 
What we were looking at was some way of getting a handle on 
what the relative profitability might be of extracting resource 
and different formations given our knowledge today of 
technology. Just as Jeff mentioned, the assumption with our 
method is that it is dynamic, that one would constantly update, 
it is transparent, it is easy to go back and examine the effect 
of certain assumptions on cost. In fact, the greatest 
uncertainty in our economic analysis comes from the underlying 
estimates of technically recoverable resource. That is where 
the biggest uncertainties come. We can vary a lot of our cost 
parameters, but it is really the uncertainty of the underlying 
estimate that has the biggest effect on the range that one 
comes up with.
    Mr. Kind. Well, just dealing with the Rocky Mountain 
regions, can you give us some type of assessment or picture in 
regards to economically viable considerations dealing with 
transportation infrastructure matters, the feasibility of 
producing in that region and the costs that we may be looking 
at.
    Ms. Knopman. Yes. Well, what we discovered was that using 
the assumptions that we lay out in our report, that you could, 
within the Greater Green River Basin, we are not able to apply 
our analysis to the whole Rocky Mountain Region, though we 
would like to see that done and believe that would be useful, 
but in the Greater Green River Basin, up to 65 percent could be 
profitably produced if the market price were in the 
neighborhood of $5 per million Btu.
    The incremental costs, the extra costs from transportation, 
for actually getting the resource out, is actually relatively 
small compared to the drilling and development costs. So that 
we found did not really play that large a role.
    When the price of natural gas goes higher, there is more of 
that technically recoverable resource that is obviously going 
to be accessible. All of these numbers are subject to 
adjustment as a new technology comes on-line and improvements 
are made in engineering.
    Mr. Kind. Got it. Thank you. Thank you for your testimony.
    Thank you, Mr. Chairman.
    Mr. Rehberg. Mr. Bishop?
    Mr. Bishop. Thank you, Mr. Chairman. If I could maybe ask 
two or three questions here.
    First of all, and, Ms. Knopman, I am going to apologize for 
this, but I am going to ask you to give me a technical answer, 
and realize you are speaking to a nontechnical mind. So it is 
going to be a rhetorical challenge for you.
    But assuming that, take the Powder River Basin, for 
example, if you had performed your resource assessment in 1990 
using that same methodology, would the coalbed methane play in 
that Powder River Basin have been deemed to hold an 
economically recoverable resource?
    Ms. Knopman. With any area, it doesn't matter where, and it 
doesn't matter when, one would make assumptions, just as is 
done in every other aspect of the economy and every economic 
sector, make assumptions about available technology and what 
that technology could do, given current market prices.
    That assessment would only be as good as those assumptions, 
and it is probably true that that would have been, there would 
have been a conclusion drawn that at today's prices, with 
today's technology, that would not have been a resource that 
was likely to be developed. We don't make a judgment in our own 
methodology of whether something should or should not be 
developed. All that we can do is show that under certain market 
conditions, under assumptions about various prices, cost of 
production, that it would be profitable, a resource would be 
profitable to develop.
    So I think the answer would have been, and it would not 
have been particular to RAND's approach, this would have been 
true had the USGS done the economic analysis or an industry 
association, it is not particular to any group, the same 
conclusion would have been drawn, which is under those 
assumptions, no, it would not have been.
    Mr. Bishop. If all of these analyses, if every analysis, 
then, is a living analysis, it is going to change by the 
criteria and conditions change. How long do these analyses have 
as far as their shelf life?
    Ms. Knopman. That is a really good question, and I guess I 
would answer that by saying, in terms of the resource 
assessment, given the time in which the USGS can go back and 
review their technically recoverable assessment, resource 
estimate, you are probably looking at a maximum of 5 years or 
so. However, on the economic side, conditions could change 
within a year if a new technology came on-line or if prices 
shot up. So you have to know, in any decisionmaking context, 
what assumptions are underlying your analysis, no matter what 
it is.
    Mr. Bishop. Mr. Eppink, would you agree with that?
    Mr. Eppink. Well, yes, I think I agree, if you had done in 
1990, an economic analysis of Powder River Basin, it wouldn't 
have passed, and if you had made a decision based on that 
analysis, you probably would have dismissed it. But I think 
people generally recognize it had technical potential.
