[House Hearing, 110 Congress]
[From the U.S. Government Publishing Office]



 
  FY 2008 BUDGET FOR THE MINERALS MANAGEMENT SERVICE, BUREAU OF LAND 
  MANAGEMENT, ENERGY AND MINERALS PROGRAMS, OFFICE OF SURFACE MINING 
   RECLAMATION AND ENFORCEMENT, MINERALS AND GEOLOGY PROGRAM OF THE 
              FOREST SERVICE, AND U.S. GEOLOGICAL SURVEY

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

                           OVERSIGHT HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                       ONE HUNDRED TENTH CONGRESS

                             FIRST SESSION

                               __________

                           February 27, 2007

                               __________

                            Serial No. 110-4

                               __________

       Printed for the use of the Committee on Natural Resources



  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
                                   or
         Committee address: http://resourcescommittee.house.gov



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                     COMMITTEE ON NATURAL RESOURCES

               NICK J. RAHALL II, West Virginia, Chairman
              DON YOUNG, Alaska, Ranking Republican Member

Dale E. Kildee, Michigan             Jim Saxton, New Jersey
Eni F.H. Faleomavaega, American      Elton Gallegly, California
    Samoa                            John J. Duncan, Jr., Tennessee
Neil Abercrombie, Hawaii             Wayne T. Gilchrest, Maryland
Solomon P. Ortiz, Texas              Ken Calvert, California
Frank Pallone, Jr., New Jersey       Chris Cannon, Utah
Donna M. Christensen, Virgin         Thomas G. Tancredo, Colorado
    Islands                          Jeff Flake, Arizona
Grace F. Napolitano, California      Rick Renzi, Arizona
Rush D. Holt, New Jersey             Stevan Pearce, New Mexico
Raul M. Grijalva, Arizona            Henry E. Brown, Jr., South 
Madeleine Z. Bordallo, Guam              Carolina
Jim Costa, California                Luis G. Fortuno, Puerto Rico
Dan Boren, Oklahoma                  Cathy McMorris Rodgers, Washington
John P. Sarbanes, Maryland           Bobby Jindal, Louisiana
George Miller, California            Louie Gohmert, Texas
Edward J. Markey, Massachusetts      Tom Cole, Oklahoma
Peter A. DeFazio, Oregon             Rob Bishop, Utah
Maurice D. Hinchey, New York         Bill Shuster, Pennsylvania
Patrick J. Kennedy, Rhode Island     Dean Heller, Nevada
Ron Kind, Wisconsin                  Bill Sali, Idaho
Lois Capps, California               Doug Lamborn, Colorado
Jay Inslee, Washington
Mark Udall, Colorado
Joe Baca, California
Hilda L. Solis, California
Stephanie Herseth, South Dakota
Heath Shuler, North Carolina

                     James H. Zoia, Chief of Staff
                   Jeffrey P. Petrich, Chief Counsel
                 Lloyd Jones, Republican Staff Director
                 Lisa Pittman, Republican Chief Counsel
                                 ------                                

              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                    JIM COSTA, California, Chairman
          STEVAN PEARCE, New Mexico, Ranking Republican Member

Eni F.H. Faleomavaega, American      Bobby Jindal, Louisiana
    Samoa                            Louie Gohmert, Texas
Solomon P. Ortiz, Texas              Bill Shuster, Pennsylvania
Rush D. Holt, New Jersey             Dean Heller, Nevada
Dan Boren, Oklahoma                  Bill Sali, Idaho
Maurice D. Hinchey, New York         Don Young, Alaska ex officio
Patrick J. Kennedy, Rhode Island
Hilda L. Solis, California
Nick J. Rahall II, West Virginia, 
    ex officio
                                 ------                                
                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on February 27, 2007................................     1

Statement of Members:
    Costa, Hon. Jim, a Representative in Congress from the State 
      of California..............................................     1
        Prepared statement of....................................     4
    Pearce, Hon. Stevan, a Representative in Congress from the 
      State of New Mexico........................................     5

Statement of Witnesses:
    Burton, Johnnie, Director, Minerals Management Service.......     7
        Prepared statement of....................................     9
        Response to questions submitted for the record...........    65
    Hughes, Jim, Acting Director, Bureau of Land Management......    22
        Prepared statement of....................................    24
    Myers, Dr. Mark, Director, U.S. Geological Survey............    16
        Prepared statement of....................................    18
    Norbury, Fred, Associate Deputy Chief, National Forest 
      System, U.S. Forest Service................................    33
        Prepared statement of....................................    35
    Wahlquist, Brent, Acting Director, Office of Surface Mining 
      Reclamation and Enforcement................................    28
        Prepared statement of....................................    30
        Letter submitted for the record..........................    32

Additional materials supplied:
    Chiang, Hon. John, California State Controller, Letter to The 
      Honorable Jim Costa submitted for the record...............    55
    Chiang, Hon. John, California State Controller, Response to 
      Costa letter from the Minerals Management Service submitted 
      for the record.............................................    57
    Hinchey, Hon. Maurice D., a Representative in Congress from 
      the State of New York, Letter to Secretary of the Interior 
      Dirk Kempthorne submitted for the record dated December 21, 
      2006.......................................................    68
    Hinchey, Hon. Maurice D., a Representative in Congress from 
      the State of New York, Letter submitted for the record from 
      R.M. ``Johnnie'' Burton, Director, Minerals Management 
      Service, dated February 27, 2007, in response to Hinchey 
      letter dated December 21, 2006.............................    71


    OVERSIGHT BUDGET HEARING ON THE FISCAL YEAR 2008 BUDGET FOR THE 
MINERALS MANAGEMENT SERVICE (MMS), THE BUREAU OF LAND MANAGEMENT (BLM), 
ENERGY AND MINERALS PROGRAMS, THE OFFICE OF SURFACE MINING RECLAMATION 
AND ENFORCEMENT (OSMRE), THE MINERALS AND GEOLOGY PROGRAM OF THE FOREST 
SERVICE, AND THE UNITED STATES GEOLOGICAL SURVEY (USGS), EXCEPT FOR THE 
        ACTIVITIES AND PROGRAMS OF THE WATER RESOURCES DIVISION.

                              ----------                              


                           February 27, 2007

                     U.S. House of Representatives

              Subcommittee on Energy and Mineral Resources

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to call, at 2:05 p.m. in 
Room 1324, Longworth House Office Building, Hon. Jim Costa 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Costa, Gohmert, Holt, and Pearce.

   STATEMENT OF THE HONORABLE JIM COSTA, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF CALIFORNIA

    Mr. Costa. The hearing of the Energy and Mineral Resources 
Subcommittee will now come to order. I want to welcome you to 
the first Subcommittee hearing in the 110th Congress.
    Today's hearing will focus on the Interior's budget for 
Fiscal Year 2008 in energy and mineral programs. But let me 
begin by saying that we are going to touch the surface today, 
no pun intended, because obviously in the next two hours in 
which the hearing will be held, we will only be able to begin 
to focus on what I think is important oversight that 
Subcommittee members will want to pursue over the course of the 
next year.
    And so, as I told those who are testifying this afternoon, 
we are going to get to know each other better, and this will 
not be your first visit before the Subcommittee. But we do hope 
to do a better job in which I think all of us aspire to who 
serve in government, whether it is in the elective level or in 
the appointed level; and that is, to ensure that there is 
accountability and transparency. Those are, I think, the 
essence of what representative democracy is all about. And I 
will do my best, as the Chairman of this Subcommittee, to 
ensure that that transparency and that accountability takes 
place on behalf of all the interests that come under the 
jurisdiction of this Subcommittee.
    I am pleased to acknowledge our panel witnesses this 
afternoon. First, Johnnie Burton, the Director of the Minerals 
Management Service; followed by Brent Wahlquist, the Acting 
Director of the Office of Mining and Reclamation and 
Enforcement. Mark Myers, the Director of the U.S. Geological 
Survey. Mr. Jim Hughes, who is the Acting Director of the 
Bureau of Land Management. And Mr. Frederick Norbury, who is 
Associate Deputy Chief for the United States Forest Service, as 
I understand it.
    Under Rule 4[g], the Chairman and the Ranking Member have 
the opportunity to make opening statements. If other members of 
the Subcommittee have statements, they will be included in the 
record, by unanimous consent.
    Additionally, under Committee Rule 4[g], additional 
material for the record should be submitted by members of this 
Subcommittee or witnesses within 10 days of the hearing. And I 
would like to ask all of those who desire, Subcommittee members 
or witnesses, we would really appreciate your cooperation in 
responding to any questions submitted to you in writing, 
because members, as you know, come and go; they have multiple 
committee assignments. Oftentimes they are not able to ask 
their questions. So it is part of our job, as the Subcommittee, 
to ensure that those questions get forwarded to you, and prompt 
responses are then provided. I know when I am not able to make 
other committees, I do appreciate getting responses back to my 
question, even if I don't like the responses.
    So let me explain to you in general terms what our agenda 
is going to be this year. And let me also caution, for those of 
you in the audience and those listening, that as I have 
conversed with our Ranking Member, Congressman Pearce from New 
Mexico, this is a work-in-progress. So we are in that process.
    Besides with the oversight that will be developed 
throughout the year, it is the Subcommittee's intent, by the 
direction of the Chairman, Chairman Rahall, and Speaker Pelosi, 
to attempt to make our recommendations that are under the 
purview of this Subcommittee by June 1 on what we hope will be 
a bipartisan energy package that will come before the Congress 
in July.
    Now, there is a lot of overlapping jurisdictions there, and 
this is an effort that is going to take a lot of cooperation. 
But we intend to try to do our part.
    In addition to that, Chairman Rahall, and I suspect this 
will be probably the focus of the Subcommittee in the latter 
half of this year, but don't hold me to those timelines please, 
on hard rock mining reform. The hard rock mining law, as I have 
learned, has not changed since it was instituted and signed 
into law by President Ulysses Grant in 1872. That is a few 
years ago.
    And so we will take Chairman Rahall's recommendations, and 
then do our due diligence to try to produce meaningful changes 
that are in the best interest of all concerned, through the 
latter half of this year.
    This afternoon, though, the Subcommittee will begin the 
review of the proposed Fiscal 2008 budget for energy and 
minerals programs. The Minerals Management Service, and as well 
the Bureau of Land Management, the Office of Surface Mining and 
Reclamation and Enforcement, the Forest Service, and the United 
States Geological Survey, except for activities and programs, 
under the Water Resource Division, all of which fall within the 
jurisdiction minus the Water Resource Division in this 
Subcommittee. Of course the Water Resource Division is in 
another subcommittee within the Committee on Natural Resources.
    Let me say that this hearing is critical, I believe, on the 
national level. As many of you already know, next to the 
Internal Revenue Service, the energy and minerals programs that 
are administered by the witnesses who will testify here this 
afternoon produce the second-highest source of revenue for the 
Federal Government. This is why I think we must ensure that oil 
and natural gas royalty revenues are managed and collected in a 
fair and honest manner that is transparent, as I said at the 
outset, and accountable. I think this is no small matter.
    These are public resources. Royalties from oil and natural 
gas production contribute a significant amount to the Treasury, 
almost $10 billion in the last fiscal year. And some believe, 
as I do, that it would be more if it were not for the problems 
that have gone on within the Department of Interior, including 
a decrease in the number of audits by 22 percent, and the 
number of auditors by 15 percent since 2000.
    The Government Accountability Office estimates that the 
problems or blunders, or whether you care to call it 
mismanagement, that have taken place under the Minerals 
Management Service, that many believe have erroneously allowed 
lessees off the hook for making royalty payments, could cost 
the Federal Treasury up to $10 billion in revenue over the next 
25 years. These unpaid royalties negatively affect the ability 
of the government to operate effectively, and they cost 
American taxpayers important services.
    Further, I think this situation undermines the public 
trust: that their government is receiving what is due from the 
use of the nation's public resources. And the Minerals 
Management Service must aggressively pursue the augmentation of 
auditors and auditing that has been reduced in the recent past. 
The collection of the royalty revenues owed the U.S. Treasury I 
think we all believe, while we may have our differences, at the 
end of the day must be paid.
    In addition, I think when we look at the President's 
proposal, this year's budget offers $20 million for the Healthy 
Lands Initiative under the Bureau of Land Management and the 
United States Geological Survey to address the growing conflict 
between oil and gas development on public lands, and also the 
need for consistency in improvement for wildlife and habitat 
conservation.
    While this is, I think, an important effort by the Bush 
Administration, I would like to see an additional effort to 
enforce oil and gas lease stipulations that assure that proper 
royalty payments are made, and adequately supporting critical 
and strategical mineral surveys, ensuring that prompt 
implementation of the 2006 amendment to the Surface Mining 
Control and Reclamation Act is performed.
    I would also like to commend the Bush Administration for 
including the repeal of certain provisions of the Energy Policy 
Act of 2005, within the 2008 budget request. These same 
provisions have already passed in the House of Representatives 
as a part of our first hundred hours agenda on the six for six. 
Those provisions, otherwise known, are contained in Chairman 
Rahall's portion of H.R. 6, which is referred to as the Clean 
Energy Act of 2007. It would strike an expansion of the Outer 
Continental Shelf oil and gas royalty relief in the Gulf of 
Mexico, and repeal the provision prohibiting the Federal 
Government from charging companies fees when they apply for 
drilling permits on Federal lands.
    Now, I know that there are those who argue about what 
aspects of that royalty relief can, in fact, be resolved 
through the enactment of H.R. 6, and certainly the measure is 
over in the U.S. Senate. And what may come out of a conference 
committee remains to be seen, surely.
    I don't think any of us want to see a prolonged 
circumstance in which significant litigation takes place if, in 
fact, we enact this very important measure. So I would urge all 
the parties to work together.
    Let me say, in closing, that my efforts in the past, from 
my previous background in the State Legislature, is to develop 
bipartisan, collaborative, and cooperative efforts to solve 
problems. Undoubtedly there will be circumstances in which we, 
as Democrats and Republicans, have to agree to disagree, and we 
understand that. But how we do that in a civil fashion, how we 
do that in a cooperative fashion, and how we do that in a 
problem-solving way, I think is what the citizens of this 
country expect from us.
    And so I want to do everything on my part, as a 
Subcommittee Chairman, to try to encourage and increase the 
sort of comity that I think is necessary for the legislative 
process to work. I am a strong believer in representative 
democracy, and I believe representative democracy works best 
when people of both parties come together at the end of the day 
to solve problems on behalf of our constituents.
    I would now like to recognize the Ranking Member of the 
Subcommittee, the gentleman from New Mexico, Mr. Pearce, for 
opening remarks that he would like to make.
    [The prepared statement of Mr. Costa follows:]

            Statement of The Honorable Jim Costa, Chairman, 
              Subcommittee on Energy and Mineral Resources

    Welcome to our first subcommittee hearing in the 110th Congress. 
Today's hearing will focus on ``The Interior Budget for Fiscal Year 
2008 in the Energy and Mineral Programs''.
    To that end, I am pleased that our panel of witnesses includes: 
Johnnie Burton, director of Minerals Management Service; Brent 
Wahlquist, acting director, Office of Surface Mining; Mark Myers, 
director, the U.S. Geological Survey; and Jim Hughes, acting director 
of the Bureau of Land Management.
    This afternoon, the Subcommittee will review the proposed Fiscal 
Year 2008 budgets for the energy and minerals programs of the Minerals 
Management Service, the Bureau of Land Management, the Office of 
Surface Mining Reclamation and Enforcement, the Forest Service, and the 
United States Geological Survey, except for the activities and programs 
of the Water Resources Division--all of which fall within the 
jurisdiction of this subcommittee.
    This hearing is critical on a national level. As many of you may 
already know, next to the Internal Revenue Service, the energy and 
minerals programs that are administered by our witnesses produce the 
second highest source of revenue for the Federal Government. This is 
why we must ensure that oil and natural gas royalty revenues are 
managed and collected in a fair and honest manner. This is no small 
matter. These are public resources. Royalties from oil and natural gas 
production contribute a significant amount to the Treasury, nearly $10 
billion in the last fiscal year--and it would be more if it were not 
for all of the mismanagement that has gone on at the Department of 
Interior----including the decrease in the number of audits by 22% and 
the number of auditors by 15% since 2000. The Government Accountability 
Office estimates that the blunders that have taken place at the MMS, 
which erroneously allowed lessees off the hook for making royalty 
payments, could cost the Federal Treasury up to $10 billion in revenues 
over 25 years. These unpaid royalties negatively affect the ability of 
the government to operate effectively and cost the American taxpayer 
important services.
    Further, this situation undermines the public's trust that their 
government is receiving what it is due from the use of the Nation's 
public resources. MMS must be made to aggressively pursue the 
augmentation of auditors and auditing that it has reduced in the recent 
past. The collection of royalty revenues owed to the U.S. Treasury must 
be paid.
    In addition, the Bush Administration envisions a $20 million 
Healthy Lands Initiative under the BLM and the USGS to address the 
growing conflict between oil and gas development on public lands with 
needs for wildlife and habitat conservation. While this appears 
laudable, we would like to see additional funding for aggressively 
enforcing oil and gas lease stipulations, assuring that proper royalty 
payments are made, adequately supporting important critical and 
strategic mineral surveys, and ensuring prompt implementation of the 
2006 amendments to the Surface Mining Control and Reclamation Act.
    I would, however, like to applaud the Bush Administration for 
including the repeal of certain provisions of the Energy Policy Act of 
2005 within the 2008 budget request. These same provisions have already 
passed the House of Representatives as part of our first 100 hours 
agenda.
    The provisions, contained in H.R. 6, the Clean Energy Act of 2007, 
and sponsored by Chairman Rahall, would strike the expansion of Outer 
Continental Shelf oil and gas royalty relief in the Gulf of Mexico and 
repeal the provision prohibiting the federal government from charging 
companies fees when they apply for drilling permits on federal lands.
                                 ______
                                 

 STATEMENT OF THE HONORABLE STEVAN PEARCE, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF NEW MEXICO

    Mr. Pearce. Thanks, Mr. Chairman. I appreciate the things 
you said about working for the business of this nation, because 
that is what we are here for. Oversight is a key part of that. 
And I think those people who watched the Parks Subcommittee 
last year were advised that we were going to be working with 
you on those oversight opportunities.
    As you mentioned, today is our first hearing of the Energy 
and Mineral Resources Subcommittee, and I am honored to serve 
as Ranking Member. Honored to serve falls about 30 percent 
short of satisfied to serve, though.
    Mr. Chairman, I want to congratulate you on your 
chairmanship, and I look forward to working with you in this 
110th Congress. I, like you, hope that we will be able to work 
together and help promote American energy and mineral 
independence. We have a great deal of work to do to accomplish 
this goal, but I think that we can see the road that lies ahead 
of us very clearly.
    As you mentioned, this hearing focuses on the Fiscal Year 
2008 budget for several of the different services. These 
important bureaus bring together much of our nation's resource 
land management.
    I especially am looking forward to hearing from Mr. Hughes 
of the BLM. The BLM is responsible for nearly one eighth of our 
nation's land mass. In New Mexico we have almost 30 percent, or 
over 30 percent of our land is in the hands of Federal 
government agencies.
    The BLM has special significance in my home state, as it 
manages 12.8 million acres of public land in New Mexico. Last 
year New Mexico's share of mineral revenues from these lands 
was $574 million. This revenue helps to make New Mexico a 
stronger state by providing dedicated funds for our education 
system.
    This mineral development also makes the Nation stronger 
with domestic production of oil, gas, coal, potash, and other 
minerals. New Mexico is proud to be a cornerstone toward 
America's energy independence.
    I especially look forward to hearing from Ms. Burton of the 
MMS, the bureau which oversees mineral production in the OCS. 
The OCS provides 21 percent of the nation's natural gas, and 30 
percent of our nation's oil. Among the many painful lessons 
that we learned from Katrina and Rita was what it would be like 
if the supply were removed from us. We learned that we must 
cultivate even more than our domestic oil and gas resources in 
the OCS.
    Every day that we do not is a day that we empower leaders 
in the world, like Hugo Chavez, whose arms spending is reported 
to have climbed to more than $4 billion in the past two years, 
transforming the Nation into Latin America's largest weapons 
buyer, and placing it ahead of other major purchasers in 
international arms market, like Pakistan and Iran.
    I also look forward to hearing about many of the 
legislative proposals and programs that accompany the 2008 
proposed budget. In particular, I am interested in hearing 
about BOM's proposal to implement a new model for land 
management in wildlife energy interface areas, such as the 
ongoing demonstration in New Mexico. Also, the 2008 budget 
assumes enactment of legislation opening the Section 1002 area 
of the coastal plain in ANWR.
    In addition to energy issues, I look forward to the further 
discussion with the Office of Surface Mining and USGS so that 
we may learn more about the direction your bureau proposes 
taking toward mineral production and regulation.
    Welcome to all of you. Thank you again, Mr. Chairman, for 
holding this hearing. I look forward to it.
    Mr. Costa. Thank you very much, Congressman Pearce, for 
your opening statement.
    We will now begin with the witnesses' testimony. We will 
hear from each witness. And following their testimony, when we 
complete the witness list, we will then move to questions in 
the normal order of House Rules and tradition.
    But let me first say, before I ask the first witness to 
testify before the Subcommittee, to help us establish the 
context in which you make your opening testimony, as well as 
the upcoming oversight for this and future legislative 
hearings.
    If you could please provide the panel at the start of your 
oral testimony a brief summary of the programs that you 
administer, and such activities which fall under your 
jurisdiction. We have a number of new members to this 
Subcommittee, and often, too often in government, I suspect 
you, as do I, get a bit frustrated when we assume that everyone 
clearly understands the jurisdiction and the focus of your 
particular bureau, or department, and how that relates to this 
year's budget challenges that you see.
    So therefore, if you will do that in your opening 
statement, I will be a little bit lenient as it relates to the 
five-minute rule as we move on here.
    Our first witness today is Ms. Johnnie Burton, who is the 
Director of the Minerals Management Service. Welcome to the 
Subcommittee. Your prepared statement will be entered into the 
record, and you now may proceed for five minutes.

