    [House Hearing, 111 Congress]
    [From the U.S. Government Publishing Office]

    H.R. 3534, ``THE CONSOLIDATED LAND, ENERGY, AND AQUATIC RESOURCES ACT
                           OF 2009'' (PARTS 1 AND 2)

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

                              LEGISLATIVE HEARING

                                   before the

                         COMMITTEE ON NATURAL RESOURCES
                         U.S. HOUSE OF REPRESENTATIVES

                         ONE HUNDRED ELEVENTH CONGRESS

                                 FIRST SESSION

                                   __________

                           September 16 and 17, 2009

                                   __________

                               Serial No. 111-35

                                   __________

           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
              DOC HASTINGS, Washington, Ranking Republican Member

    Dale E. Kildee, Michigan             Don Young, Alaska
    Eni F.H. Faleomavaega, American      Elton Gallegly, California
        Samoa                            John J. Duncan, Jr., Tennessee
    Neil Abercrombie, Hawaii             Jeff Flake, Arizona
    Frank Pallone, Jr., New Jersey       Henry E. Brown, Jr., South
    Grace F. Napolitano, California          Carolina
    Rush D. Holt, New Jersey             Cathy McMorris Rodgers, Washington
    Raul M. Grijalva, Arizona            Louie Gohmert, Texas
    Madeleine Z. Bordallo, Guam          Rob Bishop, Utah
    Jim Costa, California                Bill Shuster, Pennsylvania
    Dan Boren, Oklahoma                  Doug Lamborn, Colorado
    Gregorio Sablan, Northern Marianas   Adrian Smith, Nebraska
    Martin T. Heinrich, New Mexico       Robert J. Wittman, Virginia
    George Miller, California            Paul C. Broun, Georgia
    Edward J. Markey, Massachusetts      John Fleming, Louisiana
    Peter A. DeFazio, Oregon             Mike Coffman, Colorado
    Maurice D. Hinchey, New York         Jason Chaffetz, Utah
    Donna M. Christensen, Virgin         Cynthia M. Lummis, Wyoming
        Islands                          Tom McClintock, California
    Diana DeGette, Colorado              Bill Cassidy, Louisiana
    Ron Kind, Wisconsin
    Lois Capps, California
    Jay Inslee, Washington
    Joe Baca, California
    Stephanie Herseth Sandlin, South
        Dakota
    John P. Sarbanes, Maryland
    Carol Shea-Porter, New Hampshire
    Niki Tsongas, Massachusetts
    Frank Kratovil, Jr., Maryland
    Pedro R. Pierluisi, Puerto Rico

                         James H. Zoia, Chief of Staff
                           Rick Healy, Chief Counsel
                     Todd Young, Republican Chief of Staff
                     Lisa Pittman, Republican Chief Counsel
                                     ------

                                    CONTENTS

                                  ----------
                                                                       Page

    Hearing held on Wednesday, September 16, 2009....................     1

    Statement of Members:
        Hastings, Hon. Doc, a Representative in Congress from the
          State of Washington........................................     5
            Prepared statement of....................................     6
        Rahall, Hon. Nick J., II, a Representative in Congress from
          the State of West Virginia.................................     1
            Prepared statement of....................................     3

    Statement of Witnesses:
        Kendall, Mary L., Inspector General (Acting), U.S. Department
          of the Interior............................................    72
            Prepared statement of....................................    73
            Response to questions submitted for the record...........    76
        Lubchenco, Jane, Ph.D., Under Secretary of Commerce for
          Oceans and Atmosphere, National Oceanic and Atmospheric
          Administration, U.S. Department of Commerce................    45
            Prepared statement of....................................    47
            Relevant NOAA Legislative Mandates for the Protection of
              Marine Species and Their Environment...................    50
            Response to questions submitted for the record...........    53
        Rusco, Frank, Director, Natural Resources and Environment,
          U.S. Government Accountability Office......................    78
            Prepared statement of....................................    80
            Response to questions submitted for the record...........    90
        Salazar, Hon. Ken, Secretary, U.S. Department of the Interior     8
            Prepared statement of....................................    12

                                    CONTENTS

                                  ----------
                                                                       Page

    Hearing held on Thursday, September 17, 2009.....................    97

    Statement of Members:
        Hastings, Hon. Doc, a Representative in Congress from the
          State of Washington........................................    97
            Prepared statement of....................................    98
        Smith, Hon. Adrian, a Representative in Congress from the
          State of Nebraska, Statement submitted for the record......   241

    Statement of Witnesses:
        Brian, Danielle, Executive Director, Project on Government
          Oversight..................................................   111
            Prepared statement of....................................   113
            Response to questions submitted for the record...........   117
        Campbell. Alex B., Vice President, Enduring Resources, LLC,
          on behalf of the Independent Petroleum Association of
          Mountain States............................................   198
            Prepared statement of....................................   200
            Response to questions submitted for the record...........   206
        Hodgskiss, Lyle E., Rancher/Senior Loan Officer, Rocky
          Mountain Front Advisory Committee..........................   137
            Prepared statement of....................................   139
        Mann, Christopher, Senior Officer, Pew Environment Group, The
          Pew Charitable Trusts......................................   118
            Prepared statement of....................................   120
            Response to questions submitted for the record...........   124
        Mataczynski, Craig, President and CEO, RES Americas..........   183
            Prepared statement of....................................   185
            Response to questions submitted for the record...........   190
        Morris, Doug, Group Director, Upstream & Industry Operations,
          American Petroleum Institute...............................   220
            Prepared statement of....................................   222
            Response to questions submitted for the record...........   223
        Smith, Hon. Stephen B., Mayor, Pinedale, Wyoming.............    99
            Prepared statement of....................................   101
            Response to questions submitted for the record...........   107
        Squillace, Mark, Professor of Law, and Director, Natural
          Resources Law Center, University of Colorado Law School....   127
            Prepared statement of....................................   130
            Supplemental testimony submitted for the record..........   133
            Response to questions submitted for the record...........   135
        Stover, Dennis E., Ph.D., Executive Vice President, Uranium
          One, Americas, on behalf of the National Mining Association   212
            Prepared statement of....................................   214
            Response to questions submitted for the record...........   217
        Zorn, James E., Executive Administrator, Great Lakes Indian
          Fish and Wildlife Commission...............................   227
            Prepared statement of....................................   229

    Additional materials supplied:
        Alberswerth, David, Senior Policy Advisor, on behalf of The
          Wilderness Society, Statement submitted for the record.....   160
        Board of County Commissioners, Sublette County, Wyoming,
          Letter submitted for the record by Congresswoman Lummis....   153
        DeCoster, Kathy, Vice President and Director of Federal
          Affairs, The Trust for Public Land (TPL), Statement
          submitted for the record...................................   241
        Dooley, Cal, President and CEO, American Chemistry Council,
          Letter and press release submitted for the record by
          Congressman Hastings.......................................   146
        Land and Water Conservation Fund Coalition. Letter submitted
          for the record.............................................   243
        Leshy, John D., Harry D. Sunderland Distinguished Professor
          of Law, University of California, Hastings College of the
          Law, Letter to Chairman Rahall submitted for the record....   159
        Lyons, Patrick, President, Western States Land Commissioners
          Association (WSLCA), Letter to Chairman Rahall submitted
          for the record.............................................   247
        National Mining Association, Statement submitted for the
          record by Congressman Hastings.............................   149
        The Nature Conservancy, Statement and report on the Land and
          Water Conservation Fund submitted for the record by
          Congressman Rahall.........................................   248
        Parnell, Hon. Sean, Governor, State of Alaska, Letter to
          Chairman Rahall submitted for the record...................   259
        Pierpont, Ruth, Director, Division for Historic Preservation,
          New York State Office of Parks, Recreation and Historic
          Preservation, and President of the National Conference of
          State Historic Preservation Officers (NCSHPO), Statement
          submitted for the record...................................   255
        Sierra Club, Letter to the Members of the Committee on
          Natural Resources submitted for the record.................   263
        Simmons, Jerry R., Executive Director, National Association
          of Royalty Owners (NARO), Letter to Chairman Rahall
          submitted for the record...................................   265
        Sims, Jim, President and CEO, Western Business Roundtable,
          Letter submitted for the record by Congressman Hastings....   148
        Skaer, Laura, Executive Director, Northwest Mining
          Association, Letter submitted for the record by Congressman
          Hastings...................................................   163
        Sportsmen for Responsible Energy Development, Statement
          submitted for the record by Congressman Rahall.............   141
            Comments and suggestions submitted for the record........   143

         LEGISLATIVE HEARING (PART 1) ON H.R. 3534, TO PROVIDE GREATER
        EFFICIENCIES, TRANSPARENCY, RETURNS, AND ACCOUNTABILITY IN THE
    ADMINISTRATION OF FEDERAL MINERAL AND ENERGY RESOURCES BY CONSOLIDATING
       ADMINISTRATION OF VARIOUS FEDERAL ENERGY MINERALS MANAGEMENT AND
     LEASING PROGRAMS INTO ONE ENTITY TO BE KNOWN AS THE OFFICE OF FEDERAL
    ENERGY AND MINERALS LEASING OF THE DEPARTMENT OF THE INTERIOR, AND FOR
    OTHER PURPOSES. ``THE CONSOLIDATED LAND, ENERGY, AND AQUATIC RESOURCES
                                 ACT OF 2009''

                                  ----------

                         Wednesday, September 16, 2009

                         U.S. House of Representatives

                         Committee on Natural Resources

                                Washington, D.C.

                                  ----------

        The Committee met, pursuant to call, at 10:08 a.m., in Room
    1324, Longworth House Office Building, Hon. Nick J. Rahall, II
    [Chairman of the Committee] presiding.
        Present: Representatives Rahall, Kildee, Faleomavaega,
    Napolitano, Holt, Grijalva, Bordallo, Costa, Markey, DeFazio,
    Hinchey, Christensen, DeGette, Inslee, Baca, Herseth Sandlin,
    Pierluisi, Sarbanes, Shea-Porter, Tsongas, Kratovil, Hastings,
    Duncan, Flake, Brown, Gohmert, Bishop, Lamborn, Smith, Wittman,
    Broun, Fleming, Coffman, Lummis, McClintock, and Cassidy.

        STATEMENT OF HON. NICK J. RAHALL, II, A REPRESENTATIVE
               INCONGRESS FROM THE STATE OF WEST VIRGINIA

        The Chairman. The Committee on Natural Resources will come
    to order, please. Before the Committee begins and I make my
    opening comments, I would like to take a point of personal
    privilege and say Happy Birthday to a member of our Committee
    who happens to be a classmate of mine who came with me to this
    body some 33 years ago. And he has now reached his, shall I
    say, OK, 80th birthday. Dale Kildee, the gentleman from
    Michigan. I will let the Ranking Minority Member lead us in
    Happy Birthday since I would rather not sing. Happy Birthday,
    Dale.
        The Committee is meeting today to discuss H.R. 3534, the
    Consolidated Land, Energy, and Aquatic Resources Act of 2009,
    appropriately known as the CLEAR Act for its visionary approach
    to putting this country on a more sustainable path for energy
    development on our public lands and off our coasts.
        Our two-part hearing begins today with vital input from the
    Secretary of the Interior, our good friend, Ken Salazar, the
    Administrator of the National Oceanic and Atmospheric
    Administration; Dr. Jane Lubchenco; and two government
    watchdogs. We will continue tomorrow with a variety of
    stakeholder perspectives on this proposal.
        For too long, the only way the Interior Department has
    measured success has been by the number of acres leased and the
    number of wells drilled. Whether or not this was being done
    responsibly, safely, effectively, or with the best interest of
    the American people at heart, was simply an afterthought. We
    know from numerous hearings and a continuing stream of alarming
    reports from the Government Accountability Office and the
    Interior's own Inspector General that this approach has failed.
        Just this week, three--count them, three--new GAO reports
    detailing major flaws in the Federal oil and leasing program
    are being released. These reports add significantly to the
    massive body of investigative work done over the past 25 years
    calling into question the management of the entire Federal oil
    and gas program. In one instance, the mismanagement led to a
    hearing before this Committee regarding the offensive behavior
    of employees in the Royalty-In-Kind Division who put partying
    and cozying up with industry officials above getting a fair
    return for the American taxpayer.
        We have the opportunity, with the current Department of the
    Interior and with responsible action by this Congress, to
    ensure that the development of our Nation's resources is done
    right. The CLEAR Act, which I introduced after months of
    discussions with everyone from environmental groups to the oil
    and gas industry, is a comprehensive effort to steer us toward
    more responsible energy development. Our strategy is not one of
    no development. The CLEAR Act is about smarter development.
        There are those who argue that Congress should just get out
    of the way and allow Federal land management agencies to open
    as much land as possible for drilling. To them I say the Bush
    Administration tried that approach and it failed. The previous
    administration granted every wish the oil and gas industry had,
    and what did this Nation get in return? An upsurge in the price
    of gasoline, increased dependence on foreign oil, a string of
    ethical scandals and a blind eye toward any environmental
    responsibility whatsoever, all while the oil and gas industry
    raked in staggering profits. Doubling down on the mistakes of
    the last 8 years is not the smart way to move forward.
        To those who argue that we need an all-of-the-above
    approach to energy policy, I wholeheartedly agree. Where I
    disagree, however, is that for far too long, when it came to
    environmental responsibility, balanced development, and
    taxpayer protections--and let me stress the last, taxpayer
    protections--the previous administration pursued a none-of-the-
    above strategy.
        The CLEAR Act will change that. Offshore, this bill creates
    a more comprehensive framework for siting and developing energy
    projects while taking into consideration the other uses and
    needs of the offshore environment. While the existing process
    works well in those areas that already have oil and gas
    development, it is poorly suited for areas where new
    infrastructure may be required and new kinds of energy
    development may be possible. In addition to ensuring that
    fragile ecosystems and crucial fishing grounds remain
    protected, the CLEAR Act will give industry more
    predictability.
        When it comes to offshore energy development, the costs of
    doing it right are negligible, but the consequences of doing it
    wrong are disastrous.
        We believe this approach is an important piece of a larger
    comprehensive ocean planning effort that the President's
    Interagency Ocean Task Force is considering right now. That
    task force will issue its first recommendations this week, and
    we expect to work closely with the Administration as it moves
    forward.
        Onshore, this bill recognizes that we need to get serious
    about renewable development with a comprehensive leasing
    program to facilitate fair access and smart siting rather than
    ad hoc projects under special use permits or rights-of-way.
        This bill would establish the Office of Federal Energy and
    Minerals Leasing, combining the energy development work
    currently split between the MMS and the Bureau of Land
    Management. Having one agency doing the leasing and one agency
    collecting the money is inefficient, unnecessary, complex, and
    potentially costs the American people millions in lost
    royalties. The new office will help simplify matters for oil
    and gas companies and renewable energy developers, while
    allowing BLM to focus on its primary role as a multiple-use
    land management agency. And further, the legislation would
    dedicate a small portion of the enormous revenues generated by
    energy development toward fully funding the Land and Water
    Conservation Fund and the newly created Ocean Resources
    Conservation Assistance, or ORCA Fund. Through both programs we
    will reinvest proceeds from development into conservation.
        This bill is a step toward restoring a balance to the
    management of our Federal oil and gas programs, and I commend
    Secretary Salazar for beginning that process and certainly for
    taking time to be with us today. He recognizes that we need to
    develop these resources, but he has also taken important steps
    to ensure that public lands containing important wildlife
    habitat, wilderness, and other non-renewable natural resources
    are protected.
        I look forward to our discussion of H.R. 3534 and how we
    can best restore balance and common sense to our energy
    programs. And I recognize the Ranking Minority Member.
        [The prepared statement of Mr. Rahall follows:]

           Statement of The Honorable Nick J. Rahall, II, Chairman,
                         Committee on Natural Resources

        The Committee is meeting today to discuss H.R. 3534, the
    ``Consolidated Land, Energy, and Aquatic Resources Act of 2009,''
    appropriately known as the CLEAR Act for its visionary approach to
    putting this country on a more sustainable path for energy development
    on our public lands and off our coasts.
        Our two-part hearing begins today with vital input from the
    Secretary of the Interior, Ken Salazar, the Administrator of the
    National Oceanic and Atmospheric Administration, Dr. Jane Lubchenco,
    and two government watchdogs. We will continue tomorrow with a variety
    of stakeholder perspectives on this proposal.
        For too long, the only way the Interior Department measured success
    was by the number of acres leased and the number of wells drilled.
    Whether or not this was being done responsibly, safely, effectively, or
    with the best interests of the American people at heart was simply an
    afterthought.
        We know from numerous hearings and a continuing stream of alarming
    reports from the Government Accountability Office and the Interior
    Department's Inspector General that this approach has failed. Just this
    week, three new GAO reports detailing major flaws in the federal oil
    and leasing program are being released.
        These reports add significantly to the massive body of
    investigative work done over the past 25 years calling into question
    the management of the entire federal oil and gas program.
        In one instance, this mismanagement led to a hearing before this
    Committee regarding the offensive behavior of employees in the Royalty-
    in-Kind division who put partying and cozying up with industry
    officials above getting a fair return for the American taxpayer.
        We have the opportunity, with the current Department of the
    Interior and with responsible action by this Congress, to ensure that
    the development of our nation's resources is done right.
        The CLEAR Act, which I introduced after months of discussions with
    everyone from environmental groups to the oil and gas industry, is a
    comprehensive effort to steer us toward more responsible energy
    development. Our strategy is not one of ``no development''--the CLEAR
    Act is about smarter development.
        There are those who argue that Congress should just get out of the
    way and allow federal land management agencies to open as much land as
    possible for drilling. To them I say the Bush Administration tried that
    approach and it failed.
        The previous Administration granted every wish the oil and gas
    industry had and what did the Nation get in return? An upsurge in the
    price of gasoline, increased dependence on foreign oil, a string of
    ethical scandals and a blind eye toward any environmental
    responsibility whatsoever; all while the oil and gas industry raked in
    staggering profits.
        Doubling down on the mistakes of the last eight years is not the
    smart way to move forward.
        To those who argue that we need an ``all of the above'' energy
    policy, I wholeheartedly agree.
        Where I disagree, however, is that for too long when it came to
    environmental responsibility, balanced development, and taxpayer
    protections--and let me stress that, taxpayer protections--the previous
    Administration pursued a ``none of the above'' strategy. The CLEAR Act
    will change that.
        Offshore, this bill creates a more comprehensive framework for
    siting and developing energy projects while taking into consideration
    the other uses and needs of the offshore environment.
        While the existing process works well in those areas that already
    have oil and gas development, it is poorly suited for areas where new
    infrastructure may be required and new kinds of energy development may
    be possible.
        In addition to ensuring that fragile ecosystems and crucial fishing
    grounds remain protected, the CLEAR Act will give industry more
    predictability. When it comes to offshore energy development, the costs
    of doing it right are negligible, but the consequences of doing it
    wrong are disastrous.
        We believe this approach is an important piece of a larger,
    comprehensive ocean planning effort that the President's Interagency
    Ocean Task Force is considering right now. That Task Force will issue
    its first recommendations this week, and we expect to work closely with
    the Administration as it moves forward.
        Onshore, this bill recognizes that we need to get serious about
    renewable development with a competitive leasing program to facilitate
    fair access and smart siting, rather than ad hoc projects under special
    use permits or rights-of-way.
        This bill would also establish the Office of Federal Energy and
    Minerals Leasing, combining the energy development work currently split
    between the Minerals Management Service and the Bureau of Land
    Management.
        Having one agency do the leasing, and one agency collect the money,
    is inefficient, unnecessarily complex, and potentially costs the
    American people millions in lost royalties.
        The new office would help simplify matters for oil and gas
    companies and renewable energy developers, while allowing BLM to focus
    on its primary role as a multiple-use land management agency.
        Further, the legislation would dedicate a small portion of the
    enormous revenues generated by energy development toward fully funding
    the Land and Water Conservation Fund and the newly-created Ocean
    Resources Conservation Assistance, or ORCA, Fund. Through both programs
    we will reinvest proceeds from development in conservation.
        This bill is a step towards restoring a balance to the management
    of our federal oil and gas programs, and I commend Secretary Salazar
    for beginning that process.
        He recognizes that we need to develop these resources, but he has
    also taken important steps to ensure that public lands containing
    important wildlife habitat, wilderness and other non-renewable natural
    resources are protected.
        I look forward to our discussion of H.R. 3534, and how we can best
    restore balance and common sense to our energy programs.
                                     ______

      STATEMENT OF HON. DOC HASTINGS, A REPRESENTATIVE INCONGRESS
                      FROM THE STATE OF WASHINGTON

        Mr. Hastings. Thank you, Mr. Chairman. I am pleased to join
    you in welcoming Secretary Salazar to the Natural Resources
    Committee. We very much appreciate your taking the time to be
    here today.
        Mr. Chairman, a specific topic of today's hearing is H.R.
    3534, your legislation. Under the schedule set by you,
    Secretary Salazar is the first of many witnesses that this
    Committee will hear over the course of the next two days.
        This legislation needs very careful and thorough review.
    Let me give you a few of my observations of that. At a time
    when our Nation should be focused on creating jobs and
    producing more energy here in America, this legislation appears
    to me to erect more roadblocks to energy job creation and
    production. For example, this legislation creates a new
    bureaucracy, it raises the cost of producing energy with higher
    and new fees, and it potentially adds years of delay to energy
    development, both offshore and on Federal lands. In my view,
    all of this will cost us the high-wage energy jobs that our
    American economy desperately needs right now. These roadblocks
    impact not just oil and natural gas, but also the production of
    wind and solar renewable energy. So, it is difficult to discern
    how this legislation will result in more domestic energy
    production.
        Just as the Waxman-Markey national energy tax will drive up
    the cost of energy in America and send jobs overseas to foreign
    nations, this bill, too, fails to produce more energy, and it
    potentially costs us jobs here in America.
        On the other hand, the Republican all-of-the-above energy
    plan stands in stark contrast to the Democratic agenda to erect
    new obstacles and levy high taxes on more energy developed in
    the United States. That bill, H.R. 2846, was introduced in June
    and its consideration is under the jurisdiction of this
    Committee.
        While many in Washington want to pick and choose which
    energy jobs to create, the Republican all-of-the-above plan is
    focused on creating all of the energy jobs that we can--green
    jobs, solar jobs, wind jobs, drilling jobs, nuclear jobs, and
    clean coal jobs. With unemployment reaching almost 10 percent
    nationally, our Nation can't afford to only pursue one aspect--
    and that is the green jobs. We need to get all the jobs that we
    can get.
        So, I hope, Mr. Chairman, that we can explore the benefits
    of H.R. 2846. In addition to questions about Mr. Rahall's
    legislation, I know that many of my colleagues, likely on both
    sides of the aisle, will have additional matters that they wish
    to raise with the Secretary.
        There is a great deal that has happened during the first 8
    months of this new administration, and today's hearing is an
    opportunity to talk directly with the Secretary about matters
    under his jurisdiction at the Department of the Interior. For
    example, there is great concern over the 6-month delay that has
    been imposed on development of the new 5-year leasing program
    for offshore drilling.
        Last year, President Bush and the Congress lifted the
    moratorium on offshore drilling. Yet, in spite of the broad
    bipartisan support across the country for opening additional
    areas of drilling, among the first acts of this administration
    was to put such plans on hold for 6 months. Next Monday marks
    the end of this 6-month period, and I hope the Secretary will
    detail for us the plans for moving forward promptly with the 5-
    year offshore leasing plan.
        At the same time that new offshore leases were being
    delayed, other actions were taken by the Department that also
    harmed the production of more American energy and creation of
    American jobs. Oil and gas leases were suddenly withdrawn in
    Utah, and oil shale research that would create new jobs in
    Colorado, Wyoming, and Utah were delayed, and $31 billion in
    higher taxes on oil and gas production that were proposed in
    the President's budget.
        I know there are members of this Committee who wish to try
    to understand how the spoken words of this administration in
    support of more energy production matches up against their
    actions that, frankly, appear contradictory to their spoken
    words.
        There is also the $3 billion in economic stimulus funds
    that the Department received this year. I am sure many on the
    Committee are interested in hearing how this large sum of money
    is being spent and how many specific jobs have been created.
        So, Mr. Chairman, in the interest of allowing as much time
    as possible to hear from the Secretary, I will conclude my
    remarks. And again, thank you for holding this hearing, and I
    want to thank, once again, the Secretary for appearing in front
    of the Natural Resources Committee. With that, I yield back.
        [The prepared statement of Mr. Hastings follows:]

           Statement of The Honorable Doc Hastings, Ranking Member,
                         Committee on Natural Resources

        Thank you Mr. Chairman.
        The specific topic of today's hearing is H.R. 3534. Under the
    schedule set by Chairman Rahall, Secretary Salazar is just the first of
    many witnesses that the Committee will hear from over the course of two
    days. This legislation needs very careful and thorough review. At a
    time our nation should be focused on creating jobs and producing more
    energy here in America, this legislation erects more roadblocks to
    energy job creation and production. For example, it creates a new
    bureaucracy, it raises the costs of producing energy with higher and
    new fees, and it potentially adds years of delay to energy development
    both offshore and on federal lands. In my view, all of this will cost
    us the high-wage energy jobs that America's economy desperately needs.
    These roadblocks impact not just oil and natural gas, but also the
    production of wind and solar renewable energy.
        It is difficult to discern how this legislation will result in more
    domestic energy production. Just as the Waxman-Markey National Energy
    Tax will drive up the cost of energy in America and send jobs overseas
    to foreign nations, this bill too fails to produce more energy and
    costs us jobs.
        The Republican ``all-of-the-above'' energy plan stands in stark
    contrast to the Democrat agenda to erect new obstacles and levy high
    taxes on more energy development in the United States. That bill, H.R.
    2846, was introduced in June and its consideration is under the
    jurisdiction of this Committee. This ``all-of-the-above'' plan has four
    main objectives:
          Increase production of American-made energy in an
    environmentally responsible and sound manner;
          Promote new, clean and renewable sources of energy such
    as nuclear, hydropower, clean-coal-technology, wind and solar energy;
          Encourage greater efficiency and conservation by
    extending tax incentives for energy efficiency and rewarding
    development of greater conservation techniques and new energy
    resources; and,
          Cut red-tape and reduce frivolous litigation.
        While many in Washington, DC want to pick and choose which energy
    jobs to create, the Republican ``all-of-the-above'' plan is focused on
    creating ALL of the energy jobs we can: green jobs, solar jobs, wind
    jobs, drilling jobs, nuclear jobs, clean-coal jobs. With unemployment
    reaching almost 10 percent nationally, our nation can't afford to only
    pursue green jobs, we need all the jobs we can get.
        In addition to questions about Chairman Rahall's legislation, I
    know many of my colleagues, likely on both sides of the aisle, will
    have additional matters they wish to raise with Secretary. There is a
    great deal that has happened during the first eight months of this new
    Administration and today's hearing is an opportunity to talk directly
    with the Secretary about matters under his jurisdiction at the Interior
    Department.
        For example, there is great concern over the six-month delay that
    has been imposed on development of the new five-year leasing program
    for offshore drilling. Last year, President Bush and Congress lifted
    the moratoria on offshore drilling. Yet, in spite of the broad,
    bipartisan support across the country for opening additional areas for
    drilling, among the first acts of this Administration was to put such
    plans on hold for six-months. Next Monday marks the end of this six-
    month period and I hope the Secretary will detail for us the plans for
    moving forward promptly with the five-year offshore leasing program.
        At the same time that new offshore leases were being delayed, other
    actions were taken by the Department that also harmed the production of
    more American energy and creation of jobs. Oil and gas leases were
    suddenly withdrawn in Utah, oil shale research that would create new
    jobs in Colorado, Wyoming and Utah were delayed, and $31 billion in
    higher taxes on oil and gas production were proposed in the President's
    budget. I know there are Members of the Committee who wish to try and
    understand how the spoken words of this Administration in support of
    more energy production match-up against their actions to block and
    delay it.
        There is also the $3 billion in economic stimulus funds that the
    Department received. I'm sure many on the Committee are interested in
    hearing how this large sum of money is being spent and how many
    specific jobs have been created.
        So, in the interest of allowing as much time as possible to hear
    from the Secretary, I'll conclude my remarks by again thanking the
    Chairman for holding this hearing and the Secretary for appearing
    before us.
                                     ______

        The Chairman. Thank you, Doc. Members are reminded that
    pursuant to Committee Rule 3(c), they are required to limit
    their remarks to the subject matter under consideration today.
    Members are also advised that the Chair will be strictly
    enforcing the 5-minute rule during questioning, and that
    Members will be recognized in the order in which they arrived.
        It is now my honor to recognize a dear friend to each of us
    on this Committee, both sides of the aisle, and a former Member
    of the Congress of the United States, and now the 50th
    Secretary of the Department of the Interior, and the 9th with
    whom I have served, the gentleman from Colorado, The Honorable
    Ken Salazar. Mr. Secretary, welcome.
        Secretary Salazar. Thank you very much, Chairman Rahall.
        The Chairman. Let me mention who you are accompanied by:
    The Honorable Wilma Lewis, Assistant Secretary, Land and
    Minerals Management, U.S. Department of the Interior; The
    Honorable Bob Abbey, the Director of the Bureau of Land
    Management; and Ms. S. Elizabeth Birnbaum, the Director of the
    Minerals Management Service. Is that correct?
        Secretary Salazar. That is correct.
        The Chairman. Thank you. You may proceed.

     STATEMENT OF HON. KEN SALAZAR, SECRETARY, U.S. DEPARTMENT OF
    THE INTERIOR, ACCOMPANIED BY WILMA LEWIS, ASSISTANT SECRETARY,
    LAND AND MINERALS MANAGEMENT, U.S. DEPARTMENT OF THE INTERIOR;
    BOB ABBEY, DIRECTOR, BUREAU OF LAND MANAGEMENT, U.S. DEPARTMENT
    OF THE INTERIOR; AND S. ELIZABETH BIRNBAUM, DIRECTOR, MINERALS
          MANAGEMENT SERVICE, U.S. DEPARTMENT OF THE INTERIOR

        Secretary Salazar. Thank you very much, Chairman Rahall and
    Ranking Member Hastings, as well as members of the Committee on
    both sides of the aisle, Democrats and Republicans. I worked
    with you on many issues. I know there are actually three
    members on this Committee from my home State of Colorado,
    Congressmen Lamborn and Coffman and Congresswoman Diana
    DeGette. And so it is good to have an opportunity to work with
    all of you as we work on one of the most important and
    signature issues of the 21st Century. And I hope that today's
    hearing is only a beginning of our conversation that will take
    us over the weeks and months ahead to really grasp a new
    reality for the energy future for the United States of America.
    And this is a good beginning.
        I wanted my staff to be here with me today because they are
    not only my staff, but they are the leaders within the
    Department of the Interior; and you as Members will be
    interfacing with them in the days ahead as we craft
    comprehensive energy legislation for our Nation.
        To my right, Wilma Lewis, who is the Assistant Secretary
    for Land and Minerals, appointed by President Obama. She was
    confirmed by the Senate in August. She had worked at the
    Department of the Interior as the Associate Solicitor. She also
    had served as Inspector General for the Department of the
    Interior. That is an important point to make, an important
    factor in my selection of her to run this important part of the
    Department because of the ethical lapses that have been a part
    of the Department of the Interior over the last 8 years. Her
    past work as U.S. Attorney--she was a United States Attorney
    for the District of Columbia--will also be helpful to us as we
    manage this end of the Department. Her 28-year professional
    experience will be very helpful to all of us.
        Bob Abbey, to my left, appointed by the President,
    confirmed by the Senate to be the Director of the Bureau of
    Land Management, brings with him 30 years of on-the-ground
    experience running the Bureau of Land Management. He knows the
    lands and multiple-use issues of the Bureau of Land Management
    throughout the country like no one else and will be helpful to
    us as we address the myriad of issues that come before this
    Committee.
        And Liz Birnbaum, appointed to be Director of the Minerals
    Management Service by President Obama and me. She has 20 years
    of experience in natural resource law and policy. She has
    actually been a staff member here in the House, including
    working with the House Committee on Natural Resources. She also
    served in the past in the Solicitor's Office as a lawyer in the
    Department of the Interior, and most recently was a staff
    director for the Committee on House Administration here in the
    House. She will be one of the team members that will help us
    straighten up what I believe has been a significant mess that
    we inherited within the Department of the Interior.
        I wanted them to be here today because I wanted them to
    hear from you. And I want them to be part of the team as we try
    to put together the framework for energy development and those
    responsibilities that the Department of the Interior has as we
    move forward.
        Let me finally just make a comment, some comments that I
    want to make about the Department of the Interior. The
    Department of the Interior is a large Department. We oversee 20
    percent of the land mass of the United States of America. We
    oversee 1.75 billion acres of the Outer Continental Shelf.
        Congresswoman Diana DeGette, good morning.
        We have responsibilities in lots of different ways that I
    know many of you are interested in. In the U.S. Fish and
    Wildlife Service, since the days of T.R. Roosevelt and his
    beginnings on the fish and wildlife and the protection of fish
    and wildlife, we now have 550 wildlife refuges around the
    United States of America that cover 150 million acres. Our
    national parks, which have 391 units, are visited by over 300
    million people a year, and are in every one of the States of
    the United States of America, with the exception of Delaware,
    and we are working on a national park in Delaware.
        Our Bureau of Land Management oversees over 250 million
    acres of land, much of it in the Western States in places like
    Utah, Nevada, Colorado, other States where a very significant
    percentage of those lands are overseen by the Bureau of Land
    Management.
        Our other agencies include the U.S. Geological Survey which
    has a huge role with its 10,000 scientists in helping us
    understand the realities of climate change on issues like
    carbon sequestration, biological sequestration and the like.
        And so as we move forward in this time under President
    Obama's Administration, we look very much forward to working
    with the Members of Congress as we tackle the difficult issues
    of an energy future for America, as well as addressing the
    issues of climate change, which, while they may be debatable
    issues--and certainly the debate is one that is ongoing and
    healthy--they are issues which we must grapple with, they are
    issues that we cannot afford to fail in.
        I want to very quickly touch on energy production which is
    really, I think, at the heart of what you are trying to
    accomplish with the CLEAR Act here, Mr. Chairman, and others of
    you who care so much about this issue. We at the Department,
    since we came on in January 21 when I walked in, have moved
    forward with the energy production, both on the renewable
    energy front as well as with conventional energy.
        I want to spend just a minute speaking to this Committee
    about that, because they are in many ways new beginnings for
    the Department of the Interior, but also a continuation of the
    programs that were already in existence. In terms of new
    beginnings and renewable energy, it is a new page that we have
    turned for the Department of the Interior, because in the past
    this Department was very much focused on issuing leases on oil
    and gas, and that was about the end of the energy production
    programs of the Department of the Interior. We have a new
    beginning as we attempt to harness the power of the sun, the
    power of geothermal, the power of the wind and the other power
    of renewable energy within the Department, and through existing
    authorities that we already have and support from Congress, we
    have moved aggressively on this agenda. I won't go through all
    the detail of it. Some of it is in the written testimony, but
    we are fast-tracking solar, wind, and geothermal energy
    projects throughout the country. We have set aside 1,000 square
    miles of land for intensive study for solar energy production
    in States in the Western part of America. We have over 20
    applications for large-scale solar and wind and geothermal
    commercial facilities that we are processing and have put on
    the fast track and hope to have those permitted by the end of
    next year.
        Our expectation is that those renewable energy, clean
    energy jobs or projects, will create as many as 50,000 jobs
    here in the United States of America. And so we are not
    waiting. We have moved forward with all of our power to develop
    the new energy frontier for the United States of America.
        At the same time, it is important to remind this Committee
    that we have moved forward with the development of conventional
    energy resources. I hear from some Members of Congress from
    time to time that we have abandoned conventional oil and gas
    production, and that simply is not the case. The facts will
    demonstrate that we have continued to lease for oil and gas
    development, both in the Outer Continental Shelf as well as in
    the onshore.
        In the onshore we have, up to this point in time from
    January till now, conducted 21 lease sales. We have offered 2.4
    million acres of land for oil and gas exploration and
    development just on the onshore alone. In the offshore, we have
    conducted two lease sales in the Gulf of Mexico, lease sale 208
    and lease sale 210, and there we have offered 52 million acres
    of land or area in the Outer Continental Shelf for oil and gas
    exploration and production.
        I think what this should underscore to Members of the
    Committee is that President Obama and his administration are
    committed to a comprehensive energy plan. We know that we will
    grasp the new future renewable energy. But we also recognize
    that the development of our oil and gas resources, and
    particularly natural gas, are a very important part of us
    pulling together a comprehensive energy plan. That is what the
    President spoke about during the campaign. That is the charge
    that he has given to all of us who are working on this agenda
    on his behalf.
        We need to move forward with an effective energy plan. But
    at the end of the day we will address the cardinal goals which
    he has talked about, and that is that we must reduce our
    dependence on foreign oil, something which, whether it is
    Chairman Rahall or Ranking Member Hastings, we have been on
    this bandwagon for a long time. But frankly, the United States
    of America has failed decade after decade. The time for failure
    is over on our need to get our independence from foreign oil.
        Second, we need to create clean energy jobs and energy jobs
    of all kinds here in the United States of America. And we are
    sending over $400 billion a year to places far away every year
    as we import oil. That is money that could be helping us create
    our own energy future and a strong economy here in the United
    States of America.
        And third, the reality of the dangers of pollution to our
    planet and to our children is something that we have to grapple
    with. We have to grapple with that here in this country, and
    obviously it is something that the Congress has been engaged
    in. So, our hope is that through the Department of the
    Interior, through the land resources that we manage on behalf
    of the American people, that we will be able to contribute to
    that energy future.
        I want to speak just a little bit about--make three or four
    quick points on the legislation which is before us or before
    the Committee this morning. They raise important questions. The
    legislation that is under consideration raises important
    questions both about the organization of the Department of the
    Interior, as well as how we make sure that the United States of
    America collects a fair return for resources that are owned by
    the American taxpayer. These are fundamental questions.
        The question of royalty rates. Last year, in the Gulf Coast
    of Mexico, the royalty rates were raised over 18 percent. On
    the onshore, they have not been raised for a long time, and
    they remain at 12.5 percent where they have been for a very
    long time, so there is a question of royalty rates. There is a
    question of how we approach the simplification of royalty
    rates. Is the way in which royalty rates are being calculated
    the appropriate way, or is there a better way for us to
    calculate those royalty rates?
        Renewable energy fees and royalties. How do we charge for
    the use of public lands or for the use of the ocean or wind
    energy, for example, off the Atlantic? How do we charge for the
    use of those public assets as we produce energy for the United
    States of America? What is the then appropriate end use of
    those revenues that are generated from our public lands? Is the
    appropriate use to invest some of those monies back into land
    and water conservation as has been done in the past under LWCF?
    Are there changes that are important to be made as we look at
    these revenues that come into the United States of America
    Treasury, both with respect to conventional energies, as well
    as with respect to renewable energies? Those are very important
    questions.
        Within our Department, how do we best organize and how do
    we work with our sister agencies, including the Department of
    Commerce, with respect to what happens in the oceans? How do we
    bring MMS together to have a more synchronizing and less siloed
    approach to dealing with the issues of leasing and royalty
    collection? Those are all issues that this team is working on.
        The people who are at this table with me were not confirmed
    until right before the Senate adjourned for its recess, but
    they are working on this full-time all the time, and I expect
    that we will have many more announcements with respect to
    organization.
        I want to make one announcement this morning and that is
    with respect to the Royalty-In-Kind program. The Royalty-In-
    Kind program has been a blemish, in my view, on this
    Department, and it really has been the source which both the
    Office of Inspector General and the GAO have pointed out have
    created problems and ethical lapses within the Department.
        As Chairman Rahall pointed out in his comments, you know,
    the occurrences that happened at MMS in the last several years
    where there were allegations of sex and drugs and a whole host
    of other inappropriate conduct regarding employees of MMS and
    the industry, are issues of concern. They are issues of concern
    to this Congress. They are issues of concern to me as Secretary
    of the Interior. And so we have moved forward and tried to
    address those issues. We have set forth new ethics guidelines
    to all of the employees who work throughout the Department,
    including those who work at MMS. We have assigned a full-time
    ethics lawyer to basically provide guidance and advice to the
    employees who work at the MMS facilities. And in addition to
    that, my decision is it is time for us to end the Royalty-In-
    Kind program.
        The Royalty-In-Kind program was set up at a time when
    people thought that that was a good way for the Department of
    the Interior of the United States of America to make more money
    essentially by taking product instead of taking the royalty
    price for the oil that was being sold. But we certainly don't
    do that in the timber arena. We don't stockpile, if you will,
    timber assets and then go out to the market and try to figure
    out how we can make more money from the sale of the product.
        We don't do it in the grazing arena, for those of you from
    ranching country, where we don't compile all of the grazing
    assets when we go out and try to figure out how we ourselves
    are going to raise the cattle and then go ahead and get a
    higher return for it.
        My view of the Royalty-In-Kind program is that we should
    end it, and because it is created through administrative order
    and the authority which I have as Secretary, I do intend to
    terminate the Royalty-In-Kind program. And as I terminate the
    Royalty-In-Kind program, my comment to the members of this
    Committee is to ask you to continue to work with us as we move
    forward with the broader issue, because the Royalty-In-Kind
    program and its termination is only one thing that we have to
    do with respect to how we address the whole issue of royalties
    from oil and gas production on our public lands.
        There are many other issues out there, including royalty
    simplification. How do we make the collection of royalties more
    transparent and easier to do and less subject to the kinds of
    issues that both the OIG and the General Accounting Office have
    raised?
        So, my hope is that as I move forward, working with
    Assistant Secretary Lewis and Director Abbey and Director
    Birnbaum, that we will be able to come up with a management
    organization, and a set of recommendations around royalty
    collections for the United States.
        And with that, Mr. Chairman, I would be happy to take
    questions.
        [The prepared statement of Secretary Salazar follows:]

              Statement of The Honorable Ken Salazar, Secretary,
                        U.S. Department of the Interior

    Introduction
        Thank you, Chairman Rahall, Ranking Member Hastings, and Members of
    the Committee. I am here today to discuss H.R. 3534, the ``Consolidated
    Land, Energy, and Aquatic Resources Act of 2009.'' I look forward to
    working with you and the Members of this Committee over the coming
    weeks as we continue a dialogue on this legislation.
    Background
        With its significant land, energy, and natural resource management
    responsibilities, the Department of the Interior is helping to lead as
    the United States achieves the President's goal of energy independence.
    The Department manages 500 million acres of land, one-fifth of the land
    mass of the United States, and another 1.7 billion acres of the Outer
    Continental Shelf. This land base includes areas which boast some of
    the highest quality renewable energy resources available for
    development today: solar in the southwest; wind in the Atlantic, on the
    Great Plains and in the west; and geothermal in the west.
        The BLM has identified a total of approximately 20.6 million acres
    of public land with wind energy potential in the 11 western states and
    approximately 29.5 million acres with solar energy potential in the six
    southwestern states. There are over 140 million acres of public land in
    western states and Alaska with geothermal resource potential. There is
    also significant wind and wave potential in our offshore waters. The
    National Renewable Energy Lab, a Department of Energy national
    laboratory, has identified more than 1,000 gigawatts of wind potential
    off the Atlantic coast ``roughly equivalent to the Nation's existing
    installed electric generating capacity--and more than 900 gigawatts of
    wind potential off the Pacific Coast. The scope of the Department's
    land ownership also gives it an important role, in consultation with
    relevant federal, state, regional and local authorities, in siting the
    new transmission lines needed to bring renewable energy assets to load
    centers.
        Since the beginning of the Obama Administration, the Department has
    been focused on these issues and has set Department priorities for the
    environmentally responsible development of renewable energy on our
    public lands and the OCS. Industry has started to respond by investing
    in wind farms off the Atlantic seacoast, solar facilities in the
    southwest, and geothermal energy projects throughout the west. Power
    generation from these new energy sources produces virtually no
    greenhouse gases and, when installed in an environmentally sensitive
    manner, they harness abundant, renewable energy that nature itself
    provides and with minimum impact.
    Renewable Energy Successes
        On March 11, 2009, I issued my first Secretarial Order that made
    facilitating the production, development, and delivery of renewable
    energy on public lands and the OCS top priorities at the Department.
    These goals will be accomplished in a manner that does not ignore, but
    instead protects our signature landscapes, natural resources, wildlife,
    and cultural resources, and working in close collaboration with all
    relevant federal, state, Tribal and other agencies with natural
    resource stewardship authority. The order also established an energy
    and climate change task force within the Department, drawing from the
    leadership of each of the bureaus. The task force is responsible for,
    among other things, quantifying the potential contributions of
    renewable energy resources on our public lands and the OCS and
    identifying and prioritizing specific ``zones'' on our public lands
    where the Department can facilitate a rapid and responsible move to
    significantly increased production of renewable energy from solar,
    wind, geothermal, and biomass sources, and incremental or small
    hydroelectric power on existing structures.
        The task force is prioritizing the intra-Department permitting and
    appropriate environmental review of transmission rights-of-way
    applications on public lands for transmission lines to deliver
    renewable energy to consumers. The task force is also working to
    resolve obstacles within the Department to renewable energy permitting,
    siting, development, and production on federal lands without
    compromising environmental values.
        In April, Chairman Wellinghoff of the Federal Energy Regulatory
    Commission and I signed an agreement clarifying our respective
    agencies' jurisdictional responsibilities for leasing and licensing
    renewable energy projects on the U.S. Outer Continental Shelf. In late
    June we offered five limited leases to construct meteorological towers
    in support of offshore wind energy development off the coasts of New
    Jersey and Delaware, the first of their kind offered by the federal
    government. I am pleased to announce that the first of those leases has
    been signed, supporting our first OCS wind development. Senate Majority
    Leader Harry Reid and I also worked together to put forward ``fast-
    track'' initiatives for solar energy development on western lands.
    Responsible Development of Conventional Resources
        At the same time, we must recognize that we will rely on
    conventional sources--oil, gas, and coal--for a significant portion of
    our energy for many years to come. We have made great strides balancing
    the accelerated development of clean energy from renewable domestic
    sources with the responsible development of conventional energy sources
    while protecting our treasured landscapes, wildlife, and cultural
    resources.
        Since January the Department has offered more than 2.4 million
    acres on our public lands for oil and gas development in 21 lease
    sales, with over 780,000 of those acres going under lease and
    attracting more than $70.2 million in bonus bids and fees. We have
    plans for another 19 sales in the remaining months of this year. On the
    Outer Continental Shelf, we offered 52.9 million acres in two lease
    sales in the Gulf of Mexico; leased a total of 2.7 million of those
    acres; and collected total revenue of more than $815 million.
        I extended the public comment period on the Draft Proposed 5-year
    Program for the OCS produced by the previous Administration until
    September 21, 2009. At that time I also requested from Departmental
    scientists a report that detailed conventional and renewable offshore
    energy resources and identified where information gaps exist. I have
    held regional meetings with interested stakeholders to review the
    findings of that report and gather input on where and how we should
    proceed with offshore energy development. The additional information
    and input from states, stakeholders, and affected communities gained
    during this process will allow us to adopt, in a timely fashion, a
    truly comprehensive energy program for the OCS to succeed the existing
    2007-2012 Program.
    The Consolidated Land, Energy, and Aquatic Resources Act
        The Consolidated Land, Energy, and Aquatic Resources Act is a
    comprehensive bill that would make significant changes in the way the
    Department carries out its energy and mineral leasing programs. The
    Administration has not had an opportunity to fully analyze and consider
    the impacts of many components of this legislation.
        However, we are in agreement with the legislation's primary goals
    of ensuring a balanced and responsible approach to energy development
    on our public lands and that dependable oversight and sensible reform
    of mineral royalty programs is achieved. Like you, I support reforms of
    the mineral leasing process and programs that will enable us to manage
    our onshore and offshore resources more effectively and responsibly. In
    my statement today I will speak generally about several of the major
    issues addressed by the bill and the work that we are doing to address
    these issues.
        I appreciate the opportunity to work with you on this legislation.
    Mineral Reorganization and Reform
        Title I of H.R. 3534 would carry out a statutory reorganization of
    the Department's leasing programs. I am committed to working closely
    with the Congress to improve our management and our programs and to
    fulfill our stewardship responsibilities to the Nation. My energy team
    has come together in the past month as the Senate has confirmed key
    members. We recognize that an efficient and effective leasing program
    is integral to both the Department's rapidly developing renewable
    program and the existing mineral leasing program. I believe we can
    accomplish many reform-minded changes to these programs
    administratively.
        For example, I am developing options to improve the coordination
    between the Minerals Management Service and the Bureau of Land
    Management in on- and offshore leasing and revenue management policies
    related to domestic energy production--both conventional and
    renewable--from federal lands. I intend to bring needed coordination
    and strategic guidance to the Department's energy development programs
    and to its implementation of significant reforms, including
    recommendations for improvement from the reports of the Government
    Accountability Office and the Office of the Inspector General.
        My Interior team is also working hard at a fundamental
    restructuring of the Minerals Management Service's royalty programs,
    including the Royalty-In-Kind program. Today I am announcing a phased-
    in termination of the program and an orderly transition over time to a
    more transparent and accountable royalty collection program. This
    transition will factor in the need for domestic oil supplies. This
    restructuring will be overseen by my Assistant Secretary for Lands and
    Minerals Management, Wilma Lewis, Liz Birnbaum, the Director of MMS,
    and Bob Abbey, the Director of the Bureau of Land Management. This team
    can and will properly implement these important policy decisions.
    Conclusion
        Mr. Chairman, I again commend you for your insight and leadership
    in the interests of balanced, responsible energy development that is
    crucial to our Nation's economy, national security, and environmental
    future. I appreciate this opportunity to present some of my own
    thoughts about the Department's energy future. And as I have stated, I
    am fully committed to working with you and the Committee to ensure that
    we adopt a strong and effective program that will bring us energy
    independence and security and move us toward a new energy economy. The
    principles I have laid out today will help us accomplish this task.
        Thank you and I am happy to answer any questions that you might
    have.
                                     ______