    My difficulty isn't with doing economics per se; it is, as 
Debra pointed out in their own study, the driving force is not 
the economics, it is the technically recoverable resource, and 
that is why I maintain in my testimony, for purposes of EPCA, 
using technically recoverable resource is satisfactory.
    If you go to economic resource, and it is not RAND that 
contends that you should only use economically recoverable 
resources, it is some of the environmental groups, I think it 
can be misleading. So it does depend on when an economic 
analysis is done. It will clearly taint--taint is probably the 
wrong word--but it will clearly dictate the economic parameters 
under which you are going to run it, and you would probably 
come to different conclusions then if you base your analysis on 
technically recoverable resources. Because it was clearly 
recognized in 1990, in the Powder River Basin, that the coal 
was there.
    Mr. Bishop. Mr. Chairman, if I could ask one more question. 
I beg your indulgence because I am going to have to leave and 
get a picture taken with an artist winner that is being hung up 
in the tunnel.
    If I could ask Ms. Bower just one question. You went to a 
different area, and it is one where we, as a Congress, could 
obviously deal. You talked about lawsuits, frivolous lawsuits, 
especially on NEPA. Do you have any specific proposals of how 
we, as Congress, could deal with those frivolous lawsuits based 
on NEPA or similar statutes that produced the post-leasing 
problems?
    Ms. Bower. Mr. Chairman, Congressman Bishop, I think it is 
a complex problem. NEPA allows for public comment. We certainly 
are not advocating that you change NEPA to eliminate public 
comment and their participation in the public process. I think 
it is probably twofold, and I think IBLA is probably addressing 
one part of that, and that is lawsuits that come in, they try 
to address within I think 90 days to decide whether or not the 
merits of the case should move forward or whether or not it is 
not right to be in court in the first place.
    Another thing that is very concerning, at least from the 
Agency's perspective, is when these lawsuits are filed, it 
takes up a tremendous amount of staff time and resources to 
address the administrative records and prepare the 
administrative records and State Director reviews.
    If we could encourage that the prevailing party would be 
reimbursed for costs incurred after the case has been ruled 
upon, that may help with the coffers of the Federal Government 
as well.
    Mr. Bishop. Thank you.
    Mr. Chairman, thank you.
    Mr. Rehberg. Thank you.
    Ms. Knopman, I didn't have an opportunity to go through the 
same drill that I did with Mr. Eppink with you, so I would like 
to ask you the same questions of your group. Essentially, you 
are economists?
    Ms. Knopman. RAND is a nonprofit organization of about 11- 
or 1,200 full-time researchers of all disciplines. We have a 
full complement of economists. We have many physical 
scientists, we have MDs, we have lawyers. We really cover the 
whole spectrum. I, myself, have a doctorate in engineering.
    Mr. Rehberg. Are you able to work with companies or is this 
strictly a nonprofit independent research source that provides 
information essentially to Government?
    Ms. Knopman. Most of our clients are Government, either at 
the Federal or State and local level. However, RAND does do 
some private-sector work, fairly limited, but we do it, as long 
as it doesn't compromise our ability to be independent and 
publish our work, which is very important to us.
    Mr. Rehberg. In your 2002 papers, you had a criteria for 
viable resources. But since that time, that designation has 
been dropped. Can you explain why?
    Ms. Knopman. We learned. That was an interim report. It 
represented what our thinking had been at that time, as we 
began the study, as we spoke with people like Jeff, and many of 
the folks on the EPCA team, and got into the topic more deeply. 
We understood that that was not a particularly useful term, and 
we didn't need it to do what we thought needed to be done, 
which was to show how economic criteria could be, and 
environmental measures could be brought into an analysis of the 
resource.
    Mr. Rehberg. Would you say that Mr. Eppink made a point 
about the environmental costs being included up front? It would 
seem logical to me, someone who actually has to manage 
resources for a living, that when you talk about economics, to 
have placed it after the fact, probably, in my mind, kind of 
discounts the entire study.