   STATEMENT OF R. M. ``JOHNNIE'' BURTON, DIRECTOR, MINERALS 
      MANAGEMENT SERVICE, U.S. DEPARTMENT OF THE INTERIOR

    Ms. Burton. Thank you very much, Mr. Chairman and members 
of the Committee. I am delighted to be here, and would like to 
give you a brief overview of MMS.
    The Minerals Management Service is the agency within the 
Department of the Interior that is charged with managing two 
essential programs. One is to manage the production of oil, 
gas, and some other minerals from the Outer Continental Shelf; 
and that management goes from leasing the land all the way to 
supervising production of the minerals.
    The other program is to collect royalties due the United 
States from not only the Outer Continental Shelf, but also 
Federal and Indian lands onshore. This, in brief, is our 
mission. That is what we do. And hopefully, that is what we 
will talk to you about for the next few months, and answer your 
questions the best we can.
    I am here today to testify on the Fiscal Year 2008 budget 
request of the Minerals Management Service. The Fiscal Year 
2008 request is for $161.5 million in direct appropriation, and 
$135.7 million in offsetting receipt, for a total of $297.2 
million, which is--and I am going to compare to two things 
here--it is $10.2 million increase over the 2007 Joint 
Resolution, and it is $4.9 million over the President's request 
for 2007.
    With the enactment of the Fiscal Year 2007 Joint 
Resolution, we now have a full year appropriation of $287 
million, not including additional funds that will be provided 
for 50 percent of the January 2007 pay raises.
    Based on direction in the Joint Resolution, we are 
preparing a detailed operating plan for Fiscal Year 2007. We 
cannot talk about the details right now until that plan is put 
together and has been provided to Congress.
    The Federal Outer Continental Shelf is a major supplier of 
oil and natural gas for the domestic market. The approximately 
3900 production platforms on the OCS account for almost 30 
percent of domestic oil production, and 20 percent of domestic 
natural gas production.
    Since 1982, when MMS was created, OCS production has 
contributed almost 11 billion barrels of oil, and more than 116 
trillion cubic feet of gas for the nation. Also since 1982, OCS 
leasing has increased by 185 percent; and since 1994, OCS oil 
production has increased by 34 percent.
    Over the next decade we expect an increase in production 
from technologically challenging areas, such as deep water and 
deeper depths within the sea floor.
    The MMS administers also the rental royalty and other 
financial terms for over 28,000 producing leases, and 66,000 
non-producing leases on Federal onshore, offshore, and Indian 
lands.
    Over the last 10 years MMS revenue collection has increased 
substantially. In Fiscal Year 2006 MMS collected and accounted 
for more than $12.6 billion in mineral revenues. Since our 
inception 25 years ago, MMS has disbursed over $165 billion in 
mineral royalty, rents, and bonuses to recipient.
    In a State of the Union Address, President Bush announced 
plans to double the capacity of our nation's strategic 
petroleum reserve to 1.5 billion barrels of oil, and to fill 
existing petroleum reserve facilities to their current capacity 
of 727 million barrels. MMS will provide oil from royalty-in-
kind starting July 1, 2007, for this order.
    The Administration thinks that additional royalty relief 
for oil and gas development is unwarranted in today's price 
environment. The Fiscal Year 2008 budget proposes to repeat 
Section 344 and 345 of the Energy Policy Act of 2005. Section 
344 extended existing deep gas incentive, and 345 provides 
additional mandatory royalty relief for certain deep water oil 
and gas production.
    These two sections are dealt with in your Clean Energy Act 
of 2007, otherwise known as H.R. 6, and it would repeal those 
two sections.
    The MMS strives to ensure that our existing fiscal 
resources are distributed in a manner that allows the Agency to 
maintain current operations, meet future demands, and achieve 
departmental and bureau-level performance goals. Our budget is 
based upon the challenges confronting us during the next fiscal 
year and beyond.
    The request includes funding to fulfill MMS requirement for 
environmental and oversight responsibilities that are 
associated with a five-year plan on the OCS; and with the 
alternative energy offshore, we were given this responsibility 
in the Energy Policy Act of 2005.
    It will also include funding to manage the regulatory and 
inspection requirement associated with expanding ultra-deep 
water drilling and production. And that ultra-deep is defined 
for us between 5,000 and 10,000 feet of water, which is really 
a limit and a frontier. These activities require more 
complicated environmental assessment, new scientific research, 
and an increasing level of operation complexity. And we would 
also enhance compliance and enforcement efforts in the 
management of mineral revenues through the MMS support system 
modification that will help us verify closer and better the 
amount of money that we do collect from the industry.
    Through all of our programs, MMS works to ensure that the 
public receives the maximum benefit from America's OCS 
resources and Federal mineral revenue. As MMS moves forward in 
the new century, the importance of facilitating the nation's 
management of OCS land, and collecting and disbursing mineral 
revenues, will remain our top priority.
    Mr. Chairman, that concludes my remarks. I thank you for 
allowing me to present this summary, and I would be happy to 
answer questions when the time comes.
    [The prepared statement of Ms. Burton follows:]

           Statement of R. M. ``Johnnie'' Burton, Director, 
      Minerals Management Service, U.S. Department of the Interior

    Mr. Chairman and Members of the Subcommittee, I appreciate the 
opportunity to testify today on the Fiscal Year (FY) 2008 budget 
request for the Minerals Management Service (MMS). We have looked 
closely at our ongoing operations and responsibilities and this request 
reflects our best assessment of the funds needed to carry out mission 
critical MMS activities during FY 2008.
MMS Background
    The MMS, a federal agency within the Department of the Interior 
(DOI), is responsible for managing the Nation's oil, natural gas, and 
other energy and mineral resources on the Federal Outer Continental 
Shelf and the mineral revenues from the OCS and onshore Federal and 
Indian lands. To carry out this mission, the MMS manages two very 
important programs--the Offshore Minerals Management (OMM) Program and 
the Minerals Revenue Management (MRM) Program. Collectively, these 
programs manage activities that generate 30 percent of America's 
domestic oil production, 20 percent of domestic natural gas production 
and an average of over $7 billion in annual revenue for the Nation, 
States, and American Indians. Both of these functions are important to 
the nation's economic health and are key to meeting the nation's energy 
needs.
    The Federal OCS covers 1.76 billion acres and is a major source of 
crude oil and natural gas for the domestic market. In fact, according 
to the Energy Information Administration, if the Federal OCS were 
treated as a separate country, it would rank among the top five nations 
in the world in terms of the amount of crude oil, and second in natural 
gas it supplies for annual U.S. consumption. 1
---------------------------------------------------------------------------
    \1\ EIA U.S. Imports by Country of Origin, 12-21-2006.
---------------------------------------------------------------------------
    Since 1982, MMS has overseen OCS production of 9.6 billion barrels 
of oil and more than 109 trillion cubic feet of natural gas.
    Since 1982, OCS leasing has increased by 200 percent and oil 
production has increased by 185 percent. According to MMS's 
calculations, within the next 5 years, offshore production will likely 
account for more than 40 percent of oil and 20 percent of U.S. natural 
gas production, primarily due to deep water discoveries in the Gulf of 
Mexico.
    Since its inception twenty-five years ago in 1982, the MMS has 
distributed approximately $164.9 billion to Federal, State, and Indian 
accounts and special funds, including approximately:
      $101.1 billion deposited to the General Fund of the U.S. 
Treasury;
      $20.4 billion disbursed to states;
      $13.2 billion credited to the Reclamation Fund;
      $21.7 billion transferred to the Land and Water 
Conservation Fund;
      $5.2 billion for American Indian Tribes and Allottees; 
and
      $3.3 billion for the Natural Historic Preservation Fund.
    The receipts I have described above are derived from the 
accomplishment of the Bureau's two program missions. The FY 2008 MMS 
Request provides the resources necessary to meet the increasing demands 
and expanding responsibilities brought on by constantly changing 
external factors, such as technological and industry innovations on the 
OCS, litigation, and regulations that affect the collection and 
distribution of mineral revenues. I would now like to review a few of 
the MMS's recent achievements and what MMS sees as its challenges for 
the future.
FY 2008 President's Request
    The FY 2008 request is $297.2 million in current appropriations and 
offsetting receipts.
    With the enactment of the FY 2007 Joint Resolution, we now have a 
full year appropriation of $287.0 million, not including additional 
funds that will be provided for 50 percent of the January 2007 pay 
raise. Based on direction in the Joint Resolution we are preparing a 
detailed operating plan for FY 2007. We are not at liberty to disclose 
the details of the operating plans until they are approved and 
submitted to Congress on March 17. At that time we will be able to 
provide comparisons at the program level with the 2008 budget request.
    The comparisons in our 2008 budget are with the third continuing 
resolution, which was in effect through February 15. Throughout this 
testimony the comparisons will be on that basis.
    The 2008 Request for direct appropriations is $161.5 million, $3.2 
million above the FY 2007 Continuing Resolution level. Offsetting 
receipts are estimated to be $135.7 million, an increase of $7.0 
million over the FY 2007 Continuing Resolution.
    Our budget request is based upon our accomplishments in 
successfully implementing programs that are vitally important and 
contribute significantly to the Nation's economic well being and energy 
security. It is also based upon the challenges confronting us during 
the next fiscal year and beyond, which are the reasons for the 
increases in budgetary requirements. The request includes funding to:
      Fulfill MMS's environmental and oversight 
responsibilities associated with the implementation of the Outer 
Continental Shelf (OCS) 5-Year Oil & Gas Leasing Program (covering 
2007-2012) which is a critical component of our nation's overall energy 
strategy.
      Manage the regulatory and inspection requirements 
associated with expanding ultra-deepwater oil and gas exploration at 
depths between 5,000 and 10,000 feet. These activities require more 
complicated environmental assessments, new scientific research, and an 
increasing level of operational complexity.
      Enhance compliance and enforcement efforts in the 
management of mineral revenues through MRM Support System modifications 
that will improve the MMS's robust audit and compliance program.
Strategic Petroleum Reserve
    During the State of the Union Address, President Bush announced 
plans to double the Nation's Strategic Petroleum Reserve (SPR) to 1.5 
billion barrels of oil. Also announced was a directive to fill the SPR 
to its current capacity of 727 million barrels. The MMS will provide 
royalty-in-kind oil starting in July 2007 to accomplish this mandate. 
This policy decision will provide an additional layer of protection for 
the Nation's energy security.
Deepwater OCS Production Royalty Rates
    Deepwater OCS development has increased significantly in recent 
years as the technologies for accessing oil and gas deposits in deeper 
and deeper waters have progressed and become almost commonplace within 
the industry. In the meantime, oil and gas prices have risen 
dramatically, making OCS operations increasingly profitable. In order 
to ensure that American taxpayers are fairly compensated for the sale 
of Federal OCS minerals, the MMS recently announced that it will raise 
royalty rates from 12.5 percent to 16.67 percent for all new deepwater 
Gulf of Mexico (GOM) leases beginning in 2007. The MMS estimates that 
the increased royalty rate of 16.67 percent for new deepwater offshore 
GOM leases will increase OCS royalty revenues by $4.5 billion over the 
next twenty years.
    Based on current leasing plans, the next lease sale to which such a 
rate will apply is scheduled for August 2007, and will be announced in 
the Proposed Notice of Sale in April 2007.
Deep Gas and Deep Water Incentives
    The FY 2008 budget proposes to repeal Section 344 of the Energy 
Policy Act of 2005, which extended existing deep gas incentives in two 
ways. First, it mandated an increase in the royalty suspension volumes 
from 25 to 35 billion cubic feet of natural gas in a third drilling 
depth category (greater than 20,000 feet subsea). Second, it directed 
that incentives for all three drilling depth categories also be applied 
to leases in 200-400 meters of water. The FY 2008 budget also proposes 
to repeal Section 345 of the Energy Policy Act, which mandated 
additional royalty relief for certain deep water oil and gas 
production. Additional royalty relief for oil and gas exploration is 
unwarranted in today's price environment. A legislative proposal will 
be transmitted to the Congress to repeal Sections 344 and 345.
Net Receipts Sharing
    The 2008 President's Budget proposes amending section 35 of the 
Minerals Leasing Act (MLA) to implement a form of ``Net Receipts 
Sharing'' (NRS), whereby two percent will be deducted from the states' 
share of receipts from Federal leasing activities under the MLA. The 
two percent defrays a portion of the administrative costs incurred by 
Federal agencies in the management of onshore leasing activities, and 
would be deposited into miscellaneous receipts (U.S. Treasury).
Offshore Minerals Management Program Achievements
Providing Energy for America
    The Federal OCS is a major supplier of oil and natural gas for the 
domestic market, contributing more oil and natural gas for U.S. 
consumption than any single state or country in the world. The U.S. is 
now in its twelfth year of sustained expansion of domestic oil and gas 
development in the deep water area of the GOM. The OCS now accounts for 
almost 30 percent of domestic oil production and about 20 percent of 
U.S. natural gas production. According to MMS's calculations, within 
the next 5 years, OCS production will likely account for more than 40 
percent of oil and 20 percent of U.S. natural gas production, primarily 
due to deep water discoveries in the Gulf of Mexico.
Lease Sale Implementation
    Interior is continuing OCS oil and gas leasing and approval of 
exploration and development plans on predictable schedules. In 2005, 
four successful sales were held, three in the Gulf of Mexico and one in 
Alaska. In 2006, near record oil and gas prices led to robust bidding 
in the March 2006 Central GOM sale, where the MMS accepted $581.8 
million in high bids on 392 tracts. The August 2006 Western GOM sale 
garnered $340.9 million in high bids from 62 companies. The one 
remaining sale in the current 5-year program is the April 2007 Beaufort 
Sea sale.
    Two sales from the current 5-year program have been rescheduled. 
The Central Gulf of Mexico (CGOM) Sale 201 was scheduled for March 
2007; however, the MMS has postponed the sale to August 2007, pursuant 
to settlement of litigation brought by the State of Louisiana. The 
Chukchi Sale 193 was scheduled for mid-2007 and has been rescheduled 
for early in the next OCS 5-Year Oil and Gas Leasing Program because 
additional presale environmental analysis is required for the area 
identified of interest.
Safety and Environmental Protection
    The MMS regards the safety of personnel, the environment, and 
operations as top priorities. Prevention is our most important safety 
strategy. The continued movement of industry into deeper waters and the 
overall increased industry activity in the GOM have increased both the 
level and complexity of monitoring and ensuring safe OCS operations.
    In addition to the complexities of the operational activities, we 
must plan and prepare for the severe storms that frequently threaten 
large areas of the GOM. Consistent with our strategy of prevention, the 
MMS and the oil and gas industry work together to make sure measures 
are in place to protect workers and minimize the possibility of 
pollution when storms occur.
    The effectiveness of our preparations was demonstrated during the 
2005 hurricane season. Hurricanes Katrina and Rita and the impacts they 
had on the people of the Gulf coast and on the oil and gas 
infrastructure both onshore and offshore were the most significant 
challenges for MMS in 2005. We are still working with industry to bring 
facilities back online. Of the 4,000 Gulf OCS facilities, more than 
3,000 were subjected to hurricane force winds and 115 mostly older 
facilities were destroyed.
    Despite being subjected to these severe conditions, which tested 
the outside limits of facility engineering, there were no casualties or 
significant environmental incidents associated with offshore oil and 
gas facilities. All facility shut-in precautions and subsurface well 
shut-off valves worked as designed. Spills from ruptured pipelines and 
other containers were limited and validated the MMS environmental and 
safety regulatory requirements.
    In the aftermath of Hurricanes Katrina and Rita the MMS took a 
number of actions to facilitate the process of resuming operations to 
provide an uninterrupted supply of energy resources to America, 
consistent with the need for safety and environmental protection. These 
measures included expediting review of requests for temporary barging 
of oil or flaring of small amounts of natural gas and expediting the 
approval process for pipeline repairs. Industry repairs to the Gulf of 
Mexico's heavily-damaged oil and gas infrastructure began immediately 
and continue today.
      Energy production in the Gulf's Federal waters has 
steadily increased since the 2005 hurricane season. Gulf of Mexico oil 
and natural gas production have reached over 90 percent of pre-Katrina 
levels.
      115 platforms were totally destroyed (less than 3 percent 
of the Gulf's platforms), 96 were significantly damaged, and 19 rigs 
were set adrift as a result of Hurricanes Katrina and Rita. The MMS has 
worked and will continue to work with industry to ensure that all 
destroyed wells are properly abandoned and platforms repaired or 
properly disposed of in order to protect the environment and ensure 
safety. This will be a long-term activity.
Offshore Minerals Management Program Challenges
Proposed 2007-2012 OCS Oil and Gas Leasing Program
    The Proposed Program for 2007-2012 is under development through an 
extensive consultation process prescribed by the OCS Lands Act (OCSLA). 
The comment period for the Draft Proposed Program opened on February 
10, 2006, and closed on April 11, 2006. On August 25, 2006, a second 
draft, the Proposed Program and the associated Draft Environmental 
Impact Statement (DEIS) were released to the public. The comment period 
for these two documents closed on November 24th and November 22nd, 
respectively. The remaining schedule is as follows:
      April 2007 Proposed Final Program and Final EIS (60 day 
waiting period)
      June 2007 Final Program Approval
      July 1, 2007 Current program ends; New Program begins
    The Proposed Program includes consideration of 21 sales in seven of 
the 26 OCS planning areas--two areas in the Gulf of Mexico, one area in 
the Mid-Atlantic Planning Area, and four areas off Alaska. The total 
number of scheduled lease sales will be determined when the new OCS 
program is finalized in the spring of 2007. The MMS estimates the total 
undiscovered technically recoverable resources (UTRR) are 67.9 billion 
barrels of oil and 340.4 trillion cubic feet of natural gas from all 
planning areas where sales are under consideration in the 2007-2012 
Proposed Program, though only a portion of some of the planning areas 
are included in the proposal.
    In implementing the mandates of the Gulf of Mexico Energy Security 
Act, the MMS will offer deep-water acreage in the ``181 South'' area 
and in a portion of the Sale 181 area remaining in the Eastern Gulf of 
Mexico. We have recently begun the process of preparing environmental 
analyses for those areas.
    The 2008 President's request includes $4.0 million to fulfill the 
MMS's environmental and oversight responsibilities under the 2007-2012 
Five-Year Oil & Gas Leasing program. Specific components contained 
within this increase are: $2.5 million for environmental studies and 
required NEPA analysis in those areas previously included in the 
Proposed Five-Year Plan, where data either does not exist or is 
extremely outdated (primarily the North Aleutian Basin), and $1.5 
million for workforce needs associated with the new and expanded 
leasing areas as well as for additional leasing and program support.
Ultra Deep Water: America's Expanding Frontier
    The MMS is witnessing a surge in exploration activity and 
development in the ultra-deepwater area of the Gulf of Mexico at water 
depths between 5,000 feet and 10,000 feet. At the end of 2004, there 
were 2,300 active leases in ultra-deepwater, and in the five-year 
period 2001-2005, there were a total of 230 wells drilled in these 
water depths of which 149 were exploratory wells. This activity and the 
discoveries of oil and gas have now started to translate into 
development projects. Nine development projects began production in the 
ultra-deepwater area in 2003-2005. Several significant new ultra-
deepwater discoveries also were announced in the GOM in the summer of 
2006. The budget includes $1.3 million to acquire the required 
expertise and resources needed to regulate OCS ultra-deepwater 
development.
Ensuring the Safety of an Aging Infrastructure
    The average age of all current OCS platforms is about 20 years. In 
order to have this infrastructure remain in safe and useful condition 
for years to come, it is important to properly protect and maintain 
wells, platforms, and pipelines through sound engineering standards and 
rigorous inspection. The MMS is working closely with industry to ensure 
the continued safety of OCS facilities, protecting workers and the 
environment.
    The FY 2008 President's budget also requests $820,000 for a GOM 
hurricane recovery initiative to address well abandonment, pollution 
prevention, and to keep pace with structural modifications and repair 
permit requests. The MMS seeks the capability to address important 
outstanding issues from the devastation of recent hurricanes and future 
events.
Energy Policy Act Implementation--Alternative Energy Cost Sharing
    The MMS requested $6.5 million in FY 2007 to fulfill requirements 
under Section 388 (Alternative Energy--Related Uses on the OCS) of the 
Energy Policy Act of 2005. For the 2008 request, MMS is proposing that 
parties submitting applications for non-competitive renewable energy 
projects fund the cost of independent environmental analyses, which 
would allow for a $3.0 million in savings in appropriated funds for 
this activity.
Coastal Impact Assistance Program (CIAP)
    The Energy Policy Act of 2005 authorized disbursement of $250.0 
million from OCS oil and gas revenues in each of the Fiscal Years 2007 
through 2010 to producing States (Alabama, Alaska, California, 
Louisiana, Mississippi, and Texas) and coastal political subdivisions 
(counties, parishes, or boroughs) for approved coastal restoration and 
conservation purposes. The CIAP Plan guidelines were published in the 
Federal Register on September 29, 2006. Under the statute, States must 
submit plans no later than July 1, 2008. The 2007 President's budget 
included appropriations language authorizing the MMS to use a share of 
the receipts to administer the program. Operating under the terms of 
the three continuing resolutions that were in effect through February 
15, 2007, MMS did not have authority to use these funds to administer 
the program. The 2007 Joint Resolution, which was enacted on February 
15, 2007 provides MMS the authority to use CIAP funds for this purpose 
in 2007 and MMS is now proceeding with implementation of the program. 
The 2008 President's budget includes language to continue this 
authority.
Minerals Revenue Management Program Achievements
Financial Management--Clean Audit Opinion
    In November 2005, an independent certified public accounting firm 
issued a clean audit opinion of the MMS's audit program with no 
material weaknesses, and no reportable conditions. In its opinion, the 
accounting firm stated:
    ``In our opinion, the system of quality control for the Federal 
Audit Function of the MMS in effect for the 2-year period ending 
December 31, 2004, has been designed to meet the requirements of the 
quality control standards established by the Comptroller General of the 
United States for a Federal Government audit organization and was 
complied with during the 2-year period ending December 31, 2004, to 
provide the MMS with reasonable assurance of conforming with applicable 
auditing standards, policies, and procedures.''
Business Planning Initiative
    The MRM Strategic Business Planning Initiative was completed in 
December 2005. This initiative charts the course and direction of the 
future MRM business through the year 2012. The new initiative focused 
on identifying and implementing best value services with high quality 
and integrity. This Plan provides a strategic approach for continuous 
program improvement through development and implementation of future 
operational business plans aligned with five MRM strategic mission 
areas: Compliance, Financial Management, Indian Trust, Resource and 
Information Management, and Asset Management. Importantly, the business 
planning initiative will be supportive of, and fully integrated with, 
Departmental and the MMS strategic planning guidelines and responsive 
to the Administration's management improvement goals and objectives. 
Key outcomes include an MRM program-wide strategic plan and business 
plans that emphasize market-based regulatory guidance, valuation 
certainty, and improved business processes and systems with effective 
performance measures and strong internal controls.
Royalty-in-Kind (RIK) Program
    The RIK program has demonstrated that under certain circumstances, 
taking royalties in-kind has many advantages over taking royalties in-
value (RIV). These advantages include: revenue enhancement, reduced 
administrative costs for the MMS and the industry, reduced incidence of 
reporting disagreements, and earlier receipt of royalty revenues. The 
Department of the Interior, Environment, and Related Agencies 
Appropriations Act, 2006, and the Energy Policy Act of 2005 granted the 
MMS permanent authority to fund transportation and administrative costs 
for the RIK program through RIK revenue receipts.
    As MMS has made progress in optimizing RIK volumes and increasing 
Treasury revenues, it has examined its business practices and basic 
organizational structure. Although RIK volumes are expanding, the MMS 
anticipates that the administrative costs will remain relatively flat. 
The preliminary 2008 estimate for RIK administrative costs is $19.6 
million, an increase of only $600,000 for fixed cost adjustments over 
the FY 2007 President's request. When compared to RIV, MMS estimates 
that RIK resulted in administrative cost avoidance of $3.7 million in 
2005, primarily due to decreased audit, compliance, and litigation 
costs. The MMS anticipates similar cost avoidance in future years.
Federal and Indian Compliance Assurance
    The MMS compliance assurance activities represent a large and 
critical part of the operational strategy, ensuring that the Government 
is realizing fair market value, and that companies are in compliance 
with applicable laws, regulations, and lease terms. Through the 
Compliance and Asset Management (CAM) process, the MMS ensures that the 
Nation's Federal and Indian mineral revenues, whether received through 
in-kind or in-value royalties, are accurately reported and paid in 
compliance with laws, regulations, and lease terms. This activity plans 
and conducts targeted and random audits and special reviews of mineral 
lessees and payors to detect and collect royalty underpayments. Primary 
CAM activities include enforcing industry compliance with lease terms 
and regulations, issuing enforcement orders, and supporting the mineral 
revenue litigation and appeals processes.
    In FY 2006 the MMS reviewed and/or audited 72.5 percent of all 2003 
Federal and Indian royalty revenues within three years from the date of 
receipt of payment, using a system that targets areas of greatest 
risk--the largest properties and payors.
    As part of its compliance assurance activities, the MMS administers 
delegated and cooperative audit agreements with eleven States and seven 
Indian Tribes. The States and Tribes are working partners and an 
integral aspect of the overall onshore compliance efforts. Tribes are 
now self-empowered to perform audits on tribal mineral royalties within 
their reservation and the States perform audits on Federal leases 
within their boundaries. The MMS conducts compliance reviews and audits 
to provide compliance coverage over properties not covered by the 
States and Tribes.
    Funding for States and Tribes in the Section 205 State Delegated 
Audit Program and Section 202 Tribal Cooperative Audit Program in FY 
2006, was around $9.1 million. For FY 2007 funding for this program 
remains level. The MMS continues to explore how to best allocate 
available budget resources for the 202/205 Program. The MRM has 
analyzed cost, workload, and risk data to apply ``best business case'' 
criteria to the funding of this program. The mineral revenues at risk 
and number of producing leases are used to establish funding 
allocations among States and Tribes. Other factors, such as program 
effectiveness and anticipated increases and decreases in revenue 
activity, are also considered.
Indian Trust Responsibilities
    The MMS places high emphasis on fulfilling its Indian Trust 
responsibilities. The MMS continues to provide the highest possible 
Indian trust service in collecting and disbursing royalties from Indian 
lands to 32 Tribes and more than 25,000 individual Indian mineral 
owners (IIMOs).
    The MMS serves as an advocate for the interests of IIMOs. MRM 
operates in field offices that work closely with other Federal agencies 
to resolve Indian mineral issues and respond to the needs of IIMOs. 
These offices also administer special outreach and cooperative programs 
to educate and empower Indian mineral owners and engage them in the 
mineral revenue management process. During 2006, MMS held 74 outreach 
sessions with American Indian constituents and resolved 4,366 royalty 
related inquiries. The MMS plans to continue these efforts in 2007 and 
beyond.
Minerals Revenue Management Program Challenges
Compliance Strategy--Office of the Inspector General's (OIG) Report
    The OIG conducted an audit at the request of the U.S. Senate 
Committee on Energy and Natural Resources. The audit, dated December 6, 
2006 determined whether compliance reviews are an effective part of the 
CAM program and whether the MMS is effectively managing the compliance 
review process.
    The OIG audit concluded that compliance reviews can be an effective 
part of the MMS CAM program, though the audit ``disclosed some 
weaknesses that may prevent MMS from maximizing the benefits of the 
compliance reviews.'' In addition, the OIG audit found that while MMS 
had audited and or reviewed 72.5 percent of all revenues from Federal 
and Indian leases in FY 2006, this meant that the bureau examined only 
9 percent of all properties and 20 percent of all companies. The OIG 
recommended that the MMS ``consider modifying its CAM program strategy 
to ensure appropriate coverage of properties and companies within a 
reasonable timeframe even if this results in a reduction of the overall 
percentage of dollars covered.''
    In response, on December 28, 2006, MRM formally submitted an 
``Action Plan to Strengthen Minerals Management Service Compliance 
Program Operations.'' The Action Plan documents the improvement actions 
taken and planned to fully and effectively implement the OIG 
recommendations:
      MMS will provide reliable data for managing and reporting 
on CAM program operations; strengthen the compliance review process; 
and improve performance measures to better reflect CAM program 
operations.
      The Action Plan requires extensive oversight and frequent 
implementation status reporting by the MMS CAM managers and senior 
executives. Each improvement action has a target completion date and a 
designated MMS official with implementation responsibility.
      MMS will pursue a more dynamic, risk-based approach to 
compliance and is presently studying how to accomplish this goal most 
effectively. The number of properties and companies will increase, 
consistent with OIG recommendations.
MRM Support System Modifications
    Since the MMS's formation in 1982, the energy industry has 
undergone significant changes. Over the years, the MMS has successfully 
adapted to industry changes and become more operationally efficient. 
The MRM's primary business of collecting, accounting, and assuring 
compliance for and disbursement of Federal and Indian mineral revenues 
is highly dependent on its information technology system, the MRM 
Support System (MRMSS). In FY 2008, the MMS is proposing $2.4 million 
in MRMSS system modifications, which will enhance compliance and 
enforcement efforts. The $940,000 adjustment line monitoring initiative 
would provide for systems improvements and staff support to ensure that 
required company adjustments are made only within allowable time 
frames. It is anticipated this capacity will provide a much larger 
return to the U.S. Treasury than the initiative will cost. With an 
increase of $1.5 million for the interactive payment reconciliation and 
billing initiative, the MMS will automate the interface with its 
customer base on numerous activities and enhance online reporting and 
verification capabilities. The funding will address an area of concern 
in the Bureau's 2006 financial audit, as well as provide a strong 
return on investment.
[GRAPHIC] [TIFF OMITTED] 33676.001