        Chairman. Bravo, bravo, bravo. I salute you on your
    announcement today that by administrative decision you will end
    the Royalty-In-Kind program. As you know, I've been calling for
    that for several years, Mr. Secretary, and I do think it will
    end the opportunity for mischief, or the temptation, and
    perhaps provide a more decent return to the American taxpayer.
    So, I salute you for that announcement that you just made.
        I want to turn to the LWCF that you also mentioned in your
    testimony. I know that throughout your career in the Congress
    you have been an ardent supporter of the Land and Water
    Conservation Fund. I just wondered if you could share your
    thoughts with us on the importance of full funding for that
    program.
        Secretary Salazar. Chairman Rahall, I think you asked one
    of the most important questions which this Committee and the
    Administration, and I as Secretary of the Interior, will
    grapple with in the days and months ahead. On the one side, you
    have the reality that we are dealing with some very difficult
    times in this country relative to deficits which are inherited
    in a large part by this administration, deficits that have been
    created over the last 15, 20 years. And so that enters into
    this equation about how exactly we move forward with LWCF.
        On the other hand, I think it is important, Mr. Chairman,
    to recognize that those visionaries in the days of President
    Kennedy really felt that the Land and Water Conservation Fund
    was being created in order to be able to give something back to
    the earth when we are taking something from the earth. And yet,
    in the time that LWCF has operated, we essentially have seen
    what is a broken promise to the American Nation relative to the
    failure of funding for the Land and Water Conservation Fund.
        I sat in my office with Bill Grosvenor and Pat Noonan and
    others who were involved in the initial effort on Land and
    Water Conservation Fund, and they told me about the
    conversations with Stuart Udall and Bobby Kennedy at the time
    on LWCF. And the thought then and the letter that President
    Kennedy sent to Congress was that we would be taking resources
    from our oil and gas production in the Outer Continental Shelf
    and other places, and that that money would be invested in the
    Land and Water Conservation Fund for generations to come.
        We are taking a finite resource from the earth. It was
    owned by the American taxpayer. It was important to invest it
    in land and water conservation and wildlife and habitat issues
    that this Committee is so familiar with. And yet, when one
    looks back at the history of LWCF it has not been funded at
    that level. There is an accounting mechanism that gets entered
    into the books every year, and if you look at the current
    accounting it will show that there is $17 billion, over $17
    billion that should have gone into LWCF that simply hasn't
    gotten there. And when you compare that to the amount of money
    that was generated by the Department of the Interior on behalf
    of the people of the United States of America last year, we
    collected $24 billion. And yet just a smidgeon of that gets
    reinvested back into the great outdoors and into the land and
    water conservation.
        On an average year--and last year was an aberration in
    terms of the amount of money that comes into LWCF--on an
    average year it is more in the neighborhood of about $13
    billion. Well, when one looks back at the history of LWCF, Mr.
    Chairman, LWCF was only fully funded one time, in 1977. And in
    1977 it was funded to the extent of $900 million, which was the
    full authorization of LWCF. If that amount were to be adjusted
    for inflation, the amount today would be $3.2 billion.
        So, I think when one looks at the needs, what we have in
    the United States of America, whether it is the Appalachian
    Range or the Great Lakes or the Bay Delta in California or the
    need for the restoration of rivers and urban parks and historic
    preservation and habitat for hunters and anglers and wildlife
    watchers, there is a need to have a very robust Land and Water
    Conservation Fund.
        I am proud of the fact that the President's budget started
    us down that track with the idea of putting additional money
    into LWCF, hoping that we will get to the point where we have
    it fully funded. But I am very interested, Mr. Chairman, in
    working with you, working with members of the Committee,
    working with the Office of Management and Budget and others to
    try to get us to a point where we are making the kinds of
    investments in the great outdoors.
        There are some members here from Colorado who I know will
    remember this, but Congresswoman Diana DeGette, Congressman
    Coffman, and Congressman Lamborn know that in my State of
    Colorado we created an initiative called the Great Outdoors
    Colorado program, and through that initiative, Colorado Springs
    and Denver will never grow together because of the 200,000 acre
    conservation program between Colorado Springs and Denver.
    Rivers like the Colorado River and the Yampa and the Cache La
    Poudre and the Fountain Creek have all been restored, and they
    have become part of the economic renaissance of the State of
    Colorado, but they also have introduced important environmental
    values, and we have done it in way that has protected private
    property and in a way that also has invested in those things
    that are truly important for our future.
        I won't monopolize this conversation, but I want to end
    with just one comment on that question. There is a biography of
    T.R. Roosevelt which I would encourage all of to you read at
    some point in time. But it is a biography of Teddy Roosevelt by
    Doug Brinkley, which is titled ``The Wilderness Warrior.'' When
    one thinks about this Republican President over 100 years ago
    and the legacy that he left for the United States of America
    that includes our wildlife refuges, our national parks--which
    are, as Ken Burns will shortly say--America's best idea, in my
    view it is time for a 21st conservation agenda, and I can think
    of no better source of funding than using some of the revenues
    that actually come from American-owned assets as those are
    produced and put into beneficial use to help with the funding
    of LWCF.
        The Chairman. Thank you, Mr. Secretary.
        In conclusion, I do highly commend you for your leadership
    during these 8 months at the Department of the Interior, for
    your stewardship of our public lands, and very highly commend
    you for your decision today to end the Royalty-In-Kind program.
        Mr. Hastings.
        Mr. Hastings. Thank you very much, Mr. Chairman. And once
    again, welcome, Mr. Secretary. In my opening remarks, I
    referenced the moratoria that the Congress had lifted and
    President Bush had lifted on the OCS. And you also made a
    reference to that in your testimony. And you simply said that
    you developed something in a, I think, in a timely fashion.
        Now, the 6-month period is up next Monday. President Obama,
    in April I think it was, on Earth Day, when he was in Iowa,
    stated, and I quote, If there is oil and gas in the United
    States, we should use it, end quote.
        My question to you is, with the moratoria ending and with
    the fact that Americans, certainly last year, when gasoline
    went up to $4 a gallon, and Americans all across the country
    discovered that we have a tremendous amount of reserves in the
    OCS and in the inner mountain west of crude, but particularly
    on the OCS, what do you anticipate will come out of the end of
    the 6-month moratoria, 6-month comment period on Monday? And
    what do you mean by a timely fashion? And how will that be
    incorporated into an energy plan?
        Secretary Salazar. Congressman Hastings, we hope to move
    expeditiously on finalizing a new 5-year plan for the Outer
    Continental Shelf, and we will do that in the months ahead.
        We also, Congressman Hastings and members of the Committee,
    have always recognized that oil and gas from the Outer
    Continental Shelf will be part of our energy portfolio for the
    future. And that is part of the President's vision for our
    comprehensive energy plan. You will grapple with that energy
    plan as you all move forward, and this Committee obviously will
    have a major role in all of that.
        I want to make two comments on timing here. First, it is
    important that we get it right. It is better to get it right
    than to get it wrong and then have to go back through the
    uncertainty of litigation.
        I will give you the example of the 2007 and 2012 plan under
    which we are operating now. Subjected to litigation, the
    District of Columbia District Court found that the
    inappropriate environmental analysis had been done. This is not
    a crazy court that was doing this. It was a court that was just
    looking at the law. And it said because of the issues that have
    been raised here relative to the environmental analysis missing
    from those areas that are going to be impacted from oil and gas
    development, we are going to throw out the 2007/2012 plan. And
    they did.
        And so we came back in with the Department of Justice and
    my Department and said we need to narrow that decision. And it
    was narrowed down so it didn't affect the Gulf and didn't
    affect other areas in that 2007/2012 plan. But it underscores,
    Congressman Hastings, the importance of us doing it right as we
    come up with a plan.
        I will make some generic comments just about where we are
    at this point in time relative to information gathering. We
    will complete the 6-month moratorium on September 20. My staff,
    led by Wilma Lewis and Liz Birnbaum and others, will be working
    on moving forward with the creation of a new 5-year plan. There
    are realities that we know are out there. For example, on the
    Atlantic, we know that there is not a lot of information out
    there; that it has been 30 years since we have developed any
    seismic information on the Atlantic. On the Gulf, on the other
    hand, we have extensive information. We have new discoveries.
    So, there is huge potential.
        Mr. Hastings. Mr. Secretary, if I may, my time is--I
    apologize, but my time is running out. I know Mr. Rahall wants
    to keep us as much as we can. But technology, new technology
    has certainly come into play, advantageously, from an
    environmental standpoint. We saw that when Rita and Katrina,
    for example, went through the Gulf of Mexico. So, we know that
    there is technology to do things environmentally right.
        Now, I interrupted you when you were referencing the
    Atlantic. But it seems to me we certainly have the ability, I
    would hope that whatever you come up with would be very robust
    from the standpoint of utilizing these resources. If we are
    going to be energy independent, certainly we have to use the
    OCS. I apologize for interrupting you midway through, but if
    you would like to respond I would appreciate it.
        Secretary Salazar. The OCS is important for us. It is part
    of our energy portfolio for the future and we will be devising
    a plan that is protective of the environment, that takes into
    account what the stakeholders in those affected communities
    want, and that takes into account the imperative which I know
    this Committee agrees on, and that is getting us to a new
    energy future for the country.
        Mr. Hastings. Thank you, Mr. Chairman.
        The Chairman. Would it be fair, Mr. Secretary, to say you
    are not the first Secretary of the Interior to address the need
    for a comprehensive energy plan and the need to end our
    reliance upon foreign oil, but you intend to be the last?
        Secretary Salazar. I want to be very much so. We want to be
    the last. We want to get it done.
        The Chairman. Following the order of appearance, the Chair
    will now recognize the gentleman from California, Mr. Costa.
        Mr. Costa. Thank you very much, Mr. Chairman. And I
    appreciate the importance of this hearing today and to have the
    Secretary of the Interior here.
        As the Chairman of the Subcommittee on Energy and Mineral
    Resources, we have held extensive hearings on the challenges
    facing the Mineral Management Services over the last 2 years.
    And clearly, the Secretary's statements this morning I find
    refreshing. But I would be remiss if I did not note, and I
    believe that the Secretary commented on it a moment ago, about
    his efforts with regards to restoration of the various
    ecosystems. The Sacramento San Joaquin River Delta area is one
    that is experiencing tremendous drought conditions today. The
    Secretary is aware of it. He has flown over it. And we thank
    you for your attention to it. It is a constant concern of the
    devastation of the impacts, economic impacts to the people in
    my communities of this drought, and we are going to urge you to
    continue your efforts to provide that support. I know funding
    is being considered that would provide support for this effort.
        But much more work needs to be done, and we could have a
    fourth dry year in California, God forbid, next year. And we
    are going to need all of the flexibility and the attention of
    the Department of the Interior to help us if, in fact, that
    occurs.
        My questions as it relates to today's hearing on oil and
    gas leasing are somewhat covering a broad swath. And in the
    time remaining, let me get quickly to the point. Our
    Subcommittee has tried to look at using all the energy tools in
    our energy tool box. You say comprehensive energy efforts. I
    think we are saying the same thing. My concern is that we use--
    as we look at the reform in Minerals and Management Services,
    you talk about ending the in-kind-royalty program. In a measure
    that Congressman Abercrombie and I have introduced, a
    bipartisan bill that takes the long term in the next 10 years,
    the next 20 years and beyond, to reduce our dependency on
    foreign sources of energy and to build up this robust,
    renewable portfolio, that we take advantage of those revenues
    on onshore and offshore oil and gas leases to build that robust
    portfolio.
        And I guess, Mr. Secretary, my first question to you is, do
    you believe that this comprehensive effort that we are
    advocating in this bipartisan approach will be realized? I
    mean, our environmental friends talk about this robust
    renewable portfolio, but they don't have, I think, a
    commonsense path to financing it. We are talking about using
    those revenues from oil and gas, both onshore and offshore,
    over a programmatic period of time to finance that robust
    renewable portfolio. Could you please comment?
        Secretary Salazar. Congressman Costa, I very much
    appreciate your leadership on this issue as well as on dealing
    with the major water issues which many of you here have been
    dealing with in California, and we will continue to work with
    you on those.
        You know, the question of how we ultimately finance the
    green energy economy, Congressman Costa, we have already been
    working on that in a variety of different ways. Through the
    economic recovery package, which this Congress approved, there
    are huge investments that are going on with respect to building
    up the green energy economy. And I think when you look at what
    is happening across the country, I can tell you that in the
    areas that I am most familiar with, if you look at the Atlantic
    coast, there is tremendous interest in what we do to stand up
    the offshore wind energy potential which we believe to be in
    the neighborhood of over 900 gigawatts off the Atlantic. And
    every State along the Atlantic coast has projects which they
    believe, many of those States, that they have already financed
    before taking on those projects. You are talking money. You are
    talking money. You are talking solar, Jim Costa.
        But on the solar projects, we have many of these projects
    which we are standing up, including 13 solar major commercial
    projects in the Southwest.
        Mr. Costa. Right. I have 1 minute left or less than that,
    so let me quickly--I sent you a letter to the Department of the
    Interior to talk about the policy of allowing companies to
    invest in Iran that bid on oil and gas leases in the United
    States. The Department provides those grants to those leases. I
    think it is counterproductive to encourage companies that are
    investing in Iran when we have an economic boycott on Iran.
    Have you looked into that?
        Secretary Salazar. I will take a look at the letter. I have
    not seen it
        Mr. Costa. OK. And finally the CLEAR Act seeks to encourage
    the diligent development of resources, yet the DIO Inspector
    General found in a 2009 report that Interior suffers from such
    information systems' inconsistencies and data integrity
    problems it cannot credibly track what activity is occurring on
    these leases that are producing and nonproducing. How do you
    intend to fix these deficiencies?
        Secretary Salazar. There is much that I agree in that
    statement that we have information systems which, frankly, have
    not been very good. And much of what the Office of Inspector
    General and the General Accounting Office have recommended are
    recommendations that we have under consideration and will be
    making the management changes to that as we move forward. And
    part of it is being able to track what is happening out there,
    both on the onshore and the offshore with respect to what is
    producing and what is not produced.
        Mr. Costa. That is important. My time is expired. Thank you
    very much, Mr. Chairman, and I will submit the following
    questions on the other areas and continue to look forward to
    working with you.
        The Chairman. The gentleman from Colorado, Mr. Lamborn.
        Mr. Lamborn. I thank you, Mr. Chairman. It is good to have
    you here. Welcome.
        In your statement you made reference to energy independence
    and security and having a new energy program to accomplish
    that. So in light of that, looking at the Atlantic and Pacific
    coasts in particular where we had a recently expired moratorium
    after 30 years, which expired, can we look forward to new oil
    and gas permit areas off of the Atlantic and Pacific Ocean that
    were previously under that moratorium as we develop an energy
    plan that gives us independence and security vis-a-vis less
    imports from our country, is how I would interpret that.
        Secretary Salazar. Congressman Lamborn, first, the offshore
    oil and gas potential and its contribution to the Nation's
    energy portfolio is something which we have very much supported
    in the first 7 months of this administration, and we will
    continue to support that, I expect, in the future as we come up
    with a new 5-year plan for the Outer Continental Shelf. That is
    point one.
        Point two is, as I said earlier in response to Congressman
    Hastings's question, it is important that we get it right. And
    so part of what we did is we have held hearings in Atlantic
    City, in New Orleans and San Francisco, and Dillingham, Alaska
    and Anchorage, Alaska to get the communities to tell us what it
    is that their views are with respect to the development in the
    OCS.
        In addition to that, because I don't believe that this just
    ought to be driven by what the stakeholders are saying, we also
    have had the United States Geological Survey work with the
    Minerals Management Services and other agencies to come up with
    their review of what it is that we know and what it is that is
    we don't know. And so we are developing that information and we
    are still in the process of taking comments.
        The comment period will expire on the 20th of September.
    And at that point, with all the information before us, I will
    work with this team and figure out exactly where it is that we
    are going to move forward on development of the Outer
    Continental Shelf.
        Mr. Lamborn. Well, if it is going to be released in 5 days,
    I am assuming it is about 99 percent done. So, can't you tell
    me today whether or not we are going to have new leases off of
    the Atlantic and the Pacific in areas that were previously
    under the moratorium?
        Secretary Salazar. You know, I think it is much more
    complex than that. I think when, for example, you look at the
    Atlantic Ocean, the fact of the matter is that there is no
    seismic information that we have had in the last several
    decades that tells us what is out there on the Atlantic. It
    could be that it is a big to-do about nothing. And so we are
    going to have to make some decisions, based on the information
    that we have and based on what we think is realistic for us to
    do. But we will have a new 5-year plan.
        My own view is that when you are talking about an area that
    is as important as the subject area of energy, and when you are
    talking about an area that is as large as the Outer Continental
    Shelf is, 1.75 billion acres of land, it is important to do it
    thoughtfully. And we are doing it thoughtfully and it will be
    part of our comprehensive energy program from the President's
    administration working with all of you as we move forward.
        Mr. Lamborn. Have we done any seismic off of the Atlantic
    or the Pacific?
        Secretary Salazar. Not for a very long time.
        Mr. Lamborn. OK.
        Secretary Salazar. There is a dearth of information, and
    that is one of the places where there is a dearth of
    information.
        Mr. Lamborn. And also, sort of along the same line, you
    made mention in your comments about up to 1,000 gigawatts of
    wind potential off of the Atlantic Coast and almost the same,
    900 gigawatts, off of the Pacific. And I had this conversation
    with some folks in from the Sierra Club last week.
        But if you look at the numbers, under current technology,
    with a tower producing 3.25--I believe it is--megawatts of
    energy to produce 1,000 gigawatts, you would have to have
    300,000 windmills off of the Atlantic coast, and almost that
    same number off of the Pacific coast. And with roughly--and I
    am using round numbers here--1,800 miles of coast off the
    Atlantic, you would have 166 towers per every mile of shore. Of
    course that might go out 10 or 20 miles, but still you are
    talking about a tremendous crowding effect, I think, and
    possibly a tremendous environmental impact, just that sheer
    number of towers with all the infrastructure that goes into
    each one of those.
        I personally don't think that it is realistic to look for
    1,000 gigawatts off of the Atlantic coast. I mean, I wish it
    was. But I don't want to see us ignore oil and gas when we are
    pursuing what to me is--and pardon the pun--tilting at
    windmills, pursuing something that is not going to pan out.
        And so, do you agree with me that off the Atlantic and
    Pacific coasts we should have oil and gas in addition to
    whatever we might in the future obtain from wind or solar?
        Secretary Salazar. I am glad, Congressman Lamborn, that you
    are meeting with the Sierra Club and all of the organizations
    that are in the broad spectrum of your constituency.
        Let me just say this about wind energy off the offshore of
    the Atlantic. If I may, Mr. Chairman, just take a second about
    this. It is absolutely true, there is no way that we are going
    to stand up renewable energy potential in offshore wind that
    the lab in Colorado, at the National Renewable Energy Lab has
    said is there. They have said it is almost 1,000 gigawatts off
    of the Atlantic. But the converse is also true that we are not
    going to do anything, because there is a lot that we can do.
        When one looks at Norway and Denmark and the United Kingdom
    and the amount of energy that they currently are producing from
    the offshore, there are elements of great potential off of the
    Atlantic. And let me just mention three of them. The first is
    that the wind measurements that we have off the Atlantic show
    that it is a much higher quality wind than we have on the
    offshore of the mainland of the United States. It blows more
    steady. And so that is what our scientists are telling us.
        Number two, the way that the Atlantic coast goes off from
    the mainland, it is a very shallow coast. And so we believe
    that you can actually construct the kind of offshore facilities
    there that have been constructed in other places around the
    country; not around the country, but around the world.
        Number three, when you look at the energy contribution that
    is being made from wind energy in places like Denmark, it is
    very, very significant. And so that is how it is that States
    like New York, Delaware, New Jersey, North Carolina, Rhode
    Island and Maine have made this one of their highest
    priorities. And they have portfolio standards that they believe
    they are going to be able reach significantly from wind energy
    production, in some cases as high as 40 percent of their energy
    coming from wind energy.
        And I guess the fourth point I would make about the
    Atlantic is that one of the major challenges that we face with
    renewable energy, Congressman Lamborn, is the question of
    transmission. How do you get the energy from the place it is
    being produced to the place where it is going to be used?
        Well, one of the great positive factors that we have with
    the Atlantic is you basically are just bringing in a cable and
    plugging it into an already existing grid system. Whether it is
    Washington, D.C. or Delaware or New York or Boston, you can
    actually do that in a way that is much easier from a
    transmission perspective than when you are on the onshore.
        So, notwithstanding that, I know there are some skeptics
    out there on wind energy, but it is something that can in fact
    be done off the Atlantic. And here it is not pie-in-the-sky
    kind of stuff, because when you look at what Denmark has done,
    for example, if they can do it, there is no reason why the
    United States can't get itself in the position of leadership on
    that issue.
        The Chairman. The gentleman from Michigan on his 80th
    birthday is recognized.
        Mr. Kildee. Thank you, Mr. Chairman. Welcome to you Mr.
    Secretary, and also welcome to my former chief of staff,
    Christopher Mansour, who now works for you. You took one of the
    top people here. You have good judgment but I certainly miss
    him.
        I appreciate the work you are doing. The Land and Water
    Conservation Fund has been very, very important to this Nation,
    very important to my State. The lands of Isle Royal, a
    beautiful island which became part of the United States only
    because of the wisdom of Benjamin Franklin, and Sleeping Bear
    Dunes; all these came about because of the Land and Water
    Conservation Fund.
        What problems does the lack of full funding of the land and
    water conservation present? And could you give some examples
    where we weren't able to get some property from the Land and
    Water Conservation Fund because it was not fully funded?
        Secretary Salazar. Congressman Kildee, first of all, thank
    you for training Christopher Mansour. He is doing a herculean
    job in the Department of the Interior, dealing with a whole
    host of issues, including, I must imagine, probably 2,000
    letters that we get from the Members of Congress just about
    every week. So, he has a lot on his plate. But thank you for
    your help on that.
        On your question on the Land Water Conservation Fund, we
    simply, in my view, have not invested enough in our major
    landscapes of America and river restoration and urban park ways
    and historic sites. And you see this throughout the country.
    And if we had the opportunity to make these kinds of
    investments, I think it would be good for the economic health
    of our Nation and of our States.
        Yesterday, Secretary LaHood and I spoke in front of the
    tourism directors of the 50 States who were here in Washington,
    D.C. We spoke about how the quality of life and the strength of
    our economy was so dependent on the opportunities that we have
    for people in the outdoors.
        The State of Montana, for example, I know gets 11 million
    visitors a year who go there to hunt, who go there to fish, who
    go there to see the great wonders of the State of Montana. It
    is second only to agriculture in terms of that particular
    economy.
        And I think you can make the same argument with respect to
    each of our States in this Nation; that if we can take care of
    our outdoors, it also is a great way in which we can create
    economic vitality for the United States.
        It also, Congressman Kildee, is in my view an imperative
    that is driven from a health perspective. When we have our
    young people connected to the outdoors, it makes for a
    healthier society. And today our young people are spending many
    hours in front of televisions and computers and yet they end
    up, as I understand the last statistics I saw, less than 5
    minutes, frankly, playing in the outdoors. And so how we
    connect up our young people to the landscapes also ultimately
    is tied in to the health of our community
        Mr. Kildee. You know, we had similar funds in government,
    the highway fund. And there are 50 very visible Governors out
    there who are making sure we don't raid the highway fund. And I
    am not sure how aware they are of advocating and pushing that
    we fully fund the Land and Water Conservation Fund.
        I think it is as important, when I travel through the
    country, particularly through Michigan, I know the Governors
    would never let us take money from the highway fund. But very
    often they themselves aren't as great protectors of the Land
    and Water Conservation Fund as they should be.
        And I look forward to working with you because you have a
    great reputation of concern for our natural resources. I was
    kind of taken back when you said the last year that was fully
    funded was 1977, I believe you stated. And that was my first
    year in Congress.
        So, perhaps I bear some responsibility for not pushing
    harder that we fully fund that. But I look forward to working
    with you to do that.
        Secretary Salazar. Thank you Congressman. Happy Birthday.
        Mr. Kildee. Thank you very much, Mr. Secretary.
        Mr. McClintock. Mr. Secretary, welcome to the Committee.
    It's a pleasure to make your acquaintance.
        I wanted to follow up on the issue that Mr. Costa raised
    that affects the credibility of the Department on this and all
    issues, and that is the dispute over the regulatory drought in
    California.
        As you know, this is not a minor matter. More than 200
    billion gallons of water have been cut off to the Central
    Valley of California. These diversions have resulted in massive
    unemployment, water rationing, food lines in various
    communities. We are at the point where local communities that
    once boasted that they were feeding the world now can't feed
    themselves. I am sure you will appreciate the irony of a food
    line in the Central Valley where they are handing out carrots
    imported from China in a community that once exported carrots
    to China. Some farming towns like Mendota are running 40
    percent unemployment.
        Yet on September 9th, in a response to a Wall Street
    Journal editorial, you dismissed the crisis by writing, ``The
    fish are a sliver of the problem. The pumps are already on, and
    pointing fingers can't make it rain.''
        Mr. Secretary, do you deny that more than 200 billion
    gallons of water have been diverted from the Central Valley to
    meet environmental regulations protecting the delta smelt?
        Secretary Salazar. What I would say is that the situation
    in California is, frankly, in chaos because of the water issues
    that, frankly, have been in the making for a very long time. It
    was a water system that was built, frankly, to provide water to
    about half of the population that currently lives in
    California.
        We are in the third year of drought; and, at the end of the
    day, developing a comprehensive solution that addresses the
    conservation needs of the Bay Delta as well as providing
    additional water supply is an agenda that we have to figure out
    together. And I do think that finger pointing doesn't get us to
    that kind of a comprehensive solution.
        We are working in my Department to facilitate a number of
    different projects, including those that Congressmen Costa and
    Cardoza and Napolitano have said were very important, such as
    the Two Gates project, as well as the investment of money into
    water conservation and water banking and a host of other
    things.
        On the 30th of September, I will be meeting with the
    leadership involved in these water issues in California here in
    Washington. I have appointed David Hayes as the Deputy
    Secretary of the Interior to focus on this issue. I have a
    person on the ground trying to pull things together. And, at
    the end of the day, I think that what has happened is that
    California today and its water issue is suffering from the fact
    that it did not have the kind of attention that it should have
    had or the leadership to try to bring in the different values
    that are being debated in the future of the Bay Delta, one of
    those values being water supply, making sure there is water for
    agriculture.
        So, I hope--and we have been working closely with the
    Governor--that we are able to come together with a
    comprehensive way forward with respect to water supply for the
    State of California.
        Mr. McClintock. No one would argue for the need for
    additional water facilities, but I think you would have to
    agree that 200 billion gallons of water would have made all of
    the difference in the world in the Central Valley if it hadn't
    been diverted for the delta smelt. And while you are correct
    that we are in the third year of a drought, it is a relatively
    mild drought. Our reservoirs have received about 80 percent of
    their normal amount of water. The precipitation of the northern
    Sierras has been about 95 percent of its yearly average.
        How do you explain the fact that in far more severe
    droughts in 1977 and 1991, the Central Valley Project was
    delivering 25 percent of its water and today it is only
    delivering 10 percent?
        Secretary Salazar. We are doing everything we can under the
    law to deliver as much water as we can and to facilitate things
    such as water transfers that will provide water supply to the
    communities that are affected. There are water rights issues,
    including the fact that many of the farmers who have relied on
    water have a very junior water right within the scheme of water
    rights in the State of California.
        Mr. McClintock. Doesn't the law provide for the waiver of
    these regulations in an economic emergency, and why isn't the
    Department following through on that?
        Secretary Salazar. The law does provide for a God Squad to
    essentially override the requirements of the law.
        My own view--I have said this before; I will say it here
    today--is that that is an admission of failure; and, frankly,
    it would be a way in which we ultimately would not address the
    comprehensive nature of the issues that need to be addressed in
    the Bay Delta and conversations that I have had with Members of
    the California delegation. I think it is recognized, for
    example, that the huge water quality issues that are affecting
    the Bay Delta, including urban runoff and a whole host of other
    things are also contributing factors to the species issues that
    we have today.
        Mr. McClintock. I think the Central Valley would define
    failure as 40 percent unemployment in Mendota and an
    agricultural industry that has literally been brought to its
    knees. Thank you.
        The Chairman. The Chair will note that it was the Minority
    that first broke the Chair's warning about going outside of the
    jurisdiction. I guess I will have to allow the Majority to do
    that as well.
        On another point, just very quickly, Mr. Secretary, I have
    been advised--and again warned by the gentlelady from Guam--
    that when you are referring to the 50 Governors, that we also
    have to recognize the territories and they have governance as
    well, which means we have 56 Governors.
        The Chair recognizes the gentleman from Arizona, Mr.
    Grijalva.
        Mr. Grijalva. Mr. Secretary, let me first tell you how many
    of us are pleased with the administration of your Department,
    many initiatives, much movement in the first 7 months with an
    Interior than we saw for the previous 10 years. So, I want to
    congratulate you for that and for the initiatives and the
    leadership that you are lending to many issues and, in
    particular, to the public lands.
        The question, if I may, Mr. Secretary, is this: We are
    going to realize--I think some of the maps that came out
    initially of all of the unharnessed potential that we have,
    particularly in wind and solar on the public lands--that with
    the potential comes the inevitable conflict in the protection
    and preservation of very sensitive land and the need to get
    renewables on the ground as quickly as possible, as you
    indicated in your opening comments.
        How are we going to mitigate that? Is there a way to
    prioritize which land is on the immediate list and which other
    public land is going to require more attention and mitigation?
    And in the language under title V, do we need authority and
    exclusion to exclude certain lands, whether they be wilderness,
    wildlife corridors from the potential of development?
        I see that there will be conflicts in those areas, and I
    know you have anticipated them. How are you approaching that,
    sir?
        Secretary Salazar. Congressman Grijalva, I appreciate that
    question. It is a very good question and something that we are
    very much focused on.
        And let me reiterate what I said. I do believe that, when
    history looks back at this period, we will have stood up for
    the renewable energy potential of the Nation on solar,
    geothermal, wind--and much of that will occur on public lands.
        Now, as we engage and embrace that imperative, it is also
    important for us to do it in a way that recognizes that we
    should not do it in a helter-skelter way or a lottery way or
    whatever comes in the door that we end up taking but that we do
    it in a thoughtful way and in a proactive way; and we believe
    we have the authorities to do that.
        An example that I will throw out to you is we are currently
    doing with a thousand square miles that we have set aside for
    an intensive environmental analysis through a programmatic
    environmental impact statement. In those thousand square miles,
    what will happen is we will look at those spaces that are best
    suited for the standing up of solar energy projects on the
    public land and those areas within those thousand square miles
    which are not. In my view, it would be inappropriate for us to
    have solar energy projects located on our national monuments or
    places where we have sensitive and ecological values that we
    are trying to protect.
        In many ways, Congressman Grijalva, I think what the Nation
    and all of you who are Members of this Committee and Congress
    should look at as we look at the renewable energy future is to
    think about the analogy of a local land use planning process,
    local land use planning process, whether it is a city in
    Colorado Springs or Tucson, Arizona.
        They will go through and, frankly, make determinations
    about where it is most appropriate for the siting to occur. And
    so you don't put a house next to an industrial factory any more
    because of the way that we do land use planning at the local
    level. We need to do that kind of land-use mining at the land-
    scale level, and that is what we are committed to doing within
    the Department of the Interior and do believe we currently have
    the authority to do that.
        The Chairman. Mr. Coffman.
        Mr. Coffman. Secretary Salazar, welcome to the Committee. I
    just want to thank you for your long service to the State of
    Colorado as our former Attorney General and then our United
    States Senator and now the country's Secretary of the Interior.
        You know, as somebody who served in the first Gulf War and
    more recently in Iraq, I am more concerned about energy
    independence as it relates to national security. Currently, we
    import more than 60 percent of petroleum that we use and nearly
    90 percent of the uranium that we use for nuclear energy.
        Secretary Salazar, in your time at the Department of the
    Interior, you have blocked domestic energy development
        across the board. On February 4th, you canceled approved
    oil and gas leases in Utah. On February 10th, you essentially
    restored the moratorium on the Outer Continental Shelf by
    delaying the 5-year leasing program. On February 25th, you
    stifled the development of oil shale by officially denying oil
    shale research. On July 20th, you placed a moratorium on mining
    in an area containing 40 percent of our Nation's uranium
    supply. And, since taking office, your agency hasn't approved a
    single new solar project, even though the Department is facing
    a backlog of almost 200 applications.
        So, we can't drill on shore, we can't drill offshore, we
    can't develop oil shale, we can't develop nuclear, and we can't
    develop renewables by solar. Mr. Secretary, when will Americans
    develop American energy?
        Mr. Salazar. First of all, my good friend--since we are all
    good friends in Washington--I would like to say that I, too,
    very much enjoyed serving with you and being your lawyer. You
    didn't get in trouble. I was your Attorney General. It is good
    to see you here in Washington.
        Let me just say, on the other hand, I totally disagree with
    your characterizations of our action.
        I think when you consider in the opening statement the fact
    that we have leased out over 2 million acres on the onshore,
    made available over 50 million acres as well on the Outer
    Continental Shelf, you see a development part of our agenda in
    developing a comprehensive energy plan.
        Let me also say that you, in your service in Iraq, which I
    very much admire, know that this country has absolutely failed,
    as it did in the last 8 years, to get us to any sense of energy
    independence. You and the members of this Committee will know
    well President Nixon's timing in coining the term ``energy
    independence'' and President Carter saying that we needed to
    embrace energy independence with the moral imperative of war;
    and, in the decades that have passed since then, we have gone
    from 30 percent importation of our oil and now the last
    statistic I saw was at 67 percent.
        So, the fact is we have been living on a very failed energy
    policy; and that is why it is imperative that we move forward
    with the vision that President Obama has, that this time we
    will not fail.
        And to Chairman Rahall's question, I do want to be the last
    Secretary of the Interior that does come before this Committee
    and says we want to get to energy independence. We are going to
    get it done, and we are going to get it done in a lot of
    different ways.
        With respect to specific issues which you raised on the
    Utah lease sale, many of those leased parcel parts are going
    forward. The fact is that I don't believe that we should drill
    everywhere, because not every place is appropriate to drill. We
    shouldn't be drilling near Arches National Park and Canyonlands
    and Dinosaur. Those are important treasures that we need to
    protect.
        With respect to the Outer Continental Shelf, in my view,
    when you are talking about 1.75 billion acres of ocean, you
    should not simply do it with a 60-day comment period and you
    need to be thoughtful in terms of how you move forward with
    OCS. As I said earlier, we have moved forward to push
    development on the OCS in a number of different ways, including
    litigation.
        Mr. Coffman. If you could give us specific dates on when
    you move forward with the Outer Continental Shelf with
    additional R&D leases on oil shale and also solar projects--if
    you could give us dates on those, I would appreciate that.
        Secretary Salazar. Oil shale, we are looking at moving
    forward with research and development leases on oil shale.
    Again, there are issues there; and I don't believe we should
    engage in the wholesale giveaway of public lands, which is what
    the previous administration did.
        With respect to the OCS, I commented on that. We currently
    have a plan in place, and we are issuing leases under the plan
    on the Outer Continental Shelf. We will have a new plan in
    place and will be putting it out over the next several months.
        The Chairman. The gentlelady from the Virgin Islands, Dr.
    Christensen.
        Mrs. Christensen. Thank you.
        Welcome to the Secretary, and I appreciate your opening
    statements which I think touched on many of the issues that I
    was concerned on. I am very reassured by you and your team that
    those issues that we have been trying to deal with in the 12
    years that I have been on this Committee, the royalties and
    leases, the Energy Department and so forth, will be made more
    efficient, accountable, and transparent under your
    administration.
        I want to take a point of personal privilege, though, to
    especially welcome the Assistant Secretary Wilma Lewis, who is
    from the Virgin Islands, a person of impeccable credentials and
    character. I know she will be a great asset to you as you move
    forward with the issues that we are discussing this morning and
    in other areas in your Department.
        So, we just--I don't have any questions. We look forward to
    working with you on this. Our Chairman has introduced the CLEAR
    Act; and under his leadership this is going to be a very
    productive partnership, I can see. I am particularly pleased
    that you support many portions of the bill. I am particularly
    interested in the Regional Outer Continental Shelf Councils
    that will employ the use of marine spatial planning, capturing
    a holistic view of our resources to guide OCS development and
    the full support of funding the Land and Water Conservation
    Fund and Ocean Resources Conservation and Assistance Fund,
    something that we have been waiting for for a long time.
        So, I just want to commend your leadership, welcome you and
    your team, and look forward to working with you.
        Secretary Salazar. Thank you.
        The Chairman. The gentleman from Utah, Mr. Bishop.
        Mr. Bishop. I would also like to add for the record my
    congratulations to Mr. Kildee. I thank you for recognizing him
    on his birthday today and maybe also to let people know that it
    is the fact that he has worked with the Pages for the last 30
    years that has kept his spirit, if not his knees, in a useful
    condition. So, I appreciate that very much.
        Mr. Secretary, this is your first appearance before us in
    the 8 months you have been there, and you are in fact the de
    facto ruler of 67 percent of my State. We only have 5 minutes
    to actually go through this stuff, so let me ask you the four
    questions I have, and I will let you answer them in the end--
    or, ironically enough, you can send me a written statement if
    you would like to. Unlike the Senate, we have a limited amount
    of time, and the Chairman is particularly ruthless and
    heartless when it comes to time, so I will speak as fast as I
    possibly can.
        The Chairman. Only for you.
        Mr. Bishop. I sometimes feel so special in here.
        The bill before us actually talks about a limitation of
    development, and so I would like to ask a question that deals
    with other issues that you have unilaterally made that deal
    with limitations of development. This will be administered by
    your Department. I also want to deal with how prior actions of
    your Department should indicate how this would be administered;
    and in your opening statement you talked about questions this
    brought, one of which was interdepartmental cooperation.
        My second question goes directly to that issue with
    interdepartment cooperation. At 7 months ago, we asked for
    communication between the Park Service and advocacy and
    lobbying groups. We asked for something covering a limited
    period of time, specific individuals; and it was based on press
    reports that we had seen that bought the possibility of
    improprieties and lobbying between your Department and that
    organization. The President said he was committed to creating
    an unprecedented level of openness in government.
        So far, I am sorry, your Department has been foot-dragging,
    stonewalling; and the only thing we have received is the
    apparently false claim that there are only seven such
    communications.
        Now I don't know if there is something to hide in the
    Department--I hope not--but certainly the actions so far give
    that appearance, and I would love to tell people there have
    been no improprieties, but your Department has provided no data
    so far to allow me to do that.
        I am told that the Department's response to another
    congressional office looked like this: I have four pages of the
    response that was given to them. Everything except the
    addressee and the statement that this one was about a committee
    bill, this one was about another meeting, there was another one
    about an amendment, have simply been blacked out. I don't know
    what--I don't know if you are talking about nuclear weapons, or
    you are talking about national security. Maybe you are giving
    account information to a bank in Nigeria where you can get
    money back. But there are rules for redacting, and they are
    very specific. It doesn't cover this.
        I do hope when the Department finally gives that
    information you don't have Rosemary Wood-style 18-minute gaps
    in the tape that come to us. Because, as the President said in
    his campaign, transparency promotes accountability, provides
    information for citizens about what their government is doing;
    and that is what we are after, what the public should be able
    to find out and know.
        The second issue, which goes directly to your question
    about interdepartmental relationships and cooperation, we have
    also asked for certain documents relating to how the Department
    of the Interior is working with the Department of Homeland
    Security to coordinate responsibilities on our border security.
    Now, these documents, once again, are not a trivial fishing
    expedition that can be ignored. They are serious issues that
    the public simply needs to know.
        We have obtained from the Interior a study from 2004 that
    has never been released to the public or Congress. It says 90
    percent of the Oregon Pipe National Monument is destroyed
    because of drug trafficking and human smuggling. We obtained
    another 2002 document threat assessment that has never been
    shared with Congress. It says our Federal lands are a national
    security disaster. We are hearing reports from border patrol
    agents that their hands are shackled when dealing with Interior
    officials on Interior lands.
        Yet when we request these documents and communications to
    find out what is actually being done, all we are getting is,
    once again, more stonewalling. This does not speak well for an
    open Department or an open government, and I would seriously
    like these issues to be addressed so we know what indeed is
    going on.
        Now, third, I would like to have you look back there at the
    door and have the Harrison couple, if they would, wave at you
    so you know who they are. They are going to try and meet you in
    the hallway in some time. The Harrisons are from Vernal, Utah;
    and they have organized out there an Alliance for Public Lands,
    truly a grassroots group.
        They met with Mr. Hayes when he was out in Vernal. He said
    he would meet with them again. Mr. Hayes set a time to meet
    with that couple. On Friday, when we called to verify it before
    they came here, everything was all right. The afternoon before
    the appointment, after they had already arrived here, your
    office, the Department, once again called and said Mr. Hayes
    could not meet with them at that time or any other time this
    week, once again giving me the idea that we may have open-door
    policies for interest groups but not necessarily for citizens.
        We talked about environmental impact statements. They wish
    to hand to you, which is what they would have given to Mr.
    Hayes, what we are calling human impact statements: 150 letters
    from people who live in the Uintah Basin as to the direct
    results of the decisions that your Department has already made.
    These are results that is not part of legislative action, it is
    not part of an economic cycle, not coming from oil and gas
    companies but collateral commitments that have been made to
    those individuals.
        I am going to have letters in there about a waitress who
    has been cut from 30 hours to 13 hours in Vernal; about the
    superior mud--undercarriage mud removal that went from nine to
    two employees.
        I am talking about Heather, who is a 9-year-old who moved
    from your State of Colorado over there with her grandfather and
    mother to get a job where they had enough land for a horse as
    well as a yellow lab; and they lost that job and were forced to
    move to Vernal, in which they had to sell the horse--not for
    human consumption. You can be OK. And also they had to sell the
    yellow lab because of decisions that were made by this
    Department of the Interior that had a collateral damage, net
    result and net impact on the people of that particular area.
        I am asking you if you would actually accept those
    documents from them finally and please look at what is
    happening to real human beings on the ground as a direct result
    of decisions the Department of the Interior has made which
    affects my home State of Utah.
        And, fourth, I would like you to express your opinion on
    the particular bill before us.
        I don't have time to yield back, do I, sir?
        And since we don't the opportunity to have the Secretary
    with us very often, I have used it well.
        The Chairman. Mr. Secretary, we will allow you to respond.
    If you would rather do it in writing, we will allow you to do
    that as well.
        Secretary Salazar. I would appreciate the opportunity to
    respond to Congressman Bishop.
        First, you are not lacking in passion, and that comes
    across loud and clear. And I appreciate the passion with which
    you represent your constituents.
        Mr. Bishop. I am lacking in documents.
        Secretary Salazar. Sir, let me take, if I can, each of the
    four and just be as brief as I can.
        First, on the Departmental communications, we have
    thousands of pages, frankly, that have been sent over, are
    being sent over. You are getting additional documents. So, we
    are getting you everything we can, and that is both with
    respect to your issues concerning communications between the
    National Park Service and the National Park Conservation
    Association and other entities as well as the documents you
    requested between the Department of the Interior and the
    Department of Homeland Security. So, you have gotten a lot of
    those documents. You are getting a lot more.
        With respect to the Harrisons, I would be happy to take
    whatever documents that they do have.
        I do have to say this with respect to the issue as you
    raise it. Sometimes what ends up happening is when the
    government does things in a rushed and wrong way you end up
    having consequences to human beings like the Harrisons that you
    don't have when you do it the right way. And what happened with
    those 77 lease parcels, which I know you are very passionate
    about, Congressman Bishop, is that there was simply not the
    consultation that should have taken place there between the
    Bureau of Land Management and the National Park Service. And
    because that did not take place, there was a need to review
    that to assure that the other legal interests of the United
    States of America were being protected. We are going through a
    process now, and those 77 lease parcels are being screened to
    determine which ones are appropriate for leasing and which ones
    are not appropriate for leasing.
        I believe that, ultimately, if we do things right, we can
    avoid bad consequences to people.
        And, finally, on your question on the opinion of this bill,
    it is absolutely targeted on the right set of issues that have
    been raised by the Inspector General and the General Accounting
    Office, as well as my Department; and we will work closely with
    the Chairman and members of this Committee to get the bill to
    the place where we believe it needs to go. So, even though the
    Chairman is a very powerful chairman and those of you who
    worked on the bill have spent a lot of time thinking about this
    bill, we have some ideas that we will continue to try to
    contribute to make the bill a better bill. And I appreciate the
    opportunity to work with the members of this Committee in so
    doing.
        The Chairman. The gentlelady from California, Mrs.
    Napolitano.
        Mrs. Napolitano. Thank you, Mr. Chairman.
        Welcome, Secretary Salazar. It is good to see you again,
    finally.
        And, Mr. Bishop, I feel sorry for you but also feel sorry
    for me. Because I have been trying to see him for a long time,
    along with Assistant Secretary Hayes; and I finally saw
    Assistant Secretary Connor at one of the hearings we held last
    week. So, don't feel like the Lone Ranger.
        Now that leads to a question, Mr. Secretary, as to whether
    are not you have enough staff to be able to do all of the jobs
    that are thrown at you. And I am wondering about Assistant
    Secretary Hayes' ability to deal with Cal Fed if he is already
    working on these other great issues that are before us and
    whether or not it is possible for you to let us know whether
    this is indeed going to be a problem that we may have to help
    with in allowing your Department, your agency, to look at
    whether you have enough qualified staff to complete the
    environmental oversight of the areas along with processing
    those drilling permits.
        Are you going to restructure? What is it we can look
    forward to and how can we help?
        Secretary Salazar. Congresswoman Napolitano, thank you for
    your leadership as well on the California water issues and so
    many other issues you work on.
        We do have the staff, and we will make sure that Deputy
    Secretary Hayes and Commissioner Mike Connor and others are
    working on this issue we have. Because it is such a difficult
    and complex issue. You can't just wave magic wands or through
    platitudes resolve the water issues in California.
        I have assigned a person, David Nowey, who will be there
    full time to work with the California interests as well as with
    us here in Washington, D.C., to see how we can try to come up
    with a comprehensive way forward on the Bay Delta in
    California.
        Let me take the opportunity also, Congresswoman Napolitano,
    to say there is a reality within the Department of the Interior
    and that is that, in the last 8 years, because this Department
    was not a priority for the prior administration, that its
    capacity has been eroded day after day. Even when you compare
    the budget of this Department, we do not have the budget of
    this Department that the Department even had in 2001; and so we
    are trying to do everything we can to stand up to the new
    challenges that you, the Congress, and the President has placed
    in front of us, an agenda which I very much believe in and am
    working very hard on. But it is difficult.
        I can give you lots of statistics about how the guts of
    this Department were essentially wrenched out under the last 8
    years of the Bush Administration.
        Mrs. Napolitano. Thank you, Mr. Secretary. That was very
    enlightening.
        While we are at the issue of energy, which we have been
    talking broadly on energy independence, my concern, as Chair of
    the Subcommittee of Water and Power, is the ability to ensure
    that the grids are able to produce enough energy; and if there
    isn't any water in the rivers and dams because of climate
    change, the warming, whatever, and that leads me then to title
    XVI. I am going to request this, with the permission of the
    Chair and you, a review of the title XVI budget.
        There is $600 million still in backlog. Last year's budget
    was $9 million for this year, which, in essence, would give us
    roughly under 50 years to catch up. That would help relieve
    some of the pressure off the rivers and the dams and certainly
    Cal Fed, and we are not even putting that into the equation.
        And by that I would also like to ensure that the Army Corps
    of Engineers be included at the table on some of the
    discussions, because they do have a relevance in the Bay Delta
    area, the levees. And so those are areas that, while it doesn't
    completely involve this particular bill, it does in the sense
    of energy production.
        So, I would very much love to sit with you. And, yes, we
    have tried to get meetings. We have yet to be able to meet with
    your Commissioner on the issue or with your Under Secretary--we
    look forward to it--and certainly with you, because there are a
    lot of other ideas that have come forth, and we would like to
    be able to share them with you.
        My understanding is the California Legislature has been
    working on this almost 24/7 to be able to come up with
    solutions. They haven't yet. Political will, whatever you want
    to call it. But that Two Gates program is going to be another
    way to be able to save that water for California. While there
    are all kinds of, still, finger pointing, I still believe that
    there are some solutions in sight.
        But I would love to be able to sit with your agency, with
    you, and all of your staff to be able to follow through and be
    able to save some of this water to produce more energy.
        I thank you for your hard work. You have had 9 months, and
    you have done a marvelous job. I congratulate you and look
    forward to working with you and having you be part of our
    solutions for our water problems. Thank you.
        Thank you, Mr. Chair.
        The Chairman. The gentleman from Louisiana, Mr. Cassidy.
        Mr. Cassidy. Thank you, Mr. Secretary.
        First, I will point out that when you said--you know, I
    have heard your quote before: The rush to do something in a
    wrong way has harmful consequences for humans that would not
    have occurred if done in the right way. I heard that in my town
    hall about health care. With that said, I think you must have
    attended that.
        The Office of the Inspector General of your Department put
    out this report February, 2009, Oil and Gas Production on
    Federal Leases: No Simple Answers. And as I looked at the
    Chairman's bill, it almost seems like it is running counter to
    your own OIG's analysis, if you will.
        For example, we, in the bill, institute more regulatory
    barriers to production and, at the same time, express
    impatience that production is not happening in a more timely
    fashion. And yet your OIG said that onshore Federal oil and gas
    leases are much more difficult, time-consuming, and expensive
    compared to State and private leases due in considerable part
    to regulatory restrictions and requirements.
        Among this is that there is--they speak about litigation
    and public opposition having a significant impact on the
    ability of lease holders to conduct developmental activities,
    and the bill before us seems to
        increase the likelihood of litigation, et cetera. It says
    it could cause a dramatic increase in opposition that occurs
    even prior to lease issuances and continues throughout the
    development process. I will say that some of the pulling of
    leases already issued that you have all done seems to be
    consistent with your OIG's report.
        And then again, as I look at this bill's impatience with
    the rapidity with which oil and gas is developed, the
    conclusions have a quote from somebody from the Colorado School
    of Mines. I kind of like that he is from Colorado. It says that
    we shouldn't necessarily do faster production but rather
    smarter production. You can drill everything at once, but you
    lose the pressure pushing it up, and therefore your total
    volume produced may be less than if you just, say, do a single
    point but allow the pressure to gradually deplete.
        So again, as I look at the bill before us and I look at the
    OIG report, there seems to be little in the OIG report that
    supports some of the main tenets of this bill or, frankly, some
    of the approaches your office has taken today.
        So, I just wanted your comments upon that.
        Secretary Salazar. Thank you very much, Congressman
    Cassidy.
        If I may, Chairman Rahall, may I say have 30 seconds to
    respond to Congresswoman Napolitano?
        I appreciate the questions and wanted to just make you
    aware that I will have Commissioner Connor meet with you on
    title XVI. I think that is been in the works, and they have
    been trying to get that scheduled. September 30th we are trying
    to put together a major meeting on the California water issues
    and look forward to your participation and also helping us
    frame the agenda for that meeting.
        Congressman Cassidy, on your questions relative to our own
    process, our view is that there is room for us to improve
    relative to how we are leasing for oil and gas both in the
    ocean as well as on the onshore. And we have a number of
    recommendations, some of which are included in the bill and
    some of which are not, and we will work with the Committee as
    the legislation does move forward.
        I do agree with you very much that technology has made
    major changes and major opportunities. What was not considered
    to be conceivable on horizontal drilling even a few years ago
    now is opening up great opportunities relative to how we can
    get to the resource with lesser surface disturbance.
        There are private landowners of some huge lands that I am
    very familiar with where I know that those landowners are,
    frankly, doing different things in terms of oil and gas
    production because of technology and what is being done even on
    our public lands.
        So, one of the things that the Assistant Secretary Lewis
    and Director Abbey will be doing is try to help figure out how
    we can best do it on public lands as well.
        Mr. Cassidy. Let me come back to the point that your OIG
    made that actually some of the things that delay this process
    is, frankly, regulation and litigation inspired by the Federal
    Government. And, again, it seems that this bill exacerbates
    some of those problems. So, on that specific question, any
    comments?
        Secretary Salazar. I will take a look at the specific
    language that you raise.
        I will say this, that it was, frankly, because of missteps
    that were taken in the 2007-2012 plan on the OCS that we,
    frankly, find ourselves in the litigation that we are in. That
    was done a long time ago. But the level of environmental
    assessment that should have been conducted with respect to that
    plan--according to the court. This is not according to some
    interest group. It is not according to the Secretary of the
    Interior, not according to the Congress--but that missteps were
    made.
        Mr. Cassidy. Now, in fairness, I understand the court fuled
    that it was without precedent, and previous courts had not
    ruled that way on that specific item. So, in a sense, the court
    created an issue which previously had not existed. I think I
    know that.
        Secretary Salazar. What I will say, Congressman Cassidy, is
    that this is a very--the second highest court in the land that
    reached that finding unanimously, and they were judges
    appointed at court by Republican Presidents, and I don't think
    they were playing with the law. They were calling the facts and
    the law as they saw it.
        Mr. Faleomavaega. [presiding.] The gentlelady from
    Massachusetts, Ms. Tsongas.
        Ms. Tsongas. Thank you, Secretary Salazar, for your very
    forthright and engaging testimony. I appreciate very much
    hearing your point of view and the new direction you are taking
    at the Department.
        As I am sure you know, the Administration has an Ocean
    Policy Task Force that is in the process of determining the
    best way forward to develop and implement a national oceans,
    coast, and Great Lakes policy and marine spacial planning
    framework to protect, maintain, and restore these resources.
        As you go about your planning process, particularly in the
    Outer Continental Shelf, when do you anticipate and are you
    looking forward to the results of this task force, planning to
    use their findings in any way as you go about your thoughtful
    process, as you describe it?
        Secretary Salazar. Congresswoman Tsongas, thank you for
    that very important question.
        We are participating as the Department of the Interior in
    the Oceans Task Force. I think it is important that we take a
    look at what is happening with our oceans and that we move
    forward with the best science and the best mitigation
    approaches to some of the issues that we are seeing affecting
    our oceans today. So, I think it is a very important
    initiative; and I know you will be hearing more from my
    colleague, Jane Lubchenco, who is Under Secretary for Commerce
    and NOAA who will be speaking more to that.
        But we are very much involved in it, and I do believe that
    the information coming from the Oceans Task Force will be very
    helpful to us relative to how we move forward on OCS planning.
        Ms. Tsongas. That is good to hear.
        We have heard testimony about the grave state that our
    oceans are in; and as much as they are a potential resource for
    renewable energy, I think it is important that we take into
    account the impact of whatever we happen to do in our oceans.
    So, I am grateful to hear that.
        A follow-up question really is, as you know, the Georges
    Bank off the coast of Massachusetts in New England is an
    irreplaceable resource; and I am committed to keeping it off
    limits to drilling. What are your thoughts as you go forward
    with your planning process as to how to protect very fragile
    ecosystems that are in our oceans?
        Secretary Salazar. We should be able to do that both with
    respect to the 5-year planning efforts but then also with
    respect to particular projects. Because before a lease is
    ultimately issued for a particular parcel, before we go through
    the lease sale, we do additional environmental analysis, and
    that analysis should help us make sure that those places that
    have ecological values and the oceans that need to be protected
    are in fact protected.
        Ms. Tsongas. Thank you. I yield back.
        Mr. Faleomavaega. The gentleman from Virginia, Mr. Wittman.
        Mr. Wittman. Mr. Secretary, welcome here today. Good to
    have you here.
        As you have heard other members of the Committee here, I
    think we are all on the same page as having an all-of-the-above
    energy policy here for the United States, making sure that we
    are developing our oil and gas resources here as well as
    renewable and alternative energy sources; and Virginia is going
    to be an extraordinarily important part of that. In fact, a
    study by a university found that natural gas production off the
    Atlantic coast could create over 25,000 jobs in Virginia. And
    Virginia is also poised to be a significant player in renewable
    energy, both in jobs and in manufacturing. So, I couldn't agree
    with you more and your statement about seeking energy
    independence and also making sure we stop the exporting of
    dollars and jobs that are related to our dependence on foreign
    sources of energy. So, I think this is a great way for us to
    accomplish that.
        Looking specifically at Virginia lease sale 220, can you
    tell us where you are with expediting that and getting that
    done in a timely manner so that lease sale can take place and
    when do you believe that we will see energy produced from our
    offshore oil resources--oil and gas resources off the Atlantic
    coast?
        Secretary Salazar. The question of how we move forward on
    the Atlantic and how we move forward with the area off the
    Virginia coast is something which we are currently taking a
    look at. And we know some things that I think you know,
    Congressman Wittman, and that is that we have very little
    information on the Atlantic and what is there and what is not.
    And, frankly, we don't have that information because, for 30
    years, that information hasn't been collected. And so one of
    the active questions that we are looking at right now is how
    best do we develop the information from seismic so that we can
    make a determination as to what is there and what is not. So, I
    will be happy to get back to you with more specific questions
    on the Virginia lease sale.
        Mr. Wittman. I think we are all anxious to make sure--in
    Virginia, the lease sale 220 is the first on the list of leases
    to be considered in the Atlantic, and we are certainly anxious
    to see that go forward. I think we have the ability there in
    Virginia both with oil and gas resources out there and our
    renewables to be poised to be a leader there. So, we look
    forward to making sure we are aggressively getting that done.
        Secretary Salazar. If I may, Congressman Wittman, just one
    point that I think you put your finger on which I think is very
    important. I think where you will find some bipartisan support
    will be what we do with natural gas. I think there is
    significant potential there for it to be very much a part of
    our energy portfolio for the future.
        Mr. Wittman. I agree. It has got to be something that we do
    in a timely fashion to make sure we are developing those
    sources to transition to that next generation of energy. So, we
    appreciate all you can do to expedite that process, especially
    off of Virginia, since we are anxious to create some jobs from
    that there.
        The Land and Water Conservation Fund. As you know, I am a
    dedicated outdoors man and very interested in preserving
    habitat and ensuring the continued outdoor recreation
    opportunities for all Americans. I am interested in your
    comment earlier when you talked about securing full funding and
    dedicated sources of funding for our Land and Water
    Conservation Fund.
        Looking at that, I would like to get your thoughts about
    how you think we accomplish that and how would full and
    dedicated LWCF funding impact the Department's efforts to
    provide continued outdoor recreational opportunities for my
    constituents?
        Secretary Salazar. Thank you very much for the question.
        In my view, Congressman Wittman, we have, as a Nation,
    underinvested in these wildlife areas and places where we can
    restore the outdoors in a way that hunters and anglers and
    outdoor enthusiasts can participate in. It is an area where we
    know from information that we have developed that we create
    about 6\1/2\ billion jobs a year in the United States through
    hunting and fishing and other outdoor recreational activities.
    And those things don't happen by themselves.
        It doesn't matter whether it is Shenandoah or any of the
    other great parks or places of our Nation. They become great
    economic generators. All you have to do is to visit a town or a
    community that is close to one of our great outdoors
    facilities, and we know how excited they get when hunting
    season comes by and when the summer comes by for National Parks
    and those sorts of things.
        So, my view is we need to make additional investments in
    those great outdoors, and I hope that we are able to work with
    the Congress to be able to find a way to do it.
        Mr. Wittman. Just the other day at the Migratory Bird
    Conservation Commission, as you know, there are 34 projects
    that were jointly funded with the LWCF funding. It is so
    critical; and we know that opportunities there, especially as
    we see populations grow, are going to become more and more of a
    challenge.
        So, I think the funding and the efforts there become even
    more critical for us to make sure those opportunities are
    available. I appreciate your efforts there; and, hopefully, we
    will stand up as aggressively as we can to make sure the
    resources are there for those opportunities for recreational
    experiences.
        Secretary Salazar. If I may, Congressman Wittman, I think
    that the Migratory Bird Commission on which you sit, and you
    saw the investments that are being made there, it is an
    incredible testimony of what happens when you have the Congress
    and the executive working with States and private landowners;
    and what is happening is that we reached the billion dollar
    mark in investments in wildlife refugees through that
    Commission at that last meeting that you participated in. But
    through that $1 billion, there were thousands upon thousands of
    other organizations that contributed out of their own private
    money in the kinds of partnerships that really allowed us to
    leverage that into a multi-billion-dollar effort over the
    years. So, you and Senator Cochran and Congressman Dingell and
    Senator Blanche Lincoln have been very much a part of making
    that happen. Thank you.
        The Chairman. [presiding.] The gentleman from New Jersey,
    Mr. Holt.
        Mr. Holt. Thank you, Mr. Chairman.
        Mr. Secretary, as the Chairman said earlier, we applaud you
    for your testimony today, for the good job you are doing, the
    strong and good appointments in your secretariat and in the
    agencies and offices under you.
        I won't dwell on this, but I must underscore your good
    words about the Land and Water Conservation Fund and your
    intentions to make it what it was intended to be and your
    comments about the Royalty-In-Kind program. That really is
    music to our ears and thank you very much.
        I want to ask questions about the sustainable energy
    resources, the renewable energy resources offshore.
        You came to New Jersey and presented some figures to us--I
    could hear jaws drop all over the room when you talked about
    the large amounts of wind energy in the mid-Atlantic offshore
    region. I think there is a real future there. And I wanted to
    ask if you were taking proactive steps now, not waiting for
    individual applications but taking steps to conduct all of the
    studies that might be useful in understanding exactly what that
    resource is and how it could be harvested with environmental
    sensitivity. It is, I think, very important to what--you have
    addressed it in passing this morning, and I would like you to
    say a little bit more. I think it is very important to what the
    President has outlined in his energy talks.
        Secretary Salazar. Congressman Holt, thank you very much. I
    appreciate your question, and I appreciate your leadership in
    New Jersey on this issue. New Jersey is one of 10 States on the
    Atlantic coast, really, that is at the point of the spear in
    terms of standing up this new energy potential.
        In response to your question, we have two sets of data and
    are developing additional sets of data. The first set is a set
    of data that has been developed over a long period of time by
    the National Renewable Energy Lab, and they have done extensive
    analysis. It is the premier energy lab of the country.
        When you have conversations with Director Arvizu at ENRL,
    he can tell you where he thinks we can go on renewable energy.
    And I think his bottom line, if he were testifying here, it is
    only we who can limit where we ultimately will go because there
    is so much potential with wind and solar and geothermal and
    biomass.
        We have our information in terms of the wind energy
    potential that we have developed through the National Renewable
    Energy Lab. We also have developed information within our own
    agency through MMS, as well as through the United States
    Geological Survey, and that is information that we currently
    have that leads us to the conclusion that we have this great
    opportunity to move forward with wind energy.
        The second answer to your question really has to do with
    what we are doing to make that possible. We have, since the
    beginning of the Administration, issued five exploratory
    leases, including off the shore, off the coast of New Jersey
    where there actually are--the construction of the pilots are
    going on out there to measure the exact level of the wind so
    that then, based on those tests, then the commercial aspects of
    these developments can move forward. So, we are hoping to do
    everything we can to facilitate this process that we have
    opened up.
        We have opened up renewable energy offices in some places
    around the West. It is my hope and we are still working with
    OMB and others to try to figure out how we can open up a
    renewable energy office in the Atlantic. So, it is very much on
    our radar screen.
        The Chairman. Mrs. Lummis.
        Mrs. Lummis. Thank you, Mr. Chairman.
        Good morning, Mr. Secretary. I can't talk as fast as Mr.
    Bishop, but I might try a little bit of his strategy on you.
    So, I am going to make some statements for which I hope to
    receive a written response and then follow with a question that
    I hope you will have a chance to answer today.
        This is the question for which I hope to receive a written
    response.
        Less than 3 weeks ago, the BLM announced it was rescinding
    over 23,000 acres of oil and gas leases in the Bridger Teton
    National Forest in Wyoming. My understanding is that these
    leases were properly auctioned and that your Department
    accepted payment. My question is, what statutory authority does
    the BLM have to rescind the leases?
        The Wyoming Range Legacy Act which passed the Senate
    indicated, as Senator Barrasso stated on the Senate Floor, that
    everyone should keep in mind that the acres currently leased or
    currently leased but under protest represent the area where the
    most promising reserves exist and that the Wyoming Range Legacy
    Act does nothing to touch that. Yet the leases we are talking
    about are the ones that Senator Barrasso mentioned.
        And then, furthermore, it is my understanding that if the
    BLM accepts a bid at an oil and gas lease sale that the agency
    has a mandatory statutory obligation under the Mineral Leasing
    Act to issue that lease to the qualified winning bidder within
    60 days following payment by the successful bidder of the
    remainder of the bonus bid, if any, and the annual rental for
    the first year.
        This did occur in this case, so my question that I am
    asking that you follow up in writing is, by what authority were
    these leases rescinded?
        Second, I would like to commend to your attention the
    report of a seven-member committee on which I served under
    Secretary Kempthorne called the Subcommittee of the Royalty
    Policy Committee that dealt with mineral collections and
    enforcement. It was co-chaired by former U.S. Senators Bob
    Kerrey and Jake Garn. There was a member of the Navaho Nation
    on the committee. I was on the committee as the former
    treasurer of the State of Wyoming, Wyoming being the State that
    receives the most Federal mineral royalties from onshore
    production.
        And we did an entire performance audit of the Mineral
    Leasing Enforcement and Collection Program. So, we looked at
    both BLM and MMS programs, and we came to some different
    conclusions than are expressed in the CLEAR bill. And
    regardless of whether this bill passes or not, I sure commend
    that study to your attention because I think we made some very
    good recommendations with regard to policy.
        We came to some slightly different conclusions than you did
    about RIK. We recommended the royalty-in-kind onshore be
    discontinued but that offshore be continued. Because we found
    that when there is an excess in takeaway capacity, as there is
    in the Gulf of Mexico region, that the government was actually
    able to negotiate a better net return for the taxpayers in
    those situations than exists when you have a dearth of takeaway
    capacity.
        So be that as it may, I just think there are some really
    good suggestions in that report that was done under Secretary
    Kempthorne, and former U.S. Senator Bob Kerrey was deeply
    involved in that effort. He attended those meetings and was
    engaged. So, I strongly recommend that.
        And, finally, here is the question.
        As you know, this bill would shift both BLM's oil and gas
    program as well as the MMS responsibilities to a new Office of
    Federal Energy and Mineral Leasing, and we looked at that in
    the report that I am referencing that was done under Secretary
    Kempthorne, and we came to a different conclusion than this
    bill comes to.
        I would like to know, do you believe that this new
    Department would speed or slow the development of the
    approximately 70 percent of Wyoming's natural gas production
    and 65 percent of Wyoming's oil production that occurs on
    Federal lands and how?
        Secretary Salazar. Thank you very much, Congresswoman
    Lummis. I know, given the State of Wyoming, your great interest
    on these issues. We will get back to you on the question of the
    authority on the 23,000 acres that you spoke about first.
        Second, on the royalty policy committee which Senator
    Kerrey and others have served on, I appreciate the
    recommendation; and, in fact, that is what part of this team
    has been reviewing as we move forward on the reorganization of
    the Department. It will be part of what we will continue to
    work on with the Chairman and others. There are some great
    ideas that are included in that report.
        Third, on your question as to whether this will speed up or
    slow down the proposal in the Office of Energy and Mineral
    Leasing proposed in this bill, whether it will slow it up or
    speed it up, my answer to that is we have to get it right. I
    think the most important thing that this bill is doing for us
    right now is it is putting the spotlight on an issue that
    needed to have a spotlight put on it. When one looks at the
    Minerals Management Service, it was created a long time ago,
    not created by Congress, created by a secretarial order signed
    by a person who was in my position at the time.
        The Chairman. And yet, at the end of the day, we have given
    huge authority to the Minerals Management Service. And so some
    of the issues that are being raised in this Committee and in
    this bill, and which have been addressed by both the General
    Accounting Office and the Office of Inspector General need to
    be addressed. And so we need to come to some conclusion about
    how we are going to move forward.
        At the end of the day, I think it is important for all of
    us who will work on this issue to keep in mind that what we
    want to do is we want to have a government process and a
    government organization here that works and that works
    efficiently and that works effectively. And I will be the first
    to say, as Secretary of the Interior, that we have a long ways
    to go. We have a lot to learn and we will work with all of you
    to put together the best organization that addresses the
    interests of Wyoming as well as the rest of the country.
        Mrs. Lummis. Thank you, Mr. Secretary. Thank you, Mr.
    Chairman.
        The Chairman. The gentlelady from Guam, Ms. Bordallo.
        Ms. Bordallo. Thank you very much, Mr. Chairman and Mr.
    Secretary.
        Along with the Virgin Islands, who earlier had introduced
    their Assistant Secretary, I would like at this time to share
    with my colleagues that we are very proud of a son of Guam who
    has recently been confirmed as the Assistant Secretary of
    Insular Areas, Mr. Tony Babauta. He served with this Committee
    in Congress for many years, and I want to thank both you, Mr.
    Secretary, and Mr. Chairman, for recognizing his talent. We in
    Guam are very, very proud.
        Also, Mr. Secretary, I think you have done a very excellent
    job in the short time that you have been at the helm of the
    Department of the Interior. I know that the Department of the
    Interior is a very important agency in our government,
    especially when it comes to the territories, because you
    oversee the territories of the United States.
        I have a question here and, of course, I guess people might
    say I am very passionate about Guam and the territories.
    Currently, the Department's authorities under the Outer
    Continental Shelf Lands Act does not encompass the territories.
    So, do you and the Department support amendments to the law
    that would bring the territories under the OCSLA?
        Secretary Salazar. Thank you very much for the question,
    Congresswoman Bordallo. First, thank you again for mentioning
    Tony Babauta, and it is important that this Congress has helped
    us move forward to make him Assistant Secretary for Insular
    Affairs, because the territories are places that are far away
    from the mainland of the United States, and yet the strategic
    interest and historic relationship and current relationship is
    so important.
        You mentioned Guam, which I know you are more familiar with
    some of these issues than even I am. But the fact that we are
    moving 8,000 marines into Guam and the kind of consequence that
    that will have to the island and to the issues that affect it
    is something that is very important, and it is therefore
    important to have someone like Tony, and like you, being an
    advocate for Guam and for the territories.
        Let me--with respect to the application of the Outer
    Continental Shelf laws of the United States to the territories,
    it is one of the questions that we need to grapple with and we
    will be formulating a position and getting something back to
    you on that.
        Ms. Bordallo. I thank you very much, Mr. Secretary. And
    thank you, Mr. Chairman.
        The Chairman. The gentleman from Louisiana, Mr. Fleming.
        Mr. Fleming. Thank you, Mr. Chairman.
        I want to bring to your attention, Mr. Secretary, to Title
    III of the CLEAR Act. It establishes a new requirement for
    diligent development, diligent development of Federal oil and
    gas leases. This seems to be an extension of the old
    disapproved and discredited idea of the ``use it or lose it''
    theory from the last Congress. So, I guess part one of my
    questions is, can you clearly define diligent development?
        Second, I want to bring your attention to your own OIG
    report which was released early this year talking about the
    lease development process. It says, and I will quote, It has
    many variables that are not self-evident, end quote. And quote,
    there is no guarantee that any given lease contains oil and
    gas.
        The report also states that, quote, Mandating production on
    all Federal leases and increasing fees would not necessarily
    increase production and could, in fact, reduce industry
    interest in Federal leases, end quote.
        I guess what it is suggesting here is, instead of
    increasing production, that this could--this idea of diligent
    development could actually reduce or even stop. And so after
    this period of moratoria, where we have not been able to drill
    OCS, or at least advance leasing, are we not really through
    more regulation achieving the same goal as the moratoria?
        Secretary Salazar. Thank you, Congressman Fleming, for the
    questions. First, let me say that we recognize at Interior that
    just because a company acquires a lease, it doesn't mean that
    they are going to be able to turn that lease into production in
    a month or a year or even 5 years; that the phases, including
    the environmental assessments that have to take place, will
    require a significant amount of time before those lease areas
    are put into production. And it is also very capital-intensive
    on the part of the companies who are out there doing the
    exploration and, ultimately, the development. So, we recognize
    that there is that time lapse.
        How you define diligent development--you know, there is an
    effort to try to do it in this legislation. There have been
    other efforts at trying to get it done. It seems to me that
    there is a time-honored doctrine, at least with respect to
    water and public lands, that it is a public resource and that
    you can create incentives to try to get that public resource
    developed.
        Now, whether it is the concept that is included in this
    bill or some other concept, I think that it is worthy to pursue
    some kind of standard on diligent development. What exactly
    that will be and where we will end up, I don't have an answer
    for you today.
        Mr. Fleming. Well, just to respond to you. Of course the
    OIG is suggesting that perhaps that is not the intention to
    reduce production, but that is what the OIG expects will
    probably happen. So, again, what I am suggesting is that that
    is something that needs to be looked at; that there may be
    perhaps unintended consequences.
        Secretary Salazar. I think, as with all major matters of
    legislation--and that is a major aspect of this legislation--it
    is important to be able to project the kinds of consequences. I
    think that is part of the analysis that this Committee and
    other people who are involved will do.
        Mr. Fleming. Thank you, Mr. Secretary. Thank you, Mr.
    Chairman.
        The Chairman. And the Chair would remind the gentleman from
    Louisiana as well that we have due diligence in coal
    development with Federal leases.
        The gentlelady from South Dakota, Ms. Herseth Sandlin.
        Ms. Herseth Sandlin. Thank you, Mr. Chairman. Thank you,
    Mr. Secretary. It is good to see you. As you know we have
    extended an invitation to you to join us in South Dakota to
    discuss a number of important issues particularly as it relates
    to the jurisdiction of your Department over the BIA and the
    nine sovereign tribes that I represent in South Dakota.
        With regard to today's topic and the work of Chairman
    Rahall and the bill that is the subject of today's hearing, I
    was wondering: In light of the recent GAO reports and the IQ
    investigations, what steps has the Department of the Interior
    already taken to address many of the problems with the oil and
    gas lease management? Do we have to wait until this bill
    becomes law before we see more accountability in the leasing
    programs? Or, to put it another way--and I know my colleague,
    Mr. Boren from Oklahoma, was interested in posing the question
    this way--do you believe you can address the needed changes
    administratively and without legislation?
        Secretary Salazar. Congresswoman Herseth, thank you for the
    question. And let me say that when I see someone like you from
    South Dakota, it tells me once again how important this
    Department is. It really is the department of all the Americas,
    it is not just the department of the West.
        But when we look at whether it is Mount Rushmore or whether
    it is the Indian issues or whether it is the energy issues that
    affect your State, we very much have a major role in working
    with you on the future of South Dakota.
        With respect to your question on waiting to act, we are not
    waiting, and we have not waited. From day one when I came in to
    the Department of the Interior, we went out to the Minerals
    Management Service and issued orders with respect to a new way
    of ethics, standards for MMS. We assigned a lawyer to work with
    our employees there. And I will say this as well. I know some
    of our employees are probably listening to this testimony. The
    fact is that 99 percent, 99.9 percent of our employees are good
    public servants. They work very hard every day. They are career
    employees. And the job that we do on behalf of the United
    States with our 67,000 employees is a job that I am very, very
    happy with. However, they were having problems in the past, and
    so we have taken that kind of action to try to make sure that
    those ethical lapses that have occurred in the past don't occur
    in the future.
        In addition, Secretary Wilma Lewis, or Under Secretary
    Wilma Lewis who has just joined us, she and her team have been
    actively looking at a whole array of management issues, many of
    which are addressed in this legislation today. And there will
    be two tracks with respect to how we move forward. One will be
    a track that we can accomplish administratively within our
    Department and that I can do through existing authorities and
    secretarial orders, and we will, we are working on that and
    will have more on that in the near future. And the second will
    be organic legislative changes, which are attempted to be
    achieved in the CLEAR Act, some of which we will be supportive
    of, some of which we will have a dialogue to see how at the end
    of the day we accomplish what the Chairman wants to accomplish
    here, and that is to have a good bill with respect to energy
    development off of our public lands.
        Ms. Herseth Sandlin. Thank you, Mr. Secretary.
        And then along the lines of Mrs. Lummis' question, assuming
    the Department moves forward, either now in terms of the two
    tracks you described, administratively or with some of the
    legislative changes that are put forth in the Chairman's bill,
    how long would you anticipate a reorganization to take? And
    have there been any estimates to date in light of what you just
    described in terms of actions already taken and what the
    reorganization will cost the taxpayer?
        Secretary Salazar. We are taking a look at those issues
    right now. I will give you my philosophical approach to the
    whole concept of reorganization. I don't think it does our
    government a lot of good and the people that we serve simply by
    rearranging the boxes, OK? That there are functions which are
    essential, including leasing and royalty collection and the
    transparency issues that are addressed in this legislation. And
    what we have to do is to make sure that that ultimate
    administrative framework that we put together addresses those
    fundamental issues in the very best way. There is a lot, I
    think, that can be done with royalty simplification, for
    example. We have spent a lot of time now chasing what is a very
    complex way of royalty collections for the United States of
    America. We have spent a lot of time thinking about ways in
    which to simplify royalty collections. So, we will be able to
    move forward with some of those changes, some of them sooner,
    some of them phased in over time. But at the end of the day,
    the goal here is to have a government agency that can provide
    efficiency and effectiveness.
        Ms. Herseth Sandlin. Thank you very much, Mr. Secretary.
        The Chairman. The Chair will advise members that we are in
    the process of voting on the House Floor. Two votes will occur.
    The Secretary does have to leave and will be unable to return.
    So, the remaining members, can you do it in 30 seconds?
        Then I would ask--of course all members have the right to
    submit their questions in writing to the Secretary. He has been
    very gracious with his time today, well over 2 hours, and we
    appreciate it. And I know that he and his dedicated staff that
    are with him here today would be glad to respond to members'
    questions in writing. Am I correct?
        Secretary Salazar. Yes, Mr. Chairman. Indeed. Thank you.
        The Chairman. Thank you. And the Committee will stand in
    recess until 1:00, which should allow the two votes on the
    House Floor to occur. And then, Dr. Lubchenco will be our next
    witness when we come back. And another warning that she does
    have to leave at 2:00. The Committee stands in recess.
        [Whereupon, at 12:20 p.m., the Committee recessed, to
    reconvene at 1:00 p.m., the same day.]
        [1:10 p.m.]
        Mr. DeFazio. [Presiding.] We will proceed now. The
    Committee will resume sitting and we will proceed to the second
    panel. And it is my pleasure to have the opportunity to
    introduce Dr. Jane Lubchenco, who is Under Secretary and
    Administrator for the National Oceanic and Atmospheric
    Administration, most notably; also a resident of Oregon and an
    esteemed professor at Oregon State University.
        I assume you are on leave or something.
        Dr. Lubchenco. That is correct.
        Mr. DeFazio. You want to keep your day job in the
    background, just in case. Madam Administrator, proceed with
    your testimony.

    STATEMENT OF JANE LUBCHENCO, UNDER SECRETARY AND ADMINISTRATOR,
         NATIONAL OCEANIC AND ATMOSPHERIC ADMINISTRATION, U.S.
                         DEPARTMENT OF COMMERCE

        Dr. Lubchenco. Thank you very much, Congressman DeFazio. It
    is a pleasure to see you again. Good afternoon to the rest of
    the Committee, Congressman Hastings, other members of the
    Committee. My name is Jane Lubchenco and I have the pleasure of
    serving as Under Secretary of Commerce for Oceans and
    Atmosphere, and the Administrator of NOAA.
        I greatly appreciate this opportunity to testify on the
    Consolidated Land Energy and Aquatic Resources Act of 2009. We
    appreciate your thoughtful work to help strengthen
    comprehensive energy resource planning. We share the Chairman's
    goal of creating promising new jobs for Americans, achieving
    energy independence, while also protecting ocean and coastal
    resources, ecosystems, and communities.
        A robust approach to energy should also protect existing
    jobs in ocean-dependent industries such as fishing, marine
    transportation and tourism.
        Let me begin my remarks by touching on NOAA's involvement
    with energy development. Because NOAA has many responsibilities
    for licensing of energy development and offshore territorial
    waters, this bill is quite germane to our mission
    responsibilities. NOAA works with many energy sectors,
    including offshore oil and gas, liquefied natural gas,
    hydropower, offshore and land-based wind power, ocean thermal
    energy conversion, biomass, biofuels, and more.
        With a long track record in using our scientific
    capabilities to help make offshore energy production safe and
    efficient, NOAA is eager to assist the Nation in harnessing
    clean energy from the sea. Indeed, we are pleased to already be
    helping many States and private firms that have requested
    NOAA's scientific and technical expertise.
        Obviously, with all marine economic development, unintended
    consequences should be avoided. We take seriously our
    obligation under existing statutes to guard against energy
    activities harming marine life and ocean bottom habitats,
    causing acoustic impacts to marine mammals, other protected
    species and fisheries, producing hazards to ship traffic,
    interfering with weather radar and destroying undersea
    archaeological treasures.
        We are greatly concerned that new energy production not
    lead to damaging oil spills. The Federal Government and NOAA
    must have the necessary resources and capacity to respond
    immediately to clean up oil spills and also address long-term
    social, environmental, and economic impacts of oil that is
    spilled.
        With all of these mandates in mind, I welcome the
    opportunity to comment on the proposed legislation. While we
    applaud the intent of H.R. 3534, the CLEAR Act, our primary
    concern is that any legislation should embed energy
    considerations into the larger perspectives of other ocean
    uses.
        As ocean uses increase exponentially, comprehensive marine
    spatial planning provides a means to ensure that uses are
    balanced and collectively provide society with the maximum
    return. Marine spatial planning is a tool that will help reduce
    conflicts, identify efficient combinations of activities,
    streamline decision making, provide investors with
    predictability, and ensure that health and productivity of
    ocean and coastal ecosystems are protected or restored.
        Both the U.S. Commission on Ocean Policy and the Pew Oceans
    Commission have endorsed ecosystem-based marine spatial
    planning for the full range of uses, not just for a single
    sector. President Obama emphasized this point when in June he
    created his Interagency Ocean Policy Task Force, whose interim
    report, supported by NOAA and the other Federal agencies, will
    be released tomorrow. Significantly, the President directed the
    task force to develop a comprehensive integrated ecosystem-
    based approach, one that addresses conservation, economic
    activity, user conflict and sustainable use of ocean, coastal
    and Great Lakes resources. We believe this comprehensive
    process offers an excellent opportunity to wisely manage
    multiple uses of the ocean.
        In contrast to this approach, under the bill's section 602,
    Regional Outer Continental Shelf Councils would be required to
    prepare OCS strategic plans only for energy development without
    regard to other job-dependent ocean uses or multiple
    departments' legislative mandates.
        Also, sections 607 and 608 would exempt certain planning
    and leasing processes from consideration by the proposed
    Regional OCS Councils. From land-based planning efforts we know
    that piecemeal approaches toward development often undermine
    comprehensive planning. We suggest altering these two sections
    to avoid this problem.
        While as a general rule, the Administration opposes the
    creation of new mandatory programs, we recognize the intent of
    the proposal in the bill for an Ocean Resources Conservation
    Assistance Fund, including stepped-up efforts to protect our
    ocean and coastal environments.
        And, finally, we support a national policy that vests NOAA
    with authority to provide for the sustainable practice of
    aquaculture. NOAA will work with the Committee to address the
    current ambiguity in authority and create a durable structure
    for a responsible aquaculture management.
        We strongly oppose section 704, which would remove our
    authority to permit or regulate offshore aquaculture under the
    Magnuson-Stevens Act and would invalidate existing permits.
        As you are aware, NOAA is developing a comprehensive
    national aquaculture policy that will focus on the protection
    of ocean resources and marine ecosystems, address fishery
    management issues, and look at promising ways to reduce
    aquaculture's environmental impact. This step will help provide
    a good structure for aquaculture to be a jobs-creating,
    environmentally sustainable industry for the U.S. that will
    help meet our Nation's food supply needs.
        In summary, comprehensive energy and ocean management
    planning is vital for our Nation's future. Ocean resources
    support thousands of jobs in the commercial and recreational
    fishing, recreation, tourism, and maritime transportation
    sectors, and they present an opportunity for new clean energy
    jobs. NOAA supports the Committee's desire for effective
    management, but believes that a framework for true marine
    spatial planning must be more comprehensive than what is
    articulated in the bill.
        Thank you very much indeed for the opportunity to testify.
    I look forward to your questions and also to working with you
    as you move ahead in these areas. Thank you very much.
        Mr. DeFazio. Thank you, Madam Administrator.
        [The prepared statement of Dr. Lubchenco follows:]

      Statement of Jane Lubchenco, Ph.D., Under Secretary of Commerce for
    Oceans and Atmosphere, National Oceanic and Atmospheric Administration,
                          U.S. Department of Commerce

        Good morning Chairman Rahall, Ranking Member Hastings, and Members
    of the Committee. My name is Jane Lubchenco and I am the Under
    Secretary of Commerce for Oceans and Atmosphere and the Administrator
    of the National Oceanic and Atmospheric Administration. Thank you for
    the opportunity to testify before you today on the Consolidated Land,
    Energy, and Aquatic Resources Act of 2009. NOAA appreciates the
    continued efforts of the bill's sponsors and the members of this
    committee to strengthen comprehensive planning for energy resource use
    both on land and in the ocean and to take action to improve the
    integrated management and conservation of our oceans. Comprehensive
    planning supports ecosystem-based management and NOAA's efforts to
    protect its trust resources. As part of the Department of Commerce,
    NOAA has a critical interest in comprehensive ocean planning that both
    protects existing jobs, including those in ocean-dependent industries
    such as fishing, marine transportation, and coastal tourism, and
    fosters the creation of new clean energy jobs.
        While NOAA has an interest in, expertise on, and responsibilities
    relevant to energy planning on a variety of levels, the majority of my
    comments will focus on Title VI--Outer Continental Shelf Coordination
    and Planning--of H.R. 3534 and the importance of framing OCS activities
    as part of a broader strategy for integrated use of oceans. Before I
    discuss NOAA's comments on the bill, let me give you a brief overview
    of NOAA's roles in energy planning and permitting.
    NOAA's Involvement in Energy Planning and Permitting
        NOAA's involvement with the energy sector is wide-ranging. NOAA
    works with the following energy sectors: offshore oil and gas
    (exploration and production); liquefied natural gas (LNG); hydropower;
    offshore and land-based wind power; hydrokinetic ocean energy (wave,
    tidal, and current); ocean thermal energy conversion (OTEC); ocean
    methane hydrates; solar power; biomass and biofuels. NOAA provides
    data, scientific research, technical products, management and conflict
    resolution expertise, as well as operational services that are used by
    the energy industry, state and local governments, and agency partners
    for energy-related issues. Under the Ocean Thermal Energy Conversion
    Act (OTECA), NOAA is responsible for issuing licenses to any entity
    wishing to construct or operate an OTEC facility within the U.S.
    territorial sea. In addition, NOAA actively participates in many of the
    energy licensing processes by conducting a variety of environmental
    consultations required for federal agencies to complete energy facility
    licensing.
        Federal agencies, states, and the private energy sector are
    increasingly requesting NOAA's scientific and technical expertise in
    coastal policy and management, fisheries science and management,
    Coastal Zone Management Act federal consistency reviews, Endangered
    Species Act consultations, and mediation. NOAA also provides a broad
    range of oceanographic, meteorological, and climate services used by
    the energy sector and federal agencies in charge of leasing and
    permitting projects. In the emerging field of renewable energy,
    industry and federal partners will need enhanced NOAA products and
    services in order to make reliable investments in renewable sources of
    energy such as wind, wave, solar and water. For example, NOAA data on
    weather and oceanographic patterns could inform critical siting
    decisions for these renewable energy industries.
        NOAA's mission includes ensuring that energy exploration,
    production and transport in the ocean and coastal zone occur in an
    environmentally responsible way and that these activities minimize
    adverse interactions with other uses. Many potential impacts of energy
    exploration, production or transport impinge upon NOAA's
    responsibilities, including:
          physical, biological or chemical impacts on marine biota
    and benthic habitats;
          acoustic impacts to marine mammals, other protected
    species, and fisheries;
          impacts on navigation, including increased ship traffic;
          interference with weather radar; and
          impacts on archaeological and historic preservation.
        In particular, NOAA has several legislative mandates to protect
    marine species and their environment, some of which provide strict
    guidance related to allowable levels of impact on living marine
    resources. I've included a listing of these mandates in an attachment
    to this statement. Under these laws and associated regulations, NOAA
    must examine coastal and ocean energy projects to evaluate potential
    and actual impacts of within the U.S. Exclusive Economic Zone. NOAA
    works to implement these statutes in a manner that allows it to
    protect, manage, and conserve coastal and marine resources, while also
    generating solutions that recognize the importance of the Nation's
    energy needs and implications for national security.
    Comments on H.R. 3534
    Use of Comprehensive Marine Spatial Planning
        NOAA commends Chairman Rahall and this Committee for drawing much-
    needed attention to comprehensive energy planning, an important issue
    for the Nation and our ecosystems and we look forward to working with
    the Committee on this issue. NOAA's legislative responsibilities
    dictate the need to embed energy considerations into the broader
    perspective of other ocean uses. The broad construct within which we
    believe it is appropriate to consider these issues is marine spatial
    planning (MSP). MSP is a tool to evaluate the suite of activities that
    can coexist in a place with the goals of ensuring that legislative
    mandates are met, minimizing conflicts, and protecting the health of
    the ocean for future uses. MSP is a process for determining in an
    objective and transparent fashion which combination of compatible human
    uses are allocated to specific ocean areas in order to sustain critical
    energy, ecological, economic, national security and cultural services
    for future generations. The purpose is simply to minimize conflicts
    among activities, identify efficient combinations of activities,
    streamline decision-making, provide predictability in planning
    investments, ensure the continued provision of key benefits to society,
    reduce impacts in ecologically sensitive areas, and protect the overall
    health of the oceans.
        Both the U.S. Commission on Ocean Policy and the Pew Oceans
    Commission emphasized throughout their reports the necessity of a more
    comprehensive integration of multiple uses and the importance of
    framing MSP relative to the full suite of uses, not just one sector
    such as energy.
        President Obama's June 12, 2009 memorandum that created an
    Interagency Ocean Policy Task Force reinforced the importance of this
    broader perspective. The President's memorandum directed the Task Force
    to develop a recommended framework for effective coastal and marine
    spatial planning. Specifically, the memorandum called for, ``A
    comprehensive, integrated, ecosystem-based approach that addresses
    conservation, economic activity, user conflict, and sustainable use of
    ocean, coastal and Great lakes resources...''. In keeping with the
    direction outlined in the President's memorandum we recommend that MSP
    principles be applied more broadly. Indeed, we believe that that is the
    only way to ensure the many legislatively mandated responsibilities in
    oceans are met. Over the next three months, the Task Force will be
    preparing its recommendations on a framework for coastal and marine
    spatial planning. Included as part of this process, are a series of
    regional public listening sessions and stakeholder roundtables from a
    variety of ocean use sectors, designed to hear public input on what
    this framework should look like. NOAA is an active member of the Task
    Force and believes this process offers an excellent opportunity to
    consider the most appropriate ways to manage for multiple ocean uses.
        This bill addresses a particular and important subset of ocean
    uses. However, we believe it is important to consider these uses as
    part of a more comprehensive planning process that includes the full
    suite of key competing and complementary uses. An improved, thoughtful,
    transparent, and goal-oriented process for due consideration of
    multiple compatible uses will minimize future conflicts, greatly
    facilitate planning, and ensure overall goals can be met. In addition,
    there will be a need to increase synergistic relationships between
    existing ocean uses.
        Competing uses of the ocean are developing faster than our current
    capacity to manage them. Rapid growth of most uses will only exacerbate
    existing conflicts. The prevailing sector-based management approach is
    being increasingly challenged to ensure healthy and resilient ocean
    ecosystems and the ecological services they provide to all Americans.
    To succeed, MSP must be designed to recognize existing and emerging
    competing uses as well as ensure the appropriate balance among them.
    MSP should be conducted in a comprehensive, holistic manner in which
    society's desired uses of ocean places are optimized by conscious
    design, not inadvertent and, possibly, counterproductive competing
    uses.
        Of specific concern is Section 602, which creates Regional Outer
    Continental Shelf Councils that will prepare spatially explicit
    Regional Outer Continental Shelf Strategic Plans for energy development
    only. An alternative is to consider the critically important energy
    uses in a more comprehensive context. As urgent as energy needs are
    today, a broader strategy that recognizes the importance of energy
    along with other critical uses of oceans is more likely to produce
    long-lasting benefit to the Nation. As such, the Administration cannot
    support the Regional Outer Continental Shelf Councils or Strategic
    Plans outlined in H.R. 3534. A comprehensive, national approach to
    marine spatial planning must first be established.
    Aquaculture
        NOAA believes that aquaculture must be conducted in an
    environmentally responsible fashion, and that a national aquaculture
    policy that vests NOAA with authority to ensure that aquaculture is
    practiced in a sustainable fashion is the best approach. We would like
    to work with the Committee to address the current ambiguity in
    authority and create a durable structure for responsible management of
    aquaculture. NOAA therefore strongly opposes Section 704, the offshore
    aquaculture language within this bill. Section 704 would remove
    Department of Commerce/NOAA authority to permit or regulate offshore
    aquaculture under the Magnuson-Stevens Fishery Conservation and
    Management Act (Magnuson-Stevens Act) and invalidate existing permits
    that have been issued under that authority. NOAA recommends deleting
    Section 704 in its entirety.
        NOAA is in favor of a national aquaculture policy and is currently
    working towards developing one. Aquaculture has the potential to
    provide a safe and nutritious local seafood supply to complement supply
    from U.S. commercial fisheries, create jobs in U.S. coastal
    communities, and maintain working waterfronts. NOAA believes that
    aquaculture must be conducted in a manner that safeguards U.S. coastal
    and ocean environments.
        Without authority to regulate aquaculture, NOAA would be less able
    to implement ecosystem-based management of ocean resources and ensure
    the sustainability of marine fisheries. Additionally, Section 704 would
    create a regulatory gap because there would not be an overarching
    statute to address environmental and fishery concerns for aquaculture
    operations in the Exclusive Economic Zone. While the U.S. Army Corps of
    Engineers and the Environmental Protection Agency have some regulatory
    authority over siting and monitoring the water quality impacts of
    offshore aquaculture operations, and the U.S. Food and Drug
    Administration has the regulatory authority over the safety of
    aquaculture products, NOAA has the mandates, research portfolio,
    technical expertise, outreach and extension network, and appropriate
    infrastructure to ensure that such operations adequately safeguard our
    Nation's living marine resources. Additionally, because NOAA is within
    the Department of Commerce, it is well placed to balance the goals of
    developing an economically viable offshore aquaculture industry while
    protecting our Nation's valuable living marine resources and the
    ecosystems and communities they support.
        If Section 704 is not deleted, a grandfather clause should be
    added, allowing existing permitted aquaculture activities to continue
    and the applicable Fishery Management Plans to be amended by the
    Fishery Management Councils pursuant to their Magnuson-Stevens Act
    authority. Invalidating current permits unduly interferes with existing
    efforts by Fishery Management Councils to manage fishery resources
    pursuant to existing aquaculture-related Fishery Management Plans.
    Furthermore, invalidating these existing permits would be detrimental
    to ocean conservation efforts and would negatively impact coastal
    community economies.
    Conclusion
        Comprehensive energy planning and comprehensive ocean management
    are important for our Nation's future, if we are to use resources
    efficiently and sustainably. Our ocean resources support many jobs in
    the fishing, recreation, and maritime transportation sectors, and
    present an opportunity for new clean energy jobs moving forward. NOAA
    supports the Committee's desire to create a framework for such
    management, but believes that a framework for true marine spatial
    planning must be more comprehensive than what is articulated in the
    bill. NOAA will continue engaging on these critical issues through the
    work of the Ocean Policy Task Force. We look forward to working with
    you to address these issues once the Task Force develops its
    recommendation for a comprehensive marine spatial planning framework. I
    have mentioned some of our general comments in this testimony and look
    forward to providing more detailed, specific comments to the Committee
    as this legislation evolves. Thank you very much for the opportunity to
    provide testimony.
                                     ______

                  RELEVANT NOAA LEGISLATIVE MANDATES FOR THE
               PROTECTION OF MARINE SPECIES AND THEIR ENVIRONMENT
          Magnuson-Stevens Fishery Conservation and Management Act
    (MSA; 16 U.S.C. Sec. Sec. 1801 et seq.): Pursuant to the MSA, NOAA is
    responsible for the conservation and management of marine fishery
    resources and their habitats. NOAA is also responsible for establishing
    programs to prevent overfishing; rebuilding overfished stocks; insuring
    conservation; facilitating long-term protection of essential fish
    habitats (EFH); and realizing the full potential of the Nation's
    fishery resources. The MSA requires federal agencies to consult with
    the Secretary of Commerce, through the National Marine Fisheries
    Service (NMFS), with respect to ``any action authorized, funded, or
    undertaken, or proposed to be authorized, funded, or undertaken, by
    such agency that may adversely affect any essential fish habitat
    identified under this Act.'' When a federal action agency determines
    that an action (such as issuance of a license for an energy project)
    may adversely affect EFH, they must initiate consultation with NMFS and
    prepare an EFH Assessment. NMFS then conducts the EFH consultation and
    responds to the action agency with EFH Conservation Recommendations to
    avoid, minimize, mitigate, or otherwise offset adverse effects on EFH.
    Federal agencies must provide a detailed response in writing to NMFS
    that includes their proposed measures for avoiding, mitigating, or
    offsetting the impact of the proposed activity on EFH. If the federal
    agency chooses not to adopt the suggested NMFS Conservation
    Recommendations, it must provide an explanation. Depending on the
    degree and type of habitat impact, compensatory mitigation may be
    necessary to offset permanent and temporary effects of the project.
          Endangered Species Act (ESA; 16 U.S.C. Sec. Sec. 1531 et
    seq.): The purpose of the ESA is to provide a means whereby ecosystems
    upon which endangered and threatened species depend may be conserved,
    and to provide a program for the conservation of such listed species.
    The ESA prohibits the ``take'' of endangered or threatened species,
    with ``take'' defined as, ``to harass, harm, pursue, hunt, shoot,
    wound, kill, trap, capture, or collect, or to attempt to engage in any
    such conduct.'' Section 7 of the ESA requires federal agencies to
    consult with NOAA to insure ``any action authorized, funded, or carried
    out by such agency...is not likely to jeopardize the continued
    existence of any endangered species or threatened species or adversely
    modify or destroy [designated] critical habitat...''. If a proposed
    federal activity (such as the issuance of a license for an energy
    project) may affect a listed species or designated critical habitat,
    the agency proposing to issue the license must consult with NOAA and/or
    the U.S. Fish & Wildlife Service pursuant to section 7 of the ESA.
          Marine Mammal Protection Act (MMPA; 16 U.S.C.
    Sec. Sec. 1361 et seq.): Pursuant to the MMPA, it is generally illegal
    to ``take'' a marine mammal without prior authorization from NOAA.
    ``Take'' is defined under the MMPA as harassing, hunting, capturing, or
    killing, or attempting to harass, hunt, capture, or kill any marine
    mammal. Except with respect to military readiness activities and
    certain scientific research conducted by or on behalf of the federal
    government, ``harassment'' is defined as any act of pursuit, torment,
    or annoyance which has the potential to injure a marine mammal in the
    wild, or has the potential to disturb a marine mammal in the wild by
    causing disruption of behavioral patterns, including, but not limited
    to migration, breathing, nursing, breeding, feeding or sheltering.
    Under the MMPA, NOAA authorizes the take of small numbers of marine
    mammals incidental to otherwise lawful activities (except commercial
    fishing), provided the takings would have no more than a negligible
    impact on those marine mammal species and would not have an immitigable
    adverse impact on the availability of those species for subsistence
    uses. An activity has a ``negligible impact'' on a species or stock
    when it is determined that the total taking is not reasonably expected
    to reduce annual rates of survival or annual recruitment (i.e.,
    offspring survival, birth rates). In the event that any aspect of a
    proposed energy activity will result in a ``take'' the project
    applicant, or the lead agency acting on behalf of the applicant, would
    be required to obtain an incidental take authorization in advance from
    NOAA.
          National Marine Sanctuaries Act (NMSA; Title III of the
    Marine Protection, Research, and Sanctuaries Act, 16 U.S.C.
    Sec. Sec. 1431-1445c-1.): The NMSA and implementing regulations
    regulate certain activities within sanctuaries that might cause adverse
    impacts on sanctuary resources. In certain cases, actions that would
    otherwise violate these regulations may be authorized by permit. In
    addition, pursuant to NMSA section 304(d), any federal agency action
    that is likely to injure the resources of a sanctuary (whether that
    action occurs within or outside of the boundaries of a sanctuary)
    should consult with NOAA prior to taking such action, and NOAA may
    recommend alternatives to the proposed action to protect sanctuary
    resources. These requirements apply to energy projects proposed to be
    located within, near, or that would affect a sanctuary. This has
    included LNG projects proposed in the North Atlantic, California and
    Gulf; oil and gas projects in the Gulf; and hydrokinetic projects in
    the Pacific Northwest. The Energy Policy Act of 2005 clarified that
    authorizations for alternative energy projects on the outer continental
    shelf that would occur within a national marine sanctuary would be
    issued by NOAA's Office of National Marine Sanctuaries under the NMSA
    and not by the Minerals Management Service under the Outer Continental
    Shelf Lands Act.
          Coastal Zone Management Act (CZMA; 16 U.S.C.
    Sec. Sec. 1451 et seq.): The CZMA encourages states to preserve,
    protect, develop, and where possible, restore and enhance natural
    coastal resources. Federal actions having reasonably foreseeable
    effects on any land or water use or natural resource of a state's
    coastal zone must be consistent with a state's federally-approved CZMA
    enforceable policies. NOAA administers the CZMA and facilitates
    cooperation between states, federal agencies and others. The Secretary
    of Commerce, on appeal by a non-federal applicant, may override a
    state's CZMA objection to a federal authorization or funding
    application. The CZMA provides incentives for states to address energy
    issues through ocean management/Marine Spatial Planning (MSP) efforts.
    States use CZMA section 309 funds to develop MSP/ocean management/
    energy components for coastal management programs. In addition, the
    section 309 grant program provides an additional avenue for NOAA's
    Office of Ocean and Coastal Resource Management (OCRM) to provide
    assistance to determine how states may want to approach MSP/ocean
    management/energy.
          National Environmental Policy Act (NEPA; 42 U.S.C.
    Sec. Sec. 4321 et seq.): NEPA requires federal agencies to prepare
    Environmental Impact Statements (EIS) for major federal actions that
    significantly affect the quality of the human environment. The Council
    on Environmental Quality (CEQ) regulations implementing NEPA require
    each lead federal agency to invite the participation of other affected
    entities, including federal, state and local agencies, throughout the
    NEPA process. Furthermore, after the lead federal agency prepares a
    Draft EIS, it is required to ``obtain the comments of any federal
    agency which has jurisdiction by law or special expertise with respect
    to any environmental impact involved or which is authorized to develop
    and enforce environmental standards.'' NOAA maintains jurisdiction and
    special expertise over marine resources as contemplated by CEQ's
    regulations. In those instances where NOAA receives a Draft EIS from
    the lead agencies (for example, the Federal Energy Regulatory
    Commission (FERC), Minerals Management Service, etc.), NOAA is required
    to comment on statements within its jurisdiction, expertise, or
    authority.
          Fish and Wildlife Coordination Act (FWCA; 16 U.S.C.
    Sec. Sec. 661-666c.): The FWCA requires federal departments and
    agencies that undertake an action, or issue a federal permit or license
    that proposes to modify any stream or other body of water, for any
    purpose including navigation and drainage, to first consult with the
    U.S. Fish and Wildlife Service, NOAA, and appropriate state fish and
    wildlife agencies. NOAA responds with comments and recommendations to
    conserve the fish and their habitat. The action agency then must give
    equal consideration to the conservation of fish and wildlife resources
    in making water resource development decisions. NOAA fulfills its
    responsibilities under FWCA by consulting with the Army Corps of
    Engineers on permits and water resource development projects, with FERC
    in decisions regarding hydroelectric project licensing, and on various
    other federal actions involving water resources and energy development.
          Ocean Thermal Energy Conversion Act (OTECA; 42 U.S.C.
    Sec. Sec. 9101 et seq.): Under OTECA, no person may construct or
    operate an ocean thermal energy conversion facility located within the
    territorial sea of the United States, except pursuant to a license
    issued by the NOAA Administrator. No applications have been received,
    but OCRM is ramping up an OTEC program since several companies and the
    Navy is moving forward with OTEC pilot projects and commercial scale
    projects. NOAA is closely coordinating with Department of Energy and
    the Navy.
          Federal Power Act (FPA; 16 U.S.C. Sec. Sec. 791a, et
    seq., as amended by the Energy Policy Act of 2005 (EPAct 2005)):
    Pursuant to Sections 10(a) and 10(j) of the FPA, NMFS has authority to
    recommend that FERC include measures in licenses for hydroelectric
    power projects for the protection, mitigation, and enhancement of fish
    and wildlife and their habitats. Under FPA section 18, NMFS has
    authority to issue mandatory prescriptions for ``fishways'' to ensure
    the safe, timely and effective passage of fish past hydroelectric power
    projects. In addition, NOAA may also issue mandatory conditions for the
    adequate protection of a federal ``reservation'', for example national
    marine sanctuaries
          Oil Pollution Act of 1990 (OPA90; 33 U.S.C.
    Sec. Sec. 2701, et seq.): OPA90 greatly increased federal oversight of
    maritime oil transportation, and improved the Nation's ability to
    prevent and respond to oil spills, including contingency planning
    requirements for both government and industry. Under OPA90, NOAA and
    other federal and state agencies and Indian tribes act as Trustees on
    behalf of the public to assess the injuries to natural resources from
    spills, scale restoration to compensate for those injuries, and
    implement restoration. NOAA is a full partner with industry and the
    U.S. Coast Guard in mounting effective responses to oil spills in
    coastal and offshore environments. On more than 150 spills each year,
    NOAA scientists support response efforts with a number of scientific
    services including trajectory predictions for the spilled oil,
    identification of critical resources that need to be protected,
    shoreline assessment that guide deployment of cleanup teams, and
    weather predictions to ensure safe and effective operations. In this
    way, NOAA science helps industry responders make better decisions that
    reduce both response costs and environmental impacts. The agency also
    helps train responders. For example, the agency is now working with
    Shell Oil and the USCG to prepare for a major ``Spill of National
    Significance'' exercise that will be held next March in New England and
    involves a spill scenario that threatens to oil northeast beaches from
    Portland to Cape Cod. NOAA also helps the oil industry by working
    cooperatively to resolve liability of natural resource damage claims.
    By working cooperatively with responsible parties, costs are lowered
    and restoration of injured resources is able to happen more quickly.
                                     ______

       Response to questions submitted for the record by Jane Lubchenco,
    Ph.D., Under Secretary of Commerce for Oceans and Atmosphere, National
      Oceanic and Atmospheric Administration, U.S. Department of Commerce

    Questions submitted by the Majority:
     Question 1: Dr. Lubchenco, your testimony states that your agency
            cannot support comprehensive planning for siting energy
            development in the OCS, such as the provision in H.R. 3534
            until a comprehensive, national approach to marine spatial
            planning is established. Given the fact that there is increased
            pressure for renewable and non-renewable energy development in
            the OCS right now, while a comprehensive marine spatial
            planning effort for ALL activities will likely take years to
            implement, why shouldn't we take the first step now. Couldn't a
            comprehensive energy planning process complement a larger
            marine spatial process when it is finally put in place? When
            can we expect that the Administration will come forward with a
            binding requirement--either through Executive Order or
            regulation--to require that all federal agencies must plan
            together for every activity that is taking place in the oceans
            at the same time?
        Answer 1: NOAA agrees that comprehensive planning for siting new
    energy development is important to our nation. NOAA is not proposing
    that we stop moving forward on this important goal. Exploration for new
    sources and planning for new infrastructure should be done responsibly
    and within the greater context of comprehensive and integrated
    ecosystem based management. It would be difficult to realize our
    multiple objectives if we were to implement a system that evaluates
    projects absent a holistic context and approach. The system we create
    should not cause conflict between sectoral ocean uses and activities.
        President Obama issued a memorandum in June 2009 that created an
    Interagency Ocean Policy Task Force that was required to develop a
    recommended framework for effective coastal and marine spatial planning
    that would ``be comprehensive, integrated, ecosystem-based approach
    that addresses conservation, economic activity, user conflict, and
    sustainable use of ocean, coastal, and Great Lakes resources.'' The
    Task Force's December 9 Interim Framework for Effective Coastal and
    Marine Spatial Planning defines coastal and marine spatial planning as
    ``a comprehensive, adaptive, integrated, ecosystem-based, and
    transparent spatial planning process, based on sound science, for
    analyzing current and anticipated uses of ocean, coastal, and Great
    Lakes areas. CMSP identifies areas most suitable for various types or
    classes of activities in order to reduce conflicts among uses, reduce
    environmental impacts, facilitate compatible uses, and preserve
    critical ecosystem services to meet economic, environmental, security,
    and social objectives. In practical terms, CMSP provides a public
    policy process for society to better determine how the ocean, coasts,
    and Great Lakes are sustainably used and protected now and for future
    generations.'' As described, we envision that coastal and marine
    spatial planning would include all activities including energy
    expansion.
     Question 2: Dr. Lubchenco, while you state comprehensive energy
            planning should be delayed until a national approach to marine
            spatial planning has been adopted, your agency is now moving
            ahead with aquaculture in a piecemeal fashion, letting the Gulf
            Fishery Management Council's plan for aquaculture go into
            effect with no overarching standards for offshore aquaculture
            in place. How do you plan to develop a national aquaculture
            policy that fits into your broader vision for marine spatial
            planning and ensures that the Gulf plan is compliant with the
            national aquaculture policy that you have promised to develop?
            Why is this piecemeal approach to offshore aquaculture
            regulation okay, while comprehensive energy planning is not?
        Answer 2: NOAA agrees with the need for a comprehensive, rather
    than piecemeal, approach to aquaculture in federal waters--and
    addressing this need is a major goal of the agency's national policy.
    The broad vision for marine spatial planning is a comprehensive,
    integrated, ecosystem-based approach to ocean management that addresses
    conservation, economic activity, user conflicts, and sustainable use of
    the oceans. These principles will be considered in the development of
    NOAA's national aquaculture policy. The emphasis of this policy will be
    an environmentally sustainable approach to the development of
    aquaculture, consistent with ecosystem-based management. The policy
    will guide NOAA's approach to addressing the full range of issues
    associated with marine aquaculture, including user conflicts, ecosystem
    impacts, and other considerations that are addressed more broadly as
    part of marine spatial planning. NOAA's national aquaculture policy
    will facilitate a coordinated federal regulatory process for permitting
    aquaculture operations in federal waters that will both protect the
    environment and provide regulatory certainty to enable sustainable
    aquaculture to develop. As NOAA develops its national aquaculture
    policy in the coming months, the agency will examine the Fishery
    Management Plan for Regulating Offshore Aquaculture in the Gulf of
    Mexico (Gulf Plan) in the context of that policy. If NOAA determines
    the Gulf Plan is inconsistent with the national policy, the agency will
    consider appropriate action, which could include seeking an amendment
    or withdrawal of the plan, consistent with the Magnuson-Stevens Fishery
    Conservation and Management Act.
     Question 3: Dr. Lubchenco, what will increases in energy development
            in the OCS do to the demand for NOAA's response and restoration
            services?
        Answer 3: While increased energy production in the OCS could
    decrease the amount of oil spilled in the ocean as compared to the
    risks associated with importing foreign oil, the increase in offshore
    energy exploration will potentially increase the risk of oil spills
    from platforms, vessel traffic, pipelines, shore side facilities, and
    other infrastructure. NOAA, as a trustee for coastal and marine natural
    resources, responds to, protects, and restores resources injured by oil
    spills, pursuant to the Oil Pollution Act of 1990 and Comprehensive
    Environmental Response, Compensation, and Liability Act of 1980. Any
    increase in the number of spills would likely increase the demand for
    NOAA's response and restoration services which include responding on-
    scene for extended periods of time; conducting oil spill contingency
    planning and participation in oil spill drills and exercises;
    development of updated oil spill response and restoration tools (i.e.
    environmental sensitivity index maps, oil prediction and fate models);
    and training states and others in response, shoreline cleanup and
    damage assessment.
        Strong science is critical to effective decision-making to minimize
    the economic impacts and mitigate the effects of oil spills on coastal
    and marine resources and associated communities. Improved scientific
    knowledge is particularly important in the Arctic, where we have
    learned that many of today's standard approaches to oil spill clean-up
    and restoration do not apply in the cold Arctic waters, and there is a
    need for improved understanding and better methods to clean up, assess,
    and restore this fragile environment.
        NOAA's ability to respond to an increased demand for its scientific
    expertise, products, and services that support science-based decisions
    to prevent harm, assess impacts, restore natural resources, and promote
    effective planning and prevention for future incidents would benefit
    from research in the following areas:.
          Improved capabilities for offshore modeling of fate and
    effects of spills;
          Enhanced use of remote-sensing capabilities, including
    satellites, Unmanned Aerial Vehicles, and ocean observation networks;
          Improved understanding of the long-term fate and effects
    of dispersed oil; and
          Better understanding of climate change impacts on
    existing ecosystems and how this will directly affect long-term
    restoration options.
        Additional demands for NOAA response and restoration services may
    emerge in the OCS from offshore renewable energy development such as
    Ocean Thermal Energy Conversion, hydrokinetics, and offshore wind. This
    may be an area in need of NOAA services in the future, given the
    nascent state of the industry and the strong interest in developing
    low-carbon energy supplies. At this time, however, NOAA's efforts are
    largely focused on oil spill response and restoration.
     Questions submitted by the Minority:
     Question 1: Under this legislation, would Federal agencies be required
            to follow the Regional OCS Strategic Plans created by the
            Regional Councils?
        Answer 1: This legislation does not clarify whether all federal
    agencies would be required to follow the Regional Outer Continental
    Shelf (OCS) Strategic Plans created by the Regional Councils. Section
    309 amends the Outer Continental Shelf Lands Act, 43 U.S.C.
    Sec. 1344(a), to require that the Secretary of the Interior follow an
    applicable Regional OCS Strategic Plan as part of the Outer Continental
    Shelf Leasing Program. On the other hand, Title VI of the bill also
    does not specify how other federal agencies will be expected to
    consider Regional OCS Strategic Plans in their decision making.
    Similarly, Title VI does not indicate how or whether the provisions of
    Regional OCS Strategic Plans are enforceable. Section 607 and Section
    608 provide that the proposal, preparation, or approval of a Strategic
    Plan will not affect certain listed federal activities, but neither of
    those sections explains in what way other federal activities will be
    affected by Strategic Plans. It is also unclear whether there will be
    any recourse if a federal activity does not follow a Strategic Plan.
     Question 2: Under this legislation, if a region has endangered or
            threatened species, could that marine environment be considered
            ``healthy'' under this legislation?
        Answer 2: The presence of species listed as endangered or
    threatened with extinction under the Endangered Species Act of 1973
    (ESA) within a marine ecosystem identified under this legislation would
    not require NOAA to deem the ecosystem unhealthy. Species are listed
    under the ESA not only due to the present or threatened destruction or
    modification to their habitat, but also based on commercial and
    scientific use, disease and predation, lack of adequate regulatory
    mechanisms, and other natural or human-caused factors. Any one of these
    factors may be sufficient to list a species, even though such species
    inhabit a healthy marine ecosystem that meets their biological needs.
    The ESA also requires NOAA to designate, with some exceptions, critical
    habitat for listed species. In these cases, critical habitat may be
    healthy and the designation allows for special management of the area
    to ensure conservation. Equally important, NOAA may designate and
    consider impacts to critical habitat that is part of the species'
    historical range and essential to the conservation of the species, even
    if such habitat is not currently occupied by the species. The ESA has
    its own mechanisms for analyzing and managing threats to ESA-listed
    species and the ecosystems upon which they depend. Under this
    legislation, information on the habitat needs of ESA-listed species may
    be one consideration in the determination of marine ecosystem health,
    but would not be the sole basis for, or preclude, the agency from
    making a ``healthy'' determination.
     Question 3: Each State appears to have only one seat on the Regional
            Councils, yet each special interest group could also each have
            a seat. Does the Department/agency have any concerns about the
            creation of non-Federal entities on which a majority of the
            seats could be held by non-Federal or State representatives?
            Does the Department/agency have any concerns about a non-
            Federal entity, that is FACA exempt, making decisions on what
            areas of the country will be off limits to OCS activity? Do you
            support Councils having the authority to override one state's
            concerns?
        Answer 3: In general, the most successful planning projects gather
    input from a wide range of stakeholders. Therefore, it is important to
    involve many entities, not just state and federal representatives. The
    size, scope, and specific makeup of a particular regional council
    should be carefully considered in the context of the specific
    responsibilities of the council and the decisions that the council will
    be weighing.
     Question 4: Under the legislation, a State's concerns or interests
            could be overridden by the Regional OCS Council if the other
            States in the region disagree with that one State's position.
            What recourse would that one State have?
        Answer 4: The state would still be able to seek federal consistency
    review, under the Coastal Zone Management Act (CZMA), of the permitting
    decisions made by the Office of Federal Energy and Minerals Leasing
    pursuant to the plans developed by the Regional OCS Councils. For
    example, states would continue to undertake independent consistency
    review of federal decisions involving OCS oil and gas lease sales, OCS
    exploration plans, and development and production plans. Regional OCS
    Councils could not override a state's CZMA decisions. NOAA also
    anticipates that state participation in the Regional OCS Councils'
    decisions will result in fewer state-specific CZMA-related conflicts
    and state CZMA objections.

     Question 5: While there is an ``opt-out'' provision for a State to
    decline to participate in a Regional OCS Council, the Councils are
    still required to be created under the legislation, the Councils still
    are required to create a Strategic Plan, and the Federal government is
    still required to use the Strategic Plan's restrictions on areas to be
    leased and the timing for such leasing whether a State opts out of the
    process or not. For example, if the State of Alaska opts out of the
    Alaska Region OCS Council, the Council will still make binding
    decisions on the OCS off Alaska - decisions that were developed by a
    non-Federal entity which could be made up of a majority of special
    interest representatives. Can you comment on this?