    Ms. Knopman. Well, that is not entirely accurate as to what 
we did, though I take Jeff's point. Our estimates of costs 
include an assumption about what the environmental measures 
would be taken in a particular type formation. It didn't 
explore many different alternatives, and for that I think 
Jeff's suggestion is quite useful in that we could be looking 
at various environmental mitigation costs up front in the 
economic analysis. We made an assumption about a set of costs 
and approach for environmental mitigation.
    What we do on the environmental side is look at a set of 
environmental measures related to water quality, related to 
ecological resources. We don't attempt to assign any dollar 
figures to dealing with those particular measures. We are 
simply associating the values of those measures with the 
underlying resource and leaving it at that. We are not-
    Mr. Rehberg. But if the theory is economics, and you are 
applying a value on the opportunity to develop the resource, 
why wouldn't you put a cost or an estimated cost?
    Ms. Knopman. We do. We do. It's included in our cost base. 
The costs of compliance are included in our cost base. Now, it 
did not include, just to be correct here, we did not include 
transaction costs, so we didn't include litigation or the costs 
of obtaining a permit, and that would be great to include. We 
should do that. We didn't--
    Mr. Rehberg. I was leaning more toward the direction of my 
prior questioning of Ms. Watson about the after-leasing costs, 
that it is not a done deal once the permit is granted. There is 
a huge economic cost beyond that--
    Ms. Knopman. The way our method is set up, you can add as 
many costs as you want, and that would be worth doing. What it 
would show is simply that it would be more expensive across the 
board probably, though there may be differences from one 
formation to another to extract the resource. So all of our 
availability curves would just sink down a bit. That is all 
that would happen there. But one can add as many costs as you 
want.
    Mr. Rehberg. Mr. Johnson, just so you don't feel left out 
of this process, can you explain, in more depth, the importance 
of the BP well in Alaska. Is the drilling of the well assured, 
and what would the Government do to make certain it is drilled?
    Mr. Johnson. At this point, I have sort of heard both ways. 
The Department of Energy seems to think it is going to happen. 
BP I think to their credit is saying as they are doing their 
studies, whenever they come to a decision point, they review 
the data and make sure that economically it is worth 
continuing. My best guess is that, in fact, during the winter 
of 2004, actually, it would be, I believe, five wells being 
drilled in a gas reservoir with associated gas hydrates, and 
the plan will be to depressurize the reservoir which would then 
dissociate the hydrates.
    I think that the main thing is to make sure that the 
funding is there, particularly for the Department of Interior. 
The U.S. Geological Survey is providing a lot of the technical 
support for this. The Department of Energy has done some very 
good things, but I get the feeling gas hydrates are just not 
very high on their priority list, and perhaps should be.
    Mr. Rehberg. Japan has stated that it believes that it can 
become an energy exporting country solely on the basis of its 
gas hydrates. Do you feel that much potential exists?
    Mr. Johnson. In Japan?
    Mr. Rehberg. Yes.
    Mr. Johnson. I think there is a very strong likelihood that 
that is the case. They have drilled a few wells closely spaced 
a couple of years ago. This coming year they are planning to 
drill, I believe, it is somewhere between 20 and 30 wells, to 
really evaluate this. They are developing the production 
technology. They are modeling it. They are planning to move 
ahead, although with the Japanese program, there is a sense of 
caution, and perhaps that is simply the way that they like to 
operate.
    I get the feeling if Japan really wanted to have hydrate 
production, they could have it in 2 years. I think their plan 
is to have it in about 10 or 12 years, but the potential is 
definitely there.
    That same case could be made in the United States. We are 
designing a program for production quite a ways down the road. 
If we design the program differently, we could move that time 
table up.
    Mr. Rehberg. I want to thank you for taking time out of 
your busy schedules. The members of the Committee may have 
additional questions that they would like to have answered, and 
we would ask that they submit those, and if you could give us 
written responses to that. The Committee hearing records will 
be left open for a period of 10 days. And since I see my 
colleagues have all moved on, and there is no further business 
before this Committee, it now stands adjourned.
    [Whereupon, at 11:36 a.m., the Subcommittee was adjourned.]
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