    The MMS receives funding for operations from three sources: the 
Royalty and Offshore Minerals Management (ROMM) appropriation, Oil 
Spill Research (OSR) appropriation and Offsetting Collections 
(primarily from rental rate receipts from offshore leases). In addition 
to appropriations for operations, MMS receives appropriations for 
distribution of the States' share of onshore mineral receipts. In FY 
2008, the MMS estimates that the States' share of these onshore mineral 
receipts will be approximately $2.0 billion. This amount is slightly 
above our FY 2007 estimate of $1.9 billion.
[GRAPHIC] [TIFF OMITTED] 33676.002


Conclusion
    As we move forward in the new century, efficient, safe, and 
productive management of the Nation's OCS lands and mineral revenue 
collection efforts will remain the MMS's top priority. The MMS will 
continue to strive for excellence and work for the responsible 
development of America's energy supplies.
    Mr. Chairman that concludes my statement. Please allow me to 
express my sincere appreciation for the continued support that this 
committee has provided the MMS. It would be my pleasure to answer any 
questions you or other Members of the Subcommittee may have at this 
time.
                                 ______
                                 
    Mr. Costa. Thank you very much, Ms. Burton, and we will 
have questions for you when the time comes. And I was quite 
generous with your time. We did go a little long, but I wanted 
to make sure you completed your statement.
    As to the other witnesses, we want to be mindful of the 
Members' time here and give them an opportunity to ask 
questions following your statements.
    I would now like to recognize Dr. Myers, who is the 
Director of the United States Geological Survey, for his 
testimony.

 STATEMENT OF MARK D. MYERS, DIRECTOR, U.S. GEOLOGICAL SURVEY, 
                U.S. DEPARTMENT OF THE INTERIOR

    Mr. Myers. Good afternoon, Mr. Chairman, and thank you for 
this opportunity to testify.
    The USGS was created by an Act of Congress in 1879, and has 
evolved into a premier scientific agency which employs some of 
the world's finest scientists in biology, geology, hydrology, 
and geography. Unique is the USGS's ability to integrate and 
fuse these sciences together to deal with today's pressing, 
complex challenges.
    The USGS serves the Nation by collecting and monitoring, 
analyzing and providing scientific information, understanding 
about natural resource conditions, issues, and problems. We 
provide the Nation with relevant, impartial scientific 
information to describe and understand the earth, minimize loss 
of life and property from natural disasters, manage water, 
biological energy and mineral resources, and enhance and 
protect the quality of life.
    Some key national systems the USGS manages is the Advanced 
National Seismic System, used for earthquake monitoring and 
prediction; the Landsat 5 and 7 satellites; and a network of 
over 7,000 stream gauges.
    The value of the USGS to the Nation rests on its ability to 
carry out studies on the national scale, and sustain long-term 
monitoring assessment of natural resources. Because it has no 
regulatory or management mandate, the USGS provides impartial 
science that directly impacts and positively benefits society.
    The 9,000 scientists, technicians, and support staff of the 
USGS are located in nearly 400 offices in every state and 
several foreign countries. With a budget of approximately $1 
billion a year, the USGS leverages its resources and expertise 
in partnerships, with more than 2,000 agencies of state, local, 
and tribal government, the academic community and Federal 
allies, and non-government organizations, and the private 
sector.
    The Fiscal Year 2008 budget proposal focuses on the USGS 
research on issues of societal relevance by reflecting the 
President's commitment to reduce the deficit and balance the 
Federal budget by 2012. It ensures the USGS maintains its 
expertise to help address societal and scientific challenges 
that will arise in the months and years ahead.
    The budget proposes a moderate increase to fund an expanded 
role for the USGS in the Green River Basin of Wyoming, a 
priority for the Department of Interior's Healthy Lands 
Initiative. Through the initiative and partnership with the 
Bureau of Land Management and Fish and Wildlife Service, the 
USGS will provide essential long-term science to protect and 
restore the living resources of the Basin, while facilitating 
necessary and responsible development of energy resources. It 
includes increases to priorities in the Ocean Actions Plan.
    The Coastal and Marine Geology Program will receive 
additional funds for collaborative efforts with the Federal, 
regional, state, and local partners to provide coastal resource 
managers, coastal zone planners, and emergency and public 
health officials with data and forecasting of changing coastal 
conditions.
    Natural hazards continue to threaten life and property 
across the U.S. Each year natural disasters in the United 
States result in hundreds of lives lost, and costs billions of 
dollars in disaster aid, disrupted commerce, destruction of 
public and private property.
    The 2008 budget request builds on previous investments, and 
will seek to fill critical gaps of coverage in Southern 
California, which has one of the nation's highest potential for 
extreme catastrophic losses due to natural hazards.
    Monitoring, responding to, and mitigating these impacts of 
natural hazards remain a core focus of the USGS scientific 
research.
    A great concern to the Department, the Congress, the Nation 
are the potential impacts of climate change. USGS conducts 
national, regional, and local research across the nation, and 
provides necessary scientific information across multiple 
scientific disciplines, times, and scales. Because of this, the 
USGS has an important role in the climate science community 
that no other public or private science agency can fill.
    The 2008 budget continues the base-level funding for 
research and monitoring related to climate change. USGS will 
use this funding to monitor, model, and understand ecological 
and physical responses to our changing climate.
    The USGS Energy Resources Program also maintains its base 
funding, and will continue to provide impartial scientific 
robust information to advance the understanding of geologically 
based energy resources to contribute to plans for a secure 
energy future, and to facilitate evaluation and responsible use 
of resources.
    The Fiscal Year 2008 budget request for the program 
continues the work called for in the Energy Policy Act of 2005, 
including the national assessment of geothermal resources, oil 
and gas resource assessments, to be joined with BLM in the U.S. 
Forest Service data, with the oil and gas inventory on Federal 
lands, and unconventional gas research, such as gas hydrates.
    Additionally, USGS is a recognized scientific leader, as I 
said, in gas hydrate research, and will continue its 
collaborative work as part of major gas hydrate research 
projects around the world.
    I am sure the Committee is aware the 2008 budget proposes a 
decrease to the minerals resource program. This program 
conducts basic research in ore deposits, geochemistry, and 
geophysics and applied research in national and international 
mineral assessments. The Administration is focusing its efforts 
in mineral research assessments and research projects that 
support the needs of the Federal Land Management programs.
    The Fiscal Year 2008 budget includes funds to ensure 
continued availability of earth observation data to government, 
academic, commercial, and international users. It provides for 
operations and maintenance of Landsat 5 and 7, as well as a 
Landsat data continuity mission, to develop a ground data 
processing and flood operations system in preparation for the 
next Landsat satellite, scheduled to be launched in 2011. I 
will note that the funding to begin preparation for LDCM was 
contained in the continuing resolution.
    In the years ahead, our nation must deal with national and 
global trends that have major natural science implications. The 
USGS is uniquely suited to address the broad scope of these 
natural resource, natural science issues facing the nation.
    The 2008 budget request will enable the USGS to build on 
the breadth of expertise and its long tradition of service to 
provide data and long-term scientific understanding and 
scientific tools necessary to help the economy remain strong, 
the environment remain healthy, and the quality of life in the 
United States remain high now and into the future.
    This concludes my statement, Mr. Chairman. I would be 
pleased to answer any questions you might have, or the 
questions of other Members.
    [The prepared statement of Mr. Myers follows:]

     Statement of Mark D. Myers, Director, U.S. Geological Survey, 
                    U.S. Department of the Interior

    Good morning, Mr. Chairman and Members of the Subcommittee. Thank 
you for the opportunity to present the Administration's proposal for 
the budget of the U.S. Geological Survey (USGS) for Fiscal Year (FY) 
2008. This budget preserves the Survey's scientific excellence in our 
core areas of biologic, geographic, geologic, and water resources 
research. The FY 2008 budget request for USGS is $975 million in 
current appropriations.
    With enactment of the FY 2007 Joint Resolution, we now have a full 
year appropriation of $977.7 million, not including additional funds 
that will be provided for 50 percent of the January 2007 pay raise. 
Based on direction in the Joint Resolution we are preparing a detailed 
operating plan for FY 2007. We are not at liberty to disclose the 
details of the operating plans until they are approved and submitted to 
Congress on March 17. At that time we will be able to provide 
comparisons at the program level with the 2008 budget request.
    The comparisons in our 2008 budget are with the third 2007 
continuing resolution, which was in effect through February 15. 
Throughout this testimony the comparisons will be on that basis.
    The FY 2008 Administration's budget proposal continues to focus 
USGS research on issues of societal relevance, while reflecting the 
President's commitment to reduce the deficit and balance the Federal 
budget by 2012. It ensures that USGS maintains the expertise to help 
address the scientific and societal challenges that will arise in the 
months and years ahead. The budget strengthens USGS efforts in support 
of key Administration priorities, such as the Healthy Lands Initiative 
and the Ocean Action Plan, and it maintains strong efforts to ensure 
continued availability of Earth observation data to government, 
academic, commercial, and international users, to reduce the human and 
environmental costs of natural disasters, and to provide the 
fundamental research and monitoring needed to address increasing 
concerns about climate change. The budget reflects $16.3 million in 
program increases and $24.0 million in increases for fixed costs, which 
are offset by $10.1 million in reductions to lower priority programs.
    The budget proposes an increase of $5.0 million to fund an expanded 
role for USGS in the Green River Basin of Wyoming, a priority site for 
the Department's Healthy Lands Initiative. Through this Initiative, in 
partnership with the Bureau of Land Management and the Fish and 
Wildlife Service, USGS will provide the essential long-term science to 
help protect and restore the living resources of the basin while 
facilitating responsible development of the energy resources. The 
landscape and ecosystems of the Green River Basin include some of the 
highest quality wildlife habitat in the Intermountain West--but these 
landscapes are changing rapidly in response to recent energy resource 
development and increasing population pressures. The sagebrush, 
mountain shrub, aspen, and riparian habitats of the basin support 
significant numbers of plants and animals, including species that are 
candidates for Federal listing under the Endangered Species Act or 
species that are already listed as threatened or endangered.
    The budget increase for the Healthy Lands Initiative builds on past 
and present scientific studies and assessments, including the recently 
completed energy assessment of the basin, land use and land cover 
studies, vegetation mapping, and long-term baseline water monitoring, 
and will enable USGS to investigate the environmental impacts of 
natural events and land-use change in the basin. Working with partners, 
USGS will assess the health of habitats and resources; build the 
geospatial framework for sharing information; and monitor changes in 
landscapes to ensure the long-term health and sustainability of the 
living resources. Our research and monitoring will inform our partners 
as they develop habitat restoration strategies that benefit species of 
concern. For example, USGS will integrate landscape-scale species and 
habitat science with energy assessments for the ecoregional analysis of 
terrestrial and aquatic ecosystems within the basin, determine the 
distribution of key species such as sage grouse, assess landscape and 
habitat conditions, identify unique ecological and critical habitats in 
relation to energy resources, assess priority conservation targets, and 
test the response of species to human disturbance. USGS inventories and 
monitoring of species and habitats, water-resource monitoring, and 
syntheses of habitat and energy information are critical to inform 
land- and resource-management decisions and restoration plans that 
ensure the year-round vitality of the diversity of habitats on which 
wildlife depends.
    The proposed budget includes increases in both geology and water to 
address priorities in the U.S. Ocean Action Plan. The Coastal and 
Marine Geology program will receive $1.5 million for collaborative 
efforts with Federal, regional, State, and local partners to provide 
coastal resource managers, coastal zone planners, and emergency and 
public health officials with data and forecasts of changing coastal 
conditions, enabling them to anticipate and prepare for extreme weather 
events, natural disasters, and human influences on coastal environments 
and communities. The work will begin in pilot regions chosen to reflect 
a range of natural settings and human needs; candidate regions include 
the northern Gulf of Mexico, Southern California, and the Southeast/
Mid-Atlantic. USGS will begin initial efforts in at least three pilot 
regions in FY 2008.
    The budget also includes an increase of $1.5 million in the 
Hydrologic Networks and Analysis program to implement one of the chief 
recommendations of the U.S. Commission on Ocean Policy and the 
President's Ocean Action Plan: the creation of an interagency National 
Water Quality Monitoring Network. The network will integrate monitoring 
of watersheds, coastal waters, and oceans to provide regional and 
national data on the quality of surface and ground water in 
tributaries, wetlands, coastal waters, the Great Lakes, and coastal 
beach areas. Although many monitoring networks already exist and will 
continue, data from different networks may not be comparable. The new 
network will be unique in its ability to combine multidisciplinary data 
on water quality from many sources, ranging from upland tributaries to 
estuarine and offshore waters, and the data will be accessible through 
a single Web-based portal. The plan for the network was developed 
cooperatively with 40 different organizations at the Federal, regional, 
State, and local levels to ensure that it meets the needs of a wide 
range of users, and it has been approved by members of the Advisory 
Committee on Water Information and by the Council on Environmental 
Quality, National Science and Technology Council. In FY 2007, USGS is 
working with other agencies on pilot studies to inventory existing 
monitoring assets, identify gaps in data collection, refine the 
network's observational and data sharing requirements, and identify 
next steps for network implementation. FY 2008 activities supported by 
the proposed increase will build on pilot study results to establish 
demonstration projects that will show the feasibility of the network, 
refine observational parameters and temporal and geographic sampling 
frequencies and scales, and develop methods for sharing, summarizing, 
and reporting the data.
    These linked activities will further the broad objectives of the 
Ocean Action Plan, supporting the development of integrated mapping, 
observations, visualization techniques, forecast models, and decision-
support tools. Within 5 years, USGS and its partners will provide 
managers and officials in the pilot study areas with decision-support 
tools to help policy makers anticipate and prepare for coastal 
ecosystem and community responses to extreme weather events, natural 
disasters, and human influences.
    Natural hazards continue to threaten lives and property across the 
United States. Each year, natural disasters in the United States result 
in hundreds of lives lost and cost billions of dollars in disaster aid, 
disrupted commerce, and the destruction of public and private property. 
It is the mission of USGS to provide scientific research and analysis 
to help citizens, emergency managers, and policy makers decide how to 
prepare for and react to the natural hazards we face. By collecting 
long-term data and information on past and present hazard events, by 
providing continuous monitoring and data collection, and by developing 
tools and products to aid communities in creating emergency 
preparedness and recovery plans, USGS can mitigate the potential 
impacts, saving lives and property.
    The FY 2007 budget request reflected an increase of $2.2 million to 
support USGS hazards research and monitoring, supported by an 
additional $3.5 million from redirection of priorities within hazards-
related programs. The FY 2008 budget request builds on last year's 
request and seeks an additional $1.3 million for the Natural Hazards 
Initiative. Within the $1.5 million increase for the Ocean Action Plan 
in the Coastal and Marine Geology program, $1.0 million will address 
hazard related programs, as discussed above. In addition, the budget 
seeks an additional $250,000 for two major activities as part of the 
Natural Hazards Initiative. An increase of $100,000 will be used to 
fill critical gaps in coverage in Southern California, which has one of 
the Nation's highest potentials for extreme catastrophic losses due to 
natural hazards, by installing new streamgages with the ability to 
transmit data in real time via satellite telemetry. These data are used 
in flood, landslide, and debris-flow forecasting and warning. An 
increase of $150,000 will enhance storm-surge monitoring in hurricane-
prone areas to provide the National Weather Service and emergency 
managers with visualization of storm surge for use in conducting 
emergency response activities during a hurricane. The region bordering 
the Gulf of Mexico is particularly vulnerable to the impacts of 
hurricanes, and the Natural Hazards Initiative builds on current USGS 
activities to improve the ability to forecast and respond to hurricane 
impacts to this most vulnerable of coastal settings. These impacts 
include flooding from coastal storm surge and inland rivers; damage to 
physical features such as barrier islands, mainland beaches, wetlands 
and estuaries that provide the first line of defense when a hurricane 
strikes; and, as the hurricane moves inland, catastrophic landslides in 
mountainous areas. Scientific information and understanding are 
required to assess the physical, ecological, and socioeconomic 
vulnerability of these coastal settings; predict the potential impacts 
of storm events; provide emergency responders with timely and accurate 
information needed to direct critical resources for activities such as 
evacuations, search and rescue missions, and damage assessments; assess 
the effectiveness of post-storm restoration and enhancement activities 
(including those in response to Hurricanes Katrina and Rita) in 
reducing future vulnerability; and provide coastal zone managers with 
rapid and reliable assessments of the impacts of future storms and the 
resulting changes in coastal vulnerability to future hurricanes.
    The potential impacts of climate change are of great concern to the 
Department, the Congress, and the Nation. With our ability to conduct 
national, regional and local research across the Nation and our ability 
to provide necessary science information across multiple scientific 
disciplines, times, and scales, USGS has an important niche in the 
climate science community that no other public or private science 
agency can fill. The FY 2008 budget continues the FY 2007 base funding 
level of $26 million for research and monitoring related to climate 
change. USGS will use this funding to monitor, model and understand 
ecological and physical responses to changing climate, such as--
      Permafrost thawing in the sub-Arctic Yukon Basin and the 
Arctic regions of Alaska,
      Drought monitoring in arid parts of the western United 
States;
      Migration of plant communities and proliferation of 
invasive species in response to climate change;
      Changes in snowpack and stream runoff in mountainous 
areas;
      Retreat of alpine glaciers;
      Coastal wetlands loss related to subsidence and sea-level 
rise;
      The interplay between climate and changes in land use and 
land cover; and
      Wildland fire across landscapes.
    These observations and related USGS research are essential 
components for climate models, especially those that deal with the 
physical causes of climate change and impacts to the terrestrial, 
freshwater, and marine ecosystems from changing climate.
    The FY 2008 budget proposes $222.1 million for USGS geology 
activities, which is $4.7 million above the FY 2007 CR level. The 
proposal includes $1.5 million of the requested $3 million for the 
Ocean Action Plan initiative, described earlier. It also includes $5.8 
million in increases for fixed costs and continues funding for most 
assessments of geologic hazards, landscapes, and resources as proposed 
in FY 2007.
    The FY 2008 budget proposes a decrease of $2.6 million for the 
Mineral Resources Program. This program conducts basic research in ore 
deposits, geochemistry, and geophysics and applied research in national 
and international mineral assessments that are used by States, local 
governments, industry, and academia, in addition to many Federal 
agencies. The Administration is focusing its efforts in mineral 
resource assessments and research on projects that support the needs of 
Federal land management programs. The proposed budget will permit the 
program to conduct one site-specific mineral resource project for 
Federal land management agencies in the lower 48 States, provide 
regional-scale geologic data and mineral resource assessments in 
Alaska, complete collection of national-scale data characterizing earth 
materials, collect data on production and utilization of 70 to 80 
mineral commodities, and manage four national-scale long-term 
databases.
    The FY 2008 budget requests $181.1 million for biological research, 
which is $8.5 million above the FY 2007 CR level. The proposal reflects 
$4.5 million in increases for fixed costs and $5 million for increases 
for the Healthy Lands Initiative in the Green River Basin of Wyoming, 
as described earlier. Also included in this funding level are decreases 
of $950,000 for lower priority studies in two programs: the wildlife 
program ($300,000) and contaminants program ($650,000).
    The FY 2008 budget includes $75 million for Geography, 
demonstrating continued support for the USGS role in land remote 
sensing and geographic research. The request reflects a net decrease of 
$1.7 million below the FY 2007 CR level but an increase of roughly $15 
million compared to FY 2006 enacted funding. The FY 2008 budget 
includes funds to ensure continued availability of Earth observation 
data to government, academic, commercial, and international users. The 
budget continues to provide for the operations and maintenance of 
Landsats 5 and 7. In addition, the FY 2008 budget provides $24 million 
for the Landsat Data Continuity Mission (LDCM) to develop the ground 
data processing and flight operations systems in preparation for the 
next Landsat satellite, scheduled for launch in 2011. USGS and NASA are 
working in partnership to produce an integrated Landsat ground and 
space system. LDCM will ensure that the United States maintains its 
global technological and scientific leadership in land imaging 
operations and preserves the Nation's commitment to continuous 
observation and analysis of our dynamic planet. Decreases to the 
Geography budget include $2.0 million in the Priority Ecosystem Science 
program and $850,000 for further development of the Commercial Remote 
Sensing Space Policy Imagery-Derived Requirements.
    The FY 2008 budget for the USGS water resources discipline proposes 
$212.5 million to continue work on issues related to water 
availability, water quality, and flood and drought hazards. This budget 
proposal includes an increase of $1.4 million for streamgaging 
activities through the National Streamflow Information Program (NSIP), 
allowing USGS to reactivate real-time streamgages and continue 
operating streamgages at high-priority sites that might otherwise be 
lost through lack of partner funding. The increase will also enable 
USGS to invest in technological improvements that will make the entire 
network more cost-efficient in the long term. USGS currently operates a 
network of about 7,400 streamgages nationwide. The network provides 
near-real-time data to other Federal agencies, States, and local 
communities for activities such as protecting life and property from 
floods; water resources assessment, planning, and management; habitat 
protection; recreation safety and enjoyment; and engineering design for 
planning our Nation's infrastructure. The FY 2008 budget also includes 
increases of $1.5 million for the Ocean Action Plan and $250,000 for 
the hazards initiative, as described earlier.
    The FY 2008 budget proposes a decrease of $2.2 million in 
cooperative water studies that will result in 13 fewer interpretive 
studies to be conducted in FY 2008 than in FY 2006. Like the FY 2007 CR 
level and FY 2007 budget request, the FY 2008 budget does not include 
$6.4 million for the 54 State Water Resources Research Institutes.
    The FY 2008 budget requests $284.3 million for science support, 
enterprise information, and facilities, which is $10.3 million above 
the FY 2007 request. This funding level includes an increase of $4.7 
million for critical health and safety repairs and rehabilitation of 
facilities at the Patuxent Wildlife Research Center, a facility that is 
shared with the Fish and Wildlife Service (FWS) at the Patuxent 
Research Refuge. The USGS and FWS funds will, in combination, be used 
to replace and repair the water, sewer, and electrical utility 
infrastructure and associate sub-systems at Patuxent. The facility is a 
nationally recognized center for research on endangered whooping cranes 
and other biological issues. The increase will enable USGS, working in 
cooperation with the Fish and Wildlife Service, to replace outdated 
utility systems. The budget request also reflects a decrease for 
enterprise information of $1.5 million achieved through economies of IT 
centralization, consolidation of software and hardware purchases, and 
workforce planning.
    In the years ahead, our Nation must deal with national and global 
trends that have major natural-science implications. USGS, with its 
worldwide reputation for excellent, objective, unbiased science, is 
uniquely suited to address the broad scope of natural-resource and 
natural-science issues facing the Nation, employing scientific tools at 
scales ranging from microscopic to global. The FY 2008 budget request 
will enable USGS to build on its breadth of expertise and its long 
tradition of service to provide the data, long-term scientific 
understanding, and scientific tools needed to help the economy remain 
strong, the environment remain healthy, and the quality of life in the 
United States remain high now and into the future.
    This concludes my statement, Mr. Chairman. Thank you for the 
opportunity to testify.
                                 ______
                                 