        Answer 5: As explained in answering question one above, while the
    Regional OCS Strategic Plans are binding on the Department of the
    Interior with respect to the OCS Program, it is unclear whether the
    Plans will be binding on other federal activities and, if they are
    binding, how an agency's decisions will be compelled to comply with the
    provisions of a Strategic Plan. It is also unclear what recourse, if
    any, would exist if a federal activity does not follow a Strategic
    Plan. Assuming that Strategic Plans would contain binding restrictions,
    however, and given the theoretical possibility of the scenario outlined
    above, a state that is potentially affected by the decisions of a
    Regional OCS Council would not likely opt out of membership in the
    Council. At any rate, whether a state has opted out or not, states
    would have CZMA federal consistency review as described in response to
    question 4.
     Question 6: There appears to be a requirement for a census of living
            marine organisms and habitats but not energy resources or
            minerals. Shouldn't the Regional OCS Councils collect data on
            energy resources available to our country? Shouldn't decisions
            about whether to consider an area for any type of leasing be
            made with information about living marine resources and energy
            resources in the area?
        Answer 6: Comprehensive planning should take into consideration the
    best available information on all human uses and natural resources,
    including energy resources. Many challenges exist to collecting the
    relevant and necessary information for an area. Appropriate and
    sufficient data will lead to beneficial outcomes in the long term,
    especially for emerging ocean uses, the impacts of which may not be
    ascertainable based on currently available information.
     Question 7: H.R. 3534 requires the establishment of Regional Outer
            Continental Shelf Councils, it also recognizes the voluntary
            Regional Ocean Partnerships established by the States under
            CZMA authorities. While the Councils allow for any Regional
            Ocean Partnership to have representation on the Council, do you
            believe there will be overlap and duplication between these two
            entities? Would it be possible for the Regional OCS Councils to
            overrule actions taken by the Regional Ocean Partnerships?
        Answer 7: To clarify the terms of the question, it is important to
    explain that the Coastal Zone Management Act (CZMA) does not currently
    authorize interstate compacts. The definition of ``Regional Ocean
    Partnership'' in Section 2(16) of H.R. 3534 includes initiatives
    ``created by interstate compact--through authority granted to [states]
    by the Coastal Zone Management Act.'' The CZMA originally provided
    authority for such interstate compacts, but that authority was removed
    from the CZMA in 1990. The Committee has previously proposed restoring
    that authority, for example in the proposed Federal Lands and Resources
    Energy Development Act of 2009. The current definition of ``Regional
    Ocean Partnership'' is problematic in that it does not appear to
    address the need for statutory authorization of interstate compacts.
    Additionally, specific interstate compacts are authorized by federal
    legislation such as the Delaware River Basin Compact. If Section 2(16)
    is intended to include interstate compacts authorized by separate
    federal legislation, NOAA supports revising the definition accordingly.
        Section 2(16) also defines ``Regional Ocean Partnership'' to
    include ``voluntary, collaborative management initiatives developed and
    entered into by the Governors of two or more coastal States.''
    Presumably, this may allude to entities such as the Northeast Regional
    Ocean Council, Mid-Atlantic Regional Council on the Ocean, Gulf of
    Mexico Alliance, and West Coast Governors Agreement on Ocean Health,
    which act in an advisory capacity but lack federal authorization to
    issue binding restrictions similar to an interstate compact.
        Both the proposed Regional OCS Councils and Regional Ocean
    Partnerships (as defined) generally seek to use an ecosystem-based
    approach to address key issues facing coastal and marine areas. As a
    result, some overlap is likely. Section 602(c) provides that each
    Regional OCS Council ``shall build upon and complement current State,
    multistate, and regional capacity and governance and institutional
    mechanisms to manage and protect ocean waters, coastal waters, and
    ocean resources.'' This language seems to suggest that there should be
    strong sensitivity to ensuring that Regional OCS Council actions do not
    override or conflict with actions taken by a Regional Ocean
    Partnership. However, to avoid potential jurisdictional conflicts we
    would like to work with the Committee to further define this
    relationship.
     Question 8: Dr. Lubchenco, in remarks you made to the Regional Fishery
            Management Council Chairs on May 19, 2009, you said this about
            ecosystem-based management - ``We talk a lot about managing on
            an ecosystem basis, but we really don't have the fundamental
            understanding of ecosystem-based science to really underpin
            those decisions. There is a huge amount that we don't know
            about oceans that is desperately needed to inform the kinds of
            management decisions, especially in light of the dual
            challenges posed by climate change and ocean acidification.''
            H.R. 3534 would require ecosystem-based management. Has the
            ability of National Oceanic and Atmospheric Administration to
            grasp the underpinning science for this type of management
            changed since May of this year?
        Answer 8: NOAA has already made substantive steps toward
    implementing ecosystem-based management. A primary goal for NOAA is to
    improve the agency's ecosystem-based management mechanisms to take
    stock of the range of human activities that can coexist with one
    another, to minimize conflicts and ensure ecosystems remain healthy. To
    that end, NOAA has developed, or is in the process of developing:
          Integrated Ecosystem Assessments - frameworks to assess
    ecosystem status and trends by integrating ecosystem observing,
    research, modeling, forecasting, and assessment efforts;
          A regional ecosystem data management system that makes
    related ecosystem data accessible; and the
          Comparative Analysis of Marine Ecosystem Organizations
    (CAMEO) Program--a research program geared toward understanding the
    complex dynamics controlling ecosystem structure, productivity,
    behavior, and resilience, with the overriding objective of supporting
    comprehensive ecosystem evaluations.
        Much of the single-species information, such as stock assessments
    and habitat characterization that NOAA has developed, will be critical
    information underlying ecosystem-based management.
        Ecosystem-based management uses current knowledge as a base and
    incorporates new information as it becomes available. As in all
    scientific endeavors, there will always be things that are unknown
    about marine ecosystems. In ecosystem-based management, NOAA uses its
    current understanding of the ecosystem to inform decisions. While NOAA
    does not yet have a complete understanding of ecosystem science, the
    agency can begin to implement this type of management with its current
    knowledge, which will grow over time. The challenge is to synthesize
    research and observation to elucidate the complex and geographically
    varied dynamics, relationships and processes that comprise an
    ecosystem.
     Question 9: If the National Oceanic and Atmospheric Administration
            were to implement the ecosystem-based management provisions,
            how would the agency implement the impact assessment, which
            requires the agency to consider the cumulative impacts of the
            range of activities affecting an ecosystem? How would the
            agency weigh impacts of different types of activities, such as
            oil and gas, military exercises, fishing, or recreational
            boating?
        Answer 9: Integrated Ecosystem Assessments (IEA) can support
    ecosystem-based approaches for the management of marine, coastal, and
    Great Lakes resources. IEAs will provide management strategy evaluation
    through a comprehensive system that manages and integrates diverse
    information about biological, physical, chemical, and geological
    interactions that occur within ecosystems. In addition, IEAs will
    incorporate economic and social science data to evaluate impacts to
    social sectors that could result from various management strategies.
    The likely consequence of alternative management scenarios can be
    compared using ecosystem models that simultaneously evaluate potential
    positive and negative impacts on the ecosystem, including the human
    dimension. This integrated information will supply resource managers
    with the best-available science to assess competing resource uses and
    allow them to implement effective ecosystem-based management to achieve
    multiple objectives.
        Coastal and marine spatial planning and IEAs would provide the
    information to weigh impacts of different types of activities on
    coastal and marine systems. Both coastal and marine spatial planning
    and IEA processes would incorporate and develop information to assess
    the ecological, economic and social costs and benefits of alternative
    management strategies or uses in these ecosystems.
     Question 10: The definition of Important Ecological Area states that
            it ``means an area that contributes significantly to local or
            larger marine ecosystem health...'' ``Significantly'' is a very
            subjective term, how would the agency define it?
        Answer 10: NOAA would likely not attempt to establish a definition
    of ``significantly'' in the context of the statute without first
    seeking public input through a notice-and-comment rulemaking. Most
    likely, an ironclad definition of ``significant'' will not be possible
    because the significance of an area type may vary by ecosystem. Rather,
    it will probably be determined on a case-by-case basis, as is done in
    implementing the National Environmental Policy Act.
     Question 11: Paragraph (A) of the definition of ``Marine Ecosystem
            Health,'' requires ``a complete diversity of native species and
            habitat wherein each native species is able to maintain an
            abundance, population structure, and distribution supporting
            its ecological and evolutionary functions, patterns and
            processes'' to be present for a marine ecosystem to be
            considered healthy. Do you believe this language would require
            NOAA to deem a marine ecosystem unhealthy if there were an
            endangered or threatened species within it?
        Answer 11: As explained in answering question two above, the
    presence of species listed as endangered or threatened with extinction
    under the Endangered Species Act of 1973 (ESA) within a marine
    ecosystem identified under this legislation would not require NOAA to
    deem the ecosystem unhealthy. Species are listed under the ESA not only
    due to the present or threatened destruction or modification to their
    habitat, but also based on commercial and scientific use, disease and
    predation, lack of adequate regulatory mechanisms, and other natural or
    human-caused factors. Any one of these factors may be sufficient to
    list a species, even though such species inhabit a healthy marine
    ecosystem that meets their biological needs. The ESA also requires NOAA
    to designate, with some exceptions, critical habitat for listed
    species. In these cases, critical habitat may be healthy and the
    designation allows for special management of the area to ensure
    conservation. Equally important, NOAA may designate and consider
    impacts to critical habitat that is a part of the species' historical
    range and essential to the conservation of the species, even if such
    habitat is not currently occupied by the species. The ESA has its own
    mechanisms for analyzing and managing threats to ESA-listed species and
    the ecosystems upon which they depend. Under this legislation,
    information on the habitat needs of ESA-listed species may be one
    consideration in the determination of marine ecosystem health, but
    would not be the sole basis for, or preclude, the agency from making a
    ``healthy'' determination.
     Question 12: Paragraph (B) of the ``Marine Ecosystem Health''
            definition states ``a physical, chemical, geological, and
            microbial environment that is necessary to achieve such
            diversity''. Does NOAA have the ability to make ecosystem
            assessments down to these levels? How accurate is the
            information available to decision makers?
        Answer 12: NOAA collects large volumes of physical, chemical,
    geological and microbial data regarding marine ecosystems every day.
    However, data collection varies extensively by region and ecosystem.
    NOAA usually carries out assessments to address specific issues related
    to its legal mandates. The adequacy of information for addressing
    management issues is a function of the specific issue being addressed,
    the degree to which the issue is known in terms of basic scientific
    understanding, and the availability of the relevant data for assessing
    the management issue.
        In some cases, NOAA has the ability to make detailed ecosystem
    assessments at very small scales, such as within Marine Protected
    Areas, National Marine Sanctuaries, Habitat Areas of Particular
    Concern, or habitat restoration sites. For example, NOAA provides
    accurate assessments of ecosystems at this level through programs that
    identify harmful algal blooms, track contaminants in shellfish, or
    characterize habitats and ecosystems in National Estuarine Research
    Reserves. These programs provide information to managers to protect
    human health or to conserve relatively small areas. However, there are
    issues for which the basic scientific understanding is inadequate, and
    many regions for which comprehensive data at this resolution are not
    available for every relevant variable.
        Other data collected by NOAA, such as sea surface temperature from
    satellites, salinity and currents from buoys, and bathymetry from
    hydrographic surveys, cover broad areas (up to the ocean or basin
    scale). These data are available for large-scale assessments, but the
    degree to which the available data at these larger scales are adequate
    for decision makers also depends on the specific management issue. For
    example, it is possible to generate a regional map of fish habitat
    based on general information on depth preferences and bathymetry.
    However, generating a comprehensive analysis and high-resolution
    forecast, such as how a massive oil spill or changes in climate or land
    use would affect ecosystem productivity, may not be feasible due to the
    lack of comprehensive data sets, as well as the lack of detailed
    scientific knowledge of the relevant ecosystem functions.
                                     ______

        Mr. DeFazio. We will now proceed with the questions. I have
    both some on the subject matter before us and something that
    will be a bit off topic, but topical as relating to the
    biological opinion in the Pacific Northwest. Why don't I just
    start there?
        My staff was involved in the briefing yesterday and I have
    seen a number of news stories and different people are
    basically characterizing the position of the Administration in
    different ways; in particular, as relates to any possible study
    of dam removal. And I just want to make certain we have this
    straight for the record.
        I will quote to you one from the Oregonian and another
    story from the New York Times. And one, it says: We believe the
    actions in the plan will prevent further declines, but we have
    added these contingencies just in case.
        You go on to say: Possible breaching of the Snake River
    dams remains on the table in this plan, but it is considered a
    contingency of last resort, and would only be implemented if
    the analysis concludes it would be appropriate and, in fact,
    beneficial.
        And then you go on in the New York Times story to say, in
    speaking of the energy produced, say: They allow integration of
    wind into the grid. It is not clear what impact the removal
    would have on salmon. We believe the removal of them is not
    necessary in the short term. We want to give these other
    actions a chance to work.
        Are those accurate representations of what you have said?
        Dr. Lubchenco. Yes, they are.
        Mr. DeFazio. OK. I guess my question is, and I am one who
    is a great skeptic of--and having waded through the last
    analysis which was done mostly by the Clinton Administration
    but not released until the next administration, the Bush
    Administration had taken office, on dam removal. They talked
    about myriad problems that would result in addition to cost,
    loss of power, with the sedimentation and the spread of
    sedimentation throughout the river system, the need to
    basically transport generations of salmon while the dams were
    being removed because of the increased sedimentation. And then
    they pointed to the fact that actually most of the prime
    spawning habitat was above the private dams, which don't have
    fish passage, unlike the Federal dams, and for whatever strange
    reason, none of the environmental groups has ever raised the
    issue regarding relicensure of those high private dams which
    provide no fish passage and which block the formerly prime
    spawning habitat. So, I am a skeptic.
        But as I see it here, you have developed sort of a new
    series of short-term measures or sort of immediate or crisis
    measures that could be taken if there was a certain percentage
    drop in one or another of the runs, none of which go to dam-
    breaching. But what you are saying here is basically there
    would be a study of whether there should be a study of the dam-
    breaching, or that certainly is the way I would characterize
    it.
        Could you just sort of, since there is a lot of controversy
    swirling around this, just sort of make it as clear as you can
    what is being proposed and how it relates to that?
        Dr. Lubchenco. I would be happy to try, Congressman. We did
    file a report to the Court yesterday that was the result of a
    5-month very intensive review of the 2008 biological opinion
    dealing with, as you know, the 13 listed species in the
    Columbia River Basin system. The report includes an adaptive
    management implementation plan which provides for significant
    enhancement of a series of actions to be taken to strengthen
    protection for these endangered and threatened species. We
    believe that those actions, which encompass habitat, hydro
    measures, control of invasive species, both predators and
    competitors of the salmon, and other types of measures will
    indeed be very strong. And if they play out the way we
    anticipate they do, they will be sufficient to provide for not
    jeopardizing those species and providing adequate potential for
    recovery.
        We believe, though, that out of an abundance of caution,
    especially in light of climate change and other things which we
    might not anticipate, that it is critically important that we
    have the ability to monitor fish constantly and to have backup
    measures in place should they not be performing the way we
    expect them too.
        Hence we have identified specific triggers and contingency
    actions that would go into place if the triggers were tripped.
    Those contingency actions are both rapid response actions,
    things that could be done immediately and that would bring
    immediate benefits to the fish, and some actions that would
    take longer to implement and would have benefit farther down
    the road.
        Breaching of the dams is in this last category. We do
    consider it an option of last resort but have not taken it off
    the table completely. We do not think that it will be
    necessary, but we believe that it is important to have all
    options on the table in the eventuality that everything else
    fails.
        So, what will be done immediately is twofold relative to
    dams. The Corps of Engineers would create essentially a
    blueprint for the studies that would be needed to be done
    should the triggers be tripped. And second, the NOAA Northwest
    Fishery Science Center would develop a new life-cycle analysis
    for the different species of salmon so that we are better able
    to identify which actions would benefit a particular species
    that is in trouble, as identified by the triggers.
        So, because there are so many--it is a huge area, as you
    know--there are so many different species, it is impossible to
    know ahead of time exactly what actions would be appropriate
    for any one place and any one species. And so this analysis
    will help prepare us and give us the tools so that if a species
    is in trouble, we can more finely tune the actions needed to
    help it, not just start doing things that may or may not be
    useful. So, those two actions are done immediately, the
    blueprint and the life-cycle analysis.
        Nothing else would be done until a trigger is tripped, in
    which case there would be immediate rapid response actions set
    in motion, as appropriate to the problem. And if the analysis
    across all habitats--I mean all of the H's, habitat, hydro,
    harvest and hatcheries--across all of those, suggests that dams
    would be beneficial, a dam-breaching might be beneficial, then
    would be set in motion the studies that have a shelf life that
    need to look at the technical issues, the socioeconomic issues,
    the biological issue, the engineering issues. Those studies
    have been done in the past but are no longer current and they
    would need to be refreshed, if you will. So, that process would
    be set in motion.
        Only if those analyses continue to say that everything else
    is failing, this population is in serious trouble, would there
    then be a decision to come to Congress and raise the
    possibility of breaching the dams.
        So, as you can tell, that is a pretty lengthy process, and
    the bottom line is we believe that the actions, the
    strengthened and enhanced actions that are proposed in the
    plan, will be sufficient to uphold our responsibility under the
    Endangered Species Act for these fish. But we also want to have
    a precautionary approach, have checks and balances and things
    ready to go in case it doesn't work.
        Mr. DeFazio. All right. Well, thank you. Thanks for that
    comprehensive response. I appreciate it. It is obviously very
    important to the region of the Nation and some other members of
    the Committee.
        And I am not going to ask another question, but just one
    quick reflection. And I think the Chairman is going to follow
    up on the planning approach. But having been involved in
    terrestrial planning--that is, just zoning a county the size of
    the State of Connecticut--and having larger and angrier crowds
    than I had at my town hall meetings in doing that this summer,
    this sort of--I am going to urge you to look again at what the
    Committee is proposing and seeing whether, you know, we want to
    put all of the planning into one basket and try and move the
    entire thing forward--because I think it is going to be a
    gargantuan task--as opposed to perhaps rethinking where the
    Committee is at and discussing whether or not we could move
    ahead as we proposed and integrate it into your larger scheme,
    which I think will take quite some time. With that, I don't
    have a question.
        Dr. Lubchenco. We would welcome the opportunity to have
    that discussion with you. I think there are some real
    opportunities there.
        Mr. DeFazio. Thank you. I thank the Committee for its
    indulgence. And, Doc, you may be recognized right now.
        Mr. Hastings. Thank you, Mr. Chairman. I wasn't sure I was
    going to bring up the issue of a buyout, but since my friend
    from Oregon brought it up, I think I will take advantage to
    revise and extend my questions on that.
        Let me follow up, though, on what Mr. DeFazio mentioned.
    And briefly. With this action, do you think that the Obama
    Administration was legally required to put dam removal back on
    the agenda? And if it was not legally required, what specific
    reasons were there that dam-breaching was put back on the
    table?
        Dr. Lubchenco. Congressman, it is my understanding that our
    legal obligations are to ensure that the species of salmon and
    steelheads, for which we have responsibility, are not
    jeopardized and have adequate potential for recovery.
        Mr. Hastings. So, you are saying, then, that you believe
    that you are legally required then to do so; is that correct?
        Dr. Lubchenco. I am saying that our responsibility is to
    ensure the survival and potential for recovery for the fish,
    and therefore we have created a package of actions that we
    believe will do that. But understanding that there are
    uncertainties in how these fish will respond to some of the
    actions, we want to have a series of backup contingencies at
    the ready in case the initial actions do not work as we think
    and hope they will.
        Mr. Hastings. Well I don't want to get down--I just want
    to--this is to me kind of a yes or no question. I understand
    you want to save the species. I don't think there is anybody in
    the Northwest that wants to see these runs go extinct. But the
    previous administration in their proposal did not have dam-
    breaching on the table. You came in with dam-breaching. Do you
    think that you were doing that because you were legally
    required to do so? That is my--I mean it is a pretty
    straightforward question, I think.
        Dr. Lubchenco. Congressman, we believe we need to have a
    fully stocked tool box to address this problem.
        Mr. Hastings. From a legal standpoint?
        Dr. Lubchenco. Yes.
        Mr. Hastings. OK. Now, you mentioned in response to Mr.
    DeFazio in a quote you made, that dam-breaching would be the
    last resort. I think you were talking about different
    categories of triggers. You said last category, last resort.
    Yet in the press release that you sent out yesterday, you said:
    Starting immediately, the U.S. Corps of Engineers will prepare
    a study plan to develop scope, budget, and schedule of studies
    needed regarding potential breaching of the Lower Snake River
    dams.
        Now, if it is the last resort, by your testimony, it seems
    to violate common sense to put last resort starting
    immediately. I would just like for you to explain that.
        Dr. Lubchenco. Congressman, I think we were envisioning
    this as good responsible planning. The actions that would
    happen immediately would create, for example by the Corps, the
    blueprint for if the contingency is needed down the road, then
    we would know what would need to be done. It doesn't initiate
    any actions other than to create a blueprint.
        Mr. Hastings. OK. But is it fair--well, I don't want to
    speculate. But I would suggest just because you are starting
    studies earlier, there may be somebody else, maybe not within
    the Administration, but somebody that has a very strong view on
    breaching the dams may have some court action. We can't control
    that, but that is a possibility, I assume.
        Let me go on. As you know, there are only four of the ESA-
    listed runs that go by the Snake River dams. Why does the Obama
    Administration single out only these four dams as a contingency
    of last resort? Because if you are taking the approach that
    every option needs to be considered if the fish population is
    determined to be in a state of decline, is the Administration
    then opening the door to the potential removal of any dam
    within the Columbia River system?
        Dr. Lubchenco. Mr. Congressman, those four are the ones
    that have been the subject of much discussion and are ones for
    which these four are relevant to these four species, which have
    historically represented about 50 percent of the fish passing
    through that entire Columbia River Basin system. So, they are
    not insignificant runs.
        Mr. Hastings. So, the decision is based simply because of
    the discussions on this and not anything other--I mean, the
    reason I ask that is because--and it is very significant--
    people within the Northwest say well, if those dams go, then
    others will go.
        This strikes me as being a political decision rather than a
    scientific decision if you are only singling out those four
    dams with four runs. Because you answered my response that you
    felt that you were legally required to take this action in
    order to protect runs of fish. You answered in the affirmative
    on that.
        Now, there are 13 runs of endangered fish within the
    Columbia River system. Thirteen runs come up: Bonneville,
    Vidals, John Day and McNeary. Now, if you are legally required
    to take this action and put dam-breaching on the table, even
    though you single out these four, with the intent of doing
    whatever you can to save species of runs, and the fact that
    there are 13 runs that come up the Columbia River before it
    gets to the Snake River, aren't you by default or de facto
    putting those dams in potential of breaching, because the
    idea--you feel you are legally required to save these salmon
    runs, fish runs I should say, not just exclusively salmon. So,
    am I way off base on that?
        Dr. Lubchenco. Congressman, the analysis that we did
    suggested that the whole package of actions that we proposed
    are a comprehensive set.
        Mr. Hastings. Right. But my question was specifically on
    dam-breaching and specifically your response that you were
    legally required to do this to save these runs, and what you
    just pointed out, that these are significant runs on the Snake
    River. But there are 13 runs on the lower Colombia on those
    dams that I am talking about, starting with Bonneville,
    starting with--and up to the John Day. I mean Vidals, John Day,
    and McNeary; 13 runs there. And if you are legally required,
    aren't you putting all of those potentially at risk of being
    breached?
        Dr. Lubchenco. Congressman, we don't think that those
    actions will be needed. The rest of the package that we
    proposed. We believe should be sufficient to not jeopardize the
    species and provide adequate potential for recovery. So, we
    don't believe that----
        Mr. Hastings. So, specifically, you are saying then--and if
    I may, and I thank you for your indulgence, Mr. Chairman--
    specifically, you are saying that there is no potential of
    putting the other dams on the Potential Breaching List.
        Dr. Lubchenco. The only ones that were mentioned in our
    report were those four for the lower Snake River.
        Mr. Hastings. OK. In view of your testimony I must say it
    sounds to me that the decision of putting the Snake River dams
    on the list or on potential breaching is more of a political
    decision and not a scientific decision, simply based on your
    testimony, if the intent--if the intent is to save runs of fish
    up within the Columbia River system. I can't draw any other
    conclusion from that, unfortunately, based on your testimony.
        Now, if you have a different view of my conclusion, I would
    welcome you to write me and explain that in more depth, because
    as I hear the reasoning and the reason why the Obama
    Administration took this position, it is just hard to conclude,
    to me, that all the dams in the Snake River system would be
    potentially in jeopardy on this. And if you have a different
    view, I will more than welcome that correspondence.
        So, thank you very much. Thanks, Mr. Chairman.
        The Chairman. [Presiding.] The gentlelady from Guam, Ms.
    Bordallo, is recognized.
        Ms. Bordallo. Thank you very much, Mr. Chairman. And good
    afternoon, Dr. Lubchenco.
        As you stated, Doctor, in your testimony, the uses of the
    ocean are increasingly exponentially. In particular, there is a
    growing interest in developing renewable energy projects
    offshore as well as increasing the amount of oil and gas
    development. Isn't comprehensive planning that takes into
    consideration all uses of the OCS when you are deciding where
    to site energy projects the best way to ensure these activities
    take place most efficiently and with the least environmental
    impact? And wouldn't a requirement to look comprehensively at
    offshore energy siting and development complement a larger
    marine spatial planning effort such as that which the Ocean
    Policy Task Force is looking at right now?
        Dr. Lubchenco. Chairman Bordallo, thank you very much for
    raising that issue and providing me an opportunity to comment
    on it. We believe that the siting of energy use should ideally
    be done in a comprehensive fashion, exactly what you mentioned,
    in a way that takes into account the variety of other
    activities, the other uses of oceans that are in that area. And
    we would very much look forward to working with the Committee
    to make sure that the ways in which that is designed truly is
    comprehensive. It really does take into account the other uses,
    be it shipping, recreational, commercial fishing, aquaculture,
    tourism, the wide variety of other uses that may, in fact,
    interact with energy uses.
        We believe that all of these activities should be
    considered in a comprehensive fashion, so that we really
    understand how each affects the other, what combination of
    activities can coexist without conflicts, where we can separate
    out areas that might be in conflict, where we can ensure that
    the combined activities do not adversely impact the health of
    the ocean on which many of those activities depend, so that
    there is good economic benefit but also environmental
    responsibility. So, our interest is not at all in stopping
    energy development.
        We believe that that is critically important for the Nation
    and that the point is simply that that needs to be done in a
    larger context of the trade-offs, the other activities that
    coexist in that same area, or that might.
        Ms. Bordallo. Thank you, Doctor.
        I have another question. Do you think it is surprising that
    revenues generated by OCS energy development currently fund a
    variety of programs, yet none of these programs benefit ocean
    and coastal resource conservation programs?
        Dr. Lubchenco. Chairman, are you asking that--could you
    just rephrase that for me, please?
        Ms. Bordallo. All right. Do you think it is surprising that
    revenues generated by the OCS energy development currently fund
    a variety of programs, yet none of these programs benefit ocean
    and coastal resource conservation programs?
        Dr. Lubchenco. Thank you, Chairwoman. I believe that the
    multiple uses and activities in the oceans are sufficiently
    important, that they need to have adequate funding to ensure
    that they are sustainable, that we are managing the programs in
    the ways that we need to, and that we are accomplishing the
    greater good for that full suite of programs.
        It is certainly appropriate that revenues that are
    generated be used for the most comprehensive purposes, and from
    our perspective there are some extant and continuing needs for
    resources to address ocean uses specifically.
        Ms. Bordallo. Are you making that known?
        Dr. Lubchenco. I would welcome an opportunity to work with
    you to do that.
        Ms. Bordallo. All right. I have a few more questions of
    follow-up. Do you think dedicating 10 percent of the OCS
    leasing revenues to the conservation, protection, maintenance,
    and restoration of our oceans, coasts and Great Lakes is an
    appropriate amount?
        Dr. Lubchenco. As a general matter of policy, the
    Administration opposes the creation of new mandatory spending.
    Should Congress choose to move ahead with establishing a trust
    fund, we would like to see more revenues from offshore gas and
    oil leasing applied to ocean, coastal, and Great Lakes
    protection maintenance and use.
        Ms. Bordallo. And a quick follow-up, Doctor, on that
    question. How would better management and conservation of these
    resources benefit our economy?
        Dr. Lubchenco. Our economy is strongly dependent on
    activities around the coastal margins of our Nation. That is
    most clearly seen in many coastal communities and coastal
    States. Certainly, from your perspective, Guam is very
    dependent on its marine and coastal resources. But so, too, are
    many other States around the United States.
        Although I grew up in Colorado, my father was from South
    Carolina, and South Carolina has a very vibrant tourism
    industry that is dependent on the health and well-being of a
    variety of activities in and around the coastal region. The
    National Oceanic and Economics program gives us information
    that says that the leisure and hospitality industry of coastal
    counties in South Carolina contributed over $3 billion to the
    GDP of the State in 2007. So, that is just one sector of the
    economy of that State, and it clearly benefits significantly
    from having vibrant ocean and coastal healthy ecosystems that
    drive a lot of the economy. That is just a single State. Many
    other States depend on those revenues.
        Fishing, both commercial and recreational fishing,
    shipping, are two other examples of activities that bring
    tremendous economic benefit to the Nation. And if we sum up the
    sum total of revenues generated by the coastal communities
    throughout the United States, it is over 60 percent of the GDP
    of the entire Nation. So, clearly, these coastal States and
    territories have very significant dependence on the health of
    ocean ecosystems.
        Ms. Bordallo. Well I guess, Doctor, in wrapping up I would
    agree with you that the coastal areas of these States are
    important. But always remember that in Guam and the other
    territories, we have a coastal area all around our territory,
    so we are very important, Mr. Chairman.
        The Chairman. I would say to the gentlelady, yes, she does;
    and I was very honored and privileged to see it all during the
    last August district work period.
        The gentleman from Virginia, Mr. Wittman.
        Mr. Wittman. Thank you, Mr. Chairman. Dr. Lubchenco,
    welcome. Glad to have you here today with us.
        I want to ask you about one particular section of H.R.
    3534. It is in Title VII, section 704, as it relates to
    offshore aquaculture. In looking at that section, do you
    believe that that would in any way limit NOAA's ability to
    really look at creating a working framework for permitted
    offshore aquaculture? And in looking at that in the framework
    of Magnuson-Stevens, do you believe that it sort of takes away
    the directive from Magnuson-Stevens in where it directs to you
    manage fisheries in relationship to putting together a
    framework for offshore aquaculture?
        Dr. Lubchenco. Congressman, we believe that there needs to
    be a strong national policy on aquaculture with clear
    authority, responsibility, mandates, et cetera. And we would
    very much welcome an opportunity to work with Congress to
    ensure that that happens.
        Until we have such a policy, the existing authority under
    the Magnuson-Stevens Act is important to maintain, because
    there are existing policies in place, existing permits that are
    in place, and we would not want to be in a situation where
    there is a vacuum that is created.
        So, I think the intent, certainly our intent, is to move
    toward a situation where we have a clearly defined policy that
    provides the kinds of checks and balances, enables us to grow
    our national ability to provide healthy, safe seafood in an
    environmentally responsible fashion, to provide good jobs, and
    to do so in a way that is cognizant of the other activities
    happening in an area. We would like to move ahead in doing that
    because of the growing importance of seafood to the Nation, our
    continued reliance on imports, the opportunities that we see
    for having environmentally sustainable and responsible
    aquaculture. And therefore the time has come to create a
    national ocean policy, a national aquaculture policy that
    clearly defines what the responsibilities are.
        Mr. Wittman. As you know, right now there are a lot of
    cooperative efforts going on between the Regional Fisheries
    Management Councils, Congress, and the Administration to try to
    find ways that we can come to agreement on how aquaculture
    should be pursued within those areas.
        Do you think the particular provisions here in H.R. 3534
    might get in the way of that? Do you think it might be counter
    to that? Do you think it is complementary to that? I guess my
    concern is there seems to be, rather than parallel tracks here,
    there seems to be some divergence in what is going on
    cooperatively between the Councils, the Congress, and the
    Administration in what is portrayed in this bill, especially as
    it relates to the directions the councils have been given. And
    then going back to Magnuson-Stevens, with there being some
    counter to what Magnuson-Stevens proposes for us to do.
        Dr. Lubchenco. I believe that the provisions that are in
    the bill would make it challenging for us to--for NOAA to be
    helpful in existing aquaculture operations at present. I think
    a much preferable approach is to develop a national aquaculture
    policy that clearly describes who is responsible, and for what
    and where, with permitting, with all the kinds of checks and
    balances that are appropriate to include in such legislation.
        We currently don't have a clear description of who is in
    charge and under what authority. And that would greatly
    facilitate our being able to grow an industry in an
    environmentally responsible fashion without the ambiguities
    that currently exist.
        Mr. Wittman. I appreciate that. I believe that to be
    exactly the case, that we need a national policy that sort of
    cuts through all of the--call them stovepipes, whatever you
    want to call them, but to make sure there is continuity in
    decision making. And as we know, right now there is either some
    ambiguity, or even conflicts, in how decision making should
    take place and who has authority to do what, when, and where.
        So, I would agree. I think a national policy is the way to
    cut through that and to make sure everybody is clear as far as
    what their authority is and the direction they need to take.
        If I can ask one more question. I am going to shift gears
    here a little bit. In looking at developing OCS spatial plans,
    I am wondering--we look at everything that is above the bottom.
    I am trying to look at all the different resources there. I am
    just wondering, do you believe that we should have information
    on sub-surface minerals and the data that is available there in
    this whole OCS spatial plan? And what part does that play in
    developing the entire plan?
        Dr. Lubchenco. Congressman, having good information about
    the variety of resources on the seabed as well as on the water
    column, is incredibly valuable to helping understand what
    combination of activities can coexist and be sustained through
    time and ensure that the health of the system is protected.
    More information is absolutely useful.
        Mr. Wittman. So, you think having that sub-surface mineral
    data would be critical in any kind of OCS spatial plan that you
    would look in putting forward?
        Dr. Lubchenco. For that, as well as a lot of other types of
    information. We don't have all the information that we would
    like to have, including that. I don't believe that we need to
    wait for all of that to come in before we can begin to make
    decisions based on the information at hand; and so that we
    should proceed in two parallel tracks, acquiring that
    additional information that would enable us to make better
    decisions down the road, while at the same time utilizing the
    information that we do have at hand to make more comprehensive
    plans based on the variety of uses for which we have some data
    already.
        Mr. Wittman. Thank you, Dr. Lubchenco. Thank you, Mr.
    Chairman.
        The Chairman. Dr. Lubchenco, I had questions similar to the
    gentleman from Virginia, Mr. Wittman, in regard to agriculture,
    but I will submit those in writing in the interest of time. I
    know you have a plane to catch and I want the other members to
    have an opportunity.
        The gentleman from Indiana, Mr. Holt, is recognized.
        Mr. Holt. Thank you, Mr. Chairman. Thank you, Dr.
    Lubchenco, for your testimony. I often use you as an example of
    the President's wisdom in making appointments and his
    appreciation of science and his environmental sensitivity. In
    the interest of your time and the Committee's, your answers to
    my several questions can be in summary form and as brief as you
    care to make them.
        How important is it, do you think, that you have a
    dedicated fund for dealing with ocean and coastal issues? Does
    ORCA fill the bill? Do we need something else?
        Dr. Lubchenco. Mr. Congressman, let me say, first, just how
    much I appreciate the strong leadership that you have shown on
    behalf of science throughout the time that you have been in
    Congress. And I have appreciated that for a long time and
    continue to do so. I know that you believe not only in
    promoting science, but in using the best available science to
    make decisions, and I obviously agree with that very much.
        The President I think has made clear that protecting and
    restoring ocean and coastal environments is a high priority of
    this administration. That is reflected in the Ocean Policy Task
    Force and in the reports that we will be providing to him for
    the first part of our activities that the task force is
    releasing tomorrow. The Administration recognizes the need to
    step up our efforts to protect oceans and coasts and to have
    the resources to do that.
        As a general rule, the Administration opposes creating new
    mandatory programs or converting programs that have been funded
    through discretionary appropriations to mandatory funding. So,
    I think it would be in order for us to work closely with the
    Committee to try to define the ways in which the resources that
    are needed could be acquired in ways that would work for
    everyone.
        Mr. Holt. Thank you. In light of the task force report that
    we will be hearing about, does it have implications for the
    legislation that we are considering and moving forward with
    that legislation?
        Dr. Lubchenco. The report that we will be releasing
    tomorrow is a draft report. It outlines a national ocean
    policy, a governance framework for achieving that, and an
    implementation plan that is pretty broad, big picture. That
    report is going to the President. It remains to be seen exactly
    what he will do with it. And the report will be available for
    public comment. It does lay out, as alluded to in the
    Presidential memo that set up the task force, the urgent need
    to have more comprehensive integrated spatial planning in
    oceans to get away from the sector-by-sector, issue-by-issue
    approach that has characterized the way we have managed oceans
    in the past and that has, indeed, created lots of gaps, and in
    sum has not been sufficient to ensure that we have healthy
    oceans and coasts or vibrant coastal communities that depend on
    those.
        And so the task force will be making a series of
    recommendations that are designed to draw attention to the need
    to have more integration, more collaboration across various
    departments and agencies, and better structures for integrating
    across those different sectors. So, yes it does, indeed, relate
    to the approach that is highlighted in this bill.
        And I think that there is a wonderful opportunity for us to
    work together in figuring out how to move ahead with
    comprehensive energy legislation, because it is so important to
    the Nation, but to do so in a way that is cognizant of the
    breadth of other activities and the other important
    considerations that are also playing out in areas where energy
    might be appropriate to develop.
        Mr. Holt. Thank you.
        I believe the legislation that the Chairman has before us
    here will be very consistent with what you are talking about.
    And since my time has expired, I will just finish with a
    comment following on the question I asked of the Secretary of
    the Interior.
        I hope that your folks are moving forward as energetically
    as possible on studies of what we need to know about offshore
    wind potential. I think there are many studies to be done. I
    think we shouldn't wait for them to come up sequentially; we
    should be thinking now about what questions need to be
    addressed and vigorously pursuing answers to those questions.
        The Chairman. The gentleman from Louisiana, Mr. Cassidy.
        Sorry, didn't mean to wake you.
        Mr. Cassidy. I am trying to get my head around this. So, I
    am exploring this with you. I don't quite comprehend it.
        It seems like in these regional planning councils, the very
    nature of who is placed on the council and their relative
    representation will tilt itself toward the result.
        Do you follow what I am saying?
        Dr. Lubchenco. I believe so.
        Mr. Cassidy. So, it almost seems--for example, Chairman
    Rahall's bill, on page 47 it says that the council that is set
    up would not allow leasing to occur unless the regional council
    had established it as being suitable for leasing.
        And so I gather--I've gotten a memo on all of these things
    that you have to go through, and in my mass of papers--I've
    lost it, but there are four huge steps that you have to go
    through regulatory-wise in order to develop an offshore lease.
    It still seems you go through all of that and then be trumped
    by this regional council.
        Is that a fair understanding of the bill as you understand
    it?
        Dr. Lubchenco. I think it is.
        Mr. Cassidy. So, I have to ask, if we are going to make
    energy development a priority in our country, and we have,
    earlier, an Interior Department OIG report that speaks about
    much of the cost of developing oil and gas on Federal lands
    comes from the regulatory environment, which is more onerous on
    the Federal lands, and litigation which offers results from
    said regulations, it is like one more thick layer, a barrier to
    developing oil and gas leases offshore.
        Would you disagree with that?
        Dr. Lubchenco. What I am hearing is a plea for being able
    to develop energy resources as rapidly as possible.
        Mr. Cassidy. What I am very frustrated by is that I am from
    Louisiana. We have the Flower Gardens coral reef, which is one
    of the healthiest in the United States, in the midst of all of
    these drilling activity.
        We had testimony from folks from Massachusetts who said
    that they were not going to do drilling because they wanted to
    protect their environment. Another fellow from the Chesapeake
    Bay, he would not allow drilling.
        I am sitting there thinking, I am eating Maryland crab
    cakes with Louisiana crabs because they can't grow crabs in the
    Chesapeake Bay; and in Louisiana, where we drill, it seems we
    have a healthier coastline in terms of productivity.
        It seems naive to think we are going to be guided by
    science as much as we are going to be by the prejudice of the
    people on the Committee.
        In your testimony you mentioned how we have inadequate
    information of the ecosystems of the ocean. So, we have
    inadequate information on the ecosystems, yet we are going to
    be making decisions regarding not developing, based on
    inadequate understanding but perhaps on prejudice regarding the
    ecosystem.
        Does that follow? I mean disabuse me if I am wrong, but
    that really seems like where my thoughts are taking me.
        Dr. Lubchenco. We never have as much information as we
    like. But we have an abundance of information that could be
    utilized to make good decisions about how to balance the
    variety of uses that exist in offshore areas, with the intent
    that allowing development of energy is appropriate, making sure
    that that is done in a way that does not negatively impact
    other types of very important activities--fisheries, for
    example, in Louisiana.
        Mr. Cassidy. If I am correct and empirically I am correct
    that the Flower Gardens coral reef coexists quite nicely with
    an area of intense drilling offshore, and if somebody came to
    you and said, We don't want it in our particular marine spatial
    area because we have coral reefs to protect, would you use the
    science to trump that argument to, say, take it off the table
    because we have empiric evidence that indeed you can coexist
    between the environment and drilling without a problem?
        Dr. Lubchenco. I think the role of science in these
    decisions is to inform an understanding of the tradeoffs. The
    decisions about the tradeoffs are going to be made; those are
    societal decisions.
        Mr. Cassidy. But my question is, frankly I have found in
    this Committee we are guided often by prejudice as opposed to
    science. So, people say that it is harmful to the environment
    without empiric evidence based upon incidences from 20 years
    ago, and so therefore they proscribe things which, frankly,
    demonstrably would not hurt their environment.
        So, I guess I am a little suspicious about this, which may
    be, if you will, stacked with folks hostile to energy
    development unless I know absolutely that we could take some of
    their prejudices off the table if we have compelling empiric
    evidence.
        Do you see these MSPs as having the ability to do so?
        Dr. Lubchenco. Marine Special Planning provides an
    opportunity to think about the tradeoffs across different types
    of activities in a way that you can design--you can identify
    those activities that can coexist without conflicts and the
    total of activities that can coexist without degrading the
    environment. It is simply a tool.
        Mr. Cassidy. I may not be making my point.
        But clearly commercial fishing, recreational fishing,
    energy development and coral reef preservation is coexisting
    very nicely in the western Gulf and yet the arguments that I
    hear about bringing it to the eastern Gulf is that it would
    endanger recreational fishing and things such as coral
    structures.
        So, granted, I will accept what you just said. It gives us
    a way to balance societal demands.
        My question is, though, if I have a bunch of folks on there
    who, despite the evidence placed before them, are going to
    insist that they are not going to allow something based on what
    is effectively their prejudice, trumping MMS and four other
    agencies on the Federal level which have granted approval, that
    doesn't seem like a very good system to me.
        Do you follow what I am saying? If all we are given is a
    place for people to vent their prejudices, how does that
    advance our cause?
        Dr. Lubchenco. I think there are many examples of
    committees that are designed to bring different perspectives
    together and to, in the best of all cases, draw on scientific
    information to help inform those decisions, but where there may
    be legitimate differences of opinion. And that is part of the
    political process.
        Mr. Cassidy. Thank you.
        The Chairman. The Chair would respond to the gentleman from
    Louisiana regarding the opening part of his question about the
    council's decisions on leasing.
        Mr. Cassidy. I should have asked that of you.
        The Chairman. The Council would recommend to the Secretary
    up front, before the lease is issued, before the permit is
    issued and taking into account all of the information. These
    councils then make their recommendation up to the Secretary who
    has the ultimate decision on issuing release.
        Mr. Cassidy. Mr. Chairman, in all due respect, just because
    I don't understand this then, because on page 47, line 7, it
    says, ``shall not include in any such leasing program any
    location unless identified and a strategic plan is suitable.''
        I took that to limit the Secretary's latitude of action,
    but is that not true? The Secretary could override the decision
    of the regional planning council?
        The Chairman. That is correct. They are recommendations
    from the regional councils.
        Mr. Cassidy. So, ``shall not include''--the ``shall'' is
    messing me up here because the ``shall'' seems like it is
    saying that the Secretary cannot lease that land, ``shall
    not,'' so that is what I am asking.
        The Chairman. It is my intent that the Secretary had the
    ultimate authority. If the ``shall'' or whatever in there to
    which did gentleman is referring is a problem, then we have to
    look at that, and we will look at that together.
        I know the Director has to leave, and we appreciate your
    time with us today, and we do look forward to working with you
    as we continue to advance this legislation.
        Dr. Lubchenco. Thank you so much. I appreciate your
    leadership on this very important issue; and the areas that we
    have flagged in the bill for which we have concerns, we would
    welcome an opportunity to work with you. We agree with the
    overall goals and intent and think that we could have some very
    productive discussions.
        So, thank you for the opportunity to testify.
        The Chairman. I commend you for your leadership
        We will now proceed to our third panel composed of the
    following individuals:
        Ms. Mary L. Kendall, Acting Inspector General, U.S.
    Department of the Interior;
        Mr. Frank Rusco, the Director of Natural Resources and
    Environment, U.S. Government Accountability Office.
        We welcome the panel with us today. We appreciate the
    patience that you had during the course of the morning and
    early afternoon here.
        The Chairman. And Ms. Kendall, we will call upon you first.

     STATEMENT OF MARY L. KENDALL, ACTING INSPECTOR GENERAL, U.S.
                       DEPARTMENT OF THE INTERIOR

        Ms. Kendall. Thank you, Mr. Chairman. Members of the
    Committee, thank you for the opportunity to testify today about
    the observations of the Office of Inspector General regarding
    Federal energy programs of the Department of the Interior, as
    well as our views on the CLEAR Act of 2009.
        As you know, we have found weaknesses in the oversight of
    royalties, in the drafting of leases, in the onshore lease
    option process, in the underpayment of royalties, and in the
    ethical culture of the Royalty-In-Kind program.
        Currently, we are reviewing BLM's onshore oil and gas lease
    inspection and enforcement program, how BLM coordinates with
    MMS on production data and royalty collection, royalty-free use
    of oil and gas during production, and oil volume verification
    in the Royalty-In-Kind program.
        We are also examining alternative energy authorities, and
    practices in the Department.
        Over the years, we have observed that MMS has been
    challenged in standing up new programs. Recently, both MMS and
    BLM have told us that they do not have guidance or policies for
    emerging energy programs, saying they do not know what they
    need until the programs go operational. To us this is a red
    flag cautioning the need for special attention and oversight.
        Another concern is whether companies with geothermal leases
    are paying appropriate royalties. We are reviewing the
    propriety of geothermal regulations allowing deductions up to
    99 percent of gross sales. We were curious to learn just how
    many companies are routinely reporting the 99 percent
    deductions, and we are surprised to discover that the necessary
    data is simply not collected to determine this amount.
        Poor communications between BLM and MMS also threaten the
    loss of royalty revenues. BLM regulations and supplemental
    guidance require that all beneficial use deductions must meet
    certain regulatory criteria or receive prior approval by BLM.
    We found, however, that operators claim the deduction without
    meeting the established criteria or getting approval, thus
    underpaying Federal royalties.
        But since the jurisdiction regarding beneficial use lies
    strictly with BLM, MMS cannot determine whether the deductions
    claimed in the operators' reports are valid.
        Mr. Chairman, your draft legislation addresses many of the
    problems we have uncovered. For instance, the ethics penalties
    and restrictions on gifts, employment, and post-employment
    would affirmatively set expectations for employees involved
    with management and oversight of energy programs. The
    consolidation of the energy functions currently managed by both
    bureaus would help standardize inconsistent procedures between
    MMS and BLM that have complicated and hampered lease monitoring
    and royalty collections.
        The bill would also transfer the MMS audit and compliance
    function to the Office of Inspector General. This proposal is
    best addressed by a discussion, albeit incomplete, of the pros
    and cons.
        On the pro side, this would provide greater independence
    for the auditors, separating them from MMS policy and
    management processes. Better coordination between production
    and royalty auditors and the OIG investigators could also
    result in greater collections of underpaid royalties.
        On the con side, the OIG would inherit the current programs
    associated with the royalty compliance program. The transfer
    would also shift the OIG toward a compliance audit model as
    opposed to our present focus on performance audits.
        Finally, Mr. Chairman, I would like to discuss the effect
    that OIG efforts have had in the recovery of hundreds of
    millions of dollars for the taxpayer.
        Between 1998 and 2007, the OIG jointly conducted royalty
    investigations with the Department of Justice, resulting in the
    recovery of nearly $700 million. When the Justice Department
    prosecutes these cases, 3 percent of recoveries go into a
    general fund that helps finance certain cases or future cases
    prosecuted by DOJ.
        Investigative agencies, however, have no such funds,
    although we are absolutely critical to advancing cases to
    prosecution.
        With a growing demand for all sources of energy in this
    country, there is arguably an even greater need to continue
    such investigations to secure recoveries. I would ask the
    Committee to consider a 1 percent fund for the investigative
    agencies, fashioned after the fund created for DOJ, to help
    finance future civil recovery cases.
        I understand that this may not be in this Committee's
    jurisdiction, but we would be happy to work with this Committee
    and the relevant committee of jurisdiction toward this end.
        This concludes my testimony. I respectfully request that my
    full written testimony be accepted into the record, and I would
    be happy to answer any questions.
        The Chairman. Thank you. Without objection, all testimony
    will be made part of the record.
        [The prepared statement of Ms. Kendall follows:]

           Statement of Mary L. Kendall, Inspector General (Acting),
                        U.S. Department of the Interior

        Mr. Chairman, and members of the Committee, thank you for the
    opportunity to testify today about the on-going work of the Office of
    Inspector General (OIG) regarding federal energy and mineral leasing
    programs within the Department of the Interior (DOI), and our
    perspectives on the proposals in the Consolidated Land, Energy and
    Aquatic Resources Act of 2009, H.R. 3534. My testimony this morning
    will speak to myriad issues and challenges we have uncovered and
    continue to uncover in the Department's energy programs.
        As you know, my office in recent years has conducted numerous
    investigations, audits and evaluations of oil and gas royalties
    programs. The OIG has amassed a vast independent body of knowledge in
    these programs. We discovered weaknesses in the oversight of royalties,
    in communications in the drafting of leases, in the onshore oral lease
    auction process, in the under-payment of royalties, and in the culture
    of the Royalty-In-Kind program where employees considered themselves
    exempt from the ethics rules that govern all federal employees.
        Currently, we are reviewing the Department's onshore oil and gas
    lease inspection and enforcement program of the Bureau of Land
    Management (BLM), how BLM coordinates with the Minerals Management
    Service (MMS) on production data and royalty collection, royalty-free
    use of oil and gas during production, and oil volume verification in
    the MMS Royalty-In-Kind program.
        We are also examining alternative energy generation authorities,
    regulations, and practices within the Department, to include MMS and
    BLM offshore and onshore programs in the areas of wind, wave and ocean
    current, and solar and geothermal. In the course of our work over the
    years, we have observed that MMS has been challenged when standing up
    new programs. For instance, we found no governing principles or written
    detailed policies for the RIK program or the Cape Wind Project.
    Recently, both MMS and BLM officials have told OIG personnel that they
    do not have written detailed policies for emerging energy programs
    since they do not know what they will need until they begin operating
    these programs. To us, this is a bright red flag cautioning the need
    for special attention and oversight.
        One particular area warranting increased oversight is geothermal.
    Our overall concern is whether companies with geothermal leases are
    paying appropriate royalties. MMS has conducted nine audits of
    geothermal leases in the last eight years, collecting approximately
    $8.7 million additional royalties in the last five years alone. MMS
    compliance auditors raised concerns to the OIG that two companies were
    improperly or perhaps fraudulently claiming deductions to their royalty
    payments.
        In one of those cases, we are also reviewing the propriety of
    regulations governing deductions up to 99 percent of gross sales. We
    were curious to learn if other companies are routinely reporting the 99
    percent deductions. MMS, however, was unable to provide that
    information. It does not collect the necessary data from companies to
    determine the amount of deductions the companies take. In fact, MMS has
    little ability to determine the reasonableness of geothermal royalty
    payments it receives from a company unless it selects the company for
    an audit or compliance review, and seeks additional documentation that
    is not routinely submitted.
        Poor communications between BLM and MMS also threaten the loss of
    royalty revenues to the Treasury. In the area of beneficial gas, BLM
    regulations and supplemental guidance inform operators that all
    deductions must meet regulatory requirements or receive prior approval
    by BLM. We found, however, that operators claim the deduction without
    meeting the established requirements or getting BLM's approval. Thus,
    operators underpaid federal royalties. But because the jurisdiction
    regarding beneficial use is strictly a BLM function, MMS cannot
    determine whether the deductions claimed in the operators' reports are
    valid.
        Mr. Chairman, your draft legislation addresses many of the problems
    we have uncovered in our body of work. In Title I, for instance, the
    ethics penalties and restrictions on gifts, employment and post-
    employment would be constructive changes and would adequately address
    the behavioral anomalies we uncovered in the Royalty-In-Kind program,
    and would affirmatively set expectations for any other employees
    involved with oversight of energy production.
        Also in Title I, the consolidation into one bureau of the leasing
    and royalty tracking and collection functions currently managed by MMS
    and BLM would address the weaknesses we found in terms of
    communications, royalty collection, data collection and sharing,
    differences in terminology, and separate data systems. This would help
    standardize procedures within the Department. Prior reports of both the
    OIG and the Government Accountability Office (GAO) have disclosed
    inconsistent procedures between MMS and BLM that have complicated and
    hampered lease monitoring and royalty collection.
        Finally in Title I, the bill would transfer the MMS audit and
    compliance section to OIG. This proposal is best addressed by a
    discussion of the pros and cons, as the OIG is neutral on it.
        On the pro side, there would be greater independence for auditors,
    taking audit responsibility out of the entity responsible for
    collecting royalties and put it into an independent entity responsible
    for conducting audits of the Department. It would separate auditors
    from the negotiation, policy and rulemaking processes. It would
    separate the audit responsibility away from MMS management, which would
    eliminate allegations of management putting pressure on auditors to
    adjust findings.
        Greater coordination between production and royalty auditors and
    the OIG investigative component could also result in greater
    collections and better oversight. We are seeing this with the
    interaction of two new units in our Central Region office in Lakewood,
    Colorado. There, the Energy Investigations Unit (EIU) and the Royalty
    Initiatives Group (RIG) work closely together to share information and
    leverage available resources to improve oversight. This cross-
    discipline collaboration is relatively unique within the IG community,
    but it is extraordinarily effective.
        Finally on the pro side, would be the opportunity to improve the
    federal government's relationship with STRAC--the State and Tribal
    Royalty Audit Committee. STRAC has had a rather contentious
    relationship with MMS over the years, often questioning the accuracy of
    royalty payments. As the OIG is independent of MMS management, the OIG
    would begin with a clean slate in dealing with STRAC. And the oversight
    of STRAC audits would be consistent with OIG oversight of other
    external audits.
        On the con side, OIG would inherit the current problems associated
    with the royalty compliance program. These problems include: the
    Compliance Information Management system; a lack of reliable
    performance data; a lack of reliable data on payors and audit results;
    a dependence on MMS's current payor system, or the need to build a new
    one; and the backlog of audits for previous years.
        In addition to these issues, the OIG would have a substantial
    learning curve to overcome. Whether or not MMS personnel would be
    transferred, OIG does not currently have sufficient expertise. The
    mechanics of doubling the size of our office with additional auditors
    and support personnel would be challenging. Questions to be answered
    include: were to place new personnel; how to organize the function;
    would it cause a slowdown in other OIG work; how significant an effort
    would the hiring process be; could royalty audits end up dwarfing the
    other OIG functions?
        The transfer would also move the OIG more towards the compliance
    audit mode, as opposed to performance audits. That would present
    difficult organizational structure issues, and would require finding a
    balance between the primary mission of OIG to the Department, which is
    to provide independent oversight to ensure and improve the integrity of
    its programs and operations, versus the mission of validating royalty
    payments. The transition would take at least 18 months and would be
    costly. It would require developing new procedures, hiring and training
    employees, getting equipment up and running, dealing with possible
    staff morale issues, and relocation issues.
        Finally on the con side are the challenges with OIG taking over the
    management of contracts and cooperative agreements related to the
    STRAC, and the dynamics of conducting oversight of 18 separate audit
    entities.
        Mr. Chairman, we have identified other provisions in the bill that
    would be useful for effective oversight. I will mention just a few. OIG
    supports the doubling of fines and penalties contained in Title II.
    Prior OIG and GAO reports have discussed the need to increase fines and
    penalties. The bill also would allow for sharing civil penalty proceeds
    with states and Indian tribes. This would help create an incentive for
    the states and tribes to be extra diligent in their royalty audits.
        In Title III, OIG supports the development of more specific
    expectations concerning diligent development of oil and gas leases.
    Recent OIG and GAO reports on non-producing leases mentioned that
    existing law is vague. Increasing non-producing lease annual rental
    rates might help encourage lease holders to develop the leases.
        In Title V, OIG supports getting fair market value for revenues
    from solar and wind projects. We also support authorizing audits of
    wind and solar leases, although this would require additional audit
    capacity. Finally, in Title VII, OIG supports the repeal of certain
    incentives and royalty relief for drilling because new technology has
    reduced drilling costs in those areas. It would also establish and
    index an annual fee of $4.00 per acre for non-producing leases. We do
    not take a position on this proposal. Rather, we point to the report we
    issued earlier this year on non-producing leases, we discuss the time
    periods involved in producing on oil and gas leases. For example, time
    periods increase for the deeper Outer Continental Shelf (OCS) leases
    due to the time required to establish transportation systems. Imposing
    fees on non-producing leases may have the unintended negative impact of
    reducing industry interest in federal leases.
        Finally, Mr. Chairman, I would like to discuss the issue of
    deterrence against fraud in the payments of royalties, and the recovery
    of hundreds of millions of dollars for the taxpayer. Between 1998 and
    2007, the OIG jointly conducted royalty management investigations with
    the U.S. Department of Justice (DOJ). They resulted in the recovery of
    nearly $700 million from 25 U.S. companies operating oil, natural gas,
    coal, and other activities on federal and Indian lands. These were
    difficult and often complex civil cases, many of which were qui tam
    cases. With a growing demand for all sources of energy in this country,
    there is an even greater need to continue such investigations and
    secure recoveries.
        Unfortunately, Mr. Chairman, the OIG must carefully balance working
    those cases against other compelling investigative demands. When the
    Justice Department works those cases, three percent of recoveries go
    into a general fund that helps finance future cases prosecuted by DOJ.
    Investigative agencies however have no such fund, although we are
    absolutely critical to advancing such cases to prosecution.
        I would ask the Committee to consider a one percent fund, fashioned
    after the fund created for DOJ, to help finance future civil recovery
    cases. I understand that this may not be in this Committee's
    jurisdiction, but we would be happy to work with this Committee and the
    relevant committee of jurisdiction toward that end.
        This concludes my testimony. I respectfully request that my full
    written testimony be incorporated into the record.
        Once again, Mr. Chairman, I appreciate the invitation to share my
    views with you. I would be happy to answer any questions.
                                     ______

        Response to questions submitted for the record by Mary Kendall,
          Inspector General (Acting), U.S. Department of the Interior

    Questions from the Majority:
    1.  Ms. Kendall, based on a review that your office recently issued on
            the BLM leasing process, do you have an opinion on how well
            that process is run compared to other leasing processes, such
            as the one MMS operates offshore? What recommendations would
            you suggest for how the BLM leasing process could be improved
            legislatively?
        OIG Response: Our review of BLM's leasing process included
    assessing other state and Federal programs to identify promising
    auction practices and bidding methods. We identified several processes
    that BLM should consider, including the sealed bid method currently
    used by MMS' Offshore Energy and Minerals Management for offshore
    leasing. We also found limitations, however, to certain methods and
    recommended that BLM conduct an analysis to determine the best bidding
    method.
        One of our report recommendations was for BLM to work with Congress
    to amend the Mineral Leasing Act of 1920 to eliminate the oral auction
    requirement and allow alternative auction processes. For example, BLM
    recently piloted an internet leasing auction method which we believe is
    a promising practice. The CLEAR Act language requiring a competitive
    sealed bid method may limit BLM from implementing the internet auction
    method or any other alternative methods.
    2.  Ms. Kendall, a report your office put out earlier this year
            relating to production from oil and gas leases, states, ``the
            existing process is heavily reliant upon companies doing the
            right thing.'' Could you elaborate a bit on what you meant by
            that? Where are the greatest deficiencies in the program? What
            can the Administration do to correct these deficiencies, and
            what actions would require Congressional action?
        OIG Response: Our work on nonproducing leases found inaccuracies in
    BLM's lease tracking database and a lack of coordination between MMS
    and BLM concerning leases that enter the production phase. Timely
    notification by BLM when a lease begins producing would alert MMS to
    prepare for the leaseholder's royalty reports and payments. Otherwise,
    missed royalty payments can result. As explained in our report, neither
    BLM nor MMS adequately tracked the status of the federal lease
    universe. For example, in a small sample of leases held by one company,
    BLM was unaware that production had previously commenced on four of
    five leases. In effect, without proper government oversight, companies
    are left to police themselves to ensure their own compliance with
    reporting regulations. We believe the bureaus should be more proactive
    in their oversight.
        In our view, the greatest deficiencies in the program are gaps that
    potentially result in lost royalty payments. This includes the matter
    discussed in our report in which a breakdown in communications between
    BLM and MMS could have cost the federal government nearly $6 million in
    royalties. Both bureaus could be more vigilant in tracking the activity
    of companies on federal leases. Other deficiencies include the lack of
    reliable data on lease status and the absence of a clear policy
    regarding production expectations for federal leases. Our report
    contained recommendations to correct these problems.
        The Administration can help by ensuring BLM and MMS work together
    to solve coordination issues. This would include the identified
    miscommunications in reporting first production as well as the multiple
    lease database systems that do not share information and have data
    integrity problems. Regarding Congressional action, as I stated in my
    testimony, the proposal in Title I of the CLEAR Act to consolidate the
    leasing and royalty tracking and collection functions currently managed
    by MMS and BLM into one bureau should address the weaknesses we found
    in terms of communications, royalty collection, data collection and
    sharing, differences in terminology, and separate data systems.
    Questions from the Minority:
    1.  In a DOI IG report Oil and Gas Production on Federal Leases: No
            Simple Answers released in February 2009, your office found
            that ``...mandating production on all federal leases or
            increasing lease fees would not necessarily enhance production,
            and could, in fact, reduce industry interest in federal
            leases.'' Yet the CLEAR Act would do just that. Are you
            concerned that, rather than increasing the diligent development
            of natural gas and oil, this Act would have the effect of
            making it more difficult to operate on public lands and
            therefore development would be even slower?
        OIG Response: Our report cautioned that government actions designed
    to increase or mandate production need to be carefully considered.
    There is no guarantee that a lease contains oil and gas in commercially
    recoverable quantities. Both bureau and industry officials advised us
    that mandates or increased monetary fees may not have the intended
    effect of increasing production and may actually do the opposite. This
    could be the case especially where nearby state, fee, or Native
    American lands basically compete with federal properties. In
    formulating the complex business decisions to obtain leases, energy
    companies may choose to acquire leases that have less restrictive
    conditions.
    2.  Your office's report found that DOI does not track oil and gas
            leases until a company applies for an Application for Permit to
            Drill (APD) (page 3). This means that all background work--
            environmental analysis, exploratory work, bureaucratic
            obstacles, and clearing legal challenges--does not have any
            visibility, and only very late in the process is a lease
            considered having ``diligent development''. Wouldn't a better
            approach to diligent development first be to track and
            understand all the activities being pursued on a lease before
            punitive measures are directed at oil and gas companies?
        OIG Response: We concluded in our report that BLM and MMS can do
    more to track the status of nonproducing leases. As the responsible
    land managers, the bureaus would likely benefit from knowing the
    current phase of development for individual properties. This more
    proactive approach toward lease management should yield an improved
    understanding of the properties, thus allowing more informative
    decision-making.
        We also determined that the Department did not have a clear policy
    regarding production from federal leases. Specifically, guidelines are
    needed to direct the bureaus on production monitoring such as tracking
    lease development activities and the locations and pace that
    development should occur. We recommended that the Department consult
    with Congress to establish this policy.
    3.  BLM spent about $90 million in FY2008 to administer the onshore
            natural gas and oil program in 2008. From that investment, the
            federal government gained $4.2 billion in royalties, rents, and
            bonuses. For every dollar invested, the oil and gas program
            returned $46. Why is it necessary to increase fees on industry
            at this time, especially in a bad economy and with natural gas
            prices below the cost to produce the gas?
        OIG Response: We did not suggest, in either report or testimony,
    that increased fees are necessary.

    4.  Your office's report found serious data integrity issues in the
    management of the oil and gas program, finding that ``...leases that
    are identified as producing by BLM may be reported as non-producing by
    MMS.'' (page 4) What would be your recommendation for fixing these data
    problems? How can DOI impose so-called ``production incentive fees''
    when it doesn't have credible data to reliably track producing and non-
    producing leases? Does it make sense to penalize oil and gas companies
    with additional fees, when many of the reasons for delays to leasing
    result from government delay and legal challenges from environmental
    groups?

        OIG Response: In our report, we addressed the data integrity issue
    by first recommending that BLM improve the reliability of lease status
    information in its lease data system (LR2000) and also recommending BLM
    and MMS work together to establish a single lease management system as
    opposed to the separate systems now in use, thus eliminating the need
    for manual reporting between the two bureaus. In short, we believe the
    bureaus should concentrate on ensuring the accuracy of lease data so
    that any decisions, about fees or otherwise, can be based on reliable
    information.
    5.  Your office's report pointed out that, according to the Colorado
            School of Mines, ``...faster production rates do not
            necessarily equate to more production. That is, simply drilling
            multiple wells on every lease may not result in more produced
            volumes of oil and gas--A company looking to produce the
            greatest volumes will take a longer term outlook and drill
            fewer wells.'' (page 11) Yet the proposed ``production
            incentive fee'' penalizes lessees who are performing
            environmental analysis and conducting exploratory work to
            determine the best way to develop resources and whether it is
            even worthwhile to develop the leases. Rather than developing
            intelligently where it makes sense to do so, this disincentive
            fee could encourage faster but less efficacious drilling. Are
            you concerned about that potential perverse incentive?
        OIG Response: We have expressed concern that a government directive
    to drill could have the adverse effect of drilling unnecessary wells
    and reducing the overall production volume of oil and gas. As explained
    in our report, the decision to drill should be based on technical
    reservoir-based considerations as opposed to the desire to quickly move
    a lease into production status. The end goal should be to maximize oil
    and gas production volumes, not merely to drill wells. This goal can be
    achieved utilizing ``smart'' production methods, in which a well is
    drilled only when necessary.
    6.  The rigorous deadlines for royalty payments require companies to
            estimate payments before all information is available on
            production, making overpayments and underpayments inevitable.
            Companies currently receive a lower interest rate for
            overpayments than they pay for underpayments, and as such
            overpayment interest is not a favorable financial instrument
            exploited by industry at the expense of the government. The
            CLEAR Act would leave in place interest requirements for
            overpayment, yet remove the interest paid for underpayments.
            This seems inequitable to me. Why do you think this is
            necessary? Do you think that companies are ``gaming'' the
            system by knowingly making overpayments?
        OIG Response: We noted that the third sentence in the question
    inadvertently reversed the provision in the CLEAR Act regarding
    interest assessments. The Act actually eliminates interest on royalty
    overpayments but continues interest on underpayments. In our opinion,
    the interest rate itself is not the issue. Rather, lessees have the
    obligation to accurately report their royalties to MMS, thus interest
    penalties serve a useful purpose as an incentive to report correctly
    the first time. By allowing interest to accrue on an overpayment, the
    lessee is actually rewarded for submitting an inaccurate report.
    Accordingly, the elimination of interest on overpayments may help
    encourage more accurate reporting. We are not aware of any instances in
    which companies have exploited the system by intentionally making
    royalty overpayments, nor have we conducted any work to determine
    whether this is a practice.
                                     ______

        The Chairman. Mr. Rusco.

       STATEMENT OF FRANK RUSCO, DIRECTOR, NATURAL RESOURCES AND
          ENVIRONMENT, U.S. GOVERNMENT ACCOUNTABILITY   OFFICE

        Mr. Rusco. Thank you, Mr. Chairman, members of the
    Committee. I am pleased to be here today to discuss the
    Department of the Interior's management of Federal oil and gas
    resources and the proposed Consolidated Land Energy and Aquatic
    Resources Act of 2009.
        Effective management and oversight of our Nation's oil and
    gas resources and the royalties paid on their production is
    increasingly critical as our country faces both serious fiscal
    challenges and long-term projected growth in energy demands.
        My testimony today is based on a body of work GAO has done
    over the past 5 years in which we have found numerous
    shortcomings in the Department of the Interior's management of
    public oil and gas.
        We have made many recommendations to Interior to improve
    policies and practices, and for the most part, the Agency has
    been responsive in trying to improve. I also want to echo the
    Secretary's earlier comments that the vast majority of
    Interior's employees and management are good public servants
    doing their best to implement responsible resource management.
    Nonetheless, in reviewing this body of work in its entirety, it
    is clear that more comprehensive reform is required to achieve
    reasonable assurances that the Nation's oil and gas resources
    are being managed effectively, efficiently, and that the public
    is receiving an appropriate share of revenues generated from
    these resources.
        In the rest of my statement I will use some specific
    examples to draw attention to a few important areas in which we
    believe further improvements must be made.
        In a series of reports and testimonies on Interior's
    Royalty-In-Kind program, we have found that the Agency has
    likely overstated the net benefits of the program by
    overestimating increased revenues and by ignoring costs that
    should be attributed specifically to the program.
        In addition, over the past 10 years, during which time the
    RIK program grew from a pilot to represent almost half of the
    revenues collected by the Minerals Management Service, the MMS
    has maintained that one of the key benefits of the RIK program
    is that audits of royalty payers were not necessary because MMS
    was collecting oil and gas directly and marketing it themselves
    rather than relying on companies to report the revenue derived
    from the sale of that oil and gas.
        However, in our most recent report on the RIK program, we
    found that audits among gas companies are a routine industry
    practice and that because MMS does not audit royalty payers, it
    cannot provide reasonable assurance that it is even receiving
    the government's entitled royalty share of gas.
        A recurring theme we encountered in our work on oil and gas
    has inconsistencies in the way in which oil and gas leases are
    managed onshore and offshore. For example, Offshore Energy and
    Minerals Management appears to be more proactive in identifying
    which tracts to lease at what time and in evaluating bids to
    ensure they are getting fair market value for these leases.
        In contrast, for offshore leases, BLM appears to be more
    passive, relying on industry to nominate which tracts to offer
    for lease and not having a bid evaluation process at all.
        Second, offshore there are differing lease length terms of
    5, 8, and 10 years based on water depth, which would encourage
    faster development in areas that are closer to shore or closer
    to existing pipeline and production infrastructure, while
    allowing greater time to develop deeper or further out tracts.
        In contrast, BLM issues only 10-year leases regardless
    whether the lease is in a known production area or one that is
    more speculative in nature.
        Similarly, our ongoing work on production verification
    identified that Offshore Energy and Minerals Management and BLM
    have each developed different policies and practices for
    verifying oil and gas production, seemingly creating a
    duplication of efforts.
        In this ongoing work, we have also found cases in which
    data are not reliably and completely shared between the BLM and
    MMS to facilitate both production verification and royalty
    oversight functions.
        In our report on section 390 categorical exclusions that is
    being issued today, we found that a lack of centralized
    oversight and guidance contributed to these categorical
    exclusions being unevenly and inconsistently applied across
    different BLM field offices.
        For example, in some cases in applying section 390
    categorical exclusions, BLM thwarted the NEPA process by
    approving drilling permits using section 390 categorical
    exclusions even though the applications did not meet the
    criteria set out in the Energy Policy Act of 2005.
        BLM has issued general guidance on how and when to use
    section 390 categorical exclusions; however, BLM headquarters
    lacks an oversight program, does not know how field offices,
    are using these categorical exclusions, and has yet to develop
    a template they say is needed to maximize consistency and
    compliance with agency guidance with its many field offices.
        Mr. Chairman, these brief examples are only a few of the
    many troubling policies and practices that we have found
    characterized management of Federal oil and gas resources.
        I and my assistant director, Jeff Malcolm, will be happy to
    answer any questions you or the Committee may have about our
    work or how it relates to some of the provisions set forth in
    the proposed legislation being made today.
        [The prepared statement of Mr. Rusco follows:]

    Statement of Frank Rusco, Director, Natural Resources and Environment,
                     U.S. Government Accountability Office

        Mr. Chairman and Members of the Committee:
        We appreciate the opportunity to participate in this hearing to
    discuss the Department of the Interior's management of federal oil and
    gas leases and the proposed Consolidated Land, Energy, and Aquatic
    Resources Act of 2009. Effective management and oversight of our
    nation's oil and gas resources, and the royalties paid on their
    production, is increasingly critical as our country faces both serious
    fiscal challenges and long-term projected growth in energy demand.
        Interior plays an important role in managing federal oil and gas
    resources. In Fiscal Year 2008, Interior reported that private
    companies extracted approximately 467 million barrels of oil and 4.7
    trillion cubic feet of natural gas from federal lands and waters. This
    production provided significant revenue to the federal government.
    Specifically, Interior collected more than $22 billion in royalties for
    oil and gas produced from federal lands and waters, purchase bids for
    new oil and gas leases, and annual rents on existing leases, making
    revenues from federal oil and gas one of the largest nontax sources of
    federal government funds. Within Interior, the Bureau of Land
    Management (BLM) manages onshore federal oil and gas leases and the
    Minerals Management Service's (MMS) Offshore Energy and Minerals
    Management (OEMM) manages offshore leases. MMS is responsible for
    collecting royalties for both onshore and offshore leases.
        In recent years, GAO and others, including Interior's Inspector
    General have conducted numerous evaluations of federal oil and gas
    management and revenue collection processes and practices and have
    found many material weaknesses in this management. These weaknesses
    place an unknown but significant proportion of royalties and other oil
    and gas revenues at risk and raise questions about whether the federal
    government is collecting an appropriate amount of revenue for the
    rights to explore for, develop, and produce oil and gas from federal
    lands and waters.
        In this context, my testimony today addresses (1) Interior's
    policies and practices for oil and gas leasing, (2) Interior's
    oversight of oil and gas production, (3) the existing royalty fiscal
    regime and Interior's policies to encourage oil and gas development,
    (4) inefficiencies within Interior's oil and gas information technology
    (IT) systems, and (5) the ongoing challenges with Interior's Royalty-
    in-Kind (RIK) program. Across several of these areas, our past work has
    led us to make a number of recommendations to the Secretary of the
    Interior. Officials at Interior have reported that they are working to
    implement many of these recommendations. This statement is primarily
    based on our extensive body of work on Interior's oil and gas leasing
    and royalty collection programs, including one report being issued
    today, 1 as well as some preliminary ongoing work on
    Interior's procedures for ensuring oil and gas produced from federal
    leases is properly accounted for. This body of work was conducted in
    accordance with generally accepted government auditing standards. Those
    standards require that we plan and perform the audit to obtain
    sufficient, appropriate evidence to provide a reasonable basis for our
    findings and conclusions based on our audit objectives. We believe that
    the evidence obtained during these reviews provides a reasonable basis
    for our findings and conclusions based on our audit objectives.
    ---------------------------------------------------------------------------
        \1\ GAO, Energy Policy Act of 2005: Greater Clarity Needed to
    Address Concerns with Categorical Exclusions for Oil and Gas
    Development under Section 390 of the Act, GAO-09-872 (Washington, D.C.:
    Sept. 16, 2009).
    ---------------------------------------------------------------------------
    Interior's Policies for Offshore and Onshore Oil and Gas Leases Differ
            in Key Ways
        In October 2008, we reported that Interior's policies for
    identifying and evaluating lease parcels and bids differ in key ways
    depending on whether the lease is located offshore--and therefore
    overseen by OEMM--or onshore--and therefore overseen by BLM.
    2 These differences follow:
    ---------------------------------------------------------------------------
        \2\ GAO, Oil and Gas Leasing: Interior Could Do More to Encourage
    Diligent Development, GAO-09-74 (Washington, D.C.: Oct. 3, 2008).
    ---------------------------------------------------------------------------
        Identifying lease parcels. OEMM's and BLM's methods for identifying
    areas to lease vary significantly, specifically:
          For offshore leases, OEMM--as prescribed by the Outer
    Continental Lands Act--lays out 5-year strategic plans for the areas it
    plans to lease and establishes a schedule for offering leases. OEMM
    offers leases for competitive bidding, and all eligible companies may
    submit written sealed bids, referred to as bonus bids, for the rights
    to explore, develop, and produce oil and gas resources on these leases,
    including drilling test wells.
          For onshore leases, BLM--which must follow the Federal
    Onshore Oil and Gas Leasing Reform Act of 1987--is not required to
    develop a long-term leasing plan and instead relies on the industry and
    the public to nominate areas for leasing. BLM selects lands to lease
    from these nominations, as well as some parcels it has identified on
    its own. In some cases, BLM, like MMS, offers leases through a
    competitive bidding process, but with bonus bids received in an oral
    auction rather than in a sealed written form.
        Evaluating bids. OEMM and BLM differ in their regulations and
    policies for evaluating whether the bids received for areas offered for
    lease are sufficient.
          For offshore leases, OEMM compares sealed bids with its
    own independent assessment of the value of the potential oil and gas in
    each lease. After the bids are received, OEMM--using a team of
    geologists, geophysicists, and petroleum engineers assisted by a
    software program--conducts a technical assessment of the potential oil
    and gas resources associated with the lease and other factors to
    develop an estimate of their fair market value. This estimate becomes
    the minimally acceptable bid and is used to evaluate the bids received.
    The bidder that submits the highest bonus bid that meets or exceeds
    MMS's estimate of the fair market value of a lease is awarded the
    lease. These rights last for a set period of time, referred to as the
    primary term of the lease, which may be 5, 8, or 10 years, depending on
    the water depth. If no bids equal or exceed the minimally acceptable
    bid, the lease is not awarded but is offered at a subsequent sale.
    According to OEMM, since 1995, the practice of rejecting bids that fall
    below the minimally acceptable bid and re-offering these leases at a
    later sale has resulted in an overall increase in bonus receipts of
    $373 million between 1997 and 2006.
          For onshore leases, BLM relies exclusively on
    competitors, participating in an oral auction, to determine the lease's
    market value. Furthermore, BLM, unlike OEMM, does not currently employ
    a multidisciplinary team with the appropriate range of skills or
    appropriate software to develop estimates of the oil and gas reserves
    for each lease parcel, and thus, establish a market and resource-based
    minimum acceptable bid. Instead, BLM has established a uniform national
    minimum acceptable bid of at least $2 per acre and has taken the
    position that as long as at least one bid meets this $2 per acre
    threshold, the lease will be awarded to the highest bidder.
    Importantly, onshore leases that do not receive any bids in the initial
    offer are available noncompetitively the day after the lease sale and
    remain available for leasing for a period of 2 years after the
    competitive lease sale. Any of these available leases may be acquired
    on a first-come, first-served basis subject to payment of an
    administrative fee. Prior to 1992, BLM offered primary terms of 5 years
    for competitively sold leases and 10 years for leases issued
    noncompetitively. Since 1992, BLM has been required by law to only
    offer leases with 10-year primary terms whether leases are sold
    competitively or issued noncompetitively.
    Interior's Oversight of Federal Oil and Gas Production Has Not Kept
            Pace with Increased Activity
        Oil and gas activity has generally increased over the past 20
    years, and our reviews have found that Interior has--at times--been
    unable to meet its oversight obligations for (1) completing
    environmental inspections, (2) verifying oil and gas production, (3)
    performing environmental monitoring in accordance with land use plans,
    and (4) using categorical exclusions to streamline environmental
    analyses required for certain oil and gas activities. Specifically:
          Completing environmental inspections. In June 2005, we
    reported that with the increase in oil and gas activity, BLM had not
    consistently been able to complete its required environmental
    inspections--the primary mechanism to ensure that companies are
    complying with various environmental laws and lease stipulations. At
    the time of our review, BLM officials explained that because staff were
    spending increasing amounts of time processing drilling permits, they
    had less time to conduct environmental inspections. 3
    ---------------------------------------------------------------------------
        \3\ GAO, Oil and Gas Development: Increased Permitting Activity Has
    Lessened BLM's Ability to Meet Its Environmental Protection
    Responsibilities, GAO-05-418 (Washington, D.C.: June 17, 2005).
    ---------------------------------------------------------------------------
          Verifying oil and gas production. In September 2008, we
    reported that neither BLM nor OEMM was meeting its statutory
    obligations or agency targets for inspecting certain leases and
    metering equipment used to measure oil and gas production, raising
    uncertainty about the accuracy of oil and gas measurement. For onshore
    leases, BLM had completed only a portion of its production verification
    inspections--with some BLM offices completing all of their required
    inspections and others completing portions as small as one quarter of
    their required inspections--because its workload has substantially
    grown in response to increases in onshore drilling. For offshore
    leases, OEMM had completed about half of its required production
    inspections in 2007 because of ongoing cleanup work related to
    Hurricanes Katrina and Rita. 4 Additionally, in our ongoing
    work, we have found that Interior has not consistently updated its oil
    and gas measurement regulations. Specifically, OEMM has routinely
    reviewed and updated its measurement regulations, whereas BLM has not.
    Accordingly, OEMM has updated its measurement regulations six times
    since 1998, whereas BLM has not updated its measurement regulations
    since 1989.
    ---------------------------------------------------------------------------
        \4\ GAO, Mineral Revenues: Data Management Problems and Reliance on
    Self-Reported Data for Compliance Efforts Put MMS Royalty Collections
    at Risk, GAO-08-893R (Washington, D.C.: Sept. 12, 2008).
    ---------------------------------------------------------------------------
          Performing environmental monitoring. In June 2005, we
    reported that four of the eight BLM field offices we visited had not
    developed any resource monitoring plans to help track management
    decisions and determine if desired outcomes had been achieved,
    including those related to mitigating the environmental impacts of oil
    and gas development. We concluded that without these plans, land
    managers may be unable to determine the effectiveness of various
    mitigation measures attached to drilling permits and decide whether
    these measures need to be modified, strengthened, or eliminated.
    Officials offered several reasons for not having these plans, including
    that staff that could have been used to develop such plans had been
    busy with processing an increased number of drilling permits, as well
    as budget constraints. 5
    ---------------------------------------------------------------------------
        \5\ GAO-05-418.
    ---------------------------------------------------------------------------
          Using categorical exclusions. Our report issued today on
    BLM's use of categorical exclusions 6--authorized under
    section 390 of the Energy Policy Act of 2005 to streamline the
    environmental analysis required under the National Environmental Policy
    Act (NEPA) when approving certain oil and gas activities--identifies
    some benefits but raises numerous questions about how and when BLM
    should use these categorical exclusions. First, our analysis found that
    BLM used section 390 categorical exclusions to approve over one-quarter
    of its applications for drilling permits from Fiscal Years 2006 to
    2008. While these categorical exclusions generally increased the
    efficiency of operations, some BLM field offices, such as those with
    recent environmental analyses already completed, were able to benefit
    more than others. Second, we found that BLM's use of section 390
    categorical exclusions was frequently out of compliance with both the
    law and agency guidance and that a lack of clear guidance and oversight
    by BLM were contributing factors. We found several types of violations
    of the law, such as BLM offices approving more than one oil or gas well
    under a single decision document and drilling a new well after
    statutory time frames had lapsed. We also found examples, in 85 percent
    of field offices reviewed, where officials did not comply with agency
    guidance, most often by failing to adequately justify the use of a
    categorical exclusion. While many of these violations and noncompliance
    were technical in nature, others were more significant and may have
    thwarted NEPA's twin aims of ensuring that BLM and the public are fully
    informed of environmental consequences of BLM's actions. Third, we
    found that a lack of clarity in both section 390 of the act and BLM's
    guidance has raised serious concerns. Specifically:
    ---------------------------------------------------------------------------
        \6\ GAO-09-872.
    ---------------------------------------------------------------------------
        (1)  Fundamental questions about what section 390 categorical
    exclusions are and how they should be used have led to concerns that
    BLM may be using these categorical exclusions in too many--or too few--
    instances; for example, there is disagreement as to whether BLM must
    screen section 390 categorical exclusions for circumstances that would
    preclude their use or whether their use is mandatory;
        (2)  Concerns about key concepts underlying the law's description
    of these categorical exclusions have arisen--specifically, whether
    section 390 categorical exclusions allow BLM to exceed development
    levels, such as number of wells to be drilled, analyzed in supporting
    NEPA documents without conducting further analysis; and
        (3)  Vague or nonexistent definitions of key criteria in the law
    and BLM guidance have led to varied interpretations among field offices
    and concerns about misuse and a lack of transparency.
        In light of our findings from this report, we recommended that BLM
    take steps to improve the implementation of section 390 of the act by
    clarifying agency guidance, standardizing decision documentation, and
    ensuring compliance through more oversight. 7 We also
    suggested that Congress may wish to consider amending the Energy Policy
    Act of 2005 to clarify and resolve some of the key issues identified in
    our report.
    ---------------------------------------------------------------------------
        \7\ GAO-09-872.
    ---------------------------------------------------------------------------
    Interior May be Missing Opportunities to Fundamentally Shift the Terms
            of Federal Oil and Gas Leases to Increase Revenues
        In our past work, we have identified several areas where Interior
    may be missing opportunities to increase revenue by fundamentally
    shifting the terms of federal oil and gas leases. As we reported in
    September 2008, (1) federal oil and gas leasing terms result in the
    U.S. government receiving one of the smallest shares of oil and gas
    revenue when compared to other countries and (2) Interior's royalty
    rate, which does not change to reflect changing prices and market
    conditions, led to pressure on Interior and Congress to periodically
    change royalty rates. 8 We also reported that Interior was
    doing far less than some states to encourage development of leases.
    9 Specifically:
    ---------------------------------------------------------------------------
        \8\ GAO, Oil and Gas Royalties: The Federal System for Collecting
    Oil and Gas Revenues Needs Comprehensive Reassessment, GAO-08-691
    (Washington, D.C.: Sept. 3, 2008).
        \9\ GAO-09-74.
    ---------------------------------------------------------------------------
          The U.S. government receives one of the lowest shares of
    revenue for oil and gas resources compared with other countries and
    resource owners. For example, we reported the results of a private
    study in 2007 showing that the revenue share the U.S. government
    collects on oil and gas produced in the Gulf of Mexico ranked 93rd
    lowest of the 104 revenue collection regimes around the world covered
    by the study. Further, the study showed that some countries had
    increased their shares of revenues as oil and gas prices rose and, as a
    result, could collect between an estimated $118 billion and $400
    billion, depending on future oil and gas prices. However, despite
    significant changes in the oil and gas industry over the past several
    decades, we found that Interior had not systematically re-examined how
    the U.S. government is compensated for extraction of oil and gas for
    over 25 years.
          Since 1980, in part due to Interior's inflexible royalty
    rate structure, Congress and Interior have been pressured--with varying
    success--to periodically adjust royalty rates to respond to current
    market conditions. For example, in 1980, a time when oil prices were
    high compared to today's prices, in inflation-adjusted terms, Congress
    passed a windfall profit tax, which it later repealed in 1988 after oil
    prices had fallen significantly from their 1980 level. Later, in
    November 1995--during a period with relatively low oil and gas prices--
    the federal government enacted the Outer Continental Shelf Deep Water
    Royalty Relief Act (DWRRA) which provided for ``royalty relief,'' the
    suspension of royalties on certain volumes of initial production, for
    certain leases in the Gulf of Mexico in depths greater than 200 meters
    during the 5 years after passage of the act--1996 through 2000. For
    leases issued during these 5 years, litigation established that MMS
    lacked the authority under the act to impose thresholds. 10
    As a result, companies are now receiving royalty relief even though
    prices are much higher than at the time the DWRRA was enacted. In June
    2008, we estimated that future foregone royalties from all the DWRRA
    leases issued from 1996 through 2000 could range widely--from a low of
    about $21 billion to a high of $53 billion. Finally, in 2007, the
    Secretary of the Interior twice increased the royalty rate for future
    Gulf of Mexico leases. In January, the rate for deep water leases was
    raised to 16.66 percent. Later, in October, the rate for all future
    leases in the Gulf, including those issued in 2008, was raised to 18.75
    percent. Interior estimated these actions would increase federal oil
    and gas revenues by $8.8 billion over the next 30 years. The January
    2007 increase applied only to deep water Gulf of Mexico leases; the
    October 2007 increase applied to all water depths in the Gulf of
    Mexico.
    ---------------------------------------------------------------------------
        \10\ The Department of Justice filed a Petition for Writ of
    Certiorari with the Supreme Court on July 13, 2009 challenging the
    Fifth Circuit ruling in Kerr-McGee Oil & Gas Corp. v. U.S. Department
    of the Interior, 554 F.3d 1082 (5th Cir. 2009).
    ---------------------------------------------------------------------------
        We concluded that these royalty rate increases appeared to be a
    response by Interior to the high prices of oil and gas that have led to
    record industry profits and raised questions about whether the existing
    federal oil and gas fiscal system gives the public an appropriate share
    of revenues from oil and gas produced on federal lands and waters.
    Further, the royalty rate increases did not address industry profits
    from existing leases. Existing leases, with lower royalty rates, would
    likely remain highly profitable as long as they produced oil and gas or
    until oil and gas prices fell significantly. In addition, in choosing
    to increase royalty rates, Interior did not evaluate the entire oil and
    gas fiscal system to determine whether or not these increases were
    sufficient to balance investment attractiveness and appropriate returns
    to the federal government for oil and gas resources. On the other hand,
    according to Interior, it did consider factors such as industry costs
    for outer continental shelf exploration and development, tax rates,
    rental rates, and expected bonus bids. Further, because the increased
    royalty rates are not flexible with respect to oil and gas prices,
    Interior and Congress could again be under pressure from industry or
    the public to further change the royalty rates if and when oil and gas
    prices either fall or rise. Finally, these past royalty changes only
    affected Gulf of Mexico leases and did not address onshore leases.
          Interior's OEMM and BLM varied in the extent to which
    they encouraged development of federal leases, and both agencies did
    less than some states and private landowners to encourage lease
    development. As a result, we concluded that Interior may be missing
    opportunities to increase domestic oil and gas production and revenues.
    Specifically, in the Gulf of Mexico, OEMM varied the lease length in
    accordance with the depth of water over which the lease is situated.
    For example, leases issued in shallow water depths typically have lease
    terms of 5 years, whereas leases in the deepest areas of the Gulf of
    Mexico have 10 year primary terms; shallower water tends to be nearer
    to shore and to be adjacent to already developed areas with pipeline
    infrastructure in place, while deeper water tends to be further out,
    have less available infrastructure to link up with, and generally
    present greater challenges associated with the depth of the wells
    themselves. In contrast, BLM issues leases with 10 year primary terms,
    regardless of whether the lease happens to lie adjacent to a fully
    developed field with the necessary pipeline infrastructure to carry the
    product to market, or whether it is in a remote location with no
    surrounding infrastructure. Furthermore, BLM also uses 10 year primary
    terms in the National Petroleum Reserve-Alaska, where it is
    significantly more difficult to develop oil fields because of factors
    including the harsh environment. We also examined selected states and
    private landowners that lease land for oil and gas development and
    found that some did more than Interior to encourage lease development.
    For example, to provide a greater financial incentive to develop leased
    land, the state of Texas allowed lessees to pay a 20 percent royalty
    rate for the life of the lease if production occurred in the first 2
    years of the lease, as compared to 25 percent if production occurred
    after the fourth year. In addition, we found that some states and
    private landowners also did more to structure leases to reflect the
    likelihood of finding oil and gas. For example, New Mexico issued
    shorter leases and could require lessees to pay higher royalties for
    properties in or near known producing areas and allowed longer leases
    and lower royalty rates in areas believed to be more speculative.
    Officials from one private landowners' association told us that they
    too were using shorter lease terms, ranging from as little as 6 months
    to 3 years, to ensure that lessees were diligent in developing any
    potential oil and gas resources on their land. Louisiana and Texas also
    issued 3-year onshore leases. While the existence of lease terms that
    appear to encourage faster development of some oil and gas leases
    suggest a potential for the federal government to also do more in this
    regard, it is important to note that it can take several years to
    complete the required environmental analyses needed for lessees to
    receive approval to begin drilling on federal lands.
        To address what we believed were key weaknesses in this program,
    while acknowledging potential differences between federal, state, and
    private leases, we recommended that the Secretary of the Interior
    develop a strategy to evaluate options to encourage faster development
    of oil and gas leases on federal lands, including determining whether
    methods to differentiate between leases according to the likelihood of
    finding economic quantities of oil or gas and whether some of the other
    methods states use could effectively be employed, either across all
    federal leases or in a targeted fashion. In so doing, we recommended
    that Interior identify any statutory or other obstacles to using such
    methods and report the findings to Congress. 11We also noted
    that Congress may wish to consider directing the Secretary of the
    Interior to
    ---------------------------------------------------------------------------
        \11\ GAO-08-691.
    ---------------------------------------------------------------------------
          convene an independent panel to perform a comprehensive
    review of the federal oil and gas fiscal system, 12 and
    ---------------------------------------------------------------------------
        \12\ GAO-08-691.
    ---------------------------------------------------------------------------
          direct MMS and other relevant agencies within Interior to
    establish procedures for periodically collecting data and information
    and conducting analyses to determine how the federal government take
    and the attractiveness for oil and gas investors in each federal oil
    and gas region compare to those of other resource owners and report
    this information to Congress. 13
    ---------------------------------------------------------------------------
        \13\ GAO-09-74.
    ---------------------------------------------------------------------------
    Interior's Oil and Gas IT Systems Lack Key Functionalities
        Our past work and preliminary findings have identified shortcomings
    in Interior's IT systems for managing oil and gas royalty and
    production information. In September 2008, we reported that Interior's
    oil and gas IT systems did not include several key functionalities,
    including (1) limiting a company's ability to make adjustments to self-
    reported data after an audit had occurred and (2) identifying missing
    royalty reports. 14 Since September 2008, MMS has made
    improvements in identifying missing royalty reports, but it is too
    early to assess their effectiveness, and we remain concerned with the
    following issues:
    ---------------------------------------------------------------------------
        \14\ GAO-08-893R.
    ---------------------------------------------------------------------------
          MMS's ability to maintain the accuracy of production and
    royalty data has been hampered because companies can make adjustments
    to their previously entered data without prior MMS approval. Companies
    may legally make changes to both royalty and production data in MMS's
    royalty IT system for up to 6 years after the initial reporting month,
    and these changes may necessitate changes in the royalty payment.
    However, MMS's royalty IT system currently allows companies to make
    adjustments to their data beyond the allowed 6-year time frame. As a
    result of the companies' ability to make these retroactive changes,
    within or outside of the 6-year time frame, the production data and
    required royalty payments can change over time--even after MMS
    completes an audit--complicating efforts by agency officials to
    reconcile production data and ensure that the proper royalties were
    paid.
          MMS's royalty IT system is also unable to automatically
    detect instances when a royalty payor fails to submit the required
    royalty report in a timely manner. As a result, cases in which a
    company stops filing royalty reports and stops paying royalties may not
    be detected until more than 2 years after the initial reporting date,
    when MMS's royalty IT system completes a reconciliation of volumes
    reported on the production reports with the volumes on their associated
    royalty reports. Therefore, it remains possible under MMS's current
    strategy that the royalty IT system may not identify instances in which
    a payor stops reporting until several years after the report is due.
    This creates an unnecessary risk that MMS may not be collecting
    accurate royalties in a timely manner.
        Additionally, in July 2009, we reported that MMS's IT system lacked
    sufficient controls to ensure that royalty payment data were accurate.
    15 While many of the royalty data we examined from Fiscal
    Years 2006 and 2007 were reasonable, we found significant instances
    where data were missing or appeared erroneous. For example, we examined
    gas leases in the Gulf of Mexico and found that, about 5.5 percent of
    the time, lease operators reported production, but royalty payors did
    not submit the corresponding royalty reports, potentially resulting in
    $117 million in uncollected royalties. We also found that a small
    percentage of royalty payors reported negative royalty values, which
    cannot happen, potentially costing $41 million in uncollected
    royalties. In addition, royalty payors claimed gas processing
    allowances 2.3 percent of the time for unprocessed gas, potentially
    resulting in $2 million in uncollected royalties. Furthermore, we found
    significant instances where royalty payor-provided data on royalties
    paid and the volume and or the value of the oil and gas produced
    appeared erroneous because they were outside the expected ranges.
    ---------------------------------------------------------------------------
        \15\ GAO, Mineral Revenues: MMS Could Do More to Improve the
    Accuracy of Key Data Used to Collect and Verify Oil and Gas Royalties,
    GAO-09-549 (Washington, D.C.: July 15, 2009).
    ---------------------------------------------------------------------------
        Moreover, in preliminary findings on Interior's procedures for
    ensuring oil and gas produced from federal leases is properly
    accounted, we found that:
          The IT systems employed by both BLM and MMS fail to
    communicate effectively with one another resulting in cumbersome data
    transfers and data errors. For example, in order to complete the weekly
    transfer of oil and gas production data between MMS and BLM, MMS staff
    must copy all production data onto a disk, which then must be sent to
    BLM's building where it is subsequently uploaded into BLM's IT system.
    Furthermore, according to BLM staff, the production uploads are
    currently not working as intended. Frequently, an operator may make
    adjustments to production records, which results in the creation of a
    new record. When these new records are uploaded into BLM's IT system,
    they should replace--or overlay--the prior record. However, due to
    technical problems, new reports are not correctly overlaying the
    previously uploaded production reports; instead they are creating
    duplicate or triplicate production reports for the same operator and
    month. According to BLM's IT system coordinator, this will likely
    complicate BLM's production accountability work.
          BLM's efforts to use gas production data acquired
    remotely from gas wells through its Remote Data Acquisition for Well
    Production program to facilitate production inspections have shown few
    results after 5 years of funding and at least $1.5 million spent.
    Currently, BLM is only receiving production data from approximately 50
    wells via this program, and it has yet to use the data to complete a
    production inspection, making it difficult to assess its utility.
        To address weaknesses we identified in our September 2008 report,
    16 we recommended that the Secretary of the Interior, among
    other things
    ---------------------------------------------------------------------------
        \16\ GAO-08-893R.
    ---------------------------------------------------------------------------
          finalize the adjustment line monitoring specifications
    for modifying its royalty IT system and fully implement the IT system
    so that MMS can monitor adjustments made outside the 6-year time frame,
    and ensure that any adjustments made to production and royalty data
    after compliance work has been completed are reviewed by appropriate
    staff, and
          develop processes and procedures by which MMS can
    automatically identify when an expected royalty report has not been
    filed in a timely manner and contact the company to ensure it is
    complying with both applicable laws and agency policies.
        In addition, to address weaknesses identified in our July 2009
    report, 17 we made a number of recommendations to MMS
    intended to improve the quality of royalty data by improving its IT
    systems' edit checks, among other things.
    ---------------------------------------------------------------------------
        \17\ GAO-09-549.
    ---------------------------------------------------------------------------
    Interior's RIK Program Continues to Face Challenges
        Interior's management and oversight of its RIK program has raised
    concerns as to whether Interior is receiving the correct royalty
    volumes of oil and gas. Both we and Interior's Inspector General have
    issued reports detailing deficiencies in both program management and
    management ethics, including (1) problems with reporting the benefits
    of the RIK program to Congress, (2) Interior's failure to use available
    third-party data to confirm gas production volumes, (3) inappropriate
    relationships between RIK staff and industry representatives, and (4)
    insufficient controls for monitoring natural gas imbalances, among
    others. Specifically:
          In September, 2008, we reported that MMS's annual reports
    to Congress did not fully describe the performance of the RIK program
    and, in some instances, may have overstated the benefits of the
    program. For example, MMS's calculation that from Fiscal Years 2004 to
    2006, MMS sold royalty oil and gas for $74 million more than it would
    have received in cash was based on assumptions, not actual sales data,
    about the prices at which royalty payors would have sold their oil or
    gas had they sold it on the open market. MMS did not report to Congress
    that even small changes in these assumptions could result in very
    different estimates. Also, MMS's calculation that the RIK program cost
    about $8 million less to administer than the royalty-in-value program
    over the same period did not include certain costs, such as IT costs
    shared with the royalty-in-value program that would likely have changed
    the results of MMS's administrative cost analysis. In addition, MMS's
    annual reports to Congress lacked important information on the
    financial results of individual oil sales that Congress could use to
    more broadly assess the performance of the RIK program. 18
    ---------------------------------------------------------------------------
        \18\ GAO, Oil and Gas Royalties: MMS's Oversight of Its Royalty-in-
    Kind Program Can Be Improved through Additional Use of Production
    Verification Data and Enhanced Reporting of Financial Benefits and
    Costs, GAO-08-942R (Washington, D.C.: Sept. 26, 2008).
    ---------------------------------------------------------------------------
          In 2008, we also reported that MMS's oversight of its
    natural gas production volumes was less robust than its oversight of
    oil production volumes. As a result,
        MMS did not have the same level of assurance that it is collecting
    the gas royalties it is owed. For instance, for oil, MMS compared
    companies' self-reported oil production data with third-party pipeline
    meter data from OEMM's liquid verification system, which records oil
    volumes flowing through pipeline metering points. Using these third-
    party pipeline statements to verify production volumes reported by
    companies would have provided a check against companies' self-reported
    statement of royalty payments owed to the federal government. While
    analogous data were available from OEMM's gas verification system, MMS
    did not use these third-party data to verify the company-reported
    production numbers. 19 As of February 2009, MMS had begun to
    use the gas verification system.
    ---------------------------------------------------------------------------
        \19\ GAO-08-942R.
    ---------------------------------------------------------------------------
          Interior's Inspector General also issued a report in
    September 2008 which found that the program had suffered from ethical
    shortcomings. In particular, the Inspector General found that a program
    manager had been paid for consulting by an oil and gas company in
    violation of agency rules and that up to one-third of all RIK staff had
    inappropriately socialized and received gifts from oil and gas
    companies. 20
    ---------------------------------------------------------------------------
        \20\ Department of the Interior, Inspector General Investigative
    Report, August 7, 2008.
    ---------------------------------------------------------------------------
        Most recently, in August 2009, we found that MMS risks losing
    millions of dollars in revenue from the RIK natural gas program due to
    inadequate oversight. 21 Specifically:
    ---------------------------------------------------------------------------
        \21\ Royalty-in-Kind Program: MMS Does Not Provide Reasonable
    Assurance It Receives Its Share of Gas, Resulting in Millions in
    Forgone Revenue, GAO-09-744 (Washington, D.C.: Aug. 14, 2009).
    ---------------------------------------------------------------------------
          MMS lacks the necessary information to quantify revenues
    resulting from imbalances--instances when MMS receives a percentage of
    total production other than its entitled royalty percentage. MMS does
    not know the exact amount it is owed as a result of natural gas
    imbalances because it lacks at least three types of information. First,
    it does not verify all gas production data to ensure it receives its
    entitled percentage of RIK gas. Second, MMS lacks information on how to
    price gas imbalances and when interest will begin accruing on
    imbalances for leases that have terminated from the program or those
    leases where production has ceased. Finally, MMS could be forgoing
    revenue because it lacks information on daily gas imbalances.
          MMS also may be forgoing revenue because it does not
    audit operator data to ensure it has received its entitled royalty
    percentage. Although MMS has procedures for reconciling imbalances and
    uses OEMM's gas verification system data where available, we found that
    it has not assessed the risk of forgoing audits at those measurement
    points where it does not have complete data with which to verify that
    it has been allocated its entitled percentage of gas. Although the RIK
    guidance letter to operators states MMS's right to audit operator
    information related to RIK gas produced and delivered, MMS has not done
    so because it has considered its verification of operator-generated
    data to be sufficient. MMS has also claimed that it has saved money as
    a result of not auditing and that this is a benefit of the RIK program.
    However, other royalty owners and members of the oil and gas industry
    regularly audit operator-reported data to ensure that they have
    received the gas they are entitled to.
        To address weaknesses we identified in our September 2008 and
    August 2009 reports, 22 we recommended that the Director of
    MMS, among other things,
    ---------------------------------------------------------------------------
        \22\ GAO-08-942R and GAO-09-744.
    ---------------------------------------------------------------------------
          improve calculations of the benefits and costs of the RIK
    program and the information presented to Congress by (1) calculating
    and presenting a range of the possible performances of the RIK sales in
    accordance with Office of Management and Budget guidelines; (2)
    reevaluating the process by which it calculates the early payment
    savings; (3) disclosing the costs to acquire, develop, operate, and
    maintain RIK-specific IT systems; and (4) disaggregating the oil sales
    data to show the variation in the performances of individual sales.
          improve MMS's oversight of the RIK gas program and help
    ensure that the nation receives its fair share of RIK gas by (1)
    establishing policies and procedures to ensure outstanding imbalances
    are valued appropriately and that the correct amount of interest is
    charged; (2) monitoring daily gas imbalances and determining whether
    legislative changes are needed to require operators to deliver the
    royalty percentage on a daily basis; (3) auditing the operators and
    imbalance data; (4) promulgating RIK program regulations; and (5)
    establishing procedures, with reasonable deadlines, for resolving and
    collecting all RIK gas imbalances in a timely manner.
        In conclusion, over the past several years, we and others have
    examined oil and gas leasing at the Department of the Interior many
    times and determined such leasing to be in need of fundamental reform
    across a wide range of Interior's functions. As Congress considers what
    fundamental changes are needed in how Interior structures its oversight
    of oil and gas leasing, we believe that our and other's past work
    provides a road map for successful reform of the agency's oversight
    functions. If steps are not taken to effectively manage these
    challenges, we remain concerned about the agency's ability to manage
    the nation's oil and gas and provide reasonable assurance that the U.S.
    government is collecting an appropriate amount of revenue for the
    extraction and use of these scarce resources.Mr. Chairman, this
    completes my prepared statement. I would be happy to respond to any
    questions that you or other Members of the Committee may have at this
    time.
    GAO Contact and Staff Acknowledgements
        For further information on this statement, please contact Frank
    Rusco at (202) 512-3841 or ruscof@gao.gov. Contact points for our
    Congressional Relations and Public Affairs offices may be found on the
    last page of this statement. Other staff that made key contributions to
    this testimony include Ron Belak, Ben Bolitzer, Melinda Cordero, Nancy
    Crothers, Heather Dowey, Glenn C. Fischer, Cindy Gilbert, Richard
    Johnson, Mike Krafve, Jon Ludwigson, Jeff Malcolm, Alison O'Neill,
    Justin Reed, Holly Sasso, Dawn Shorey, Karla Springer, Barbara
    Timmerman, Maria Vargas, Tama Weinberg, and Mary Welch.[NOTE: The GAO
    reports submitted for the record have been retained in the Committee's
    official files. The reports can be found at the web addresses listed
    below:] Government Accountability Office (GAO) Report entitled ``Energy
    Policy Act of 2005. Greater Clarity Needed to Address Concerns with
    Categorical Exclusions for Oil and Gas Development under Section 390 of
    the Act.'' September 2009, GAO-09-872 http://www.gao.gov/new.items/
    d09872.pdf Government Accountability Office (GAO) Report entitled
    ``Mineral Revenues. MMS Could Do More to Improve the Accuracy of Key
    Data Used to Collect and Verify Oil and Gas Royalties.'' July 2009,
    GAO-09-549.http://www.gao.gov/new.items/d09549.pdf Government
    Accountability Office (GAO) Report entitled ``Royalty-In-Kind Program.
    MMS Does Not Provide Reasonable Assurance It Receives Its Share of Gas,
    Resulting in Millions in Forgone Revenue.'' August 2009, GAO-09-744
    http://www.gao.gov/new.items/d09744.pdf