    Mr. Costa. Thank you very much, Dr. Myers. I would now like 
to recognize Mr. Hughes, who is the Acting Director of the 
Bureau of Land Management.
    Mr. Hughes.

   STATEMENT OF JIM HUGHES, ACTING DIRECTOR, BUREAU OF LAND 
          MANAGEMENT, U.S. DEPARTMENT OF THE INTERIOR

    Mr. Hughes. Mr. Chairman, Members of the Subcommittee, 
thank you for the opportunity to appear before you today to 
discuss the Bureau of Land Management's Fiscal Year 2008 budget 
request.
    The Bureau of Land Management manages more land, 258 
million surface acres, than any other Federal agency. Most of 
this public land is located in 12 western states, including 
Alaska. The Bureau also administers 700 million acres of 
subsurface mineral estate throughout the nation.
    The BLM's multiple-use mission is to sustain the health and 
productivity of the public lands for the use and enjoyment of 
present and future generations. The Bureau accomplishes this by 
managing such activities as outdoor recreation, including 
hunting and fishing; livestock grazing; mineral development; 
and energy production; and by preserving natural, historical, 
and cultural resources on public lands.
    The BLM is dedicated to ensuring the American people, 
regardless of where they live, benefit from the Agency's 
multiple-use mission. Rapid population growth in the West has 
led to an increasing pressure to meet complex and sometimes 
competing demands for public land resources.
    These challenges in the BLM's larger role as steward of 258 
million-plus acres of public lands are reflected in our Fiscal 
Year 2008 budget request, which serves to advance the Agency's 
top priorities. These include restoring the health of the land 
and enhancing important fish and wildlife habitat; providing 
the Nation with dependable and affordable energy that is 
developed in an environmentally sound manner; and capturing 
efficiencies by improving the Agency's operational and 
administrative functions.
    The BLM continues to do its part to contribute to domestic 
energy production through implementation of the President's 
National Energy Policy, and the Energy Policy Act of 2005, 
which the Congress passed.
    Among our actions to date, we have made oil and gas 
permitting more efficient by streamlining the process of 
applications for permits to drill in the seven pilot offices 
that were identified in the Energy Policy Act. We are also in 
the process of preparing a programmatic environmental impact 
statement for oil shale and tar sands, and to date have issued 
five research development and demonstration oil shale leases in 
Colorado.
    The BLM's land use planning process seeks to ensure that 
domestic oil and gas production on public lands is done in a 
way that protects the environment, and involves locals in land 
use planning.
    For example, our recently completed resource management 
plan for Otero and Sierra Counties in New Mexico is one of the 
most restrictive plans ever developed for oil and gas leasing 
on Federal lands. It strictly limits, regulates, and monitors 
all surface disturbance activities, and ensures that important 
habitat for endangered species and other special areas are 
preserved.
    The BLM is proposing an increase of $3.1 million in its 
2008 budget request, to better ensure that oil and gas 
operations are conducted in an environmentally sound manner, 
and that the terms of leasing permits are enforced. This 
funding increase is necessary so that the BLM's oversight 
capabilities can match the pace of industry's on-the-ground 
operations.
    While we have made progress in support of traditional forms 
of energy, we are also focusing our attention on the 
development of renewable energy sources. Renewable forms of 
energy have the potential to diversify our energy supply and 
increase our energy security. The Energy Policy Act of 2005 
requires development of renewable energy sources. The BLM is 
making progress in advancing the development of geothermal, 
solar, and wind energy on public lands.
    The annual electrical needs of 1.2 million homes in the 
U.S. are generated by 58 geothermal leases on BLM-managed 
lands. Another one million homes could be powered in coming 
years by wind energy produced on public lands. When it comes to 
our own energy consumption, the BLM has installed about 600 
photovoltaic solar equipment systems in our facilities to self-
generate electricity, and we expect to install more systems 
this spring. All of these efforts are undertaken in conformance 
with strict mitigation measures to minimize any impacts on 
wildlife from habitat fragmentation, ground disturbances, or 
noise.
    The BLM's Fiscal Year 2008 budget request includes a 
proposed increase of $15 million in support of the Department's 
Interior Healthy Lands Initiative. Multiple pressures on public 
land uses affect large landscapes, particularly those in the 
growing wildlife energy interface. The Healthy Lands Initiative 
is a new strategy for aggressively meeting these challenges, 
and focuses on cooperative watershed restoration and ecosystem 
enhancement at the landscape level. The goals of this 
initiative are to sustain public lands and wildlife habitat to 
maintain recreational opportunities, manage landscapes to 
prevent the listing of species, and stabilize energy production 
and enhance energy security.
    The BLM plans to use the requested increase in funds to 
begin habitat restoration enhancement projects in six 
geographic areas that face the greatest challenge in 
maintaining multiple use. The funds will be used to leverage 
resources with other Federal agencies and our partners in the 
state and local levels.
    The BLM's Fiscal Year 2008 budget request also proposes a 
number of reductions, resulting from improving some of the 
Agency's operational and administrative functions. We are in 
the process of consolidating and streamlining our information 
technology functions, implementing changes to our management 
structure, reducing travel costs. We plan to continue with 
these cost-saving efforts in 2007.
    Mr. Chairman, this concludes my opening remarks. I will be 
happy to answer questions. Thank you, sir.
    [The prepared statement of Mr. Hughes follows:]

               Statement of Jim Hughes, Acting Director, 
       Bureau of Land Management, U.S. Department of the Interior

    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to appear here today to discuss the Fiscal Year (FY) 2008 
President's Budget Request for the Bureau of Land Management (BLM).
Budget Overview
    With enactment of the FY 2007 Joint Resolution, the BLM now has a 
full year appropriation of $1.76 billion, not including additional 
funds that will be provided for 50 percent of the January 2007 pay 
raise. Based on direction in the Joint Resolution we are preparing a 
detailed operating plan for FY 2007. We are not at liberty to disclose 
the details of the operating plans until they are approved and 
submitted to Congress on March 17. At that time we will be able to 
provide comparisons at the program level with the 2008 budget request.
    The comparisons in our FY 2008 budget are with the third 2007 
continuing resolution, which was in effect through February 15 of this 
year. Throughout this testimony the comparisons will be on that basis.
    The BLM's FY 2008 Budget request is $1.812 billion for the BLM's 
major appropriations, including the Management of Lands and Resources, 
Oregon and California Grant Lands (O&C), Construction, Land 
Acquisition, Miscellaneous Trust Funds, and the Department of the 
Interior's Wildland Fire Management Appropriation. This represents an 
increase of $57.8 million above the 2007 continuing resolution level. 
When permanent accounts are included, the BLM's total budget request is 
about $2.012 billion.
    The budget proposes several programmatic decreases totaling $36.6 
million, which include $3 million for the Cultural Resources Management 
program; $4.7 million in the Wild Horse and Burro Management program; 
$3 million for Resource Management Planning program; $4.3 million for 
Deferred Maintenance program; and, $5 million in the O&C Grant Lands 
Appropriation. Cost savings totaling nearly $10 million are achieved by 
consolidating and streamlining BLM's information technology functions, 
implementing changes in BLM's management structure to improve 
efficiency, and reducing travel costs. In part, these reductions take 
into account savings that can be achieved due to past programmatic 
accomplishments; however, they also reflect the need to shift funding 
from lower priority activities to higher priorities such as the Healthy 
Lands Initiative.
Background
    The Bureau of Land Management is dedicated to ensuring that the 
American people--regardless of where they live--benefit from the 
agency's multiple-use mandate. As stewards of 258 million acres, the 
BLM manages these public lands in accordance with the 1976 Federal Land 
Policy and Management Act. These public lands contain myriad resources 
and provide for a variety of our Nation's needs, including outdoor 
recreation, domestic energy, wildlife habitat, livestock grazing, 
timber, and other natural, cultural, and historical resources. With the 
rapid population growth in the west--from nearly 20 million people in 
1950 to more than 60 million today--the pressures to meet complex, and 
sometimes competing, demands for public land resources also has grown 
exponentially.
    In ever increasing numbers, the American public has turned to BLM-
managed public lands for recreation. We also have important 
responsibilities in managing for critical wildlife habitat, cultural 
resources, our National Monuments, and wilderness values, to name a 
few. In providing an appropriate mix of both renewable and conventional 
energy supplies from the public lands, the BLM contributes to a more 
secure and reliable energy future for our country.
    As one of the Nation's oldest land management agencies, the BLM 
also delivers value on a daily basis to the American public. Each 
dollar spent by the taxpayer on BLM activities is an investment, not 
only in the land, but also in an ongoing revenue stream. The BLM is an 
important source of revenue to the Treasury. Royalties collected from 
energy leasing, and fees collected from grazing permits and timber 
sales, among others, all serve to benefit the taxpayer. In 2008, public 
lands will generate an estimated $4.5 billion in revenues, mostly from 
energy development. Approximately 44 percent of these receipts are 
provided directly to States and counties to support roads, schools, and 
other community needs.
    The President's FY 2008 budget proposal will enable the BLM to 
fulfill its multiple-use mission in the most effective and efficient 
way possible. In particular, the President's budget advances the 
Agency's top priorities in the upcoming fiscal year, which are to:
      Maintain or restore the health of the land and enhance 
vital habitat;
      Provide the Nation with dependable, affordable energy 
developed in an environmentally-sound manner; and
      Improve the efficiency of the BLM's operational and 
administrative functions.
Healthy Lands Initiative
    The President's FY 2008 budget proposal includes an increase of $15 
million over the FY 2007 Continuing Resolution in support of the 
Department of the Interior's Healthy Lands Initiative (Initiative). The 
Initiative represents a new concept for meeting emerging challenges in 
managing natural resources with flexible, landscape-level approaches 
for continued multiple-use. Landscapes are land areas composed of 
diverse habitat types that include winter range and migration 
corridors.
    Land health is being affected by pressures such as community 
expansion, wildfires, unprecedented demands for energy resources, ever-
expanding recreation uses, and weed invasion. These pressures often 
interact among themselves to affect large landscapes and ecosystems, 
particularly those in the growing wildlife-energy interface.
    A different management approach is urgently needed to meet these 
challenges. Taking aggressive steps now will help avoid the need for 
future restrictions on uses of public land that would directly affect 
the Nation's economy and quality of life.
    The goals of the Initiative are to:
      Continue to provide access to energy resources, thereby 
enhancing energy security;
      Manage landscapes to ensure sustainable habitat for wide-
ranging species, such as the sage grouse, and prevent future ESA 
listings; and
      Sustain public lands and wildlife habitat, and 
traditional activities on public lands.
    The BLM will begin aggressive, landscape-scale habitat enhancement 
projects in six geographic areas: southwest Wyoming; northwest and 
southeast New Mexico; south-central Idaho; southwestern Colorado; Utah; 
and the three-corner area of Idaho, Oregon, and Nevada.
    The Bureau will concentrate a large number of treatments in each 
emphasis area, resulting in significant improvements to habitat in an 
entire watershed or landscape-wide area within one to three years. The 
BLM will also utilize $8 million in other BLM funds, as well as 
leverage funding with other Federal agencies and our partners at the 
state and local levels.
The Green River Basin in Wyoming
    One of the six priority areas of the Healthy Lands Initiative is 
the Green River Basin in Wyoming. It is representative of areas in the 
West where landscapes and habitats are undergoing changes in response 
to pressure from multiple-use. Southwest Wyoming possesses some of the 
most diverse wildlife habitats in the Intermountain West, which 
attracts hunters, fishermen, and other outdoor enthusiasts each year. 
While these interests represent important sources of income for 
surrounding rural communities, this region, principally the Green River 
Basin (Basin), is also under pressure from natural gas development. The 
15 million-acre Basin, characterized by sagebrush (sage grouse 
habitat), mountain shrub, aspen, and riparian communities, also has an 
estimated 83 trillion cubic feet of recoverable natural gas.
    The BLM together with the Fish and Wildlife Service and U.S. 
Geological Survey, are teaming up to protect these important habitats 
while natural gas production takes place in the Basin through the 
Wyoming Landscape Conservation Initiative (WLCI). Rather than 
conducting separate and uncoordinated impact studies and mitigation 
efforts, these partners will:
      Conduct efficient, science-based species monitoring and 
habitat enhancement;
      Facilitate best reclamation and mitigation practices for 
areas affected by current natural gas development;
      Integrate existing data with new knowledge and 
technologies to forecast future development of energy resources and 
assist in habitat conservation planning; and
      Conduct habitat enhancement in all habitat types with a 
special focus on sagebrush, mountain shrub, aspen, and riparian 
communities.
    The partnership, which also includes efforts underway by the 
National Park Service, Bureau of Reclamation, Forest Service, and 
Wyoming Game and Fish, will also provide a broader understanding of the 
valuable Green River Basin ecosystem.
    By using this landscape-level approach and using the WLCI 
partnership, the Bureau expects to be able to leverage funding for key 
projects that will mitigate the pressures these habitats face from a 
combination of energy, industrial, and residential development in both 
the short- and long-terms. In Wyoming, partners have already identified 
funding priorities including vegetation treatments (sagebrush, aspen 
trees), water projects such as building or restoring water sources for 
wildlife, and improving riparian areas. Funding for the WLCI will be 
long-term and include leveraging funding with other Federal agencies 
and our partners at the state and local levels.
Energy Initiatives
    BLM's FY 2008 Budget will continue to address America's energy 
needs by facilitating environmentally-sound energy development on 
public lands. The budget builds upon the significant prior year funding 
increases to the Energy and Minerals program budget, including those 
proposed in the FY 2007 President's Budget. These increases will enable 
the BLM to continue to support implementation of the Energy Policy Act 
of 2005 and to support the goals of the National Energy Policy for 
increasing domestic energy supplies.
    The FY 2008 President's Budget request includes an increase of $3.1 
million to support increased oil and gas inspections and monitoring to 
better ensure that oil and gas operations are conducted in an 
environmentally-sensitive manner and that leasing permit terms are 
enforced. This increase is necessary so that the BLM's oversight 
capabilities can match the pace of industry's on-the-ground operations. 
Additionally, the BLM is implementing two innovations that will both 
increase the efficiency of Inspection and Enforcement (I&E) functions 
and result in cost savings.
    The Remote Data Acquisition for Well Production (RDAWP) Project 
will provide the BLM up-to-date wellhead production data by way of 
direct downloads from wellhead flow meters to a secure web-based 
server. The objective of this project is to provide the BLM with the 
ability to perform production verification accounting tasks more 
efficiently, and to reduce the production verification workload. 
Currently, production verification is time consuming because it is 
performed using hard copies of production reports. RDAWP will allow 
``real-time'' access to production data collected at specific points 
within a producing oil and gas lease. In addition, the BLM will have a 
rapid means of cross-checking production data that has been rectified 
and provided by the Minerals Management Service (MMS) with the known 
equipment located at the lease. The initial benefits of RDAWP should be 
an incremental increase in processed production verification 
capabilities, and increased accuracy of royalties recovered.
    Another innovative inspection tool the BLM is adding to its I&E 
capabilities is the Automated Fluid Minerals Support System (AFMSS) 
Handheld Inspection Capability. These handheld data capture units will 
provide field inspectors access to inspection information and 
associated agency computing capabilities while in the field, improving 
inspection efficiency, and productivity.
    The BLM's land use planning process seeks to ensure that domestic 
oil and gas development on public lands is done in a way that protects 
the environment. For example, the BLM recently issued an innovative 
Resource Management Plan (RMP) for limited, environmentally-sensitive 
oil and gas development on public lands in Otero and Sierra Counties in 
New Mexico. It is one of the most restrictive plans ever developed for 
oil and gas leasing on Federal lands.
    The plan will allow strictly regulated and carefully monitored 
activity, leading to a maximum surface disturbance of only 1,589 acres 
from well pads, roads and pipelines--less than one-tenth of one percent 
of the total surface area of 2 million acres. At most, there will be 
141 exploratory wells drilled, resulting in up to 84 producing wells. 
Almost 36,000 acres of grasslands with the highest potential as habitat 
for the endangered Aplomado falcon will be closed to leasing and 
permanently protected. In addition to these measures and overall limits 
on development, leasing will not be allowed in six existing and eight 
proposed Areas of Critical Environmental Concern and four Wilderness 
Study Areas--bringing the total number of protected acres to 124,000. 
This new plan amends a 1986 RMP that would have allowed leasing with 
few restrictions on oil and gas activities, would have used standard 
lease terms and conditions for leasing, and would not have provided the 
protections for grasslands and other sensitive areas developed in the 
BLM's current plan amendment.
Recreation
    Along with the BLM's Healthy Lands Initiative, the BLM is 
participating in the new ``Take it Outside'' campaign to reconnect 
America's families to the great outdoors. Our goal is both to increase 
an appreciation for the wonderful world of nature and address problems 
of physical and mental health brought on by inactivity.
    Opportunities for physical and educational experiences and 
activities abound through the discovery and exploration of public land 
adventures. By engaging children through their schools, youth groups, 
and families, we hope to increase outdoor activities for all families 
and children, including the growing numbers who call the public lands 
their backyards. In our strategy, which is in the process of being 
finalized, our hope is to:
      Connect children to nature through schools and an 
educational program using the BLM's existing Environmental and Heritage 
Education programs;
      Create and promote outdoor activities which encourage 
family-friendly recreation; and,
      Engage children in nature through volunteer and public 
service opportunities on public lands.
Efficiency Improvements
    The BLM is aggressively focusing on the effective stewardship of 
our resources--funding, employees, and assets--to ensure that they are 
used wisely and responsibly. The agency will undertake a series of 
actions to promote a more effective and efficient organization, 
including:
      Establishing a set of broad-ranging management concepts 
to maintain the agency's core mission;
      Creating consistently structured state organizations made 
up of a state office, district offices, and field offices;
      Establishing a National Operations Center in Denver that 
consolidates the existing business functions already located there, 
thus providing greater support to the field because of its proximity to 
the majority of Rocky Mountain offices; and
      Taking advantage of technological improvements to 
centralize functions in information technology and human resources.
    Mr. Chairman, thank you for the opportunity to testify on the BLM's 
FY 2008 Budget Request. I will be pleased to answer any questions you 
may have.
                                 ______
                                 
    Mr. Costa. Thank you very much, Mr. Hughes. I would now 
like to recognize Mr. Frederick Norbury, who is the Associate 
Deputy Chief of the United States Forest Service.
    Actually, I went out of order. First we will hear from 
Brent Wahlquist, Acting Director of the Office of Surface 
Mining Reclamation and Enforcement. Mr. Wahlquist.

  STATEMENT OF BRENT T. WAHLQUIST, ACTING DIRECTOR, OFFICE OF 
SURFACE MINING RECLAMATION AND ENFORCEMENT, U.S. DEPARTMENT OF 
                          THE INTERIOR

    Mr. Wahlquist. Thank you, Mr. Chairman, and thank you, 
Members of the Committee, for the opportunity to discuss the 
budget.
    Our nation is blessed with huge reserves of coal. For over 
200 years, coal has fueled our nation's development. It built 
our industrial might, heated our homes, and moved--I am having 
some more trouble with that mike. We might want to use the 
other one. Paula, you might try to figure out what is going on. 
We will see if we are doing better here.
    Over 30 years ago, Congress had the wisdom to address the 
impact of coal mining, because that development of coal 
certainly had substantial impacts upon the public and the 
environment. And with the passage of the Surface Mining Act in 
1977, the Office of Surface Mining was created.
    I should note here that the Office of Surface Mining is 
really misnamed, in that it is really the Office of Coal 
Mining. We deal with coal, and only coal, both surface and 
underground.
    We operate two basic programs: a regulatory program to 
address prospective mining after the passage of the Act, to 
make sure that that mining is conducted in a way in which the 
public and the environment is protected and the land is 
restored. We also operate an Abandoned Mine Lands program that 
is based upon the collection of a fee on each ton of coal that 
is produced.
    In this past fiscal year we collected over $300 million 
from that fee. That is used to fund an Abandoned Mine Lands 
program across the Nation to address those problems that had 
existed prior to 1977.
    While implementing that Act has not been without 
controversy, OSM and our state and Federal partners are proud 
of the achievements of the past three decades. Mining has truly 
become a temporary use of the land. As we implement that, we 
recognize that we do this primarily through state primacy. We 
have approved programs with 23 states and three Indian tribes 
that also operate an abandoned mine land program.
    Today the primary use of coal is to generate electricity. 
Electric power is the backbone of this nation's economy, and is 
integral to the daily life of each and every citizen; and more 
than half of that electricity comes from the burning of coal, 
and that is on the rise.
    The Act requires that we balance the need for environmental 
protection with our nation's need for coal. OSM and our state 
partners continually strive to provide that stable regulatory 
environment necessary to achieve that balance.
    This afternoon I would like to highlight three critical 
aspects of our budget request with implications for OSM and our 
state and tribal partners. To continue this record of success, 
it is critical that funding for state regulatory programs be 
increased, as the President has requested, in our Fiscal Year 
2008 budget.
    State programs regulate 97 percent of U.S. coal production. 
Just like the Federal government, state programs have fixed-
cost increases each year, but they have gone unfunded now for 
several years. This is a mistake.
    State regulatory programs are a tremendous bargain because 
they accomplish the permitting and enforcement work essential 
to keep the coal moving and the lights on at a fraction of what 
it would cost OSM to do the same work under Federal programs. 
Without additional funding, states will be forced to further 
reduce staff, which will impact permitting and enforcing 
efforts.
    Virginia, for example, has already asked us to work with 
them to explore options to current grant funding, including 
giving the program back to OSM. I cannot over-emphasize how 
important it is that no state lose primacy.
    The second point I would like to highlight is that there 
are major changes in our budget request, resulting from the 
2006 amendments to the Surface Mining Act.
    On behalf of the OSM and states and tribes that administer 
Abandoned Mine Lands programs, I want to thank the Congress for 
reauthorizing AML fee collections. That debate is now over.
    We are now engaged in new debates that will arise as we 
implement and interpret these amendments as signed into law. We 
will work closely with the Congress, and the states and tribes, 
in an open and transparent process, as we make the regulatory, 
procedural, and administrative changes needed to implement 
these amendments. In doing so, we will focus on the goal of 
finishing the job of mitigating all of the serious health and 
safety problems at coal AML sites in the 15 years you have 
given us for this extension.
    Finally, our budget proposal continues to emphasize the 
importance of sound science and modern technology tools in 
maximizing the efforts of regulatory and reclamation programs. 
We will continue our efforts to apply current technology to 
mining and reclamation issues, to use good science to solve 
technical problems, and to increase the technical capacity of 
states and tribes in doing their jobs.
    An example of this is our Appalachian Reforestation 
Initiative. Almost all of the land in Appalachia surface mined 
for coal over the past 30 years was forested before mining. 
However, very little of it has been returned to productive 
forest. Yet it is possible to restore highly productive forests 
on mine land.
    Over the past three years, in cooperation with states, 
academic experts, industry, the American Chestnut Foundation, 
and other public interest groups, we have made a substantial 
progress in changing perceptions of how reclamation should be 
done in order to restore the benefits associated with forests.
    We anticipate the investment of our 2008 budget makes the 
nation's coal mining and regulation programs, together with the 
amendments to the Surface Mining Act, will bring about a period 
of unprecedented achievement. And we look forward to working 
with the Congress and this committee, or Subcommittee, to bring 
the benefits of these achievements to millions of Americans 
living and working in the coal fields.
    Thank you, Mr. Chairman.
    [The prepared statement of Mr. Wahlquist follows:]

  Statement of Brent T. Wahlquist, Acting Director, Office of Surface 
  Mining Reclamation and Enforcement, U.S. Department of the Interior

    Mr. Chairman and Distinguished Members of the Subcommittee, I am 
pleased to present to you the Fiscal Year (FY) 2008 budget request of 
the Office of Surface Mining Reclamation and Enforcement (OSM).
    In August, OSM will mark the 30th year since its creation. OSM was 
established with the passage of the Surface Mining Control and 
Reclamation Act of 1977 (SMCRA). Since then, working closely with the 
States and Tribes, OSM has been responsible for assuring that coal 
mines are operated in a manner that protects citizens and the 
environment and that the land is restored to beneficial use following 
mining. Additionally, we are responsible for reclaiming and restoring 
lands and water degraded by past mining operations.
    Coal is an important energy source for the nation. It provides over 
one-half of the nation's electricity. Balancing coal production and the 
protection of the public and environment during operations to produce 
coal is a challenge faced by OSM and its State and Tribal partners on a 
daily basis.
    Currently, 24 States have regulatory primacy programs in place. 
Twenty-three States and three Tribes administer approved abandoned mine 
land reclamation programs. The primacy States are successfully 
implementing their approved regulatory and reclamation programs. OSM's 
role has evolved to establishing policy direction and guidance, 
providing grants to primacy States and Tribes, conducting oversight 
activities in accordance with SMCRA, and administering and operating 
programs on Federal and Tribal lands and in States that have not 
assumed primacy.
    Since enactment of SMCRA, OSM has provided about $1 billion in 
regulatory grants to the States and Tribes to assist in funding the 
regulation of active coal mines. Also, since that time, OSM has 
provided about $3 billion in grants to States and Tribes to clean up 
mine sites abandoned before passage of SMCRA. In the course of 
addressing health, safety and environmental hazards, more than 215,000 
acres of Priority 1 and 2 abandoned coal mine sites have been reclaimed 
under OSM's Abandoned Mine Land (AML) Program.
    The authority to collect the mine reclamation fee and distribution 
of the fee was revised by the Tax Relief and Health Care Act of 2006, 
which included the Surface Mining Control and Reclamation Act 
Amendments of 2006 (Public Law 109-432). Among other things, these 
amendments extended the authority for fee collection through September 
30, 2021, and changed the way State and Tribal reclamation grants are 
to be funded, beginning in FY 2008. State and Tribal grants, except for 
grants under the emergency program, are now mandatory spending derived 
from the AML Fund and the general fund of the U.S. Treasury. OSM 
continues to review the new law, which was signed on December 20, 2006, 
and discuss the changes with its State and Tribal partners. Appropriate 
rulemaking will occur during FY 2007 to implement the many changes 
contained in the law. OSM will also be revising policy directives and 
operational systems to accommodate these changes.
    In order to maximize the effectiveness of our program, OSM must 
also take advantage of the tools modern science and technology have to 
offer. We will continue our efforts in several areas to increase the 
technical capacity of our staff and State and Tribal partners, apply 
current technology to mining issues, and pursue new ways to solve 
technical issues.
Fiscal Year 2008 Budget Request
    To address some of the issues I have just outlined, I would like to 
present some highlights of our FY 2008 budget proposal. With enactment 
of the FY 2007 Joint Resolution, we now have a full year appropriation 
of $294.2 million not including additional funds that will be provided 
for at 50 percent of the January 2007 pay raise. Based on direction in 
the Joint Resolution, we are preparing a detailed operating plan for FY 
2007. We are not at liberty to disclose the details of the operating 
plans until they are approved and submitted to Congress on March 17. At 
that time, we will be able to provide comparisons at the program level 
with the 2008 budget request.
    The comparisons in our 2008 budget are with the third 2007 
continuing resolution, which was in effect through February 15. 
Throughout this testimony, the comparisons will be on that basis. OSM's 
FY 2008 budget request totals $168.3 million in discretionary spending 
(or current appropriations) and 544 full-time employees. Compared with 
the 2007 continuing resolution level of $291.7 million, this represents 
a total decrease of $123.5 million. This change is comprised of a shift 
of $134.2 million in State and Tribal grant funding that is mandatory 
and no longer subject to appropriation. The balance of the change from 
the 2007 level reflects an increase of $1.5 million for fixed costs and 
net program increases of $9.2 million.
    OSM's budget also contains an estimated $ 401.4 million in 
mandatory spending (or permanent appropriations). Mandatory spending 
includes $ 288.4 million for reclamation payments to States and Tribes 
and $113.0 million for payments to the United Mine Workers of America 
for specified health benefits plans. Mandatory spending comes from both 
the AML and Treasury Funds. These estimates, as contained in our budget 
submission, are very preliminary and subject to change as we refine our 
understanding of the SMCRA Amendments of 2006.
Current Appropriations
    The FY 2008 request will enable OSM to provide sufficient financial 
support for 24 State regulatory programs, and for State AML emergency 
programs implemented by 14 States. It will also enable OSM to continue 
to administer Federal regulatory and reclamation programs in States 
that do not operate their own programs and on Federal and Tribal lands.
    A portion of the funding appropriated to OSM is passed on to the 
States and Tribes in the form of regulatory and reclamation grants. For 
FY 2008, our request includes $11.2 million in reclamation grants to 
States for the emergency program, and $60.6 million for regulatory 
grants. These grants, along with Federal emergency and high priority 
project funding, and watershed cooperative agreement funding, account 
for 50 percent of OSM's budget. The remaining portion of the budget 
provides funding for OSM's internal operations, including the operation 
of Federal programs, technical training, and other technical assistance 
to the States and Tribes.
    OSM's overall FY 2008 request includes $115.5 million for the 
Regulation and Technology (R&T) appropriation and $52.8 million for the 
AML appropriation. This request represents an increase of $6.6 million 
for the R&T program and a decrease of $130.0 million for the AML 
program, thus accounting for a total decrease of $123.5 million from 
the FY 2007 continuing resolution level.
    Our FY 2008 budget request contains an increase in regulatory 
grants for a total of $60.6 million in funding. This level of funding 
is important to support continued operational increases at the State 
level (e.g., salaries, benefits, rents and utilities) that constitute 
by far the largest proportion of State regulatory program expenditures. 
States must have sufficient staff to complete permitting and inspection 
and enforcement actions needed to protect citizens of the coal fields. 
If a State were to relinquish primacy, OSM would have to hire 
sufficient numbers and types of Federal employees to implement the 
program. The cost to the Federal government would be significantly 
higher than the current matching grant amount.
    Additional increases include $0.5 million for Watershed Cooperative 
Agreements, $0.1 million for the Working Capital Fund to support 
implementation of the Department-wide Financial and Business Management 
System that will result in improved effectiveness and efficiency, and 
fixed costs for increases in FY 2008 for OSM of $1.5 million.
    The major decrease is $134.2 million in AML grants to States and 
Tribes as a result of the SMCRA Amendments of 2006. That funding is now 
accounted for under mandatory spending.
    Our FY 2008 budget is a fiscally responsible proposal that enables 
OSM to implement its mission goals effectively and efficiently.
Government-wide Management Reforms
    This budget supports the Administration's Government-wide 
management reforms by integrating budget and performance measures; 
improving capital asset planning and control; improving strategic 
management of human capital; improving financial performance; and 
expanding electronic government. OSM's budget proposals have integrated 
strategic goals and associated measures with OSM's budget structure for 
the past several fiscal years. Our 2008 proposal continues this 
integration and incorporates the Department's Strategic Plan for FY 
2007-2012.
    OSM is also implementing a new financial system, the Financial 
Business and Management System (FBMS). Furthermore, OSM continues to 
refine its workforce plan to help strategically manage its human 
resources. Finally, because of OSM's expanded electronic government 
initiatives, greater opportunities exist for citizens to access OSM 
provided information.
    I thank the Subcommittee for providing this opportunity to present 
OSM's FY 2008 budget request, and I look forward to answering your 
questions.
                                 ______
                                 
    [A letter submitted for the record by Mr. Wahlquist 
follows:]
[GRAPHIC] [TIFF OMITTED] 33676.003

[GRAPHIC] [TIFF OMITTED] 33676.004


    Mr. Costa. Thank you, Mr. Wahlquist, for your testimony. 
And I am glad we got the mike problem resolved. Hopefully it 
will work as well for our next testifier, Mr. Fred Norbury, who 
is the Associate Deputy Chief for the National Forest System.
    Now you are on.

STATEMENT OF FRED NORBURY, ASSOCIATE DEPUTY CHIEF FOR NATIONAL 
             FOREST SYSTEM, U.S.D.A. FOREST SERVICE

    Mr. Norbury. Thank you, Mr. Chairman.
    Mr. Costa. Thank you very much.
    Mr. Norbury. Thank you for giving me this opportunity to 
talk to you today.
    With your permission, I would like to submit my testimony 
for the record, and just summarize it briefly for you.
    Mr. Costa. That would be welcome.
    Mr. Norbury. And use a little bit of the time to address 
the question that you raised at the beginning, about the nature 
of our program on the national forests.
    Just to dimensionalize the program for you a little bit, 
there is 193 million acres in the national forest. Five million 
of those acres are currently leased for oil and gas 
development. There are 90,000 mining claims in the national 
forest There are 15,000 ongoing mineral operations. There are 
39,000 abandoned mines in the national forests, of which 
roughly 2,000 have some sort of environmental hazard that needs 
to be mitigated, and 22,000 have some sort of safety hazard, 
physical safety hazard that needs to be mitigated.
    Now, to address all of these issues, we work in a close and 
complex relationship with the Bureau of Land Management and the 
rest of the Department of the Interior. The exact nature of 
that relationship depends upon the mineral in question, and 
whether or not you are dealing with public domain land or land 
that was acquired. So it is very complex.
    In general, you could characterize the kind of relationship 
that we have is that we provide advice to the Bureau of Land 
Management as to stipulations that should be included in 
leases, and conditions that should be included in plans of 
operations, in order to manage the surface resources in 
conjunction with the subsurface and mineral resources in a way 
that is optimal for all the resources and interests considered.
    For example, on oil and gas leasing, the Forest Service 
will provide advice to the Bureau of Land Management as to 
areas which are available to oil and gas leasing, and what 
stipulations should be attached to leases when they are issued. 
The Bureau of Land Management actually manages the leasing 
process.
    Our program in Fiscal Year 2008, our proposed program in 
Fiscal Year 2008, is down slightly from last year. Well, 
actually, the overall budget is down slightly. The Minerals 
Program is down by about 14 percent in this coming year.
    It is a tight budget year for us. We have increasing 
demands from fire; fire has gone from 13 percent of our budget 
in 1991 to an estimated 48 percent of our budget in 2008. And 
it continues to go up every year as the fire years get worse. 
In addition, we are devoting increased resources to law 
enforcement because of the growing drug problem in the national 
forests.
    This means that most of the discretionary programs on the 
national forest system are declining by somewhere between 9 
percent and 15 percent in 2008, in our proposed program.
    Within that program, the biggest single activity will be 
administering those 15,000 ongoing mineral operations, and 
making sure that all the requirements that we have established 
for those operations are adequately enforced.
    The second-largest program is processing new applications 
for mineral operations. I think we are planning for something 
on the order of 7,000 of those, although the exact number to be 
processed will depend upon the number of complexity of those 
that get proposed.
    The third-largest program is in environmental restoration, 
and we also have programs in management of geologic resources, 
including groundwater and paleontological resources, and 
mitigation of physical hazards to public safety.
    We do hope to mitigate some of these reductions in the 
overall budget with increased operational efficiencies. We 
expect to see some efficiencies out of, there are consolidation 
of some administrative operations in Albuquerque. We have some 
administrative, some efficiencies we have achieved with the 
legislated categorical exclusions that were in the Energy 
Policy Act, and additional categorical exclusion from NEPA that 
we have adopted administratively.
    We are also embarked this year on a redesign effort for our 
Washington office and our regional offices, and our intent is 
to reduce the overall spending at those levels of the 
organization by 25 percent by the end of 2009. Our expectation 
is that we will make more money available at the ground level 
which will mitigate some of the reductions in funding that are 
in our proposed budget.
    That is the highlights of the testimony. And again, I would 
like to stress our close relationship with the BLM and the rest 
of DOI, and say that has been a good working relationship. And 
we are proud to be a partner with them.
    [The prepared statement of Mr. Norbury follows:]

 Statement of Fred Norbury, Associate Deputy Chief for National Forest 
                    System, U.S.D.A. Forest Service

Overview
    Mr. Chairman and members of the Subcommittee, thank you for the 
opportunity to discuss the President's Fiscal Year 2008 Budget for the 
Forest Service's Minerals and Geology programs. I am pleased to be here 
with you today.
Forest Service Fiscal Year 2008 Budget
    The Forest Service's Fiscal Year 2008 Budget request must be viewed 
in the larger context of the overall federal budget in which it is 
presented. Like other non-defense domestic discretionary programs, the 
Forest Service faces a constrained budget. And the results of the 
Administration's policies on economic growth and fiscal restraint 
include cutting the deficit in half, three years sooner than originally 
predicted. The Fiscal Year 2008 President's Budget request for the 
Forest Service is $4.127 billion, which is approximately the same level 
of funding as Fiscal Year 2006 and a modest reduction below Fiscal Year 
2007. However, within that total are some important shifts: the budget 
makes important changes to the Wildland Fire account, maintains funding 
for Healthy Forests including a commitment to fully fund the Northwest 
Forest Plan, and emphasizes public health and safety by proposing a 
significant increase in the Law Enforcement Operations budget.
    In order to fund these high priority programs, the Budget makes 
hard tradeoffs to other programs. Moreover, efficiencies gained through 
the centralization of Business Operations, Planning Rule revisions, and 
renewed focus on collaborative management will help offset reductions 
under the Fiscal Year 2008 Budget request. In Fiscal Year 2008 and 
Fiscal Year 2009, the agency will further its efforts to optimize 
organizational efficiency by restructuring leadership and program 
management functions at its National and Regional Offices. In order to 
provide additional funding for on-the-ground performance, many 
headquarters and regional activities will be consolidated on a 
centralized basis, and appropriate program management functions will be 
zoned across multiple regions. The Forest Service will realize 
personnel cost decreases of approximately 25 percent in National and 
Regional Office operations by the end of Fiscal Year 2009. An executive 
Steering team, led by Eastern Regional Forester Randy Moore, has been 
appointed to oversee the reorganization effort.
    These and other efficiencies are reflected in the request. Today I 
will provide an overview of the FY 2008 proposed budget and program for 
the Minerals and Geology Management and a summary of accomplishments.
Minerals and Geology Management Program and Budget
    The Fiscal Year 2008 President's Budget requests $71 million for 
the Minerals and Geology Management program. This decrease from prior 
year levels reflects greater efficiencies and supports the agency's 
increased emphasis on administration of operations to ensure the 
protection of surface resources, supports continued implementation of 
the National Energy Plan and Energy Policy Act of 2005, and funds 
environmental compliance and environmental restoration programs at 
levels similar to prior years to continue the focus on cleanup of 
abandoned mines and other contaminated sites.
    In general, the Minerals and Geology Management program is 
responsible for the management of energy and non-energy mineral 
commodities which includes processing proposals and administering 
approved operations. Program responsibilities also include the 
protection of groundwater, paleontologic and geologic resources, and 
restoration of hazardous waste sites within the 193 million acres of 
National Forest System lands. The value of mineral production from 
National Forest System lands typically exceeds $2 billion per year 
yielding over $125 million in revenues to the U.S. Treasury. National 
Forest System lands are the single largest source of municipal water 
supply providing over 66 million people with safe drinking water. 
Estimates also state that there are over 2,000 abandoned and inactive 
mines on National Forest System lands requiring some type of cleanup.
    The energy component of the Minerals and Geology program continues 
to emphasize the implementation of the National Energy Plan and the 
Energy Policy Act of 2005. Funding for the energy program will focus on 
opportunities for development and supply of oil and gas, coal, and 
geothermal resources from Federal lands. Specifically the 2008 Budget 
identifies $15 million for activities authorized by the Act.
    The Environmental Compliance and Protection and Abandoned Mine 
Lands (ECAP/AML) programs consists of three major funding areas: 1) 
cleanup and restoration of NFS lands impacted by hazardous materials 
and/or mining activities; 2) mitigation of safety hazards associated 
with inactive/abandoned mine lands; and 3: environmental compliance 
audits of Forest Service operations, facilities, and permitted 
activities. The FY 2008 Budget will support environmental audits that 
will be conducted at 33 administrative units and mitigation of over 470 
physical safety hazardous such as open shafts and adits. The agency 
will continue to emphasize cost recovery from potentially responsible 
parties and partnership opportunities with state, federal, and private 
organizations to mitigate safety hazards and cleanup of abandoned mines 
and other sites that pose the greatest risk to human health.
    The locatable or ``hardrock'' mineral program provides for approval 
and administration of operations on National Forest System lands under 
the General Mining Law. There are approximately 90,000 mining claims on 
National Forest Systems land. Operations range in size and complexity 
from major underground and open pit platinum-palladium, gold, silver or 
copper mines producing millions of dollars in value, to small, 
individual hand tool or suction dredging activities occurring on a 
seasonal basis. The salable mineral program involves approximately 
8,000 mineral material sale contracts and permits. These provide 
mineral materials such as sand, gravel and other construction material 
for industrial mineral uses. In total, the FY 2008 Budget supports the 
processing of more than 6700 mineral applications and administering 
almost 12,000 mineral operations.
Forest Service Accomplishments
    The Forest Service has been highly successful at implementing 
actions authorized by the Energy Policy Act of 2005. The Forest Service 
and Department of the Interior agencies have entered into an 
interagency Memorandum of Understanding that has improved energy permit 
coordination on Federal lands and included the assignment of personnel 
to pilot project offices. The Forest Service is participating in four 
of the pilot project offices, which are located in areas with a high 
volume of development and project proposals. Project processing 
timelines have been shortened substantially, as a result of the 
efficiencies realized by having multi-agency personnel involved in the 
approval of operations who are working out of a single office. The 
agency has also worked closely with the BLM on the revision of the Oil 
and Gas Onshore Order No.1.
    Accomplishments in the Environmental Compliance and Protection and 
Abandoned Mine Land program for 2006 included:
      346 dangerous safety hazards at 70 abandoned mine sites 
in 12 states were eliminated with appropriated funds and State 
partners' funding.
      77 site characterization and enforcement activities: 11 
cleanup plans; and 38 cleanups were completed with appropriated funds 
and Department of Agriculture Central Hazardous Materials Management 
funds.
      7 environmental compliance audits were conducted by the 
National Environmental Audit Team.
      The agency recovered nearly $3,000,000 in past costs and 
$3,000,000 to cover future costs associated with cleanup of abandoned 
and other sites affected by hazardous materials from support received 
by the Department of Agriculture Office of General Counsel Pollution 
Control Team.
    The Minerals and Geology Management program has designed and is 
beginning to implement new national databases that will accurately 
track and report accomplishments. This will enhance program performance 
by providing consistent, accurate and timely information. Additionally, 
the Agency revised guidance to comply with the Clean Water Act for 
locatable mineral operations; thereby ensuring mining operations meet 
water quality requirements.
Conclusion
    Thank you for this opportunity to discuss the President's Budget 
for the minerals and geology program. I look forward to working with 
you to implement our Fiscal Year 2008 program, and I'm happy to answer 
any questions that you may have.
                                 ______
                                 