    [GRAPHIC(S) NOT AVAILABLE TIFF FORMAT]

        Response to questions submitted for the record by Frank Rusco,
         Director, Natural Resources and Environment, U.S. Government
                             Accountability Office

    Questions from the Majority:
    1.  Mr. Rusco, during the hearing the Inspector General was questioned
            about the alleged ``simplicity'' of the Royalty-In-Kind (RIK)
            program, and whether or not the Minerals Management Service
            (MMS) would need to hire additional auditors upon the
            elimination of RIK. The implication appeared to be that the RIK
            program was simpler for producers and the government, and did
            not require auditing, as MMS has stated in prior years. Has
            your work touched on this issue at all, and have you been able
            to draw any conclusions regarding the issue of RIK and
            auditing?
        As we pointed out in our statement, MMS may be forgoing revenue
    from the RIK program because it does not audit operator data to ensure
    it has received its entitled royalty percentage. Although MMS has
    procedures for reconciling imbalances--differences between the RIK gas
    MMS is owed and the percentage it actually receives--and verifies some
    available data, we found that MMS does not audit and has not assessed
    the risk of forgoing audits at those measurement points where it does
    not have complete data with which to verify that it has been allocated
    its entitled percentage of gas. In contrast, other royalty owners and
    members of the oil and gas industry regularly audit operator-reported
    data to ensure that they have received their entitled percentages of
    oil and gas. In our August 2009 report, we recommended that MMS audit
    the operators and gas imbalance data of a sample of leases taken in-
    kind and, on the basis of the audit findings, establish a risk-based
    auditing program for RIK properties. 1
    ---------------------------------------------------------------------------
        \1\ GAO, Royalty-In-Kind Program: MMS Does Not Provide Reasonable
    Assurance It Receives Its Share of Gas, Resulting in Millions in
    Foregone Revenue, GAO-09-744 (Washington, D.C.: Aug. 14, 2009).
    ---------------------------------------------------------------------------
        Looking more broadly at our work examining Interior's oversight of
    royalty collections, we have noted that Interior has relied on company-
    reported data and reduced its use of auditing overall, and that these
    practices place at risk Interior's ability to ensure that the federal
    government is receiving the royalties it is entitled to. We have not
    evaluated whether the termination of the RIK program would necessitate
    an increase in auditing staff, specifically. However, our work has
    emphasized the key role that we believe auditing can provide in the
    oversight of minerals management. We have, for example, found that
    audits--which include a review of third-party source documents that
    contain information on prices, volumes and deductions--are an important
    control for ensuring accurate royalty payments. As such, an increased
    role of auditing may increase staffing costs, but could also increase
    revenues. As the RIK program winds down, some staff involved in that
    program may have valuable knowledge, skills, and abilities that could
    aid in the auditing of traditional leases or otherwise assist in
    oversight of the program.
    2.  Mr. Rusco, as part of your investigations, have you or other GAO
            investigators visited BLM field offices? Please provide a
            report on those visits, including a report on the quality and
            competence, generally, of the various oil and gas management
            programs. Are BLM field offices complying with environmental
            laws and regulations? And if not, do you believe this is a
            function of requiring BLM to do more than is possible given the
            resources it has? Or, you would ascribe any deficiencies to
            other causes, and if so, what would be the greatest concerns
            you have in this regard?
        Regarding field offices, over the past several years, GAO has
    completed numerous investigations involving activities at BLM related
    to royalties and oil and gas leasing and development. As part of those
    investigations, GAO staff have been to 13 BLM field offices, as listed
    in table 1, which comprise about half of the field offices with oil and
    gas operations. We have been to some of these offices more than once.

    [GRAPHIC(S) NOT AVAILABLE TIFF FORMAT]

        Overall, we have found these site visits and interviews with
    key staff in those locations to be instrumental to our efforts to
    identify ways to improve oversight of royalty collections and mineral
    leasing and development within Interior. Over the course of our work in
    these field offices, the staffing levels, experience, expertise, and
    overall level of performance across these offices have varied widely at
    given points in time and over time. As such, we cannot provide a report
    on the quality and competence of the oil and gas programs in these
    offices. We have examined some of these issues as part of our
    production verification work and expect to release a report in a few
    months about our findings that may provide insights about staffing and
    experience.
        Regarding compliance with environmental laws and regulations, in
    previous reports, we have identified instances where BLM staff have not
    complied with laws and regulations and noted what we believed to be the
    causes, as well as any recommendations we had for addressing them. In
    particular, see our September 2009 report 2 on the use of
    Categorical Exclusions and our September 2008 report 3 that
    examined Interior's ability to inspect oil and gas wells. We have
    identified staffing levels and experience as issues of concern in past
    reports, and our ongoing work examining oil and gas production
    verification has revealed similar problems. Beyond the work I have
    cited, I cannot speak to specific other causes for issues at BLM.
    ---------------------------------------------------------------------------
        \2\ GAO, Energy Policy Act of 2005: Greater Clarity Needed to
    Address Concerns with Categorical Exclusions for Oil and Gas
    Development under Section 390 of the Act, GAO-09-872 (Washington, D.C.:
    Sept. 16, 2009).
        \3\ GAO, Mineral Revenues: Data Management Problems and Reliance on
    Self-Reported Data for Compliance Efforts Put MMS Royalty Collections
    at Risk, GAO-08-893R (Washington, D.C.: Sept. 12, 2008).
    ---------------------------------------------------------------------------
    3.  Mr. Rusco, are the problems that you found with BLM's use of
            Section 390 Categorical Exclusions indicative of a broader
            problem with BLM's management of oil and gas, and if so, what
            is at the core of that deficiency?
        Given that the review of BLM's use of section 390 categorical
    exclusions conducted for our September 2009 report only examined BLM's
    management as it related to this oil and gas tool, we cannot draw
    conclusions about the overall management practices of BLM's oil and gas
    programs. 4
    ---------------------------------------------------------------------------
        \4\ GAO-09-872.
    ---------------------------------------------------------------------------
    Questions from the Minority:
    1.  In the GAO report Oil and Gas Leasing: Interior Could Do More to
            Encourage Diligent Development, your office suggested
            increasing rental rates and escalating royalty rates as a way
            to promote more development of federal oil and gas leases. How
            is making it more expensive to develop on federal lands an
            incentive, when federal lands already present a higher cost to
            operators because of the additional regulatory burdens that
            accompany them?
        In our October 2008 report, we identified increasing rental rates
    and other tools as ways to increase the speed of moving from leasing to
    production. 5 Such tools, which effectively increase the
    cost of holding land or delaying production, may give companies that
    lease federal land an incentive to complete the work needed to begin
    producing oil or gas. As we noted in our report, some private and state
    lands may be more costly to lease than federal lands are now, so it is
    not clear that such efforts would necessarily make it more expensive to
    produce oil or gas from federal land. Certainly, not all the tools we
    cited in our report may be appropriate for all federal lands leased for
    oil and gas production; however, we believe these tools would be useful
    for Interior to evaluate.
    ---------------------------------------------------------------------------
        \5\ GAO, Oil and Gas Leasing: Interior Could Do More to Encourage
    Diligent Development, GAO-09-74 (Washington, D.C.: Oct. 3, 2008).
    ---------------------------------------------------------------------------
    2.  In the Oil and Gas Leasing report, your office compared the federal
            leasing procedures to states such as Texas, Alaska and
            Louisiana. However, as alluded to in the report, there may be
            ``...important restrictions on development activity that do not
            apply to the same extent for state or private leases.'' Do you
            think that the CLEAR Act adequately takes into consideration
            the additional regulatory burden placed on federal lands
            compared to state and private lands? What about the legal
            challenges from environmental groups and others? How should
            federal lands leasing be different than state and private lands
            to account for these regulatory and legal differences?
        We have not examined the CLEAR Act to determine whether it
    adequately considers the important differences in leasing federal
    lands, as compared to state or private lands. As we noted in our
    report, there are specific statutory and regulatory requirements
    associated with developing oil and gas leases on federal land. We have
    not developed a view of what specific differences in federal leases are
    needed to fairly address these differences. We have recommended that
    the Secretary of the Interior consider the information we provided in
    our October 2008 report on diligent development as well as identified
    for Congress that it consider directing Interior to conduct a
    comprehensive review of leasing practices. 6
    ---------------------------------------------------------------------------
        \6\ GAO-09-74.
    ---------------------------------------------------------------------------
    3.  In your investigations have you found that states or private
            landowners are more eager to see development of their lands
            than the federal government? Do developers on private lands
            face protests from environmental groups at the same rate as
            developers on federal lands?
        We have not evaluated the relative interest of private and state
    mineral and landowners to those of federal policies and officials. I
    believe that it would be difficult to determine such differences. We
    have not evaluated the relative rates of environmental or other
    protests of oil and gas development on federal, state, and private
    lands.
    4.  Your report on Categorical Exclusions stated that while they have
            been a benefit that they are frequently used differently by the
            agency due to a lack of clear direction. Do you believe that
            clearer direction will result in more frequent or less frequent
            use of categorical exclusions on federal land?
        Whether clearer direction on the use of section 390 categorical
    exclusions would result in more frequent or less frequent usage would
    depend on the nature of the clarification. For example, two of the
    areas that we identified in our September 2009 report that needed
    clarification and that could impact the frequency with which section
    390 categorical exclusions are used include clarifying (1) whether the
    extraordinary circumstances checklist should be used to screen the use
    of section 390 categorical exclusions and (2) whether section 390
    categorical exclusions are mandatory or discretionary. 7
    Using the extraordinary circumstances checklist to screen the use of
    section 390 categorical exclusions would reduce their use to the extent
    that any extraordinary circumstances were identified. Conversely, if
    section 390 of the Energy Policy Act of 2005 was clarified to indicate
    that the use of section 390 categorical exclusions was mandatory, then
    their usage would increase. There may also appear to be an increase in
    usage if BLM field offices begin to apply a separate section 390
    categorical exclusion to each well; however, this would be an increase
    on paper only and not reflect a real increase in usage.
    ---------------------------------------------------------------------------
        \7\ GAO-09-872.
    ---------------------------------------------------------------------------
                                     ______

        The Chairman. Thank you both.
        Mrs. Kendall, it seems like a major problem here is the BLM
    and MMS computer systems are completely inadequate for the task
    at hand. You testified to the lack of communication between the
    two as being a major problem.
        Is it computers or is it a philosophy from above?
        Ms. Kendall. Computers contribute to it.
        For instance, in the report we did on nonproducing leases,
    we discovered that they have two separate systems that, for
    instance, do not even use the same lease number nor the
    identical lease. So, they can't even overlap to ensure that
    lease 1 at BLM may be lease 29 at MMS.
        So, there are no tracking systems between the two systems,
    and it is something as fundamental as not even using the same
    leasing numbers. And that is one of many examples.
        The other is the example I used of beneficial use, which is
    something that--BLM allows operators to utilize a certain
    amount of oil and gas during the actual production of oil and
    gas, but they have to either meet regulatory criteria or BLM
    has to affirmatively approve this beneficial use.
        MMS has no idea whether that approval has been given or
    not, and operators may claim it and MMS wouldn't know whether
    it has been approved or whether they met the regulatory
    criteria and would have no reason to question whether it was a
    legitimate deduction or not.
        These are just two examples of many that we have come
    across that comprise the communications issue.
        The Chairman. Mr. Rusco, do you wish to follow up on that?
        Mr. Rusco. Yes. Our work has also found numerous instances
    in which BLM and MMS practices are inconsistent with each
    other. In our ongoing work, in particular on production
    verification, we have found cases in which the data that is
    collected at BLM, that could help MMS in their royalty
    collection activities, are not transmitted in a usable format
    to MMS for that purpose; and similarly, the data that comes
    from audits and royalty activities are not always transmitted
    back to BLM in ways they could use for their oversight in
    managing ongoing leases.
        So, there are many cases in which there are opportunities
    for improvements in the communication, in the data that is
    shared and in the systems, so that the systems can be updated
    and can talk to one another.
        The Chairman. Do both of you believe that provisions in the
    CLEAR Act may help clear up and coordinate and address some of
    these inefficiencies?
        Mr. Rusco. Yes, there are several areas where the bill
    focuses on addressing specific issues that we have raised in
    our past work, and I can give you a few examples. But--overall
    we have not looked at the bill in its entirety in our work, and
    I cannot comment on the entire bill; but in the areas where the
    bill has touched on areas in which we have made
    recommendations, we are in accord with those provisions.
        Ms. Kendall. Likewise, Mr. Chairman, we really believe that
    a single bureau managing leases and royalties would really help
    standardize management practices and policies and would,
    hopefully, eliminate many of the communication issues that we
    have identified that really do impact the royalty collection
    process.
        The Chairman. Last year there was some debate, when we had
    the issue in pending legislation of whether diligent
    development was already existing law. I am aware that there is
    a requirement for lessees to drill a well in the first 5 years
    of an 8-year lease. But are there any other specific
    performance requirements on other leases, or is it possible to
    obtain a lease and then hold it for almost the entire length of
    the primary term where you are actually trying to bring the
    lease into production or not?
        Mr. Rusco. That is currently correct, yes.
        The Chairman. I have no further questions.
        The gentleman from Idaho.
        Mr. Lamborn. Ms. Kendall, I am somewhat confused by
    statements in your testimony relative to title III and title
    VII and how they fit together. So, if you could help me by
    clarifying.
        In your statement regarding title III, you said in relation
    to diligent development that, quote, ``Increasing nonproducing
    lease annual rental rates might help encourage lease holders to
    develop the leases.'' But in your statement regarding title VII
    you said, ``It would also establish an index and annual fee $4
    per acre for nonproducing leases. Imposing lease fees on
    nonproducing leases may have the unintended negative impact of
    reducing industry impact of Federal leases.''
        Now, I tend to agree with the second of those two
    statements, but I am confused about the inconsistency between
    those two. Can you help clarify that for me?
        Ms. Kendall. The comment in the first one, I think, ties
    into the comment in the second one.
        I can't say definitively that increasing fees on leases is
    going to have a negative effect in the report that we issued on
    nonproducing leases. Some of the sources that we interviewed
    suggested that this may have a negative impact. On the other
    hand, adding some increased rental rates may, in fact, urge
    people to do something quicker and faster.
        I think I am straddling a line in my testimony clearly,
    because I can't take a position one way or the other. I don't
    have evidence strongly one side or the other.
        Mr. Lamborn. So, it is still, in your mind, somewhat of an
    open question as to what the effects would be?
        Ms. Kendall. I would say so, yes.
        Mr. Lamborn. So, it could be that it would be a
    discouraging thing?
        Ms. Kendall. It could be
        Mr. Lamborn. So, the jury is still out?
        Ms. Kendall. My jury is still out.
        Mr. Lamborn. Thank you for that.
        And second, doesn't the Royalty-In-Kind program, should it
    continue, simplify the process by eliminating the need to
    calculate the value of oil and gas at particular points in time
    in particular market conditions, et cetera?
        Ms. Kendall. My personal feeling on this, Congressman, is
    that the entire oil and gas royalty process, if you will, could
    be improved, if simplified, pretty much across the board, not
    just royalty-in-kind.
        Mr. Lamborn. On simplification, is simplification enhanced
    when a producer has to turn over a particular quantity
    regardless of what the markets are doing that particular day or
    that month or that week?
        Ms. Kendall. I am not sure I understand your question, or
    may not be qualified to answer it.
        Mr. Lamborn. If an assessment is made based on quantity
    produced, you are going to have to peg that to win that barrel
    of oil or win that cubic foot of gas that came out of the
    ground because markets fluctuate continually, they are
    volatile, they change hour by hour. So, the value of that
    barrel of oil or that cubic foot of gas varies from hour-to-
    hour, from day-to-day.
        Ms. Kendall. I recognize that.
        Mr. Lamborn. So, isn't it simpler for the producers just to
    turn over a percentage and not have to have them calculating
    and then you auditing on a continual basis, when did that come
    up from the ground and what was the price at that moment in
    time? Doesn't that get into a lot of complications?
        Ms. Kendall. I think it is very complicated. The suggestion
    that there is auditing of the royalty-in-kind, there really
    isn't. There is very little auditing of the royalty-in-kind.
    So, I am not sure that we actually have the data to suggest
    that one over the other is the more beneficial to the taxpayer,
    to the Treasury.
        And I am trying to think of a concrete example that I can
    give, and I am failing at the moment
        Mr. Lamborn. Are you saying that you are going to come back
    and ask, or the Department will come back and ask, for more
    personnel, more staff, and more resources because it is going
    to involve a lot more monitoring and auditing and calculating
    and everything else?
        Ms. Kendall. I am not saying that, no, sir.
        Mr. Lamborn. That is my suspicion. And I wanted to get your
    view on that.
        Ms. Kendall. Well, I would say, though, with the
    elimination of royalty-in-kind, if it is eliminated, there
    would be a need for some additional auditors to audit the way
    the auditors are now conducting their work; I wouldn't say
    significantly, but there may be a need for some additional
    auditors because there simply aren't auditors covering the
    Royalty-In-Kind program.
        Mr. Lamborn. Are you in a position to say how many people
    you think that would involve?
        Ms. Kendall. I am certainly not.
        Mr. Lamborn. And then with the people who are currently in
    the royalty-in-kind office, like in Denver in my State, are
    they going to be transferred to another division? Or will they
    just be let go, or do you have any idea of what would happen to
    them?
        Ms. Kendall. I don't know.
        I heard the Secretary's statement this morning for the
    first time, as well as I think many of the members here did.
    But there are certainly processes in place in the Federal
    personnel rules that would protect them to a certain extent;
    and to the extent that they could be protected or transferred
    to another function, I wouldn't imagine that you would see a
    massive elimination of employees--perhaps a transfer of
    function.
        Mr. Lamborn. That is something we certainly want to be
    looking at as we go forward.
        Thank you.
        The Chairman. The Chair wishes to thank the panel very much
    for your patience and being with us through this day and also
    for your work on behalf of the American taxpayers to ensure
    that they do receive fair value for the use of their resources.
        And we look forward to continuing to use your expertise in
    investigations as we move forward with this legislation and
    other legislation.
        Mr. Lamborn. Before we adjourn, I would like to ask
    unanimous consent to submit for the record the collection of
    letters from the Harrison family, mentioned by Mr. Bishop of
    Utah earlier, regarding the consequences of actions in Utah by
    the Secretary and unanimous consent to submit for the record
    the CRS report on land leasing, correcting the earlier record
    on the volume of land under the Clinton and Bush
    Administrations.
        The Chairman. Without objection, so ordered.
        [NOTE: The information submitted for the record has been
    retained in the Committee's official files.]
        The Chairman. With that, the Committee on Natural Resources
    stands adjourned.
        [Whereupon, at 2:35 p.m., the Committee was adjourned.]

         LEGISLATIVE HEARING (PART 2) ON H.R. 3534, TO PROVIDE GREATER
        EFFICIENCIES, TRANSPARENCY, RETURNS, AND ACCOUNTABILITY IN THE
    ADMINISTRATION OF FEDERAL MINERAL AND ENERGY RESOURCES BY CONSOLIDATING
       ADMINISTRATION OF VARIOUS FEDERAL ENERGY MINERALS MANAGEMENT AND
     LEASING PROGRAMS INTO ONE ENTITY TO BE KNOWN AS THE OFFICE OF FEDERAL
    ENERGY AND MINERALS LEASING OF THE DEPARTMENT OF THE INTERIOR, AND FOR
    OTHER PURPOSES. ``THE CONSOLIDATED LAND, ENERGY, AND AQUATIC RESOURCES
                                 ACT OF 2009''

                                  ----------

                          Thursday, September 17, 2009

                         U.S. House of Representatives

                         Committee on Natural Resources

                                Washington, D.C.

                                  ----------

        The Committee met, pursuant to call, at 10:06 a.m. in Room
    1324, Longworth House Office Building, The Honorable Nick J.
    Rahall [Chairman of the Committee] presiding.
        Present: Representatives Rahall, Faleomavaega, Bordallo,
    Heinrich, Capps, Shea-Porter, Hastings, Duncan, Gohmert,
    Bishop, Coffman, and Lummis.
        The Chairman. The Committee on Natural Resources will come
    to order. The Committee is meeting today to continue the
    legislative hearing on H.R. 3534, the CLEAR Act. Does the
    Ranking Member or any Member wish to make an opening statement?
    Yes?

     STATEMENT OF THE HONORABLE DOC HASTINGS, A REPRESENTATIVE IN
                 CONGRESS FROM THE STATE OF WASHINGTON

        Mr. Hastings. Thank you, Mr. Chairman, and thank you for
    holding this second hearing. This is a very important issue
    that our country needs to face. Yesterday, I discussed how I
    thought this bill would set up roadblocks on the path to energy
    development, instead of opening up additional areas for
    drilling. In my view, this bill raises fees, expands government
    bureaucracy, rolls out more red tape, and delays greater wind,
    solar, oil and natural gas production.
        I would like to today explain how these roadblocks would
    affect everyday Americans. First, these roadblocks will slow
    America's oil, natural gas, wind, and solar energy production,
    and ultimately would make, in my view, energy more expensive.
        While the average price of gasoline is about $2.55 a gallon
    right now, this, unfortunately, will always be the case. Before
    we know it the American people will be forced to pay more at
    the pump again, and that is when they will reach for their
    wallets and ask, ``Why didn't the Administration and Congress
    take action to actually increase all types of energy
    production?'' And Americans will not like the answer. Unless we
    take action on an all-of-the-above energy plan, the
    Administration and the Democrats in Congress will have to
    explain that they were focused on legislation that will
    actually make it harder and more expensive to produce American
    energy.
        Second, the roadblocks in this bill will increase our
    reliance on foreign sources of energy from countries that I do
    not believe live up to American's high environmental standards.
    Saudi Arabia, Cuba, Russia, Venezuela and other nations are
    increasing their energy supply at a great pace and America is
    at a standstill.
        This Committee is considering legislation that will make
    our nation less energy independent and less secure. As the
    American Chemistry Council recently wrote, and I quote, ``The
    bill fails to contribute in any way to the energy security of
    the United States.''
        Finally, these roadblocks threaten current energy jobs and
    prevent the creation of new American energy jobs at a time when
    almost 10 percent of Americans are unemployed. This last week
    the PriceWaterhouse study confirmed that oil and gas industries
    contribute over 9 million full-time and part-time jobs,
    accounting for over 5 percent of our nation's total employment.
    When nearly 15 million Americans are out of work, the last
    thing our country needs is for Congress to pass a bill that
    will eliminate even more jobs in our country. Instead we should
    be focusing on paying even more Americans to take advantage of
    the high-paying jobs in all parts of our energy sector.
        Unfortunately, the Democratic leaders in Congress have
    focused on passing a national energy tax bill and a roadblock
    to an energy bill that will only make our current economic
    problems worse.
        So, I continue to urge my colleagues on both sides of the
    aisle to choose a better path forward by supporting all of the
    above energy plans that will help Americans by creating new
    high-paying jobs and protecting our environment, and more
    importantly, providing affordable energy.
        Thank you, Mr. Chairman. I yield back my time.
        [The prepared statement of Mr. Hastings follows:]

           Statement of The Honorable Doc Hastings, Ranking Member,
                         Committee on Natural Resources

        Thank you, Mr. Chairman. Today is the second day of hearings on
    this legislation.
        Yesterday, I discussed how this bill will set up road blocks on the
    path to energy development. Instead of opening additional areas for
    drilling, this bill raises fees and taxes, balloons government
    bureaucracy, rolls out more red tape, and delays greater wind, solar,
    oil and natural gas production.
        Today, I would like to explain how these roadblocks would directly
    impact Americans.
        First, these roadblocks will slow America's oil, natural gas, wind
    and solar energy production and ultimately make energy more expensive.
    While the average price of gas is about $2.55 a gallon right now, this
    unfortunately won't always be the case. Before we know it, the American
    people will be forced to pay more at the pump again. And when they
    reach for their wallets, they'll ask ``why didn't the Administration
    and Congress take action to actually increase all types of domestic
    energy?'' Americans won't like the answer. Because unless the
    Administration and Democrat Leaders in Congress take action on an all-
    of-the-above energy plan, they'll have to explain that they were
    focused on legislation that will actually make it harder and more
    expensive to produce American energy.
        Second, the roadblocks in this bill will increase our reliance on
    foreign sources of energy from countries that don't live up to
    America's high environmental standards. Saudi Arabia, Cuba, Russia,
    Venezuela, and other nations are increasing their energy supply at a
    break neck pace--but America is at a standstill. And our Committee is
    considering legislation that will make our nation less energy
    independent and less secure. As the American Chemistry Council recently
    wrote ``the bill fails to contribute in any way to the energy security
    of the United States.''
        And finally, these roadblocks threaten current energy jobs and
    prevent the creation of new American energy jobs at a time when almost
    ten percent of Americans are unemployed. Last week, a PriceWaterhouse
    study confirmed that oil and gas industries contribute 9.2 million
    full-time and part-time jobs, accounting for 5.2 percent of our
    Nation's total employment. When 14.7 million Americans are out of work,
    the last thing our country needs is for Congress to pass a bill that
    will eliminate even more jobs in our country. Instead, we should be
    focused on helping even more Americans take advantage of high-paying
    jobs in all parts of the energy sector.
        But unfortunately, Democrat Leaders in Congress are focused on
    passing a National Energy Tax bill and a Roadblock to Energy bill that
    will only make our current economic problems worse.
        I continue to urge my colleagues on both sides of the aisle to
    choose a better path forward by supporting the Republican all-of-the-
    above energy plan that will help Americans by creating new high-paying
    jobs, protecting our environment, and providing affordable energy.
                                     ______

        The Chairman. Do any of the other Members wish to make
    opening statements? If not, we will proceed with the panel.
        The first panel is composed of The Honorable Stephen B.
    Smith, the Mayor of Pinedale, Wyoming; Ms. Danielle Brian,
    Executive Director of the Project On Government Oversight; Mr.
    Christopher Mann, the Senior Officer, Pew Environment Group,
    the Pew Charitable Trusts; Mr. Mark Squillace, Professor and
    Director, Natural Resources Law Center, University of Colorado
    School of Law; and Mr. Lyle E. Hodgskiss, Rancher/Senior Loan
    Officer, Rocky Mountain Front Advisory Committee.
        Lady and gentlemen, we welcome you to our Committee today,
    appreciate your being with us. We do have copies of all your
    prepared testimony. They will be made part of the record as if
    actually read. You may proceed in the order in which I
    announced you and in the manner you wish in the five-minute
    time limit.
        Mr. Mayor, you go first.

     STATEMENT OF THE HONORABLE STEPHEN B. SMITH, MAYOR, PINEDALE,
                                WYOMING

        Mr. Smith. Mr. Chairman, Members of the Committee, thank
    you for the opportunity to appear before you today. My name is
    Stephen Smith, and I serve as the mayor of Pinedale, a small
    town with about 1,600 people in the upper Green River Valley in
    western Wyoming.
        Pinedale is the county seat of Sublette County with a
    population of around 7,500, and nearly half of the county's
    residents live within five miles of our town. In a county
    larger than the State of Connecticut, 80 percent of our lands
    are Federally managed. We are also home to one of the largest
    natural gas fills in the United States.
        I come before you not as an expert on energy policy or an
    advocate for or against the energy industry. I am here to speak
    of the concerns and challenges that we as a community have
    experienced over the past few years and to share my opinions on
    the proposed legislation.
        Natural gas exploration and production in Sublette County
    has changed the dynamics of our community over the past few
    years. We are traditionally a community rooted in agriculture
    and tourism. The natural gas fields around Pinedale are not a
    recent discovery, and were known to hold great reserves, but
    only a few years ago the technology become available to
    successfully extract this resource and Pinedale changed
    overnight.
        The development of the gas fields has been of significant
    economic benefit to our community but has also brought
    challenges. One of our greatest concerns in light of energy
    development has been the socio-economic impacts of a rapidly
    increased population. These include the need for local
    governments to provide new and updated infrastructure, build
    new medical clinics, support child care facilities, as well as
    addressing increases in crime, traffic, and calls for emergency
    services.
        Even more important than socio-economic issues are our
    citizens' concerns over real and potential health hazards. Over
    the past three years we have had numerous ozone alerts in our
    county, the first ever, with ozone levels exceeding maximum
    established by the U.S. Environmental Protection Agency. Air
    quality in the valley, and especially in the Class 1 air shed
    of the wilderness is declining and needs to be addressed.
        Local citizens have rallied around these issues and have
    taken their concerns to both state and Federal agencies. The
    Wyoming Department of Environmental Quality has been active in
    monitoring air quality and ozone, and although their efforts
    are ongoing we see no relief for the situation. Similar
    concerns have been raised over water quality and the potential
    of contaminated wells from chemicals used in the drilling
    process.
        Because of the large amount of Federal ownership in
    Sublette County, House Resolution 3534 would certainly affect
    the future of development in our area. There are certain
    portions of this proposed legislation on which I would like to
    comment; the first being Title 3, Section 306, best management
    practices.
        In my opinion, the use of best available technology should
    be required for all energy development on Federal lands.
    Industry in our area is currently moving in that direction,
    using some natural gas-burning engines for drilling, and
    introducing a loose gathering system on the Pinedale Anticline.
    These are two examples of voluntary and proactive steps taken
    by some operators and we are hopeful that this trend might
    continue.
        Requiring these practices ensures the most current
    technology continues to be implemented and used in both
    exploration and development.
        Second, H.R. 3534 addresses the elimination of categorical
    exclusions. From October 2006 through May of 2009, over 1,500
    applications to drill were approved with the use of these
    categorical exclusions out of the Pinedale BLM field office
    alone. Use of this magnitude circumvents proper analysis of
    large-scale development and goes against the intentions of
    NEPA.
        This legislation does not, however, address the issue of
    social and economic concerns, their identification and
    mitigation. The town and the county have had extensive
    conversations with the BLM, the Governor's office, and our
    congressional delegation on this subject in hopes of
    alleviating some of the impacts our community has endured. In
    the future, socio-economic matters should be considered and
    mitigated at all stages of planning and development in the same
    manner as physical and environmental impacts.
        I understand the need for energy development and its
    economic benefit not only to the Town of Pinedale but to our
    nation as a whole. On the other hand, I also understand the
    social and economic impacts that it has had on the citizens of
    my community and surrounding areas. I therefore thank you for
    taking the time to hear the concerns of a small community and
    possibly addressing them in this bill. I look forward to
    answering any questions you may have.
        [The prepared statement of Mr. Smith follows:]

            Statement of Stephen B. Smith, Mayor, Pinedale, Wyoming

        Pinedale, Wyoming is a small town of about 1,600 people in the
    upper Green River Valley in western Wyoming. It is located at 7,200
    feet and surrounded on three sides by magnificent mountain ranges.
    Pinedale is the county seat of Sublette County, population around
    7,500, and nearly half of the county's residents live within 5 miles of
    town. In a county larger in size than the state Connecticut, 80% of our
    lands are federally managed. We are also home to one of the largest
    natural gas fields in the continental United States.
        Natural gas exploration and production in Sublette County has
    changed the dynamic of our community over the past few years. We are
    traditionally a community rooted in agriculture and tourism. The
    natural gas fields around Pinedale were explored in the early 1980s and
    were known to hold great reserves, but only a few years ago technology
    became available to successfully develop this resource. Pinedale
    changed overnight.
        The development of the gas fields has been of significant economic
    benefit to the community. It has also brought challenges.
        One of our greatest concerns in light of energy development has
    been the socio -economic impacts of a rapidly increasing population.
    These include the need for new and updated infrastructure, providing
    childcare, increased crime, increased traffic, demands on emergency
    services and health care as well as growing class room sizes.
        Even more important than socio-economic issues are citizens'
    concerns over potential health hazards. Over the past three years we
    have had numerous ozone alerts in our county with ozone levels
    exceeding maximums established by the U.S. Environmental Protection
    Agency. These were the first ozone alerts in the history of Sublette
    County. In the spring of 2007, due to gasfield NOx and VOC
    emissions, 8hr-ozone ground level levels in the Pinedale area spiked as
    high as 122ppb (the national ambient air quality standard to protect
    public health is set at 75ppb). This is of special concern in an urban
    area, let alone a rural community and county of 7,500 people. Air
    quality in the valley and especially in the class one air shed of the
    Bridger Wilderness is declining and needs to be addressed. Local
    citizens have rallied around these issues and have taken their concerns
    to state and federal agencies. The Wyoming Department of Environmental
    Quality has been active in monitoring air quality and ozone and their
    efforts are ongoing. Similar concerns have been raised over water
    quality.
        Because of the large amount of federal ownership in Sublette
    County, House Resolution 3534 would certainly affect the future of
    development in our area. There are certain portions of this proposed
    legislation on which I would like to comment, the first being Title 3
    Section 306 Best Management Practices. The use of best available
    technologies should be required for all energy development on federal
    lands. Industry in our area is currently moving in that direction,
    using some natural gas burning engines for drilling, and introducing a
    liquid gathering system on the Pinedale anticline. These are two
    examples of voluntary and proactive steps taken by some operators.
    Requiring these practices ensures the most current technology continues
    to be implemented and used in both exploration and development. The
    requirements should be specific, measurable and enforceable.
        Secondly, HR3534 addresses the elimination of categorical
    exclusions. From October 2006 through May of 2009 over 1500
    applications to drill were approved with the use of these categorical
    exclusions out of the Pinedale BLM field office alone. This constitutes
    over 80% of the permitting by our local field office in the past three
    fiscal years. Use of this magnitude circumvents proper analysis of
    large field development and goes against the intentions of NEPA.
        This legislation does not however address the issue of social and
    economic concerns, their identification and mitigation. The town and
    the county have had extensive conversations with the BLM, the
    Governor's office and our Congressional delegation on this subject.
    Socio-economic matters should be considered and mitigated at all stages
    of planning and development in the same manner as physical and
    environmental impacts.
        In February 2008 the Town of Pinedale submitted official comment to
    the BLM on its draft of the Supplemental Environmental Impact
    Statement. In these comments specific concerns were raised over socio-
    economic matters and the need for mitigation of these issues. Below are
    a few examples of these comments:
        ``If the BLM approves a planning document which, in reality, allows
    for the fastest possible energy development on lands surrounding
    Pinedale, the Town of Pinedale asks BLM managers to create provisions
    in the final EIS which would provide on-the-ground resources for the
    Town of Pinedale to address the social and economic impacts that we
    will continue to bear with rapid energy development.''
        ``We applaud the mitigation fund proposed by the operators for off-
    setting on site impacts increased development. However, it appears that
    there is no direct mitigation commitment for the substantial
    socioeconomic impacts that our town will sustain from the proposed
    dramatic increase of the current amount of energy development today.''
        These comments were not addressed in the Record of Decision and
    have yet to be resolved.
        Energy development and its economic benefits are not only important
    to the town of Pinedale, but to the country as a whole. But regulating
    this development in order to address socio-economic impacts is vital to
    protecting my community and other potential areas of development.
        Attached please find two documents, the first of which is a
    document outlining the categorical exclusions and their use in the
    BLM's Pinedale Field Office; and the second being a letter to Governor
    Freudenthal from the elected officials in Sublette County, outlining
    our highest priority socio-economic needs.
                                     ______

                    Categorical Exclusions (CXs) Fact Sheet

    June 2009
    What they are:
        Activities conducted on public lands (primarily oil and gas
    development activities) that are excluded from environmental review and
    impact analyses. These activities and their potential impacts are
    normally reviewed and analyzed, with adequate public input, according
    to the requirements of the National Environmental Policy Act (NEPA).
    Analysis is conducted and contained in NEPA documents such as the
    Pinedale Anticline Environmental Impact Statement (EIS). Applicability
    of CXs is presumed for all oil and gas development, but subject to
    rebuttal (called a rebuttable presumption).
    How they came to be:
        CXs were established in Section 390 of the Energy Policy Act of
    2005.
    What they say:
        If a proposed oil and gas activity fits into one of these five
    categories, then the application of a categorical exclusion shall be
    presumed if:
        (1)  Individual surface disturbances are less than 5 acres so long
    as the total surface disturbance on the lease is not greater than 150
    acres and site-specific analysis in a document prepared pursuant to
    NEPA has been previously completed.
        (2)  An oil or gas well is drilled at a location or well pad site
    at which drilling has occurred previously within 5 years prior to the
    date of ``spudding'' (beginning to drill) the well.
        (3)  An oil or gas well is drilled within a developed field for
    which an approved land use plan or any environmental document prepared
    pursuant to NEPA analyzed such drilling as a reasonably foreseeable
    activity, so long as such plan or document was approved within 5 years
    prior to the date of spudding the well.
        (4)  A pipeline is placed in an approved right-of-way corridor, so
    long as the corridor was approved within 5 years prior to the date of
    placement of the pipeline.
        (5)  There is maintenance of a minor activity, other than any
    construction or major renovation of a building or facility.
    Why the use of CXs has raised concerns in the Pinedale BLM Field
            Office:
        In both the Jonah and Pinedale Anticline EISs, BLM has made
    commitments to conduct additional, site-specific environmental analyses
    when Applications for Permit to Drill (APDs) are filed. ``The
    Authorized Officer will review and authorize each component of the
    project that involves disturbance of federal lands on a site-specific
    basis.'' (Jonah ROD, pg. 3.)
        However, BLM has used CXs to circumvent site-specific review, so
    impacts have not been thoroughly analyzed, and the public has been
    deprived of the opportunity to examine or comment on impacts, as
    required by NEPA.
        Simply put, complete and accurate federal agency analysis and
    public oversight of impacts from oil and gas development to public
    resources is inadequate or missing altogether.
    What are the problems with authorizing development under CXs?
        As we have seen in Pinedale, water quality, air quality, and
    wildlife impacts have grown exponentially since natural gas development
    began:
    Water Quality Contamination
         89 industrial water wells & 1 livestock well have been
    contaminated w/ hydrocarbons;
        14 contaminated wells have been plugged by the operators,
    preventing further monitoring;
         13 water wells have low levels of methane present at the surface,
    making them too dangerous to monitor;
         Some high-elevation lakes monitored in the Wind River Range are
    experiencing decreasing acid neutralizing capacity (indicating a
    tendency toward acidification).
    Air Quality Contamination
        Ozone levels have exceeded the federal, 8-hour standard over a
    three-year period, prompting the Governor to request a ``non-
    attainment'' designation from the EPA;
        Visibility impacts in the Bridger Wilderness Class I airshed have
    exceeded the Forest Service and BLM standards of no more than 0 days of
    visibility impairment above (respectively) the 0.5 and 1.0 deciview
    change thresholds. Visibility impairment in the Bridger Wilderness is
    predicted by BLM to occur 67 days per year.
    Wildlife Population Declines
        30% reduction in mule deer populations on the Anticline over a 7-
    year study period, compared to the control area (46% decline during the
    first 4 years of the study);
        51-89% decline in sage-grouse male lek attendance in the Anticline
    and Jonah Fields, with a predicted local extirpation of the bird within
    19 years, contributing to the need to list the greater sage-grouse as
    an endangered species;
        Habitat fragmentation of previously undisturbed lands may lead to
    reduced pronghorn usage and ultimate abandonment of habitat.
    How many Applications to Drill are approved with the use of CXs in the
            Pinedale BLM?
        Here are counts for the categorical exclusions used over the past
    few years in the BLM Pinedale Field Office. It appears that BLM is now
    processing a majority of APDs as CXs.

    [GRAPHIC(S) NOT AVAILABLE TIFF FORMAT]

    What are the solutions?
        1.  EPA could initiate discussions with Council on Environmental
    Quality (CEQ) to amend the Energy Policy Act and rescind all statutory
    CX provisions.
        2.  APDs could be issued with a ``contingency rights'' clause, so
    that permits that may cause environmental damage are not grandfathered
    in.
        3.  If used, all proposed categorical exclusions authorized by Sec.
    390 of the Energy Policy Act of 2005 should conform with 40 CFR 1507.3,
    which states that BLM must, (a) ...utilize a systematic,
    interdisciplinary approach which will insure the integrated use of the
    natural and social sciences and the environmental design arts in
    planning and in decision making which may have an impact on the human
    environment. (b) Identify methods and procedures--to insure that
    presently unquantified environmental amenities and values may be given
    appropriate consideration.
        4.  If used, all proposed categorical exclusions authorized by Sec.
    390 of the Energy Policy Act of 2005 should conform with current
    Department of the Interior policies for applying the ``extraordinary
    circumstances'' screen to categorical exclusion proposals found at 69
    FR 10878, in which: ``a normally excluded action may have a significant
    environmental effect thus requiring additional analysis and action.--
    Any action that is normally categorically excluded must be subjected to
    sufficient environmental review to determine whether it meets any of
    the extraordinary circumstances, in which case, further analysis and
    environmental documents must be prepared for the action.''
        5.  Promote better planning and use of superior strategies for
    evaluating landscape-scale cumulative impacts to wildlife habitat and
    ecological communities while minimizing the amount of well-by-well
    consultation and mitigation planning. Instructional Memorandum IM 2003-
    152 (April 13, 2003), outlines the use of geographic area NEPA analysis
    and comprehensive development plans and strategies.
        (For more information: Linda Baker, Upper Green River Valley
    Coalition: 367-3670 or email: linda@uppergreen.org.)
                                     ______

    Federal Funding- Town of Pinedale
        1.  In Fiscal Year 2009 (July 1, 2008 through June 30, 2009) the
    Pinedale Airport Board received $2,201,173.00 from the FAA. In Fiscal
    Year 2008 (July 1, 2007 through June 30, 2008) the Pinedale Airport
    Board received $1,384,619.00 from the FAA. This information was taken
    from the Survey of Local Government Finances Form F-32.

            Jim Parker
            Airport Manager-Pinedale
        2.  The Town of Pinedale was recently awarded approximately $6.6
    million in ARRA funding. To date, the Town has not received or drawn on
    these funds.

            Eugene Ninnie, PE
            Engineer- Pinedale
                                     ______

    [GRAPHIC(S) NOT AVAILABLE TIFF FORMAT]

       Response to questions submitted for the record by Hon. Stephen B.
                        Smith, Mayor, Pinedale, Wyoming

    1.  Mayor Smith, H.R. 3534 would raise rental rates for oil and gas
            from $1.50 to $2.50 an acre. Are you concerned that such an
            increase--of $1--would stifle energy development in the
            Pinedale region and cost jobs?
        Based on the mass amount of natural gas in Sublette County, as well
    as the profitability of the resource, it is my opinion that the
    suggested increase would have no measurable impact.

    2.  Mayor Smith, over the past three years the BLM Pinedale field
    office has issued roughly 1,500 categorical exclusions to permit oil
    and gas activities, more than any other field office. Last week, the
    GAO issued a report saying that the BLM has frequently violated the law
    when doing this, and that such violations have, quote, ``thwarted
    NEPA's twin aims of ensuring that both BLM and the public are fully
    informed of the environmental consequences of BLM's actions.'' What has
    the impact of this been on the ground?

        Use of CXs have expedited development in our community. This fast
    paced development has made it very difficult to proactively address the
    impacts we currently face. Cumulative impacts have not been adequately
    addressed with the issuance of these CXs as they relate to air quality,
    water quality, wildlife and human community.
    3.  Mayor Smith, you've mentioned that your community dynamic has
            changed--that natural gas drilling has brought challenges, and
            you mention several of those--air quality, water quality, the
            need to require best management practices. Do you think that
            BLM has appropriately balanced conservation with the need to
            get energy out of the ground in the Pinedale area? If not, do
            you think this legislation will help to reestablish that
            balance?
        While BLM and industry have made efforts to mitigate wildlife and
    other conservation issues, the lack of an appropriate balance is
    evidenced by:
          30% reduction of mule deer populations
          Sublette County's identification as a potential non-
    attainment area (ozone) by the EPA
          Concerns over air quality in the class 1 air shed of the
    Bridger Wilderness
          Serious declines in male sage grouse population in the
    Jonah Field and Pinedale Anticline
        This legislation may increase the balance by bringing the original
    intentions of NEPA back into play. Site specific impacts and cumulative
    analyses are essential in achieving balance.
    4.  Mayor Smith, the Committee was surprised to hear about ozone
            problems in such a rural place as Sublette County--ozone
            problems that sound more typical of a place like Los Angeles,
            not a place with as much space and as few people as Pinedale.
            Please tell us more about the scope of the air quality problems
            in Sublette County and what is happening with oil and gas
            development that has led to such problems? How can development
            be done better to address those impacts?
        The scope of air quality problems in Sublette County can be
    directly linked to development on the Jonah Field and Pinedale
    Anticline. Pace and intensity of development are two of the main
    contributors to the concerns over air quality in general. There is also
    strong speculation that this unmitigated pace and intensity directly
    contributes to increases in NOx and VOCs. Mandating the use
    of best available technologies, measuring cumulative emissions and
    enforcing stricter penalties are a few suggestions to address these
    impacts.

    5.  Mayor Smith, much was made of an attachment to your testimony
    relating to Categorical Exclusions, also known as CXs. As you know, CXs
    were established in Section 390 of the Energy Policy Act of 2005 and
    cover activities conducted on public lands (primarily oil and gas
    development activities) that are excluded from environmental review and
    impact analyses. These activities and their potential impacts are
    normally reviewed and analyzed, with adequate public input, according
    to the requirements of the National Environmental Policy Act (NEPA).
    Analysis is conducted and contained in NEPA documents such as the
    Pinedale Anticline Environmental Impact Statement (EIS). Applicability
    of CXs is presumed for all oil and gas development, but subject to
    rebuttal (called a rebuttable presumption). If a proposed oil and gas
    activity fits into one of five categories, then the application of a
    categorical exclusion shall be presumed if the activity is limited or
    will cause limited environmental effect. However, according to a recent
    report by the GAO, BLM has used CXs to circumvent site-specific review,
    so impacts have not been thoroughly analyzed, and the public has been
    deprived of the opportunity to examine or comment on impacts, as
    required by NEPA. GAO found that BLM had ``thwarted NEPA's twin aims of
    ensuring that both BLM and the public are fully informed of the
    environmental consequences of BLM's actions.'' Simply put, complete and
    accurate federal agency analysis and public oversight of impacts from
    oil and gas development to public resources is inadequate or missing
    altogether.

        The attachment to your testimony stated that some of the effects of
    misuse of the CXs include:
    ``Water Quality Contamination
          89 industrial water wells & 1 livestock well have been
    contaminated w/ hydrocarbons;
           14 contaminated wells have been plugged by the
    operators, preventing further monitoring;
          13 water wells have low levels of methane present at the
    surface, making them too dangerous to monitor;
          Some high-elevation lakes monitored in the Wind River
    Range are experiencing decreasing acid neutralizing capacity
    (indicating a tendency toward acidification).
    Air Quality Contamination
          Ozone levels have exceeded the federal, 8-hour standard
    over a three-year period, prompting the Governor to request a ``non-
    attainment'' designation from the EPA;
          Visibility impacts in the Bridger Wilderness Class I
    airshed have exceeded the Forest Service and BLM standards of no more
    than 0 days of visibility impairment above (respectively) the 0.5 and
    1.0 deciview change thresholds. Visibility impairment in the Bridger
    Wilderness is predicted by BLM to occur 67 days per year.
    Wildlife Population Declines
          30% reduction in mule deer populations on the Anticline
    over a 7-year study period, compared to the control area (46% decline
    during the first 4 years of the study);
          51-89% decline in sage-grouse male lek attendance in the
    Anticline and Jonah Fields, with a predicted local extirpation of the
    bird within 19 years, contributing to the need to list the greater
    sage-grouse as an endangered species;
          Habitat fragmentation of previously undisturbed lands may
    lead to reduced pronghorn usage and ultimate abandonment of habitat.''
        That attachment also included the following data regarding the
    number of CXs issued by the BLM Pinedale field office:

    [GRAPHIC(S) NOT AVAILABLE TIFF FORMAT]

    6.  Can you confirm that these statements and data are accurate?
        References for information stated in the CX fact sheet can be found
    at the following links. Additional information can be found by
    contacting the Pinedale BLM office.
    Water Quality Contamination
          Go to Figure 17 here to see all the monitored water wells
    with measurable petroleum hydrocarbons during the period Sept. 2006 to
    Dec. 2007: http://www.blm.gov/pgdata/etc/medialib/blm/wy/field-offices/
    pinedale/pawg/2008.Par.55477.File.dat/
    HydrogeologicConceptualModel_appa.pdf.
    Air Quality Contamination
          DEQ's Boulder monitor for years 05, 06 & 07 showing the
    average over that 3-year period, which indicate that our ozone levels
    were 0.080 ppm, over the 0.075 federal standard.
          ``Visibility impairment in the Bridger Wilderness is
    predicted by BLM to occur 67 days per year, see Table E.12.3 here:
    http://www.blm.gov/pgdata/
    etc/medialib/blm/wy/information/NEPA/pfodocs/anticline/
    fseis.Par.27527.File.dat/08AQappE.pdf
    Wildlife Population Declines
          ``30% reduction in mule deer populations on the Anticline
    over a 7-year study period, compared to the control area,'' see under
    ``Reports'' here: http://www.west-inc.com/big_game_reports.php
          Sawyer, H., R. Nielson, and D. Strickland. 2009. Sublette
    Mule Deer Study (Phase II) Final Report. Western Ecosystem Technology,
    Inc., Cheyenne, WY. See page 5-11, which states, ``Our helicopter count
    data indicate that mule deer abundance in the treatment area (Mesa)
    declined by 30% during the first 7 years of gas
    development.''...``there is no evidence that suggests any segments of
    the Sublette Herd Unit have declined at a rate comparable to that in
    the treatment area.'' ``Habitat fragmentation of previously undisturbed
    lands may lead to reduced pronghorn usage and ultimate abandonment of
    habitat.''
          Wildlife Conservation Society report, page 46 last
    sentence states, ``continual fracturing of previously undisturbed lands
    is leading to reduced usage and abandonment of habitat parcels.''
    Questions from the Minority:
     1.  Did the City Council of Pinedale spend millions of dollars last
            year on open space (when surrounded by 'public' and therefore
            open lands) rather than any on of the priorities listed in your
            attachment?
        Yes. The town spent $1.1 million to preserve 18 acres of green
    space within the town limits. Saving this land from development was a
    priority for the people of Pinedale based on a survey requesting input
    from residents.
     2.  Did the industry help in providing information for development of
            the priority list? Didn't industry also commit to helping you
            get funding for some of this, but your list was too late for
            the WY Legislative Session?
        Industry did commit to providing information at the request of
    Governor Freudenthal and Senator Enzi. This information was to be used
    for planning not for the development of a priority list.
     3.  How many times did the operators invite you to meet with them
            during the SEIS process to update you on issues?
        During the SEIS process for the Pinedale Anticline the town met
    with industry regularly on average once a month. Subsequent to the
    Record of Decision, our meetings with industry are infrequent at best.
     4.  Do you communicate with the operators to help better plan your
            community?"
        Refer to #3
     5.  Given your comments about lack of planning and socioeconomic
            concerns are you suggesting that the federal government and BLM
            should be in charge of planning your community? Do you really
            want the BLM to be in charge of local zoning and planning for
            Pinedale? If the BLM does this then why does Pinedale need a
            mayor, town council or planning and zoning office?
        No, it was never our intention to suggest the federal government or
    the BLM be in charge of our community. The town requested and was
    granted participating agency status during the SEIS and went to great
    lengths to express our concerns during this time.
     6.  In your small community, like most rural towns in America, are
            your main street businesses or buildings boarded up and vacant?
        We work hard in accordance with our Master Plan to encourage
    development within our historic and downtown district, but nonetheless,
    some buildings in this area are currently vacant. We are working to
    diversify our economy and provide for sustainability.
     7.  Didn't you appear on a segment on national network news about the
            benefit of the industry to jobs? Are jobs the best way for the
            community to address revenue to local and state governments
            (sales tax) in WY? If not, what is?
        Yes. At the time, Sublette County enjoyed the lowest rate of
    unemployment of any county in the United States. Since then development
    has slowed and jobs are more scarce. Jobs based on economic diversity
    and sustainability are indeed the best way to address revenue to local
    and state governments.
     8.  Are you saying that you and your constituents would prefer not to
            have development in the Pinedale gas fields? Is that the
            opinion of the State government and the majority of the
            citizens of Sublette County?
        As stated in my testimony before the committee, I speak not for or
    against industry, but rather for responsible development and citizens'
    concerns over quality of life issues.
     9.  What is the time horizon for the gas fields to produce? Isn't this
            a pretty sustainable economy in our or any economic system?
        Predictions for long-term production range from 30-50 years.
    Intensive development (when the vast majority of population increase
    and socio-economic impacts occur) is predicted for the next 12-15
    years. This cycle of boom and bust is not a sustainable economy in the
    long-run.
    10.  Were the Cat Exclusions used for infill drilling decisions only
            after a comprehensive EIS was completed?
        No. A number of wells were approved using CXs 1 and 2 prior to
    Pinedale Anticline ROD of September 2008
    11.  Aren't detailed air quality models used in development decisions
            and corresponding mitigation measures taken?
        Air quality models have been used in both Jonah and Pinedale
    Anticline development decisions, but EIS analyses underestimated
    impacts on air quality in the area. Research and application of
    corresponding measures are underway, but effective mitigation has yet
    to be determined.
                                     ______

        The Chairman. Thank you, Mayor.
        Ms. Brian.

      STATEMENT OF DANIELLE BRIAN, EXECUTIVE DIRECTOR, PROJECT ON
                          GOVERNMENT OVERSIGHT

        Ms. Brian. Thank you for inviting me to testify today.
        Since 1995, POGO has issued five reports about the
    underpayment of royalties to the Federal government by major
    oil and gas companies. Most recently we issued a report tracing
    the troubled history of the Royalty In Kind Program and
    recommending the abolition of it. POGO applauds the Committee
    for your oversight of royalty collections and for writing the
    CLEAR Act of 2009. This legislation will benefit taxpayers by
    implementing several key reports that will help ensure
    taxpayers are receiving their fair share from their natural
    resources.
        As this Committee is well aware, MMS's RIK program has been
    a failure on many fronts. The GAO has found nearly annually,
    most recently this week, that MMS could not accurately account
    for RIK's program cost and benefits. POGO strongly supports
    Interior Secretary Salazar's announcement yesterday before this
    Committee to end the RIK program.
        However, our concern is that the language in this bill is
    not adequately clear that the RIK program is to be eliminated.
    The language currently reads, ``The Secretary shall not conduct
    a regular program to take oil and gas lease royalties in oil or
    gas.'' Given that the existing RIK program quietly grew out of
    an innocuous pilot program, I believe this language does not
    fully put a stake in the heart of RIK, and without such
    language it is likely to rise again from the ashes in future
    administrations.
        As outlined in our most recent report, the royalty
    management system is just broken. There are three basic and
    significant structural weaknesses to the MMS's royalty
    management program. The first is organizational and conflict.
    The sole mission of a Federal royalty and management collection
    program should be determining and enforcing revenue obligations
    of private companies operating on public and Indian lands. Yet,
    currently auditors and other compliance and enforcement
    personnel report to officials within MMS whose responsibilities
    also include leasing and development, and who may be more
    inclined to make the royalty management program look successful
    rather than be successful.
        The second structural flaw is mythological. MMS's
    preference has been to perform compliance reviews rather than
    audits. Compliance reviews are based entirely on self-reported
    data provided by industry, meaning no third party reporting is
    required.
        Third, a recent GAO report revealed that the MMS computer
    system is incapable of identifying in a timely manner instances
    when industry failed to report revenue and royalty at all. The
    CLEAR Act addresses all of these weaknesses.
        First, delegating the compliance and auditing functions to
    the IG strengthens the independence of those functions.
    However, POGO is not sure if the IG in the long run is
    ultimately the right place for these functions to reside given
    the IG's other statutory responsibilities and the need to
    maintain independence from the Federal agencies and programs
    that it oversees.
        Second, the CLEAR Act strengthens royalty accountability by
    prohibiting compliance reviews from substituting for audits.
    The Committee is also taking important steps to restore leasing
    offices' accounting and auditing credibility.
        Finally, POGO sees potential in the CLEAR Act's proposed
    pilot program for automated transmission of oil and gas volume
    and quality data. The Committee might also consider
    incorporating language from H.R. 1462 to provide for a National
    Academy of Sciences study to improve the accuracy of oil and
    gas lease data.
        While POGO believes removing the core auditing functions
    from MMS will go a long way to improve the structural and
    ethical problems, past investigations reveal there are
    significant cultural problems at MMS that also need to be
    restored.
        POGO is deeply troubled, for example, by the revolving door
    between the Department and industry as has been recently
    evidenced this morning by the news of an investigation of
    former Interior Secretary Norton's turn through the revolving
    door to the Shell company. Fortunately, there have already been
    several improvements to ethics policies in the Department of
    the Interior since our last report, and POGO is happy to see
    that the CLEAR Act also requires the Secretary of the Interior
    to annually certify that all employees involved in royalty
    production oversight are in full compliance with all Federal
    employees' ethics laws and regulations.
        Just as adequate auditing is essential to revealing
    problems, transparency is essential to getting those problems
    fixed, but copies of contracts and other vital information is
    not currently publicly available. POGO is concerned that there
    is not enough transparency about the influence of organizations
    outside of MMS that help the agency to shape policy. Given the
    history of the RIK program where industry had a
    disproportionate amount of influence, we are particularly
    concerned about the Regional Outer Continental Shelf Council
    created under CLEAR. We hope that the Committee will make sure
    that their operations are transparent to the public, and
    recommend that these councils not be exempt from the Federal
    Advisory Committee Act.
        And last, as a member of the Publish What you Pay
    Coalition, we hope that the Committee will consider in the
    future increasing transparency of the U.S.'s royalty revenue
    collections in order to serve as a model to other countries. As
    Secretary Clinton recently stated, ``Sustainable progress is
    not possible in countries where the profits from oil and
    minerals line the pockets of oligarches who are corporations a
    world away, but do little to promote long-term growth and
    prosperity.'' The solution starts with transparency.
        Companies publishing what you pay and governments
    publishing what you earn is a necessary first step toward a
    more accountable system for the management of natural resource
    revenues. The U.S. can lead here by example.
        Thank you again for your oversight of royalty collections
    and asking me to testify. I look forward to answering any
    questions you may have.
        [The prepared statement of Ms. Brian follows:]

               Statement of Danielle Brian, Executive Director,
                     Project On Government Oversight (POGO)

        Thank you for inviting me to testify today. I am the Executive
    Director of the Project On Government Oversight, also known as POGO.
    POGO was founded in 1981 by Pentagon whistleblowers who were concerned
    about wasteful spending and weapons that did not work. Throughout its
    twenty-eight-year history, POGO has worked to remedy waste, fraud, and
    abuse in government spending in order to achieve a more effective,
    accountable, open, and ethical federal government. Since 1995, POGO has
    issued five reports about the underpayment of royalties to the federal
    government by the major oil and gas companies. Most recently, we issued
    a report tracing the troubled history of the Department of the
    Interior's Royalty-In-Kind (RIK) program and recommending the abolition
    of the program.
        POGO applauds the House Natural Resources Committee for your
    vigilant oversight of royalty collections, and for writing the
    Consolidated Land, Energy, and Aquatic Resources (CLEAR) Act of 2009.
    This legislation will benefit taxpayers by implementing several key
    reforms that will help to ensure taxpayers are receiving their fair
    share from their natural resources.
    RIK Is a Failed Experiment
        Oil and gas royalties collected from drilling on federal lands and
    waters is one of the largest sources of revenue for the federal
    government other than taxes. Royalties used to be collected primarily
    in cash, also known as royalty-in-value. This changed in 1997 when the
    Minerals Management Service (MMS) began a pilot program called Royalty-
    In-Kind (RIK). 1 This program accepts royalty payments in
    the form of product rather than cash, and is one of the Department of
    Interior's primary methods of collecting those royalties. Industry
    influence on the RIK program is traceable from the program's
    conception, through its expansion, to the full-blown program that
    exists today.
    ---------------------------------------------------------------------------
        \1\ Deal Consulting & Dispute Resolution, LLC, ``Federal Oil & Gas
    Royalty Valuation, Royalty in Kind and Royalty Relief 1980-2008,''
    August 2008. http://www.dtdeal.com/pdf/chronology-
    valuation_royalty_relief1980-2008.pdf (Downloaded September 15, 2009)
    ---------------------------------------------------------------------------
        As this Committee is well aware, MMS's RIK program has been a
    failure on many fronts. The Government Accountability Office (GAO)
    found in 2003, 2 2004, 3 2007, 4 2008,
    5 and 2009 6 that MMS could not accurately
    account for the RIK program's cost and benefits. In light of that,
    according to the GAO, RIK operated as an honor system. As the Inspector
    General discovered and reported to the full committee last fall, this
    honor system resulted in a culture of ``ethical failure'' and
    ``substance abuse and promiscuity.'' 7
    ---------------------------------------------------------------------------
        \2\ General Accounting Office, Report to Congressional Requesters
    on Mineral Revenues: A More Systematic Evaluation of the Royalty-in-
    kind Pilots is Needed (GAO-03-296), January, 2003, Summary page. http:/
    /www.gao.gov/new.items/d03296.pdf (Downloaded September 15, 2009)
        \3\ General Accounting Office, Report to Congressional Requesters
    on Mineral Revenues: Cost and Revenue Information Needed to Compare
    Different Approaches for Collecting Federal and Gas Royalties (GAO-04-
    448), April 2004, Summary page. http://www.gao.gov/new.items/d04448.pdf
    (Downloaded September 15, 2009)
        \4\ Government Accountability Office, Testimony Before Committee on
    Natural Resources, U.S. House of Representatives on Royalties
    Collection: Ongoing Problems with Interior's Efforts to Ensure A Fair
    Return for Taxpayers Require Attention (GAO-07-682T), March 28, 2007,
    Summary page. http://www.gao.gov/new.items/d07682t.pdf (Downloaded
    September 15, 2009)
        \5\ Government Accountability Office, Testimony Before the
    Subcommittee on Energy and Mineral Resources, Committee on Natural
    Resources, House of Representatives on Mineral Revenues: Data
    Management Problems and Reliance on Self-Reported Data for Compliance
    Efforts Put MMS Royalty Collections at Risk (GAO-08-560T), March 11,
    2008, p. 4. http://resourcescommittee.house.gov/images/Documents/
    20080311/testimony_rusco.pdf (Downloaded September 15, 2009)
        \6\ Government Accountability Office, Royalty-In-Kind Program: MMS
    Does Not Provide Reasonable Assurance It Receives Its Share of Gas,
    Resulting in Millions in Forgone Revenue (GAO-09-744), August 2009,
    http://www.gao.gov/new.items/d09744.pdf (Downloaded September 15, 2009)
        \7\ Department of Interior, Office of Inspector General,
    ``Memorandum on OIG Investigations of MMS Employees,'' September 9,
    2008, p. 2. http://www.doioig.gov/upload/Smith%20REDACTE%
    20FINAL_080708%20Final%20with%20transmittal%209_10%20date.pdf
    (Downloaded September 15, 2009) (hereinafter ``Memorandum on OIG
    Investigations of MMS Employees'')
    ---------------------------------------------------------------------------
        The reform most fundamental to making this program functional would
    be a dramatic increase in auditing capacity, yet this fix would wholly
    undermine MMS's original justification for the program--that the RIK
    program would reduce the need for auditing and so would decrease
    oversight costs. This alone should be reason enough to cancel the
    failed program. However, the legitimacy of the program is also called
    into question given the Inspector General's findings that MMS employees
    consider themselves exempt from standard ethical provisions that
    protect the public's interest. 8 MMS's close relationship
    with industry has been instrumental in preventing the public from
    getting what is owed to them for industry's use of public resources.
    Extensive corruption and collusion in the RIK program, given that it is
    charged with managing billions of dollars of federal revenue, should be
    the final nail in the program's coffin.
    ---------------------------------------------------------------------------
        \8\ ``Memorandum on OIG Investigations of MMS Employees.'' pp. 1-2.
    ---------------------------------------------------------------------------
        POGO supports the CLEAR Act for seeking to eliminate RIK as a
    method for paying federal oil and gas royalties. However, we are
    concerned that the language is not strong enough. We recommend that the
    CLEAR Act be strengthened to cancel the RIK program, or to place the
    program on a moratorium until an independent audit shows that it is
    accurately collecting all of the royalties owed to taxpayers.
    Taxpayers Deserve Assurances Royalties Are Collected Accurately
        As outlined in our most recent report, Drilling the Taxpayer:
    Department of Interior's Royalty-In-Kind Program, MMS's problems go far
    deeper than the ethical failures of individuals. The biggest problem is
    that the royalty management system is broken.
        There are three basic and significant structural weaknesses to the
    MMS's royalty management program. The first is an organizational
    conflict. The sole mission of a federal royalty management and
    collection program should be determining and enforcing revenue
    obligations of private companies operating on public and Indian lands.
    Yet, currently, auditors and other compliance and enforcement personnel
    report to officials within MMS whose responsibilities also include
    leasing and development, and who may be more inclined to make the
    royalty management program look successful rather than be successful.
    As POGO discovered, in some instances MMS told their professional
    auditors to stop auditing, even when the auditors had discovered
    evidence that companies were underpaying royalties.
        The second structural flaw is methodological. MMS's preference has
    been to perform compliance reviews rather than audits. compliance
    reviews are based entirely on the self-reported data provided by
    industry--meaning that no third-party reporting is required.
        Third, a recent GAO report revealed that the MMS computer system is
    incapable of identifying in a timely manner instances when industry
    fails to report revenue and royalty at all. 9
    ---------------------------------------------------------------------------
        \9\ Government Accountability Office, Mineral Revenues: Data
    Management Problems and Reliance on Self-Reported Data for Compliance
    Efforts Put MMS Royalty Collections at Risk (GAO-08-893R), September
    12, 2008, p. 5. http://www.gao.gov/new.items/d08893r.pdf (Downloaded
    September 15, 2009)
    ---------------------------------------------------------------------------
        When it comes to royalty collection, both MMS and its technology
    are untrustworthy, and these weaknesses may have cost taxpayers
    hundreds of millions of dollars in much-needed revenue.
        The CLEAR Act addresses these structural weaknesses.
        First, delegating the compliance and auditing functions to the
    Inspector General strengthens the independence of those functions,
    which is essential for the royalty management system to be effective.
    However, POGO is not sure if the Office of the Inspector General (OIG)
    is ultimately the right place for these functions to reside, given the
    OIG's other statutory responsibilities and the need to maintain
    independence from the federal agencies and programs it oversees. We are
    also concerned that the CLEAR Act continues some aspects of the current
    conflict of mission problems between leasing and oversight functions.
    The Office of Federal Energy and Minerals Leasing that this bill would
    create will be responsible for both managing leases for development and
    conducting oversight and inspections of those leases--one of the
    problems that moving compliance and auditing duties to the OIG seeks to
    remedy. POGO believes that royalty management independence must include
    regulatory and enforcement independence, and the Committee should
    consider the importance of severing oversight functions from the Office
    of Federal Energy and Minerals Leasing.
        Second, the CLEAR Act strengthens royalty accountability by
    prohibiting compliance reviews from constituting or substituting for
    audits. The Committee is also taking important steps to restore leasing
    offices' accounting and auditing credibility by requiring employees who
    conduct compliance reviews to ``meet professional auditor
    qualifications that are consistent with the latest Government Auditing
    Standards.'' In addition, the CLEAR Act's requirement to refer for
    audit disparities revealed by any compliance reviews is also a step in
    the right direction.
        Finally, POGO sees potential in the CLEAR Act's proposed pilot
    program for automated transmission of oil and gas volume and quality
    data to improve production verification systems and ensure accurate
    royalty collection and audits.
    Ending Ethical Misconduct in Royalty Collections
        While POGO believes that removing the core auditing functions from
    MMS--and thereby the conflict of mission within the agency--will go a
    long way to improve the structural and ethical problems, past
    investigations reveal that there are significant cultural problems at
    MMS that also need to be resolved. As the Inspector General discovered,
    MMS's inappropriate relationship with industry--which included ``gifts
    and gratuities''--compromised their objectivity. 10
    Additionally, POGO is concerned about industry's entrenched influence
    at MMS.
    ---------------------------------------------------------------------------
        \10\ Department of Interior, Office of the Inspector General,
    Royalty Initiatives Group, Evaluation Report: Minerals Management
    Service Royalty-in-Kind Oil Sales Process (C-EV-MMS-0001-2008), May
    2008, p. 4. http://www.doioig.gov/upload/2008-G-0021.pdf (Downloaded
    September 15, 2009)
    ---------------------------------------------------------------------------
        Our investigation revealed that MMS justified the expansion of the
    RIK program over the objections raised by state auditors, Members of
    Congress, and POGO 11 by relying on a so-called
    ``independent'' study by Lukens Energy Group. 12 Not only
    was the Vice President of Lukens a vocal advocate for the RIK program,
    13 the Inspector General determined that Lukens Vice
    President Hagemeyer was considered a ``trusted advisor'' by RIK Program
    Director Greg Smith, and that the two communicated extensively during
    the contract selection process despite regulations clearly prohibiting
    such contact between bidding companies and MMS officials. The IG
    reported that during the same time period Lukens' contract bid was
    being considered by MMS, Hagemeyer assisted then-RIK Deputy Program
    Manager Smith in his efforts to market Geomatrix, a firm with which
    Smith was improperly consulting on the side. 14 POGO remains
    concerned that Smith was never prosecuted. This sends the wrong message
    to employees in MMS--that blatant misconduct will go unpunished.
    ---------------------------------------------------------------------------
        \11\ Innovation & Information Consultants, Inc. ``Memorandum on MMS
    Report in RIK Pilot Program in Wyoming,'' April 24, 2001, p. 1. http://
    www.pogoarchives.org/m/ep/ep-rikmemo.pdf (Downloaded September 15,
    2009); Representative Carolyn Maloney, ``Maloney Cautions Against
    Republican Plans to Bolster Oil Industry,'' June 12, 2001. http://
    maloney.
    house.gov/index.php?option=com_content&task'view&id=688&Itemid=61
    (Downloaded September 15, 2009); House Subcommittee on Energy and
    Mineral Resources, ``Statement of Danielle Brian at Oversight Hearings
    on Royalty-In-Kind for Federal Oil and Gas Production,'' July 31, 1997,
    pp. 101-102. http://commdocs.house.gov/committees/resources/
    hii45026.000/hii45026_0.htm (Downloaded September 15, 2009)
        \12\ Lukens Energy Group, Assessment of the Federal Royalty-in-Kind
    (``RIK'') Program and Development of RIK Business Plan, September 30,
    2003.
        \13\ American Petroleum Institute, ``Hagemeyer gets API honor,''
    API EnCompass: News, November 13, 2000. http://web.archive.org/web/
    20001213110900/www.api.org/release.cgi?days=90 (Downloaded September
    15, 2009)
        \14\ Department of the Interior, Office of Inspector General,
    Investigative Report: Gregory W. Smith, August 7, 2008, p. 16-17.
    http://www.doioig.gov/upload/Smith%20REDACTED%
    20FINAL_080708%20Final%20with%20transmittal%209_10%20date.pdf
    (Downloaded September 15, 2009)
    ---------------------------------------------------------------------------
        POGO is also deeply troubled by the revolving door between the
    Department of the Interior and industry. A number of the individuals
    who went through the revolving door have actually been sentenced to
    prison for violations of conflict-of-interest laws or obstruction of
    justice. 15 As long as the door continues to revolve between
    industry and Interior or MMS, the public cannot be sure that their
    interests are being served.
    ---------------------------------------------------------------------------
        \15\ For a list of these individuals, see our report: Project On
    Government Oversight, Drilling the Taxpayer: Department of Interior's
    Royalty-In-Kind Program, September 18, 2008, pp. 13-14 http://
    pogoarchives.org/m/nr/rik/report-20080918.pdf (Downloaded September 15,
    2009)
    ---------------------------------------------------------------------------
        Fortunately, there have already been several improvements to ethics
    policies in the Department of the Interior since our report. POGO
    applauds President Obama's Executive Order for Ethics Commitments by
    Executive Branch Personnel, 16 and Interior Secretary Ken
    Salazar's Memorandum to Employees on their ethical responsibilities.
    17 POGO particularly wants to praise Secretary Salazar for
    enhancing the ethical culture of the agency by urging employees to seek
    the assistance of bureau or office ethics officials for guidance to
    avoid even the appearance of impropriety.
    ---------------------------------------------------------------------------
        \16\ White House, ``Executive Order--Ethics Commitments by
    Executive Branch Personnel,'' January 21, 2009. http://
    www.whitehouse.gov/the_press_office/ExecutiveOrder-EthicsCommit
    ments/ (Downloaded September 15, 2009)
        \17\ Department of the Interior, ``Secretary Salazar Outlines High
    Ethical Standards for Interior Department in Memo to All Employees,''
    January 26, 2009, http://www.doi.gov/news/09_News_Releases/012609a.html
    (Downloaded September 15, 2009)
    ---------------------------------------------------------------------------
        While these are important steps, POGO is also happy to see that the
    CLEAR Act requires the Secretary of the Interior to annually certify
    that all employees involved in royalty production oversight are in full
    compliance with all federal employee ethics laws and regulations.
    Increasing Transparency in Royalty Management and Collections
        Just as adequate auditing is essential to revealing problems,
    transparency is essential to getting those problems fixed. But copies
    of RIK contracts and vital information about who operates the program
    are usually not publicly available to be scrutinized by watchdogs,
    other issue-area experts, the news media, or the public in general.
    Many of the problems that have occurred in the RIK program and within
    MMS could have been prevented or resolved sooner if the Interior
    Department's actions had been more transparent to Congress and other
    stakeholders.
        Due to the opaqueness of the royalty management system, many of the
    insights into its problems have come from whistleblowers. As this
    Committee is well aware, many whistleblowers have tried to draw
    attention to management and underpayment problems as they saw them
    occurring, only to be discouraged or retaliated against. For example,
    the Audit Manager for the North Dakota State Auditor's Office told this
    Committee's Subcommittee on Energy and Mineral Resources that a high-
    ranking MMS official advised him and other members of the State and
    Tribal Royalty Committee not to testify before Congress: ``This
    official expressed to us that Congress only requests that you testify
    so you aren't obligated to testify and that it is best to keep any
    problems in house.'' 18 This is clearly unacceptable and
    undermines the public interest. We hope that the members of this
    Committee will keep in mind how essential it is for there to be real
    protections for whistleblowers.
    ---------------------------------------------------------------------------
        \18\ Dennis Roller, ``Written Testimony of Dennis Roller, Audit
    Manager for the North Dakota State Auditor's Office--Royalty Audit
    Section For the Minerals Management Service Before the Natural
    Resources Subcommittee on Energy and Mineral Resources United States
    House of Representatives,'' March 11, 2008, p. 2. http://
    resourcescommittee.house.gov/images/Documents/20080311/
    testimony_roller.pdf (Downloaded September 15, 2009)
    ---------------------------------------------------------------------------
        POGO is also concerned that there is not enough transparency about
    the influence of organizations outside of MMS that help the agency to
    shape policy. In our investigation of the development of the RIK
    program, we learned that industry had a disproportionate amount of
    influence over the program's development. Because of this, we are
    particularly concerned about the Regional Outer Continental Shelf
    Councils created under the CLEAR Act. We hope that this Committee will
    continue to be vigilant in its oversight to make sure that the public
    interest is sufficiently represented on the Councils, which will
    develop future natural resources policies. Additionally, we urge the
    Committee to remove the current language in the bill that would exempt
    these Councils from the Federal Advisory Committee Act. The Federal
    Advisory Committee Act's requirements to make membership,
    administrative procedures, and hearings public knowledge provide
    precisely the kind of openness and accountability that our natural
    resource management system so desperately needs.
        POGO also supports provisions in the CLEAR Act that will ensure
    federal agencies have access to proprietary information for wind and
    solar projects to assure compliance, but we hope that the Committee
    will extend this provision to include uranium leases.
        And lastly, as a member of the Publish What You Pay Coalition, we
    hope that the Committee will consider in the future increasing
    transparency of the U.S.'s royalty revenue collections in order to
    serve as a model to other countries. As Secretary of State Hillary
    Clinton recently stated, ``Sustainable progress is not possible in
    countries that fail to be good stewards of their natural resources,
    where the profits from oil and minerals line the pockets of oligarchs
    who are corporations a world away, but do little to promote long-term
    growth and prosperity. The solution starts with transparency.''
    19 Companies ``publishing what you pay'' and governments
    ``publishing what you earn'' is a necessary first step towards a more
    accountable system for the management of natural resource revenues.
    ---------------------------------------------------------------------------
        \19\ Secretary of State, Hillary Rodham Clinton, ``Remarks at the
    8th Forum of the African Growth and Opportunity Act,'' August 5, 2009.
    http://www.state.gov/secretary/rm/2009a/08/126902.htm (Downloaded
    September 15, 2009)
    ---------------------------------------------------------------------------
        Thank you again for your oversight of royalty collections and for
    asking me to testify. I look forward to answering any questions you may
    have, and to working with your Committee on this issue.
                                     ______

       Response to questions submitted for the record by Danielle Brian,
              Executive Director, Project On Government Oversight

    Questions from the Majority:
    1.  Ms. Brian, there are a number of provisions in Title II of the
            CLEAR Act that are designed to improve accuracy and
            accountability in the federal royalty collection system, such
            as increasing fines for violators and eliminating interest on
            overpayments made by royalty payors. Please provide the
            Committee your analysis and conclusions on these provisions.
        Billions of dollars in false claims act suits demonstrate that
    gross underpayments of royalties occur and that MMS is not sufficiently
    deterring companies from defrauding taxpayers. Increasing penalties to
    deter cheating taxpayers will help ensure that taxpayers get paid what
    is owed to them.
        There are several important provisions in the CLEAR Act that
    improve the accuracy of the federal royalty collection system by
    improving auditing of royalty payments. MMS's preference has been to
    perform compliance reviews rather than audits. Compliance reviews
    constitute superficial oversight, since these reviews are based
    entirely on the self-reported royalty data provided by industry and do
    not require third-party reporting. POGO supports the language in the
    CLEAR Act that ends this practice by prohibiting compliance reviews
    being used as a substitute for audits.
        POGO also supports the intent of the CLEAR Act to restore
    independence to the auditing function of the government for royalty
    payments by removing this function from MMS and giving it to the Office
    of the Inspector General (OIG). It is essential for the auditing
    function to be independent if it is going to be effective. However,
    POGO is not sure that the OIG is ultimately the right place for these
    functions, given the OIG's other statutory responsibilities and the
    need to maintain independence from the federal agencies and programs it
    oversees. POGO would also support amendments to the CLEAR Act or other
    legislation that would create an independent auditing agency to audit
    royalty payments.
        The provision in the CLEAR Act to end the RIK program is also a
    positive step to restore accuracy and accountability to royalty
    management, but this language should be strengthened to replicate the
    actions of Secretary Salazar and actually terminate the program.
    Questions from the Minority:
    1.  Do you believe there should be a planning council for each of the
            Minerals Management Service's OCS planning areas?
        POGO does not have a position about the number of planning councils
    for OCS planning. But the effectiveness of planning councils will only
    be as good as their composition. This is why POGO believes that it is
    important that all planning councils be subject to the Federal Advisory
    Committee Act, which would ensure public and private interests are
    appropriately taken into consideration, and that the actions of each
    planning council is open to the public.
    2.  Can you elaborate on why it is important for the Planning Councils
            to be subject to the Administrative Procedures Act?
        In my testimony, I expressed specific concerns about how the
    Regional Outer Continental Shelf Councils created under the CLEAR Act
    not being subject to the Federal Advisory Committee Act. The Federal
    Advisory Committee Act (FACA) includes several important provisions
    that make the actions of these Councils, and their influence on
    resource development, transparent to the public. These provisions
    enhance the transparency of the Councils' actions, making them more
    objective, accountable to the public, and more likely that these
    Councils will act in the public interest. The FACA requirements to make
    membership, administrative procedures, and hearings public knowledge
    provide precisely the kind of openness and accountability that our
    natural resource management system currently lacks and so desperately
    needs.
        The Administrative Procedures Act also provides several important
    safeguards for the public interest by making sure that information,
    rules, and operational procedures for these Councils are made available
    to the public. This includes making sure that final opinions--including
    concurring and dissenting opinions--records, and administrative
    instructions are also publicly available. It is important that the
    public understands how the Councils reach their conclusions, and the
    Administrative Procedures Act helps to ensure they will.
                                     ______

        The Chairman. Thank you. Mr. Mann.