    Mr. Costa. Well, thank you very much, Mr. Norbury. And 
thank you for falling within the five minutes allotted for your 
time. We appreciate your good work.
    Now we begin the rounds of questions to the witnesses, and 
I shall begin by taking my five minutes. And we will follow 
normal rules of the House and the Committee and custom, and 
then alternate it between our Republican colleagues as we go 
through the rounds, until the time that I designated on the 
outset, which will be approximately 4:00, at which we will 
conclude the hearing.
    Ms. Burton, let me begin with you. As I indicated on the 
outset, accountability and transparency is something that I 
think is very important as we do the proper oversight of this 
Subcommittee. And while there can be differences of opinion, 
the numbers that I have is that only 9 percent of the oil/gas 
leases have been reviewed by auditors. And of 20 percent of all 
the companies in the last five to six years, which has been a 
total decline, as I said in my opening statement, of 
approximately 22 percent, and the auditors have been reduced by 
15 percent.
    What I am trying to understand--and if you could please 
explain to me--under the Fiscal Year 2008 budget for Mineral 
and Management Services, is that the proposal does not reflect, 
as I understand it, the Inspector General's recommendations to 
use compliance reviews solely in conjunction with the audits. I 
am wondering if you could respond, please.
    Ms. Burton. Mr. Chairman, the goal of an audit program or 
compliance program is to make sure everybody pays what they 
need to pay. But it is also to entice people to do it right the 
first time. Which means that as our regulations are getting 
more clear, then industry ought to be reporting more correctly, 
and there should be less mistakes made that can be caught on 
the back end.
    Now, why do the numbers go down? There are several reasons. 
New regulations, more clear regulations that we have issued in 
the last five years, are making it easier for industry to 
report correctly the first time around.
    The other issue that is really a very big part of the 
decline that you saw is royalty-in-kind. When we take product 
in kind, we sell it ourselves, there is no need for that much 
audit. All we verify is the volume, the meter. But there is no 
valuation audit necessary. And therefore, that declines the 
number of companies and the number of properties that need to 
be audited.
    Furthermore, we have audited, we have reviewed 72 percent 
of the volume of money that we take in. A compliance review is 
really a fairly extensive check. And I would like to share a 
couple----
    Mr. Costa. So you take issue with the Inspector----
    Ms. Burton. I would like, Mr. Chairman, if you----
    Mr. Costa.--General's recommendation
    Ms. Burton. No. I think that the idea has given us some 
good information, and we will improve our program wherever we 
can. But I would like to share a couple numbers with you.
    For every dollar that we spend on compliance review, we get 
back $3.27. For every dollar we spend on an audit, we get back 
$2.06. Which is telling us that we do better to allocate our 
resources where we can get more money back. And this is what we 
are doing. We are doing more compliance review. We are still 
doing a lot of audits; we need to do more. And this is why part 
of our budget is asking for money to improve our computer 
system so that we can catch certain types of errors much more 
quickly.
    Mr. Costa. I don't want to belabor this; this is something 
that I will go into in further questioning. But in terms of the 
audits and the randomness of the audits and how they take 
place, I would like to understand that better. I am sure other 
Members of the Subcommittee would, as well.
    Let me move on quickly to Mr. Hughes, who is the Acting 
Director. The proposal for the $20 million Healthy Lands 
Initiative under the Bureau of Land Management proposes to 
address the conflict between oil and gas development.
    The President obviously has proposed promoting additional 
development and the issuances of the APDs, the applications for 
permits to drill. That obviously has positive impacts because 
we need the additional energy, but on the same time it has 
additional environmental impacts, as well.
    How do you think we are going to address that with $20 
million? Is that going to be sufficient?
    Mr. Hughes. We are trying to do this, this is a whole new 
way of thinking for the BLM, looking at it in a landscape, a 
landscape view of where we are having these programs on the 
ground.
    So what we are going to do, we are going to try to find 
partners, partners who will also contribute money. I think it 
is a conservative estimate, but I think in the next year we 
think we can find a minimum of $10 million in partners' money 
to also come in and work with us.
    In the State of Utah there is a bill currently in the 
Legislature to put up $6 million to help us with this program 
in Utah. Other, in the case of EnCana, a company in Pinedale, 
Wyoming, they have offered up $2.5 million per year for the 
next 10 years to help mitigate the impacts of development in 
that part of the country.
    So we think people are ready to step up to the plate. We 
want to try it in six locations. Once these six locations work, 
we will try and expand this program. We have been all over the 
country talking to groups like the Rocky Mountain Elk 
Foundation, the Wild Turkey Federation; these groups are ready 
and excited to step up to the plate and work with us on this.
    Mr. Costa. Well, Mr. Hughes, I don't want to belabor the 
point. I can understand why the Wild Turkey Association would 
be excited and enthusiastic about wanting to participate, but I 
am not so sure that is the pilot project we want to highlight.
    My time has expired, but I do want you to know the 
Subcommittee will continue to look at these, I don't know if 
you described them as pilot projects, but state/Federal 
participation and collaboration is something from my previous 
background I am a big supporter of. I would like to understand 
that better.
    Mr. Hughes. Yes, sir.
    Mr. Costa. I would like now to defer to the gentleman from 
New Mexico for a question. Mr. Pearce.
    Mr. Pearce. Thank you, Mr. Chairman. Ms. Burton, if you 
were to estimate the number of audits--in other words, of the 
total receipt transactions that you get, about what percent do 
you audit? Not the compliance review, but the audit.
    Ms. Burton. I am not sure.
    Mr. Pearce. Just roughly. How many, what percent of your 
activity gets audited, I guess
    Ms. Burton. From a money standpoint, 72 percent of the 
revenue gets reviewed, and probably I would say that 20 percent 
of that is audited. But that is a rough number, and it is off 
the top of my head.
    Mr. Pearce. Sure. I mean, we are just trying to get a flow, 
we are not trying to get you into a corner. So roughly 20 
percent of 70 percent, about 14 percent if I were doing the 
calculation; 20 percent of 74 percent, 14 percent? If you just 
multiply 20 percent times 74?
    Ms. Burton. Might be.
    Mr. Pearce. Might be, but something in that range
    Ms. Burton. Yes.
    Mr. Pearce. Now, that is interesting, because we only audit 
3 percent of income, Internal Revenue Service people. So you 
are outperforming Internal Revenue Service by 5 percent, I 
suspect, or five times, on less of a budget.
    And I do understand that you get $1.21 more for every 
compliance review than what you do on your audits
    Ms. Burton. That is correct, sir. Because when we do a 
compliance review, we exchange letters with the company. And 
unless they really fight us, they pay us at that point. So we 
get the money in faster, and we don't have to expend the 
resources that it takes to do a full-blown audit.
    Mr. Pearce. OK. Now, on your in kind, I got a little 
distracted at that point. You are taking how much in in-kind 
amount? In other words, you don't even have to do a calculation 
of the dollars coming in, you just take the oil at the well 
heads? You have a meter reading of what the oil was pumping up 
through, just like a water well, so you get the oil pumped to 
the surface. And you take your, what is your royalty rate, 12.5 
percent?
    Ms. Burton. It depends. It is 12.5 or 16-2/3, depending on 
where it comes from.
    Mr. Pearce. But you know on each different well what you 
get.
    Ms. Burton. Right, right.
    Mr. Pearce. So you simply take that number of barrels, and 
so you know you have a lock-solid deal at that point.
    Ms. Burton. That is correct.
    Mr. Pearce. And what of your production that is capable of 
converting from audits or compliance reviews to in kind, how 
much?
    Ms. Burton. The in-kind production comes mostly from the 
Gulf of Mexico, and we are now at 75 percent of all royalty 
position taken in kind.
    Mr. Pearce. So you are converting from 75 percent, and yet 
your reduction of compliance reviews or audits is only down by 
22 percent. It looks like you are checking more of a smaller--
    Ms. Burton. We are.
    Mr. Pearce. A smaller universe. And yet you are checking 
more if you have changed 75 percent out. And so if you had 
changed 75 percent of your audits or compliance reviews down, 
you could say that it would be almost roughly equivalent. But 
you are only down 22 percent, and yet the need to check is only 
like 25 percent of what it was a couple years ago
    Ms. Burton. Right. We are taking 75 percent of the oil and 
about 45 percent of the natural gas in kind. And so that 
eliminates the need to audit those----
    Mr. Pearce. And some of the personnel changes? I assume you 
are sticking them over in the in kind
    Ms. Burton. That is correct, sir.
    Mr. Pearce. When it makes business sense----
    Ms. Burton. We have moved people into the----
    Mr. Pearce.--to me. Mr. Hughes, kumbaya, the first hearing 
is over. Mr. Hughes and I had a previous hearing today, and it 
was all easy-going.
    Now, then, you are recommending--we had an energy summit in 
our state in August, and were trying to figure out what New 
Mexico can do to lead the Nation in renewables. We have wind, 
we have solar, we have biomass, we have geothermal, we are 
leading the Nation in nuclear. And here you are trying to 
undermine our geothermal program that we have laid out there. I 
mean, not you, but the Administration is suggesting rolling 
back on the Energy Policy Act.
    Why are you doing this? It is, the 25 percent savings was 
important. The improvement of the NEPA process was important. 
Here we are trying to convert to renewables. We have a pretty 
good stimulation package that industry, consumer advocates, we 
all met here in Albuquerque in August to see what we can do. 
And now you are unspooling it.
    What am I to conclude by that?
    Mr. Hughes. Mr. Pearce, we are moving ahead on the new 
geothermal program. We are going to be submitting regulations.
    But I think what we are trying to do here, as an 
Administration, is to keep those royalties coming into the 
Treasury, and then putting through sort of a regular order in 
terms of the process.
    I know people on the Hill have strong feelings about the 
way this program, in the Energy Policy Act, is financed. But I 
think the Administration just feels that it is better that all 
those revenues go into the Treasury, and then are appropriated 
through the normal process.
    We proposed to replace the geothermal rental fees as a 
source of funding for the program. We know there are Members on 
the Hill who disagree with that, but we think this is a proper 
way of administering the program.
    Mr. Pearce. Thank you, Mr. Chairman. As I yield back, I 
would say that the normal process is what we were doing, and 
geothermal is at this level of what it should be, what it could 
be. And so we are going back to the normal process. And I will 
tell you, thank you, Mr. Chairman, I will look for a second 
round if you have it.
    Mr. Costa. We will have a second round, and we will allow 
you to follow up on that at the appropriate time. I think that 
suffice it to say that the gentleman from New Mexico and I 
would like to have a better response.
    Dr. Myers, I would like to move over to your area, with the 
U.S. Geological Survey.
    In the Fiscal Year 2008 budget, as we look at the U.S. 
Geological Service budget, that it continues to refocus on the 
Mineral Resources program, how can you do that when it proposes 
a decrease of $2.6 million from 2007 under the continuing 
resolution?
    Mr. Myers. Mr. Chairman, first of all, I come from Alaska, 
which is a traditional mining state, and I have a lot of 
respect for mining. We value the Mineral program very much in 
the Survey, and that is not just rhetoric.
    Mr. Costa. We have a lot of respect for Alaska, too.
    Mr. Myers. Thank you. But truly, it was a matter of having 
to make some tough choices on the budget; that is really what 
it amounts to. It is a significant cut to the program. It is a 
good program, but it is really a matter of tough prioritization 
made by the Administration.
    Mr. Costa. All right. Mr. Wahlquist, under the Office of 
Surface Mining and Reclamation Enforcement as you explained it, 
what steps is OSM taking to ensure prompt implementation of the 
2006 amendments to the Surface Mining Control and Reclamation 
Act?
    Mr. Wahlquist. That is a fairly complex set of amendments 
that were passed in December.
    Mr. Costa. That is why I asked the question.
    Mr. Wahlquist. We have already had a series, we had a 
meeting with our states in late January to discuss preliminary 
estimates of how this was going to be undertaken. We are 
participating again with a meeting with the Association of 
Abandoned Mine Land States this week in Santa Fe. And we have 
had discussions with Members of Congress.
    We will continue to operate through an open and transparent 
process as we undertake these changes. We recognize that there 
are administrative changes, there is regulatory changes, and 
there is system changes that we have to make as we do this. We 
have kind of laid out a process. We are comfortable at this 
point that we will be able to get this done by September 30, to 
be able to accommodate the shifts in terms of how the money is 
going to come in, and how the money is going to come out.
    Mr. Costa. Do you have a timeline?
    Mr. Wahlquist. Basically, by September 30 of 2007. Because 
that is when the major shifts come in as to how this money is 
coming in and going out. We anticipate that those things that 
are being done as to regulatory changes, we may need to do an 
interim final rule on some of that, along with the proposed 
rule, in order to be able to have those changes in place to 
operate for Fiscal Year 2008.
    Mr. Costa. Right. Well, that is an area that I believe we 
will continue to track, and that we want to maintain updates on 
as you proceed to implement the challenges that you explained.
    Mr. Norbury, you talked about the comprehensive level of 
jurisdiction that the Forest Service has, and having a great 
deal of Forest Service land in California. I am familiar with 
some of it, and commend your efforts in those challenges you 
face.
    There is a decrease in the funding, though, for the Forest 
Service budget, as you know, in terms of the testimony.
    How, in the area of the Minerals and Geological program of 
the Forest Service, are you going to maintain the 
responsibility for the development of energy and non-energy 
mineral commodities; and at the same time, try to restore the 
hazard waste sites that you spoke about, that are voluminous in 
number when you get down to it, including abandoned and 
inactive mine sites that are within, you know, hundreds of 
miles of the National Forest system? I just think that with 
over 15,000 mining operations, that this lack of funding is 
going to present you with some real tough choices. How are you 
going to prioritize?
    Mr. Norbury. Well, Mr. Chairman, you are correct, it does 
present us with tough choices. Our initial response is to try 
to get more efficient administratively, to cut out 
administrative costs, to reduce overhead costs, to make more 
resources available to the people who are on the ground who 
actually have to oversee these operations and do the cleanup 
work. That is our primary emphasis.
    We have also been very successful in getting some 
additional funds through the Department of Agriculture for some 
mitigation of contaminated sites. And in cooperation with the 
Office of General Counsel, we have been very successful in 
getting large sums of money from the PRPs, potential 
responsible parties, for circular cleanup sites. We are going 
to pursue those efforts very aggressively, as well.
    Mr. Costa. If you could share those priorities with the 
Subcommittee as you detail them, we would be, I think, wanting 
to get a better grasp of how you develop the criteria.
    Mr. Norbury. I would be happy to provide that.
    Mr. Costa. My time has expired, but I would be happy to 
yield to the gentleman from Texas, who is a classmate of mine. 
Mr. Gohmert.
    Mr. Gohmert. Thank you, Chairman, and I am delighted you 
are having this hearing. I think it is very worthwhile. And I 
appreciate you all being here.
    I want to follow up on what the Chairman and Mr. Pearce 
have both brought up regarding the geothermal policy and the 
way the Administration seems to be backing off of that.
    Mr. Hughes, you said, as I understood it, basically you 
want to keep the royalties flowing, and that is why--when you 
say royalties, which royalties are you talking about? From oil 
and gas, or what?
    Mr. Hughes. No, I may have misspoke, Congressman.
    Mr. Gohmert. Well, I may have misheard. But that is what I 
understood.
    Mr. Hughes. What I am talking about, the Administration 
feels that royalties, rents, and bonuses should go into the 
Treasury.
    Mr. Gohmert. From what? From everything?
    Mr. Hughes. From everything.
    Mr. Gohmert. OK.
    Mr. Hughes. This is consistent. We have, in our budget we 
proposed that a prohibition on getting cost recovery from the 
applications for permits to drill, there is currently a 
prohibition against us doing that. It is in the 2005 National 
Energy Act.
    We have called for the repeal of that, and that we should 
be allowed to charge companies for cost recovery on the 
applications for permits to drill.
    The geothermal area, we are just trying to be consistent 
with that, in that the rentals would go to the Treasury. And we 
would----
    Mr. Gohmert. So you don't like the 25 percent that would go 
to the host counties? Is that one of the problems you have got, 
or what?
    Mr. Hughes. What we are trying to do is do cost recovery 
and get those rentals back into the Treasury.
    Mr. Gohmert. So do you have a problem with 25 percent going 
to host counties because of the effect locally?
    Mr. Hughes. We are more in tune with trying to get cost 
recovery back from the companies, sir.
    Mr. Gohmert. Oh, OK. Well, let me ask it a different way. 
Do you have a problem with the 25 percent share going to the 
host counties?
    Mr. Hughes. Good question. That is an excellent question.
    [Laughter.]
    Mr. Gohmert. Well, let us see, I am still green. I am going 
to keep asking until I get an answer.
    Mr. Hughes. We have numerous programs that try and----
    Mr. Gohmert. Let us go at it from a different way. Do you 
have a problem with the host counties getting 25 percent of the 
royalties?
    Mr. Hughes. Typically, the Administration favors that money 
going back into the Treasury, and----
    Mr. Gohmert. Typically, but how about in geothermal?
    Mr. Hughes. In geothermal, we will take a look at that, and 
I will take your views back to the Administration, sir.
    Mr. Gohmert. I just asked a question, that is all I have 
done. Do you have a problem--you are the one testifying--do you 
have a problem with the host counties getting 25 percent of the 
royalties? I mean, this is a little different than some areas 
of energy, and it is an alternative energy. And Heaven knows, 
we are sure needing to make use of all that we can.
    So do you personally have a problem with that?
    Mr. Hughes. Well, we favor sharing royalties----
    Mr. Gohmert. OK, are you talking about everybody here?
    Mr. Hughes. With the Mineral Leasing Act, we split 50 
each----
    Mr. Gohmert. Well, the way it confuses me, that is the 
first person plural. I am asking first person singular. Do you, 
Mr. Hughes, have a problem with host counties getting 25 
percent of the royalties?
    Mr. Hughes. Mr. Hughes's opinion I don't think is--I 
understand what you are saying, that----
    Mr. Gohmert. I haven't said anything. I have asked a 
question.
    Mr. Hughes. No. You have said there is an impact on local 
counties, communities----
    Mr. Gohmert. Right, I did say that.
    Mr. Hughes.--development. We have numerous programs that we 
send back to the state, shares of income that we collect to 
offset those.
    Mr. Gohmert. OK. So for that reason, you have a problem 
with host counties getting 25 percent of the royalties? Is that 
fair?
    Mr. Hughes. That is probably fair, sir.
    Mr. Gohmert. OK, thank you. All right. Now, also, Mr. 
Hughes--and hopefully we will have other rounds. This is very 
helpful, I appreciate this. But on the issue of leases, you 
know, we have heard a number of times that this Administration 
has just leased, had so many more leases than prior 
Administrations. Anybody that knows something about the 
business knows that you don't get leases until you have, well, 
let us see--I am sorry. We had twice the number of applications 
to drill in 2005 than we did in 2000. So you don't get the 
application to drill until you have leases done.
    And apparently, the Clinton Administration had 63 percent 
more leases actually entered. Do you know why the Clinton 
Administration had so many more leases than the current 
Administration?
    Mr. Hughes. I think it depends on what your base years are. 
Our figures----
    Mr. Gohmert. Well, let us go from 1994 to 2000, with the 
Clinton Administration, and 2001 to 2007.
    Mr. Hughes. OK. From 1995 to 2000, 19.7 million acres were 
leased in the Clinton Administration, according to our records. 
From 2001 to 2006, a five-year period, we leased, 22.1 million 
acres were leased. Now, some of those leases may have been 
larger in acreage than in the previous, so the numbers.
    However, earlier, if you would go from 2001 to 2004, and 
from 1997 to 2000, I think you will see that the Clinton years, 
they leased more than we did. Part of the reason, there is a 
couple things going on.
    One is in some cases, our resource management plans we had 
to redo, and we had to put leasing on hold. We were shut down 
in the Powder River Basin for about a year and a half while 
were doing new resource management plans, where we did no 
leasing in the early 2002/2003 period. So that plays into it.
    I think currently, for instance, we could put another 4 
million acres on the market, but we are currently deferring 
that while we do additional studies on those acres. We found 
out there are some discrepancies; they need additional NEPA, 
additional cultural resource surveys. So we have deferred 
leasing on close to 4 million acres during the past few years 
while we look at issues that have come up.
    Mr. Costa. The gentleman's time has expired, but I wanted 
to allow the witness to answer the question.
    Mr. Gohmert. Thank you.
    Mr. Costa. Let it be stipulated for the record that there 
are a lot of factors under which, why percentages of 
application to drill permits take place over a certain period 
of time. And I believe the witness was trying to explain that 
to us.
    Notwithstanding that, there are issues as it relates, Mr. 
Hughes, to remediation. And you know, I get, right or wrong, 
constituents of mine, when they see $50, $60, $70 a barrel oil 
and record profits, asking me to explain why the remediation 
shouldn't be paid by oil and gas companies that are benefitting 
from the use of these public resources, public-owned resources. 
And why taxpayers get stuck with the bill for the remedying of 
that remediation that takes place in an industry that obviously 
has enjoyed record profits.
    Could you please give your best answer to explain that? You 
did such a good job with Mr. Gohmert on the previous question. 
I don't want to get back to the counties, though.
    Mr. Hughes. Right. There are a lot of factors that are 
going on.
    Let me say first, an oil company that is out there gets a 
lease, goes through a process. In many cases we do not have the 
funds available to do environmental work when that company 
wants to do it. In many cases that company is paying for the 
environmental work. It pays for cultural resource service.
    Mr. Costa. Do you document that?
    Mr. Hughes. Yes, sir. We can get you those numbers.
    Mr. Costa. I would like to see that.
    Mr. Hughes. OK. In other cases we have required companies 
to decrease the footprint on that, what they are going to have 
to do to plug those wells when they are done, to spend money 
to, as I say, fix up the area, so to speak, once they are 
completed.
    Mr. Costa. Do you have any collaboration with the states 
when you are dealing with this remediation? I know in 
California they tend to get quite involved.
    Mr. Hughes. Yes, we do. We work closely, especially with 
the oil and gas divisions of state governments. Also the State 
Game and Fish folks, we work closely to make sure again the 
footprint is minimal as possible in that area.
    We are also trying to work out, in some cases, companies 
are voluntarily, in northwestern New Mexico they have put up a 
fund to go in and clean up some of the fields. They contribute 
into a fund for what we call our orphan wells and roads to go 
in on their own and fix it up.
    Mr. Costa. We have a similar program in California. I like 
those numbers.
    I would like to move on before my time expires. Mr. 
Wahlquist, getting back to the questions we were asking 
regarding the Fiscal Year 2008 budget. It is proposed, I 
believe, a $2.3 million increase from Fiscal Year 2007 for the 
state and regulatory grants. Can you explain why this was 
proposed, and where you expect to spend those--I mean, what 
bang for your buck do we expect to get for that?
    Mr. Wahlquist. That money is primarily to cover the fix 
costs that states have in carrying out their programs. We are 
asking for $60.6 million for state regulatory grants. Actually, 
because the 2007 continuing resolution is at the 2006 level, 
there is--which was 56.3, we had really expected to have 58.3, 
but we didn't get that. And so it ends up being a larger step 
increase between 2007 and 2008 than we had otherwise 
anticipated. But that will help ease the crunch that states are 
in very serious trouble this year from 2007 because of the 
reduction that we had not anticipated in 2007.
    Mr. Costa. All right. I am going to yield back the balance 
of my time to the Ranking Member, because I have a longer line 
of questioning for Ms. Burton, and it would extend beyond the 
23 seconds that I currently have. So I will yield back to the 
gentleman from New Mexico.
    Mr. Pearce. Thank you. And I would assume, Mr. Chairman, 
you mean the third round, which fits me really well, too.
    So Mr. Norbury, you have how many acres of land in the 
Forest Service?
    Mr. Norbury. 193 million acres.
    Mr. Pearce. 193 million. And how much revenue do you make 
off of your mineral leases, your oil and gas leases? Just 
approximate.
    Mr. Norbury. The Forest Service doesn't receive any of that 
revenue.
    Mr. Pearce. How much revenue is generated off of----
    Mr. Norbury. In general, the sum total of the revenues that 
flow to all parties from those activities is around $125 
million.
    Mr. Pearce. About $125 million. How much do you make off of 
your tree sales, your timber sales?
    Mr. Norbury. I don't have that figure at my fingertips.
    Mr. Pearce. Have you got anybody in the audience that could 
give you an approximate? Just, we are talking ballpark figures, 
trying to get concepts here, so anything.
    Mr. Norbury. Total Forest Service revenues from all sources 
are around $1.2 billion.
    Mr. Pearce. Around $1.2 billion?
    Mr. Norbury. That includes timber and other sources of 
income.
    Mr. Pearce. It would be instructive to know that. So that 
figure, if you can get your staff to e-mail out, we will come 
back around on the next round to ask that question.
    The next question, Mr. Hughes, is going to be a bank shot 
at you. But first of all, to get to the question, we really 
need to approach it through Mr. Wahlquist.
    Mr. Wahlquist, you said roughly 50 percent of the electric 
production in the U.S. is coal generated, is that right
    Mr. Wahlquist. That is correct.
    Mr. Pearce. So of 300 million homes, you would deal with 
approximately 150 million, right? How significant is the 
downward pressure on the coal? I hear in the Congress a lot of 
really comments that would decrease the amount of coal, it 
seems like, I don't know, but it feels like that. How much 
downward pressure is there on the coal usage?
    Mr. Wahlquist. Well, I don't know that there has been that 
much downward pressure. Certainly over the last 30 years, coal 
production has almost doubled under the Surface Mining Act.
    We do have issues in particular certain areas, such as 
resale controversies in southern Appalachia with mountaintop 
mining.
    Mr. Pearce. You don't have trouble permitting mines and 
things? I noticed the hearing that occurred over this past 
weekend, where a southern Arizona group was objecting 
strenuously. But you are saying it doesn't really.
    Mr. Wahlquist. Well, there are certainly permitting issues, 
but by and large, the permits have been able to continue to 
flow.
    Mr. Pearce. Ten years ago, how much of the electricity 
production was coal?
    Mr. Wahlquist. It would have been a little less than 50 
percent, I believe, but I would have to check that.
    Mr. Pearce. Pretty static at 50 percent.
    Mr. Wahlquist. Yes.
    Mr. Pearce. OK.
    Mr. Wahlquist. We stayed around that number in----
    Mr. Pearce. All right, Mr. Hughes, here we go to you. You 
said that we would get 1.2 million households on geothermal if 
we could develop it, and 1 million households on power by 
solar? Wind, I am sorry, it was wind.
    Mr. Hughes. Right.
    Mr. Pearce. If we are going to significantly change the 
pattern of usage--and there are people, regardless of what Mr. 
Wahlquist says, I think there are people who would stop use of 
coal today if they could. And what I want to get really clear 
for me is, do we have the capabilities with renewables to do 
anything else except supplement coal and oil and gas?
    In other words, oil and gas and coal are going to fuel the 
economy; and supplementally, we can take small increments. But 
when I hear you talk in terms of 1.2 million households versus 
150 million out of geothermal and 1 million out of wind, can 
you, on all the public lands, get us to where we need to go to 
be, to have a complete renewable fuel economy, which is what 
some people declare we should have? People in my district say 
that frequently. Can we get there? Or is that a stretch?
    It is harder than Mr.--I won't ask it as many times as Mr. 
Gohmert did. If you want to dodge, it is OK.
    Mr. Hughes. I am certainly no expert, Mr. Pearce. But 
everything I have seen, you can talk to the Energy Information 
Agency and others, the answer is no, we can't get there.
    Mr. Pearce. OK, fine, I appreciate it.
    Ms. Burton, before my yellow light turns red, the 149 
leases out of 230--I am reading in your testimony, 149 leases 
out of the 230--were exploratory? That is a pretty stunning 
figure to me if, because as a business guy, I am going to do 
sound business. And yet, if there is 149 out of 230 who are 
exploring, who are going out beyond, who are trying to open up 
new areas, I think our Outer Continental Shelf is working 
pretty well. Am I right? Wrong? 149 is a pretty stunning 
percent of exploration
    Ms. Burton. You are absolutely right, sir. There is an 
enormous amount of work going on in the OCS. And it has paid 
off, particularly in deep water in the last 10 years. It has 
been really extraordinary.
    Mr. Pearce. OK. Thank you, Mr. Chairman. I will look for 
another round if you have it.
    Mr. Costa. Thank you. Ms. Burton, please comment on the 
progress of the independent panel for the Department of 
Interior's Royalty Policy Committee, which is taking, I 
understand, a comprehensive policy assessment of the Department 
of Interior's royal management program
    Ms. Burton. Are you, Mr. Chairman, talking about a panel 
that is supposed to be investigating our royalty collection, 
our management?
    Mr. Costa. Yes.
    Ms. Burton. I am not sure I understood your question, sir.
    Mr. Costa. I understand there is an independent panel
    Ms. Burton. Oh, yes, OK, I am with you.
    Mr. Costa. I am with you. We are both here together
    Ms. Burton. I am sorry.
    Mr. Costa. That is OK
    Ms. Burton. Unfortunately, sir, I cannot talk about that 
panel very much, because it is really a Secretarial Initiative, 
and the Assistant Secretary for Lands and Mineral is really in 
charge of that. I know very little, other than there will be a 
panel, and it will look at us from an----
    Mr. Costa. You are saying it is above your pay grade
    Ms. Burton. Yes, sir.
    Mr. Costa. OK. Well, that is fine. I would like to move 
further on to the situation that is more local for me. As a 
former Speaker of ours once said, all politics is local, and 
this involves California.
    The State Controller's office that audits reviews in 
California for Federal leases for money that is owed the state 
within the boundaries. As you know, the Department of Interior 
has delegated the audit authority to states at the 
recommendation of the Linowes Commission, which, in 1982, 
recognized that states, as well as tribes, have more direct 
revenue interest, and in many cases greater expertise, about 
the operation of minerals in their particular regions. I 
suspect that would go for other states, as well.
    The partnership that Congress envisioned some 25 years ago 
does not exist today, according to the Controller in California 
who wrote me a letter. He believes that SCO and the audit 
program is being steadily dismantled by the Mineral and 
Management Services funding cuts, and what he believes are 
questionable compliance policies. These funds, or whatever 
goals or priorities you may have, he believes, and I share his 
opinion, are in conflict with funding that goes to the states, 
goes to public schools, as well as the counties. Not only the 
counties in Mr. Gohmert's constituency and in Texas, but 
counties in California, monies that they believe they are owed.
    My first concern is the restoration of the audit funds. And 
I would like you to respond
    Ms. Burton. Yes, sir. We have not decreased the amount of 
money going to state for the collaborative work they are doing 
with us on audits.
    What we have done, however, is reallocated to different 
states in different ways. We have made a business case for how 
much revenue and how many leases are to be audited in a 
particular state, and made sure the state that had the highest 
level of work received the bigger share of the money.
    For example, New Mexico and Wyoming were two states that 
were under-funded. But California, in terms of how much, how 
many audits they had to do and how much money was coming back, 
and how many companies were operating, they were over-funded.
    So what we did was we reallocated----
    Mr. Costa. I don't think the Controller in California 
believes that he shares that opinion
    Ms. Burton. You are right, you are absolutely right, sir. 
We don't agree necessarily.
    Mr. Costa. I mean, you may think they were over-funded.
    Ms. Burton. But we made a business case. We looked at the 
amount of money, and we decided that the state with the biggest 
amount of money at risk were the one requiring the most audits. 
And so we reallocated the money based on that.
    Some states gained, some states lose. But the total amount 
of money is still the same. We still have about $9.5 million a 
year that goes to paying our state partners.
    Mr. Costa. Well, in case you are in the doubtful column, 
let me indicate to you that Controller John Chiang and myself 
believe that--and it is not a fair question to you, but we 
think our public schools and our counties in California frankly 
are not--not--receiving their fair share of royalty revenue 
that is owed to them through this public resource.
    And while California has not generally looked upon it in 
that way, we are a tremendous oil- and gas-producing state. And 
I know you know that. And certainly the State Lands Commission, 
as well as the Controller's office, monitors that effort. And I 
will submit this letter to you, and please respond. And 
hopefully you can give a better response to our Controller, Mr. 
John Chiang, than you gave just now to me, with all due respect
    Ms. Burton. Yes, sir, we will do.
    Mr. Costa. And I will now refer to the gentleman from 
Texas, who is concerned about all sorts of things, including 
counties.
    Mr. Gohmert. Thank you. I am concerned about all kinds of 
things, thank you.
    I would like to ask Dr. Myers--I feel like you have been 
neglected here for a little bit--but I was surprised to hear 
your discussion about the U.S. Geological Survey role in 
assessing climate change, with all the things that you are 
concerned with. And I am curious, was the USGS assessing 
climate change back in the late sixties, seventies? How long 
has USGS been involved in that?
    Mr. Myers. Sir, pretty much from the start of the concern. 
We have had, because we had the geological component----
    Mr. Gohmert. Start of the concern, being when?
    Mr. Myers. The start of the concern being recognizing, on 
the geological record, that climate has changed dramatically 
over----
    Mr. Gohmert. And when would you say that start was?
    Mr. Myers. The understanding of that probably goes back at 
least 50 years.
    Mr. Gohmert. OK. So back when I was in school, and I was 
being taught, and I said that doesn't make sense, but I was 
being taught that we were dangerously at the very beginning of 
a new ice age, USGS was helping formulate that type of thinking 
back then? Is that correct? You are going back 50 years.
    Mr. Myers. Sir, again, as we get back into the geologic 
record, we recognize ice ages come and go. The geologic climate 
has changed dramatically. My home state, Alaska, for example, 
66 million years ago there were dinosaurs really roaming across 
the north slope of Alaska. So we recognize the history of 
climate.
    Now, obviously today we are in a bit of a different state, 
as we understand the effects of climate change, having effects 
on our environment. And we can document those effects.
    Mr. Gohmert. Right.
    Mr. Myers. That is not to say how much percentage of that 
is human induced versus natural systems. But clearly, those 
changes are occurring, and the USGS has been, being an 
integrated science agency, has watched it and monitored----
    Mr. Gohmert. Well, let me get back to the question. Was 
USGS supportive in the seventies, that we were beginning a new 
ice age? Because that was the prevalent thing being taught back 
then.
    Mr. Myers. The USGS, again, is actually looking at the 
long-term climate record. We were not the agency that developed 
the current climate models, but we did provide a lot of 
significant input into those models, including the 
understanding of the climate change as we see it occurring 
during a period.
    During the nineties, for example, the USGS was, in fact, 
the lead agency for the United States with respect to climate 
change. So again, we understand----
    Mr. Gohmert. You provide the data, and other people say oh, 
ice age is starting; 30 years later they are saying no, we are 
starting to warm up; Alaska is going to melt. Texas will be the 
biggest state in the union then. Those type of things, right? 
OK. Thank you, Dr. Myers.
    Ms. Burton, we had a hearing previously with the full 
committee, and a big topic of conversation was the price 
thresholds that were omitted. And of course, we heard from the 
IG, and I was very concerned, and at first I thought he would 
be part of the solution, but he kept wanting to talk about 
criminal conduct and paint it with a broad brush, and seemed to 
be painting that more of the Bush Administration. We finally 
pinned him down. It turned down that 1998/1999 leases by the 
Clinton Administration were the only ones in which the price 
thresholds or the price triggers were omitted, and that he said 
initially it was a mistake. And then we found out actually that 
someone within the Administration, the Clinton Administration, 
one of three people had directed that they specifically be 
omitted, the appendix be omitted, so that these were not 
included.
    Obviously, the Federal government is losing money as a 
result of that. If it is criminal, I would like to see somebody 
go to jail, I don't care what administration they are in.
    But we had, since the Democrats took the majority, we had a 
bill, as you are probably aware, last month trying to address 
this. As somebody who has dealt extensively with contract 
disputes, I have concerns when the Federal government 
unilaterally steps in and says we are going to breach the 
contract and start over, and the litigation that that may 
spawn. It may be, you know, the attorney savior act if we were 
to do something like that. It would give a lot of lawyers a lot 
of business.
    But what do you see that could be done to correct the 
problem, without triggering all kinds of lawsuits
    Ms. Burton. I think that we need to entice the company to 
voluntarily come and accept, to get a price trigger in those 
contracts, without forcing them, because that would breach 
their contract, and the Administration doesn't believe this is 
something we can do.
    Mr. Gohmert. Entice with a hammer, or with sugar
    Ms. Burton. No, with sugar. I think that if there is a way 
to give something to bring them to the table that doesn't cost 
too much, maybe we need to do that. But I think that using only 
a hammer is going to create a situation where we will have lots 
of litigation, because those contracts are valid. Even though 
they may be bad, they are valid. And so that may create a 
situation where maybe we would be enjoined in future sales, and 
the repercussions of that action, because of litigation, would 
be disastrous for the country.
    Not only would we, years down the road, have decrease in 
production, we would have also huge decrease in money. I think 
we calculated or we estimated that if we are enjoined for three 
years to have OCS sales, it may cost as much as $13 billion.
    Mr. Gohmert. Thank you.
    Mr. Costa. I think you answered the question, and the 
gentleman's time expired.
    One more question to you, Ms. Burton, and this deals with 
our efforts that we have talked about somewhat in oil and gas 
leasing offshore in the next five years within the budget for 
the Offshore Minerals and Management. It states that there will 
be a $1 million reduction, if my information is correct, on 
environmental studies that take place with regards to the Outer 
Continental Shelf five-year leasing program.
    You spoke in your own testimony about the difficult on the 
outer shelf at depths of 5,000 to 10,000 feet. I am wondering 
what the justification is for the reduction. Can you explain?
    Ms. Burton. It is a redirection that $1 million that we are 
decreasing here, is because we need it somewhere else.
    In other words, we are asking, in our budget, $4 million 
for the five-year program, so that we can do some more 
environmental oversight. And environmental studies that we are 
willing to give $1 million for are general studies. We need to 
be more specific for the five-year program.
    And so we are sort of redirecting that request to have $4 
million additional put in the five-year program, but we give up 
$1 million of the general environmental studies. It is just a 
matter of trying to make a few dollars go a long way.
    Mr. Costa. It sounds to me like you don't have sufficient 
resources to begin with. But I want to move on to Mr. Hughes, 
because I have some questions as relates to hard rock mining.
    It relates to the GAO's 2005 recommendation that the BLM 
needs to better manage financial assurances to guarantee the 
coverage of reclamation costs; that there needs to be adequate 
protections in place to ensure that the hard rock mining 
operations are reclaimed, and not abandoned, for the taxpayers. 
We have spoken about this earlier with the testimony by the 
Forest Service.
    Can you please explain, Mr. Hughes?
    Mr. Hughes. Mr. Chairman, we are taking a look at a number 
of items. One is our reclamation bonding requirements. We are 
reviewing that at the department level. We did look at those 
recommendations. We think in some cases they--we think they 
didn't adequately portray what was going on out there in the 
field.
    Mr. Costa. Well, but the financial assurances to guarantee 
the coverage of reclamation costs found that, correct me if I 
am wrong, 48 hard rock mines without bonding that were 
abandoned, and left for the government to reclaim. I mean, 
aren't you concerned about that?
    Mr. Hughes. That is why I say that is why we are reviewing 
our current standards to make sure we do have adequate bonding 
out there. That is one thing----
    Mr. Costa. I mean, the bonding seems to be, to me, would 
have to go part and parcel with the issuance of the permits, at 
least prospectively. Otherwise, we are asking the taxpayers to 
reclaim these sites. I mean, we have some sites that I am 
familiar with in California that for decades have potentially 
created potential water quality issues that, you know, are 
significant.
    Mr. Hughes. You are correct, we have numerous abandoned 
mines on public lands we are taking a look at each year. We are 
working to address those issues, and prioritize which ones we 
look at.
    But you raise an excellent point, Mr. Chairman.
    Mr. Costa. And if you could, for the Committee's 
information, provide information that would demonstrate what 
the Bureau of Land Management is doing to implement and 
accomplish these protections for hard rock mining operations? 
And please provide a report to the Subcommittee on all the hard 
rock mines on Bureau of Land Management lands that have been 
abandoned since 1987.
    Mr. Hughes. Yes, sir.
    Mr. Costa. And if we could get that information, that would 
be helpful. I would appreciate it.
    Again, in the balance of fairness, I have a longer line of 
questioning, so I will yield back the balance of my time to, I 
believe it is the gentleman from New Mexico's turn.
    Mr. Pearce. Thank you, Mr. Chairman. Mr. Hughes, you have 
258 million acres of land, and the Forest Service has got 193 
million acres. What is your revenue off of your, what is the 
total revenue off of your lands?
    Mr. Hughes. Well----
    Mr. Pearce. Just approximate.
    Mr. Hughes. Approximately $5 billion.
    Mr. Pearce. Five billion?
    Mr. Hughes. Yes, sir.
    Mr. Pearce. See, the Forest Service generates $101.2 
billion off of their 193 million, and you have about 1.3367 
times as much land. So if you were making revenue at the same 
rate as the Forest Service, you would be getting $1.6 billion. 
Instead you are getting five-point-how many billion?
    Mr. Hughes. Five billion.
    Mr. Pearce. Five billion. We ought to let you manage the 
Forest Service land, excuse me. Excuse me, Mr. Norbury, I got 
on tricky ground. I have to take that back. But I do recognize 
the difference in the numbers.
    Mr. Hughes, let us go to you first, and then I will come to 
Ms. Burton. You mentioned how many leases that we are now 
creating shale in Colorado. How many of those leases are 
actually producing, and how much production do we get out of 
that? More or less.
    Mr. Hughes. On the oil shale, there is no real producing 
leases. These are 160-acre leases that they are using for 
research and demonstration projects.
    We are currently in the process of doing an oil shale 
leasing EIS that, under the auspices of the 2005 National 
Energy Act----
    Mr. Pearce. OK. Basically nothing is coming out of the 
research.
    Mr. Hughes. Nothing is coming out right now. There is 800 
million, an estimated 800 million barrels of recoverable shale 
oil.
    Mr. Pearce. Eight hundred million barrels compared, how 
does that compare to something else? How much in regular oil 
through the rest of the nation?
    Mr. Hughes. That----
    Mr. Pearce. Is it a lot or a little?
    Mr. Hughes. It is a lot.
    Mr. Pearce. Yes. So I mean, so it is promising, but would 
need some stimulation. Because the same thing is happening here 
that happened in the Gulf 15 years ago. Nobody is putting money 
into it, and so we need some kind of stimulations. We have the 
stimulations, and as I covered last time, 149 out of 230 of the 
wells being drilled are exploratory. A lot of times our friends 
just, it is hard to understand why we need stimulations. But 
business is frankly the only one that can't get it out.
    Now, Ms. Burton, we are back at this point of trying to 
figure out if the government is getting a good deal, and then 
we got this letter from the State of California, the SEO, being 
concerned that we are dismantling. Now, one of the rough checks 
that I would do--and I do it on my, for instance, my MRA--I 
know about what percent we want to spend on things, and then I 
would take a look. So I do a lot of percentages.
    If I look at the total revenue dollars produced out of the 
Gulf, and I want to know--and roughly, you said, we have some 
leases at 12 percent, some at 16 percent, but most of them I 
think are at 12 percent, 12.5 percent royalty rate. I am going 
to do a rough calculation in my head that we have so many 
dollars produced, and it ought to be 12.5 percent of that, plus 
a little bit more.
    When you do the calculations just with a pencil and a piece 
of paper--we are not doing big mainframe computers--what kind 
of percentage rate do you come up with? Again, rough is close 
enough. How much revenue are you generating?
    Ms. Burton. I would think that the rough number is between 
9 percent and 10 percent.
    Mr. Pearce. So about 10 percent. So what was that figure 
three years ago or two years ago? In other words, is it 
trending up or trending down? Are we getting stronger
    Ms. Burton. That number stays about the same, because the 
royalty rate is about the same. So whatever they sell, we get 
10 percent net of that----
    Mr. Pearce. You get 10 percent net, and you are between 9 
percent and 10 percent.
    Ms. Burton. Between 9 percent and 10 percent.
    Mr. Pearce. And so the worry that we are not getting our 
money for what we are doing with a large-view picture says that 
we are getting pretty close
    Ms. Burton. I think so, sir.
    Mr. Pearce. Now, the letter, I was looking at the letter, 
and it seems pretty well constructed, from the guy in 
California. And you seem pretty familiar with the discord 
there, with the different opinion.
    How do reasonable people--on policy I can understand how 
people come to different things. What I am going to do is I am 
going to ask a question. I am going to wait, I think we are 
going to get one more round, and I am going to let you have 
until the next round. But why do you think that he is under the 
belief that you are dismantling the MMS, and that you are not 
getting the revenues desired? When to me, the rough looks like 
10 percent is what we ought to be getting, and we are between 9 
percent and 10 percent. We are going to increase some, but 
there is not much room there to increase
    Ms. Burton. Congressman, what I heard from California, and 
a couple of other states actually, is not so much that they 
weren't getting the revenues they were entitled to in terms of 
royalty share; but that they weren't getting as much money to 
pay for the audits. And what happens, as I tried to explain, 
but obviously didn't do a very good job, is that we have to 
allocate the money to those states based on certain criteria. 
And we made a business case of how much revenue there are----
    Mr. Pearce. I understand, you have three-point-something, 
you know, $3.60, OK
    Ms. Burton. And we decided how much money to give them, 
based on what we could collect----
    Mr. Pearce. And they just would like to have a bigger share 
to run their audits or whatever. OK
    Ms. Burton. Right.
    Mr. Pearce. Thank you, Mr. Chairman.
    Mr. Costa. Thank you. And I thought I said earlier, but if 
not I would like to, for the purpose of this hearing, to submit 
the letter from Mr. John Chiang for the record. And as I asked 
you earlier, please respond to Mr. Chiang, and you can CC me.
    Ms. Burton. I would be happy to.