            STATEMENT OF CHRISTOPHER MANN, SENIOR OFFICER,
            PEW ENVIRONMENT GROUP, THE PEW CHARITABLE TRUSTS

        Mr. Mann. Thank you, Mr. Chairman, Ranking Member Hastings,
    and Members of the Committee. My name is Christopher Mann, and
    I serve as the Senior Officer for Pew Environment Group.
        Pew Environment Group is the conservation arm for the Pew
    Charitable Trusts. It is dedicated to advancing strong
    environmental policies guided by sound science on climate
    change, wilderness protection and marine conservation.
        I appreciate the opportunity to share our views on H.R.
    3534, the Consolidated Land, Energy, and Aquatic Resources Act
    of 2009.
        The Pew Environment Group supports the CLEAR Act. This
    legislation will assist the much needed transition to
    sustainable energy production, improve accountability for
    energy development on public lands and public waters, and
    protect the environment and coastal economies through
    comprehensive planning for offshore energy development.
        My testimony today will focus primarily on the provisions
    of the bill that relate to energy development on the OCS.
    Because the United States will continue to depend on fossil
    fuels for sometime to come, even as we begin the transition to
    renewable energy, we are not opposed to offshore drilling in
    general. However, if offshore development is expanded it must
    be grounded in science and give priority to maintaining the
    health of the marine ecosystems.
        Both the Pew Oceans Commission and the congressionally
    charted U.S. Commission on Ocean Policy recommended that single
    sector resource management give way to an integrated and
    comprehensive approach implemented at the regional level. With
    no over-arching framework for their management and no single
    entity responsible for their well being, the oceans are bearing
    accumulative effect of the growing list of ad hoc resource use
    decisions.
        Since the Ocean Commission's released their findings,
    progress has been mixed. A number of states are pursuing
    comprehensive ocean management in their waters, yet these
    efforts extend only three miles from shore, and there is no
    comparable Federal program farther offshore. With the
    leadership of this Committee, Congress has put fisheries
    management on a more sustainable course, but sound fisheries
    management cannot by itself safeguard the health of the marine
    ecosystems.
        Even as the environmental damage caused our dependence on
    fossil fuels becomes apparent, there is renewed interest in
    exploiting offshore oil and gas resources. President Obama took
    an important step when he established an interagency task force
    in June to recommend a national ocean policy. The broad
    outlines of that plan have already been transmitted to the
    President, and we expect that it will be made public as early
    as today.
        The CLEAR Act contains a number of reforms to guide
    rational development of offshore energy while providing greater
    protection for marine living resources and ecological services.
    We believe these reforms are complementary, not contradictory,
    to the administration's efforts.
        The OCS Council established by the bill are not the fully
    integrated governance system recommended by the Ocean
    Commissions, but creating an offshore energy decisionmaking
    process that requires fuller consideration of other uses and
    users of ocean resources is a substantial improvement over
    current practice. We strongly support establishing a
    permanently appropriated dedicated fund for ocean and coastal
    management capitalized by OCS revenue. There is a compelling
    logic in taking public revenue from the extraction of non-
    renewable marine resources and investing it in ocean and
    coastal conservation. This Committee lent bipartisan support to
    similar legislation and shepherded it through the House a
    number of years ago.
        We also support Section 704 of the bill which prohibits the
    Department of Commerce and regional fishery management councils
    from permitting and managing offshore aquaculture under the
    Magnuson-Stevens Act.
        While we share NOAA's goal of a national aquaculture
    policy, we believe that offshore aquaculture should be managed
    under a national regulatory program designed for aquaculture,
    not for capture fisheries.
        Moving for a moment to the land, we strongly support
    removing uranium from the purview of the 1872 mining law. The
    sensible change will allow extraction of uranium from public
    lands where such development is in the public interest and with
    the appropriate safeguards. Today, uranium remains the only
    energy mineral still subject to the antiquated law that limits
    the ability of Federal managers to determine how and where
    extraction takes place.
        We do have a number of recommendations for improvement of
    the bill which are detailed in my written statement: First,
    make NOAA a full partner in regional council management and in
    preparing ocean assessment; second, ensure that the Secretary
    must promptly approve regional plans and impose regional
    restrictions on offshore development until a regional plan is
    approved; third, do not provide voting membership on OCS
    councils to non-Federal stakeholders who may have an economic
    interest in the outcome; last, because of its unique fragility
    and vulnerability, prohibit development of offshore energy in
    the Arctic until a comprehensive plan is approved for that
    region.
        Mr. Chairman, we look forward to working with both Congress
    and the administration to protect, maintain, and restore the
    health of our oceans through comprehensive ecosystem-based
    management. The CLEAR Act provides for rational and sustainable
    development of the energy resources of our public lands an
    oceans that is an important step forward.
        I thank you for the opportunity to testify, and I would be
    happy to answer any questions you may have.
        [The prepared statement of Mr. Mann follows:]

               Statement of Christopher G. Mann, Senior Officer,
                             Pew Environment Group

        Chairman Rahall, Ranking Member Hastings and Members of the
    Committee:
        My name is Christopher Mann and I serve as a Senior Officer with
    the Pew Environment Group in Washington, D.C. I greatly appreciate your
    invitation to appear before the Committee to share our views on H.R.
    3534, the Consolidated Land, Energy, and Aquatic Resources Act of 2009.
    The Pew Environment Group is the conservation arm of the Pew Charitable
    Trusts. We are dedicated to advancing strong environmental policies
    that are informed and guided by sound science on climate change,
    wilderness protection and marine conservation. I manage a number of
    Pew's marine conservation initiatives, including our efforts to promote
    comprehensive, ecosystem-based management of our oceans, coasts, and
    Great Lakes.
        I am pleased to offer the support of the Pew Environment Group for
    H.R. 3534. We believe that, this legislation is a strong step in the
    right direction to assist the much-needed transition to sustainable
    energy production, to improve accountability for energy development on
    public lands and in public waters, and to protect the environment and
    coastal economies through comprehensive planning for offshore energy
    development. My testimony today will focus primarily on the provisions
    of the bill that relate to energy development on the Outer Continental
    Shelf (OCS).
    Offshore energy development and a new approach to national energy
            policy
        The Pew Environment Group understands that the United States will
    continue to depend on fossil fuels for some time to come, even as we
    begin the necessary transition to non-polluting, renewable energy. As a
    result, we are not opposed to offshore drilling in general, but feel
    that if offshore oil and gas development is expanded, it must be done
    in a way that protects the oceans and coasts. Decisions should be
    grounded in science and give priority to maintaining the health of the
    ecosystem. Further, any expansion in offshore energy development should
    be used to build a sustainable energy future, not to continue the
    dependence on fossil fuels that has created the looming crisis of
    global warming. Congress and the Administration should adopt measures
    above and beyond the current OCS leasing and development process to
    ensure that our coastal economies, and the marine resources that
    sustain them, are not harmed by expanded offshore development. That is
    why we endorse the approach taken in H.R. 3534.
    The case for ocean governance reform
        Six years ago, the Pew Oceans Commission released its final report.
    A year later, the U.S. Commission on Ocean Policy issued its report.
    The two commissions came to remarkably similar conclusions: Our use and
    misuse of marine resources--from overfishing, water pollution, habitat
    destruction, and other activities--has led to widespread marine
    environmental degradation. The damage from human activities to marine
    ecosystems was documented exhaustively in the reports of the ocean
    commissions. The case has since been bolstered by dozens of additional
    scientific studies.
        There is no better example of the Tragedy of the Commons than our
    oceans. For millennia, humankind viewed the oceans as vast and their
    resources inexhaustible. Particularly after World War II, however,
    technology allowed us to strip living resources from the oceans far
    faster than the oceans could replace them. Technology now allows us to
    remove minerals and carry out offshore activities, such as renewable
    energy production and aquaculture, in places never before accessible.
    With no overarching framework for their management and no single entity
    responsible for their wellbeing, the oceans are bearing the cumulative
    effect of a growing list of ad hoc resource use decisions.
        Single-sector management approaches are simply not up to the task
    of addressing the complex interactions and effects of multiple
    stressors on the oceans. After all, you can drill for oil, float wind
    turbines, or ship cargo, over a warm, dead ocean, but you can't fish in
    it and you wouldn't want to swim in it. To address these shortcomings,
    the ocean commissions recommended that narrow, single-sector resource
    management give way to a more integrated and comprehensive approach
    implemented at the regional level and supported at the national level.
    This would be a transformative and much-needed change in both the way
    society views the oceans and in the way we manage our use of the
    oceans.
        Since the ocean commissions released their findings, progress has
    been mixed. A number of states have adopted a more comprehensive
    approach to ocean planning and management in their own waters, and are
    working with adjacent states on regional efforts. Yet these state-based
    efforts to improve ocean management are limited to the narrow band of
    coastal waters over which they have jurisdiction and are frustrated by
    the lack of coordination among federal activities.
        With bipartisan leadership from this Committee, Congress has
    enacted important reforms putting fisheries management on a more
    sustainable course. But marine ecosystems are about much more than
    fish. Although science-based fisheries management is a critical element
    of sound ocean management, fisheries management cannot by itself
    safeguard the health of marine ecosystems. And it is the overall health
    of marine ecosystems on which fisheries ultimately depend.
        As we struggle to transform our energy economy, there is renewed
    interest in offshore oil and gas extraction, as well as emerging
    opportunities for ocean renewable energy development. At the same time,
    the environmental damage that our dependence on fossil fuels is causing
    to marine and terrestrial ecosystems alike has become more apparent.
    Global warming-induced changes in currents and upwelling patterns,
    rising sea level and water temperature, melting sea ice, and the
    increasing acidity of ocean waters will cause considerable damage to
    marine ecosystems. These new challenges are perhaps nowhere more
    evident than in the Arctic, where a poorly understood system already
    under stress from rapid environmental change is at the same time being
    exposed by reduction in ice cover to increased resource extraction and
    maritime traffic.
        As you are aware, President Obama took an important step to address
    ocean management needs when he established an interagency ocean policy
    task force in June to recommend a national ocean policy and an
    implementation framework for that policy. The broad outlines of that
    plan have already been transmitted to the President and we expect that
    it will be made public as early as today.
    Comprehensive offshore energy planning and management: a constructive
            step
        Mr. Chairman, H.R. 3534 contains a number of significant reforms to
    guide rational development of offshore energy while providing greater
    protection for the living resources and ecological services provided by
    the oceans. We believe these reforms are complementary to the ocean
    governance reforms being undertaken by the Administration, and we of
    course urge you to work closely with the Administration to ensure that
    continues to be the case as the President's efforts come into sharper
    focus and as this legislation advances in Congress.
        First, title VI requires that the Secretary of the Interior and the
    Secretary of Commerce jointly establish outer continental shelf
    councils to provide for long-term, multiple-objective planning and
    management of energy development in the OCS on a regional basis. The
    councils would be chaired either by Interior or Commerce. The councils
    would be broadly representative of the key resource-use decision makers
    at the federal, state and tribal levels. They would take full advantage
    of existing regional expertise in marine fisheries management and
    interstate ocean management. Detailed regional assessments of the
    renewable and non-renewable energy potential, resource uses and users,
    and ecological condition of an OCS region would be prepared by the
    Department of the Interior, in consultation with the Department of
    Commerce.
        Based on these assessments, each regional council would prepare,
    and submit to the Secretary of the Interior for approval, a multi-
    objective, science- and ecosystem-based plan for OCS energy development
    in that region. The plans developed by regional councils would
    explicitly consider the many other economic and recreational uses of
    the marine resources of each region, and would be designed to ``ensure
    the protection and maintenance of ecosystem health in decisions
    affecting the siting of energy facilities.'' After considering these
    factors, the plans would delineate areas open to energy development in
    each region, and once finalized, the plans would be binding on the
    Secretary of the Interior in leasing and permitting under the OCS Lands
    Act (OCSLA).
        This is not the fully integrated governance system recommended by
    the ocean commissions, but we recognize that this is an energy bill.
    Creating an offshore energy decision-making process that requires
    fuller consideration of other uses--and users--of ocean resources is a
    substantial improvement over current practice. Careful assessment of
    the economic and ecological conditions of each region, followed by full
    consideration of the impact of energy development decisions on
    resources, resource users, and ecological values will result in energy
    siting decisions that protect the long-term public interest in healthy
    and productive marine ecosystems. To further these ends, we suggest a
    number of improvements to the bill.
    Suggested improvements to the bill
        We strongly support the inclusion of the Department of Commerce,
    presumably acting through the National Oceanic and Atmospheric
    Administration, in establishing and running regional councils, and in
    preparing regional energy, economic and ecological assessments. To
    better fulfill the purposes of title VI, however, we believe the bill
    should go further and require that regional councils are jointly
    chaired by Interior and Commerce, and that regional assessments are
    jointly prepared by the two departments. These departments bring
    considerable, but different, expertise to bear on the problem of
    offshore energy siting and management. To ensure the fullest
    consideration of the range of ocean resources and users affected by
    offshore energy development decisions, we believe that NOAA should be a
    full partner in the assessment and regional planning process, even
    though Interior will make final decisions regarding regional plan
    approval and implementation under the OCSLA.
        As introduced, the bill would allow leasing and permitting under
    the OCSLA to continue as usual until regional plans are approved. The
    timeline in the bill allows up to four years for regional plans to be
    approved and the consequences for failure to approve a plan are vague.
    We recognize the complexity of the task assigned to the councils, but
    four years is too long to continue with business as usual under the
    OCSLA. We recommend that you firm up the requirement for the Secretary
    of the Interior to ultimately approve regional plans. We also request
    that you include provisions from an earlier draft of the bill that
    created new environmental requirements in the OCSLA that would apply in
    addition to requirements of a regional plan.
        Section 602 of the bill provides broad authority to appoint non-
    government officials to the council to achieve balance on the council.
    Although we support balanced representation of interests and
    perspectives on these councils, that can be done from within the ranks
    of government agencies with expertise and jurisdiction over marine
    resources. We do not feel it is appropriate to delegate decision-making
    authority over public resources to non-government stakeholders. Indian
    tribes and interstate efforts to improve ocean management should be
    represented on the regional councils, but there is a need to clarify
    how such representation will be selected and appointed. As a practical
    matter, one council for the entire Atlantic EEZ will be too large and
    ungainly. This represents too many states and marine ecosystems to
    provide effective advice to the Secretary.
        Because of the pace and magnitude of climate change in the Arctic,
    the challenges to safe energy exploration and development in that
    hostile environment, and the poor state of scientific understanding of
    those ecosystems, the Pew Environment Group recommends that energy
    development in the Arctic be deferred until a comprehensive plan can
    developed for that region.
    Reinvesting OCS revenue to conserve and manage our oceans and coasts
        We strongly support section 605, which establishes a permanently
    appropriated, dedicated fund for ocean and coastal management. This is
    consistent with the recommendations of both ocean commissions. The bill
    would cover ten percent of OCS revenue into the fund each year. This
    would provide approximately one billion dollars annually for ocean and
    coastal management. The proposed trust fund would be used to support
    three classes of activities for protection, maintenance and restoration
    of marine ecosystem health: grants to states based on a formula similar
    to that used to allocate funds under the Coastal Zone Management Act;
    competitive grants for ocean conservation and management available to
    public and private entities; and grants to support regional ocean
    partnerships.
        Offshore energy extraction has significant offshore and onshore
    impacts. This fund can help address those effects as well as the myriad
    other challenges facing our oceans and coasts. There is a compelling
    logic in taking public revenue derived primarily from the extraction of
    non-renewable ocean resources and investing them in the conservation
    and management of renewable resources. Such a financing scheme will pay
    rich dividends long after the oil and gas coming from our oceans has
    been used. That was certainly the thinking of this Committee a number
    of years ago when it crafted bipartisan legislation establishing a
    similar fund and shepherded it through House passage.
        Of course we are in a much different fiscal climate than the late
    1990s, but given the state of our oceans and coasts, an investment of
    this magnitude is appropriate and much needed. Moreover, an investment
    of this magnitude is in fact modest given the millions of jobs and
    hundreds of billions in annual economic activity derived from our
    oceans and coasts. Given the hundreds of billions that are being spent
    to prop up our financial infrastructure, I respectfully suggest that an
    investment of a tiny fraction of that amount in support of our blue
    infrastructure is highly prudent.
    Mining Law reform
        My portfolio is marine conservation, but the Pew Environment Group
    continues to support reform of the nation's antiquated mining law. As a
    result, we strongly support the provision in this bill that removes
    uranium from the purview of the 1872 Mining Law. We believe this is a
    sensible policy change that will allow development of uranium resources
    from public lands where such development is in the public interest and
    with the appropriate safeguards. Long ago, the government recognized
    the critical value of oil and gas resources and removed them from the
    antiquated law that gives away mineral resources on public lands. At
    the time that oil and gas reserves were withdrawn from the mining law,
    the primary concern was the potential loss of strategic resources.
    Thanks to those concerns, oil and gas resources on public lands have
    been managed for decades under the Mineral Leasing Act, bringing
    significant returns to the U.S. taxpayers.
        Today, uranium remains the only energy mineral still subject to the
    antiquated law that limits the ability of federal land managers to
    determine how and where extraction takes place. Under that law, uranium
    mining may occur in sensitive areas, including lands adjacent to the
    Grand Canyon National Park that hold important waters feeding springs
    and seeps in the Park's rich ecosystem. And once claims are staked and
    valid discoveries made, mining may go forward, even in areas that have
    important public uses such as watershed protection, wildlife habitat or
    recreation that may be seriously impaired. In contrast, management of
    public uranium resources under a leasing program will allow not only
    for a royalty return to the taxpayers but also careful, proactive
    balancing of other public needs.
    Offshore aquaculture
        Last but not least, we support section 704, which prohibits the
    Department of Commerce and Regional Fishery Management Councils from
    permitting and managing offshore aquaculture under the Magnuson Stevens
    Act. The Pew Environment Group believes that attempting to regulate
    aquaculture under the Magnuson Stevens Act is a gross misinterpretation
    of the plain meaning of that law and congressional intent in enacting
    it. Offshore aquaculture should be guided by a national regulatory
    program designed specifically for aquaculture, not created ad hoc from
    a law designed to regulate capture fisheries.
    Conclusion
        Mr. Chairman, we look forward to working with both Congress and the
    Administration to protect, maintain and restore the health of our
    oceans through comprehensive, ecosystem-based management. H.R. 3534
    provides for rational and sustainable development of the energy
    resources of our public lands and oceans, while ensuring that a
    significant portion of the revenue derived from extraction of
    nonrenewable resources is reinvested in the conservation and management
    of renewable resources. That is an important step toward a sound and
    sustainable national energy policy. I thank you again for the
    opportunity to provide the views of the Pew Environment Group and I
    would be happy to answer any questions you may have.
                                     ______

      Response to questions submitted for the record by Christopher Mann,
                     Senior Officer, Pew Environment Group

    Questions from the Majority:
    1.  Mr. Mann, in her testimony, NOAA Administrator Lubchenco indicated
            concerns about provisions of title VI because, in her view,
            they were not comprehensive enough. The Pew Environment Group
            is on the record in support of comprehensive ocean planning and
            management, yet you support the provisions of title VI. Why do
            you feel this legislation is a step in the right direction when
            it comes to comprehensive ocean planning?
        There are two main dimensions along which progress towards
    comprehensive ocean governance can move at the federal level:
    administrative action and legislation. President Obama has taken a
    significant step to advance the efforts of the federal government to
    improve ocean and Great Lakes management by directing the federal
    agencies involved in ocean management to recommend to him a national
    ocean policy, an implementation strategy for the policy, and a
    structural framework for marine spatial planning and management to
    carry it out. Acting under executive authority, the federal agencies
    are of course limited to activities and actions that are already
    authorized by law. The Pew Environment Group believes that the many
    federal laws affecting ocean and Great Lakes resources provide
    considerable discretion that could be used to significantly improve the
    management of these resources, and as a result, the health of ocean and
    Great Lakes ecosystems.
        However, we also believe that to fully realize the goal of well-
    coordinated federal, state and tribal management of ocean and Great
    Lakes resources, additional statutory authority will eventually be
    required. We are greatly encouraged by the national ocean policy
    proposed by the interagency ocean policy task force, but to realize the
    benefits of such a policy over the long term, it should be enacted into
    law. In addition, the federal agencies are likely to encounter gaps or
    obstacles under their current authority to the full implementation of
    that policy. As a significant and growing use of ocean space and
    resources, offshore energy development is an aspect of ocean management
    that clearly requires a policy makeover.
        Ideally, ocean resource use decisions would be made in an
    integrated framework that considers all the current and reasonably
    anticipated uses, and their environmental impacts, and makes decisions
    on siting and development to minimize harm to ecosystem health.
    However, given the complexity of federal law guiding ocean activities,
    such a system will not be quickly or easily achieved. As discussed
    above, significant improvements can be made through a government-wide
    mandate to cooperate towards a set of shared goals. But this kind of
    cooperation would have more lasting value if enacted into law.
        The process for offshore energy siting is in need of an overhaul to
    make it more sustainable and responsive to regional priorities and
    needs. The OCS provisions of the CLEAR Act offer a reasonable approach
    to achieving these goals. We have offered several suggestions for
    improving these provisions and the ocean policy task force may have
    additional suggestions as well. With enactment of comprehensive
    national ocean policy likely to be a long way off, it seems prudent to
    set the process for offshore energy siting--clearly a major component
    of comprehensive ocean management--on the right footing. In striving
    for comprehensive ocean planning and management, Congress and the
    Administration should not let the perfect be the enemy of the good.
    2.  Mr. Mann, you have indicated strong support for the establishment
            of an Ocean Resources Conservation and Assistance Fund (ORCA).
            Why do you believe that this source of funding is needed in
            addition to the Land and Water Conservation Fund?
        The Land and Water Conservation Fund has made an invaluable
    contribution to the protection of wildlife habitat and terrestrial
    ecosystems in the United States. By protecting riparian and coastal
    habitat, the Fund has also helped to protect and restore the health of
    aquatic ecosystems. But because the LWCF is focused on land
    acquisition, it is unable to address active conservation and management
    needs in the water. The public does not have to acquire submerged lands
    and waters of the oceans and Great Lakes in order to protect them: We
    already own it. But aquatic conservation and management programs are
    chronically underfunded and these needs are significant and growing. As
    a result, a source of funding dedicated to ocean, coastal and Great
    Lakes conservation and management is needed.
        The ORCA fund proposed by the CLEAR Act fulfills that need. It
    wisely creates two funding streams--one to support regional efforts to
    coordinate and improve ocean and Great Lakes management across
    government jurisdictional lines. The second is a program of competitive
    grants open to all qualified applicants to protect, maintain and
    restore the health of ocean, coastal and Great Lakes resources. This
    structure ensures that much-needed intergovernmental efforts receive
    appropriate support while also ensuring that the best conservation and
    management ideas receive support, regardless of their origin.
        There is an inherent logic, as well as a sense of fairness, in
    taking a portion of the revenue derived from development of ocean
    resources--revenue that mostly derives from non-renewable resources--
    and reinvesting it in the conservation and management of renewable
    resources. This is a prudent public investment that will strengthen our
    coastal environment and economy long after the nonrenewable resources
    are gone.
    3.  Mr. Mann, the uses of the ORCA fund authorized in the bill include
            support for Regional Ocean Partnerships like the ones that have
            been established in New England--the Northeast Regional Ocean
            Council. Can you elaborate on the importance of these regional
            ocean partnerships and the importance of individual state
            efforts like the one that Massachusetts is undertaking and talk
            about the need to further their efforts even while the larger
            federal Ocean Policy Task Force is underway?
        Both the U.S. Commission on Ocean Policy and the Pew Oceans
    Commission recommended regional approaches to more effectively manage
    coastal and ocean resources across jurisdictional boundaries. Such
    mechanisms would enable governments at all levels to work together to
    develop regional goals and priorities, and improve responses to
    regional needs. The Northeast Regional Ocean Council is one of six
    regional partnerships that have emerged to address these needs. Other
    interstate efforts include the West Coast Governors' Agreement on Ocean
    Health, Gulf of Mexico Alliance, Governors' South Atlantic Alliance,
    Mid-Atlantic Regional Council on the Ocean and the Great Lakes Regional
    Collaboration.
        Although these partnerships differ in structure, process and degree
    of development, they all focus on large-scale issues that require
    multi-state responses for success. Each partnership has established a
    platform for collaboration amongst the states, federal agencies, and
    non-governmental entities on the most pressing issues of importance to
    the region. They have benefited from participation by the federal
    agencies, with federal participation changing somewhat from region to
    region depending on the priority issues being addressed.
        The efforts of Massachusetts to improve ocean planning and
    management in state waters are an important step towards comprehensive,
    ecosystem-based coastal and ocean management. Competition for ocean
    space and resources is increasing and approaches need to be developed
    to assess needs and plan for sustainable use. The effects energy
    facilities, submarine cables, shipping routes, fishing, and recreation
    need to be managed in order to maximize the wide variety of benefits
    provided by our oceans. Coastal states are increasingly using marine
    spatial planning (MSP) as an effective tool, not only in Massachusetts
    but also in Rhode Island, Oregon and California. These states are in
    various stages of planning and early implementation, looking to develop
    increased capacity and collaborate regionally. Future efforts at ocean
    planning and management can learn from and build upon the work in
    Massachusetts and other states, taking advantage of the expertise and
    momentum developed to ensure more efficient use of resources by
    eliminating redundancies, focusing on management priorities, and
    building a common baseline and methodology for assessing and managing
    resources across jurisdictions.
        The federal government could provide leadership in three key areas
    to assist the states in these efforts. First, the establishment of the
    national ocean policy recommended by the interagency ocean policy task
    force would provide a clear mandate for federal leadership to protect
    oceans and Great Lakes. Second, the implementation plan for the policy
    and/or energy siting provisions of the CLEAR Act would provide an
    appropriate framework for working with the states to improve regional
    ocean governance. Third, funding to regional partnerships, in
    combination with specific project funding, through the ORCA fund would
    provide the necessary financing for all levels of government to
    collaborate to improve ocean and Great Lakes ecosystem health.
    Questions from the Minority:
    1.  Mr. Mann, do you believe that technology developed by American
            engineers has made oil production cleaner and more
            environmentally responsible over the last 4 decades?
        The Pew Environment Group has not formally evaluated progress in
    the average environmental performance of oil production technology.
    Even if there have been substantial improvements, routine discharges
    from production facilities and pipelines occur and are significant
    because petroleum is highly toxic to marine life even at low exposures.
    In addition, despite new techniques and technologies, catastrophic
    events in both the production and transportation of petroleum can and
    do happen, with disastrous effects on marine life. While this does not
    mean we should stop producing oil and gas from public lands and waters,
    it does require extreme caution, especially when such development may
    affect sensitive or unique habitats, and threatened or endangered
    species.
    2.  Do you believe that this environmentally responsible technology
            which we have developed through responsible drilling has been
            exported to other countries like Norway and Brazil in the
            development of their resources?
        I cannot validate your assertion that this technology is
    environmentally responsible. I am not an expert on the technology and I
    do not know whether, when and how it has been exported.
    3.  Mr. Mann, in your testimony you stated that you would oppose all
            development in the Arctic until sometime in the future is that
            correct?
        The Pew Environment Group does not oppose all oil and gas leasing
    in the Outer Continental Shelf but what is being proposed in the
    Chukchi, Beaufort and Bering Seas is unprecedented in both scale and
    pace, in an ecosystem that is restructuring itself faster than anywhere
    else on the planet due to climate change. As part of implementing a
    national ocean policy, we believe the Department of Interior should
    defer industrial activities in U.S. Arctic waters pending development
    and implementation of a comprehensive, precautionary research and
    monitoring plan that is based on a scientific assessment of the health,
    biodiversity, and functioning of Arctic ecosystems. This process must
    consider avoidance of important subsistence and ecological areas, spill
    response capability and best available technology.
        To ensure the protection and maintenance of Arctic marine
    ecosystems, government agencies should allow science and precaution to
    guide decisions about whether industrial activities occur in the Arctic
    Ocean and, if so, when, where, and how. This will help ensure that
    permitted industrial activities will be conducted sustainably, without
    harming Arctic ecosystems or the cultures dependent on them.
    4.  Do you believe that other nations with claims to the Arctic will
            delay their development of these resources?
        The Pew Environment Group is not in a position to make assumptions
    about other nations' oil and gas development plans.
    5.  Do you believe there is any benefit for America to move forward
            with Arctic leasing in order to develop the environmental and
            technical knowledge to export to other nations, like Russia who
            is moving quickly to develop their Arctic OCS?
        Despite leasing millions of acres in the Arctic in recent years,
    the United States continues to face challenges with responsible oil and
    gas development in that region. Spills occur frequently, and failures
    to detect and respond to spills have resulted in criminal charges. Each
    year according to the Alaska Department of Environmental Conservation,
    an average of 450 oil and other toxic spills occur on Alaska's North
    Slope as a result of oil and gas activity. In addition, no technology
    currently exists for cleaning oil in the presence of broken ice.
    Traditional oil spill response methods are ineffective in dynamic sea
    ice conditions and the kinds of weather conditions that are common in
    Arctic waters.
        In one area the United States has set an example for other Arctic
    nations on how to sustainably manage industrial activities in the
    Arctic Ocean. The North Pacific Fishery Management Council adopted a
    fishery management plan that prohibits commercial fishing unless and
    until new information demonstrates that commercial fishing can be
    conducted sustainably, without harming the ecosystems or peoples of the
    Chukchi and Beaufort seas. The Council acknowledged that current
    scientific information was insufficient to predict accurately the
    impacts of commercial fishing on ecosystems and subsistence activities
    in the Arctic, and decided to take a proactive, precautionary approach.
    This is the type of leadership the United States should continue to
    show the world.
    6.  Do you believe that windmills and oil and gas development are
            incompatible with each other or can Americans have all of the
            above energy production?
        The Pew Environment Group does not believe that production of
    energy from renewable sources, including wind and hydrokinetic energy,
    is incompatible with oil and gas development on public lands and in
    public waters. However, the production of all these forms of energy
    requires a certain footprint. These questions should be explored by
    experts in these fields in collaboration with the agencies that permit
    such activities. That is why we advocate a comprehensive marine
    planning and management process that can weigh the requirements and
    impacts of such industries against the requirements of other offshore
    resources and resource users, and recommend development options that
    meet the nation's energy needs while ensuring that environmental health
    is protected.
    7.  Do you support enforcement of the Migratory Bird Treaty Act?
        Yes.
    8.  A recent article in the Wall Street Journal highlighted that
            Oregon-based electric utility PacifiCorp paid $1.4 million in
            fines and restitution for killing 232 eagles in Wyoming over
            the past two years. ExxonMobil just settled a suit for $600,000
            regarding bird kills related to contact with crude oil or other
            pollutants in uncovered tanks or waste-water facilities on its
            properties. Do you believe those penalties are appropriate?
        We assume that these penalties were lawfully assessed under
    applicable law. If that is the case, then they are appropriate by
    definition. The Pew Environment Group does not support waiving
    applicable law to expedite energy development.
    9.  Michael Fry of the American Bird Conservancy estimates that U.S.
            wind turbines kill between 75,000 and 275,000 birds per year.
            Yet the Justice Department is does not bring cases against wind
            companies. Do you believe that wind companies should be
            compliant with the Migratory Bird Treaty Act as to how it
            relates to bird and bat kills?
        The Pew Environment Group has no expertise on enforcement of the
    Migratory Bird Treaty Act and is therefore not in a position to comment
    on decisions made by the Justice Department regarding whether and how
    to prosecute alleged violations of that Act.
                                     ______

        The Chairman. Thank you. Mr. Squillace.

     STATEMENT OF MARK SQUILLACE, PROFESSOR AND DIRECTOR, NATURAL
       RESOURCES LAW CENTER, UNIVERSITY OF COLORADO SCHOOL OF LAW

        Mr. Squillace. Thank you, Mr. Chairman and Members of the
    Committee. I appreciate the opportunity to appear before you
    this morning to talk about the CLEAR Act of 2009.
        My name is Mark Squillace. I am a Professor of Law and the
    Director of the Natural Resources Law Center at the University
    of Colorado Law School.
        Over the course of my career, which includes two stints at
    the Department of the Interior, I have worked on a range of
    natural resources issues, and I have especially focused on the
    need to promote better policies for mining development on
    public lands.
        While I generally support the goals of the proposed
    legislation, I am here today to talk about two particular
    provisions of the proposed legislation that relate to mining on
    the public lands. The first appears at Section 307 concerns
    coal mine methane. The second provision, which appears at
    Section 511, involves a proposal to remove uranium from the
    general mining law and place it under the Mineral Leasing Act
    as just mentioned by Mr. Mann. I would like to address each of
    these issues separately.
        First, on the issue of coal mine methane, underground mines
    are a major source of methane in the United States which we all
    know is a potent greenhouse gas. This coal mine methane is also
    a serious hazard to underground mines and for that reason
    methane from such mines has historically been vented into the
    atmosphere. In recent years, however, mining companies have
    begun to appreciate the economic value of capturing and selling
    this methane that was otherwise being vented. This obviously
    has enormous environmental benefits as well since it allows the
    captured methane to be used as a fuel and it assures that the
    methane will be converted to carbon dioxide and other compounds
    with a much smaller greenhouse gas footprint.
        Unfortunately, the current law governing Federal coal
    leases effectively precludes this common sense solution. The
    coal mine methane that we are talking bout is essentially
    embedded in the coal. Nonetheless, the Supreme Court has
    interpreted Federal law in a way that requires the coal to be
    leased separately from the gas, and when the government leases
    the coal they are reluctant, of course, to lease that gas to a
    separate party because of the conflicts that would likely
    create.
        Further complicating this matter, the Interior Board of
    Land Appeals has held that methane gas is not even subject to
    leasing under the Mineral Leasing Act because it is not a
    deposit of gas for purposes of that law. In order to understand
    the problem here, I would like to just describe an example from
    Colorado.
        The West Elk Mine on national forest lands near Somerset,
    Colorado, has historically released between 13 and 17 million
    cubic feet of methane each day. In terms of greenhouse gases,
    it is about the equivalent of about a 300 megawatt coal-fired
    power plant. It is about 3 percent of total emissions in
    Colorado of greenhouse gases, and it is enough to heat nearly
    50,000 homes each year.
        Section 307 of the CLEAR Act solves these problems by
    simply including embedded coal methane in the Federal coal
    lease. In exchange for granting the coal lease or the rights to
    this resource the lessee would be obliged to recover the
    methane released during the mining to the maximum extend
    possible.
        Moreover, for deep mining operations where most of this
    recoverable methane exits, the Secretary would be required to
    analyze the feasibility of methane recovery before issuing the
    lease.
        Everyone wins under this proposal. The coal lessee receives
    the opportunity to capture and sell a valuable fuel resource.
    The Federal government receives new royalties from the sale of
    this gas, and the public is assured of a significant reduction
    of greenhouse gas emissions. For all these reasons, I applaud
    the Committee for including this provision in the legislation
    and I urge its passage.
        Let me turn briefly to the public lands uranium issue as
    well. Section 511 of the CLEAR Act would convert uranium from a
    locatable mineral under the general mining law to a leasable
    mineral under the Mineral Leasing Act. This is a good idea for
    a number of reasons.
        First, under the mining law claimants must locate claims as
    either loads, which are veins of ore, or as placer deposits,
    unconsolidated deposits usually carried to their location by
    wind or water. Uranium deposits, however, do not easily fit
    into either category and thus the courts have struggled with
    how best to characterize these deposits.
        Uranium also logically fits better under the Leasing Act
    because all the other energy minerals of fuels and fuel
    minerals--coal, oil and gas, tar sands, oil shale and
    geothermal resources--are governed by the leasing program.
    Leasing also enables the government to better protect the
    government's fiscal and environmental rights or interests.
        On the fiscal side, Section 511 would end what now amounts
    to a subsidy of domestic uranium industry. As this Committee
    well knows, the general mining law allows publicly owned
    minerals like uranium to be taken from our lands without a
    royalty or other payment to the treasury. However, there is no
    strategic argument for subsidizing domestic uranium production.
    Friendly countries such as Australia and Canada have abundant
    uranium resources that can often be developed far more cheaply
    than U.S. uranium.
        The environmental reasons for this proposal are even more
    compelling. Past uranium milling and mining on our public lands
    have left a huge bill that the taxpayers will have to pay to
    clean up. At a single large abandoned mill tailing pile on the
    banks of the Colorado River near Moab, Utah, for example, the
    Department of Energy is currently in the midst of a problem
    that is likely to cost more than a billion dollars. This is
    just one example of the 50 uranium mills on lands of the United
    States, 24 have now been abandoned and they are all under the
    jurisdiction now of the Department of Energy, which will likely
    incur millions of dollars to clean up these sites.
        Finally, Congress should recognize that uranium mining
    poses special health and safety hazards that do not generally
    exist with other forms of mining. The tragic legacy of uranium
    mining on the Navajo Indian Reservation which has led to the
    premature death of many native workers is perhaps the most
    profound example of this reality.
        A leasing system, of course, will not necessarily prevent
    future tragedies like this, but it offers the promise for a
    more proactive management both for siting future uranium mining
    projects and for assuring that they are carried out in a safe
    and environmentally sound manner.
        Thank you for the opportunity to appear today before the
    Committee. I look forward to your questions.
        [The prepared statement of Mr. Squillace follows:]

          Statement of Mark Squillace, Professor of Law and Director,
       Natural Resources Law Center, University of Colorado School of Law

        Thank you for the opportunity to appear before the House Committee
    on Natural Resources to share my views on the Consolidated Land,
    Energy, and Aquatic Resources Act of 2009. My name is Mark Squillace
    and I am a professor of law and the Director of the Natural Resources
    Law Center at the University of Colorado Law School. For more than 25
    years, the Natural Resources Law Center has engaged policymakers to
    help find efficient and environmentally sound solutions to natural
    resource problems.
        Over the course of my professional career, which includes two
    stints working on mining and related issues at the Department of the
    Interior, I have worked on a range of natural resources issues, and I
    have been especially focused on the need for better policies governing
    mineral development. While I generally support the efficiency,
    transparency, and accountability goals of the proposed legislation, I
    am here today primarily to offer my support for two particular
    provisions in the proposed legislation that relate to mining on the
    public lands. The first, which appears at Section 307 of the proposed
    legislation, concerns coal mine methane. The second provision, which is
    found at Section 511, involves a proposal to remove uranium from the
    General Mining Law and place it under the Mineral Leasing Act. I will
    address each issue separately.
    Coal Mine Methane
        As this Committee knows, methane, commonly known as natural gas, is
    a potent greenhouse gas that is approximately 23 times stronger than
    CO2. Coal mining releases about 10% of all anthropogenic
    sources of methane (CH4) in the United States, and about 90% of
    fugitive CH4 emissions come from the coal mining sector, primarily
    underground mines. Deep coal deposits have more CH4 because of greater
    overburden pressure. See Identifying Opportunities for Methane Recovery
    at U.S. Coal Mines, EPA 430-K-04-003, 1-1 (2005).
        This coal mine methane (CMM) is also a serious hazard to
    underground miners and for that reason, methane from such mines has
    historically been vented into the atmosphere. In recent years, however,
    mining companies have begun to appreciate the economic value of
    capturing and selling the methane that was otherwise being vented. In
    recognition of the environmental benefits associated with CMM capture
    and use, the Environmental Protection Agency has established the
    Coalbed Methane Outreach Program (CMOP). CMOP is a voluntary program
    designed to reduce methane emissions from coal mining activities, by
    removing barriers to CMM recovery and promoting its profitable use. See
    http://www.epa.gov/cmop/.
        Unfortunately, the current law governing federal coal leasing is a
    barrier to CMM recovery by creating complications and obstacles that
    serve no one's interest. Although coal mine methane is essentially
    embedded in the coal resources that a federal coal lessee develops, the
    United States Supreme Court has interpreted federal law to separate
    ownership of the coal from ownership of the embedded methane gas. As a
    result, lessees of federal coal do not own the gas, and the gas can
    only be developed if it is separately leased. Amoco Production Co. v.
    Southern Ute Indian Tribe, 526 U.S. 865 (1999). The Southern Ute
    decision raises significant practical questions about how best to order
    development to maximize recovery of both the coal and the gas
    resources, as well as important legal questions about the coal
    developer's potential liability to the gas owner for any releases of
    methane that might have been captured by the gas owner had the coal not
    been developed first.
        On most public lands disposed of after 1916, the federal government
    reserved all of the minerals, including the coal and the gas. Even on
    lands where the U.S. owns both the coal and the gas, the Mineral
    Leasing Act (MLA) thwarts recovery and development of the coal and gas
    resources because the coal and the gas resources are subject to
    separate competitive leasing provisions. Compare 30 U.S.C.
    Sec. Sec. 201 and 226. Moreover, under Southern Ute, a lessee of
    federal coal does not own or have the right to develop the gas.
    Conceivably the federal government could lease the gas in a separate
    competitive leasing process, but a gas lease held by a separate entity
    could interfere with the operation of the coal lease, as well as the
    safety of coal miners in an underground mining situation.
        Further complicating this matter, the Interior Board of Land
    Appeals (IBLA) recently held that methane gas from a coal mine is not
    subject to leasing under the MLA because coal mine methane is not a
    ``deposit'' of oil or gas for purposes of the MLA. Vessel Coal Gas,
    Inc., 175 IBLA 8, 25 (2008). While some commentators have suggested
    that coal lessees might simply capture gas and sell it as an incident
    to coal mining, the legal risks pose a strong disincentive to such
    development by the mining company. See L. James Lyman, Coalbed Methane:
    Crafting a Right to Sell From an Obligation to Vent, 44 Colo. L. Rev.
    393 (2007); Jeff Lewin, et al., Unlocking the Fire: A Proposal for
    Judicial or Legislative Determination of the Ownership of Coalbed
    Methane, 94 W. Va. L. Rev. 563 (1992).
        To better appreciate the extent of the problem of methane venting,
    the Committee should consider the circumstances at the West Elk Mine on
    national forest land near Somerset, Colorado. Historic methane releases
    from the mine have averaged 13-17 million cubic feet per day. In terms
    of greenhouse gases this is about the amount emitted by a 300-400 MW
    coal-fired power plant. When mining begins on a new coal seam, methane
    releases will drop to about 7 million cubic feet per day, which is
    still the equivalent of nearly 1 million metric tons (MMT) of
    CO2 per year, or enough methane to heat more than 48,000
    homes each year. Indeed, methane releases from this single mine are
    equal to nearly 3% of the total greenhouse gas emissions from all
    electric utility plants in the State of Colorado. Final EIS: Deer Creek
    Shaft and E Seam Methane Drainage Wells Project, August 2007, available
    at, http://www.fs.fed.us/r2/gmug/policy/minerals/deer_creek/
    Deer_Ck_Shaft_
    and_ESeam_MDW_Project_FEISr2.pdf.
        Several environmental groups have challenged the Forest Service
    decision to approve new methane gas venting at the West Elk Mine in
    court. Apparently in response, the BLM (which manages coal leases on
    national forest lands) has approved an addendum to the coal lease that
    authorizes the lessee ``to drill for, extract, remove, develop,
    produce, and capture for use or sale any or all of the coal mine
    methane'' from the leased lands. It further provides, however, that the
    lessee is not required to capture the CMM if it is not economically
    feasible to do so, ``independent of the activities related to mining
    coal.'' Finally, the addendum imposes a 12.5% royalty on CMM that is
    captured for use or sale, except that no royalty is imposed for methane
    use that benefits mineral extraction at the West Elk mine site.
        While the BLM deserves credit for trying to address this issue, its
    resolution raises two significant problems. First, the government does
    not appear to have any legal authority to lease gas outside the scope
    of the Mineral Leasing Act, and IBLA's Vessel Coal Gas decision holds
    that CMM is not subject to leasing under the MLA. Second, the decision
    to allow the lessee to continue to vent CMM unless it is economically
    feasible independent of the mining operation makes no sense. No other
    environmental restriction on mining is required to meet such an
    economic threshold and none should be imposed for CMM capture,
    especially given the growing concern over greenhouse gas emissions.
        Section 307 of the Consolidated Land, Energy, and Aquatic Resources
    Act of 2009 solves these problems in a straightforward manner, by
    including embedded coal mine methane in the federal coal lease. In
    exchange for granting the coal lessee the rights to this valuable
    resource, the lessee would be obligated to recover the methane released
    during mining to the maximum extent feasible. Moreover, for deep mining
    operations where most of the recoverable methane exists, the Secretary
    would be required to analyze the feasibility of methane recovery before
    issuing any lease. The Secretary would also be required to consider the
    possibility of flaring methane gas if the methane cannot be recovered
    feasibly. Flaring would effectively convert the methane to
    CO2, which would significantly reduce the greenhouse impact
    from methane releases. While the intent of Section 307 seems to be to
    require flaring if flaring is feasible but recovery is not, the
    Committee should consider adding a sentence to Section 307 to clarify
    this intent.
        By including in every federal coal lease any embedded gas that is
    owned by the federal government, and by requiring the development of
    the coal mine methane at federal coal leases whenever it is
    economically and technically practical to do so, Section 307 of the
    Consolidated Land, Energy, and Aquatic Resources Act of 2009 recognizes
    the significant greenhouse gas implications of methane venting at coal
    mines and proactively promotes a policy to maximize recovery of CMM in
    conjunction with mining activities. I applaud the Committee for
    including this provision in the proposed legislation and strongly urge
    its passage.
    Public Lands Uranium Leasing
        Section 511 of the Consolidated Land, Energy, and Aquatic Resources
    Act of 2009 would convert uranium from a locatable mineral under the
    General Mining Law of 1872 to a leasable mineral under the Mineral
    Leasing Act. I strongly support this proposal for several reasons.
        First, uranium deposits have never fit particularly well under the
    General Mining Law. Uranium deposits tend not to fit the classic
    definition of either a lode or placer claim and for that reason courts
    have struggled with how best to characterize these deposits for
    purposes of the General Mining Law. See e.g., Globe Mining Co. v.
    Anderson, 318 P.2d 373 (Wyo. 1957). Likewise, uranium deposits, and
    thus associated uranium mining operations, tend to occur over large
    relatively uniform tracts of lands that lend themselves to the kind of
    advanced planning that can be accomplished through a leasing program.
        Uranium also logically fits with the other leasable minerals. All
    of the other energy minerals or fuels--coal, oil and gas, tar sands,
    oil shale, and geothermal resources--are governed by leasing systems,
    most dating back to 1920. Leasing enables the government to better
    protect the public's fiscal and environmental interests. Past and
    current controversies about uranium mining around such national
    treasures as the Grand Canyon underscore how ill-suited the Mining Law
    is to govern uranium development. Indeed, some federal uranium is
    already subject to leasing rather than to the Mining Law--a result of
    post-World War II withdrawals of some federal land on the Colorado
    Plateau that vested the old Atomic Energy Commission with jurisdiction,
    now exercised by the Department of Energy.
        The leasing program established under Section 511 would also end
    the unwarranted subsidy to the domestic uranium industry, and
    consequently to the civilian nuclear power industry. Under the General
    Mining Law publicly-owned uranium is mined without a royalty or other
    payment to the treasury. The legacy of uranium mining and milling on
    our public lands has also left a huge cleanup bill for the taxpayer. At
    a single large abandoned mill tailings pile on the banks of the
    Colorado River near Moab, Utah, for example, the Department of Energy
    currently estimates clean up costs from $844 million to $1.084 billion.
    See http://www.em.doe.gov/pdfs/Final.Moab.Report.pdf. Many other
    uranium mines on public lands have been abandoned and millions of
    dollars more will be needed to reclaim these sites. Moreover, uranium
    mines pose significant health and safety hazards, as shown by the
    tragic legacy on the Navajo Indian Reservation, where mining authorized
    by the Department of Energy contaminated water supplies and led to a
    dramatic rise in the incidence of lung cancer, especially among Indian
    miners. See e.g., Doug Brugge and Rob Goble, The History of Uranium
    Mining and the Navajo People, American Journal of Public Health, Vol.
    92, No. 9 (September, 2002). A leasing system is not a cure-all, but it
    can provide for better environmental management than is usually
    accomplished under the General Mining Law. A leasing program for
    uranium will also better ensure that uranium development occurs only on
    those public lands that are suitable for such use and that consumers of
    uranium will pay the full cost of uranium development and reclamation.
        Finally, there is no strategic argument for subsidizing domestic
    uranium production. Friendly countries such as Canada and Australia
    have abundant uranium resources that can often be developed far more
    cheaply than U.S. uranium. See http://www.wise-uranium.org/umaps.html.
        A few minor changes to the current language in Section 511 would
    further improve it. First, subsection (f)(2) properly requires that
    leasing units of not more than 2,560 acres be ``as nearly compact as
    possible.'' For management reasons, lease tracts should also conform to
    the public land survey system to the extent possible.
        Second, at the end of subsection (j)(1) (page 67, line 19 of the
    bill), a phrase should be added to clarify what appears to be the
    committee's intent to adjust the royalty for pre-existing uranium
    mining properties from 6.25% to 12.5%. The phrase ``at which time the
    royalty shall become 12.5% of the value of production,'' would
    accomplish this result.
        Third, subsection (j)(2), which addresses the status of pre-
    existing uranium mining claims, should be changed to eliminate the one-
    year gap between the deadline for applying for leases and the
    expiration of the claims. Under subsection (j)(1), the owner of any
    uranium claim may apply for conversion of the claim to a lease within
    two years from the date of enactment of the law. The Secretary would
    then have one year to decide whether to approve a lease. Whether or not
    a pre-existing claimant applies for a lease within two years, all
    affected claims should be deemed null and void immediately after the
    two-year deadline has expired. There is no good reason to extend the
    claims of claimants who fail to file a lease application for a third
    year. The Secretary is obliged to process the lease applications of
    claimants who file them, and make a final decision as to whether to
    issue a lease, whether or not any pre-existing claims have expired.
    These changes can be accomplished by amending section (j)(2) to read as
    follows:
            (2) Other Claims Extinguished--All mining claims located for
            uranium on Federal lands shall become null and void by
            operation of law, immediately following the expiration of the
            two-year deadline for lease applications established under
            subsection (j)(1); provided, however, that nothing in this
            language shall alter the Secretary's obligation to process and
            resolve lease applications filed for pre-existing uranium
            mining claims.
        Finally, there is a minor typographical error on page 64, line 4.
    The fifth word ``is'' should be removed.
        Thank you for the opportunity to appear today to offer my views on
    the provisions in the Consolidated Land, Energy, and Aquatic Resources
    Act of 2009 relating to coal mine methane and uranium leasing on public
    lands. I am happy to answer your questions relating to my testimony.
                                     ______

     Supplemental Testimony submitted by Mark Squillace, Professor of Law
      and Director, Natural Resources Law Center, University of Colorado
     School of Law on the Consolidated Land, Energy, and Aquatic Resources
                                  Act of 2009

        Dear Congressman Rahall:
        I am grateful to have had the opportunity to appear before your
    Committee to discuss my views on the CLEAR Act. This letter supplements
    my written and oral statements of September 17, 2009 and responds to
    various questions from members of the Committee.
    Question:
        Congressman Rahall asked whether I could provide the Committee with
    information on the total amount of methane emissions from coal mines,
    as well as information about operations that currently develop methane
    alongside their coal operations.
    Answer:
        The EPA has gathered substantial information about coal mine
    methane as part of its voluntary Coalbed Methane Outreach Program
    (CMOP), which was referenced in my primary written testimony. EPA's
    CMOP website offers an estimate of about 115 billion cubic feet of
    methane gas emitted from active or abandoned underground coal mines
    each year. See http://www.epa.gov/cmop/basic.html. EPA also estimates
    that currently 11 coal mine methane recovery projects are operating at
    15 active underground coal mines, and that 20 other methane recovery
    projects are operating at about 30 abandoned underground coal mines.
    http://www.epa.gov/cmop/accomplishments.html. In terms of greenhouse
    gas emissions, the EPA estimates that the methane recovered from these
    projects is the equivalent of removing over 39 million passenger
    vehicles from the roads for one year, shutting off more than 46 coal
    fired power plants for one year, or providing electricity to more than
    28 million homes for one year! Id.
        EPA has also identified numerous existing mines where coal mine
    methane is currently being recovered as well as other mine methane
    recovery opportunities in 12 major coal producing states, including
    Colorado, Illinois, Pennsylvania, and West Virginia. See Identifying
    Opportunities for Methane Recovery at U.S. Coal Mines: Profiles of
    Selected Gassy Underground Coal Mines 1999-2003, EPA 430-K-04-003,
    available at, http://www.epa.gov/cmop/docs/profiles_2003_final.pdf. For
    example, Peabody's Federal No. 2 mine in West Virginia has had a joint
    venture with Dominion Gas Company to recover natural gas and deliver it
    to a gas pipeline. Id. at p. 3-5.
    Questions:
        Congressman Duncan posed several questions relating generally to
    energy development on public lands including whether the bill would
    drive up energy costs, whether it gives an advantage to foreign
    companies, and whether it disadvantages small companies.
    Answers:
        These are important questions and while it is impossible to answer
    them with certainty until the provisions are implemented, I would like
    to offer several observations. First, any additional expense associated
    with energy development will necessarily drive up the cost of energy
    production. Of course, the rise in cost could be quite modest or it
    could be large, but the important policy question is whether the
    benefits achieved by the proposed legislation are worth the costs. When
    we allow energy development on our public lands, however, without fully
    understanding the consequences of that development, as for example,
    when we avoid NEPA compliance, it is not even possible to fully assess
    the costs and benefits. Given the significant risks associated with
    most forms of mineral development, an understanding of the consequences
    of that development is critical to ensuring a reasoned decision that
    maximizes the benefits of development and minimizes any adverse
    consequences. For similar reasons, when the public subsidizes uranium
    mining by failing to require market rate royalties to be paid, it
    promotes mineral development that in a free market might not be
    economical. This does not serve the public interest. The CLEAR Act does
    a good job of promoting NEPA compliance and of assuring a fair return
    to the public for the leasing of its uranium deposits. In this way, it
    promotes mineral development where it is warranted based upon the costs
    and benefits of the development and where such development can fairly
    compete in the marketplace.
        Second, the notion of foreign producers is somewhat ambiguous. As
    was noted at the hearing, Uranium One is actually a Canadian company
    that has operations in the United States. I assume that Congressman
    Duncan's concern was about domestic mineral production and not about
    whether the mine operator is a domestic company. The question then is
    whether companies producing uranium in the United States are placed at
    an unfair competitive disadvantage by the proposed legislation. While
    imposing a royalty obligation on a uranium mine on public lands imposes
    a cost not currently borne by the company, it is a fair cost that
    reflects market principles. As such, the uranium royalty provisions in
    the bill do not unfairly disadvantage uranium miners.
        Finally, some costs may disadvantage smaller companies that lack
    the capital to engage in a major mining operation. But under-
    capitalized small companies are often the ones that have walked away
    from mining operations in the past, leaving a legacy of polluted land
    and water, and a massive clean-up bill that will likely be borne by the
    taxpayer. Federal policy should not unfairly constrain small companies
    from entering the uranium mining business but neither should it
    encourage entry by companies that lack the wherewithal to guarantee
    well-planned and environmentally sound mining operations that fully
    reclaim the mine site once mining is completed. The measures in the
    CLEAR Act will afford the federal leasing authority an opportunity to
    make judgments about the capacity of the mining operator to meet these
    obligations before a lease is issued.
    Question:
        Congresswoman Lummis posed two questions regarding uranium mining.
    First she asked what regulatory framework currently exists for uranium
    mining on public lands. She also asked what incentives, if any, exist
    under the bill for uranium mining.
    Answer:
        Uranium is currently treated as a locatable mineral under the
    General Mining Law of 1872. As such, a mining company can go out on
    federal lands that are open to location under the law and stake mining
    claims over any such land where valuable mineral deposits are found.
    Before developing those minerals, the company must submit and obtain
    approval from the relevant federal land management agency for a plan of
    operations. The relevant BLM regulations are found at 43 CFR subpart
    3809. The Forest Service rules are at 36 CFR subpart 228. The rules are
    quite similar in mandating compliance with various environmental and
    reclamation standards. In certain situations, exploration activities
    also require prior approval by the agency.
        The CLEAR Act does not directly offer incentives for uranium mining
    but it does provide a security of tenure for a mining company that is
    simply not available under the General Mining Law. A mining claimant is
    always subject to having its claims contested either by the federal
    government or an outside party, and must be prepared to demonstrate at
    all relevant times that its claims support a mineral deposit of
    sufficient value to justify ``a person of ordinary prudence--in the
    further expenditure of his labor and means, with a reasonable prospect
    of success, in developing a valuable mine....'' Castle v. Womble, 19
    Land Dec. 455 (1894). Given the volatility in the uranium market, this
    is a risky proposition. A mine that might meet this ``prudent person''
    test when uranium is selling at $140/pound, might very well not meet
    the test when uranium drops to $45/pound. Thus, to a large extent, the
    validity of any given group of uranium mining claims may be subject to
    the vagaries of the uranium market. By contrast, under the CLEAR Act, a
    uranium lessee would be assured of tenure for the term of the lease and
    so long thereafter as the mine is producing uranium in paying
    quantities. The security of tenure provided under the CLEAR Act might
    well prove a powerful incentive for further uranium development.
        I hope that these answers are helpful to the Committee as it moves
    this bill forward. I would like to thank the Committee once again for
    affording me the honor of sharing my views on this important
    legislative initiative.
                                     ______

       Response to questions submitted for the record by Mark Squillace,
          Professor of Law, and Director, Natural Resources Law Center

    Questions from the Majority:
    1.  Mr. Squillace, you testified that leasing enables the government to
            ``better protect the public's fiscal and environmental
            interests.'' In fact, the DOE's uranium leasing program, when
            it started in the 1940's, was started with the express intent
            of ``ensuring an adequate supply of uranium ore for the
            nation's defense program.'' How might a leasing program better
            position the U.S. to manage its uranium reserves for the long-
            term than a claim-staking approach under the 1872 Mining Law?
        Answer: As I mentioned in my original testimony, U.S. strategic
    interests are not at stake in securing an adequate supply of uranium.
    The largest global reserves of uranium are found in countries that are
    very friendly to the U.S., including Australia and Canada, and uranium
    can be developed far more cheaply in those countries than in the United
    States. See http://www.wise-uranium.org/umaps.html (Click on the data
    set that shows reasonably assured resources of uranium at $40/kg U. The
    resulting map shows substantial recoverable resources at this price in
    Canada and Australia but none in the United States.) Assuming, however,
    that the United States concluded that it was necessary to secure an
    adequate supply of domestic uranium, a leasing program is far
    preferable to a claim staking program for several reasons. First, a
    leasing program gives the federal government control over the location
    and scope of uranium development, as well as who develops the minerals
    and for what purpose. In this way, a leasing program can be targeted
    quite specifically to develop particular American uranium reserves, and
    to manage that development in the country's best interests. By
    contrast, the claim-staking program under the 1872 Mining Law, severely
    limits the ability of the government to control where, how, and who is
    developing the uranium. Claims can be located on any lands open for
    location, and while the government must approve a plan of operations
    for mining, many mining companies seem to take the view that the plan
    of operations cannot be so onerous as to prevent them from making a
    reasonable profit. While this begs the question as to whether the
    mining company has valid claims, it certainly invites conflict and
    possibly litigation over uranium development. Moreover, while the
    mining law generally denies the right of an alien to locate a mining
    claim, claims can be sold to non-citizens, Manuel v. Wulff, 152 U.S.
    505 (1894), and domestic corporations can locate mining claims, even if
    they are wholly owned by a foreign company. 43 C.F.R. 3830.3(c) (2008).
    Thus, the 1872 Mining Law offers companies based in foreign countries
    the opportunity to stake all of the uranium deposits in the United
    States. Indeed, most of the current uranium mining operations in the
    United States are owned by foreign corporations. See George A. MacLean,
    Clinton's Foreign Policy in Russia: From Deterrence and Isolation to
    Democratization and Engagement 79, note 30 (2006).
    2.  Mr. Squillace, can you share any information or analysis on the
            potential job or economic impacts of Section 511, which makes
            uranium a leasable mineral subject to a royalty, including the
            job creation benefits of funding uranium cleanup with the
            royalty.
        Answer: The potential for job creation and economic impacts from
    domestic uranium mining is necessarily speculative given the radical
    fluctuations in the price of uranium over the past several years.
    Currently, it is estimated that uranium mining creates fewer than 500
    jobs in the United States. MacLean, supra at 79, note 30. A leasing
    system with the benefit of a royalty that might be dedicated, in whole
    or in part, to reclaim abandoned mines has several advantages in terms
    of job creation and economic impact. First, a leasing system makes
    development more predictable than it is under the 1872 Mining Law.
    Lessees have a relatively short window of time to develop or lose their
    lease. A mining claimant, by contrast, can hold a claim indefinitely,
    and for speculative purposes. Moreover, revenues made available from a
    lease royalty program to clean up abandoned mines could create many
    jobs and have a substantial economic impact. Currently, there are an
    estimated 500,000 abandoned mines in the United States. http://
    www.abandonedmines.gov/ep.html. Reclaiming these mine sites requires
    heavy, earth-moving equipment and skilled personnel. The current
    economic downturn means that much of this heavy equipment is currently
    sitting idle and could be readily made available for this work. The
    skill levels needed to operate this equipment is sufficiently high that
    well-paid jobs are likely to be created. While some level of advance
    planning is necessary to assure reclamation success, most of these
    sites are otherwise ``shovel ready'' and thus offer the opportunity for
    a relatively quick boost to the economy.
    Questions from the Minority:
    1.  Mr. Squillace, do you know what percentage of domestic uranium is
            imported. Do you believe that import dependence on uranium is
            good for the American economy?
        Answer: The United States currently produces about 8% of its
    domestic uranium needs. However, since uranium can generally be
    produced more cheaply in stable foreign countries like Australia and
    Canada, the domestic nuclear power industry, which provides about 20%
    of U.S. electricity needs, benefits greatly from having available to it
    a lower cost supply of uranium from stable, friendly countries. This in
    turn benefits the U.S. economy. Moreover, since most uranium mining in
    the U.S. uses the in situ leaching (ISL) method, very few permanent
    jobs are created by domestic uranium mining. Current estimates are that
    uranium mining in the United States supports fewer than 500 permanent
    jobs. MacLean, supra at 79, note 30. Far more jobs would likely be
    created by collecting a royalty from public lands uranium mines, and
    using that royalty to reclaim abandoned mined lands.
    2.  Do you believe that our dependence on foreign oil is good for our
            economy?
        Answer: I firmly believe that our long-term reliance on foreign oil
    supplies is not good for our economy. More importantly, it is not good
    for our national security. Unlike uranium, our foreign oil supplies
    largely come from less stable countries with a more hostile attitude
    toward U.S. interests. While it makes sense to use foreign oil when it
    is available to us so that we can conserve our domestic supplies for
    the time when foreign oil may not be so readily available, the most
    intelligent way to minimize our long-term reliance on foreign oil, is
    to dramatically improve our fuel economy standards for motor vehicles.
    Viewed from the perspective of the past 30 years, our current efforts
    to improve fuel economy have been a dismal failure. In my opinion, the
    Congress and the Department of Transportation bear substantial
    responsibility for this failure.
        In 1975, Congress passed the Energy Policy Conservation Act, which
    entrusted the Department of Transportation with the authority to
    establish Corporate Average Fuel Economy (CAFE) standards. The near-
    term goal for CAFE standards was a doubling of new car fuel economy by
    model year 1985. Standards were established requiring that cars built
    after model year 1985 achieve at least 27.5 mpg, but that standard
    remained largely unenforced until model year 1990. Moreover, a
    significant shift in consumer preferences toward light trucks and SUVs
    during the 1980's and 1990's meant that the savings in oil production
    that were expected from the higher CAFE standards were largely
    unrealized because light trucks and SUVs were subject to lower CAFE
    standards. Most tragically, efforts by some to further increase the
    CAFE standards in 1990's and most of the 2000's were rebuffed. Finally
    in 2007, Congress passed the Energy Independence and Security Act,
    which requires that the current CAFE standards be improved to at least
    35 mpg by 2020. Under President Obama, the Department of Transportation
    has adopted even more aggressive standards. But even with these
    improvements, the United States will continue to lag far behind the
    CAFE standards established by Japan, the European Union, and even
    China. See http://www.pewclimate.org/docUploads/Fuel%20
    Economy%20and%20GHG%20Standards_010605_110719.pdf at page 24.
        If the United States were really serious about energy security we
    would not have allowed more than 20 years to pass without improving our
    CAFE standards. Through very gradual improvements over that time, we
    could now be driving cars that easily exceed 40 mpg. This would have
    dramatically decreased our dependence on foreign oil and perhaps more
    importantly, would have assured American leadership in automobile fuel
    efficiency technologies. We are now in a race with Japan, China, and
    Europe over efficiency technologies and it is not at all clear that
    this is a race we will win. Still, we are on the cusp of some dramatic
    breakthroughs with battery and hybrid technologies that could
    significantly improve our fuel economies to levels that could not have
    been imagined just a decade ago. If we fail to seize this moment to
    demand that these technologies be deployed as quickly as possible, then
    it will be clear that we are still not serious about our energy
    security. We may also miss the opportunity to claim a leadership role
    in producing the fuel efficient cars of the future. That would truly be
    devastating for our economy.
    3.  Do you believe that the nations we import uranium from do a better
            job of protecting the environment than the United States?
        Answer: Although I spent a year in Australia in the mid 1990's and
    studied several Australian mining operations, I do not have specific,
    current knowledge about either Australian or Canadian mine reclamation
    practices. All three countries, however, have laws that require the
    assessment of environmental impacts in advance of issuing federal
    permits, and, on paper at least, Canada's law is superior to that of
    the United States in so far as it requires that developers carry out
    all reasonable mitigation of adverse environmental impacts. (In the
    U.S. we require only that mitigation be studied.)
        It is my understanding that most modern uranium mining operations
    use the ISL method, which involves far less surface disturbance and
    waste production than conventional mining. Nonetheless, the ISL method
    can pose significant risks to groundwater, and the United States has
    not been free of such problems. See Gavin A. Mudd, Critical Review of
    Acid in In Situ Leach Uranium Mining: 1. United States and Australia,
    41 Environmental Geology 390-403 (2004), available at, http://
    www.springerlink.com/content/bqle04wx71kkjgpv/fulltext.pdf
        Ultimately, I cannot assess with specificity the relative merits of
    U.S. environmental compliance as compared with that in other uranium
    producing countries like Canada and Australia. Nonetheless, the United
    States is clearly not where it ought to be regarding environmental
    protection from uranium mining. A recent news story in the Casper Star
    Tribune, for example, describes significant environmental violations at
    the Smith-Highland Ranch Mine near Douglas, Wyoming. See Dustin
    Bleizeffer, Probe Finds Uranium Mining Violations, Casper Star Tribune,
    April 4, 2008, available at, http://www.trib.com/news/state-and-
    regional/article_b8f9b03a-d250-51f5-a1fc-f34646cfc567.html
        Thank you for the opportunity to offer these additional comments
    about the Consolidated Land, Energy, and Aquatic Resources Act of 2009.
    I am happy to answer any additional questions you may have relating to
    these answers or to my other testimony.
                                     ______

        The Chairman. Mr. Hodgskiss.

     STATEMENT OF LYLE E. HODGSKISS, RANCHER/SENIOR LOAN OFFICER,
                ROCKY MOUNTAIN FRONT ADVISORY COMMITTEE

        Mr. Hodgskiss. Good morning. I would like to thank Chairman
    Rahall for the invitation to testify this morning as I consider
    it a great privilege. My testimony this morning is very
    specific to Title 4 of the bill which deals with the full and
    permanent funding of the Land and Water Conservation Fund. I am
    here representing the Rocky Mountain Front Advisory Board to
    the Natures Conservancy.
        On the Powerpoint you will see the general project area
    that I will be speaking of as well as a rolling slide show that
    will give you a glimpse of the landscape that I am working in.
        As a community banker and a third generation rancher in
    Montana, I have no particular qualifications to be here in
    front of you this morning other than my real live personal
    experience working with a collaborative conservation effort,
    employing conserving easements with partial funding from land,
    water, and conservation funds. This testimony is meant to
    provide you with a grass roots example of the kind of project
    that can be implemented with a permanent funding as proposed in
    this bill.
        The Rocky Mountain Front project, in my opinion, is a real
    win/win/win scenario. It is obviously a win for the
    conservation of the landscape as we are able to preserve the
    rich biodiversity of our plant and animal species, but just as
    importantly it is a win for my ranching customers as it gives
    them a financial tool that the would not have otherwise access
    to. And finally, it is also a real win for my rural community
    and all the communities in the area that depend on the
    landscape to provide for the economic stability and viability
    for their citizens.
        The Front model employees the use of a public/private
    partnership that seeks to leverage Federal funds for the
    biggest bang for the buck. To this date we have used $4 million
    of LWCF funds, and with that we have matched it with $29
    million of private donations, and with that we have been able
    to put conservation easements on 43,000 acres. Partners to date
    have included U.S. Fish and Wildlife Service, the Nature
    Conservancy, and the Conservancy Fund.
        The front buffers an area on the eastern edge of an area
    that many call the crown of the continent. This area
    encompasses 10 million acres. It includes Glacier National
    Park, three wilderness areas and the associated bordering
    Forest Service properties. To put this in perspective, this is
    an area of land approximately the size of Connecticut,
    Massachusetts and Rhode Island combined.
        Private land protected by conservation easements to date in
    the project area is 138,000 acres. In fact, the largest U.S.
    Fish and Wildlife Service easement in the lower 48 was just
    closed that encompassed a ranch just over 12,000 acres.
        The Front project is truly a community-driven voluntary
    project with ranchers being the most important partners. Right
    now we have an inventory of 15 to 16 ranchers representing
    120,000 acres that are waiting for easements to be funded. Our
    average cost for an easement is $300 per acre. Therefore if you
    extrapolate that out, we have an unmet demand at the present
    time of $36 million, and these are third generation, third and
    fourth generation ranchers who are seeking to protect their
    ranch and maintain the habitat that they have worked hard to
    create over the years.
        As a taxpayer and a banker, I would much prefer a
    conservation easement model over a fee title acquisition mainly
    for the reason that the management and ongoing maintenance
    under a conservation easement is borne by the landowner, and it
    also keeps the property and the land in its traditional
    agricultural use, and this also maintains the livelihood of the
    rancher, it creates jobs, it contributes to his community.
        Probably the best thing I can do is give you an example of
    a customer of mine who had a home place of 2,500 acres. His
    neighbor was seeking to sell his ranch of 5,000 acres. He was
    able to secure a conservation easement, partially with LWCF
    funds and through the Conservancy and the Conservancy Fund,
    that enabled him to acquire the neighboring ranch at a debt
    level that was sustainable for his operation. By doing this he
    was able to bring home his nephew and his family. Now,
    obviously that put more kids in our schools, it contributes to
    our community.
        Other ways that the easement funds can be used is simply to
    pay down debt so their cash flow is more viable, and oftentimes
    they will us easement funds to improve their infrastructure,
    maybe their water systems, buy equipment, improve their
    technology. All of these things contribute to the viability and
    profitability of the rancher which flows down to our local
    community.
        In summary, wildlife habitat and working ranches are both
    key components to our American heritage. To achieve both these
    goals with the use of LWCF for the support of locally driven
    voluntary conservation is highly cost effective and efficient.
    It provides our ranchers in real communities with a valuable
    tool, that it creates opportunities to preserve our landscapes
    while simultaneously giving them more sustainability and
    viability.
        I thank you for the opportunity to visit with you this
    morning, and would welcome any questions or clarifications you
    may have on my testimony.
        [The prepared statement of Mr. Hodgskiss follows:]

           Statement of Lyle Hodgskiss, Rancher/Senior Loan Officer,
                    Rocky Mountain Front Advisory Committee

        Mr. Chairman and members of the Subcommittee, I appreciate this
    opportunity to present my perspectives on H.R. 3534 the Comprehensive
    Land, Energy, and Aquatic Resources Act of 2009. My name is Lyle
    Hodgskiss. I am a third generation Montana rancher and the Senior Loan
    Officer for Citizen's State Bank of Choteau in Choteau, Montana. I am
    also a member of the Rocky Mountain Front Advisory Committee that
    provides counsel to the efforts of The Nature Conservancy and others in
    their on-going effort to protect the Rocky Mountain Front (RMF) of
    Montana. I am testifying today on behalf of that committee.
        In 2005, the U.S. Fish and Wildlife service identified 561,000
    acres of Montana's Rocky Mountain Front as a Conservation Area. This
    designation authorizes the USFWS to spend Land and Water Conservation
    Funds to purchase conservation easements on the Front. The RMF
    conservation area was established to protect the working agricultural
    and ranching landscapes of the RMF, while simultaneously protecting the
    world class natural resources in the place I call home.
        My hometown of Choteau Montana is part of the Rocky Mountain Front
    Conservation Area. This is one of the newest conservation areas
    established by the FWS, and just two established by the Fish and
    Wildlife Services during the previous administration. The Nature
    Conservancy has been present on the Rocky Mountain Front for 30 years
    and even before the establishment of the conservation area, the Nature
    Conservancy established The Rocky Mountain Front Advisory Committee to
    assist their efforts to conserve land on the Front.
        I support Title IV of H.R. 3534 and I thank Chairman Rahall for his
    leadership on fully funding the Land and Water Conservation Fund.
        LWCF is the principal source of federal investments to protect the
    Front. Since 2005, $3.98 million in LWCF investments have contributed
    to the protection of 43,000 acres of private land, and leveraged $29
    million in private philanthropy. Last year, LWCF funding enabled the
    FWS to secure an easement on Clay Crawford's ranch on the Front. At
    12,130 acres, This is the largest FWS conservation easement ever
    purchased by the Fish and Wildlife Service in the continental United
    States.
        This is just the latest piece of the successful conservation story
    of the Rocky Mountain Front. The Rocky Mountain Front is unique for a
    number of reasons. It is a vast, largely unspoiled landscape. It is
    part of the larger Crown of Continent comprising Glacier National Park,
    the Bob Marshall Wilderness complex and the surrounding public and
    private lands. Together the Crown covers over 10-plus million acres, an
    area larger than Massachusetts and Connecticut combined. The Crown,
    including the Front, is the only place in the lower 48 states that
    contains ALL of the plant and animal species that were present when
    Lewis and Clark passed through.
        The Front is home to a unique and thriving population of grizzly
    bears. With some of the highest-quality seasonal habitat left, the
    Front's large intact ranches boast very high-density bear use during
    the spring and fall months. These grizzlies have higher reproductive
    rates, heavier cub weights, and adult bears rivaling the size of their
    Alaskan siblings. The Front is also one of the last places on earth
    where grizzlies still use their natural plains habitat.
        Land and Water Conservation Funds are essential to conservation on
    the Rocky Mountain Front. The U.S. Fish and Wildlife Service works
    closely with the local community and organizations like the Nature
    Conservancy and The Conservation Fund to protect the Front, and craft
    solutions that work for agriculture, rural communities, and
    biodiversity. To date, each dollar of LWCF funds leverages more than $5
    of private money, other public sources, and the critical match
    components for sources like NAWCA to stretch the federal investment.
    Since 1978, the Front partnership has protected 138,000 acres of
    private lands, and in doing so, supported the rural heritage and
    culture in the Front communities. Land and Water Conservation Funds
    have made it possible for this partnership (USFWS, TNC and TCF) to work
    at a landscape level--while addressing concerns from the agriculture
    community and achieving globally-significant conservation measures.
        I want to emphasize that this has been a local conservation effort
    based on voluntary participation. The Rocky Mountain Front Advisory
    Committee counsels The Nature Conservancy on its efforts but it is
    truly a public/private partnership that is making this project work.
    There is tremendous support from the agricultural community, as well as
    other elements of the community, to see the project to a successful
    conclusion.
        The LWCF investment in conservation easements goes beyond the
    preservation of the landscape. Purchase of conservation easements helps
    to ensure the economic vitality of the ranching community, the many
    businesses agriculture supports, and the larger area economy. The
    current ``inventory'' of ranchland that is on a waiting list to
    participate in this project (by obtaining conservation easements over
    that land) exceeds 120,000 acres. This clearly demonstrates the strong
    broad based support that our project enjoys.
        Conservation easements provide ranchers with a necessary tool, and
    access to funds that can be used by them in a variety of ways to
    improve their operations, such as to reduce the debt level on their
    operation in order to become more viable from a cash flow standpoint,
    acquire additional land to improve their economies of scale, invest in
    better infrastructure (fences, watering systems, irrigation systems,
    buildings, technology) to improve their efficiency. All of these
    options make ranching operations more profitable and sustainable, which
    in turn, pass the success onto the rural communities that depend on
    agriculture for their own viability.
        Those are the principal reasons I support fully funding LWCF.
    Purchase of conservation easements not only protects and preserves the
    iconic landscape of the Rocky Mountain Front, but it helps it helps the
    larger community as well.
        But it's not just in my community on the Front. LWCF has been a
    flexible funding source for important conservation actions throughout
    Montana, both on private and public land. The Front is an easement only
    project. Elsewhere in Montana, especially with my friends in the
    Blackfoot Community Project in the Blackfoot River valley, LWCF is used
    to acquire fee title to lands and facilitate land sales (as additions
    to the national forests and BLM holdings), as well as conservation
    easements.
        Similar to our advisory committee, the Blackfoot Community Project
    is a community-based, community-supported effort to preserve the land
    and character of that valley. This group, from a community-based grass
    roots perspective, concluded that federal ownership would ensure
    continued public access to important recreational lands, while ensuring
    protection of critical wildlife habitat.
        When complete, the Blackfoot Community Project will conserve over
    100,000 acres in diverse public and private ownerships. It will help
    maintain a rural way of life for that community. LWCF is and has been a
    critical funding component of this project.
        The Land and Water Conservation Fund leverages landscape-level
    accomplishments throughout Montana. LWCF Funds are a necessary
    component in the Blackfoot valley, in the Centennial valley west of
    Yellowstone National Park, in the Beartooth Mountains south of
    Billings, and in many other places throughout Montana and the West.
        On the Rocky Mountain Front we are experiencing a crisis of
    opportunity for private land conservation. Last year's economic
    downturn, a time of generational transfer and associated estate issues,
    as well as the need to increase operations and update technology to
    remain competitive, have affected awareness and encouraged landowners
    to re-assess their operations and their ``tools'' to maintain those
    livelihoods. On the Rocky Mountain Front, conservation easements are
    seen as an important new management tool for the community. So
    important in fact that current landowner-demand for easements on the
    Front again, has grown by 120% in just one year, to the previously
    mentioned 120,000 acres.
        I support full funding of the Land and Water Conservation Fund, for
    the many reasons cited above. As important as full funding, however, is
    the provision making full funding permanent. Permanent funding will
    give people and the agencies the ability to anticipate and plan for
    future projects knowing there will be an available source of funds
    available. It will allow for more efficiency and cost-effectiveness
    over the long term, to the benefit of America's heritage, and our rural
    places like Montana's Rocky Mountain Front. Previously, as the federal
    commitment to LWCF has varied greatly, the ability of The Nature
    Conservancy and USFWS to work with land owners to protect their land
    has also fluctuated. In addition to generation transfer and associated
    estate issues and the challenging economy, this lack of certainty has
    contributed to the current backlog of opportunities on the Front, and
    other project areas in other rural places throughout the West.
        Again, I want to express my support for full and permanent funding
    of the Land and Water Conservation Fund as expressed in Title IV of
    Chairman Rahall's H.R. 3534.
        Thank you for the opportunity to testify and I welcome any
    questions you may have.
                                     ______

        The Chairman. The Chair thanks the panel for their
    testimony this morning. Before proceeding with questions, I
    would ask unanimous consent to enter two pieces of testimony
    into the record. First, I would like to enter the testimony of
    the Sportsmen for Responsible Energy Development, along with
    two reports they have produced with recommendations on how to
    better develop energy on Federal lands without impacting
    hunting and fishing opportunities.
        Second, I would like to enter the testimony of the Nature
    Conservancy. Their testimony outlines their support for full
    and dedicated funding for the Land and Water Conservation Fund.
        Without objection these will be entered in the record.
        [The information submitted for the record by the Sportsmen
    for Responsible Energy Development follows:]

                     Statement submitted for the record by
                  Sportsmen for Responsible Energy Development