    [The letter from John Chiang, California State Controller, 
to The Honorable Jim Costa and the response to Mr. Chiang from 
the Minerals Management Service submitted for the record 
follow:]
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[GRAPHIC] [TIFF OMITTED] 33676.013

[GRAPHIC] [TIFF OMITTED] 33676.014

[GRAPHIC] [TIFF OMITTED] 33676.015

[GRAPHIC] [TIFF OMITTED] 33676.016


    Mr. Costa. On request of our Chairman, Chairman Rahall, and 
I try to honor requests, especially when it comes from our 
Chairman, he has a line of questioning, Director Wahlquist, 
that he has asked me to ask you, on behalf of the full 
committee, on his behalf.
    Throughout your testimony you referred to the Office of 
Surface Mining. In fact, you even stated, I remember quite 
clearly, earlier that it actually should be called the Office 
of Coal Mining.
    Chairman Rahall would like to remind you that, from his 
vast experience--and of course, he has been here for a few 
years, even though he was very young when he started--that the 
statutory name of the office is Surface Mining, Reclamation, 
and Enforcement. The Chairman also notes that he can't even 
find a reference to the Office of Surface Mining, Reclamation, 
and Enforcement on your website, and he wanted you to note 
that.
    Chairman Rahall also strongly believes that the reclamation 
and enforcement, he believes, and I think Members of the 
Committee do, is an important part of your mission, and that he 
observes that reclamation enforcement is something that your 
bureau has not always done very well.
    And so, as such, he is curious as to why your bureau does 
not utilize the proper statutory name.
    Mr. Wahlquist. That is a fair question. Certainly when we 
first began in the late seventies, it was shortened to the 
three-letter acronym. In the eighties it was expanded, and you 
will notice Federal Register Notices in the 1980s as OSMRE. And 
then our director, in the early nineties, under Secretary 
Babbitt, said no, let us go back to the three-letter acronym. 
And so we have gone back to the three-letter acronym really 
since 1994.
    Mr. Costa. So we will blame it on Secretary Babbitt, huh? 
Seriously, though, I will tell you--and this is just one of my 
own personal gripes I will share with Members of the 
Subcommittee--I think we get so involved oftentimes here in 
Washington in government-speak, with all these acronyms. If you 
will notice, and I probably won't always do it, but I try to 
say Bureau of Land Management. I try to say the Mineral 
Management Services.
    I mean, we get so caught up here in our acronyms and our 
initials that frankly, most of my constituents think we are 
speaking a foreign language. And I am a big believer in that we 
should all be literate in as many foreign languages as 
possible, but government-speak I think oftentimes is to confuse 
and obviate the obvious. So therefore, I would suggest you take 
Chairman Rahall's suggestions seriously, because I think we can 
all do a better job in making sure that we follow and better 
communicate, whether or not we agree.
    Mr. Wahlquist. We will take any suggestion from the 
Chairman very seriously.
    Mr. Costa. Good. Let me move over to Dr. Myers. You talked 
about--and again, this deals with the budget for Fiscal Year 
2008--to provide scientific information for the objective 
resource assessment on mineral potential and production, 
consumption, and environmental effects.
    My understanding is, Dr. Myers, that you are going to have 
decreased funding. How are you going to do more with less?
    Mr. Myers. Mr. Chairman, in truth we are going to do less 
with less with the Minerals program.
    Mr. Costa. Thank you. I mean, I am saddened to hear that, 
but that is the most truthful answer that you could give, and I 
appreciate it.
    How do you think that the United States Geological Service 
is going to maintain the critical publication of your mineral 
commodity summaries that are published on an annual basis, that 
furnishes and estimates covering non-fuel mineral industry 
data, and are a focal point of a lot of the new and emerging 
science and technology that are in the mineral fields, and that 
many of us believe are a part of our efforts to reduce our 
dependence on foreign sources of energy?
    Mr. Myers. Mr. Chairman, energy minerals are not part of 
the MIT program, so it is strictly with strategic commodities. 
In those reports, about 50 of the 100 commodities we now track 
will not be tracked with the budget decrease. Furthermore, some 
of the geochemical labs will be closed, and there will be a 
significant decrease in staff.
    So we will be challenged to maintain it. We will maintain 
it with 50 significant mineral commodities. But it will be a 
much more limited----
    Mr. Costa. Well, I think you put it best, you are going to 
be doing less with less. Thank you very much. My time has 
expired. I believe the gentleman from Texas is up. Mr. Gohmert.
    Mr. Gohmert. Thank you, CC.
    Mr. Costa. Chairman Costa.
    [Laughter.]
    Mr. Gohmert. I have a question for Ms. Burton regarding the 
minerals review management. In your statement you talked about 
the minerals review management its primary business of 
collecting, accounting, and assuring compliance for 
disbursement of Federal and Indian mineral revenues, and is 
highly dependent on its information technology system.
    And I mean, that is pretty elementary. But do you think, 
because of allegations that the Federal government is getting 
less than it should, that we should be more relying on people 
in the field? Should we have a different type of information 
technology system? Or should we just convert to having somebody 
that examines the books, see how much is sold, and what the 
right was, and divide that and see exactly what the amount was?
    It doesn't seem like this should be too difficult to zero 
in on what the Federal government's portion would be
    Ms. Burton. Congressman, I think you are absolutely right. 
But it is complex.
    Mr. Gohmert. On which part? That was really a multifarious 
question.
    Ms. Burton. Well, you are correct that we need to make sure 
the government gets its share. And we want to do our share in 
making sure that happens.
    The problem is that it is a complex system. We are dealing 
with an enormous amount of laws and regulations that have to be 
applied. How do we do that, or how can we do that better?
    The Inspector General has given us some recommendations 
that we are going to follow to improve our process. But the 
fact is that we have 26,000 leases to look at, we have 2600 
companies. We can't audit every one of them. And so we have to 
have a system to decide which to audit.
    We had picked a system based on money. We looked at the 
most vulnerable and the larger amount of money. Obviously the 
Inspector General thought that was not enough; we needed to 
vary our strategy. So we looked at very small companies, too, 
so that we would look at more companies, maybe less money, but 
more companies. So we are in the process of looking at what the 
IG gave us, and redesigning our process.
    But in the meantime, we need to use technology. There is no 
way we can have enough people to do all of that. It would not 
be, from business standpoint----
    Mr. Gohmert. What kind of technology are you talking about?
    Ms. Burton. We need to modify our computer system. We have 
a very complex computer system that looks at a lot of things. 
When companies send us their production report, their sales 
report, et cetera, we look at a lot of things.
    We now need to add some modification. For example, a 
company can take recoupment for maybe some money they overpaid 
at some point in their business. We now have trouble tracking 
those recoupments. Are they done within the limits that the 
statute permits recoupment or not?
    And right now we have trouble following that, because our 
system doesn't have that module. So we need to do that, and 
that is why we are asking for about close to $1 million to do 
that. We are asking for some more money to make our program a 
little more interactive with companies, so we can follow what 
they do and immediately pin them back when we don't like what 
we see or something is missing, so they can come back with the 
right answer.
    So we need to be a little smarter in how we do things with 
computers. But I think that the two major recommendations of 
the IG is to have a different way of picking companies we 
audit, and we are going to do that.
    Mr. Gohmert. Well, in speaking of the money, why is there a 
reduction in your budget for methane hydrate programs?
    Ms. Burton. Congressman, I will tell you what I answered 
the Chairman about the difference in the OCS money.
    In the times of constraints, of budget constraints, we have 
to use the money where the priorities are. The USGS does a lot 
of work on methane hydrate. They are out scientific agency; 
they do a lot.
    We will come into the picture on hydrate when they are 
producible. Then we have to worry about the value, how they are 
produced, how we manage the production, and how we value them, 
and what royalty we receive for the government.
    So our work comes down the line a little bit. So right now 
it is not as crucial for us to have money for hydrate as it may 
be for the USGS. And so we have more crucial needs right now, 
with a five-year oil and gas program, and the new alternative 
energy program. So that is why we redirected the money.
    Mr. Gohmert. Well, I would encourage you to keep looking at 
this.
    Ms. Burton. I know.
    Mr. Gohmert. I mean, we have got, what, 44 years nearly of 
gas out there, and we are paying higher gas prices probably 
than anybody in the world.
    Thank you, Mr. Chairman.
    Mr. Costa. Thank you, Mr. Gohmert. There is also obviously 
a focus on natural gas as it relates to its clean-burning 
capabilities. And so there are a number of different dividends 
here that we are talking about.
    I would like to go back to Mr. Myers. The mission of the 
Cooperative Topographical Mapping Program, otherwise known as 
CTM--that is a mouthful--provides the Nation with access to, as 
I understand it, current and accurate, consistent-based 
geographic data from derivative products that include 
topographical maps. The CTM program, as I understand it, is the 
lead responsibility of developing and maintaining and making 
available the national map.
    In your Fiscal Year 2008 budget you have a lack of funding 
for this program, in my view. Do you want to respond? Will you 
be doing less again?
    Mr. Myers. Mr. Chairman, that is not the case at this time. 
What happened is the money moved over from what was 
traditionally the geography discipline into the Geospatial 
Information office. So you will see a transfer of those funds 
for----
    Mr. Costa. So is the work going to still get done?
    Mr. Myers. Yes, Mr. Chairman.
    Mr. Costa. In a timely fashion?
    Mr. Myers. Mr. Chairman, the basic mapping capabilities of 
the Survey, our GIS capabilities, are crucial to our success. 
They are also crucial to the national success with, again, 
understanding natural resources and----
    Mr. Costa. So you haven't dropped this down on the priority 
list.
    Mr. Myers. Mr. Chairman, it is one of my highest 
priorities.
    Mr. Costa. Good, I am glad to hear that. Mr. Hughes, back 
to you. I get questions from many of my colleagues, and I share 
some of the concerns, on why the Bureau of Land Management 
continues to issue leases on what, in many cases--and this 
relates to all politics being local--but where they view, in 
their respective districts, environmentally sensitive areas. 
Lands that have been identified for wilderness characteristics 
are areas that they may to, in fact, designate that as such.
    Does the Bureau of Land Management propose or is currently 
looking at wilderness designation by Members of Congress when 
we are still in the process of obviously facilitating permits 
that are going through the pipeline? No pun intended.
    Mr. Hughes. Mr. Chairman, the Bureau of Land Management, as 
you are probably well aware, sent a recommendation a while back 
to Congress, after running an intensive wilderness inventory. 
That recommendation has been up here. In some cases Congress 
has acted on it; in other cases, those areas remain out there, 
waiting for Congressional action.
    We do not typically pull lands from consideration because 
someone, you know, puts a bill out saying we want to do 
something with that. We look at that very closely. But for 
instance, in some cases, in the State of Utah there has been--
--
    Mr. Costa. Do you take in the wilderness impacts as you are 
considering these?
    Mr. Hughes. We have in many cases made those judgments 
already, and sent those recommendations to Congress. In other 
cases we are required by law, when companies come in and 
petition us to put lands up for lease/sale, we look at those. 
We have a resource management plan. If that management plan 
does not indicate a protective status for those lands, we 
would, in that we have adequate environmental studies 
available, that we have adequate cultural studies, adequate 
threatened endangered species studies, we offer those up for 
lease.
    Mr. Costa. OK. Before my time expires, I want to go to Mr. 
Norbury.
    You have a backlog, I understand, in facilitating the 
process for energy leasing and permit applications. In respect 
to eliminating that backlog of oil and gas lease nominations 
for APDs, with the implementation of the Energy Policy Act of 
2005, how do you expect to deal with that in an environmentally 
safe fashion, Mr. Norbury? With the decrease of funds that 
seems to be the case in the 2008 proposed budget?
    Mr. Norbury. The backlog, as defined in the Energy Policy 
Act, my understanding is that we will process all those 
applications this year. We will go into 2008 with no backlog.
    Mr. Costa. And you have sufficient funding to ensure that 
they are done in an environmentally safe fashion?
    Mr. Norbury. We believe we do.
    Mr. Costa. All right, my time has expired. And we will have 
the gentleman from New Mexico have the balance of his time, and 
then I will close the hearing following his five-minute line of 
questioning.
    Mr. Pearce. I thank the Chairman for extending past that 
4:00 deadline, because there are just some burning things I had 
to get right out here.
    Ms. Burton, you are one of the lucky two here to wrap us 
up. The five-year plan, 2007 to 2012, what is going to happen 
to the Mid-Atlantic Planning Area? And then second, what about 
the sale of 181 and 181 South out in the Gulf? Tell me about 
both of those things
    Ms. Burton. Congressman, the five-year plan is almost 
reaching conclusion. The final EIS should be done I think 
within the next month or so, and then the Secretary will make a 
decision as to whether to keep the Atlantic piece in the plan 
or not. That decision has not been made.
    The offshore of Virginia is still in the proposed plan 
today. But the Secretary will make the decision in another 
month, 45 days. Then the plan will be sent to you for review, 
to Congress for review for 60 days, and then it will become 
effective by July 1.
    As far as sale 181, the 181 South, I think you asked for, 
is scheduled to have a sale in 2009. We have to do all the 
environmental work on that, because it was under moratorium. We 
couldn't spend money on doing the work on this part of the OCS 
while we were preparing the five-year plan.
    So now that you have lifted the moratorium, we can start 
the work. And this is why we are looking at our money very 
carefully.
    Mr. Pearce. Who in your department is in charge of talking 
to the Secretary as he approaches that decision on the Mid-
Atlantic Region? Because I think it is important that we get 
new states involved, that we begin to develop those revenue 
sources for both the Federal government and the states.
    Ms. Burton. The way the process works----
    Mr. Pearce. No, just who. I don't want to know the process, 
I want to know who is going to be lobbying. Is that you?
    Ms. Burton. I make a recommendation to the Assistant 
Secretary.
    Mr. Pearce. All right. I hope you hear from at least one 
Member of the Committee.
    Ms. Burton. I heard you very loud and clear.
    Mr. Pearce. You know, again, New Mexico has got $13 billion 
that the oil and gas industry almost by itself has created for 
the State of Mexico, the third-largest permanent fund in the 
world when I was at the State Legislature five years ago. And 
those are great sources of revenue.
    Mr. Myers, on the MIT, the minerals information teams, I 
wish Mr. Gohmert were here to ask this question, because I 
wonder how you feel about that MIT. If there has been attempts 
from the Administration to defund it, and how do you feel about 
the defunding? Or fund it at a lower level and changes.
    Minerals information teams for me seems valuable because 
what it does is assesses the strategic minerals that this 
country uses, and it looks at what we are having to import 
versus what we get, with China being one of the great importers 
to us, or exporters to us today. I worry about that, and I 
would think we need more information, not less. And yet the 
Administration continues to try to do that. Why is that? And 
are you a party to that? I guess that is a loaded question. You 
don't have to answer that last part.
    Mr. Myers. Thank you, Congressman Pearce. Clearly, it is an 
important program. And it is a matter simply of the 
prioritization process that works with a limited budget. It was 
one of those hard----
    Mr. Pearce. How much is this MIT?
    Mr. Myers. The MIT cut is for this year about $2.6 million. 
But I believe----
    Mr. Pearce. Out of how big a budget?
    Mr. Myers. About $50 million. But earlier, because of the 
way the budget structure works, it is actually about, it is 20-
some million. Carl, do you have the exact number? About $25 
million. About half the program.
    Mr. Pearce. Yes, that is, I mean, on your commodity reports 
there is even the recommendation that we would just measure 
some, and not all of strategic minerals. Why is that? And what 
does it take to go ahead and get the MIT team authority to 
check all those minerals?
    Mr. Myers. Well, it is clearly, you know, the budget is 
determined by the Congress. Again, the Administration is trying 
to make--myself included--trying to make some very tough 
choices within a limited budget. And that is strictly it. It is 
a matter of prioritization.
    Clearly it is up to Congress to determine what they think 
is appropriate to fund. And again----
    Mr. Pearce. Yes, we funded it at a higher level than you 
all did. And if it is up to us, Congress, both Houses, I think, 
want to fund this thing at a higher level at some point. With 
all respect, if you could carry that message back, too, I would 
appreciate it.
    Mr. Chairman, I am going to yield back. You have been more 
than gracious with the time, and I appreciate the hearing. It 
has worked out very well.
    Mr. Costa. Thank you, the gentleman from New Mexico. I 
appreciate your focus and your earnest questions. I hope the 
panel that testified this afternoon feels the same way. I hope 
it was relatively painless.
    In closing, we obviously want to thank you for your 
testimony. Members of the Subcommittee and I may have, or 
probably will have, additional questions to the witnesses. We 
will forward those to the Department in the next several days. 
We would appreciate, as I said on the outset, your cooperation 
in responding to those questions.
    As I indicated in my opening comments, oversight is an 
important role of the checks and balances, I believe, of the 
legislative process. And it is our intent, it is my intent as 
the Subcommittee Chairman, to work in a very collaborative 
basis with Members, both Democratic and Republican Members of 
this Subcommittee, to continue this oversight effort throughout 
the 110th Congress. So that is my way of me telling you this 
won't be the last time we see you. And that goes with other 
areas within the jurisdiction of this Subcommittee as we begin 
to try to do our best work on behalf of our constituents.
    The Subcommittee on Energy and Minerals on Public Lands 
will now be adjourned.
    [Whereupon, at 4:15 p.m., the Subcommittee was adjourned.]

    [Additional material submitted for the record follows:]

   Response to questions submitted for the record by Johnnie Burton, 
                 Director, Minerals Management Service

    1. Ms. Burton: I am sorry to have missed the hearing on the 
27th, but I was unable to get back from New York in time to 
attend this important hearing. I also appreciate your providing 
me with a response to my December letter to Secretary 
Kempthorne that same afternoon. It contained a good bit of 
useful information and I appreciate the time you and your staff 
put into it. I am attaching both my letter, the lease agreement 
document and your response for the record.
    However, I would also appreciate your expanding upon the 
first three critiques (bullet points) in my letter, because 
while I believe you met the fourth critique head-on and with 
some detail, my concerns about the implications regarding 
recouping past production, the impacts of future agreements 
with other non-negotiating lease holders on the existing 
agreement, and the potential of the Kerr-McGee lawsuit to 
further derail these renegotiations, did not get addressed 
adequately in my view. Please provide that response for the 
record.
    Answer: The first bullet point in your letter of December 
21, 2006, states that the agreements ``[d]o nothing to recoup 
royalties on past production that has already occurred before 
October 2006 . . . .'' The agreements we have entered into to 
date do not address pre-October 2006 production. Because the 
financial consequences of the future period are several times 
greater than for the past period, our priority is to address 
the future period.
    The second bullet states that the agreement allows the 
lessee to terminate the agreement if the Department, in a 
future agreement with another lessee, agrees to different terms 
that are more favorable to the lessee. The agreements do not 
allow for termination. They do contain a ``most favored 
nation'' provision under which the terms of an existing 
agreement would be conformed to the terms of any subsequent 
agreement entered into with another lessee that is more 
favorable to that lessee. Without this provision, none of the 
lessees with whom we have negotiated was willing to be the 
first to enter into an agreement with the Department. We 
presume that their reluctance arose out of an apprehension that 
they could be harmed if the government made concessions to 
other lessees in subsequent negotiations that it had not made 
to those who signed first. That is why Director Burton noted in 
her February 27 letter that this provision was necessary to 
break open negotiations. In addition, we desire to treat all 
lessees equally. We find no reason to provide an economic 
advantage to one company over another. However, if for some 
unforeseen reason, we had to make a concession to a company 
whose agreement to a lease amendment was critical, then 
everyone should benefit from the same concession. We do not 
anticipate this happening and for these reasons, as I also 
noted in my February 27 letter, we expect this provision to 
have little or no monetary impact.
    The third bullet of your letter notes that the agreement 
will terminate if the United States loses the pending judicial 
challenge to the legality of including price thresholds in the 
deep water leases issued in the 1996-2000 period that do 
include them (i.e., the leases issued in the lease sales held 
in 1996, 1997, and 2000). The Department believes that it is on 
strong legal ground in applying price thresholds to these 
leases. If, however, the courts were to agree with Kerr-McGee, 
the plaintiff in this pending challenge, that section 304 of 
the Deep Water Royalty Relief Act operates to prohibit price 
thresholds on royalty relief granted under that section, then 
inclusion of price thresholds in leases subject to section 304 
would be beyond the Department's statutory authority. The 
section 304 leases include the leases issued in the 1998 and 
1999 lease sales, so under this scenario, the Department would 
not be authorized to collect royalties on the production 
covered by the new agreements.
    The third bullet also states that the agreements will 
terminate if the Department loses ``any other lawsuit alleging 
that the Department lacks this authority.'' This seems to 
reflect a misunderstanding of the provision. Under paragraph 
5(b) of each of the agreements, if the United States prevails 
in the first lawsuit to reach a final non-appealable judgment, 
the agreement will remain in force even if another court were 
to rule against the government in a subsequent case, unless the 
Supreme Court later rules adversely to the United States.
    2. Ms. Burton, it seems that from the very beginning of 
this oil royalty debacle, you, and the Department of the 
Interior have been undermining the American people's ability to 
recoup the missing royalty payments from the 1998 and 1999 
leases. Whether it was opposing my amendment to provide the 
Department of the Interior negotiating incentive tools to bring 
the oil and gas companies to the table, or publicly stating in 
September 2006 ``I don't like to say ``negotiate'' because I 
really don't have anything to trade.'' Now, in testimony 
provided to the Senate Energy and Natural Resources Commerce, 
the Assistant Secretary for Lands and Management, Stephen 
Allred, requested additional authority from Congress to allow 
the Department of the Interior to extend leases for companies 
that choose to renegotiate their 1998 and 1999 leases. I guess 
after talking yourself into a negotiating corner, the 
department wants to somehow add more sweeteners to an oil and 
gas honey pot.
    Which companies are requesting lease extensions as a 
prerequisite for renegotiations?
    Answer: During discussions with companies, including 
Chevron and Devon, this tool was raised as a possible option as 
a way to move forward.
    Has this proposal been submitted to Congress?
    Answer: During a January 18, 2007, hearing before the 
Senate Energy and Natural Resources Committee, Assistant 
Secretary Steve Allred offered this concept in response to a 
question regarding what Congress could do to help the 
Department of the Interior negotiate terms that would result in 
companies paying royalties on leases from the 1998 and 1999 
lease sales. The Department looks forward to working with the 
Congress on this concept.
    What is the reasoning behind this request?
    Answer: The majority of companies have indicated that there 
is management, stockholder or board of director pressure to not 
negotiate such agreements, since they hold valid leases issued 
in 1998 and 1999 without thresholds.
    Presumably, by making a concession such as allowing some 
leases to be extended, companies could go back to stockholders 
and show that they received some benefits in the negotiation. 
In addition, as Assistant Secretary Allred has noted in his 
previous testimony, some proposals that would penalize 
companies that do not sign agreements may have an unintended 
consequence of creating legal risk of enjoining future lease 
sales and delaying new domestic production of oil and natural 
gas. The proposal to extend lease terms may avoid that risk.
                                ------                                

    [A letter dated December 21, 2006, submitted for the record 
by The Honorable Maurice D. Hinchey to Secretary of the 
Interior Dirk Kempthorne follows:]

[GRAPHIC] [TIFF OMITTED] 33676.005

[GRAPHIC] [TIFF OMITTED] 33676.006

[GRAPHIC] [TIFF OMITTED] 33676.007

    [A letter dated February 27, 2007, submitted for the record 
by The Honorable Maurice D. Hinchey from R.M. ``Johnnie'' 
Burton, Director, Minerals Management Service, in response to 
the Hinchey letter dated December 21, 2006, follows:]

[GRAPHIC] [TIFF OMITTED] 33676.008

[GRAPHIC] [TIFF OMITTED] 33676.009

[GRAPHIC] [TIFF OMITTED] 33676.010

[GRAPHIC] [TIFF OMITTED] 33676.011


    [NOTE: A sample Minerals Management Service agreement 
submitted for the record by Mr. Hinchey has been retained in 
the Committee's official files.]

                                 
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