        National Wildlife Federation (NWF), Theodore Roosevelt Conservation
    Partnership (TRCP), and Trout Unlimited (TU) would like to thank
    Chairman Rahall and Ranking Member Hastings along with the
    distinguished members of the committee for the opportunity to submit
    written testimony as we open a dialogue on the complexities of energy
    development.
        Our three organizations together represent Sportsmen for
    Responsible Energy Development (SFRED). SFRED is a coalition of more
    than 500 businesses, organizations and individuals working together to
    promote and support responsible energy development in the Rocky
    Mountain West. SFRED provides credible, science-based solutions
    supported by hunters, anglers, businesses and organizations from across
    the nation.
        Approximately half of the roughly eight million people living in
    the energy-rich states of Colorado, New Mexico, Montana, Utah and
    Wyoming are hunters, anglers or wildlife-related recreationists.
    1 When non-residents are included, more than six million
    individuals hunted, fished or participated in wildlife-related
    recreation in these states in 2006, contributing nearly $7.3 billion to
    state and local economies. 2 In addition to serving as
    important ecological resources, fish and wildlife in the West are
    important economic resources that, if responsibly managed, can provide
    a reliable and consistent economic base for the region in perpetuity.
    Irresponsible energy develop threatens that economic base as well as
    the quality of life values of clean air and water and healthy,
    sustainable populations of fish and wildlife.
    ---------------------------------------------------------------------------
        \1\ U.S. Department of the Interior, Fish and Wildlife Service, and
    U.S. Department of Commerce, U.S. Census Bureau. 2006 National Survey
    of Fishing, Hunting, and Wildlife-Associated Recreation.
        \2\ Id.
    ---------------------------------------------------------------------------
        In May 2008, SFRED brought together experienced land managers,
    scientists, planners, and fish and wildlife experts from across the
    West to create a framework for implementing responsible energy
    development. That framework became the Sportsmen for Responsible Energy
    Development Recommendations for Responsible Energy Development
    including specific proposals for legislation. 3
    ---------------------------------------------------------------------------
        \3\ Copies of these documents are attached.
    ---------------------------------------------------------------------------
        Sportsmen support responsible energy resource development on public
    lands. Unfortunately, years of haphazard and often irresponsible energy
    extraction coupled with special exemptions for energy corporations have
    harmed important big-game habitat and sage-grouse breeding areas, as
    well as contaminated rivers and diminished recreational fisheries,
    resulting in decreased public hunting and fishing opportunities. Future
    energy development on public lands--including renewable energy
    development--must consider the many uses public lands provide and
    conserve the uniquely western landscapes, local economies and,
    especially, the way of life.
        Over the past decade, unprecedented amounts of vital fish and
    wildlife habitats on public lands have been harmed by oil and gas
    drilling. Millions of additional acres are leased for oil and gas
    development. As our nation struggles with its dependence on energy
    generated from fossil fuels, we can expect more public lands to be
    impacted. The vast majority of the new drilling on public lands is for
    natural gas. Americans use 22 trillion cubic feet of natural gas a
    year. To sustain current levels of consumption, we will need to drill
    tens of thousands of new wells each year. Legislation to reduce carbon
    emissions may actually increase demand for natural gas, at least in the
    short term, as industry shifts from coal to cleaner-burning natural
    gas. That pace of development will have devastating impacts on western
    public lands and the fish and wildlife that depend on those lands
    unless we develop responsibly with careful conservation of our hunting
    and fishing heritage.
        Just last week SFRED released a report on ten treasured locations
    to go hunting and fishing on public lands in the West that are
    imperiled by ongoing or proposed oil and gas development. 4
    We urge the Committee members to read our report.
    ---------------------------------------------------------------------------
        \4\ A copy of the executive summary of the SFRED report Hunting and
    Fishing Imperiled is attached. The full report can be found at SFRED's
    website: http://sportsmen4responsibleenergy.org.
    ---------------------------------------------------------------------------
        The development of renewable energy resources on public lands will
    be a significant addition to the western landscape and this development
    must be approached with learned caution, especially where irreplaceable
    fish and wildlife habitat--and hunting and fishing opportunity--is
    concerned. Development of utility-scale renewable energy generation and
    transmission facilities will transform the lands upon which they are
    located. An inappropriately sited and constructed renewable energy
    facility has the same potential to cause significant damage to the
    environment and to eliminate vital fish and wildlife habitat as an
    inappropriately sited natural gas field.
        SFRED appreciates the Chairman's efforts to address responsible
    energy development, both renewable and non-renewable, on our nation's
    public lands and waters, and we strongly support many of the proposals
    in this bill. These reforms include many of the SFRED recommendations
    for improved management, including fewer onshore oil and gas lease
    sales per year, increased rental fees for onshore oil and gas leases,
    elimination of the special treatment afforded oil and gas operations
    under the Energy Policy Act of 2005 that shielded these operations from
    adequate review under the National Environmental Policy Act and the
    addition of required best management practices for both renewable and
    non-renewable energy operations on public lands. We also thank the
    Chairman for defining the responsibilities of the land management
    agencies to require bonds sufficient to cover the actual costs of
    reclamation. 5
    ---------------------------------------------------------------------------
        \5\ Currently, oil and gas companies can provide a single bond for
    $150,000 that covers all of their drilling operations on public lands
    nationwide. SFRED believes the bill should mandate the promulgation of
    new regulations to establish more appropriate bonds for oil and gas
    development similar to those required for coal mining operations on
    public lands.
    ---------------------------------------------------------------------------
        However, there are also provisions that have not been included in
    the bill that we believe are necessary to ensure that energy
    development on public lands is conducted responsibly. These include a
    shorter lease term and an increase in royalty rates for onshore oil and
    gas lessees. SFRED believes strongly that the current ten-year lease
    term and the willingness of the Bureau of Land Management (BLM) to
    suspend the tolling of the lease term has led to the creation of a
    speculative market in federal minerals that deprives our nation of
    needed energy supplies and wreaks havoc with the management of other
    resources on the public lands. While the bill provides for increased
    rental payments over the last five years of a ten-year lease, we do not
    believe an additional $.50 per acre will provide sufficient incentive
    to ensure diligent development of oil and gas leases. 6 With
    respect to the royalty rate for onshore oil and gas leasing, SFRED
    notes that although the Secretary of the Interior clearly has the
    authority under the Mineral Leasing Act of 1920 to raise the royalty
    rate above 12.5%, that authority has never been exercised.
    Congressional action is therefore required.
    ---------------------------------------------------------------------------
        \6\ This was well-documented in the recent General Accountability
    Office (GAO) report on incentives to encourage diligent development of
    leases. GAO, Oil and Gas Leasing: Interior Could Do More to Encourage
    Diligent Development GAO-09-74 (October 2008).
    ---------------------------------------------------------------------------
        We also believe that both the Forest Service and BLM are in need of
    new direction from Congress regarding the content of their land use
    plans and the adequacy of those plans to address the impacts of
    renewable and non-renewable energy development on other resources of
    federal lands. Under the current statutory and regulatory framework,
    analysis of the environmental consequences of energy development occurs
    on a project-by-project and well-by-well basis, a strategy that all but
    guarantees an inadequate evaluation of development's full impacts. This
    piece-meal approach fails to account for the cumulative effects of
    energy development across habitats and watersheds.
        Moreover, sportsmen and other public lands users are often caught
    in a trap. When they insist resource management agencies fully evaluate
    potential impacts to fish, wildlife, and water and air resources at the
    planning or leasing stage, BLM and the Forest Service respond that such
    analysis will occur at a later, site-specific level. Yet when sportsmen
    and others then seek comprehensive evaluations of development's effects
    before permits to drill are approved, the agencies claim their ability
    to protect natural resources is now limited by the fact that a lease
    has already been issued. 7 SFRED is concerned that the bill
    may now create this same conundrum for renewable energy development.
    Leases will be issued committing public lands and resources to
    renewable energy generation without any real analysis of the
    consequences for other public lands values. 8 In its
    recommendations for legislative changes to ensure responsible oil and
    gas development, SFRED offered specific language to address these
    concerns with respect to oil and gas leasing. 9 We believe
    that similar provisions should apply to renewable energy leasing as
    well, and that the cumulative impact of uses such as oil, gas, coal,
    wind, solar, geothermal, timber, and grazing must be addressed in a
    landscape-level analysis that employs an interagency and
    intergovernmental approach.
    ---------------------------------------------------------------------------
        \7\ Like other multiple uses of federal public lands, federal law
    and BLM's regulations make clear that oil and gas leases convey to the
    lessee a usufructuary right to the lease parcel that is subject to the
    federal land management agencies' multiple-use management of the land.
    BLM's regulations provide that:
           A lessee shall have the right to use so much of the leased land
    as is necessary to explore for, drill for, mine, extract, remove and
    dispose of all the leased resource in a leasehold subject to:
    Stipulations...; restrictions...; and such reasonable measures as may
    be required by the authorized officer to minimize adverse impacts to
    other resource values, land uses or users not addressed in the lease
    stipulations at the time operations are proposed.
        43 C.F.R. Sec. 3101.1-2 (2007) (emphasis added).
        Despite the plain language of BLM's regulations and the lack of any
    federal legislative intent or statutory language to the contrary, there
    is substantial confusion regarding the extent of the right conveyed by
    an oil or gas lease. Some industry advocates incorrectly claim that oil
    and gas leases convey a property right that is compensable under modern
    takings law. Because of this confusion, it is important to reinforce
    the fact that leases do not convey a property right and that federal
    land management agencies retain the ability to manage leased lands for
    fish, wildlife, water and air resources, and other multiple uses.
        With respect to renewable energy, the development right that is
    granted with the issuance of a lease is less well defined. Does the
    lease grant a right to go forward with a specific generation facility
    identified as the preferred alternative in a comprehensive
    environmental impact statement or does it grant the right to develop
    the leasehold in whatever manner the lessee determines will maximize
    its return on investment?
        \8\ We are concerned that the discussion draft creates the risk of
    developing energy resources without a comprehensive analysis of
    environmental impacts. We believe the appropriate solution is the
    development of comprehensive land use plans which establish impact
    thresholds for fish, wildlife, and water and air resources that cannot
    be exceeded whether leases have been issued or not.
        \9\ A copy of these recommendations is attached. See pages 1-6 for
    specific language addressing these planning issues.
    ---------------------------------------------------------------------------
        In conclusion, hunters, anglers and sportsman from all walks of
    life depend not only on energy development for jobs and economic
    support but also the landscape that this development encompasses. The
    sportsman way of life is an enormous economic driver in much rural and
    populated areas of the West, and it's important we protect this
    important role of hunting and fishing. As we embark on this new energy
    frontier the sportsman community urges the committee and all parties
    involved to work together to develop a common sense and responsible
    energy program.
        Again thank you for the opportunity to submit comments to the House
    Natural Resources Committee regarding H.R. 3534, the Consolidated Land,
    Energy, and Aquatic Resources (CLEAR) Act.
        Attachments:
          SFRED specific comments and suggestions on the provisions
    of the CLEAR Act (HR 3534)
          SFRED recommendations for Responsible Oil and Gas
    Development Report
          SFRED hunting and fishing imperiled report
                                     ______

           SFRED specific comments and suggestions on the provisions
                          of the CLEAR Act (H.R. 3534)

        Section 2. The following recommendation comes from the attached
    SFRED recommendations referenced above. Federal law provides that oil
    and gas leases ``shall be leased...to the highest responsible qualified
    bidder.'' 1 However, federal law does not define
    ``responsible qualified bidder'' and, outside of providing a few
    minimum qualifications, 2 the BLM has wide discretion in
    determining whether a bidder is ``responsible'' or not. Like federal
    law, the BLM's regulations state that leases ``shall be awarded to the
    highest responsible qualified bidder'' 3 but fail to define
    what makes a qualified bidder ``responsible.'' We recommend adding a
    definition of ``Responsible Qualified Bidder''. This definition would
    read, ``The term `responsible qualified bidder' means any otherwise
    qualified bidder who does not have blatant or chronic prior or existing
    bad lease performance. Bad lease performance includes, but is not
    limited to, performance under an existing or prior oil or gas lease
    that violates the terms of the lease or permitting documents, leases
    that are inadequately monitored or enforced, or leases that fail to
    comply with comprehensive mitigation and reclamation strategies.''
    ---------------------------------------------------------------------------
        \1\ 30 U.S.C. Sec. 226(b)(1)(A).
        \2\ See 30 U.S.C. Sec. Sec. 181, 184(d).
        \3\ 43 C.F.R. Sec. 3120.5-3(b).
    ---------------------------------------------------------------------------
        Section 101 (f) (2). After ``land uses'' on line 3, we suggest
    adding ``..., as well as areas that are unsuitable for oil and gas
    development.'' Oil and gas development can have an intense impact on
    the landscape, functionally excluding other multiple uses of the land
    and ruining important fish, wildlife and water resources for
    generations to come. Even when the most protective stipulations are in
    place and modern technologies and practices are employed, irreparable
    harm to the productivity of the land is only a spill away. It shouldn't
    take an Act of Congress to protect the most important public lands from
    oil and gas development. However, in Montana's Rocky Mountain Front and
    New Mexico's Valle Vidal--an area donated to the U.S. citizens by
    Pennzoil in 1982 because of its exceptional fish and wildlife habitat--
    it took just that. Similarly, it was up to Congress to protect valuable
    fish and wildlife habitat in the Wyoming Range.
        Section 306. This section has the potential to significantly
    improve management of oil and gas development on public lands. One
    suggested addition: in line 12 we suggest inserting the italicized
    text, ``...on Federal lands in a manner consistent with ecosystem-based
    management that avoids where practical, minimizes, and mitigates actual
    and anticipated impacts to environmental habitat functions resulting
    from oil and gas development.'' The definition of ecosystem-based
    management herein will help guide the creation of protective best
    management practices.
        Section 502. The activities discussed in this provision are
    primarily land management activities and should be the responsibility
    of the land management agencies rather than OFEML.
        Section 502(2)(B). We believe renewable energy lessees and
    operators should be required to complete interim reclamation. The
    useful life of a solar or wind facility is likely to be much more than
    30 years. The draft language does not appear to require reclamation of
    areas disturbed by construction of facilities for decades while the
    facilities are operating. Section 502 should be revised to require
    interim reclamation requirements applicable during the project's useful
    life.
        We also believe that no onsite mitigation alone will be adequate to
    sustain the ecological function of public lands on which many renewable
    energy facilities are located. Unlike oil, gas, and coal, the wind and
    sun are renewable sources of energy which will not be exhausted. The
    landscapes impacted by renewable energy facilities will not be restored
    to their current condition for the foreseeable future. This is
    emphatically true with respect to solar energy generation facilities.
    The facilities will result in the total and, essentially, permanent
    loss of fish and wildlife habitats. Therefore, the only way to mitigate
    the impact of these facilities is to require the restoration or
    acquisition and preservation of comparable ecological resources
    elsewhere along with on-site actions to minimize the severity of
    impacts to natural resources. However, BLM insists that it cannot
    require off-site or ``compensatory'' mitigation. 4 Section
    502 should clarify that the Congress intends for BLM and the Forest
    Service to ensure that onsite mitigation is performed and to require
    compensatory mitigation where other onsite measures are inadequate or
    infeasible.
    ---------------------------------------------------------------------------
        \4\ See BLM IM 2008-204 at http://www.blm.gov/wo/st/en/info/
    regulations/Instruction_Memos_and_Bulletins/national_instruction/20080/
    IM_2008-204.html
    ---------------------------------------------------------------------------
        Section 503. The hunting and angling community is supportive of
    responsible increases in renewable energy production from public lands.
    We also support responsible development of oil and gas so long as it is
    done in a manner that avoids or minimizes harm to fish, wildlife, and
    water resources. The impacts of poorly planned oil and gas development
    on public lands and the lack of sufficient resources for mitigation,
    monitoring, and adaptive management to protect and restore fish and
    wildlife habitat have become serious problems.
        This bill could have the effect of accelerating oil and gas
    development (by penalizing leases that are not developed) and layering
    over the top of an already impacted landscape the effects of new
    renewable energy development. Avoiding, minimizing, and mitigating
    impacts to fish and wildlife habitat and recreational opportunities
    associated with energy development of any form is essential to
    maintaining the flow of billions of dollars generated from hunting,
    fishing, and wildlife related recreation in New Mexico, Arizona,
    Nevada, Wyoming, Colorado, California, Idaho, and other public land
    states.
        It is vital that state and federal agencies have the resources
    necessary to properly manage energy development. Thousands of miles of
    transmission lines may be needed to move renewable energy to market.
    Funding must be made available to avoid fish and wildlife damage and
    for mitigation and restoration.
        For that reason, we propose that the revenues collected by the
    federal government pursuant to the regulations established in
    subsection (c) of this subtitle, and from revenues collected from an
    increase in royalties associated with onshore oil and gas development
    (as described below), should be placed in two accounts, a Renewables
    Mitigation Fund and a Onshore Oil and Gas Mitigation Fund. These funds
    would be available each fiscal year for expenditure for the purposes of
    this Act without further appropriation. Each of these funds would have
    a Federal Resource Management Account, and a State and Community
    Restoration Account--as follows:
    Renewables
          Federal Resource Management Account: 50 percent shall be
    deposited into a special fund in the Treasury and used by federal
    agencies for mitigation, monitoring, inventory, and management
    associated with conserving fish, wildlife, and water resources affected
    by renewable energy development.
          State and Community Restoration Account: 50 percent shall
    be paid by the Secretary of the Treasury to the one or more States
    within which the income is derived and used by: state resource agencies
    to monitor and mitigate the effects of energy renewable energy
    development on fish, wildlife, and water resources affected by
    renewable energy development; local communities to mitigate the effects
    of renewable energy development on impacted communities; and by other
    non-profit entities to mitigate (including off-site mitigation) and
    restore areas affected by renewable energy development.
    Onshore Oil and Gas
        In addition, as stated earlier, the Congress should increase the
    minimum royalty rate associated with onshore oil and gas development
    from 12.5% to 18.75% as proposed in an earlier draft. We propose that
    these additional revenues and the other fee increases and penalties for
    onshore oil and gas development be used to create new funding fish,
    wildlife, and water resource mitigation and restoration associated with
    oil and gas development as a companion fund to accompany the Renewables
    Fund. Specifically, we propose that:
          Federal Resource Management Account: 50 percent of these
    revenues be deposited into a special fund in the Treasury and used by
    federal agencies for mitigation, monitoring, inventory, and management
    associated with conserving fish, wildlife, and water resources affected
    by onshore oil and gas development.
          State and Community Restoration Account: 50 percent shall
    be paid by the Secretary of the Treasury to the one or more States
    within which the income is derived and used by: state resource agencies
    to monitor and mitigate the effects of oil and gas development on fish,
    wildlife, and water resources; local communities to mitigate the
    effects of oil and gas development on impacted communities; and by
    other non-profit entities to mitigate (including off-site mitigation)
    and restore areas affected by oil and gas development.
        Section 511(d). We are very supportive of moving uranium from hard
    rock mining into this new regime. You might consider adding to the end
    of this provision, the following: ``Upon consideration of these
    factors, the Secretary may decide not to lease an area for uranium
    mining.'' This would underscore the discretionary nature of the
    activity.
                                     ______

        The Chairman. The Chair recognizes the gentleman from
    Washington.
        Mr. Hastings. Thank you, Mr. Chairman. I ask unanimous
    consent to submit for the record a series of letters about this
    bill which we have received. The first is from the American
    Chemistry Council and signed by our former Democratic colleague
    from California, Cal Dooley, which states that this bill, and I
    quote, ``fails to contribute in any way to the energy security
    of the United States.'' In addition, I am asking to submit a
    letter from the Western Business Roundtable and a statement
    from the National Mining Association.
        The Chairman. Without objection, so ordered. So does that
    make it two for two?
        Mr. Hastings. I had three.
        The Chairman. Oh, you had three. I only had two. All right.
        [The information submitted for the record by the American
    Chemistry Council, Western Business Roundtable, and the
    National Mining Association. follows:]

    [GRAPHIC(S) NOT AVAILABLE TIFF FORMAT]

    Statement
    For Immediate Release September 16, 2009
    Contact: Jennifer Scott, ACC, (703) 741-5813
    jennifer--scott@americanchemistry.com

       ACC: HOUSE NATURAL RESOURCES COMMITTEE BILL MISSES OPPORTUNITY TO
                          ADVANCE U.S. ENERGY SECURITY

                 Domestic Energy Supply Necessary to Maintain
                America's Manufacturing Competitiveness and Jobs

        ARLINGTON, VA (September 16, 2009)--Today the U.S. House Committee
    on Natural Resources began a two-part legislative hearing on the
    ``Consolidated Land, Energy, and Aquatic Resources (CLEAR) Act of 2009
    (H.R. 3534).'' Additional information is available at http://
    resourcescommittee.house.gov/.
        American Chemistry Council (ACC) President and CEO Cal Dooley
    issued the following statement:
        ``We are concerned that H.R. 3534 fails to contribute in any way to
    the energy security of the United States. Our industry and the entire
    U.S. manufacturing sector are dependent on competitively-priced energy
    to maintain our jobs. Last year, Congress confirmed the importance of
    offshore domestic energy when it lifted the moratorium on development
    in the Outer Continental Shelf (OCS). By neglecting domestic energy
    supply, the Committee is missing a significant opportunity to enhance
    the nation's energy security, energy diversity and economic outlook.
    Imposing tax and procedural provisions that raise the cost of fuel and
    energy feedstock borne by American manufacturers will threaten U.S.
    competitiveness and employment.
        ``The House Subcommittee on Energy and Mineral Resources recently
    held a hearing on legislation that would ensure the development of
    diverse domestic energy supply critical to maintaining jobs and
    competitiveness in the United States (H.R. 2227). We would hope that
    lawmakers would move legislation of that nature through the Committee.
        ``Natural gas is an important U.S. energy source for clean energy
    such as cleaner electricity, renewable fuels, cleaner transportation
    fuels (e.g. ultra-low-sulfur diesel) and energy efficiency. It's also a
    key low-emission source while others such as carbon capture and
    storage, nuclear, and renewable and alternatives are in development or
    under capacity. For the business of chemistry, natural gas is an
    important raw material for chemistry that goes into energy-saving
    applications such as solar panels, wind turbines, building insulation,
    compact fluorescent light bulbs, lithium-ion batteries, lightweight
    vehicle parts, and many others--a use that in most cases does not emit
    greenhouse gases. Unfortunately, H.R. 3534 ignores this vital use of
    natural gas.
        ``With a smart energy policy, the United States can reduce
    greenhouse gas emissions while bringing about efficient, available,
    affordable and diverse energy. We continue to support efforts by
    Congress to develop a comprehensive policy including energy efficiency
    and conservation, energy diversity (e.g. renewables and alternatives,
    nuclear, carbon capture and storage, and combined heat and power), and
    domestic oil and natural gas supply. We strongly urge the Committee to
    add new domestic oil and natural gas supply to H.R. 3534 and take up
    legislation such as H.R. 2227. ``

                                     # # #

    www.americanchemistry.com/newsroom
        The American Chemistry Council (ACC) represents the leading
    companies engaged in the business of chemistry. ACC members apply the
    science of chemistry to make innovative products and services that make
    people's lives better, healthier and safer. ACC is committed to
    improved environmental, health and safety performance through
    Responsible Care...common sense advocacy designed to address major
    public policy issues, and health and environmental research and product
    testing. The business of chemistry is a $689 billion enterprise and a
    key element of the nation's economy. It is one of the nation's largest
    exporters, accounting for ten cents out of every dollar in U.S.
    exports. Chemistry companies are among the largest investors in
    research and development. Safety and security have always been primary
    concerns of ACC members, and they have intensified their efforts,
    working closely with government agencies to improve security and to
    defend against any threat to the nation's critical infrastructure.
                                     ______

        [A letter submitted for the record by the Western Business
    Roundtable follows:]

    WESTERN BUSINESS ROUNDTABLE
    200 Union Blvd. #105
    Lakewood. Colorado 80228
    www.westernroundtable.com

    September 16, 2009

    The Honorable Nick Rahall
    Chairman
    House Committee on Natural Resources
    1324 Longworth House Office Building
    Washington, DC 20515

    Dear Chairman Rahall,

        The Western Business Roundtable and its diverse membership are
    writing to express concern regarding the Consolidated Land, Energy, and
    Aquatic Resources Act (H.R.3534). We have reviewed this legislation
    and, unfortunately, we believe it would frustrate future domestic oil
    and gas production.
        As an organization comprised of both energy producers and
    consumers, the Roundtable recognizes that energy is the foundation of
    our domestic economy and powers the standard of living upon which
    American citizens rely. The environmentally responsible development of
    the full range of our domestic resources can be a ``win'' for the
    nation in a number of ways: dramatically improving energy security;
    diversifying our domestic energy supply; adding thousands of well-
    paying American jobs; helping with our balance of payments and economic
    growth during times of recession by bringing billions of dollars into
    the U.S. Treasury instead of sending them abroad.
        Many in the 111th Congress have made the move to a ``new energy
    future,'' based on renewable energy, among their highest priorities. Of
    course, the reality is such a renewables-rich future will have to be
    backed up by traditional baseload resources. A robust domestic natural
    gas supply will be necessary to help fulfill that role.
        The Roundtable believes strongly that a strong and economically
    sustainable national energy policy must rest on three basic premises:
    responsible production from all feasible domestic energy sources;
    robust, incentive-based policies to encourage the development/
    deployment of next generation energy technologies; and policies to
    encourage energy efficiency and conservation practices to ensure the
    wise use of our domestic resources.
        H.R.3534 fails to meet these goals. The bill is nothing short of a
    frontal attack on domestic oil and gas production. For example, it
    would:
          Remove energy authority for the Bureau of Land Management
    (BLM) and abolish the Minerals Management Service which manages the
    federal Outer Continental Shelf (OCS). In place of these departments, a
    brand new bureaucratic arm would be set up at the Department of
    Interior--the Office of Federal Energy and Mineral Leasing which will
    be responsible for all onshore and offshore leasing and lease
    developments;
          Institute complicated and bureaucratic planning
    processes, including establishment of local councils to make rulings on
    development sites;
          Raise royalty rates for oil and gas across-the0board;
          Reduce the term for new leases from ten to five years;
          Impose ``use it or lose it'' lease terms;
          increase fines and penalties;
          Repeal important deep water energy provisions from
    current law; and
          Eliminate the onshore and offshore royalty-in-kind
    program.
        The Roundtable urges you not to move forward with a rushed markup
    of H.R.3534in its current form. Rather, we hope you will adopt a more
    inclusive approach. Certainly, the House is blessed with a large number
    of Members already engaged on energy policy issues. For example, the
    House Blue Dog Coalition, the House Western Caucus and the Republican
    Study Committee have already advanced a variety of proposals and
    principles that are worth the Committee's consideration. Likewise, a
    bipartisan group of35 Members, including a number of your Committee
    colleagues, have sponsored H.R. 2227, which deals with a number of
    these issues. All these policy initiatives deserve full consideration
    by the Committee.
        The Western Business Roundtable appreciates your efforts and would
    like to have a constructive dialogue with you on this and any other
    energy legislation that is considered by the Committee.

    Sincerely,

    Jim Sims
    President and CEO
    Western Business Roundtable

        The Western Business Roundtable is a broad-based coalition of
    companies doing business in the Western United States. Our members are
    engaged in a wide array of enterprises, including: manufacturing;
    retail energy sales; mining; electric power generation and
    transmission; energy infrastructure development; oil and gas
    exploration development, transportation and distribution; and energy
    services. We work to defend the interests of the West and support
    policies that encourage economic growth and opportunity, freedom of
    enterprise and a commonsense, balanced approach to conservation and
    environmental stewardship.
                                     ______

        [A letter submitted for the record by the National Mining
    Association. follows:]

     Statement submitted for the record by the National Mining Association

        The National Mining Association (NMA) appreciates the opportunity
    to provide this statement to the committee. NMA is the principal
    representative of the producers of America's coal, metals, industrial
    and agricultural minerals; the manufacturers of mining and mineral
    processing machinery, equipment and supplies; and the engineering and
    consulting firms, financial institutions and other firms that serve our
    nation's mining industry.
        Our members have a significant interest in the exploration for and
    development of minerals on federal lands. Federal lands are an
    important source of minerals, energy and non-energy, that are critical
    to the nation's economic security and well-being. Mining on federal
    lands creates high-wage jobs, contributes to the economic vitality of
    local communities and is essential for meeting the nation's resource
    needs and to rebuilding America.
    Applicability of Title I
        It is unclear whether Title I, ``Consolidation of Department of
    Interior Energy and Minerals Leasing Programs'', is intended to apply
    to federal coal and leasable federal minerals. While the bill
    description and the title imply that programs dealing with the leasing
    of all federal leasable minerals will be managed by the newly
    established Office of Federal Energy and Mineral Leasing (``the
    office''), the enumeration of functions transferred to the office are
    limited to those of the Mineral Management Service (MMS), except for
    auditing and compliance management, and the oil and gas management
    program of the Bureau of Land Management (BLM) (section 101(b)).
        However, Section 101(d) states, ``ADMINISTRATION.--The office shall
    administer its functions by such means as are reasonably necessary to
    carry out the purposes of this Act...the Mineral Leasing Act (30 U.S.C.
    181 et seq.), the Mineral Leasing Act for Acquired Lands (30 U.S.C.351
    et seq.)...and all other applicable Federal laws.'' This provision
    implies that the new agency will oversee the leasing and royalty
    collection functions for coal and all leasable minerals.
        These provisions conflict, or at least are so vague, as to leave
    lessees of federal resources other than renewable energy resources and
    oil and gas at a loss as to what their relationship with the newly
    formed office will be. The ambiguous scope of Title I must be clarified
    so that potentially affected parties can fully analyze the impact of
    the proposed legislation on their enterprises.
    Application of FOGRMA Statutes to Federal Solid Mineral Lessees
        Section 219 of the bill would apply the provisions of 107, 109 and
    110 of the Federal Oil and Gas Royalty Management Act of 1982 (FOGRMA)
    to any lease authorizing the development of coal or any other solid
    mineral on federal lands. NMA contends that oil and gas is not
    comparable to coal or other solid mineral, and a one-size-fits-all oil
    and gas policy should not be applied to solid minerals. Solid minerals
    are already subject to interest on late payment of royalties, and the
    provisions of leases enable BLM to take steps to cancel a lease for
    non-performance of lease terms, which include reporting and payment of
    royalties.
        It is NMA's understanding that civil and criminal penalties were
    incorporated into FOGRMA due to significant underreporting of federal
    oil and gas royalties resulting from the lack of an effective audit
    program, multiple interests in a working well and the subjectivity of
    measuring production through well-head meters. The oil and gas criminal
    penalties have been in place for more than 25 years, and MMS has never
    indicated the need for similar statutory penalties for solid minerals.
    The primary reason is that the coal and solid mineral's model and
    methods of tracking production and revenues are significantly different
    from the oil and gas industry with their vertical integration. If there
    is a legitimate concern with implementation of the Mineral Leasing Act
    (MLA), then a solution should be proposed within the context of the MLA
    and should be mineral-specific.
    Coal Mine Methane Recovery
        Any provision in section 307 that mandates the production, capture
    and/or flaring of coal mine methane (CMM) would eliminate opportunities
    for these facilities to generate domestic offset credits that will most
    likely be included in H.R. 2454, the American Clean Energy and Security
    Act (ACES). EPA's own modeling has shown that reduction in offset
    supply will increase the costs of any cap-and-trade program to the U.S.
    economy. If it is required by law, these carbon capture activities will
    not meet the ``additionality'' requirement likely to be included in
    both public and private offset registration protocols.
        EPA's analysis of ACES concluded that the regulation would
    eliminate offset project opportunities at coal mines and mandated
    recovery would increase compliance costs for the U.S. economy as a
    whole. Coal mines may provide some of the most readily available and
    low-cost offset opportunities. Offsets would be needed most in the
    first 5-10 years of any cap-and-trade program. In those first years,
    advanced emission reduction technologies, as well as large-scale land-
    based carbon sequestration, will not yet be available. As a result,
    domestic methane-based offset projects could play a key role in
    fostering cost containment and reducing the risk of allowance price
    volatility.
        Section 307 also raises the question of whether the Department of
    the Interior (DOI) or its delegated expert would assess the potential
    value of offset credits in determining if the CMM can be ``economically
    captured and either put to productive use or flared.'' Also, the many
    variables in assessing possible offset credit value in the future will
    create confusion and dispute.
        There are many differences between the federal oil and gas leasing
    and coal leasing programs related to acreage holding limitations, the
    general leasing process, how a regional or specific Environmental
    Impact Statement or Environmental Assessment is prepared, diligent
    development and continuous development obligations, ``maximum economic
    recovery'', by-passed coal concepts, and how rentals and royalty are
    calculated and paid. Section 307 does not clearly establish which rules
    would govern CMM recovery from a federal coal lease and the development
    of that resource. It is necessary to clarify these issues, since many
    of these concepts and mandates, such as diligent development and
    continuous development obligations, cannot apply to the CMM asset under
    the lease.
        The following are specific concerns with section 307 as introduced:
    Section (e)(1):
        The bill makes no reference to situations where the methane is
    leased to a third party prior to the issuance or renewal of a coal
    lease. If that CMM lease expires later, does this CMM automatically
    fall under the coal lease that was previously issued, or will it be
    added as a mandate on the next lease renewal or modification? If so,
    how will the provisions be implemented for determining whether CMM can
    be captured? It should be noted that the value of CMM wells is greatly
    diminished if they are not drilled far in advance of mining. This
    increases the depreciation and shortens the period to obtain economic
    payback. Stated differently, one cannot start a CMM program at an
    active coal mine without having major impact on the CMM economics.
    Section (e)(2):
        The use of the word ``requirement'' negatively impacts any
    ``additionality'' assessment as set forth above. Further, a
    ``requirement that the lessee recover the coal mine methane,'' begs the
    following questions: How much has to be recovered? Is there a certain
    percentage that must be recovered before mining starts? If the mandated
    percentage is not recovered, does mining have to wait until the
    percentage is met? (If this is the case, the impact on customers and
    employees will be significant as they must wait for mine development to
    proceed.) What if the initial production rates and production decline
    curves are not known for a particular coal seam or region such that the
    date for recovering the minimum percentage is not known? Such
    uncertainty in permitting, equipping, staffing and marketing the coal
    is unworkable. Some CMM wells can produce for decades and have various
    decline curves. These factors can vary within a seam and between coal
    seams.
        As written, section (e)1 applies to coal leased for both surface
    and underground mining, as opposed to section (e)(3), which is clear
    that it only applies to deep mining. Section (e)(1) would require
    degassing to ``recover'' the CMM ``to the maximum feasible extent''
    regardless of the economics. The provision only requires ``taking into
    account the economics of both the mining and methane capture
    operations.'' It does not say that if it is uneconomic then it is not
    required, even if it is ``feasible.'' Placing the concepts of ``maximum
    feasible extent'' and ``taking into account the economics'' in the same
    sentence creates ambiguities, especially for a third-party expert,
    unless the law is clear that an uneconomic, stand-alone CMM business
    need not be operated.
        The fact that the assessment of the requirement to capture the CMM
    should be made ``taking into account the economics of both the mining
    and methane capture operations,'' creates a clear implication that one
    does not look only at the economics of the CMM operation to determine
    if CMM must be extracted. If one is to assess the combined, integrated
    economics of a profitable coal mine and an unprofitable CMM operation,
    then the requirement to extract CMM frequently may be in dispute, and
    complex issues (e.g., unpaid royalties) will always be unresolved. It
    is difficult to assess the economics of a CMM operation and a coal mine
    together as a single business enterprise. Among other things, different
    accounting, tax, Security and Exchange Commission segment reporting and
    other rules apply to oil and gas activity as opposed to coal. Most coal
    operators are not experienced in these areas.
    Section (e)(3):
        The concept that ``prior to the issuance of a lease'' a third party
    with expertise ``in the capture of coal mine methane'' will determine
    if it can be ``economically captured and either put to productive use
    or flared'' is simply unworkable. This process will add extensive
    delays to an already lengthy process of obtaining a federal coal lease
    in the current lease by application process. If the potential lessee
    does not agree with the conclusion of the expert, presumably this
    decision will be on appeal for several years before a lease is issued.
    Considering that gas prices have ranged from over $13/MCF to below $3/
    MCF in the past year, what if the gas price assumptions used vary
    during the period of this assessment and/or after the assessment is
    completed and before the lease is issued? Such delays are untenable in
    a system that already requires many years to obtain federal coal by
    lease and permit those reserves to commence production.
        If the economics of the integrated coal mining and CMM operation is
    to be assessed, as appears to be required by section (e)(2) as noted
    above, the expert has to be equally knowledgeable in coal mining and
    gas production. If the expert is to assess only the economics of the
    potential CMM operations, this expert needs to have expertise far
    beyond the capture of coal mine methane. The expert would need to
    understand property rights; the ability of the coal lessee to have
    access to the surface (keeping in mind that much of the surface over
    federal coal is controlled by the USFS); the hydrologic impacts
    associated with CMM extraction; the options and costs for disposal of
    water produced during production; the need and ability to process the
    gas to meet regional pipeline specifications; the costs to develop and
    operate gas processing or to transport the gas to third- party
    processors; the cost to access and use regional gas transmission lines;
    the long term pricing prospects for natural gas and the ability and
    cost to hedge those prices to justify investment in CMM; and many other
    factors.
        Moreover, the techniques for drilling for and capturing CMM from
    coal in advance of mining are constantly emerging. Vertical wells
    drilled from the surface, horizontal wells drilled from the surface,
    horizontal wells drilled from within the coal mine, the ability to frac
    such wells and not damage the coal seam or otherwise adversely impact
    mining conditions of the floor or roof in the mine, and the ability to
    plug and safely mine through such boreholes are all constantly emerging
    technologies that vary between coal seams and even within the same coal
    seam. Moreover, what will and will not be allowed for operating CMM
    wells associated with coal mines are always subject to review and
    change by the Mine Health and Safety Administration as technology
    changes and experience is gained. It is unlikely that one expert has
    the capability to assess the numerous variables, all in a vacuum,
    before specific technical information on a yet-to-be-mined lease is
    obtained.
        Section (e)(3) provides that this assessment shall consider whether
    the CMM can be ``economically captured and either put to productive use
    or flared'', although there is not reason to anticipate flaring to
    capture greenhouse gas could provide important offset credits discussed
    above. (Note: ``recovery or flaring'' is in Section (e)(4) as well.) In
    light of the considerable economic issues surrounding the capture and
    beneficial use of CMM, the expert also would need to have the skills to
    assess a complex and emerging market for carbon offset credits. To
    reiterate, due to the ``additionality'' issue such offset credits will
    likely not be available absent a clear mandate from Congress that they
    be included in any federally run carbon offset registry, if not private
    registries as well.
    Section (e)(4):
        Miner health and safety should be clearly stated as the controlling
    criteria regardless of ``feasibility'' or economics of extraction.
    Again, factors such as the ability to frac wells and the ability to
    plug and mine through well bores, are constantly evolving. The DOI
    itself is going to have to develop the expertise to assess these
    complex safety issues before making the determinations with which it
    has been charge under H.R. 3534.
    Section (e)(5)
        The federal government has and continues to control conflicting CMM
    and coal assets while leasing them out separately. This legislation
    should clarify whether the federal government will continue to issue
    separate leases and rely on the mechanism provided in this bill or
    consolidate the assets at the time of lease issuance. As to the
    proposed approach of dealing with a third party owning the CMM asset
    under this bill, the proposal to force the CMM owner to allow a federal
    coal lessee to extract such gas may raise constitutional issues.
        NMA appreciates the opportunity to provide its comments for the
    record and looks forward to working with the committee coal and solid
    mineral issues related to H.R. 3534.
                                     ______

        The Chairman. Let me begin my questions with Mayor Smith.
        Mrs. Lummis. Mr. Chairman.
        The Chairman. Yes, ma'am.
        Mrs. Lummis. I have a letter that was submitted to you and
    Mr. Hastings as Chairman and Ranking Member, but I would like
    to----
        The Chairman. Without objection, it will be made part of
    the record.
        Mrs. Lummis. Thank you. It is from the Board of County
    Commissioners of Sublette County, Wyoming.
        The Chairman. Without objection, it will be made part of
    the record.
        [The letter submitted for the record by the Board of County
    Commissioners of Sublette County, Wyoming, follows:]

    BOARD OF COUNTY COMMISSIONERS
    Sublette County, Wyoming
    P.O. Box 250
    PINEDALE, WY 82941

    September 16, 2009

    Chairman Nick J. Rahall, 11
    Doc Hastings, Ranking Republican Member
    Members of the Committee on Natural Resources
    U.S. House of Representatives
    111th Congress
    Washington, D.C.

    Dear Honorable Committee Members:

        Thank you for the opportunity to comment on H.R. 3534. Sublette
    County, Wyoming's land base consists of about 20 percent private lands,
    and about 80 percent public lands. Our economy is strongly dependent on
    the multiple use of public lands, including energy production,
    agriculture, and recreation. Energy production in Sublette County
    accounts for roughly 97 percent of the county tax base and resulting
    revenue.
        The Sublette County Commission supports the need to streamline the
    federal planning process in a way that will more effectively promote
    efficient, responsible energy development. This legislation appears not
    to serve that purpose, but rather the opposite.
        Along with the increased emphasis to develop renewable energy such
    as wind and solar, as well as increased demand for low carbon emission
    fuel, there will likely be an increased demand for natural gas.
        Sublette County has been actively engaged as a cooperating agency
    with BLM during the planning process on all recent energy development
    projects in our county. Our goal in that participation is to try and
    insure that our energy resources are developed in a manner that
    effectively mitigates impacts to our other multiple use economies and
    protects our ability to maintain and enhance our economic diversity. We
    feel we have been successful for the most part in achieving that goal.
    As an example, Sublette County has and is working cooperatively with
    our energy developers, BLM, and other state cooperators, including the
    Wyoming Department of Environmental Quality to address ozone non-
    attainment issues. We feel we are being successful in that effort and
    within the next year we should have data to measure that success. We do
    not feel that adding more federal regulations will help in that
    process.
        Pinedale Mayor Stephen Smith is attending this session to discuss
    his view of the legislation and the impacts of natural gas development
    in his town, one town in our vast county of nearly 5,000 square miles.
    We know that there are a wide variety of viewpoints on energy
    development in our county, and Mr. Smith's view is one, but is probably
    not in the majority. While Mr. Smith's view endorses the mandated use
    of ``best management practices'' for all energy development on federal
    lands, we know from experience that such a cookie-cutter approach
    doesn't achieve the desired results. Instead, we as a county commission
    actively work with natural resource agencies and with natural gas
    operators to address issues of concern, and are doing that now in
    partnerships where we monitor water and air quality, and impacts to
    wildlife populations.
        Mr. Smith's letter included an attachment claiming to be a fact
    sheet about categorical exclusions, but that was far from a factual or
    impartial collection of information, and was in fact prepared by an
    environmental group in Wyoming that has fought energy development in
    our county. The fact sheet doesn't give an accurate presentation of the
    facts, and fails to note that while categorical exclusions are indeed
    commonly used in our local BLM office for processing applications for
    permit to drill, that is because the agency has already completed
    exhaustive environmental impact statements for the development that is
    currently occurring. Categorical exclusions are used because the
    analysis has been made, and mitigation has already been determined, and
    because the proposed drilling falls within the narrow categories for
    such use.
        For those wanting an honest assessment of the impact of energy
    development in a western county currently home to two of the largest
    natural gas fields in the nation, we the Sublette County Commission
    would be glad to provide further information.
        The Sublette County Commission maintains that along with the need
    for the United States to become more energy independent, the congress
    needs to promote statutory and policy changes which will enhance
    responsible energy development and not provide unnecessary and unneeded
    roadblocks that only serve to make us more dependent on foreign energy.
        Thank you for the opportunity to comment.

    Sincerely,

    William W. Cr mer, Chairman
    John Linn, Member
    Joel E. Bousman, Member
                                     ______

        The Chairman. We are outnumbered now. We had better get on
    the ball.
        [Laughter.]
        The Chairman. Mayor Smith, this bill as you know would
    raise rental rates for oil and gas from $1.50 to $2.50 an acre.
    Are you concerned that such an increase of a dollar would
    stifle energy development in the Pinedale region and cost jobs?
        Mr. Smith. Mr. Chairman, I am not sure that it would or
    would not. I would make the comment very clearly that Sublette
    County is home to over 35 trillion cubic feet of natural gas,
    and from a personal speculation I do not see an energy bill
    walking away from that natural reserve.
        The Chairman. Let me continue to ask you. Over the past
    three years the BLM Pinedale field office issued roughly 1,500
    categorical exclusions to permit oil and gas activities more
    than any other field office. Yesterday the GAO issued a report
    saying that the BLM has frequently violated the law when doing
    this, and that such violations have, and I quote, ``thwarted
    NEPA's twin aims of assuring that both BLM and the public are
    fully informed of the environmental consequences of the BLM's
    actions.''
        What has this impact have been on the ground is my question
    to you?
        Mr. Smith. Mr. Chairman, one of our most serious concerns
    when the town was submitting official comment to the BLM as a
    participating agency in the SEIS and RFP record of decision
    process was the pace of development. One thing that we have
    seen based on all the permits to drill with categorical
    exclusions is a very rapid pace of development. Our concerns
    initially and continue to be a slower pace of development in
    our community would give us the opportunity to plan for change
    and see what is coming down the pike, prepare our local
    infrastructure for what sort of growth we will see at a much
    slower pace of development.
        Categorical exclusions have, among other things, certainly
    increased the rate of development in our community, which is a
    real challenge to us.
        The Chairman. Appreciate that. You mentioned that your
    community dynamic has changed. The natural gas drilling has
    brought challenges, and you mentioned several of those in your
    testimony: the air quality, water quality, the need to acquire
    best management practices.
        Do you think that the BLM has appropriately balanced
    conservation with the need to get energy out of the ground in
    the Pinedale area? If not, do you think this legislation will
    help to reestablish that balance?
        Mr. Smith. If you are speaking of conservation as far as
    land and wildlife mitigation, I think the BLM has done an
    adequate job of that in the past. One of our major concerns is
    that there are no provisions within the record of decision from
    the BLM to look at the social and economic impacts of our
    community, those impacts that have affected those of us who
    live there on a daily basis.
        The Chairman. Professor Squillace, excuse me if I
    mispronounced.
        Mr. Squillace. That is OK.
        The Chairman. How much coal mine methane are we talking
    about where there is a substantial volume of natural gas
    currently being emitted from coal mines that we could be
    capturing?
        Mr. Squillace. Yes. I cannot give you numbers. I do not
    know the exact amount that is being vented. The only data that
    I have is from several mines in Colorado. There is this one
    mine that I mentioned, the West Elk Mine. There is another one
    about to be permitted very near to the West Elk Mine that will
    also I am told is going to be emitting or venting even more
    methane than the current mine, the West Elk mine is emitting,
    and this is a problem generally in underground mines because of
    the way that the coal deposits sit when they are deep
    underground. The pressure, somehow the pressure of being a deep
    deposit increases the amount of methane. And so when they
    develop any underground mine they have to vent.
        In terms of total quantities, I cannot tell you exactly how
    much it is. I do know that in the east and in your State of
    West Virginia, and a number of other eastern states where the
    mining company owns both the methane and the coal, or owns the
    whole mineral estate, there are these joint developments going
    on. It can be done. It is being done, and I believe is
    profitable for the companies to do that or they would not
    likely to be engaged in that activity.
        The Chairman. I am sorry. Did you submit any data for the
    eastern operation?
        Mr. Squillace. I did not, Congressman. I focused strictly
    on the Federal lands, but I certainly can find that and would
    be happy to submit that to the Committee.
        The Chairman. I would appreciate it. Appreciate it. I have
    no further questions.
        The gentleman from Washington.
        Mr. Hastings. Thank you, Mr. Chairman. I have no questions
    of the panel but I do want to thank them for being here, and I
    will yield my time to the gentlelady from Wyoming, Ms. Lummis.
        Mrs. Lummis. Thank you, Mr. Chairman, and Mr. Ranking
    Member, and greetings from me to a former law school professor
    of mine, Mark Squillace, from whom I took administrative law at
    the University of Wyoming. In fact, when you were teaching
    there was an earthquake you may recall, and we were all about
    to drive under our desks at the University of Wyoming, College
    of Law, when the earthquake finally stopped, but it was quite
    an experience. It is nice to see you again.
        I would like to say to Mr. Hodgskiss that your testimony is
    music to my ears as a former member of the Wyoming Stock
    Growers Agricultural Land Trust where we worked with ranchers
    to hold over 120,000 acres of agricultural conservation
    easements. I was delighted with your testimony and thank you
    for being here.
        My question are first for Mayor Smith, and Mayor, it is
    nice to see you here. Thank you for coming. While we certainly
    do not agree entirely on how to get there, we all agree that a
    responsible balance between energy development and other public
    land uses and protections is what this Committee is constantly
    striving to find. So, I deeply appreciate your willingness to
    attend today.
        I might note that in the letter that I received and that
    was addressed to the Chairman and the Ranking Member, the
    County Commissioners of Sublette County, which surrounds
    Pinedale, have indicated that your letter and testimony include
    an attachment claiming to be a fact sheet about categorical
    exclusions, but it was far from a factual or impartial
    collection of information, and was in fact prepared by an
    environmental group in Wyoming that has fought energy
    development in our county. I am quoting from the County
    Commissioners' letter. ``The fact sheet doesn't give an
    accurate presentation of the facts and fails to note that while
    categorical exclusions are indeed commonly used by our local
    BLM office for processing applications for permits to drill,
    that is because the agency has already completed exhaustive
    environmental impact statements for the development that is
    currently occurring, categorical exclusions are used because
    the analysis has been made and mitigation has already been
    determined, and because the proposed drilling falls within the
    narrow categories for such use,` and I further commend, Mr.
    Chairman, this letter to your attention.
        My question, Mayor Smith, you made several points in your
    testimony about the financial costs of maintaining and
    repairing infrastructure in Pinedale and it has experienced
    tremendous growth due to energy development, and I agree that
    those costs can be very significant as a former member of the
    Land Commissioners in Wyoming who issues mineral royalty grants
    to communities, especially impacted areas such as yours, and
    when I sat on that board we issued numerous grants of Federal
    mineral royalties to your community. You have a magnificent new
    sizable state-of-the art aquatic center. I believe your library
    is the most fantastic library in the State of Wyoming. You have
    a magnificent senior and community center all paid for in large
    part by the mineral production, oil and gas production.
        You did assert that the energy industry is passing the buck
    by not funding these improvements. Are the companies operating
    Sublette County not paying a sizable royalty on what they
    product and half of that money being returned to the state for
    the very purpose you describe, mineral royalty grants from
    impacted areas through the Board of Land Commissioners in
    addition to the taxes you receive?
        Mr. Hodgskiss. Representative Lummis, thank you for the
    question, and good morning, ma'am.
        Mrs. Lummis. Good morning.
        Mr. Smith. I will start first with the concerns over
    categorical exclusions. The county commissions and I are both
    on the same page as far as trying to do what is best for our
    community with socio-economic impacts. Regardless the source of
    categorical exclusions there is no denying that over 1,500 used
    in our small, very small Pinedale BLM field office alone, I do
    find that disconcerting.
        Moving onto the resources we have in Sublette County, we do
    have a lot of very nice facilities. The Aquatic Center, which
    is paid for recapture from a school district. County
    commissioners have been very generous in funding senior
    centers. My wife works at the library, which is a tremendous
    facility.
        That being said, it is not a matter of how we spend the
    taxpayers' monies that come back; rather, my opinion that
    socio-economic issues should be considered in records of
    decision for use on development of natural resources on Federal
    lands.
        That being said, the Town of Pinedale last year, and our
    budget received under $300,000 of direct payment from mineral
    royalties and mineral severances, so how that system is set up
    for distribution of those funds are also of great concern to
    me.
        Mrs. Lummis. And Mr. Chairman, shall I use the balance of
    my time now or later? Thank you.
        In Wyoming, the revenue largely goes to the county, and as
    you know Sublette County is the wealthiest county in the State
    of Wyoming by virtue of the production of oil and gas in the
    county. So is part of the problem perhaps not the fact that the
    money goes to the county rather than the city?
        Mr. Smith. I assume that is a question for me.
        Mrs. Lummis. It is, Mr. Smith.
        Mr. Smith. The way the mineral royalties are distributed
    amongst the state to the counties and the towns is a state
    issue. Those decisions are made, the formulas are set up by
    state statute. So, yes, that could be a situation we need to
    address at the state level.
        The second attachment to my written testimony, if I may,
    was a letter from all elected official in Sublette County to
    the Governor of Wyoming outlining infrastructure requirements
    and things that we needed to address that are budgets were not
    allowing us to do.
        Yes, there are, and I do not forget for a moment that oil
    and gas corporations are taxpayers as well, but going back to
    my original theory of we need to have those issues addressed in
    a record of decision for small communities that are impacted by
    drilling on Federal lands.
        Mrs. Lummis. Thank you.
        Mr. Chairman, with regard to the document you submitted for
    the record regarding categorical exclusions used by the BLM
    Pinedale office, the one that was referenced in the county
    commissioners' letter that says was prepared by an
    environmental organization raised several questions for me. So
    I contacted the Pinedale field office of the BLM to directly
    verify the data.
        The Pinedale field office told me they found numerous
    inaccuracies in the document, particularly regarding assertions
    that the agency offices uses categorical exclusions to
    circumvent site-specific reviews when issuing APDs or that APDs
    are posted for public comment, and do you standby the document
    you submitted?
        Mr. Smith. Representative Lummis, the document I submitted
    was more than anything a courtesy to explain categorical
    exclusions and how I view them within the Pinedale field
    office. Certainly we can differ on opinions on the source.
    Categorical exclusions have been a very serious concern for
    locals in my community as well, obviously, as environmental
    groups as they in some way circumvent the policies and
    requirements set forth by NEPA, and again I will stand firmly
    by the fact that I feel 1,500 categorical exclusions in three
    years is excessive.
        Mrs. Lummis. Mr. Chairman, in spite of the fact that
    environmental impact statements were performed.
        Mr. Smith. Yes, ma'am, in spite of that fact.
        Mrs. Lummis. Mayor, thank you so much for coming to
    Washington. I now have a question for my former professor, Mark
    Squillace. It is so nice to see you.
        Mr. Squillace. Nice to see you, Congresswoman.
        Mrs. Lummis. What incentives do you think the bill provides
    for uranium exploration in Wyoming and the United States?
        Mr. Squillace. Yes. You know, I think that it certainly
    allows uranium development to occur in what I would consider to
    be a more orderly and a fairer fashion for the taxpayer. So,
    under the proposed legislation there would be a leasing
    program. There would be an opportunity for exploration as well.
    There would be an obligation to pay a fair royalty to the
    government if uranium is developed on the public lands.
        So, that is the way all of our other fuel resources are
    developed on the public lands. I do not think the leasing
    process has unduly hindered that development, and it certainly
    could occur with uranium as well.
        Mrs. Lummis. Mr. Chairman, another question for Mr.
    Squillace. You said in your testimony that cheaply developed
    uranium in Canada and Australia offsets the need to produce
    uranium here in the U.S. And my question is, does your cost
    analysis include the negative impacts to jobs and local
    economies that would hit Wyoming, which is the number one state
    for uranium production and uranium reserves in the U.S.?
        Our local economies, how would they be hit should we drive
    this industry away to Australia and Canada?
        Mr. Squillace. Sure, a fair point. I do not think this is a
    question of driving the industry out of the United States.
    There actually is not very much uranium development in the
    United States. I believe that in Wyoming, north of Cheyenne,
    there is one in situ site that is I think the largest in the
    United States, and there are a few others in other places in
    the United States, but we develop only about 5 percent of the
    uranium that we actually use in the United States right now,
    and what has kept, I think, uranium mining out of the United
    States under the current regime has simply been the low price
    of uranium.
        Now, it spiked as you know I am sure a couple of years ago,
    but it is back down to, I think 43-45 dollars a pound from
    being upwards, I think, of 140. So I think the price of uranium
    that has limited development and we have not seen a substantial
    amount of development. I do not really think, I do not know the
    number of jobs that exists with uranium, but as I said, it is
    such a small amount of development of uranium in the United
    States that we are not talking about a lot of jobs.
        Under the proposed legislation, these existing operations,
    to the extent that they are on public lands, would be allowed
    to convert. Again, because we are dealing with a hazardous kind
    of material, the leasing program would allow what I think would
    be better management of these resources and better assurance
    that we can reclaim the sites in a reasonable manner, and that
    is, as you know, been a problem with many of our abandoned
    uranium mines in the past.
        So, I think that the bill certainly acknowledges the
    importance of developing uranium domestically if the market is
    there to do it, but it also acknowledges that in terms of our
    strategic need for uranium that we have friendly countries who
    are in a position to provide it if we cannot, or economically
    are not interested in providing it ourselves.
        Mrs. Lummis. Mr. Chairman, Ranking Member, thank you very
    much for the opportunity to provide questions, and thank you,
    panel.
        The Chairman. The gentleman from Washington and the
    gentlelady from Wyoming's time has expired, and we are catching
    up here.
        I ask unanimous consent that two more letters be received.
        [Laughter.]
        The Chairman. And be made part of the record. One from John
    Leshy, Professor of Hastings College of Law, and the other one
    from the Wilderness Society.
        Without objection, both letters will be made a part of the
    record.
        [The information submitted for the record by John Leshy,
    Professor of Hastings College of Law, and the Wilderness
    Society, follows:]

    September 16, 2009

    The Honorable Nick Joe Rahall, Chairman
    Committee on Natural Resources
    U.S. House of Representatives
    1324 Longworth House Office Building
    Washington, D.C. 20515

    Re:  Statement submitted on H.R. 3534, the Consolidated Land, Energy,
    and Aquatic Resources Act of 2009

    Dear Chairman Rahall:

        I appreciate your invitation to provide a statement on features of
    this legislation. I am sorry I am unable to attend the Committee's
    hearing in person.
        I have read the testimony submitted by Professor Mark Squillace,
    Director of the Natural Resources Law Center at the University of
    Colorado Law School. I agree completely with his endorsement of the
    provisions dealing with coal mine methane capture (section 307) and
    making uranium a leasable mineral (section 511). I also agree with his
    suggestions for improvement, and I hope you will give them serious
    consideration.
        Section 307 would provide the clarity needed to fix a technical
    glitch in current law. Controlling unnecessary greenhouse gas emissions
    is too urgent to the quality of life on the planet to let obstacles
    like this, which serve no useful purpose, stand. Requiring lessees of
    federal coal to capture the methane emitted as part of the mining
    process when it is profitable for them to do so does not substantial
    burden them; in fact, it provides benefits to them as well as to the
    public.
        Making uranium a leasable mineral also makes eminent sense, for the
    reasons described by Professor Squillace, but I want to emphasize the
    importance of the transition rules for existing mining claims. Section
    511 requires holders of existing mining claims located for uranium to
    apply for leases within two years of enactment, and instructs the
    Secretary to issue a uranium lease to the claimant if it demonstrates
    that ``the claim was, as of such date of enactment, supported by the
    discovery of a valuable deposit of uranium on the claimed land.''
    Section 511 goes on to declare all such existing claims null and void.
        Holders of mining claims located for uranium may argue that this
    feature illegally ``takes'' their mining claims. In fact, however, by
    allowing valid mining claims to be converted to leases, section 511
    protects whatever property interests exist in these claims.
        ``[I]t is clear that in order to create valid rights...against the
    United States [under the Mining Law] a discovery of mineral is
    essential.'' Union Oil v. Smith, 249 U.S. 337, 346 (1919); see also
    Cole v. Ralph, 252 U.S. 286, 296 (1920). It has also long been clear
    that the burden of proof is on the claimant to demonstrate a discovery.
    Consistent with this, Section 511 requires mining claimants to
    demonstrate a discovery in order to obtain a lease. By giving claimants
    the option to convert valid existing claims to leases, and declaring
    all other claims null and void, section 511 takes no property interest,
    because claims without a discovery are not property rights, but merely
    revocable licenses to occupy federal lands.
        Mining claimants may argue that this legislation should instead
    simply protect ``valid existing rights'' in existing claims. The
    experience under the Mineral Leasing Act of 1920 shows why this
    suggestion should be rejected. When it was enacted in 1920, Congress
    brought coal, oil, gas, oil shale and some other minerals under a
    leasing system for the first time, but decided to grandfather ``valid
    claims existent'' on the date of enactment. See 30 U.S.C. Sec. 193.
    Litigation over the extent to which grandfathered mining claims are
    still valid has gone on for almost ninety years, enriching no one but
    the lawyers. For a recent example of such litigation, see Cliffs
    Synfuel Corp. v. Norton 291 F. 3d 1250 (10th Cir. 2002). Section 511
    would avoid this kind of unhappy legacy.
        Thank you for the opportunity to submit these comments, and for
    pushing forward with legislation on these very important topics.

    Yours truly,

    John D. Leshy
    [for identification only]
    Harry D. Sunderland Distinguished Professor of Law
    U. of California, Hastings College of the Law
    200 McAllister St.
    San Francisco, CA 94102
                                     ______

        [The statement submitted for the record by The Wilderness
    Society follows:]

            Statement of David Alberswerth, Senior Policy Advisor,
                      on behalf of The Wilderness Society

        The Wilderness Society appreciates the opportunity to submit this
    statement in general support of H.R. 3534, ``The Consolidated Land,
    Energy and Aquatic Resources Act'', introduced by Chairman Nick Rahall.
    Chairman Rahall is to be commended for once again focusing the House
    Natural Resources Committee's attention on a number of key problems
    that have arisen during the past decade in the administration of the
    Department of the Interior's oil and gas programs, both the onshore
    program managed by the Bureau of Land Management, and the offshore
    program managed by the Minerals Management Service. Chairman Rahall's
    proposal also sets forth a framework for moving forward with the
    development of wind and solar energy projects on the public lands. The
    Wilderness Society especially appreciates Chairman Rahall's call for
    full and dedicated funding of the Land and Water Conservation Fund. Our
    statement focuses on issues related to the onshore oil and gas program
    and the proposed solar and wind power leasing program.
    Title I--Responsibilities of the ``Office of Federal Energy Mineral
            Leasing''
        Title I establishes a new ``Office of Federal Energy Mineral
    Leasing'' (OFEML), and defines its responsibilities. We have two
    reservations regarding the scope of responsibilities transferred to
    OFEML from the Forest Service and BLM. First, we think it should remain
    the responsibility of the two land management agencies to approve lease
    tracts for sale. The two land management agencies will be more familiar
    with the areas proposed for leasing than will the new agency, both have
    established administrative mechanisms for resolving conflicts that
    arise from decisions to offer leases for sale, and both are in a better
    position to understand the ``conditions of approval'' that need to be
    incorporated into lease terms in order to accommodate various resource
    management issues.
        For the same reason, we believe that responsibility for approving
    applications for permits to drill should continue to reside with the
    BLM, and not be transferred to the proposed OFEML (though the Committee
    may consider providing that authority to Forest Service for National
    Forest System lands). Since under the proposal the BLM apparently will
    remain responsible for assuring that the terms of drilling permits are
    fulfilled, and in fact will continue to have overall responsibility for
    overseeing exploration and development activities on the public lands,
    we believe that transferring drilling permit approval authority to the
    new Office would inevitably lead to unnecessary conflicts between the
    agencies, and confusion among the public and operators as well.
        Separating these two mineral resource management decisions--leasing
    and drilling permit approval--from the rest of the multiple uses and
    resources for which the land management agencies are responsible raises
    the risk of having energy development become institutionalized as the
    dominant use of the public lands instead of one of their many uses. For
    example, an agency land use plan may identify an area as suitable for
    leasing. But five years later, when the land use plan still provides
    for leasing, conditions on the ground may have changed. Given the fact
    that OFEML's primary mission is to facilitate energy development on the
    public lands, it will likely not be as sensitive to this reality as the
    land management agencies. Nor is it likely that that OFEML will have as
    good a grasp of how to build ``best management practices'' into
    drilling permits. The bottom line is that OFEML likely will view its
    mission as expediting the leasing and drilling of public lands and
    national forests, and will not be as committed to the idea of balancing
    that mission with protecting and managing the other resources and
    values on these lands.
    Title III--Oil and Gas Leasing Reforms
        Aside from the concern outlined above, Titles I and III contain a
    number of noteworthy reforms in the federal onshore oil and gas
    program. For example, we applaud the inclusion of Sec. 101(f)(6) which
    essentially requires oil and gas operators to provide financial
    guarantees that cover the full estimated costs for restoration and
    reclamation. Current policies for assuring the timely and complete
    restoration of lands disturbed by oil and gas activities are woefully
    inadequate. Just as one example, the GAO has found that on Alaska's
    North Slope, the costs of restoration could reach $6 billion, yet
    existing financial assurances, such as bonding requirements, ensure the
    availability of only a small portion of the funds that are likely to be
    needed to dismantle and remove the infrastructure used for oil industry
    activities and to restore state-owned lands.
        (Alaska's North Slope: Requirements for Restoring Lands After Oil
    Production Ceases, GAO-02-357 June 5, 2002.) The situation at the BLM
    is similar. Currently, BLM policy is to allow operators to post
    reclamation bonds as little as $25,000 to cover all surface
    disturbances in a state. Enactment of the provision will assure that
    taxpayers will not be stuck with the costs of cleaning up public lands
    affected by oil and gas activities.
        With respect to the ``diligent development'' requirements set forth
    in Sec. 301, we recommend the addition of language that would limit the
    primary term of an onshore lease to five years from the present 10
    years. Such a requirement would limit the opportunity for the
    speculative acquisition of oil and gas leases.
        Section 303 requires public notice be given before leases and
    drilling permits are issued. Such a requirement will enhance the
    opportunities for public scrutiny and involvement in the leasing and
    permitting process. In addition, we recommend that language be added to
    require public notice prior to the issuance of lease suspensions as
    well. Sec. 304(b) requires that all federal oil and gas leases be
    issued via sealed competitive bidding. Such a requirement is likely to
    both enhance federal revenues from lease sales, and inhibit
    opportunities for the speculative acquisition of federal oil and gas
    lease tracts. We do recommend, however, that the ``minimum acceptable
    bid'' of $2.50 per acre be raised to $5.00 per acre, and that the
    rental rate set at $2.50 per acres in Sec. 304(c) also be raised to
    $5.00 per acre. These changes will both reduce the speculative
    acquisition of leases, and enhance revenues from the leasing program.
        We also recommend that the base federal royalty rate for onshore
    oil and gas resources be raised from 12.5% to 18.75%, as the Obama
    Administration has recommended. According to the Government
    Accountability Office, ``[T]he U.S. federal government receives one of
    the lowest government takes in the world.'' [GAO-07-676R, Letter to The
    Honorable Jeff Bingaman, etal., May 1, 2007, p. 2] Raising the onshore
    rate to 18.75% would make the onshore rate roughly equivalent to
    royalty rates charge on recent offshore leases, and assure a fairer
    rate of return for the American taxpayer.
        We are especially pleased with two provisions in H.R 3534 that
    relate to protection of environmental values on lands subject to oil
    and gas activities. The first is Sec. 306, which requires the BLM to
    promulgate ``best management practices'' to assure the
    ``...environmentally responsible development of oil and gas on Federal
    lands in a manner that avoids where practical, minimizes, and mitigates
    actual and anticipated impacts to environmental habitat functions
    resulting from oil and gas development...'' As an example of a new
    ``best management practice'' that should be implemented by the BLM, all
    operators on federal onshore leases who utilize hydraulic fracturing
    operations should be required to publicly disclose the chemicals they
    propose to use prior to approval of such operations. We also strongly
    support the repeal of Sec. 390 of the Energy Policy Act (EPACT) in Sec.
    306. The BLM's problem-plagued administration of EPACT Sec. 390 is
    detailed in the forthcoming Government Accountability Office evaluation
    requested by Chairmen Rahall and Bingaman. In our view EPACT Section
    390 is ``too broken to fix'', and should be repealed outright, as H.R.
    3534 provides.
    Title IV--LWCF
        We support full and dedicated funding for the LWCF program as set
    forth in Title IV. The program should be funded at the $900 million
    annual level that Congress authorized when the program was created.
    Since 1965, over $17 billion in funding for LWCF has been diverted to
    other programs, and this bill would change that by finally dedicating
    the funds to their intended purpose. We wish to clarify, however, that
    we strongly oppose OCS development in inappropriate places, such as
    Alaska's Outer Continental Shelf.
        LWCF is an effective and popular program that deserves full and
    dedicated funding because it is used to acquire critical inholdings
    within federally designated parks, refuges and forests. These lands
    provide a host of ecological benefits such as water filtration, erosion
    control, landscape connectivity, and important wildlife habitat.
        As climate change continues to have a major impact on the
    landscape, LWCF should be used to conserve and connect large, healthy
    ecosystems and habitats to ensure that biological systems stay
    resilient. Providing opportunities for species to migrate or shift
    their ranges as temperatures and other conditions change is essential
    to the survival of plants, fish, and wildlife.
        The LWCF has many economic benefits. The lands LWCF protect help
    ensure Americans have access to top-quality recreation opportunities.
    LWCF supports an American outdoor recreation economy worth $730 billion
    dollars a year. Approximately 1 out of every 20 American jobs are
    supported by outdoor recreation. In addition, these lands help promote
    a healthy tourism economy, increase property values in local
    communities, and contribute to a lowering of management costs on public
    lands associated with private land interests.
    Title V, Solar and Wind
        We are pleased that wind and solar leasing authorities are clearly
    tied to the Federal Land Policy and Management Act (FLPMA) and the
    National Forest Management Act (NFMA), rather than existing
    independently. While we believe DOI currently has the authority to
    lease lands for wind and solar development, we share the Committee's
    interest in improving the environmental review and federal
    authorization processes for wind and solar development on federal
    lands. Additionally, we think that an incentive structure should be
    created to transition current right-of-way holders into a leasing
    framework.
        We recommend that language addressing mitigation and reclamation
    for wind and solar development be expanded to ensure sensitive wildlife
    and wildlands are safeguarded. Mitigation must start with responsible
    development of only suitable lands. The language should clarify that
    wilderness-quality lands, lands managed for conservation purposes, and
    important habitat should be avoided or excluded from leasing.
    Responsible siting is far more effective and efficient than attempts to
    mitigate impacts with compensatory approaches. Nevertheless, even in
    suitable locations there will be a host of unavoidable impacts. In
    Section 502(d), mandatory best management practices should be
    complemented by mandatory project-specific mitigation requirements,
    including habitat restoration and/or acquisition.
        Likewise, we recommend that wind and solar reclamation should call
    for interim requirements. The useful life of a solar or wind facility
    is uncertain, but likely to be more than 30 years, but the draft
    language does not require interim reclamation activities prior to
    completion of commercial activities. Section 502 should be revised to
    require the Interior Department to issue regulations that proscribe
    interim reclamation requirements applicable during the project's useful
    life.
        To that end, we recommend that Section 503 should prescribe that
    some portion of revenues from wind and solar leasing be dedicated to
    funding conservation activities. Such a commitment of resources is
    appropriate given the sensitivity of ecosystems and species in the
    landscapes with the greatest renewable resource potential.
        Title V, Subtitle B, uranium leasing--We support changing the
    status of uranium resources on public lands from a locatable mineral
    subject to location under the 1872 Mining law, to a leasable mineral,
    as provided by Sec. 511. The time is long past when valuable minerals
    such as uranium can simply be removed from our public lands without
    compensation to the owners of these resources--the American people. The
    one change we would recommend is deletion of lines 13 through 18 on
    page 61. We see no reason why judgments by the Secretary as to the fair
    market value of uranium resources should be withheld from public
    disclosure.
    Title VII Misc Provisions--Interagency Consultation to Protect Wildlife
        We support Sec. 701(b) and (c). Sec. 701 (b) repeals EPACT Section
    346, which extended discretionary royalty relief authority to the
    Alaskan OCS. Sec. 701(c) strikes part of EPACT Section 347,
    specifically those parts that allowed for extension of NPR-A leases for
    up to 30 years and that provided for royalty relief authority in NPR-A
    as well.
        Finally, our nation's 550 National Wildlife Refuges were
    established because they are areas of biological importance and provide
    stopovers for millions of migratory birds and wildlife habitat for
    countless species. Energy development, whether oil and gas exploration
    or solar and wind leasing projects, can threaten the health of
    migrating birds and other wildlife. Therefore, we recommend that the
    legislation be amended to ensure that the United States Fish and
    Wildlife Service be consulted during the siting, permitting,
    implementation, and oversight of energy projects on federal lands,
    particularly when projects are adjacent to or in proximity to a refuge,
    or may impact a migratory corridor, or may affect the status of species
    listed as threatened or endangered, or their habitats. Such an
    amendment could also reference needed coordination with the park
    service and NOAA. The Wilderness Society would like to work with the
    Committee on developing language that would ensure interagency
    consultation.
        We look forward to working with the Chairman and the Committee on
    this important reform legislation.
                                     ______

        Mr. Hastings. Mr. Chairman.
        The Chairman. Yes.
        Mr. Hastings. In an effort to stay ahead, I ask unanimous
    consent that a letter from the Northwest Mining Association be
    made a part of the record.
        The Chairman. Without objection, so ordered.
        [The letter submitted for the record by the Northwest
    Mining Association follows:]

    September 17,2009

    The Honorable Nick 1. Rahall II
    Chairman, House Committee on Natural Resources
    1324 Longworth House Office Building
    Washington, D.C. 20515

    The Honorable Doc Hastings
    Ranking Member, House Committee on Natural Resources
    1329 Longworth House Office Building
    Washington, D.C. 20515

    Re:  Legislative Hearing on H.R. 3534 -The Consolidated Land, Energy,
    and Aquatic Resources Act of 2009

    Dear Chairman Rahall and Ranking Member Hastings:

        The Northwest Mining Association (NWMA) appreciates the opportunity
    to provide the following statement to the committee.
        Our comments on the legislation will be limited to Subtitle B -
    Uranium Leasing, contained in Section 511 of H.R. 3534.
        Approximately 20 percent of the electricity generated in the United
    States is produced from nuclear power, and uranium is the fuel that
    creates this energy. Nuclear power is one of the cleanest sources of
    consistent and reliable energy available. The nuclear energy process
    emits only one greenhouse gas -water vapor. It also is important to
    recognize that the vast majority of the uranium used to fuel our
    domestic nuclear electric plants is imported from Canada, Russia,
    Kazakhstan, and other countries. We import more than 95% of the uranium
    we need in spite of the presence of significant uranium resources in
    several of the western states, much of it located on public lands.
        Section 511 of H.R. 3534 is particularly troubling to the domestic
    uranium industry because it would permanently remove uranium from
    location under the Mining Law after two years following enactment of
    the legislation and make it leasable. We will outline below why this
    scenario is unworkable from an economic and operational perspective,
    will severely damage our national and economic security, and subject
    the federal government to substantial takings litigation.
    Northwest Mining Association - Who We Are
        NWMA is a 114 year-old non-profit mining industry trade association
    with offices in Spokane, Washington, and 1,650 members residing in 40
    states. Our members are actively involved in exploration, mining, and
    reclamation operations on BLM and USFS administered land in every
    western state, in addition to private, land grants and tribal lands.
    Our membership represents every facet of the mining industry including
    geology, exploration, mining, reclamation, engineering, equipment
    manufacturing, technical services, and sales of equipment and supplies.
    Our broad-base membership includes many small miners and exploration
    geologists as well junior and large mining companies. More than 90% of
    our members are small businesses or work for small businesses.
        Our members have extensive first-hand experience with locating
    mining claims, exploring for mineral deposits, finding and developing
    mineral deposits, permitting exploration and mining projects, operating
    mines, reclaiming mine sites, and ensuring that exploration and mining
    projects comply with all applicable federal and state environmental
    laws and regulations.
    H.R. 3534 Violates the Takings Clause of the Constitution
        Section 511 of H.R. 3534 requires all uranium production to have a
    lease even if a claimant holds an existing mine with a valid discovery
    of a valuable uranium mineral deposit. The bill would:
          create a bidding system similar to coal and oil & gas
    leases;
          impose a 12.5% royalty;
          require an exploration license; and
          if the claimant has a discovery, the claimant must apply
    to convert his mining claims to a lease within one year or the claims
    will be deemed null and void; and
          mining claims converted to leases pay a 6.25% royalty for
    the first ten years, then 12.5%.
        H.R. 3534 fails to contain provisions to protect existing uranium
    mining claims that were located under the Mining Law. While the bill
    does require the secretary to issue a lease for uranium claims that can
    show a valid discovery as of the date of enactment, it extinguishes the
    claim (and the claimant's rights under the Mining Law) by converting it
    to a lease. The legislation fails to include some type of valid
    existing rights language to protect pre-existing property rights from
    being impaired by subsequently enacted policy changes. By failing to
    take into consideration property rights relating to properly maintained
    claims established prior to enactment of the bill, the legislation will
    likely generate claims for a compensable taking under the Takings
    Clause of the U.S. Constitution.
        More than 100 years of legal precedent clearly indicates that a
    valid mining claim under the Mining Law of 1872 creates property rights
    for the claim holder. Best v. Humboldt Placer Mining Co., 371 U.S. 334,
    336 (1963). The courts have recognized that valid unpatented mining
    claims are exclusive possessory interests in federal land for mining
    purposes, which entitle claim holders to extract and sell minerals
    without paying any royalties to the government. Union Oil Co. v. Smith,
    249 U.S. 337,348-349 (1919) (``If he locates, marks, and records his
    claim in accordance with [the Mining Law] and the pertinent local laws
    and regulations, he has...an exclusive right of possession to the
    extent of his claim as located, with the right to extract the minerals,
    even to exhaustion, without paying any royalty to the United States as
    owner, and without ever applying for a patent or seeking to obtain
    title to the fee....'') (emphasis added). The Federal Circuit has
    reached the same conclusion, and stated further that ``[e]ven though
    title to the fee estate remains in the United States, these unpatented
    mining claims are themselves property protected by the Fifth Amendment
    against uncompensated takings.'' Kunkes v. United States, 78 F.3d 1549,
    1551 (Fed. Cir. 1996).
        Therefore, under existing law, the claimant of a valid unpatented
    mining claim has a protected property right in the fit/I value of the
    minerals it extracts from its mining claim. A royalty interest, which
    is commonly defined as a right to a fractional share of the minerals
    produced from the land, also is a property interest. Shell Oil Co. v.
    Babbitt, 920 F. Supp. 559, 564-65 (D. Del. 1996). Thus, by requiring a
    claimant to pay the United States a royalty of 6.25% of the gross value
    of the uranium produced from an existing valid unpatented mining claim,
    H.R. 3534 plainly and directly affects a legislative/regulatory taking
    of that property interest from the mining claimant without compensation
    in violation of the Fifth Amendment. Lucas v. S.C. Coastal Council, 505
    U.S. 1003 (1992); Penn Central Transp. Co. v. New York City, 438 U.S.
    104 (1978). Further, because the imposition of the royalty obligation
    is on mining claims that already are in existence on the date H.R. 3534
    is enacted, the effect of the new law would be retroactive, depriving
    the mining claimants of their due process rights under the Fifth
    Amendment. Landgraf v. Usi Film Prods., 511 U.S. 244 (1944).
    Uranium is Different from Coal, Oil and Natural Gas
        To argue that uranium is an ``energy mineral'' and therefore should
    be treated just like minerals under the Minerals Leasing Act denies the
    simple facts of geology. Furthermore, the royalty provisions in H.R.
    3534 are so high as to render essentially all of the domestic uranium
    resources uneconomic. The points below describe in detail why uranium
    differs markedly from coal, oil and natural gas and.
          Coal, oil and natural gas are fuel minerals that are
    typically located in vast sedimentary basins such as the Powder River
    Basin, San Juan Basin'' Permian Basin, or the midcontinental U.S. and
    Appalachians. Once an oil or natural gas well is successfully
    completed, it can produce with little or no additional effort other
    than insuring the well is in operating condition and functioning.
          Mines for uranium, gold, copper and other locatable
    minerals must be operated 24/7 and can't be walked away from like a
    producing oil or gas well can.
          Uranium deposits are small and difficult to locate, just
    like other hardrock deposits of gold, copper, molybdenum, cobalt or
    copper. Just because a uranium deposit may be discovered doesn't mean
    it is economical to mine because of ore grade, depth, metallurgical
    problems and additional geological or environmental constraints.
          Discovery, delineation and development of an in-situ or
    conventionally recoverable uranium ore body involves the same
    activities as those required for development of copper, cobalt, zinc,
    gold or copper ore bodies. Such activities typically require years of
    expensive fact-finding including ground, aerial and satellite
    reconnaissance; exploration drilling; environmental baseline data
    gathering; workforce hiring and training; mine and mill planning,
    design and construction; decommissioning and decontamination.
          Once a mineable deposit is identified, uranium ore
    requires additional extensive and expensive processing in the form of
    mining, crushing of the ore, separation and concentration of the U308.
    Further off-site steps include conversion to uranium hexafluoride,
    enrichment, conversion back to U02 and finally fuel fabrication. The
    in-situ process, while somewhat less expensive, still requires
    discovery and delineation of an economic ore body, mine planning and
    construction, recovery, separation and concentration, and all of the
    additional downstream steps of conversion, enrichment and fuel
    fabrication.
          Uranium may also be found as an IOCG (Iron-oxide copper
    gold) deposit, similar to Australia's Olympic Dam operation where by-
    product uranium is produced from a copper gold deposit. Such a setting
    speaks for itself -there's simply no similarity to a leasable substance
    such as coal, oil or gas.
          Unconformity Style deposits such as those in Canada's
    Athabasca Basin often form along structures which provide conduits for
    the mineralization to deposit in basement rocks such as granites,
    gneisses, etc. or at the contact with the overlying sediments or up in
    the sediments such as gold deposits, etc. With such deposits there is
    no comparison to oil, natural gas or coal deposits.
          However, unlike the large disseminated gold or copper
    deposits, uranium deposits are typically very small deposits in a real
    extent relative to the surface footprint. Unlike coal, oil or natural
    gas deposits, uranium deposits are drill intensive, thus easy to miss,
    and very close drill spacing is required, often less than 50' spacing.
    NOTHING about these deposits is comparable to oil, natural gas or coal
    deposits.
          Volcanic hosted deposits are similar to the Canadian
    unconformity deposits. These deposits are often hosted in veins such as
    those that host underground gold deposits, and are possible in New
    Mexico and Nevada. The Streltsovka caldera in Russia is a prime
    example. In addition, the mineralization may be hosted in various
    volcanic units that exhibit alteration such as is found in gold
    deposits or massive sulfide deposits. Again, there is NO similarity to
    coal, oil and natural gas.
          Quartz-pebble conglomerate deposits such as those found
    in the Witswaterand in South Africa are described where uranium occurs
    along with the gold and is produced as a byproduct of the gold
    operation.
          Roll Fronts are long, linear, discontinuous, narrow and
    sinuous ore bodies, and are very common in New Mexico, Texas, Wyoming
    and Nebraska. Such ore bodies are often drilled out on 25-50 foot
    centers and require a reductant such as a humate substance to cause the
    uranium to drop out of the fluids to form the ore deposit. Such
    deposits are unlike any known coal, oil or natural gas deposits.
          Alaskite hosted deposits are where uranium is
    disseminated in a granitic rock such as at Rossing in Namibia,
    Schwartzwalder in Colorado or Copper Mountain in Wyoming, forming bulk
    tonnages of low grades. For such deposits, mining techniques would be
    comparable to mining a large copper porphyry deposit.
          Uranium is a metal and is often mined with copper, gold
    and other metals. With the breccia pipe deposits, uranium commonly
    occurs with copper, nickel, cobalt, molybdenum, vanadium and a number
    of other locatable metals. To make uranium leasable, while the others
    mined at the same time are locatable, would produce regulatory and
    accounting confusion and would be unworkable from an operational
    perspective.
          In order to explore for and produce uranium, the same
    costly exploration, recovery and beneficiation techniques and
    extraction methods used for metals deposits are required. There is no
    similarity to coal, oil and gas or industrial minerals such as gypsum,
    gravel, etc. Uranium is a metal deposit just like gold, iron, copper,
    lead, zinc, etc., and should be treated as such.
    Conclusion
        Uranium is currently locatable under the Mining Law for a reason -
    because it belongs there. Previous Congresses have recognized the
    differences between uranium and coal, oil and natural gas. We urge this
    Congress to do the same and reject the misguided effort to make uranium
    leasable.
        Provisions in Section 511 of H.R. 3534 will make the mining of
    uranium in the United States uneconomic, leading to the loss of good-
    paying jobs and a dangerous total reliance on foreign sources of a
    critical component of our nation's energy portfolio. If enacted, H.R.
    3534 also will subject the federal government to substantial takings
    litigation.
        As a nation facing increasing demand for energy, we must increase
    the capacity for all available sources of energy, including clean
    nuclear power. Now is not the time to erect barriers to the development
    of the resources necessary to ensure our energy future. H.R. 3534 is
    bad policy for this country that will unnecessarily cripple the
    domestic uranium industry and put our nation's economic and national
    security at risk. Section 511 should be deleted entirely from the bill.

    Respectfully submitted,

    Laura Skaer
    Executive Director
    Northwest Mining Association
                                     ______

        The Chairman. The gentlelady from Guam, Ms. Bordallo, is
    recognized.
        Ms. Bordallo. Thank you very much, Mr. Chairman. Mr. Mann,
    I have a couple of questions for you, and good morning to all
    the witnesses.
        Yesterday NOAA's written testimony stated that they could
    not support the Regional Outer Continental Shelf Councils or
    the strategic plans outlined in the bill because a
    comprehensive national approach to marine spacial planning must
    first be established, and the Ocean Policy Task Force is
    already working on recommendations for such an approach.
        I know that Pew has endorsed a comprehensive planning
    approach, but do you think this is something that can be
    achieved administratively or do you think legislation will be
    needed to address the likely resistance from Federal agencies
    who will need to change the way they do business? Should we let
    energy development and siting go forward with no planning
    process in place while we wait for the Ocean Policy Task Force
    to develop a broader planning proposal that may or may not be
    adopted?
        Mr. Mann. Thank you for the question, Ms. Bordallo. Let me
    answer the last question first. No. We fully support the
    efforts of the administration to develop a national ocean
    policy and a framework for its implementation. That is
    consistent with the recommendations of both the Pew Commission,
    Pew Oceans Commission, and the U.S. Commission on Ocean Policy.
    The problem being that in the oceans you do not have a single
    landlord over any acre or square mile of land, and so because
    of that legal framework, which is not likely to fundamentally
    change, we need the agencies to work together under a national
    framework, and we need the Federal government, once it is
    better organized, to work with the states to provide
    comprehensive management for those marine ecosystems which for
    some reason just do not respect the jurisdictional boundaries
    that we have imposed on them.
        Having said that, I do not think we are in disagreement
    with Dr. Lubchenco in that we support the goal of comprehensive
    management, but the administration can only do what it does
    under the authority of current law, and they can do quite a
    bit, but ultimately they will probably need changes in
    statutory law to more fully implement that.
        In addition, with all due respect, I do not see the energy
    legislation being enacted within the next few weeks. I think
    there is plenty of time to work out any coordination needs with
    what the administration is doing and what this bill does, and
    if we are going to walk before we can run, the energy sector is
    a substantial use of the offshore, and providing better
    coordination for that use with more consideration of other
    ocean uses and users is a significant step forward that I think
    will contribute to the overall effort.
        Ms. Bordallo. Thank you. Thank you very much.
        My second question to you, Mr. Mann, is, interestingly
    while NOAA stated that a comprehensive planning effort for
    energy development should be delayed until we have a national
    approach to marine spacial planning that addresses all
    activities in the ocean, they are moving ahead with the
    development of offshore aquaculture in a piecemeal fashion.
    They let the Gulf Fishery Management Council's plan go into
    effect with no over-arching Federal standards for offshore
    aquaculture in place with the vague promise of developing a
    national aquaculture policy at some point in the future, and
    with no clear explanation of how much a policy or the Gulf plan
    fits into their strict vision for marine spacial planning.
        Would you care to talk about why a piecemeal approach to
    offshore aquaculture regulation is not OK, and what do you
    think the approach should be?
        Mr. Mann. Thank you for the opportunity to again disagree
    with my good friend Dr. Lubchenco, and I think that
    disagreement is one of strategy and not of outcomes and goals.
        In other words, the Pew Charitable Trust shares NOAA's goal
    of a strong and science-based national aquaculture policy, but
    we do not think that the way to get there is through the law
    designed to regulate fisheries management. It was not, as
    Chairman Rahall has articulated to both the administration and
    to the Gulf Fishery Management Council, Congress did not intend
    that law to regulate fisheries. There is some technical overlap
    perhaps in that if you have a fish on your boat, you know, you
    may need an exemption from the Magnuson Act to be able to take
    that.
        But that does not in any way justify extrapolation to a
    full-on permitting and regulatory program for something that is
    very fundamental. Aquaculture is a form of agriculture. It is
    not to capture fish.
        So, I do think that argument that you mention made by NOAA
    is a little inconsistent. They are endorsing a piecemeal
    approach for aquaculture at a time when we do not have a
    national policy, and we should have a national policy first,
    and I believe that will require legislation to establish.
        Ms. Bordallo. Thank you very much, Mr. Mann, for your
    straightforward answers to the question.
        Mr. Chairman, thank you.
        The Chairman. Because I allowed two timeframes be used in
    succession on the Minority side, I am going to do the same on
    the Majority side. Mr. Heinrich of New Mexico is recognized.
        Mr. Heinrich. Thank you, Mr. Chairman. I want to direct my
    first question to Mayor Smith, and I will put in a plug first
    because last time I was through Pinedale back in--it has been a
    number of years now--it is an absolutely gorgeous community,
    and one of the concerns I have because I spent a lot of time in
    my own state grappling with these issues has less to do with
    the development of the oil and gas as it has to do with the
    long-term impacts of fragmentation in places like the Jonah
    Field that you deal with and that we have similar issues in the
    northwest and southeast parts of our state.
        I wanted to ask you if you had any suggestions or
    recommendations for best practices to address some of the needs
    for service reclamation and seasonal closures and other things
    that can allow for the development of oil and gas in a way that
    still protects both the natural resource for hunters and
    fishermen and recreationists, and also the economic resources
    that that provides. That is a sportsmen makeup, an enormous
    part of New Mexico's economy, and I can only imagine that the
    same is true in Wyoming.
        Mr. Smith. Congressman, thank you both for the compliment
    and for the question.
        In the Jonah Field on the Pinedale Anticlines there has
    been serious mitigation efforts made, first of all, for
    population studies on mule deer as well as sage grouse habitat
    along those lines. The industry has stepped up quite valiantly
    actually in funding some of those mitigations both at BLM and
    the Governor's request, and quite frankly, I think they have
    done a pretty good job.
        One thing that the operators, there are three operators on
    the Pinedale Anticline, which is a proposed 4,000 well
    development, they have worked creatively to find a way to
    cooperate and to explore and produce in groups. In their work,
    they will work in one specific area of the geographic location,
    develop that without interrupting migration, and then once that
    exploration has concluded, they will as a group them move in a
    cooperative effort so that the migration routes are not
    affected. I commend them for that and that has been good work.
        The economic development out of Pinedale is a great bonus
    for us. Again, I am not here to advocate for or against energy.
    This is a resource that we really have benefitted from over the
    last few years.
        Wildlife mitigation has been taken seriously, and we are
    happy to have seen that.
        Mr. Heinrich. So phased development within a general
    leasing area is one of the things that you think is really
    worth taking a lesson from?
        Mr. Smith. I do. That is something fairly original that I
    think has come up, and the industry for the most part has done
    that themselves. They made proposals during the SEIS on the
    Anticline that they would move forward with that sort of phase,
    and moving along geographically in the area, and they are
    sticking to their gun, and it seems to be working.
        Mr. Heinrich. Thank you, Mayor.
        Ms. Brian, I have a couple of questions for you, too. I was
    going to ask you if you thought that the Royalty In Kind
    Program was simply unreformable, but when you said quote/
    unquote ``stake in the heart of RIK'' you made your point on
    that.
        Ms. Brian. Point on that, yes.
        Mr. Heinrich. But I want to drill down a little bit,
    forgive me the pun, but I am curious as to--you know, I am very
    familiar with the problems with the program, and I certainly
    think it has to be reformed, but the question I have is are the
    problems really a matter of--are they structural, or it seems
    to me it is just bad management, lack of clear ethics lines? Is
    there something fundamentally wrong with the idea of accepting
    product, oil and gas, rather than currency for royalty
    payments?
        Ms. Brian. Well, thank you for the question, and the
    opportunity to discuss RIK.
        Ultimately the reason the Royalty In Kind Program was
    created was in order to reduce the burden essentially of
    auditing. The idea was that this was going to be saving money
    because we are shrinking essentially the government bureaucracy
    that is looking into auditing the leases. But what ends up
    happening over the years GAO has found we have never been able
    to be sure that actually we--the taxpayers are actually making
    money and having any confidence that royalties are being
    reflected in the manner that they should be reflected. So in
    the end the only way to reform it is to bring back the auditors
    to determine whether we are getting any royalties which the
    obviate the whole point of royalty in kind in the first place.
        Mr. Heinrich. Well, I think from that perspective if you
    articulate it that way I would agree. But what I have heard
    from a number of small independent producers is that they
    simply do not have the capital to be--you know, it helps them
    develop without having huge capital reserves, and that is a
    separate problem from the idea of just saving on the auditing
    from the Federal government side. So that is one of the issues
    I have is if we had a program that actually was doing the
    taxpayer right in terms of making sure that the product was
    being provided, it was being provided at the right cost in
    full, et cetera, would there be--is there still a problem with
    the idea of utilizing product in kind as opposed to currency?
        Ms. Brian. No, it is not the concept of it being in kind as
    much as the fact that the way the system has operated has been
    totally nonfunctional.
        Mr. Heinrich. One last thing. The IG's investigation, you
    know, given the nature of the inspector general, do you think
    that royalty auditing is really appropriate for that office or
    would you recommend it remain part of the operation and mission
    of the new agency that is created to oversee these things
    because I see the IG's role as more of, you know, once somebody
    gets in trouble their job is to investigate?
        Ms. Brian. Yes. I mean, I have a Solomon's choice on that
    one because I feel very protective of the integrity of the
    inspector general's office as well, and this is a little bit
    awkward from our perspective because we want the IGs to be able
    to actually review whether those offices are appropriately
    auditing. However, keeping it within the same organization,
    even if they are split off, they are still ultimately reporting
    to the same people within the Department of the Interior and
    creates still that tension of having people who really want to
    make it look like they are doing well rather than whether they
    really are doing well in recoveries.
        So, in my perfect world actually the IG would be a short-
    term solution. POGO has found a number of agencies that have
    problems with their auditing functions, and we ultimately are
    hoping to see the Federal auditing agency that be created that
    would be dealing with GSA and DOD and many other agencies
    audits that would be independent from those agencies, but until
    we have that I think it is proper to staying in the IG.
        Mr. Heinrich. Thank you, Chairman. I yield back.
        The Chairman. At this time without any fanfare or drum roll
    the gentleman from Utah is recognized, Mr. Bishop.
        Mr. Bishop. Thank you, Mr. Chairman. I know you sat me
    between two microphones for a reason.
        Could I just inquire as to the number of letters on the
    letter game? Are we behind on unanimous consent? Because I
    could write one right now if you want me to.
        The Chairman. You are ahead. We do not need yours.
        Mr. Bishop. OK.
        [Laughter.]
        Mr. Bishop. I only have two quick questions. Mr. Mann, if I
    could, just for you. I was intrigued yesterday when the
    Secretary discussed one of the advantages of wind power on the
    outer continental shelf was its proximity to areas of demand.
    Was he accurate when he said the proximity was one of the
    benefits for development of the OCS for wind power? Again, your
    opinion, obviously.
        Mr. Mann. I will give you the best answer I can on that,
    Mr. Bishop. I am not an expert on offshore energy product, but,
    yes, I believe that is what he said, and I agree with it, but
    if you have an area with a good wind field to produce the
    energy, the issue with renewables always seems to be getting it
    to where the users are. So, depending on where the resource is,
    it can be very good potentially on the east coast with the high
    population density, and a relatively shallow continental shelf
    where you can develop wind quite a ways out.
        In other less populated areas, it probably would not make
    sense to develop that resource because the loss of transmission
    would diminish the return on that.
        Mr. Bishop. I thank you for that answer, and I appreciate
    it because it presented at least a question in my mind and I
    guess I could ask you the next one with that. Do you believe
    the development of natural gas on the outer continental shelf
    of the Atlantic, which is certainly closer to Trinidad, or
    Venezuela or Egypt where we are presently importing liquid
    natural gas through Atlantic ports, would have the same and a
    similar benefit to the United States?
        Mr. Mann. As I testified, we are not opposed to development
    of offshore mineral sources, whether it is natural gas or oil
    and gas. I think the challenge there is the difficulty of
    separating natural gas production from oil production, and I
    know there has been a lot of talk of it up here by people who
    know much more about it than I do, but I am not aware that you
    can truly separate that, and producing either has environmental
    impacts.
        So, you know, I think the point of my testimony today was
    not to try to tell you where, when and how offshore resources
    should be developed, but to advocate a process that allows for
    decisionmaking on a regional basis that takes better account of
    the users and uses of those resources and tries to come up with
    a plan that is more durable both politically and
    environmentally, you know, on a regional basis to advise the
    Secretary.
        Mr. Bishop. I thank you for coming through with that
    clarification there. It is, I think, interesting, especially
    for those in the West who are dealing with alternative; not
    necessarily alternatives but supplemental energy sources that
    proximity is indeed one of the questions we have to deal with.
        With that I will allow any extra time I have to go to Ms.
    Lummis for her last speech. I am trying to catch up here.
        The Chairman. The gentlelady from New Hampshire, Ms. Shea-
    Porter is recognized.
        Ms. Shea-Porter. Thank you very much.
        I am very interested in Pinedale because I think Pinedale
    is a case study. We know that we are going to have to continue
    to find our resources to fuel our engine requirements, but I
    would like to talk about Pinedale if you will, please, because
    the conversation that we had previously where they were talking
    about the letter from the Sublette County Commissioners and you
    have your material from an environmental group, and I would say
    that each has its place there, and so I am happy that everyone
    is engaged in this conversation. It is also nice to hear my
    colleague praise Federal grands and funds, and I am happy that
    your community has received some benefits along with the
    sacrifices, Mayor Smith.
        But could you talk to me about what was your population
    before the big discovery of natural gas, and what is your
    population now?
        Mr. Smith. Thank you for the question, and again, of
    course, I am always happy to talk about Pinedale.
        Our population in the 1990--correction--in the 2000 census
    in the municipal limits of Pinedale was almost exactly 1,400
    people. Our best guess now with our socio-economic analysis of
    the county is we may be at 1,600 to 1,800 people in the
    municipal limits alone.
        Ms. Shea-Porter. OK, and 1,500 categorical exclusions you
    mentioned, right?
        Mr. Smith. Yes.
        Ms. Shea-Porter. What would you expect to find? Is there a
    normal range that you get out of the BLM?
        Mr. Smith. In our area we really have no reference. There
    wasn't a tremendous amount of permitting allowed before this
    boom in Sublette County. As far as the ratio of other
    communities' experience, I am not sure, but I do know that the
    field office in Pinedale is more in Fiscal Year 2008 than in
    any other BLM office in the nation.
        Ms. Shea-Porter. OK. And you are counting Sublette County?
        Mr. Smith. Sublette County, yes.
        Ms. Shea-Porter. And I was looking at the letter and I was
    surprised to hear that, I guess you are all in this letter
    together, and the letter states to the Governor, ``Although our
    community has benefitted enormously from energy development,
    our list illustrates that the costs of maintaining
    infrastructure and public services have outstripped our ability
    to fund these necessities. The towns in particular are
    disadvantaged in funding infrastructure needs.''
        Can you talk to me about those infrastructure needs? I read
    that you have some problems with your water. You have problems
    with air, and you said the Wyoming Department of Environmental
    Quality has been active in monitoring your air quality. Could
    you talk a little bit more about the problems and why the
    county agreed with your statement that the town, and your town
    is having trouble keeping up with the changes?
        Mr. Smith. Yes, and again, thank you for the question.
        The letter to the Governor was signed by all the elected
    officials in Sublette County, the mayors of each of our three
    towns, as well as each member of the commission. We had
    approached the Governor regarding identifying some of the
    impacts that we have, and in that letter we specifically
    identified the needs specifically of each town as well as the
    county commissioners needs, which I think the request was
    around $32 million for a shortfall and building a road that
    they needed.
        As far as our water quality goes, we have no real concerns
    about our drinking water. Our main concerns in Sublette County
    based on the residents that I have visited with are questions
    over ozone. We have had multiple issues of ozone occurrence in
    the county in the last three years. In a very rural county we
    have exceeded the Federal standard of 75 parts per billion on
    numerous occasions, going as high as 122 parts per billion, and
    keep in mind this is a rural community. This is not Los
    Angeles, Chicago, or New York. We have less than 8,000 people
    in the county, we are having ozone leaks. That prompted citizen
    groups to be created, to come to the state and Federal level
    with their concerns.
        There are specific infrastructure needs that I could go
    onto. Just in Pinedale we identified some road projects, Big
    Piney had, I think, a water or sewer project. There are
    multiple projects that we identified in our letter to the
    Governor.
        Ms. Shea-Porter. Just to summarize it, when you have this
    growth you obviously have problems within your community, and
    again I would like to repeat the line that your county wrote
    with you, ``Although our community has benefitted enormously
    from energy development, our list illustrates that the costs of
    maintaining infrastructure and public services have outstripped
    our ability to fund these necessities.''
        So we all know and we understand that we are going to have
    to continue to develop energy. What would your message be to
    the communities that will be the next communities, and what do
    you want us to do for them as well as for yourself as we
    continue to develop our sources of energy?
        Mr. Smith. For future small communities that are expected
    to be impacted by this sort of rapid development and very large
    development, first of all, become a participating agency with
    your local BLM office. That gives you the opportunity to submit
    official comment to them for their record of decision.
        Second, make sure you address in writing your concerns
    about potential social and economic issues, not specific to
    wildlife or lands or reclamation, but to the people of your
    small community because guess what--your lives are going to
    change and are going to change very quickly. So you best
    insurance is to get out there, make sure your concerns are
    known. Talk about view shed, talk about schools, talk about
    increase in crime.
        Ms. Shea-Porter. So, what we are talking about is
    responsible energy development, keeping it in mind the needs of
    the community and the people, the taxpayers of this country who
    just want to maintain their quality of life as much as possible
    while we also develop energy.
        Mr. Smith. That is exactly right. We need the energy. We
    need it for local economies, state economies. We need it for
    the national economy, national defense. But at the same time we
    have to take care of the small people on the ground in these
    small communities.
        Ms. Shea-Porter. Thank you, and we are trying to hit that
    balanced approach. Thank you, and I yield back.
        The Chairman. The gentleman from Texas, Mr. Gohmert.
        Mr. Gohmert. Thank you, Mr. Chairman. We are taking up some
    matters here that clearly have past. Once again we will make
    our natural resources more difficult in some of these areas to
    procure, and it is really astounding.
        Ms. Brian, I appreciated your comment that you felt torn,
    you needed to protect the integrity of the IG's office, but
    based on some hearings we have had in the last couple of years
    you can be comforted. I do not think there is that much
    integrity to protect there, so you can find comfort there.
        Ms. Brian. I think they are pretty good.
        Mr. Gohmert. Yes, exactly. We had hearings on the 1998 and
    1999 deep water leases that were leased during the Clinton
    Administration, and which the Federal government lost $10
    billion because they did not put the price thresholds in there
    as most any people with some sense in the area would have done,
    and the Inspector General, Mr. Devaney has been up here and
    testified, and on questioning he never really got to the bottom
    of why that was left out even though either it was gross
    negligence or something even more sinister, and the last report
    we had was that the people that really knew what happened had
    left government service, so they really couldn't be questioned.
        Well, good news on that front. We now know that one of the
    two primary people involved in that gross misconduct, whether
    it was negligence or intentional, is now the new deputy
    director of mineral management service, so good news there, and
    the other has now been named Deputy Assistant Secretary of Land
    and Minerals Management which will oversee mineral leasing. So
    good news there, you know.
        And, of course, the Inspector General that came up here and
    testified that they had not gotten to the bottom, and then
    later you talk to those people and they have left government
    service. Well, fortunately, a man that was able to get to the
    bottom of it and not be able to find what the problem was is
    now in charge of the $787 billion stimulus package, so we can
    be comforted there.
        Mr. Mann, you mentioned that you know that there have been
    people who have come up here and testified who know a lot more
    about the oil and gas separation issue than you do, but I
    wanted to thank you for being willing to weigh in there on that
    issue even though you did not know as much as they did.
        Mr. Mann. Always willing to lend----
        Mr. Gohmert. Sure, appreciate it.
        I had some people I was visiting with from China. There is
    just so much here to cover, there is no way to cover it all,
    but we are continually making it more and more difficult to get
    our own energy resources, and you know, for example, the
    royalty in kind issue. You know, there were some problems. As a
    law and order judge, I believe if somebody has done something
    wrong you go after them. That is not what we are doing here. We
    are going to eliminate the program. Instead of fixing the
    ethical problems and allowing the program to continue and
    making sure it is adequately supervised, a program which
    actually raises millions of dollars in additional revenues that
    we would not otherwise get, instead of fixing it, going after
    the ethical problem, we are just going to eliminate it. And you
    know there have been some benefits among people who have dealt
    with this issue ethically, do you not, Ms. Brian?
        Ms. Brian. Congressman, one of the statements you made
    there I just want to clarify where you said that RIK was
    actually providing royalties that we would not otherwise have.
    We do not----
        Mr. Gohmert. No, no, I did not say royalties it would not
    otherwise have. It was money that we would not otherwise have.
    There is a distinction because the government was able to make
    money from some of that oil that they otherwise would not have
    been able to make.
        Ms. Brian. Well, the GAO has repeatedly for years said that
    we actually cannot tell how much we are losing or making from
    the Royalty In Kind Program----
        Mr. Gohmert. Right, that is the government.
        Ms. Brian.--because they are not providing any information.
        Mr. Gohmert. Well, there are smarter people than the g
    people who have figured out it has actually made some money.
        Ms. Brian. I think those were industry people who have been
    benefitting from this.
        Mr. Gohmert. Well, I appreciate that, and again, you say
    you think the government people think, but again the problem is
    when there is an ethical violation, you fix that. But I see--I
    will only ask for about tenth as much time over my five minutes
    as we have been getting.
        But I had some Chinese visitors here and they said, you
    know, we have been seeing you constantly bringing up
    legislation in the last couple of years that make it more and
    more difficult to use your own natural resources. And since
    they think in terms of hundreds of years instead of tomorrow,
    they said, we have been trying to figure out what you are
    doing. We figured out what you are doing in your government.
    You are putting your resources where they are harder and harder
    to get so that the rest of the world will have to use up their
    natural resources, and then when everyone else is all used up
    you will be the only superpower once again because you will be
    the only one with resources.
        And I said, you know what, I wish I could tell you that we
    think that far ahead like you do, but we just do not give it
    that kind of thought, and I sure do wish we would. There are
    ways that the environment can benefit because when we hurt the
    economy as we saw last summer, unfortunately people quit caring
    about the environment because they are so worried about getting
    their gas tank filled, and I hate to see the environment hurt
    the way it does and the way it is when we keep making it more
    and more difficult to get our resources, our people have to pay
    more, the economy gets in trouble. And so I would just
    encourage, keep an open mind, keep in mind that poor single
    moms that have been hitting me up when gas prices get high, the
    80-year-old lady that says, I am not going to be able to afford
    propane and electricity anymore, I am not sure that I want to
    end my life with a wood stove the way I started. And I had to
    assure her that because of cap and trade she may not be able to
    have that wood stove. I yield back.
        The Chairman. I am not sure who that all was directed at,
    but does any member of the panel wish to respond?
        Ms. Brian. If I could just----
        The Chairman. Sure.
        Ms. Brian.--just as I assume a fellow fiscal conservative,
    Congressman, I would just remind you that royalty collection is
    essentially the second largest source of revenue for the
    taxpayer after taxes themselves, and that is why we have to
    jealously guard to make sure that the taxpayers are getting as
    much royalties as possible from our natural resources.
        Mr. Gohmert. But you understand the legislation we are
    taking up is going to create the ability for far more
    litigation than we have had in the past. You do see that
    potential in this legislation, do you not?
        Ms. Brian. That is not something that is in my universe of
    working on royalty.
        Mr. Gohmert. Well, as a----
        The Chairman. the gentleman's time has expired.
        Mr. Gohmert.--former judge, I assure you it is there.
        The Chairman. The gentleman from American Samoa, Mr.
    Faleomavaega is recognized.
        Mr. Faleomavaega. Thank you, Mr. Chairman, and I have been
    listening with tremendous interest in terms of the dialogue and
    the sentiments that have been expressed about this very
    important bill. And I do want to thank you for your leadership
    and initiative in introducing this legislation which I feel
    very strongly if I sense exactly the basis of the heart and
    soul of this bill is to establish not only less dependence of
    our country to foreign energy sources, but also to make sure
    that the environment is protected as well. So a balance
    approach is what I look at in this proposed bill, and I just
    wanted to ask a couple of questions here with the members of
    our panel.
        Professor Squillace?
        Mr. Squillace. Squillace.
        The Chairman. Squillace. I noticed with interest, and it is
    something that is very dear to my heart, you mentioned here in
    your statement and I quote, ``Uranium mines pose significant
    truth and safety hazards as shown by the tragic legacy of the
    Navajo Indian Reservation where mining authorized by the
    Department of Energy contaminated water supplies that led to a
    dramatic rise of incidence of lung cancer, especially among
    Indian miners.''
        I would say that that is a real sad legacy of the history
    of uranium mining in our country's history.
        Can you elaborate a little bit further, other than the
    Indian, the Navajo Nation, were there not other Indian tribes
    whom we leased their lands that had uranium, and to this day
    their lands are still polluted, or you might say contaminated
    to the extent of what we have done to these people?
        Mr. Squillace. I think that the Wallopi in northern Arizona
    have also had some uranium development on their reservation,
    but the primary development has been in New Mexico on the
    Navajo reservation, a very large reservation as you probably
    know. About a quarter of the United States uranium reserves,
    the discovered reserves are on Navajo lands, so they are host
    to much of the uranium that we have in the United States.
        But because of the legacy of the past abuses by uranium
    mining, and despite the fact that they are very willing to
    promote energy development of other forms on their reservation,
    including coal, they have as a government and certainly as
    local people are adamantly opposed to any new uranium mining on
    that reservation. If you talk to Navajo people, most of them
    know someone who has died from lung cancer. The uranium mining
    that was done results in releases of large amounts of radon in
    the mine. The people that are sent down in the mines, usually
    native people, down into the mines have had exposures far in
    excess of government levels, and they are still facing the
    legacy from that experience.
        There was also a dam at Church Rock, New Mexico, that
    burst, I believe it was in 1979, that sent down 93 million
    gallons of radioactive contaminated water into the Rio Puerco
    River, and about 1 percent of it was cleaned up after the
    operation.
        So it is these kinds of incidences that have led the
    Navajos to oppose new mining, and it is part of what leads me
    to think that a leasing program would allow us to do better
    planning. If we are going to allow it, we are going to need to
    decide where it is appropriate, where we are not going to
    unduly impact people. And if we are going to allow it, we need
    to be sure that the environmental impacts of that operation are
    addressed in a careful way.
        Mr. Faleomavaega. Do you think perhaps this legislation
    should also address some kind of restoration efforts on the
    part of the Federal government to restore and to reconstitute
    the needs of these people in terms of not only health-wise?
        Mr. Squillace. I believe there is some legislation that has
    been considered over the years by Congress to address and re-
    mediate the problems that the Navajos have faced, and also
    Congressman Rahall has other legislation, as you probably know,
    dealing with mining law reform more generally that would set up
    an abandoned mine reclamation program that would allow a fund
    to be developed that would provide money to reclaim some of
    these lands. So there are some initiatives that have been taken
    by Congressman Rahall and others to try to address these
    problems. Unfortunately, they really have not been enacted yet.
        Mr. Faleomavaega. I know a little bit about nuclear. Well,
    you mentioned uranium, you are talking about nuclear energy as
    well. What is your best opinion? Should we redevelop nuclear
    energy as a major portion of our efforts to become energy
    independent?
        You know, currently we are importing over $700 billion
    worth of oil from foreign countries. Do you think that maybe
    nuclear energy could be part of that solution to the problems
    we are faced with our energy needs?
        Mr. Squillace. Given the challenges that we are facing with
    respect to climate change right now, I think all forms of
    energy ought to be on the table. We need to look at things like
    uranium and nuclear power development. There are some new
    generation kinds of nuclear plants that many people think are a
    better design, and they are safer, and would allow for
    appropriate development.
        But obviously it raises some significant challenges as
    well. Despite the fact that we have passed legislation in 1982
    to deal with uranium waste, we still do not have a permanent
    disposal site for uranium waste, so there are some challenges
    dealing with uranium development. I think though that uranium
    development and nuclear power should be part of the mix or at
    least on the table for discussion.
        Mr. Faleomavaega. I just want to know--I know my time is
    up, Mr. Chairman, but just a quick note that I was recently
    invited by the government of Kazakhstan to go there, and to go
    to Ground Zero where the former Soviet Union exploded its first
    nuclear bomb in 1949. Guess what? That place is still
    contaminated. But the horrors of all this is that after the
    former Soviet Union conducted 450 nuclear bomb testings in this
    place, Kazakhstan, 1.5 million Kazaks were exposed to nuclear
    contamination, and to this day because of abnormality in
    genetics and all of that, jelly babies, deformed human beings
    come out, the worst example, if you want to talk about nuclear
    use, and you mention about uranium, I think Kazakhstan has
    about 25 percent of the world's supply of uranium as well.
        I will wait for the second round. I have not even gone to
    Mr. Pew--Mr. Mann who represents the Pew organization. Mr.
    Chairman, I will wait for the second round. Thank you.
        The Chairman. The gentlelady from California, Ms. Capps.
        Ms. Capps. Thank you, Mr. Chairman, and thank you to this
    illustrious panel of people from very notable areas of
    expertise. I want to address two quick questions to Mr. Mann,
    if I could, and then a question to the rancher on the panel. I
    have a lot of ranchers in my district too, and I appreciate you
    being on the panel.
        Mr. Mann, as you know, my district has a long history off
    the coast of California, both offshore and onshore development.
    When the first offshore platform was drilled in 1896, we did
    not realize then the legacy that would be left that is pretty
    hard to clean up, and now off our coast and on our public lands
    many of our constituents and I and others are prioritizing
    clean renewable energy like wind and wave and solar as exciting
    opportunities for the future.
        We are talking about smart development, and given the
    overwhelming need to get renewables on the ground or in the
    water as soon as possible how do we know how to plan in advance
    to mitigate for some of the conflicts, some of the problems
    that we do not anticipate now but that very well could be there
    in the same way that the history has shown us in the past? How
    can we ensure that deployment of renewables is done
    strategically while also preserving critical habitat, realizing
    that our oceans and our public lands as well we have great
    needs for energy use but we have a lot of other needs to be
    protected that those resources offer to us as well?
        Mr. Mann. Well, you know, I guess that the 64 billion
    dollar question, but let me just start by saying that we
    appreciate that fossil fuels are going to be part of the mix
    for some time to come.
        Ms. Capps. Yes.
        Mr. Mann. I think that is not the question.
        Ms. Capps. No.
        Mr. Mann. The question is can we begin the necessary
    transition to a renewable and sustainable energy economy
    because if we do not addressing the long-term concerns that Mr.
    Gohmert brought up, we will be in trouble for the long term
    from the effects that are already evidence from climate change
    and the damage it is going to be causing to----
        Ms. Capps. I totally agree with you on that. I am only
    bringing this issue, and maybe you are getting to it.
        Mr. Mann. I will.
        Ms. Capps. OK.
        Mr. Mann. And I will try to get to it quickly because I
    know it is your time and not mine.
        We do not know all the impacts but we do know some, and the
    way we believe that we need to do it, at least for offshore
    energy production, is to consider--is to get a good assessment
    in hand of what the resources are, not just energy but living
    resources and the uses.
        Ms. Capps. Right.
        Mr. Mann. It is kind of a mapping exercise. What are the
    uses in a region, and think about it, and discuss it with the
    community, both the users and the public desire.
        Ms. Capps. Right.
        Mr. Mann. And try to come to some conclusion about the best
    balance of resources on a regional basis where people have the
    actual--you know, it should not be done in a centralized way
    from Washington and decisions imposed. It needs to be done on a
    regional basis where people have a connection and will live
    with the consequences of those decisions.
        Ms. Capps. Right.
        Mr. Mann. I hope that addresses your question, and that
    needs to be formalized. Now, the administration is working on
    doing that, creating an administrative process to do that and
    we are very excited to hear the results of that, and I
    understand we are going to get some information on that today.
        Ms. Capps. Right. I am just laying out as well as part of
    that is anticipating that in advance when you do these things
    you do not know all of the details of all they are going to
    interplay, that you keep this kind of conversation going of how
    one desire, one goal sits alongside others.
        Mr. Mann. And that is why I think this needs to proceed in
    a multi-year planning process that is reviewed and updated
    periodically. The management needs to be adaptive. We address
    the concerns as best we understand them now, and later on if
    there are more concerns that needs to cycle into it, but it
    does not mean----
        Ms. Capps. Right.
        Mr. Mann.--the application of caution does not mean that
    you go forward at all.
        Ms. Capps. No, I totally agree with you. There is an
    urgency about doing this, but I think we have to learn that we
    can do more than one thing at one time, and do them well.
        You have kind of answered my second question, but maybe you
    will just make it formal. I have been a strong supporter of
    regional collaborations, and that is what you are kind of
    referring to, such as the west coast Governors on ocean health.
    As you know, the CLEAR Act provides funding to regional ocean
    partnerships. These kind of partnerships are considered by both
    ocean commissions--by both ocean commissions to be crucial to
    addressing the management of human activity on our oceans.
        Elaborate just a little bit more on why regional ocean
    partnerships are so important. What role, in particular, do
    they have to play as we move forward with marine spacial
    planning?
        Mr. Mann. Yes.
        Ms. Capps. Yes.
        Mr. Mann. Thank you. The challenge with truly protecting
    the health of our ecosystems, as I said in answer to an earlier
    question, is that there is not a single landlord out there. You
    know, the public owns it so to speak.
        Ms. Capps. Right.
        Mr. Mann. But no one agency has complete control over the
    real estate, and this is why--you know, I do not know if it is
    applicable on public lands.
        Ms. Capps. Right.
        Mr. Mann. But in the ocean far smarter people than me have
    looked at this and come to the conclusion that we need to get
    these various resource management agencies together and get
    their decisions aligned in that adaptive way that you spoke of,
    and again because of control over the different areas the
    states' control is much smaller in area, but I think in the
    perception of most people and in the reality of biology it is
    some of the most important areas both in terms of economic and
    environmental resources the states are a critical partner.
    Congress has given them control over waters out to three or in
    some case nine miles. Once the Federal government is organized
    better they need to be brought in as well, the states, if we
    are going to have a truly more comprehensive form of ocean
    management that can deal with all the uses that are going on
    out there.
        Ms. Capps. Thank you very much. I know my time has expired.
    Can I ask--I do not want to leave out the very important role
    that people who live who really understand the land, as
    ranchers do, the perspective. I wanted to ask your perspective,
    Mr. Hodgskiss.
        In my district, I have seen firsthand how conservation
    elements benefit our ranches and our environment, both
    together, not one pitted against the other, but very much a
    partnership. You described in your testimony how these elements
    can work to strengthen your local economy. That is something
    that oftentimes is not perceived to be a part of the same
    sentence. You know, that that could be a positive thing for the
    economy as well as protection and enhancement of resources.
        Could you just for the record explain how these elements
    work differently, uniquely, and well before your ranching
    community, and do you find that ranchers gravitate toward them?
    Are they popular or are they accepted well?
        Mr. Hodgskiss. Thank you for the question, Congresswoman.
        Yes, to answer that last question first. They are very
    popular. It took awhile for the community to warm up to the
    idea. Once a couple prominent ranchers stepped out and took
    advantage of the conservation easement, they are not extremely
    popular. As I mentioned in my testimony, we currently have
    about 120,000 acres on call waiting, if you will, waiting for
    funding. That represents----
        Ms. Capps. Wow.
        Mr. Hodgskiss.--about 16 ranchers. As I was thinking about
    my testimony just within my own portfolio at the bank, we are a
    small community agricultural bank, and I currently have
    somewhere in the neighborhood of 15 to 20 of my customers are
    involved with an operation of some kind that have been involved
    with the conservation easement.
        So, it is being embraced by the community, largely in part
    because of the long-term relationship that the Nature
    Conservancy has built in our area through their local project
    manager. He has lived in our community, and there has been a
    great deal of trust developed there, and I think people maybe
    underestimate the importance of that trust when they are trying
    to work with farming ranching community.
        In terms of trying to specifically identify how the
    conservation also impacts our local economy, ranchers are a bit
    like everyone else. Any money they have they spend it quite
    rapidly in one way or the other, and most of the instances I
    have been familiar with they have used that money to leverage
    themselves into a larger operation to help their economies of
    scale and to make room for the next generation. As ranching
    changes, they need more and more ground. They need more and
    more animals to remain viable. And in order to make room for
    the next generation you just need more and more economies of
    scale.
        So, that is the manner in which most often I see easement
    funds used is to expand their ranch operation. How that flows
    down to the local community is such that if the ranchers were
    unable to buy that neighboring ranch, it likely would be bought
    by a recreational buyer that would not be stocking it with
    cattle.
        Ms. Capps. Right.
        Mr. Hodgskiss. They would not be spending much money on
    mineral or veterinary services, and all those things flow into
    our economy and replicate themselves.
        Ms. Capps. I appreciate that you isolated it. The long-term
    presence there of the conservation organization to appreciate
    the ways that the economy will really be strengthened, the way
    they can fit in these easements so that it will absolutely
    strengthen the economy, as well as to protect some of the goals
    of preserving the rural landscape, allowing the ranching to
    continue, which is such a valuable part of our common history,
    and our needs.
        So, thank you very much for your answer to the questions.
    Thank you, Mr. Chairman, for your indulgence.
        The Chairman. Thank you. Any more questions on the Minority
    side?
        Then the gentleman from American Samoa is recognized again.
        Mr. Faleomavaega. I appreciate that, Mr. Chairman. I note
    with interest the line of questions that were presented earlier
    by my colleague from Guam, Ms. Bordallo, and I guess this is to
    Mr. Mann. I am sorry, I did not mean to say Mr. Pew, but you
    represent the Pew's foundation.
        Mr. Mann. It would be an honor.
        [Laughter.]
        Mr. Mann. You are wearing a much better suit.
        Mr. Faleomavaega. I just wanted to ask you, I know that the
    Pew Foundation has been actively engaged, in fact, you even
    released an oceans report I thought was an excellent report
    concerning the ocean situation, and because our areas deal a
    lot with the oceans, what are the implications and the fact
    that we are not members of the Law of the Sea Convention that
    has been signed off by over 150 countries, and the fact that
    these countries are carving out all these different areas,
    ocean included, about the potentials of mineral resources
    contained in the bottom of the ocean?
        Do you think that we ought to continue not being a party to
    this important international treaty that is currently being
    implemented, and that we are just sitting by and doing nothing?
        Mr. Mann. No, I strongly think that and the Pew Environment
    Group strongly supports accession of the United States to the
    Law of the Sea Treaty. We believe it is hindering our efforts
    to stake a full claim over resources that might pertain to the
    United States, and to participate in international discussions
    about the management and protection of marine resources,
    particularly in the Arctic where there is aggressive action by
    a number of countries to stake out----
        Mr. Faleomavaega. Russia, especially.
        Mr. Mann.--outer continental shelf claims. With the changes
    that are already happening in the Arctic and more to come, it
    is absolutely critical that the United States accede to the Law
    of the Sea Convention.
        Mr. Faleomavaega. One of the concerns that I have every
    time we talk about minerals it is also within the continental
    United States or Alaska, but we never talk about the minerals
    contained in the bottom, the seabed is what I am talking about,
    the oceans. We have jurisdiction to the fact that not only in
    these territory or islands, but even in other areas where we
    could lay claim.
        My point is that the Cook Islands, I do not know if you are
    familiar of this situation, only about 20,000 people, but they
    own about 3 million square miles of ocean, and a company I
    think from Norway recently conducted the potential there is in
    the seabed ocean of this little island nation, and found out
    that they have what is known as manganese nodules, and these
    nodules contain manganese, cobalt, nickel, copper, and maybe
    one or two very valuable minerals. It is estimated that this
    little island nation at least has a potential to well over $200
    billion worth of manganese nodules if they are ever to harvest
    this from the bottom of the ocean.
        Do you think our country should be serious about maybe that
    we ought to do this because we have ownership for so many of
    these different islands, Jarvis, Johnson, Midway, Wake Island,
    and that the contents of these areas as far as seabed minerals
    is going to be just as much part of our resource and our wealth
    that we have not even given any serious consideration for?
        Maybe this legislation might address that issue as well? It
    is a mineral.
        Mr. Mann. Yes.
        Mr. Faleomavaega. Although it is not on land, it is in the
    ocean.
        Mr. Mann. It is a mineral. I would need to think about. I
    would assume that those might be subject to leasing under the
    OC Lands Act, but I am not sure at this moment.
        With respect to the larger issue of whether we should
    consider developing those, I mean, that is a public policy
    decision for the administration and Congress to decide. The Pew
    Environment Group would, of course, want to make sure that
    those minerals were developed in an environmentally responsible
    way. The deep sea is a little known environment, and what we
    have seen in the past, unfortunately, with our resource
    exploitation in this country and around the world is that we
    often rush in and dig things up, and drill, and do not
    necessarily take care to examine the environmental impacts
    beforehand.
        Having said that, those manganese nodules are potentially
    strategic minerals. Up till now the economics, you know, the
    minerals are very concentrated in those nodules, so if you get
    one in your hand it is much better than most of the ores that
    we dig out of the ground. The problem is you have to go down
    three, four, five thousand meters in some cases to get them,
    and that kind of puts a crimp on the economics. So those have
    not in the past been economically exploitable. With the price
    of metals right now in our economic situation I don't believe
    they really are, but at sometime in the future they might
    become so, in which case you need a regime for managing those
    both domestically and internationally, and the Law of the Sea
    provides an international regime.
        Mr. Faleomavaega. And I just want to make this observation.
    I know my time is over. I do not mean to disregard our other
    good witnesses, but how ironic it is, Mr. Chairman, that here
    we are, we want to go to Mars, and we do not even know what is
    contained in our marine resources in the oceans.
        Thank you, Mr. Chairman. Thank you.
        Mr. Mann. Thank you.
        The Chairman. Thank the panel very much for their time and
    expertise this morning. Appreciate it.
        Our next panel is composed of the following individuals:
    Mr. Craig Mataczynski, President and CEO, RES Americas; Mr.
    Alex B. Campbell, Vice President, Enduring Resources, LLC; Dr.
    Dennis E. Stover, Ph.D., Executive Vice President, Americas
    Uranium One; Mr. Doug Morris, Group Director, Upstream &
    Industry Operations, American Petroleum Institute; and Mr.
    James E. Zorn, Executive Administrator, Great Lakes Indian Fish
    and Wildlife Commission.
        Gentlemen, we welcome you to the Committee on Natural
    Resources. We do have your prepared testimony which will be
    made a part of the record as if actually read, and you are
    encouraged to summarize within the five-minute period, and may
    proceed in the order in which I just announced you.
        Mr. Mataczynski.

                    STATEMENT OF CRAIG MATACZYNSKI,
                    PRESIDENT AND CEO, RES AMERICAS

        Mr. Mataczynski. Good morning, Chairman Rahall, Ranking
    Member Hastings, Members of the Committee. Thank you for the
    opportunity to speak to you this morning about H.R. 3534.
        My name is Craig Mataczynski. I am the Chief Executive of
    Renewable Energy Systems Americas. RES Americas is one of the
    leading renewable energy companies in the country. We have
    constructed, owned or operated more than 3,400 megawatts of
    renewable energy projects since 1997, and have made more than
    12,500 megawatts of wind and solar projects currently in our
    development portfolio. I am also testifying this morning on
    behalf of the American Wind Energy Association, or AWEA, and
    the Solar Energy Industries Association, or SEIA, S-E-I-A.
        In terms of my specific comments on H.R. 3534, I want to be
    clear that the renewable energy developers are generally
    supportive of the existing Federal framework for permitting
    projects. The process is not perfect, but we believe that the
    shortcomings in the existing processes, such as inconsistent
    implementation of the rules by some field offices, delays in
    processing, and inadequate resources for the agency, do not
    require a major overhaul of the rules.
        That said, we do understand that the Committee's interest
    is in reforming the rules for wind and solar, so I will provide
    recommendations on how to improve the overhauls proposed under
    the bill while noting that the wind and solar industries
    believe that addressing the shortcomings in implementing the
    existing rules would have the most positive impacts in the near
    term.
        First, I would like to acknowledge some improvements that
    have been made. The wind and solar industries greatly
    appreciate the removal of the onshore mapping provisions that
    could place broad areas off limits to renewable energy
    development regardless of site-specific characteristics or
    information. We also appreciate the addition of language
    allowing the Secretary to provide preference during the
    competitive process to a company that has installed a
    meteorological tower or another device for resource
    measurement. Finally, we appreciate the expanded grandfathering
    provisions for both onshore and offshore projects. However,
    even with these improvements we see the need for additional
    enhancements in these areas and others.
        Regarding the consolidation of energy leasing programs, the
    wind and solar industries are concerned that consolidation of
    all energy leasing into a single office will undermine the
    renewable energy coordination offices the Secretary has
    created, and further increase already extensive processing
    delays.
        If you move forward with consolidation, we would
    respectfully request a separate and adequately sized staff
    dedicated solely to reviewing and processing renewable energy
    applications. We would also suggest including legislation along
    the lines of H.R. 2662 to dedicate a portion of the renewable
    energy fees back to the Interior to fund the processing of
    additional renewable energy applications.
        Regarding competitive leasing, our industries understand
    the interest in moving all energy sources to the same time of
    leasing platform, at the same time, as I detail in my written
    testimony, the Federal track record with respect to competitive
    leasing for wind and solar has not yielded positive results,
    and the solar industry, which is even less mature than the wind
    industry, sees more difficulties.
        If the Committee does elect to move forward with
    competitive leasing, we would recommend the following:
        First, the Secretary should be required to establish
    standards for bidders to demonstrate that they have developed
    capabilities and financial wherewithal to complete viable
    projects. These recommendations combined with existing due
    diligence language would discourage speculation.
        Second, bidding should be done in a single round with
    strict timelines for leasing office actions; and third, to
    ensure comparability of the various bids the process should be
    based on a package of rental fees prior to operation of a
    project, project operational date, and royalties once the
    project is operational.
        Regarding grandfathering, we propose grandfathering all
    projects with applications pending as of the date of enactment
    of the bill. This would hold harmless those applicants who have
    filed papers, spent time and money, but may have seen delays in
    processing. For example, my company has been waiting for over
    five years to get a met. tower lease from BLM on one of our
    wind projects. With the existing grandfathering language,
    despite the significant money and time we have already spent,
    we would have to bid in order to continue development of that
    site.
        With respect to royalties, the rental fees paid by wind
    energy developers already incorporate a royalty calculation by
    the BLM of 5 percent of project revenues. This is approximately
    market. Under the current system solar developers pay an annual
    rental fee based on a BLM evaluation of the permitted land.
    Should the Committee move forward with a more explicit royalty
    process we request the following considerations:
        First, we think the current royalties for existing project
    should remain unchanged.
        Second, royalties for wind projects should be based on the
    revenue stream, that is, royalties should be set on a dollar
    per megawatt basis, and royalties for solar projects need to
    consider both the revenue stream and the permitted acreage.
        Third, royalties should be fixed for the life of the
    project at the start. Predictability is a critical element of
    financing renewable energy projects.
        Finally, relative to offshore wind energy development a few
    comments. My company is not currently building any offshore
    wind farms. However, I will share the concerns that we as
    offshore wind developers with the bill.
        In terms of grandfathering for offshore development
    creation of the strategic plans and zoning envisioned under
    H.R. 3534 adds a new layer of regulation for offshore wind at
    the time when the ink is barely dry and the rule is finalized
    by MMS a few months ago. Offshore wind developers and
    potentially investors in both projects are extremely wary of
    new regulations which may result in further delay.
        Relative to marine spacial planning, the wind industry
    supports it in principle, however we see a need to be careful
    in that the collection of data is relatively little at this
    point. There are some big data gaps that exist. So proceeding
    in a way that would not limit the development of offshore
    winds, overly development of offshore projects would be
    advisable.
        I want to thank you again for the opportunity today. The
    wind and solar industries do look forward to continuing to work
    with the interested members of the Committee staff on improving
    the bill as it moves forward.
        [The prepared statement of Mr. Mataczynski follows:]

     Statement of Craig Mataczynski, President and CEO of RES Americas, on
      behalf of the American Wind Energy Association and the Solar Energy
                             Industries Association

    Introduction
        Chairman Rahall, Ranking Member Hastings, members of the Committee,
    thank you for the opportunity to testify today about H.R. 3534 on
    behalf of the wind and solar energy industries.
        My name is Craig Mataczynski. I am President and CEO of RES
    Americas. RES Americas is one of the leading renewable energy companies
    in the country. We have constructed, owned and operated more than 3,400
    megawatts (MW) of renewable energy projects since 1997; and have more
    than 12,500 MW of wind and solar projects currently under development.
        I am also testifying as a Board member of the American Wind Energy
    Association (AWEA) 1, as Chair of AWEA's Siting Committee
    and as a member of the Solar Energy Industries Association (SEIA)
    2.
    ---------------------------------------------------------------------------
        \1\ AWEA is the national trade association of America's wind
    industry, with more than 2,300 member companies, including project
    developers, manufacturers, and component and service suppliers.
        \2\ SEIA is the national trade association of the solar energy
    industry, representing over 900 member companies. As the voice of the
    industry, SEIA works to make solar a mainstream and significant energy
    source by expanding markets, removing market barriers, strengthening
    the industry, and educating the public on the benefits of solar energy.
    RES Americas currently is serving as Chair of the Siting & Permitting
    Work Group.
    ---------------------------------------------------------------------------
    Status of the Wind and Solar Energy Sectors
        Let me start by giving you a sense of the current scope and
    potential of renewable energy to power our country, employ Americans in
    good jobs, and rebuild our manufacturing base.
        Last year, wind accounted for 42% of all new generating capacity,
    second only to natural gas for the fourth year running. Total wind
    energy capacity is now over 29,440 megawatts, enough to power nearly 8
    million homes. Thirty-five states have utility scale wind projects. The
    U.S. solar industry has demonstrated remarkable growth as well, with
    the annual rate of PV installations alone growing by more than 80% in
    2008. New utility-scale solar power plants have been announced in
    states ranging from California to Texas, Florida, Pennsylvania, New
    York and more, and projects totaling more than 10,000 MW are currently
    operational or under development.
        The renewable sector has seen significant growth in manufacturing
    as well. Wind turbine and component manufacturers announced, added or
    expanded over 70 facilities in the past two years. Wind-related
    manufacturing is occurring in over 40 states. U.S. solar panel
    manufacturers currently have production capacity in excess of domestic
    demand, and domestic manufacturing capacity is keeping pace with demand
    growth. Suppliers of components for Concentrating Solar Power (CSP)
    plants have also significantly increased their domestic presence in the
    last two years.
        The wind industry employs at least 85,000 workers in the U.S. in
    good paying jobs. The solar industry supports thousands of small
    businesses and tens of thousands of employees nationwide.
        This is just the beginning.
        The U.S. Department of Energy has concluded that achieving 20% of
    our nation's electricity from wind energy alone by 2030 is feasible
    with no technological breakthroughs and that achieving that level of
    deployment would have significant benefits for the environment and our
    economy. The industry views 20% as a floor for our potential, not a
    ceiling.
        There is also significant potential for growth of solar energy in
    the United States. A study conducted by the Department of Energy for
    the Western Governors' Association determined that the seven states in
    the Southwest have a combination of solar resources and available
    suitable land to generate up to 6,800 GW of electricity. This compares
    to today's nameplate capacity for all electricity generation of 1,000
    GW. 3
    ---------------------------------------------------------------------------
        \3\ ``Analysis of Concentrating Solar Power Plant Siting
    Opportunities: Discussion Paper for WGA Central Station Solar Working
    Group,'' M. Mehos, NREL, July 2005
    ---------------------------------------------------------------------------
    Wind and Solar Industries Appreciate Improvements Made from Earlier
            Draft
        With respect to the specifics of H.R. 3534, I want to be clear that
    renewable energy developers are generally supportive of the existing
    federal processes for permitting projects. These processes are not
    perfect; but, the problems that do exist--such as inconsistent
    implementation of the rules by some field offices, lengthy delays in
    processing, and inadequate financial resources for the agencies--do not
    require a major overhaul of the rules. Further, the current
    Administration is already taking steps to address many of the problems
    areas. 4 At the same time, we understand the Committee's
    interest in reforming the rules for wind and solar to more closely
    mirror those applicable to other technologies. So, I will spend much of
    my testimony on recommendations to improve the workability of the
    overhauls proposed in H.R. 3534 even as our industries have some
    reservations about those overhauls.
    ---------------------------------------------------------------------------
        \4\ For example, Secretary Salazar issued a Secretarial Order
    prioritizing renewable energy development on public lands. FERC and MMS
    resolved a long-standing dispute over energy regulation on the outer-
    continental shelf, which allowed the MMS rules governing offshore
    renewable energy development to be finalized. Secretary Salazar
    established renewable energy coordination offices. And, the BLM just
    held an informational conference for field staff in the Western U.S. on
    wind and solar energy.
    ---------------------------------------------------------------------------
        I want to begin my discussion of the specific provisions of H.R.
    3534 by acknowledging some improvements that were made from an earlier
    draft version of the bill.
        The wind and solar industries greatly appreciate the removal of the
    provisions requiring mapping of federal lands and the creation of
    strategic plans that would put potentially broad areas off-limits to
    renewable energy regardless of whether site specific reviews would
    reveal no conflicts or concerns.
        We also appreciate the addition of a provision to the onshore
    competitive leasing provisions that allows the Secretary to provide
    preference during the competitive process to a company that has gone
    through the expense of putting up a meteorological tower (``met
    tower'') or another measurement device to collect resource and other
    data for a given site. This is a key change because without some right
    to develop a site where a company has spent time and money verifying
    that the wind or solar resource is viable; there will be little
    interest in developing on public lands. However, we would urge that
    this ability to develop be made more explicit by giving the companies
    that are actively doing resource assessments the right of first refusal
    to build on a given site. We would also request that this language be
    further clarified to ensure the resource and other data collected by a
    company is considered proprietary and is not subject to release to
    competitors. These are competitive industries and no one wants to give
    a competitor an edge by turning over expensive data for free.
        Finally, we appreciate the expanded grandfathering provisions for
    both onshore and offshore projects that are intended to ensure prior
    investments by developers are not lost during the transition to a new
    system. Though we believe further refinement is necessary in this area
    and look forward to having discussions with the Committee on this in
    the future.
        At the same time, renewable energy developers continue to have
    concerns with the bill that I will summarize below. These concerns
    relate to the following areas:
          Consolidation of energy leasing programs
          Competitive leasing for onshore projects
          Offshore strategic plans and ocean zoning
    Consolidation of Energy Leasing Programs
        Renewable energy has often been neglected and poorly understood by
    federal lands agencies. This is changing slowly, and Secretary
    Salazar's leadership in this area has been beneficial. The development
    process, economics and other aspects of renewable energy projects are
    different than the oil and gas projects with which agency staff are
    familiar. For example, electricity sold from a renewable generation
    project is the refined product which means that the levels of royalties
    available are not going to be at the same level as oil or natural gas
    because the value of electricity isn't as high as petroleum products.
    In addition, renewable energy development does not deplete finite
    resources.
        The wind and solar industries are concerned that the consolidation
    of all energy leasing into a new office will undermine the Renewable
    Energy Coordination Offices the Secretary has created to establish and
    focus expertise on renewable energy permitting. This has the
    possibility of disadvantaging renewable energy vis-a-vis oil and gas;
    maybe not with this Administration, but with future ones.
        Our industry is also concerned that undertaking this reform at this
    time will delay the resolution of the large and growing backlog of
    pending renewable energy applications 5, as well as
    complicate the processing of applications by the Minerals Management
    Service (MMS) under the new offshore renewable energy rule, as staff
    and managers are forced to devote time to reorganizing.
    ---------------------------------------------------------------------------
        \5\ According to a fact sheet accompanying a June 2009 BLM press
    release, BLM has received 158 solar applications (up from 135 in
    January 2008) and 281 wind energy applications (up from 150 in January
    2008).
    ---------------------------------------------------------------------------
        If you move forward with consolidation, we would respectfully
    request that you maintain within the new office a separate and
    adequately sized staff dedicated solely to reviewing and processing
    renewable energy applications. We would also suggest including
    legislation along the lines of H.R. 2662, introduced by Rep. Heinrich,
    to dedicate a portion of the fees paid by renewable energy developers
    back to Interior to provide a steady stream of funding to improve the
    processing of additional renewable energy applications.
    Competitive Leasing for Onshore Development
    Competitive Leasing Generally
        Our industries understand the interest in moving all energy sources
    to the same type of leasing program.
        At the same time, there has not been much historical competition
    for areas in which a given onshore wind or solar developer proposes a
    project on federal lands. The Bureau of Land Management (BLM) does have
    the authority to run competitions today, but has largely chosen not to
    because of the lack of competitive interest.
        BLM has run competitive processes for wind energy development a
    handful of times. These have resulted in the expenditure of significant
    funds by both BLM and developers but the results have been that no wind
    projects have been developed on sites where a competition has been
    held. 6
    ---------------------------------------------------------------------------
        \6\ One of the competitions was around 2005 for a parcel in Palm
    Springs and one was out of the Ridgecrest field office in the 1990s.
    With respect to Palm Springs, it took a year and a half from the first
    bid to the awarding of the right to apply to put up a met tower (not
    even the right to put it up, but the right to apply to put it up). And,
    it took this length of time despite the fact that the Palm Spring
    office was experienced with wind energy development, and despite the
    fact that the parcel had previously been developed and decommissioned.
    The winning bidder still has not been able to get a project constructed
    on this parcel despite having a signed power purchase agreement (PPA).
    The Ridgecrest process became so drawn out and complex that it
    eventually collapsed.
    ---------------------------------------------------------------------------
        Additionally, the solar industry is even less mature than the wind
    industry. To date, the BLM has not issued a right-of-way permit for a
    solar project. While competitive bidding may work for established
    industries like oil and gas or mining, it may not be appropriate for
    less mature market entrants like solar.
        The industry therefore, recommends that instead, the BLM should
    focus on improving the process for granting permits to companies with
    the financial and technical expertise to bring solar projects to
    fruition.
        Also, keep in mind that the BLM has recently adjusted the rental
    fees paid by wind energy developers to include a royalty calculation of
    five percent of project revenues. This approximates the current
    royalties received by private land owners; and, therefore, does not
    reflect a loss of revenues from federal lands.
        We are, also, concerned that moving to competitive leasing will
    delay renewable energy development on federal lands. Competitive
    leasing will take enormous government and developer resources to engage
    in. It will make federal lands potentially less attractive to develop
    by adding complication and expense to a process that is already
    difficult and generally more expensive 7 than developing on
    private lands.
    ---------------------------------------------------------------------------
        \7\ Here are some examples to better understand how the cost to
    develop a wind project on BLM lands compares to private lands:
        The relative cost of BLM rent is generally high relative to private
    land on lower wind sites, and low compared to private land on high wind
    sites. This is because the BLM rent is fixed regardless of how much
    electricity is generated, and private leases are often (though not
    always) based on a percentage of the revenue paid by the power
    purchaser. However, most of the very windy BLM sites are already being
    developed and in the future the less windy sites will be the most
    common BLM projects, so this cost disparity will become less and less
    favorable toward developing on BLM land in the future.
        BLM charges 5101 Account Reimbursement fees for yearly
    administration of the right-of-way beyond the cost of rent. This can
    add up to more than $100,000 over the project life, an expense that is
    not incurred on private land. Secondly, BLM reviews and increases rent
    every 5 to 10 years, unlike private leases which are fixed at the time
    of option negotiation, so BLM rent is unpredictable compared to private
    land rents. Thirdly, BLM typically requires an EIS to satisfy the NEPA
    process, which is both costly and time consuming. When you add these
    costs to BLM right-of-ways compared to private land, the costs on BLM
    land are comparable to private land or higher.
        BLM requires $10,000 per turbine decommissioning bond, which may be
    the very highest anywhere in the US, and is above the actual net cost.
    Previous BLM bonds were $3,000 per turbine. Private land
    decommissioning bonding is typically $0. Since a wind company cannot
    post a surety bond on BLM rights-of-way, and typically must post cash
    for the entire life of the right-of-way, this is a time cost of money
    expense that does not occur on private land.
    ---------------------------------------------------------------------------
        If the Committee elects to move forward with competitive leasing,
    we would recommend some additions to the provisions in H.R. 3534 to
    ensure the process is fair, does not add time to the development
    process, and results in a more rapid deployment of megawatts.
        The Secretary should be required to establish standards that
    bidders will have to meet to demonstrate they have the development
    capabilities and financial wherewithal to complete a viable project.
    The Secretary should require bidders to demonstrate an understanding of
    the technology they're using and the experience and knowledge to
    construct the project. This should also require that the bidder be able
    to demonstrate a history of successfully completing such projects.
    These recommendations, combined with the due diligence language already
    in the bill, will work to discourage speculation.
        Second, bidding should be done in a single round 8. This
    should be accompanied by strict timelines under which the new leasing
    office is required to act. For example, once a bid is released, bidding
    should be open for a set period of time, say 60 days, after which the
    office would be required to announce the winner bidder within 15 days.
    Timely resolution of the bidding process with strict timelines is the
    key to any competitive bidding process that seeks to encourage the
    development of renewable energy projects.
    ---------------------------------------------------------------------------
        \8\ BLM used a multiple round bidding process in the Palm Springs
    case, which is one of the reasons it took 18 months.
    ---------------------------------------------------------------------------
        Finally, the bidding should be based on a package of what companies
    are willing to pay in rental fees prior to a project being operational,
    the date a project could be placed in service, and the royalties a
    bidder is willing to pay after the project is operational.
    Grandfathering
        With respect to grandfathering for onshore projects, currently, the
    language in the bill applies to projects that have submitted a Plan of
    Development (POD) or have a met tower or other measuring device in
    place prior to enactment of the bill. This is an improvement from the
    earlier draft that just grandfathered projects that had reach the POD
    phase. However, some companies cannot get met tower right-of-ways
    (ROWs) from federal agencies in a timely manner, let alone get to the
    POD stage, due to agency backlogs. One quick example from my company.
    We've been waiting for over five years to get a met tower lease from
    BLM for one of our projects. We've spent money doing environmental
    reviews for the met tower and preparing a POD for the tower. With the
    existing grandfathering language, despite the money and time we've
    already spent, we'd be out of luck on this project and would have to
    bid to continue it.
        We believe that additional projects deserve to be grandfathered.
    Penalizing developers by failing to grandfather them in because of
    delays attributable to agency backlogs or related inaction would have a
    chilling effect on development.
        We strongly urge the Committee to consider establishing a broader
    threshold: a date prior to which all projects with pending applications
    would be grandfathered. We propose grandfathering all projects with
    applications pending as of the date of enactment of the bill. This
    would hold harmless those applicants who have filed papers, spent time
    and money, but may have seen delays in processing for one reason or
    another.
    Royalties
        H.R. 3534 requires wind and solar development to move away from the
    rental-fee model for renewable energy and toward a royalty-based
    approach. 9 The rental fees paid by wind energy developers
    already incorporate a royalty calculation by BLM of five percent of
    project revenues. This was raised from three percent by BLM last year.
    ---------------------------------------------------------------------------
        \9\ The Committee should not underestimate the difficulty of
    calculating royalties. And, keep in mind that a royalty does not
    necessarily mean a higher return to taxpayers. It is our understanding
    that the Palm Springs BLM office was the entity that actually
    recommended to BLM headquarters that the Bureau move from royalties to
    rental payments because it was extremely difficult to determine whether
    the proper royalties were being paid. The paperwork submitted by the
    generators and the utilities that bought the power was complex and BLM
    had a lot of trouble understanding it. With rental payments--
    particularly since BLM increased the payments last December--projects
    in high wind areas may pay a little less than they would under
    royalties, but projects in lower wind areas (which are generally the
    only areas left unclaimed) would be paying more than they would under a
    straight royalty system. In the competitive process envisioned by H.R.
    3534, the level of royalties a bidder is willing to pay will be set by
    the market. That may or may not be the 5% currently used in BLM's
    calculation of the rental payments charged to wind projects.
    ---------------------------------------------------------------------------
        Under the current system, solar developers pay an annual rental fee
    based upon a BLM valuation of the permitted land. BLM is currently
    conducting its valuation for the first solar project anticipated to
    receive a Right-of-Way permit.
        Should the Committee move forward with an explicit royalty process,
    we would request that there not be any net increase in the amount
    renewable energy projects pay the federal government, as the current
    payment levels are consistent with those in place on privately owned
    lands. As discussed above with respect to how to make a competitive
    bidding process workable, I believe the best way to accomplish this
    would be through a competitive bidding process that would establish the
    current market value for royalties at a particular site in much the
    same way royalty rates are established for private lands; but does not
    result in additional impositions of cost or time as part of the
    process.
        We also suggest that to ease the administration of any suggested
    change over to royalties that they be based on the revenue stream
    (dollar-per-megawatt-hour basis) for wind development. Royalties for
    solar development need to consider both megawatt-hour output and
    permitted acreage. Finally, it would be important to have a fixed
    royalty for the life of the project at the start so that it could be
    factored into financing up front. Predictability is critically
    important for renewable energy projects because all of the capital
    costs are paid at the outset.
    Offshore Wind Energy Development
        While RES Americas is not currently building any offshore wind
    farms, I will share the concerns of AWEA's offshore wind developers
    with the Committee. The U.S. recently marked the end of a de facto
    four-year freeze on offshore wind development with the publication of a
    long-delayed Minerals and Management Service leasing rule for renewable
    energy projects on the Outer Continental Shelf (OCS). Publication of
    the rule followed issuance of a comprehensive Programmatic
    Environmental Impact Statement that was itself two years in the making.
        Creation of the strategic plans and ocean zoning envisioned in
    Title VI of H.R. 3534 adds a new layer of regulation for offshore wind
    at a time when the ink is barely dry on the latest regulatory
    framework. Even with the grandfathering language, adding this new
    process signals that the U.S. is still not ready to commit to a single
    rulebook for offshore renewable energy development. From the
    perspective of offshore wind developers and potential investors,
    including firms that are considering substantial investment in key
    elements of the supply chain and service infrastructure, there is
    strong concern about a new process to add a new layer of regulation and
    delay when the rules of the road were originally just set a few months
    ago.
    Grandfathering
        While we appreciate the addition of offshore grandfathering
    language, we have concerns about the existing thresholds and would like
    to work with the Committee to find the most appropriate thresholds to
    ensure the offshore wind industry is fairly treated, investments in
    manufacturing and services can go forward, and viable projects are not
    delayed (for example, but not necessarily limited to, those with met
    towers installed or leases for met towers and those moving forward as a
    result of state competitive processes).
    Marine Spatial Planning
        The wind industry is not opposed in principle to ocean zoning, or
    marine spatial planning (MSP). If properly implemented, MSP could lead
    to more accurate analyses of potential environmental threats and wiser
    resolutions of conflicts among users.
        However, existing information bearing on the economic viability of
    offshore wind sites is particularly sparse. The siting of offshore wind
    turbines depends on detailed physical data, including hub-height wind
    speed, site-specific geophysical and geotechnical information, and
    information on wave conditions through the seasons. This information
    does not now exist on the scale or level of detail that would be
    required to reach sensible OCS-wide judgments about where offshore wind
    farms should be sited.
        The language as written recognizes the need for additional data but
    it still directs plans to be created and decisions to be made with
    admittedly limited facts. The lack of information specific to offshore
    wind energy development could unnecessarily limit offshore wind
    projects to areas that are not, in fact, economically viable.
        Siting factors relating to human systems and policies add further
    complexity to any effort to zone for offshore wind projects. Offshore
    wind projects require access to onshore transmission grid connections
    and access to markets in which there is public support for renewable
    energy development (through, for example, renewable electricity
    standards). An attempt by planners to zone for (and against) offshore
    wind development without reference to these (changeable) political and
    legal factors could confine offshore wind projects to unnecessarily
    narrow areas that developers cannot pursue due to poor economics.
    Conclusion
        The wind and solar industries appreciate the Chairman's willingness
    to make changes to the earlier draft to reflect comments from our
    sectors on how the bill would impact development. We look forward to
    continuing to work with interested members and the Committee staff on
    improving the bill as it moves forward.
                                     ______

     Response to questions submitted for the record by Craig Mataczynski,
                  CEO, Renewable Energy Systems Americas, Inc.

    Question from the Majority
    1.  Mr. Mataczynski, you indicate in your testimony a concern that
    renewable energy leasing would be disadvantaged relative to oil and gas
    if combined in one office with fossil fuel leasing. However, the
    Committee has heard complaints from other representatives of the
    renewable energy industry that oil and gas permits are issued more
    efficiently than renewable energy permits. Why do you really believe
    that combining the leasing programs in one office, as proposed in H.R.
    3534, would disadvantage your industry? And, further, do you have any
    analysis or data to support your fears?

        Thank you for the question. I agree that oil and gas permits are
    generally issued more efficiently than renewable energy permits. In
    fact, I think that serves to underscore my point. Let me explain.
        In the Energy Policy Act of 2005, Congress approved several oil and
    gas pilot projects that recycled tens of millions of dollars in oil and
    gas royalties back into the Bureau of Land Management every year for
    the purpose of expediting additional oil and gas permits.
        It is my understanding that this provision led to the hiring of at
    least 150 BLM staff and is funding 30 staff from agencies like the
    Forest Service and the Fish and Wildlife Service in order to create
    ``one-stop'' locations for oil and gas producers. Concentrating the
    expertise for oil and gas permitting and creating a dedicated staff
    focused solely on processing these permits seems to have had the
    desired effect of expediting the process.
        Renewable energy has not enjoyed that benefit, which is one of the
    reasons why processing renewable energy permits can take 18 months or
    longer, whereas processing oil and gas permits may only take six or
    seven months. In my written testimony, I expressed support on behalf of
    the American Wind Energy Association (AWEA) and the Solar Energy
    Industry Association (SEIA) for legislation introduced by Rep.
    Heinrich, H.R. 2662.
        H.R. 2662 would provide renewable energy with a benefit the oil and
    gas industry already enjoys. Specifically, the bill would set aside a
    portion of the fees renewable projects pay for permits, and dedicate
    that portion toward funding federal agency staff dedicated solely to
    processing additional permits for renewable technologies.
        I think another reason for the discrepancy in timing is that
    federal agency staff tend to be more familiar with conventional energy
    extraction projects than they are with renewable energy projects. This
    is largely a function of the length of time field staff has been
    dealing with oil and gas versus renewable energy projects.
        Consolidating organizational charts such that the same office or
    staff works on permits for both types of projects will not improve this
    situation. In contrast, Secretary Salazar's establishment of Renewable
    Energy Coordination Offices will. Creating a corps of agency staff
    whose sole responsibility is evaluating renewable energy applications
    should improve the efficiency with which those applications are
    processed.
        Economics also play a role in the priority given to various uses of
    public lands. Oil and gas activities generate, on a per acre basis,
    some 5-10 times the revenue as would be expected from wind or solar
    energy development. While I would like to believe wind energy would get
    equal treatment, my experiences in places like Texas demonstrate that
    the resources are allocated first where the highest revenues would be
    generated. This would leave wind and solar as a second priority. To
    some, that may also lead to the question of whether it is worth
    dedicating public lands to renewable energy generation.
        However, Congress and this Administration, as well as the previous
    Administration, are all on record stating this is a worthwhile goal for
    this country. In addition, there are many places where oil and gas and
    renewable energy are not co-located, making wind and solar development
    and the resulting revenue to taxpayers an attractive option. And, even
    when resources are in the same general vicinity, my experience in Texas
    demonstrates that turbines and drilling rigs can exist as close as 500
    feet to each other.
        While the current Administration has made renewable energy
    development a priority, and perhaps this competition for resources
    concern would not manifest during the next several years, there is no
    guarantee that a future Administration would share this priority.
        Finally, the concern about the consolidation arises more generally
    out of the complications that follow any reorganization, whether in the
    public or private sector. Change is never easy--in most organizations
    it leads to bureaucratic turf fights, steep learning curves as staff
    are transferred to jobs with new responsibilities, and delays and
    insecurity as people settle into new work environments with new rules
    and expectations. Perhaps in the long run the reorganization would
    prove to be beneficial, but in the near term, we do not expect that it
    would improve the process for renewable energy projects.
        As I stated in my testimony, if you do move forward with
    consolidation, we respectfully request that you continue the
    Secretary's efforts to establish a staff dedicated solely to becoming
    experts in renewable energy and processing those permits.
    Questions from the Minority
    1.  You expressed concerns in your testimony with several provisions
            contained within this legislation. Would you agree that if H.R.
            3534 were enacted into law as currently drafted, it would put
            at risk the progress that has been made toward expanding the
            leasing and development of renewable resources in America?
        As expressed in my written testimony, several of the provisions in
    H.R. 3534 would create obstacles to developing renewable energy
    resources on our public lands and on the Outer Continental Shelf.
    Different agencies follow differing policies with regard to renewable
    energy development, so I would like to address each separately.
    Bureau of Land Management
        The Bureau of Land Management (BLM) manages the majority of the
    public lands in the U.S. where renewable energy development companies
    see near-term project opportunities. Two specific provisions in H.R.
    3534 could impede renewable energy development on BLM-managed lands.
    1. Lack of Adequate Resources
    A. Renewable Energy Coordination Offices
        Since the development of a national Wind Energy Development Policy,
    first issued in August 2006, only two wind energy projects sited on BLM
    land have been fully permitted and begun construction.
        This has largely been due to constraints in agency resources,
    expertise, and funding. BLM and Interior Secretary Salazar have taken
    steps this year to address these issues through training and the
    creation of Renewable Energy Coordination Offices in states with wind
    and solar resources.
        It is my opinion that BLM and the Department of the Interior should
    be given a chance to implement this new initiative and see it through.
    Pursuing the alternative strategy of consolidating the leasing
    activities for all energy sources in one office is likely to consume
    valuable time and resources, at the expense of renewable energy
    development. What's more, even with the new office, renewable energy
    projects may potentially face the same challenges that have stymied
    development in the past.
    B. Set Aside a Portion of Fees Paid and Dedicate Those Funds to
            Processing Applications
        A better solution would be to bring wind and solar funding in line
    with other activities on BLM land. This could be achieved by passing
    legislation along the lines of H.R. 2662, introduced by Rep. Heinrich.
    H.R. 2662 would set aside a portion of the fees paid by renewable
    energy developers and redirect the funds back to Interior to be used
    for the specific purpose of processing of additional renewable energy
    applications.
    C. Application and Implementation of the National Environmental Policy
            Act (NEPA)
        As I have stated, the primary challenge on public lands,
    particularly on BLM-managed lands, has been the application and
    implementation of NEPA and other policies by field offices. It is
    critical that reforms aimed at resolving these issues be allowed to
    take effect rather than creating new processes that do not address the
    underlying issues.
        I would like to make it clear, however, that NEPA itself is not the
    issue. Wind energy projects interconnecting to federal Power Marketing
    Administrations such as the Western Area Power Authority and Bonneville
    Power Administration also trigger NEPA, yet thousands of megawatts of
    wind energy capacity have been added to these systems.
    2. Competitive Leasing for Wind and Solar Projects
        The other BLM-related provision that could potentially be
    problematic is the requirement for competitive leasing for wind and
    solar projects. BLM already has the authority to offer land leases via
    a competitive process, but has largely chosen not to because of a lack
    of participant interest.
        I think this lack of interest in bidding on areas for wind and
    solar development is due to a number of factors, including:
          the time needed to complete the leasing and permitting
    process on BLM lands, as compared to the time needed to complete the
    process on private lands;
          the lack of clarity surrounding the protection of
    proprietary data, as stated in my written testimony; and
          the fact that wind and solar resources can be found in
    many locations--unlike oil, gas, or even geothermal energy resources,
    which are concentrated in a relatively small number of locations. As a
    result, there is less inherent competition for wind and solar sites
    than for oil and gas sites.
        The few competitive processes BLM ran for wind development in the
    past were time consuming, expensive, and ultimately did not result in
    the construction of a single wind turbine on the lands in question. As
    such, and for the other reasons explained in greater detail in my
    written testimony, we do not think this is a strategy BLM should be
    required to pursue. Rather, if it makes sense on a case-by-case basis,
    BLM should consider competitive leasing under their current
    authorities. As to how these leasing efforts should be conducted I
    would refer you to my previously filed testimony.
    U.S. Forest Service
        The Forest Service is reviewing only two project applications for
    wind energy projects on lands under Forest Service management through a
    Special Use Permit process. In 2007 the Forest Service released wind
    energy siting draft directives for public comment. AWEA submitted
    extensive comments 1 and it is my understanding that the
    draft directives are still under review at the Forest Service.
    ---------------------------------------------------------------------------
        \1\ See http://www.awea.org/policy/regulatory_policy/pdf/
    080123_AWEA_supplemental_
    comments_on_USFS_draft_directives.pdf
    ---------------------------------------------------------------------------
        The wind energy industry strongly encourages the Forest Service to
    release an ``interim final'' version of the draft directives for an
    additional round of public comment before releasing final directives.
    As with BLM, we believe that working within the existing system will
    yield a more timely result than a wholesale reorganization of staff and
    resources.
    Minerals Management Service
        Development of our nation's offshore wind resources has for years
    largely been stymied while the Minerals Management Service (MMS)
    developed a regulatory framework as directed by the Energy Policy Act
    of 2005. MMS finally released the regulations for offshore wind project
    leasing and permitting in April 2009.
        States and project development companies are anxious to put these
    new regulations into practice and have operational offshore wind
    projects on the Outer Continental Shelf in the next few years. However,
    as written, H.R. 3534 could create barriers to offshore wind
    development in two ways:
        1)  disruption and confusion due to the consolidation of energy
    leasing into a new office just as MMS staff is beginning to focus on
    processing offshore wind energy applications; and
        2)  unintended negative consequences due to strategic planning and
    ocean zoning based on incomplete information.
        I have already addressed the issue of the new energy leasing office
    above, so I shall focus my response on the issue of marine spatial
    planning.
        The strategic plans envisioned in H.R. 3534 would create a new
    layer of regulation at a time when the ink is barely dry on the
    preceding set of regulations. The offshore wind energy industry in the
    U.S. is just beginning to gain momentum in states up and down the
    Atlantic and around the Great Lakes.
        Offshore wind is a highly specialized industry, and it relies
    heavily on data, much of which has yet to be collected for U.S.
    offshore wind resources. Creating a new regulatory structure based on
    limited data could result in poor planning, and will have the
    additional unintended consequence of signaling that the U.S. is not yet
    ready to seriously pursue offshore wind development.
        This could have far-reaching consequences, because the
    infrastructure needed to support the growth of the offshore wind
    industry requires investment now. Companies seeking to invest in
    developing U.S. offshore wind may react to this signal by investing
    elsewhere, resulting in a loss of economic opportunities and green job
    creation.
    2.  Do you believe that the provisions of the Jones act relating to
            America's Merchant marine fleet, apply to the companies
            developing wind power in the OCS?
        The offshore wind industry is operating under the assumption that
    the Jones Act will apply to wind projects on the Outer Continental
    Shelf (OCS). The U.S. does not currently have vessels equipped to
    transport and install wind turbines. Therefore, such vessels will have
    to be built or retrofitted for project construction to begin.
        Obviously, such activities have long lead times and can be
    expensive. Therefore, those investments are unlikely to be made until
    we have a stable national policy in place that allows offshore
    renewable energy projects to move forward.
        The Jones Act requirements and the time needed to meet them
    underscore the industry's concern about the new layer of regulation
    created by this legislation, which will require mandatory strategic
    planning for offshore wind energy projects and other energy activities.
    The associated delay involved may jeopardize the substantial
    infrastructure investments that will be required at a time when we need
    to send clear signals to the market that the U.S. is serious about
    moving forward with offshore wind energy projects.
    3.  In light of the fact that so many companies in Europe that
            pioneered windmills with huge subsidies have begun moving their
            plants to China where costs are cheaper when the governments
            reduced the subsidies. Would it make sense to you that the
            committee includes a provision consistent with the Jones Act
            that the windmills be manufactured, in the US, to protect
            American jobs?
        If I understand this question correctly, it suggests that a primary
    driver of the surge in turbine manufacturing in China is the reduction
    in European subsidies for wind energy. I would point out that a more
    likely driver is the fact that the Chinese government made a strong
    commitment to greatly increasing the usage of wind energy, which sent a
    strong signal to manufacturers, who then flocked to set up facilities
    in China.
        Transportation costs account for roughly 20% of the cost of a wind
    turbine. It makes economic and competitive sense to produce turbines
    and their components as close to their point of ultimate usage as
    possible. However, manufacturing facilities represent a major
    investment.
        The bottom line is that manufacturers have to believe there will be
    a strong and steady market for their product in the U.S. for them to
    invest in building a substantial manufacturing base here.
        The U.S. wind industry has been hamstrung by an on-again, off-again
    approach that has made long-range planning all but impossible.
    2 Despite this, the U.S. now ranks number one in installed
    wind capacity, and several new manufacturing facilities have been
    constructed.
    ---------------------------------------------------------------------------
        \2\ Wind turbines and solar panels benefitted from tremendous
    interest following the oil shortages of the 1970s which increased the
    price of electricity generated from oil. By 1986, California had more
    than 1,200 MW of wind energy capacity, or 90% of the worldwide
    installations at that time. Expiration of supportive policies in the
    mid-1980s meant that Europe took the lead in new capacity, along with
    the associated domestic manufacturing base. By 2000, Europe had more
    than 12,000 MW of wind energy capacity installed versus just 2,500 MW
    in the U.S. The on-again, off-again saga of the Production Tax Credit
    led to boom and bust cycles in development that are not conducive to
    companies investing the billions of dollars necessary to build a
    manufacturing base.
    ---------------------------------------------------------------------------
        In fact, wind turbine and component manufacturers announced, added
    or expanded over 70 facilities in the U.S. during the past two years.
    Vestas has four facilities under construction in Colorado. Gamesa
    recently built two facilities in Pennsylvania. Siemens just announced a
    facility in Kansas and already has one in Iowa. Acciona built a
    facility in Iowa. And, of course, domestic companies like GE and
    Clipper have manufacturing facilities here at home as well.
        The U.S. wind industry employs at least 85,000 workers and wind-
    related manufacturing is occurring in more than 40 states. The share of
    domestically manufactured wind turbine components has grown from under
    30% in 2005 to around 50% in 2008.
        This is all good news, but what everyone should realize is that it
    is only a fraction of what could happen if we pass strong federal
    policies that commit us to a renewable energy future. The key to
    growing our nation's renewable energy industry is stable policies,
    including federal tax policies and state renewable electricity
    standards. A federal RES is critical to promoting even more domestic
    manufacturing for the renewable energy sector. By the same token, the
    establishment of domestic manufacturing for the offshore wind
    industry--which requires different equipment than the onshore wind
    industry--will require stable policies as well.

    4.  The CLEAR Act provisions for offshore wind power proposes charging
    bonus bids, rents, fees, and royalties to ensure a ``fair return to the
    United States.'' Since wind power today relies on tremendous subsidies
    from the federal government. How much more should we be prepared to
    increase those subsidies so American taxpayers can be sure they are
    receiving a ``fair return'' in the form of royalties from the OCS?

        I am not sure I understand the question. Charging bonus bids,
    rents, fees and royalties is presumably intended to increase the cost
    of development on federal lands and in federal waters. By contrast,
    subsidies are intended to have the opposite effect. I do not consider
    paying bonus bids, rents, fees and royalties to be a subsidy.
        I dispute the characterization that the wind and solar industries
    receive ``tremendous subsidies.'' Federal incentives are a fact of life
    in our energy industry today, for all sources of energy. Furthermore,
    numerous studies have shown that the subsidies for conventional and
    mature energy sources such as fossil fuels and nuclear power vastly
    exceed those for renewable energy, including wind.
        For example an October 2007 report by the Government Accountability
    Office (GAO) found that between FY2002-2007, fossil fuels received
    nearly 5 times the amount of tax subsidies that renewable energy
    received. Furthermore, federal R&D funding was provided as follows:
    $6.2 billion for nuclear, $3.1 billion to fossil fuels, and $1.4
    billion to renewables. And according to a 1978 report by the Battelle
    Memorial Institute, more than $500 billion in subsidies was spent on
    oil, gas, hydro and nuclear between 1950 and 1977.
        For decades, the fossil fuel industry has benefited from what are
    essentially permanent tax subsidies. According to the Congressional
    Research Service, the U.S. government has explicitly subsidized oil and
    gas since at least 1916 with the passage of the intangible drilling
    cost deduction and passage of percent depletion allowance in 1926, with
    coal added in 1932.
        In stark contrast, the tax incentive for wind has never been
    permanent. Implemented in the Energy Policy Act of 1992, the tax credit
    for wind and biomass expired in 1999 for a short period of time, and
    has never been extended for more than 3 years at a time.
        Another notable comparison can be drawn with the unconventional
    fuels tax credit for oil shale, tar sands, synthetics fuels and coalbed
    methane and other unconventional fossil fuel development, which was
    instituted in the 1980 during the windfall profits tax and continues to
    exist for certain types of fuels. 3
    ---------------------------------------------------------------------------
        \3\ Congressional Research Service. Energy Tax Policy: History and
    Current Issues.. http://www.ncseonline.org/nle/crsreports/08Oct/
    RL33578.pdf
    ---------------------------------------------------------------------------
        If energy is a public good and harnessing our nation's clean,
    renewable energy resources is in the public interest, then it is
    appropriate that renewable energy sources such as wind and solar
    receive support in the same way that the conventional industries have
    enjoyed over the past several decades.
    5.  Do you believe that windmills and oil and gas development are
            incompatible with each other or can Americans have all of the
            above energy production?
        Wind energy is part of our energy mix. We will, of course, need oil
    and gas, as well as other energy sources to meet rising energy demand
    and maintain fuel diversity. However, wind and solar energy can play a
    much larger role that they do currently. In 2008, wind energy provided
    a scant 2% of our nation's electricity. The U.S. Department of Energy
    released a report in 2008 4 concluding that there are no
    technical barriers to reaching 20% wind-generated electricity by 2030.
    ---------------------------------------------------------------------------
        \4\ U.S. Department of Energy, 20% Wind Energy by 2030 (Jul. 2008),
    available at http://www1.eere.energy.gov/windandhydro/wind_2030.html.
    ---------------------------------------------------------------------------
    6.  Do you support enforcement of the Migratory Bird Treaty Act?
        Wildlife laws are and should be enforced as required by law. No
    wind energy company has been prosecuted under either the Migratory Bird
    Treaty Act (MBTA) or the Bald and Golden Eagle Protection Act, although
    the U.S. Fish & Wildlife Service and the Department of Justice have the
    authority to do so.
        I believe this is, in part, because the wind industry has a strong
    track record over the past 15 years of proactively addressing wildlife
    issues, and avian issues in particular. This record is described in
    greater detail below.
        Wind energy projects collect information before and after
    construction to avoid, minimize, and mitigate wildlife impacts, and my
    company as well as others will continue to do so. Unfortunately, birds
    fly into even stationary structures, such as buildings and
    communication towers. Careful siting and efforts to avoid, minimize,
    and mitigate negative effects on birds have, to date, have resulted in
    no wind energy companies or projects being prosecuted.
    Proactive Wind Industry Efforts to Address Wildlife Concerns
        In order to further reduce impacts to wildlife and the environment,
    the wind energy industry has committed to various efforts to define
    impacts to species in order to generate solutions to reduce them.
    Requirements that seek to reduce the local impacts of wind energy
    projects should be based on sound science. Fortunately, the body of
    scientifically based species-specific information continues to grow,
    and the wind industry has taken steps to add to that body of scientific
    knowledge through the proactive collaborative research projects
    discussed below.
            The National Wind Coordinating Collaborative Wildlife Workgroup
        For the last 15 years, the wind energy industry has actively
    participated in what is now called the National Wind Coordinating
    Collaborative (NWCC), which is comprised of representatives, among
    others, from the wind industry, environmental, and state and federal
    government sectors. NWCC identifies issues that affect the use of wind
    power and has established the Wildlife Workgroup to serve as an
    advisory group for national research on wind-wildlife interaction
    issues.
        The wind industry has supported development by the NWCC of a siting
    handbook and avian site evaluation guidelines used by wind developers
    to screen sites and to provide research-based analysis that can avoid
    potential problems 5 The Wildlife Workgroup has also
    facilitated four National Avian-Wind Power Planning Workshops and three
    Wind Wildlife Research Meetings to define needed research and explore
    current issues related to wind energy's impacts on birds and bats.
    6 At these meetings, scientists present the latest research
    findings and talk with other stakeholders about research gaps and
    future needs.
    ---------------------------------------------------------------------------
        \5\ NWCC, Studying Wind Energy/Bird Interactions: A Guidance
    Document (Dec. 1999), available at http://www.nationalwind.org/
    publications/wildlife/avian99/Avian_booklet.pdf.
        \6\ Proceedings from past NWCC wildlife research meetings are
    available at: http://www.nationalwind.org/events/past.htm.
    ---------------------------------------------------------------------------
            American Wind Wildlife Institute
        The American Wind Wildlife Institute (AWWI) was founded in December
    2007 by various wind energy companies and 20 of the nation's top
    science-based conservation and environmental groups, including the
    National Audubon Society, Union of Concerned Scientists, Natural
    Resources Defense Council, Sierra Club, and the Association of Fish &
    Wildlife Agencies.
        AWWI's mission is to facilitate the timely and responsible
    development of wind energy while ensuring the least possible impact on
    wildlife and wildlife habitat. In order to achieve that goal, AWWI
    supports research, mapping, mitigation, and public education
    initiatives that guide best practices in wind farm siting and habitat
    protection. AWWI will also provide needed research data and advice on
    how best to utilize data sets in determining project site locations.
            Bats & Wind Energy Cooperative
        Since 2003, the Bats & Wind Energy Cooperative (BWEC), a joint
    effort by AWEA, Bat Conservation International, the National Renewable
    Energy Laboratory, and the U.S. Fish & Wildlife Service, has researched
    the issue of bat fatalities at wind energy projects and is exploring
    ways to reduce them.
        BWEC focuses on finding good site screening tools and testing
    mitigation measures, including ultrasonic deterrent devices to warn
    bats away from turbines and potential operational adjustments to reduce
    mortality. BWEC collaborates to secure and administer cooperative
    funding among interested parties and allocate those resources to
    conduct local, regional, and continent-wide research required to
    address issues and develop solutions surrounding wind energy
    development and the fatality of bats.
        BWEC supports three main areas of research to address concerns
    regarding bats and wind energy. This multi-dimensional approach will
    shape future research and determine next steps, which includes:
          pre-construction monitoring to assess bat activity levels
    and use at proposed wind turbine sites;
          post-construction fatality searches to determine
    estimates of fatality, compare fatality estimates among facilities, and
    determine patterns of fatality in relation to weather and habitat
    variables; and
          operational mitigation and deterrents that will focus on
    testing the effectiveness of seasonal low-wind shutdowns and deterring
    devices on reducing the fatality of bats.
    7.  A recent article in the Wall Street Journal highlighted that
            Oregon-based electric utility PacifiCorp paid $1.4 million in
            fines and restitution for killing 232 eagles in Wyoming over
            the past two years. ExxonMobil just settled a suit for $600,000
            regarding bird kills related to contact with crude oil or other
            pollutants in uncovered tanks or waste-water facilities on its
            properties. Do you believe those penalties are appropriate?
        I cannot comment on the appropriateness of fines or penalties for
    MBTA violations by other entities.
    8.  Michael Fry of the American Bird Conservancy estimates that U.S.
            wind turbines kill between 75,000 and 275,000 birds per year.
            Yet the Justice Department does not bring cases against wind
            companies. Do you believe that wind companies should be
            compliant with the Migratory Bird Treaty Act as to how it
            relates to bird and bat kills?
    a.  If you answer yes, should wind companies be prosecuted with similar
            zeal to traditional energy companies?
    b.  If you answer no, why should we treat wind energy differently than
            other energy sources with respect to the Migratory Bird Treaty
            Act?
        These figures cited by the American Bird Conservancy have no
    statistical basis that I am aware of. A report by the National Research
    Council found bird mortality at individual wind projects ranges from
    less than 1 bird per installed megawatt of capacity per year, to about
    12 birds per installed megawatt of capacity per year, with the majority
    of sites studied at less than 3 birds per installed megawatt of
    capacity per year. 7
    ---------------------------------------------------------------------------
        \7\ National Research Council, Environmental Impacts of Wind-Energy
    Projects (2007) http://dels.nas.edu/dels/viewreport.cgi?id=4185
    ---------------------------------------------------------------------------
        This large range points to the differences among projects at a
    site-specific level. It is not appropriate, therefore, to extrapolate
    these figures to a national mortality rate. Furthermore, a full
    assessment of the effect of any energy resource on should also take
    into account the potential benefits to birds from reduced reliance on
    fossil fuels, such as reduced air pollution and reduced greenhouse gas
    emissions. For example, the U.N. Intergovernmental Panel on Climate
    Change predicts that climate change may contribute to the extinction of
    20-30 percent of all species by 2030. 8
    ---------------------------------------------------------------------------
        \8\ Neil Adger, et al., Contribution of Working Group II to the
    Fourth Assessment Report of the Intergovernmental Panel on Climate
    Change at 11 (Apr. 2007 ), available at http://www.ipcc.ch/pdf/
    assessment-report/ar4/wg2/ar4-wg2-spm.pdf.
    ---------------------------------------------------------------------------
        Individual bird deaths due to wind development will never be more
    than a very small fraction of those caused by other commonly accepted
    human activities and structures.
        Each year, in the U.S. alone, some of the biggest causes of bird
    fatality include:
          house cats and feral cats, which kill an estimated 1
    billion birds;
          tall buildings, which kill an estimated 100 million to 1
    billion birds; and
          automobiles, which kill an estimated 60-80 million birds
    9.
    ---------------------------------------------------------------------------
        \9\ FWS, U.S. Dep't of the Interior, Migratory Bird Mortality (Jan.
    2002), available at http://birds.fws.gov/mortality-fact-sheet.pdf.
    ---------------------------------------------------------------------------
        Lastly, it should be noted that whereas there have been many
    extensive studies of bird collisions at wind energy projects, in
    contrast, there is a distinct lack of a systematic effort to monitor
    direct impacts on avian species from mining and drilling, power plant
    emissions or pollution, or habitat loss brought on by these activities.
        The MBTA should be enforced against those people who knowingly take
    birds and do nothing to mitigate those impacts. As clearly stated
    above, this does not describe the wind industry which has been
    proactive in developing measures to avoid and reduce bird fatalities.
    Unfortunately, birds often collide with structures, natural and
    manmade, close to the ground and projecting into the air column. The
    wind energy industry is committed to the exercise of due care and the
    implementation of best management practices in order to avoid, minimize
    and mitigate negative effects on birds, and is seeking no loophole or
    change in the law.
        MBTA does not cover bat species, and no bats listed as endangered
    under the Endangered Species Act have been found killed at any wind
    energy projects in the U.S. And it is important to note that not all
    wind energy projects have high rates of bat mortality.
        Nonetheless, bat fatalities are a concern for the wind energy
    industry which is why, when relatively high levels of fatalities were
    discovered at a project in 2003, the American Wind Energy Association
    (AWEA) immediately partnered with Bat Conservation International, the
    U.S. Fish & Wildlife Service, and the National Renewable Energy
    Laboratory to create the Bats & Wind Energy Cooperative (BWEC). This is
    another example of how the wind industry is responsibly and proactively
    addressing environmental impacts.
        As described in detail above, for the past five years BWEC has been
    focused on finding good site screening tools and testing mitigation
    measures, including ultrasonic deterrent devices to warn bats away from
    turbines and potential operational adjustments to reduce mortality.
        BWEC and other collaborative efforts including the National Wind
    Coordinating Collaborative and the American Wind Wildlife Institute
    attest to the wind energy industry's proactive approach to minimizing
    wildlife and habitat impacts.
        Wind energy is one of the most environmentally-friendly ways to
    generate electricity, 10 but all energy development has an
    impact on the environment. Through the proactive efforts described
    above, the wind energy industry strives to minimize impacts and has a
    proven track record of doing so.
    ---------------------------------------------------------------------------
        \10\ A study by a leading environmental science research firm found
    land-based wind energy projects posed the least threat to vertebrate
    wildlife from electricity generation in comparison to the other major
    sources of coal, oil, natural gas, nuclear, or hydropower.
    Environmental Bioindicators Foundation, Inc. and Pandion Systems, Inc.,
    Comparison Of Reported Effects And Risks to Vertebrate Wildlife from
    Six Electricity Generation Types in the New York New England Region at
    7 (Mar. 2009), available at http://www.nyserda.org/publications/
    Executive%20Summary%20Report.pdf
    ---------------------------------------------------------------------------
                                     ______

        The Chairman. Thank you. Mr. Campbell.

        STATEMENT OF ALEX B. CAMPBELL, VICE PRESIDENT, ENDURING
                             RESOURCES, LLC

        Mr. Campbell. Mr. Chairman and Members of the Committee,
    thank you for the opportunity to discuss the CLEAR Act and the
    affects this legislation could have on the American energy
    supply on Federal lands in the inner mountain West. These lands
    contain vast amounts of our domestic natural gas resources. The
    expanded use of domestic natural gas is the most obvious and
    cost-effective way immediately and over the long term to reduce
    greenhouse gas emissions and increase our energy security.
        Enduring Resources, my company, is a small independent
    natural gas exploration and production company headquartered in
    Denver, Colorado. Independent producers like Enduring are small
    businesses with an average of 12 employees, yet we drill 90
    percent of U.S. wells and product 82 percent of America's
    natural gas. My company has 19 employees and natural gas
    holdings in Utah and Texas. Approximately 80 percent of our
    Utah wells and leasehold are on public lands.
        I am here today on behalf of the Independent Petroleum
    Association of Mountain States, IPAMS, which represents more
    than 400 companies and over 150,000 workers engaged in all
    aspects of natural gas and oil production in the Rockies. The
    region's supply is about 27 percent of America's natural gas,
    about 54 percent which is on Federal lands. Therefore, the
    concern is that the CLEAR Act will put at risk approximately 15
    percent of America's natural gas supply.
        IPAMS believes that the CLEAR Act would put at risk many of
    the 267,000 industry jobs in the Rockies at time-consuming
    delays by creating a new government bureaucracy, and redundant
    layers of regulation; institute policies that will hamper the
    action of efficient market mechanisms; significantly increase
    costs to produce natural gas and oil on Federal lands; and
    fundamentally change the multiple use management of public
    lands to an approach that will restrict energy development,
    both conventional and renewable.
        The legislation displays a lack of understanding of the
    business of natural gas and oil production. There are vast
    differences in geology, topography, and environmental
    considerations, market considerations, and many other factors
    which make each lease unique.
        Producers are already making every effort to diligently
    develop leases where it makes economic sense to do so. Any
    definition if diligent development must include recognition of
    all factors involved in the exploration and production of
    natural gas. An additional impediment created by the proposed
    legislation is the imposition of top-down control from DOI by
    imposing best management practices and benchmark from
    Washington rather than from land managers on the ground.
        I personally have extensive experience interacting with the
    various Federal agencies managing our public lands. I find
    these individuals to be hard working, dedicated, and willing to
    sit down and problem-solve at all levels as the local
    representatives of public lands that have the best
    understanding of how to protect the environment while achieving
    energy production.
        The CLEAR Act directs fundamental changes to a Federal oil
    and gas leasing system that has already proven remarkably
    responsive to energy demands in our nation. The CLEAR Act would
    assign the government to the task of establishing a fair market
    value for onshore leases and change the current live auction
    system to a sealed bid system only. The government setting a
    market value is inherently contradictory concept. IPAMS
    believes the free enterprise system in a live auction system is
    the best method for determining fair market value rather than
    government bureaucracy.
        Further, the CLEAR Act would destroy the integrity of the
    bidding system. Rather than a winning bid fairly translating
    into an issued lease, the bill leaves it to the discretion of
    the Interior Secretary. This would codify the disincentive to
    lease Federal minerals similar to that in the decision by the
    Secretary to reject 77 legitimate bids from the Utah December
    2008 lease sale auction.
        Enduring Resources was the successful bidder on four of
    those lease. Enduring's plan to develop domestic natural gas
    from these lands has now been canceled. No other bidding system
    from eBay to Fine Art Auctions allow a seller to withdraw bids
    from a sale after someone has fairly won the bidding process.
        More importantly, independents reinvest 100 percent or more
    of their cash flow in the new development projects. The CLEAR
    Act would increase rental fees, minimum bonus bids and
    regulatory costs, and add a production incentive fee on
    nonproducing acres. With these additional expenses, producers
    will have less capital available to explore or and produce
    American energy. This is particularly impactful in this
    economic climate.
        The DOI inspector general has cautioned that mandating
    production on Federal leases or increasing lease fees would not
    enhance production but will serve as a disincentive to invest
    in Federal leases.
        The industry is already one of the largest non-income tax
    sources of Federal revenue. In Fiscal Year 2008, BLM spent over
    90 million to administer the onshore natural gas and oil
    program. From that small investment the Federal government
    gained $4.2 billion in royalties, rents and bonuses. For every
    dollar invested the program returned $46. Industry assumes all
    the cost and risk of exploring for and producing natural gas
    and oil, supplies needed domestic energy, provides millions of
    jobs, and pays a significant return to the American taxpayers.
        I see that my time is over, and would refer the Committee
    to the recommendations contained in my written testimony. Thank
    you very much.
        [The prepared statement of Mr. Campbell follows:]

                Statement of Alex B. Campbell, on behalf of the
              Independent Petroleum Association of Mountain States

        Mr. Chairman and Members of the Committee, thank you for the
    opportunity to be here today to discuss the Consolidated Land, Energy,
    and Aquatic Resources (CLEAR) Act and the effects that this legislation
    could have on small, independent producers of natural gas and oil who
    operate on public lands in the Intermountain West. These lands contain
    vast amounts of our domestic natural gas resources. As several
    prominent political leaders and academics have recently observed, the
    expanded use of domestic natural gas is the most obvious and cost-
    effective way, immediately and over the long term, to reduce greenhouse
    gas emissions and increase energy security.
        Enduring Resources, LLC is a small independent natural gas
    exploration and development company headquartered in Denver, Colorado.
    Independent producers like Enduring are mostly small American
    businesses with an average of twelve employees, yet we drill 90% of
    U.S. wells and produce 82% of America's natural gas. Our current gross
    production from our properties is approximately 40 mcfd and we have 19
    employees. We have extensive natural gas holdings in Utah and Texas.
    Approximately 80% of our Utah wells and leasehold are operated on
    public lands. I am the Vice President of Lands and have day-to-day
    responsibility to lease, site and permit our natural gas holdings.
        I am here today on behalf of the Independent Petroleum Association
    of Mountain States (IPAMS). IPAMS is a non-profit organization
    representing more than 400 companies and over 150,000 workers engaged
    in all aspects of production of natural gas and oil in the
    Intermountain West. The Intermountain West supplies about 27% of
    America's natural gas and approximately 54% of that natural gas (and
    34% of oil production in the Intermountain West) is on federal lands.
    The CLEAR Act would put at risk about 15% of America's natural gas
    supply.
        The CLEAR Act as proposed would have significant negative impacts
    on the production of the Nation's supply of clean-burning natural gas.
    IPAMS believes that rather than ``furthering the Nation's goals of
    securing a reliable and sustainable supply of American energy,'' as
    suggested by the Committee, the CLEAR Act would result in less American
    production of natural gas and oil and would put at risk many of the
    267,000 industry jobs and the billions of dollars of investment in the
    Intermountain West at a time we can least afford such losses. As a
    result, the bill has the potential to disrupt the supply of American
    energy to millions of families, farmers, and small and large
    businesses. This proposal comes at a time when the President has
    challenged our Nation to focus on an increase of clean domestic energy
    supplies to address climate change, energy security and American jobs.
    This is the wrong answer to that challenge.
        In sum, the CLEAR Act will: 1) add time-consuming delays by
    creating redundant and unnecessary layers of government bureaucracy and
    regulation; 2) institute policies that will hamper the action of
    efficient market mechanisms and decrease the integrity and transparency
    of leasing; 3) significantly increase costs to produce natural gas and
    oil on federal lands; and 4) fundamentally change the multiple-use
    management of public lands to an approach that will further restrict
    energy development--conventional and renewable.
    Additional, Redundant Bureaucracy and Unnecessary Regulations
        Western natural gas producers believe that one of the major
    problems with the CLEAR Act is the unnecessary and redundant red tape
    and bureaucracy that will be created. The CLEAR Act would create a new
    bureaucracy in the Department of the Interior (DOI)--the Office of
    Federal Energy and Minerals Leasing--that would combine certain
    Minerals Management Service (MMS) functions with the Bureau of Land
    Management's (BLM) oil and gas program. CLEAR would add new regulatory
    requirements including new and unworkable notice requirements and
    counter-productive due diligence requirements. There is no demonstrable
    benefit to the environment or to increased supplies of domestic energy
    from these legislative provisions.
    Office of Federal Energy and Minerals Leasing
        The creation of the Office of Federal Energy and Mineral Leasing
    (Leasing Office) will create a new layer of bureaucracy to no purpose.
    Separating leasing from the overall land stewardship and multiple use
    management responsibilities of BLM will result in severed functionality
    and the lack of a holistic approach to land management. BLM and U.S.
    Forest Service land managers gain important knowledge of the lands they
    manage through the land planning process and their day-to day
    management activities. This proposal would sever that knowledge from
    the leasing activity. This cannot possibly benefit either the
    environment or domestic energy supplies. The Act will create two
    offices whose missions may conflict. For example, CLEAR would require
    BLM to set the conditions for surface occupancy, but would remove BLM
    from the issuance of the leases or Applications for Permit to Drill
    (APDs) that must comply with those conditions. In addition, the new
    office would require duplication of professional minerals staff in the
    agencies because only the oil and gas program, and not coal,
    geothermal, and other leasable minerals, will be administered by the
    new agency. This is not cost-effective government.
    Diligent Development Requirements
        Under Section 301 of the Act, DOI would have one year to define
    ``diligent development,'' and then would require producers to meet
    certain ``benchmarks'' that ``will ensure that leaseholders take all
    appropriate measures necessary to produce oil and gas from each lease
    that contains commercial quantities of oil and gas within the original
    term of the lease.''
        This provision displays a lack of understanding of the business of
    exploration and production of natural gas and oil. Finding and
    developing oil and gas is not a simple process. Vast differences in
    geology, topography, reservoir characteristics, composition of the
    resource, environmental considerations, market conditions,
    transportation of the resource to market and many other factors make
    each oil and gas lease unique. The financial aspect of this business is
    also critical in determining when, where and how a property will be
    developed. Acquisition of the capital necessary to develop the
    properties is a never-ending activity for the independent natural gas
    producer.
        An energy company will make no return on its investment in the
    lease (lease bid and rental payments) until it produces a resource.
    Industry is already under an economic imperative to develop the
    purchased leases as soon as it makes economic and regulatory sense to
    do so. Producers are already making every effort to diligently develop
    leases where it makes economic sense to do so, but existing regulatory
    processes and special interest groups throw up roadblocks and delays at
    every stage of the process, making development on public lands long and
    arduous. Any definition of diligent development must include
    recognition of all the many preparatory activities companies are
    performing to begin ground-disturbing developments (environmental and
    cultural surveys, APD permits, National Environmental Policy Act (NEPA)
    compliance, Plans of Development) and the impediments to development
    beyond operators' control. The Committee should also recognize the
    budget implications of hiring a staff to review the diligent
    development plans required under the bill and to monitor the biannual
    reports required to be filed by all federal lessees.
    Command and Control Planning: Best Management Practices
        Another major deficiency of the proposed legislation is that it
    imposes centralized decision-making from Washington. The bill proposes
    to broaden top-down control by the government by directing the
    Secretary to impose one-size-fits-all best management practices (BMP)
    and benchmarks from Washington. This provision would separate the
    decision-making from those with the best information--the land managers
    on the ground, who are intimately familiar with the area's land,
    resources, and stakeholders.
        I have extensive experience with developing BMPs to site and
    develop Enduring's federal holdings and have interacted with employees
    in BLM and EPA among other federal and state agencies in that process.
    I have found these employees to be hard working, dedicated and willing
    to sit down and problem-solve at all levels. They are open to new ideas
    to achieve enhanced environmental protections while developing federal
    natural gas as long as those ideas are within the confines of their
    regulatory authority. My concern today is how the CLEAR legislation
    will curtail the ability of the local managers to implement on-the-
    ground solutions. As the local administrators of these public lands,
    they have the best understanding of how to achieve our country's goal
    to maximize domestic energy production while minimizing impacts on
    other resources. The CLEAR Act will dramatically change the ability of
    the local managers to best steward the public lands.
    Additional Notice Requirements
        Section 303 of the bill adds a new requirement that the Secretary
    shall provide 45 days notice prior to each sale to ``all surface land
    owners in the area of the lands being offered for lease'' and to the
    holders of ``special recreation permits for commercial use, competitive
    events, and other organized activities on the lands being offered for
    lease.'' This new statutory mandate will increase the administrative
    costs of the sale and provide opportunities to challenge sales despite
    the Leasing Office's good faith efforts to comply. First of all, who
    are the surface owners ``in the area of'' the lands being offered for
    lease? The inference is that notice is required to not just surface
    owners of the severed federal minerals being offered, but also to
    anyone in the general vicinity. How will those surface owners be
    identified? Will the Leasing Office hire title examiners to identify
    all of the surface owners ``in the area'' of each sale? Will the
    Leasing Office rely on the records of the local tax assessor? If so,
    and the tax assessor's records are in error, is the notice invalid? How
    is the notice to be given to such persons? If it is not given by
    certified mail or other method with confirmed delivery, how can
    purchasers of the leases be assured that the Leasing Office satisfied
    this obligation? What if, despite its best efforts, the Leasing Office
    overlooks providing notice to one of the surface owners in ``the area''
    or to one of the holders of special recreations permits? Is the
    resulting lease void for the agency's failure to comply with a
    statutory mandate?
        This provision would create serious risks of title uncertainty.
    While oil and gas producers are accustomed to evaluating the geologic
    and engineering risks of drilling a well, they are not willing to
    invest millions of dollars to purchase a lease or drill a well in the
    face of clouds on the title. The challenges created by such a proposal
    were recently confirmed by BLM in the 2006 Split Estate Leasing Report
    to Congress required by Section 1835 of the Energy Policy Act of 2005
    (EPAct 2005). Instead of recommending the adoption of a similar
    provision, BLM issued agency guidance and new information to split
    estate property owners to provide better and timely information to the
    public in the leasing process. (Instruction Memorandum 2007-165).
    Market Distortion and Reducing the Integrity and Transparency of
            Leasing
        The CLEAR Act directs fundamental changes to a federal oil and gas
    leasing system that has proved remarkably responsive to the energy
    demands of the Nation. It would separate critical leasing decisions
    from the best information. In our economic system the market--not
    government--is judged to have the best information on the value of a
    commodity. The CLEAR Act would reject that fundamental principle and
    direct the Secretary to set ``market rates'' for leases and change the
    competitive bidding system. The government setting a market value is an
    inherently contradictory concept. IPAMS believes the free enterprise
    system in a live auction system is the best method for determining fair
    market value, rather than government bureaucracy. The CLEAR Act would
    also reduce both the integrity and transparency of the leasing process.
    The Competitive Bidding System
        The CLEAR Act would change the existing system for bidding on
    federal leases from oral bids at a public sale to sealed bids, and
    would require the Leasing Office to evaluate the adequacy of bids
    before accepting them. IPAMS does not understand the impetus for these
    changes. In 2008, prior to the collapse of crude oil and natural gas
    prices, BLM was receiving record high bids for onshore leases, and we
    are unaware of any allegations that the U.S. has been receiving less
    than fair market value at the competitive lease sales. It is therefore
    unclear why a change should be made in a system that is working well
    for both industry and the U.S. Treasury. Moreover, when the Federal
    Onshore Oil and Gas Leasing Reform Act (authored in part by
    Representative Rahall) was enacted some 20 years ago, Congress chose to
    abandon the sealed bid procedure which had been followed for
    competitive leasing in known geologic structures (sometimes called a
    ``KGS'') in favor of oral bidding. In addition, Congress specified that
    the highest oral bid greater than the national minimum bid ($2.00 per
    acre) would be accepted ``without evaluation of the value of the lands
    proposed for lease.''
        There are several drawbacks to a system which attempts to second-
    guess the market price as established by public bidding. First, it will
    require increased staffing of the proposed Leasing Office with
    professional geologists and engineers to prepare the necessary
    evaluations of bid adequacy, which will require increased agency
    budget. Second, regardless of the skills of the Leasing Office staff
    conducting such evaluations, that staff will never have the same
    quality of information available to it as will industry. The oil and
    gas business is highly competitive and companies invest significant
    sums in proprietary exploration and data collection. Third, in wildcat
    areas where there is little well control data available, the fair
    market value of a tract will be difficult for federal geologists to
    determine. Lands in undeveloped areas may have only a nominal value
    unless geologists from several companies have concurrently developed an
    exploration concept that creates a speculative higher value for the
    lands. Unlike coal, where knowledge about the resource is generally
    available to all participants and where the large up-front investment
    necessary to develop a mine limits the number of competing bidders,
    knowledge about the oil and gas resource, if any, present in a wildcat
    area is often limited to the imagination of the geologists working the
    area. Fourth, the number of entities competing at the sale is very
    large, so the likelihood that a high bid at a public sale does not
    represent fair market value is very low. Fifth, industry reacts quickly
    to market changes. For example, if the Leasing Office staff develops a
    fair market value for an area in advance of a sale, falling prices or
    the development of technical data (such as new information showing that
    production from a particular formation is more short-lived than
    expected) could result in the industry assigning a lower value to the
    acreage than the Leasing Office's ``fair market value.'' The result
    would be rejection of bids that, in fact, represent fair market value
    as of the date of the sale.
        History supports this concern over post-sale bid evaluations. BLM
    had difficulty defending its decisions with respect to the adequacy of
    competitive bids under the old KGS sealed-bid system which Congress
    eliminated in 1987. A good example of the difficulties can be found in
    the decision of the Interior Board of Land Appeals (IBLA) in the case
    of Harold Green v. BLM, 93 IBLA 237 (1986). There, a sealed bid of
    $22.75 per acre made at a competitive sale held in February of 1983 was
    rejected as inadequate. The high bidder appealed that rejection to the
    IBLA, which referred the matter to a hearing before an administrative
    law judge. That judge concluded that BLM did not justify its rejection
    of the high bid and directed the agency to accept the bid. BLM appealed
    the administrative law judge's decision to the IBLA which decided (3 1/
    2 years after the sale) that BLM had, in fact, justified its rejection
    of the bid, yet each of the three judges separately suggested ways for
    BLM to improve its bid evaluation process. There simply is no reason to
    return to the costs and delays of a bid evaluation requirement which
    Congress discarded 20 years ago.
    Integrity and Transparency of Lease Sales
        Another effect of the CLEAR Act is the destruction of the integrity
    of the bidding system. Rather than a winning bid fairly translating
    into an issued lease, the bill leaves it to the discretion of the
    Interior Secretary whether to accept a bid within 90 days after the
    auction. The bill would thus codify the uncertainty and disincentive to
    lease federal minerals that resulted from the decision of Interior
    Secretary Salazar to reject 77 legitimate bids made at the Utah
    December 2008 lease sale auction. Enduring Resources was the successful
    bidder on four of those leases and had carefully planned how those
    leases would fit into its existing natural gas developments. The leases
    have been withdrawn and Enduring's plans to develop domestic natural
    gas resources for the Nation from these lands have been cancelled.
        Currently the Mineral Leasing Act requires DOI to issue leases
    within 60 days of payment of the bonus so that the winning bidder
    receives the property that he/she has fairly purchased. If passed, the
    CLEAR Act would institute a subjective system, which is prone to
    second-guessing and the politics of the moment. No other bidding
    system, from eBay to fine art auctions, allows a seller to withdraw
    goods from a sale after someone has fairly won the bidding process.
        As mentioned above, the oil and gas business is highly competitive
    and companies are reluctant to show their hand by bidding at a sale
    only to then have the Department determine that it will not issue the
    lease. Furthermore, even though existing law provides that the
    Secretary of the Interior shall issue a lease within 60 days following
    payment of the balance of the bonus, that statutory deadline is
    frequently missed, meaning that the bidder's money can be tied up,
    without interest, for many months. In fact, currently DOI is holding
    about $100 million worth of lease bids in Colorado, Utah and Wyoming
    while it processes lease protests. The companies do not have the
    leases, but the government holds its money. That is significant company
    capital being held by the government in a non-productive capacity that
    could be used to find and produce more American energy.
        Under the CLEAR Act, the Secretary ``shall decide whether to accept
    a bid and issue a lease'' within 90 days following payment of the
    bonus. The bill does not contain any standards upon which the Secretary
    shall base his decision to issue or not issue a lease. That decision
    should be made prior to the sale. Bidders spend significant sums in the
    form of professional staff time spent identifying whether lands offered
    for lease by BLM can be economically developed under the terms and
    stipulations described in the sale notice and formulating their maximum
    bids based on available geologic and engineering data. There is little
    incentive to invest that time and effort, and disclose your analysis in
    the form of the amount of your bid made at a public sale, only to have
    the Secretary decide several months later not to issue a lease on the
    lands advertised for sale.
    Increased Costs
        In order to maintain natural gas supplies to meet American's every-
    increasing demand for this clean energy source, independents must
    reinvest 100% or more of their cash flow into new development projects.
    Because the CLEAR Act would increase rental fees, minimum bonus bids,
    and regulatory costs, natural gas and oil producers will have less
    capital available to explore for and produce American energy. This is
    particularly true in this economic climate where credit is tight and
    the price of both oil and gas is low. The DOI Inspector General (IG)
    has cautioned that mandating production on federal leases or increasing
    lease fees would not enhance production, but will serve as a
    disincentive to investment in federal leases.
        In addition, the CLEAR Act also proposes a ``production incentive
    fee'' of $4 for non-producing acres. First of all, a lessee is already
    required to develop oil and gas within the original term of the lease
    because if it does not, the lease terminates. Second, how will the
    agency determine which leases ``contain commercial quantities of oil
    and gas?'' Unless a newly acquired lease offsets existing production
    (and even sometimes when it does), there is no guarantee that any
    particular lease contains commercial quantities of oil and gas until a
    well is drilled. Although advances in geophysical technology have
    reduced some of the exploration risk, there are still many dry holes
    drilled on federal lands. The average rate of success for wildcat wells
    is only 10-20% and for exploratory wells 25-50%.
        The CLEAR Act proposed ``production incentive fee'' of $4 for non-
    producing acres is particularly troubling when the DOI IG found such
    problems with data integrity and information systems at MMS and BLM
    that DOI cannot say with certainty how many leases are producing. IPAMS
    recommends that DOI fix its data problems before trying to impose
    another cost on industry. Furthermore, since many leases are held up
    from production because of required environmental studies, timing
    restrictions for surface-disturbing activities, government processing
    delays and legal challenges, a production ``incentive'' fee would be
    inequitable if these factors were not considered.
        The natural gas and oil industry is already one of the largest non-
    income tax sources of federal revenue. In FY2008, BLM spent about $90
    million to administer the onshore natural gas and oil program. From
    that small investment, the federal government gained $4.2 billion in
    royalties, rents, and bonuses. For every dollar invested, the oil and
    natural gas program returned $46.
        In spite of the fact that oil and natural gas companies more than
    pay for this program, companies must also pay a $4,000 fee per APD,
    whether or not the permit is granted. In the Fiscal Year 2010 budget,
    that fee is proposed to increase to $6,500 without any justification
    for the increase and again in an economic climate when independent
    producers like Enduring can ill afford it. Industry assumes all the
    cost and risk of exploring for and producing natural gas and oil,
    provides a needed supply of domestic energy and pays a significant
    return to the American taxpayer.
        The CLEAR Act would also result in higher regulatory costs and
    increase permitting delays by eliminating Section 390 Categorical
    Exclusions (CX)) of EPAct 2005. EPAct 2005 mandated the use of CXs to
    enable energy development where the environmental impact is minor, and
    where drilling was analyzed in a NEPA document as a reasonably
    foreseeable activity. In 2005, Congress recognized that this provision
    would encourage the timely development of domestic energy resources and
    concluded that in the narrowly described circumstances environmental
    impacts would be insignificant. A requirement for an ``extraordinary
    circumstances'' analysis would defeat the intent of the statute.
        The CX provision was designed to limit redundant environmental
    analysis, free federal land managers to perform other tasks and
    encourage industry to limit environmental impact by drilling on
    existing well sites. CXs enable federal land managers to focus on
    activities like inspections and monitoring that lead to actual, on-the-
    ground environmental protection and companies can timely deliver
    domestic energy resources to consumers CXs do eliminate redundant NEPA
    and enable energy development where the impact is minimal. The CX tool
    is an established NEPA compliance tool and indeed is one of the most
    frequently used NEPA compliance options by agencies across the federal
    government. The EPAct 390 CXs were narrowly drafted and are being
    cautiously implemented by BLM.
    Changing the Multiple Use Management of Public Lands
        In addition to creating an entirely new agency to issue and
    administer oil and gas leases, adding burdensome regulations and
    dramatically changing the federal leasing process, the Act would impose
    on BLM and the U.S. Forest Service the obligation to review and approve
    ``general land use plans that identify areas in which energy
    development would not conflict with other land uses.'' This requirement
    would seem to trump, with respect to ``energy development,'' the
    multiple use management directive contained in BLM's organic act, the
    Federal Land Policy and Management Act (FLPMA), and the multiple-use
    sustained yield statute governing National Forest System lands.
    ``Energy development'' is not defined in the bill and so would apply to
    all energy development on public lands, including coal, geothermal,
    wind, solar and oil and gas. Because the bill does not define exactly
    what energy development activities are deemed to ``conflict'' with
    other land uses, this provision will provide ample opportunities for
    challenges to plans by, for example, livestock producers who prefer
    that no energy development occur on their grazing permits, hunters who
    want no energy development in any area where big game might be found
    and surrounding landowners who dislike derricks, turbines or solar
    arrays. BLM and the Forest Service already strive to achieve ``the
    enormously complicated task of striking a balance among the many
    competing uses to which land can be put'' (as the Supreme Court noted
    in Norton v. Southern Utah Wilderness Alliance) and that task should
    not be further complicated by adding a seemingly contradictory
    requirement.
        Operators in the West already experience lengthy planning delays to
    energy projects. Project-specific Environmental Assessments (EA) and
    Environmental Impact Statements (EIS) are routinely taking three to
    over five years to complete and BLM Resource Management Plan NEPA
    analyses have taken five years to close to a decade. Enduring has a
    sixty-four well EA that has taken over five years already. IPAMS
    recommends that instead of creating additional planning requirements,
    Congress should direct federal land managers to follow reasonable and
    time-sensitive guidelines for NEPA documents. The Council on
    Environmental Quality rules on NEPA documents contemplate a focused and
    timely process. Implementing the intent of those rules would free up
    the time and resources for land managers to engage in activities that
    truly benefit the environment, such as monitoring and enforcement,
    rather than endless documentation.
    Recommendations
        In order to truly increase energy security and address global
    warming in a meaningful way, IPAMS recommends the following measures to
    increase production of natural gas on public lands:
          Congress should consider ways to shorten the timeframe
    for environmental analysis. The bureaucratic delays and runaway costs
    associated with more environmental studies provide no additional
    environmental protection, but would serve to restrict the development
    of new supplies of domestic oil and natural gas.
          Congress should ensure the DOI does not continue to
    restrict leasing of public lands by failing to timely complete its
    administrative responsibilities.
          Congress should carefully consider how new wilderness
    areas could limit America's ability to meet its future energy needs.
          Congress should increase the budget for the BLM oil and
    natural gas program to ensure the bureau has the necessary staff and
    resources to process permits to drill and rights of way for gathering
    and pipeline infrastructure so that new supplies of natural gas and oil
    can be brought to the market.
          Instead of creating new redundant processes, Congress
    should work with Interior and industry to improve existing processes so
    that public resources are made available to the nation in a timely and
    cost-effective manner.
        I have attached for your convenience specific comments and concerns
    of IPAMS' members on the provisions of the CLEAR Act.
        Thank you.
        [NOTE: The attachment has been retained in the Committee's official
    files.]
                                     ______

      Response to questions submitted for the record by Alex B. Campbell,
    Enduring Resources, on Behalf of the Independent Petroleum Association
                               of Mountain States

    Questions from the Majority:
    1.  Mr. Campbell, your testimony states, ``no other bidding system,
            from eBay to fine art auctions, allows a seller to withdraw
            goods from a sale after someone has fairly won the bidding
            process.'' In fact, the federal offshore leasing system works
            exactly that way: the Secretary has the discretion to either
            issue or not issue leases to the high bidders on a lease tract,
            and typically exercises that discretion based on an assessment
            of whether or not the high bid met a minimum acceptable bid for
            that tract. Such a system, which also includes sealed bidding,
            has been in place on the Outer Continental Shelf for thirty
            years. Do you stand by the statement in your testimony as
            quoted in this question? And why do you believe that a system
            that has been so effective offshore would not work onshore? Do
            you have any evidence or data to support your theories?
        Answer: I stand by my statement. It is common for many types of
    auctions to specify a minimum bid, as is done for off-shore leasing,
    which if not met, means that the item is not sold. The CLEAR Act does
    not specify a minimum bidding system at all, just an arbitrary decision
    by the Secretary to reject bids for some unspecified reason. The eBay
    and art auction examples likewise often set minimum bids, but don't
    enable a seller to arbitrarily withdraw goods from a legitimate auction
    after the auction ends. This is basic contract law--an offer is made
    with specific terms, an acceptance is tendered meeting those terms, the
    result is a contract between the parties for the sale according to the
    agreed upon terms. The change proposed in the CLEAR Act would introduce
    unacceptable subjectivity into the bidding system.
        The current on-shore live-auction system was developed under the
    Federal Onshore Oil and Gas Leasing Reform Act of 1987 that was
    sponsored by Senator Dale Bumpers (D-AR) specifically to make federal
    onshore leasing more competitive and transparent. Under the current
    live auction system, the market, through competitive bidders, sets the
    price of a lease. Under the previous Known Geologic Structure (KGS)
    sealed-bid leasing system, government employees, without access to the
    most current geologic, drilling and market information, made the
    determination of where the resource was and what the fair market value
    should be. In order to provide a value for leases by government mandate
    rather than the market, the government would have to hire numerous
    geologists and auditors to actively and periodically assess the
    resource, and monitor markets to arrive at a value. IPAMS believes
    that's a job more efficiently and effectively done by private industry
    working through a competitive free-market system.
        A sealed bid system does indeed exist for off-shore leasing, but
    there are many differences in the types and size of reserves, and the
    amount of seismic surveying available offshore compared to onshore.
    Offshore reserves in the Gulf of Mexico are generally large
    conventional reserves that have been studied extensively over several
    decades and large amounts of seismic data are available, whereas
    onshore leases generally contain unconventional reserves without
    extensive seismic mapping.
        The offshore process also involves a detailed process for
    determining which bids to accept based on bid amount, not an
    unspecified reason as the CLEAR Act provides. If a winning bid for off-
    shore resources is not immediately accepted based on specific,
    subjective criteria, it is evaluated in more depth by MMS geologists,
    geophysicists, petroleum engineers, economists and computer scientists,
    who prepare detailed estimates of the economic value of oil and gas
    resources on each tract. Bids may only be rejected by MMS based on
    rigorous value criteria, not for subjective reasons by the decision-
    maker. Furthermore, companies have fifteen days to appeal any rejection
    of a bid by MMS. The CLEAR Act neither includes objective criteria for
    bid rejection nor a right to appeal.
        Finally, with today's unconventional onshore resources and
    industry's ability to apply new technology and develop reserves that
    even five years ago were not possible, a government bureaucracy
    mandating where to develop and at what price is especially out-dated
    and inefficient. Examples abound where industry has responded to market
    signals of tight supplies and higher prices to assume the risk and
    apply new technology to develop natural gas and oil reserves previously
    thought unrecoverable. The potential of the Bakken Shale in North
    Dakota has only been fully realized within the last three years. Other
    shales throughout the United States such as the Marcellus Shale in
    Appalachia and the Haynesville in Louisiana have just started to be
    exploited within the last five years. Ten years ago the Fort Worth
    basin in Texas was considered a rapidly declining basin until producers
    figured out how to exploit the Barnett Shale and dramatically increased
    production from that basin. Ten years ago, the unconventional tight
    sands of the Pinedale Anticline were just beginning to be tapped, and
    today it is the second largest natural gas field in the US. These are
    all examples of what happens when industry operating in a free
    enterprise market system is able to apply geological and technical
    know-how with the right economic conditions to produce domestic energy.
    2.  Mr. Campbell, your testimony states, ``the EPAct 390 CXs were
            narrowly drafted and are being cautiously implemented by BLM.''
            A position paper produced under the IPAMS letterhead, states
            that, ``the only abuse of the system is that BLM consistently
            does not utilize these Congressionally mandated CXs, even when
            companies meet all the criteria for their use.'' However, on
            September 16, 2009, the Government Accountability Office (GAO)
            issued a report (GAO-09-872) that found that, ``BLM's use of
            Section 390 categorical exclusions has frequently been out of
            compliance with both the law and BLM's implementing guidance,''
            and that ``violations we found thwarted NEPA's twin aims of
            ensuring that both BLM and the public are fully informed of the
            environmental consequences of BLM's actions.'' In the report,
            the GAO reports finding violations of the law at 18 BLM field
            offices, examples of noncompliance with BLM guidance at 22
            field offices, and found that the law contained ``vague or
            nonexistent definitions''. Given the findings of this non-
            partisan government watchdog, do you stand by your statement
            that the law was ``narrowly drafted'' and that the Section 390
            Categorical Exclusions are being ``cautiously implemented'' by
            BLM? If so, why and what evidence or data do you have to
            support your opinion?
        Answer: I stand by my statement that the Section 390 Categorical
    Exclusions (CX) are narrowly drafted and are being cautiously
    implemented by BLM. A careful reading of the GAO report finds this non-
    partisan government watch-dog concluded that, ``Overall, we found many
    more examples of noncompliance with guidance than violations of the
    law. We did not find intentional actions on the part of BLM staff to
    circumvent the law; rather, our findings reflect what appear to be
    honest mistakes stemming from confusion in implementing a new law with
    evolving guidance.'' 1
    ---------------------------------------------------------------------------
        \1\ United States Government Accountability Office, Energy Policy
    Act of 2005: Greater Clarity Needed to Address Concerns with
    Categorical Exclusions for Oil and Gas Development Under Section 390 of
    the Act, GAO-09-872, September 2009, page 29.
    ---------------------------------------------------------------------------
        Further analysis of the GAO report shows that from a random sample
    of 300 approved CXs, these were the types and percentages of violations
    found:
          Using CX2, CX3, or CX4 beyond the five-year timeframe: 3
    instances, a 1% sample error rate
          Using CX2 or CX3 to approve an activity other than an oil
    or gas well: 7 instances, 2.3% error rate
          Using CX2 on a well pad that did not have an existing
    well: 5 instances, 1.7% error rate
          Using CX5 for projects that are not ``maintenance of a
    minor activity'': 4 instances, 1.3% error rate
          Using CX 3 without an approved environmental document: 1
    instance, 0.3% error rate
          Cumulative sample error rate of 6.7%.
        While IPAMS is concerned with any violation of the law, we agree
    with GAO that these errors stem from confusion over implementing a new
    program, which is not uncommon with any new government program. These
    errors can be cleared up with revised guidance, implementation
    templates, and better oversight from state offices, as recommended by
    GAO.
        GAO also provides details on several other problems with
    implementation, but these are clearly administrative, and did not
    result in violations of the law. Indeed, the last two cases cited below
    resulted in more restrictive use of the CXs than required by law. These
    administrative errors include:
          Using one form to document CXs for multiple wells, all of
    which individually were legitimate uses of CXs--15 instances
          Documents without the expiration date stated, but with no
    legal violations--95 instances
          CX decision documents that did not adequately provide
    supporting documentation--no number of instances given
          Using the incorrect date to start the five-year
    timeframe, resulting in less time for using the CX than that allowed by
    law--6 instances
          Applying the CX extraordinary circumstances checklist,
    which specifically is not required for statutory CXs--21 instances.
        Again, these administrative errors can be easily cleared up with
    training and better oversight, but are clearly not abuses of the law.
        Indeed, to further support my statement that BLM was cautious and
    overly conservative in their use of CXs, the GAO found many examples
    where BLM failed to use an applicable CX, despite the mandate in EPAct.
    GAO ignored BLM's frequent violations or failure to fully utilize the
    provisions of the law when CXs were not used for projects that met the
    criteria mandated by Congress. For example, GAO didn't even investigate
    why five busy field offices that process APDs - Miles City, MT; Great
    Falls, MT; Rock Springs, WY; Newcastle, WY; and Roswell, NM--failed to
    approve a single CX. IPAMS would be very interested in seeing the data
    on cases where CXs were not used, even when the statutory criteria were
    met.
        The Section 390 CXs were narrowly drafted by Congress to encourage
    development of natural gas and oil in cases where the environmental
    impact is minimal, where NEPA analysis has already been done within the
    last five years, and on existing well pads. CXs enable federal land
    managers to focus on activities like inspections and monitoring that
    lead to actual, on-the-ground environmental protection rather than on
    redundant NEPA documentation.
    3.  Mr. Campbell, you testified in opposition to the creation of the
            Office of Federal Energy and Minerals Leasing, due in part
            because you believe that it would sever the knowledge that
            Forest Service land managers have over their lands from leasing
            decisions. Perhaps you are not aware that currently the Forest
            Service does not actually conduct the oil and gas leasing
            program on its lands. Instead, BLM acts as a leasing agent for
            the Forest Service on National Forest lands. If enacted, staff
            of the proposed new office would then simply do for the Forest
            Service and BLM what the BLM currently does for the Forest
            Service in terms of oil and gas leasing activity. Both the BLM
            and the Forest Service would continue to act as land managers,
            making land use decisions, overseeing environmental and public
            safety compliance, and other appropriate activities. The BLM
            has received considerable and consistent criticism of the
            manner in which it conducts the oil and gas leasing program, as
            testified to by the Government Accountability Office and the
            Inspector General. You may wish to review their findings prior
            to responding to this question: In light of the long-standing
            and systemic deficiencies in the BLM leasing program,
            repeatedly uncovered by the GAO and IG, and the fact that the
            BLM and Forest Service would retain their primacy as land
            managers under H.R. 3534, do you continue to object to the
            transfer of certain leasing activities to the new office, or
            for that matter, to the MMS?
        Answer: IPAMS is not alone in it's concern with further severing
    the leasing function from BLM's overall land stewardship. The
    Wilderness Society is also concerned about the CLEAR Act's potential to
    create ``confusion and conflicts between the two agencies'' as quoted
    in Platts Inside Energy publication of September 14, 2009, page 18.
    ``Dave Alberswerth [Wilderness Society]...said his organization had
    reservations about making the new agency responsible for onshore
    leasing decisions, rather than leaving those functions with BLM.''
    Obviously BLM today handles leasing of the federal mineral estate on
    Forest Service lands in close coordination with Forest Service
    employees. The Forest Service has an entire Minerals & Geology section
    to address the development of oil, gas and geothermal on Forest Service
    lands. The CLEAR Act would add yet another organization, so that BLM's
    leasing would be severed from its overall land management stewardship,
    while similarly Forest Service lands would have two organizations to
    coordinate with on oil and gas issues. The CLEAR Act would indeed
    further distance Forest Service and BLM land managers from permitting
    and leasing of oil and gas activities.
        While the CLEAR Act supposedly would retain BLM primacy over land
    management, the Act would remove from BLM certain critical functions
    that go hand-in-hand with leasing and permitting, resulting in
    confusion. How would BLM establish and enforce lease stipulations,
    conditions for surface occupancy and reclamation requirements, as
    required in Section 101, if it is not responsible for leasing and
    issuing permits? The split in activities doesn't seem logical to IPAMS.
        As far as recent GAO reports, we would argue that these reports do
    not demonstrate ``long-standing deficiencies'' in Interior's management
    of on-shore oil and gas leasing, but isolated issues that can be best
    addressed through targeted, focused actions by BLM or MMS. A wholesale
    reorganization of the two bureaus and the creation of an additional
    layer of process onto an already process-laden leasing activity is
    simply not warranted. For example, as our response above on the GAO's
    categorical exclusions report illustrates, this study did not find
    long-standing or major deficiencies, but rather mostly administrative
    error that GAO found could be rectified with better oversight. Creating
    a new office is not necessary for exercising better oversight and
    implementing GAO's recommendations. In an October 2008 GAO report
    entitled ``Oil and Gas Leasing: Interior Could Do More to Encourage
    Diligent Development,'' the GAO again does not find long-standing,
    systemic deficiencies in the BLM leasing program, but rather that DOI
    should develop a strategy to evaluate options to encourage faster
    development of its oil and gas leases.
        Similarly, the Department of the Interior Inspector General (IG)
    has not argued for whole-sale change to Interior's oil and gas leasing
    program. In a 2004 report, ``Audit of Oil and Gas Permitting Process,
    Bureau of Land Management'', the IG made a series of targeted
    recommendations to improve the management of the APD and associated
    NEPA process to make it more efficient. The DOI Inspector General also
    found in a February 2009 report entitled Oil and Gas Production on
    Federal Leases: No Simple Answer that mandating production on all
    federal leases or increasing lease fees, as suggested by GAO, could
    actually disincentivize production. The CLEAR Act contains many
    provisions which would indeed disincentivize industry, such as
    mandating development according to centrally-imposed benchmarks
    divorced from conditions on the ground and additional fees for non-
    producing acres.
        The DOI IG further found in the above cited 2009 report that
    because of severe data integrity problems and incompatible systems at
    DOI, the usefulness of data showing which acres are producing or non-
    producing is suspect. DOI recommends fixing these data and information
    systems. IPAMS agrees with that recommendation, particularly since it
    would give DOI visibility on all the activities companies are taking to
    diligently develop their leases and would highlight the obstacles
    created by the government and legal challenges that are preventing
    timely development of America's energy supplies. A time-consuming and
    whole-sale bureaucratic reorganization is not necessary to fix data and
    systems problems.
    Questions from the Minority:
    1.  Industry is often criticized for not diligently developing on
            federal leases. MMS reported last year that about 60% of leases
            are non-producing. Why are you concerned with attempts by
            Congress and DOI to slow the leasing process when companies
            already seem to have plenty of leases?
        Answer: DOI does not track data on the full range of activities
    that are occurring on leases, such as geophysical exploration,
    environmental analyses, permitting, wildlife and cultural resource
    surveying, and the numerous other activities necessary before a well is
    drilled. Therefore, although companies are diligently trying to develop
    their leases, DOI does not give any visibility to all the activities
    that are occurring on leases. I call your attention to the IPAMS
    leasing timeline attached to my written testimony which shows many of
    the activities undertaken on leases and a realistic timeline for those
    activities. A company may be diligently attempting to develop natural
    gas or oil on its leases but not be able to start production until near
    the end of the ten year lease term because the process on public lands
    is much more lengthy and arduous than on private or state lands. DOI
    does not give any visibility to all this activity.
        There are many roadblocks that are continually thrown up to prevent
    operators from developing their leases. Government delays hold up
    environmental analyses, well permits, and rights of way. Environmental
    analyses are routinely taking five to six years to complete. Besides
    government delay, legal challenges from environmental groups hold up
    natural gas projects. Enduring has had a relatively small 64 well
    project held up since 2004 because of legal challenges and government
    delays.
        Furthermore, the often repeated criticism that 60% of leases are
    non-producing doesn't appear to be based on credible data. A February
    2009 DOI Inspector General report 2 found that inconsistent
    procedures and incomplete, inaccurate records ``call into question both
    the integrity and the usefulness'' of MMS and BLM data. Inconsistencies
    between MMS and BLM mean that leases identified by BLM as producing may
    be reported as non-producing by MMS, and vice versa. IPAMS believes
    that DOI should fix its information systems and track all the
    activities occurring on leases rather than imposing fees on non-
    producing leases, as the CLEAR Act would do.
    ---------------------------------------------------------------------------
        \2\ Oil and Gas Production on Federal Leases: No Simple Answer,
    U.S. Department of the Interior, Office of Inspector General, Royalty
    Initiatives Group, February 27, 2009.
    ---------------------------------------------------------------------------
    2.  Explain to me why companies are only developing on about 40% of
            leases? Why do companies sit on their leases for so long?
        Answer: That statistic may not be accurate, as mentioned in the
    response to question 1 above, and does not reflect the myriad
    activities operators are conducting on their leases such as
    environmental analysis, wildlife and cultural surveys, seismic
    exploration, and permitting.
        An energy company will make no return on its investment for a lease
    (lease bid and rental payments) until it produces a resource. Industry
    is already under an economic imperative to develop the purchased leases
    as soon as it makes economic and regulatory sense to do so. Producers
    are already making every effort to diligently develop leases where it
    makes economic sense to do so, but existing regulatory processes and
    special interest groups throw up roadblocks and delays at every stage
    of the process, making development on public lands long and arduous.
    The 40% statistic does not include a recognition of the myriad
    preparatory activities companies are performing before drilling
    commences and the impediments to development beyond operators' control.
    3.  How will additional bureaucratic requirements to report biennially
            on benchmarks, create surface use plans of operation, and
            additional documentation under the National Environmental
            Policy Act (NEPA) affect your ability to develop your leases?
        Answer: Developing on federal lands already carries extensive
    additional regulatory requirements, such as environmental analysis
    under NEPA. Additional reporting on whether my company is meeting
    certain benchmarks will not contribute to us finding and producing
    American energy, but will require additional resources, time and effort
    spent on regulatory requirements. Without knowing the nature and extent
    of the benchmarks, it is difficult to assess what the additional costs
    and time will be, but IPAMS is concerned that the reporting process
    would be overly burdensome. If such a requirement is put in place,
    IPAMS recommends a quick status report of what activities have been
    undertaken and what obstacles are being imposed and from where (e.g.,
    legal challenges from environmental groups, government delay on NEPA
    documents, etc).
    4.  What does an increase in rental rates and bonus fees, and the
            addition of a ``production incentive fee'' mean for your
            company? How would that affect your ability to acquire
            leaseholds, and your drilling budget? Why shouldn't oil and gas
            companies pay for the full cost of developing on public lands?
        Answer: A February 2009 DOI Inspector General report found that
    ``...mandating production on all federal leases or increasing lease
    fees would not necessarily enhance production, and could, in fact,
    reduce industry interest in federal leases.'' IPAMS agrees that
    increased fees are a disincentive to responsible energy development on
    non-park, non-wilderness federal lands. Independents like Enduring
    Resources already reinvest over 100% of cash flow back into developing
    more natural gas and oil. With the low wellhead natural gas price
    available in the Uinta Basin of Utah, and the high costs due to
    permitting delays on federal lands, it is currently uneconomic for my
    company to invest additional drilling dollars in that Basin. Even
    during the good times, increases in fees and regulatory costs have a
    direct impact on our bottom line, and the capital available to reinvest
    in developing more American energy resources.
        Companies are already paying the full cost of developing on public
    lands. BLM spent about $90 million in FY2008 to administer the onshore
    natural gas and oil program in 2008. From that small investment, the
    federal government gained $4.2 billion in royalties, rents, and
    bonuses. For every dollar invested, the oil and gas program returned
    $46. In addition to providing government with such a good return on
    investment, industry pays a $4,000 fee per Application for Permit to
    Drill, whether or not the permit is granted. That fee is proposed to
    increase to $6,500 for Fiscal Year 2010 without any justification for
    the increase. Industry assumes all the cost and risk of exploring for
    and producing natural gas and oil, supplies needed domestic energy,
    provides millions of jobs, and pays a significant return to the
    American taxpayer.
    5.  Section 390 Categorical Exclusions have been characterized as an
            unwarranted end-run around environmental analysis. Why does
            industry need categorical exclusions? Why shouldn't companies
            have to do environmental analysis before drilling?
        Answer: Section 390 CXs only apply when the environmental impact is
    minor, such as on existing well pads, and where drilling was analyzed
    in a document required under NEPA. CXs don't eliminate environmental
    analysis - they merely reduce the amount of redundant environmental
    analysis under NEPA. Congress mandated the use of CXs because it
    recognized they would encourage the timely development of domestic
    energy resources in situations where the environmental impact is
    minimal, and encourage industry to limit environmental impact by
    drilling on existing well sites. CXs enable federal land managers to
    focus on activities like inspections and monitoring that lead to
    actual, on-the-ground environmental protection. Rather than an
    ``unwarranted end-run around long-standing environmental statutes'' as
    they have been characterized by this committee, Section 390 CXs were
    narrowly drafted and are being cautiously implemented by BLM. IPAMS
    believes the only abuse of the CXs is BLM's failure to use CXs even
    when companies meet all the criteria.
        Enduring has not benefitted very much from Section 390 CXs because
    of BLM's unwillingness to use them.
    6.  In many instances, companies will acquire some leases, but attempt
            to acquire a larger leasehold before commencing drilling. Why
            should a company delay commencing operations on some leases
            until others are acquired, and what challenges are companies
            facing in order to do so?
        Answer: In order to justify the risk and high cost of drilling on
    public lands, operators must often acquire leases from several lease
    sales in order to have a sufficient leasehold to commence operations.
    Protests of lease sales slow the diligent development of natural gas
    and oil on federal lands because they hinder the ability of operators
    to acquire leases in a timely manner. Last year, 100% of lease sales
    were protested, including close to 100% of the parcels offered. It
    often takes years to acquire a leasehold because of all the challenges.
    To compound the matter, DOI is currently holding about $100 million of
    bonus bids and rents for unissued and suspended leases in Colorado,
    Utah and Wyoming alone. This is significant company capital being held
    in an unproductive capacity by the government, which is especially
    egregious in these hard economic times. It all equates to more
    roadblocks to our ability to produce American energy.
    7.  The CLEAR Act calls for companies to track and report biennially on
            as-yet-to-be-determined benchmarks set by DOI in Washington.
            What would this additional burden mean for your company?
        Answer: Requiring a diligent development plan showing how companies
    are meeting benchmarks will produce more regulatory overhead, but not
    contribute to finding and producing new energy supplies. Leaseholders
    already submit plans when they initiate project-level analysis under
    the National Environmental Policy Act (NEPA). It's not clear how these
    proposed benchmark reports would interact with NEPA or what useful
    purpose they would serve.
        There is one thing that would be useful from such reports if the
    data were gathered and available to the public in an easily accessible
    manner--a big ``if'' given the current state of DOI information
    systems. Giving visibility to those activities would help operators
    defend against inequitable charges that they are not diligently
    developing their leases.
    8.  The CLEAR Act calls for companies to follow best management
            practices (BMP) determined by DOI. Why is there any opposition
            to BMPs? Doesn't your company want to operate in the most
            environmentally sound manner possible?
        Answer: Enduring and the vast majority of Rockies producers work
    very hard to ensure they operate in an environmentally-responsible
    manner, with as small a footprint as possible. Rockies producers have
    worked with BLM, the Department of Energy and the Western Governor's
    Association, among others, to develop BMPs that can be used as
    conditions and circumstances warrant. That experience and our day-to-
    day operations with state and federal regulators and surface owners
    lead us to conclude that determining the optimal way to operate is done
    best not by fiat from Washington, but in cooperation with local federal
    land managers with on the ground expertise in the areas where they live
    and work. Every area is different, and different lands and ecosystems
    require tailored practices.
        I have extensive experience with developing BMPs to site and
    develop Enduring's federal holdings and have interacted extensively
    with field-level federal land managers and state and federal regulatory
    agencies. I have found these employees to be hard working, dedicated
    and willing to sit down and problem-solve at all levels. They are open
    to new ideas to achieve enhanced environmental protections while
    developing federal natural gas as long as those ideas are within the
    confines of their regulatory authority. Often centrally imposed BMPs
    don't make sense to a particular area.
        I believe the CLEAR Act would curtail the ability of the local
    managers to implement on-the-ground solutions. As the local
    administrators of these public lands, they have the best understanding
    of how to achieve our country's goal to maximize domestic energy
    production while minimizing impacts on other resources. The CLEAR Act
    will dramatically change the ability of the local managers to best
    steward the public lands.
    9.  In the State of Colorado, the BLM recently concluded this past
            week, the first of what should be a series of lease sales
            conducted online via the Oil and Gas Lease Internet Auction
            Pilot (OGLIAP) program. The OGLIAP internet auction website has
            been developed by the BLM over the past nine months to
            investigate the benefits and feasibility of conducting the
            Federal Lease Auction process online. The website has been
            available for approximately two months, giving potential
            leasing citizens the opportunity to review the parcels being
            offered by the BLM Colorado State Office in the initial lease
            sale of approximately 28 parcels. The website offers a fully
            online and paper less system for providing parcel information
            and bidding capabilities. The BLM's website vendor has worked
            with the BLM to produce and deliver several presentations to
            both industry representatives and the leasing public in the
            form of user workshops. Based on the response to this new
            program appears to be positive as some in the industry has been
            quick to embrace a new way of participating in BLM lease
            auctions. By bringing the auction process online, a host of
            potential benefits have been identified by the BLM and bidder's
            alike including increased competition for parcels and
            elimination of travel costs for bidders. In addition, by
            operating the lease sale online, the BLM's auction process is
            increasingly transparent for all parties involved. Would you
            provide the Committee an overview of how the recent auction n
            played out and what industry's opinion of moving towards this
            type of auction process verse a sealed bid process as proposed
            under H.R. 3534? What are the advantages of this program to
            industry and to BLM in your opinion? Would industry support the
            continuation of this program and would industry support
            conducting additional lease sales in the next 12 months in
            other states? If so, which states would be good candidates to
            participate?
        Answer: I have not had time to review the results of the auction.
    Some in industry may prefer a live auction, others may not. In general,
    I prefer the live auction, as it enables bidders to look into their
    competitors eyes in head-to-head bidding. I think the BLM may miss
    additional revenue potential inherent to the bidding excitement that
    can occur when people in one place are focused on one parcel in a live
    auction atmosphere.
        An open online auction system is better than the sealed bid system
    proposed in the CLEAR Act, but IPAMS has not developed a position yet
    on online auctions as a replacement for live auctions. There is a
    report from EnergyNet.com, Inc. that includes statistics on the on-line
    auction results to which the committee may wish to refer. We have
    attached this report.
                                     ______

        The Chairman. Dr. Stover.

               STATEMENT OF DR. DENNIS E. STOVER, PH.D.,
             EXECUTIVE VICE PRESIDENT, AMERICAS URANIUM ONE

        Mr. Stover. Mr. Chairman, Members of the Committee, I am
    Dennis Stover. I serve as Executive Vice President for the
    Americas Uranium One, Inc. I appreciate the opportunity to
    testify today on behalf of the National Mining Association
    about the negative impacts of removing uranium from the
    auspices of the mining law and making it leasable under the
    Mineral Leasing Act.
        Uranium One is the seventh largest uranium mining company
    in the world. We are currently licensing three new institute
    recovery uranium mines, two in Wyoming and one in Texas. We are
    reactivating our conventional uranium mill and permitting an
    underground mine in Utah. Much of our mineral rights nationwide
    are tied to Federal lands.
        Last month we paid nearly $1.4 million to the U.S. Bureau
    of Land Management in annual maintenance fees for our
    unpatented mining claims. The vast majority of these holdings
    are exploratory properties that will require extensive
    exploration expenditures over several years to test and then
    confirm the presence of economic quantities of uranium. Only
    then will we begin the multi-year licensing and permitting
    process that leads to construction and operation of commercial
    mining facilities. All the while annual claim maintenance
    payments will continue to flow to the BLM.
        In my view, the proposal to make uranium a leasable mineral
    will not only negatively impact the domestic uranium mining
    industry, but also the economy and national security of the
    U.S. There are no incentives to explore and no preferential
    leasing rights for the company that makes the discovery
    contained in the bill. This will put an end to the growth of a
    viable domestic uranium mining industry, an industry that
    creates high-paying jobs with good benefits, and provides
    energy resources critical to meeting our nation's dual goals of
    decreasing our reliance on foreign energy supplies and
    drastically reducing domestic greenhouse gas emissions.
        A common argument in favor of leasing uranium is that
    uranium is a fuel mineral and therefore should be governed,
    like fossil fuels such as oil, gas and coal, under the Mineral
    Leasing Act. This assumption ignores the fact that uranium in
    fact is a metal.
        I began my professional career as an oil and gas reservoir
    engineer with a major oil company. Now after 30 years in
    uranium mining I can assure you that uranium geology,
    geochemistry, and production methods are totally different from
    those of coal, oil and gas. Further, a leasing system is not
    needed to address the question of the lack of fair return on
    uranium production from Federal lands. For the last decade the
    mining industry has fully supported the payment of a reasonable
    net proceeds type royalty from production on Federal lands
    through amendments to the general mining law.
        The U.S. currently consumes about 56 million pounds of
    uranium each year, yet only produces 4.5 million pounds. The
    U.S. has the world's largest fleet of nuclear power plants that
    produce 20 percent of our country's electricity, yet the U.S.
    produces today less than 10 percent of its own uranium and
    imports the balance.
        Time and time again doubts have been voiced to me
    personally by the investment community as to whether any new
    licenses for uranium mining will ever be issued by the U.S.
    Federal Government. Investors need to know that a uranium
    project in the U.S. can obtain approval and proceed as long as
    the operator complies with all the relevant laws and
    regulations.
        Finally, the legislation fails to include any type of valid
    existing rights language to protect preexisting property rights
    from being impaired by subsequently enhanced policy changes. By
    failing to take into consideration property rights related to
    valid mining law claims established prior to enactment of the
    bill, the legislation will likely to generate claims for a
    taking under the takings clause of the constitution.
        In conclusion, a stable regulatory environment is critical
    for development of our uranium resources or risk becoming even
    more reliant on foreign uranium. Increased import dependency
    causes a loss of job creation, alters the U.S. balance of
    payments, leads to unpredictable price fluctuations, and
    vulnerability with the possible supply disruptions due to
    political or military instability abroad. At a time when
    greenhouse gas emissions must be reduced and all available
    resources of energy must be utilized to meet increased demand,
    erecting barriers to the development of our uranium resources
    which, in turn, fuel the growth of domestic nuclear power is
    simply bad public policy.
        I thank the Committee for this opportunity to comment on
    this proposed legislation.
        [The prepared statement of Mr. Stover follows:]

             Statement of Dennis Stover, Executive Vice President,
      Uranium One, Americas, on behalf of the National Mining Association

        My name is Dennis Stover, Executive Vice President of Uranium One,
    Americas. I am testifying today on behalf of the National Mining
    Association (NMA). NMA appreciates the opportunity to testify before
    this committee to discuss the negative impacts of removing uranium from
    the auspices of the Mining Law and making it leasable under the Mineral
    Leasing Act (MLA).
        NMA has vast expertise and is the principal representative of the
    producers of most of America's coal, metals, industrial and
    agricultural minerals; the manufacturers of mining and mineral
    processing machinery, equipment and supplies; and the engineering and
    consulting firms, financial institutions and other firms that serve our
    nation's mining companies.
        Uranium One, Inc. is the seventh largest uranium mining company in
    the world and is Canadian based, listed on the Toronto stock exchange.
    I am responsible for our activities in the United States with offices
    in Edmond, Oklahoma; Casper, Wyoming; Corpus Christi, Texas, Denver
    Colorado; as well as Kanab and Moab, Utah. We are licensing three new
    ISR uranium mines, two in Wyoming and one in Texas. In addition, we are
    reactivating a wholly owned conventional uranium mill in Utah. We
    control uranium exploration and development properties in Arizona,
    Colorado, Nevada, Oregon, Utah, Wyoming and Texas. With the exception
    of Texas, much of these mineral rights are tied to federal lands. As a
    point of information, in August of this year, we paid about $1.4
    million to the U.S. Bureau of Land Management (BLM) in maintenance fees
    for nearly 10,000 unpatented mining claims. The vast majority of these
    holdings are exploration properties that will require extensive
    exploration expenditures over several years to test and then confirm
    the presence of economic quantities of uranium. Once confirmation is
    achieved, only then will we begin the multi-year licensing and
    permitting process that leads to construction and operation of
    commercial mining facilities. All the while, claim maintenance fees
    will continue to flow to the BLM.
        Making uranium leasable will not only negatively impact the
    domestic uranium mining industry, but also the economy and national
    security of the United States. I say this because the proposed change
    will put an end to growth of a viable domestic uranium mining industry,
    an industry that creates high-paying jobs with good benefits and
    provides resources critical to meeting our nation's goals of decreasing
    our reliance on foreign sources of energy and drastically reducing
    green house gas emissions.
    Uranium is different from minerals under the Minerals Leasing Act (MLA)
        A common argument in favor of leasing uranium under the MLA is that
    uranium is a fuel mineral and, therefore, should be governed like other
    fossil fuels such as coal, oil and gas under the MLA. This assumption
    ignores the fact that uranium is a metal. Its geology and geochemistry
    are totally different from that of the fossil fuels.
        Unlike oil gas and coal, the discovery potential for uranium
    remains vast. As such, more exploration for uranium is required to find
    commercial developable deposits than for oil and gas and coal.
    Furthermore, uranium requires significant processing prior to having a
    marketable product. Oil and gas are much more readily marketable after
    being mined. For example, crude oil is sold in local and international
    markets, and the price of the product that comes out of the ground is
    generally readily ascertainable at the well. Gas is also often sold at
    the well head, in some cases without any processing. Upon initial
    extraction, uranium itself has no real economic value--considerable
    upfront investment and ongoing operating expense must be incurred to
    turn it into a marketable product.
    Uranium is no different than other hardrock mining
        In fact, uranium, as a metallic mineral, is much more akin to other
    hardrock minerals governed by the Mining Law than fossil fuels under
    the MLA. Extraction of uranium on federal lands is conducted similarly
    to extraction for other hardrock minerals governed by the Mining Law,
    involving advanced mining activities rather than traditional extraction
    techniques for fossil fuels such as oil and gas or coal. Oil and gas
    and coal are relatively plentiful, and occur over relatively large
    areas where found. Hardrock minerals are scarce and occur in small
    concentrations, and must be discovered by expending considerable money
    pursuing elusive prospecting clues. Once a prospect is identified,
    development commences at considerable cost, with the capital and labor
    intensiveness of large coal mines, but without the geologic or
    metallurgical certainty of coal mines nor the economic certainty and
    incentive of long-term coal sales contracts, which are not customary
    for most hardrock minerals. The combination of price volatility and the
    variations in the concentration and the chemical and geological
    characteristics of hardrock minerals, such as uranium, within an ore
    body can turn a profitable mine into valueless rock with a sudden
    downturn in the market.
        It is for these reasons that the Mining Law provides an incentive
    for those who take substantial financial risk to develop a mineral
    deposit. To encourage mineral development, the Mining Law is uniquely
    self-executing in that a citizen may enter upon much of the public
    lands and explore for minerals. 30 U.S.C. Sec. 22. Thus, the Mining Law
    allows the right of self initiation and those who explore for and
    discover a valid claim, obtain the right to develop that claim as long
    as they meet all applicable statutory and regulatory requirements.
    Since mining is a capital-intensive process that often takes years of
    development before minerals are produced, claimants need to have
    certainty that they will be able to bring a project to fruition.
        The fact that the Department of Energy (DOE) currently administers
    a uranium leasing program on federal lands does not weigh in favor of a
    leasing system for all federal uranium. These leases address a
    relatively small area of withdrawn federal lands, containing 1.5
    percent of proven domestic uranium reserves. The regulations governing
    this program are found at 10 C.F.R. Part 760. These regulations provide
    for competitive lease sales, royalty payments, environmental controls
    and performance requirements. Similar to oil and gas and coal under the
    MLA, the DOE leasing program involves known reserves discovered during
    the ``massive'' exploration drilling program undertaken by the U.S.
    Geological Survey and the Atomic Energy Commission during the 1950s.
    1 Therefore, lessees have sufficient information about the
    potential rewards prior to bidding on the lease and committing to the
    expensive process of developing the uranium. Even so, when domestic
    annual uranium production peaked in 1980 at 43.7 million pounds,
    production from the DOE leased tracts (at 1.1 million pounds)
    represented about 2.5 percent of the total. (source: DOE/EA-1535, page
    1-4)
    ---------------------------------------------------------------------------
        \1\ See statement of David W. Geiser, Deputy Director for Legacy
    Management, U.S. Department of Energy, before the Senate Energy and
    Natural Resources Committee, March 12, 2008.
    ---------------------------------------------------------------------------
    H.R. 3534's leasing system will decrease U.S. exploration and
            development of uranium resources and increase reliance on
            foreign sources
        By introducing great uncertainty regarding the lands ultimately
    available for uranium exploration and development, a leasing system
    will only serve to increase the United States' reliance on foreign
    sources of uranium. Under H.R. 3534, there is no guarantee that any
    uranium on federal lands will ever be leased as the decision to offer
    lands for leasing is completely in the Secretary of the Interior's
    discretion. Further uncertainty is created by the exploration license
    provisions of the legislation. An exploration license, even if the
    licensee discovers a commercial uranium deposit, confers no rights upon
    the licensee that discovers the claim. By failing to provide some type
    of preference right to mine the uranium to the discoverer and
    instituting a 12.5 percent royalty on new uranium production, the
    proposed system removes all incentives for exploration for uranium on
    federal lands and will result in decreased domestic uranium production.
    Leasing system not needed to address lack of royalty
        Another oft-used argument for converting uranium to the MLA is that
    under the MLA, a royalty would be imposed for production on federal
    lands. However, a leasing system is not needed to address the lack of a
    fair return from uranium production from federal lands. For the last
    decade, the mining industry has fully supported the payment of a
    reasonable net proceeds type royalty from production on federal lands
    though amendments to the Mining Law.
    Regulatory certainty is needed to encourage uranium development
        The United States currently consumes about 56 million pounds of
    uranium each year, yet only produces 4.5 million pounds. The U.S. has
    the world's largest fleet of reactors (now 104), which operate at the
    world's highest average capacity factor and produce 20 percent of our
    country's electricity. In fact, America's nuclear reactors now produce
    more electricity than ever before. And the U.S. has one of the world's
    largest resource bases of uranium.
        Despite the size of its nuclear fleet, however, the U.S. produces
    less than 10 percent of its own uranium and imports more than 90
    percent of what we need to operate our reactors. The price for uranium
    has recently climbed to an historic high, and yet new U.S. production
    is still lagging, at least in part because of uncertainty over the
    regulatory environment for new production.
        Uranium mining projects require a long lead time, are capital
    intensive and high risk. Thus, regulatory certainty is critical in
    obtaining the financing necessary to encourage the private sector to
    invest in uranium development on federal lands. Investors need to know
    that a uranium project in the United States can obtain approval and
    proceed unimpeded as long as the operator complies with all relevant
    laws and regulations. Due to their time- and capital-intensive nature,
    uranium projects require years of development before investors realize
    positive cash flows. Failure to provide certainty in the applicable
    legal regime will chill the climate for capital investments in uranium
    mining, to the detriment of this nation. Investments critical for
    bringing such projects to fruition will migrate toward projects planned
    in countries that offer predictable regulatory climates that correspond
    to the long-term nature of such operations. It is noteworthy that many
    of these foreign countries have regulatory regimes at least as
    prescriptive and stringent as those within the United States.
        If the U.S. cannot offer a stable regulatory climate, we will
    become even more reliant on imports of foreign uranium to meet our
    growing domestic energy demands. Increased import dependency causes a
    multitude of negative consequences, including aggravation of the U.S.
    balance of payments, unpredictable price fluctuations, and
    vulnerability to possible supply disruptions due to political or
    military instability.
    H.R. 3534 fails to protect valid existing rights and constitutes a
            violation of the takings clause
        H.R. 3534 does not contain provisions to protect existing uranium
    mining claims that were located under the Mining Law. While the bill
    does require the secretary to issue a lease for uranium claims that can
    show a valid discovery as of the date of enactment, it extinguishes the
    claim (and the claimants' rights under the Mining Law) by converting it
    to a lease. The legislation fails to include some type of valid
    existing rights (VER) language to protect pre-existing property rights
    from being impaired by subsequently enacted policy changes. VER clauses
    are commonplace in federal land-use statutes. Over the past century,
    Congress and the executive branch have used the same or a substantively
    similar phrase in more than 100 statutes and proclamations to preserve
    the status quo ante by protecting property interests that otherwise
    would be adversely affected by subsequently enacted federal laws. By
    failing to take into consideration property rights relating to properly
    maintained claims established prior to enactment of the bill, the
    legislation will likely generate claims for a compensable taking under
    the Takings Clause of the Constitution.
        More than 100 years of legal precedent clearly indicates that a
    mining claim supported by a discovery is a property interest.
    2 The courts have recognized that valid unpatented mining
    claims are exclusive possessory interests in federal land for mining
    purposes, which entitle claim holders to extract and sell minerals
    without paying any royalties to the government. For more than 135
    years, this law has not required the owner of a valid unpatented mining
    claim to pay any royalty to the United States for the right to possess
    and use the land for mining purposes or to extract and sell minerals
    therefrom. Thus, extinguishing the mining claims for valid existing
    uranium claims and subjecting existing claims to a royalty of 6.25
    percent on the value of the uranium produced under the lease
    constitutes a Fifth Amendment taking without payment of just
    compensation by allocating to the government a cost-free share of
    production and extinguishing the claimant's unencumbered, exclusive
    property right to possess and enjoy its mining claims.
    ---------------------------------------------------------------------------
        \2\ See e.g., Best v. Humboldt Placer Mining Co., 371 U.S. 334, 336
    (1963) and Union Oil Co. v. Smith, 249 U.S. 337, 348-349 (1919)
    ---------------------------------------------------------------------------
    Conclusion
        At a time when energy costs are rising and all available sources of
    energy must be utilized to meet increased demand, erecting barriers to
    the development of resources to provide such energy is simply bad
    public policy.
                                     ______

    Response to questions submitted for the record by Dr. Dennis E. Stover,
       Executive Vice President, Uranium One, Americas, on behalf of the
                          National Mining Association

    Question from the Majority:
    1.  Mr. Stover, please provide detailed information, including the
            rate, the type, and the amount, on any royalties that Uranium
            One or its subsidiaries pays to mine uranium from any
            properties in the United States.
        Response: At present, Uranium One has no uranium production in the
    United States, therefore we currently have no royalty payment
    obligations.
        However, Uranium One is in the process of acquiring the Irigaray-
    Christensen Ranch ISR facilities and uranium mineral rights in Wyoming
    with the intent of initiating commercial production in 2011. In
    addition, Uranium One is presently licensing three new ISR projects in
    the US, two in Wyoming (Moore Ranch and Jab-Antelope) and one in Texas
    (La Palangana).
        At Irigaray-Christensen Ranch, mineral rights associated with these
    properties are held by a combination of private and state leases along
    with federal unpatented mining claims. Production royalties from all
    State of Wyoming leases are 5% of gross realized value. The private
    leases contain uranium production royalties of 3% of the proceeds of
    the sale of the uranium.
        At Moore Ranch, mineral ownership is a combination of private
    leases and unpatented federal mining claims with private leases
    containing uranium production royalties ranging from 2% to 6.5%
    depending on the price per pound of yellowcake sold and State of
    Wyoming leases which are 5% of gross realized value.
        At Jab-Antelope, mineral ownership is a combination of State of
    Wyoming leases and unpatented federal mining claims. Here again the
    State of Wyoming leases have a 5% of gross realized value royalty.
        Please note that all uranium production in Wyoming, independent of
    mineral ownership, is subject to a state mineral severance tax which
    currently is 4% of the selling price, subject to certain production
    cost related deductions.
        At La Palangana, all mineral rights are secured with leases from
    ranches or individuals. Associated production royalties are tied to the
    selling price in a graduated schedule based on the price per pound of
    uranium sold. The production royalty schedules range from 7% up to 10%
    based upon the yellowcake selling price. Texas currently has no state
    mineral severance tax.
        Please see the attached table entitled State Lease Royalty Rate
    Review for more details on state lease royalty provisions. I have
    compiled this brief description of the royalty schedules as examples of
    most of the uranium producing states including Arizona, Colorado, New
    Mexico, South Dakota, Utah and Wyoming.
        It is important to understand the four projects mentioned above
    were deemed commercially viable based on economic analyses which
    included the reported royalty rates using long term price forecasts
    that are substantially above the current uranium spot market price.
    Uranium mining like base metal mining requires substantial processing
    to create a marketable product in the form of dried natural uranium
    concentrate. Processing requires not only substantial operating
    (ongoing cash costs) expenditures but also large front end commitments
    of capital which must be recovered from the resulting revenue stream.
        Furthermore, the lack of a federal royalty is not a persuasive
    reason to convert uranium to mineral leased under the Minerals Leasing
    Act. For the last decade, the mining industry has fully supported the
    payment of a reasonable net proceeds type royalty from production on
    federal lands though amendments to the Mining Law.
    Questions from the Minority:
    1.  Dr. Stover, proponents of this legislation and certain testimony
            submitted today have made the assertion that moving uranium to
            a leasing regime under the Mineral Leasing Act (MLA) will
            better protect the environment. Can you please explain for this
            panel what regulatory framework currently oversees uranium
            mining to ensure environmentally sound production occurs?
        Response: I would like to respond in two parts. Uranium mining
    involves both exploration and production, each of which is highly
    regulated under a series of Federal and State environmental rules. As a
    general rule, companies that engage in hardrock mining and related
    activities on the public lands are subject to a comprehensive framework
    of federal and State environmental, ecological, and reclamation laws
    and regulations to ensure that operations are fully protective of
    public health and safety, the environment. The National Academy of
    Sciences (NAS) reviewed this regulatory framework for hardrock mining
    and concluded that the existing laws were ``generally effective'' in
    ensuring environmental protection. [Hardrock Mining on Federal Lands,
    National Academy of Sciences, National Academy Press, 1999, p. 89.]
        A.  Regarding exploration drilling activities on federal mineral
    properties, applications are submitted to the U.S. Bureau of Land
    Management (BLM) or U.S. Forest Service (USFS) depending on which
    agency manages the surface and to an appropriate state agency (for
    example, the Arizona Department of Water Resources (ADWR) or the
    Wyoming Department of Environmental Quality (WDEQ)). With respect to
    the federal agencies, a Plan of Operations or Notice of Intent
    application is submitted. A Notice of Intent to Drill and Abandon an
    Exploration/Specialty Well is submitted to ADWR or the WDEQ.
        The federal agencies are required to adhere to the General Mining
    Law of 1872 (and its revisions and amendments), National Environmental
    Policy Act (NEPA), and Federal Land Policy Management Act (FLPMA),
    which also address procedures in cooperating with state and Native
    American agencies. FLPMA amends the Mining Law to ensure protection of
    the federal lands from impacts of hard-rock mining and related
    activities.
        Following are further details of the various reviews undertaken and
    satisfied in the approval process:
            1.  A full review of the impact of the proposed exploration
            program's potential impact upon Threatened or Endangered
            species [as specified by the Endangered Species Act] is carried
            out by the U.S. Fish and Wildlife Service. Potential impacts
            upon plant species are also assessed by the U.S. Fish and
            Wildlife Service.
            2.  U.S. Forest Service biologists assess the possible impacts
            of the proposed exploration program upon U.S. Forest Service
            designated ``sensitive species''.
            3.  Biologists study habitat for various plant species in the
            proposed exploration areas.
            4.  Floodplains, wetlands and municipal watershed surveys are
            conducted in the project areas.
            5.  Cultural resources surveys, in compliance with the National
            Historic Preservation Act, are conducted, and heritage
            clearances for the project must be obtained.
            6.  A drill hole/well design plan that includes reclamation
            procedures is reviewed by ADWR and a registration number must
            be obtained.
            7.  The application must include mitigation procedures for all
            aspects of the operations including reclamation at the close of
            the project.
            8.  A reclamation bond must be posted with the appropriate
            agency by the exploration company which will assure full
            reclamation in the event the company does not perform
            reclamation.
        In addition to the above processes relating to field operations,
    the following public notification and involvement procedures must be
    satisfied:
            1.  The authorizing agency (BLM or USFS) must hold government-
            to-government consultation with Native American Tribes.
            2.  For Plans of Operations, a public notice must be published
            in local newspapers with a description of the project with
            instructions on how to submit comments.
            3.  Follow-up meetings are held with Native American Tribes as
            necessary.
            4.  For Arizona and the Grand Canyon area, other agencies and
            organizations that are contacted as required by the particular
            authorizing agency include:
                 a.  Arizona Game and Fish Department
                 b.  Center for Biological Diversity
                 c.  County Board of Supervisors
                 d.  Williams-Grand Canyon News
                 e.  Grand Canyon National Park
                 f.  Wildlands Council
                 g.  KSGC Radio
                 h.  Arizona Department of Water Resources
                 i.  Forest Guardians
                 j.  Private property owners in area
        The above procedures also take into account requirements outlined
    in the Clean Air and Clean Water Acts.
        B.  In the event exploration activities result in the discovery of
    a mine, permitting for a mine would require an Environmental Assessment
    (EA) or an Environmental Impact Statement (EIS) at the federal level
    and a number of regulatory reviews at the state level including but not
    limited to the Arizona Department of Environmental Quality (ADEQ) and
    Arizona State Mine Inspector. Similarly, permitting of a mine in
    Wyoming would require the same federal level actions and would include
    the Wyoming Department of Environmental Quality as the lead state
    agency. Further, any processing facility for the extraction of uranium
    from the ore would be subject to licensing by the U.S. Nuclear
    Regulatory Agency.
    2.  What incentives does H.R. 3534 provide for uranium exploration in
            the United States?
        Response: Unfortunately, H.R. 3534 removes existing incentives that
    encourage exploration for uranium. Currently, uranium mining on federal
    lands is conducted pursuant to the General Mining Law of 1872. H.R.
    3534 would remove uranium mining from the operation of the Mining Law
    and make uranium a leasable mineral under the Mineral Leasing Act and
    thereby remove the existing incentives for uranium exploration. The
    Mining Law encourages mineral development by allowing entry of most
    public lands for mineral exploration. 30 U.S.C. Sec. 22. Those who
    discover a valid claim obtain the right to develop that claim as long
    as they meet all applicable statutory and regulatory requirements. By
    introducing great uncertainty regarding the lands ultimately available
    for uranium exploration and development, the leasing system in H.R.
    3534 removes the incentive for exploration, makes uranium projects less
    attractive for capital investment and will serve to increase the United
    States' reliance on foreign sources of uranium.
        The present form of the proposed leasing program will not encourage
    exploration for uranium minerals on federal lands. There are no
    incentives to explore and no preferential leasing rights for the
    company that make an economic discovery.
          A key provision of this bill is the imposition of a flat
    12.5 % gross royalty on any production from the new uranium leases.
    Production royalties at this level are so high as to render essentially
    all of the domestic uranium resources uneconomic. By comparison, flat
    royalties on private and state mineral rights typically are in the
    range of 3 to 5 %. Double digit royalties are negotiated in rare or
    unusual circumstances but generally are at the top end of a graduated
    royalty scale. For example, one might see a sliding scale royalty
    schedule that ranges from 4 % - 5 at current market conditions to 10 or
    12 % at triple digit sales prices.
          The bill requires individuals and firms who desire to
    explore for uranium deposits on the Public Domain to obtain an
    exploration license from the Interior Department before undertaking any
    exploration activities. The provision requires the licensee to provide
    copies of all exploration data collected (and paid for by the licensee)
    to the Interior Department, yet the incense does not obtain any
    preferential rights to lease the lands he previously has explored.
    Hence, an exploration company has no assurance that its propriety
    information documenting the discovery will remain confidential or that
    it can retain lands upon which it has made a valid discovery.
        The proposed lease with a primary term of 10 years and a provision
    that the lease could then be held only if uranium ``is produced under
    the lease in paying quantities'' is another barrier to exploration.
          The typical lead time from discovery of payable
    quantities of a mineral to commercial production exceeds the 10 year
    primary term. Unlike coal, oil and natural gas that are typically
    located in vast sedimentary basins, uranium deposits are small and
    difficult to locate, just like other hardrock deposits of gold, copper,
    molybdenum, cobalt, or copper. Just because a uranium deposit has been
    discovered, does not mean that it is economical to mine because of ore
    grade, depth, metallurgical problems and additional geological or
    environmental constraints. Discovery and confirmation of a potential
    economic deposit typically requires several years of intense drilling
    and metallurgical testing. Once this confirmation is achieved, only
    then will the multi-year licensing and permitting process begin which
    ultimately leads to construction and operation of a commercial mine.
    Completion of all stages of exploration, confirmation, delineation, and
    commercial development can require far more than the 10 years assigned
    to the primary term. Without assurance of extended lease terms,
    exploration is not likely to begin.
        Another barrier to exploration is the geophysical reality that
    uranium is a metal that co-exists with other economic metals. The legal
    constraints of simultaneous exploration and exploitation of a leasable
    mineral in conjunction with locatable minerals presents a difficult, if
    not impossible hurtle.
          Uranium is a metal and in some of the world's largest
    deposits such as Olympic Dam in Australia, it is mined along with
    copper and gold. In the breccias pipes of northern Arizona as well as
    the Colorado Plateau region of Colorado and Utah, uranium commonly
    occurs with copper, nickel, cobalt, molybdenum, vanadium, and a number
    of other locatable minerals. To make one of these minerals leasable
    while allowing the others that would be mined simultaneously to be
    locatable would produce regulatory, legal, and accounting confusion at
    the very least.
                                     ______

        The Chairman. Thank you. Mr. Morris.

    STATEMENT OF DOUG MORRIS, GROUP DIRECTOR, UP-STREAM & INDUSTRY
                OPERATIONS, AMERICAN PETROLEUM INSTITUTE

        Mr. Morris. Mr. Chairman, I am Doug Morris, Group Director
    for Upstream & Industry Operations for the American Petroleum
    Institute which represents nearly 400 companies involved in all
    aspects of the oil and natural gas industry. We welcome this
    opportunity to present industry's views on The Consolidated
    Land, Energy, and Aquatic Resources Act of 2009.
        Securing America's energy future will require the
    development of all forms of energy, plus greater focus on
    energy efficiency and conservation. Alternative energy sources,
    which our members have made major investments, will grow in
    importance. However, oil and gas is the life blood of the
    nation's economy and will continue to be vital to our energy
    security for decades to come. These resources keep our
    transportation systems running, heat and cool or our homes, and
    are the basic components of thousands of consumer products that
    are used daily.
        Oil and gas production from Federal lands plays a key role
    in supplying our nation's energy. These areas account for
    almost 25 percent of our domestic production, provide thousands
    of jobs for Americans, and are a major source of revenue for
    the government. For decades Federal policy prevented the
    development of hydrocarbon reserves located under most of OCS.
    Now for the first time in many years the Secretary of the
    Interior has the opportunity to open up these areas to
    exploration and production, and he should do so by moving
    quickly on the draft proposed five-year leasing plan.
        Earlier drafts of this bill would have clearly hampered the
    development of oil and gas on Federal lands. We thank the
    Chairman for deleting many of these onerous provisions.
    However, we do have concerns with this legislation.
        First, it does nothing to encourage the development of oil
    and gas resources. In fact, it creates additional layers of
    bureaucracy which could in fact slow down leasing. For example,
    it has the potential to interfere with the OCS five-year
    leasing plan process that has worked well for 30 years. This
    process includes three separate public comment periods, two
    separate draft proposals, and the development of an EIS, and
    even after the Secretary approves the final program, there is a
    lengthy public comment period for each lease sale that includes
    consultation with stakeholders at various stages, and also a
    second EIS.
        This process ensures that the Secretary receives extensive
    public comment and is able to give full consideration to all
    the economic, social and environmental issues in developing the
    program. Unfortunately, this legislation creates new regional
    planning councils, a new independent tier of decisionmakers
    which appears to mirror many of the activities that are
    currently being performed in a current leasing process.
    Furthermore, these councils have the potential to interfere
    with OCS development since leasing cannot occur if regional
    plans do not identify an area as being suitable for oil and gas
    leasing. By vesting this authority within regional councils the
    bill could essentially place areas under moratorium for years
    to come.
        The bill would also eliminate the Royalty In Kind Program
    and use of categorical exclusions. These programs simplify
    payment to the Federal government, limiting a range of tough
    regulatory compliance issues, and eliminate unnecessary and
    redundant environmental studies. Problems with the management
    of either of these programs, whether perceived or actual, can
    and should be addressed by the Interior Department. Elimination
    of these programs have the potential--the programs have the
    potential to increase inefficiency is both unnecessary and
    unwise.
        Finally, provisions such as requiring the promulgation of
    benchmarks for the development of each lease and the addition
    of a production incentive fee could increase the burden on
    lessees and the Interior Department with little or no positive
    impact on the development of Federal leases.
        In summary, we believe that it is important to develop
    policies that provide more access to Federal lands and remove
    barriers that delay the development of these resources. We
    should not be erecting additional obstacles which,
    unfortunately, would be the unintended consequences of this
    legislation.
        Delays in oil and gas developments do have a direct impact
    on our economy. An initial study on the impact of a two-year
    delay in developing unconventional natural gas resources shows
    that about 5.7 tcf would not be produced on Federal lands over
    the next 30 years. This 18 percent drop in production would
    amount to $37 billion loss to the economy.
        We look forward to working with you on the continued
    development of an access policy that meets the energy needs of
    a nation. Thank you.
        [The prepared statement of Mr. Morris follows:]

                   Statement of Doug Morris, Group Director,
         Upstream and Industry Operations. American Petroleum Institute

        Mr. Chairman, I am Doug Morris, Group Director for Upstream and
    Industry Operations for the American Petroleum Institute, which
    represents nearly 400 companies involved in all aspects of the oil and
    natural gas industry. We welcome this opportunity to present the
    industry's views on the Consolidated Land, Energy and Aquatic Resources
    Act of 2009.
        Securing America's energy future will require the development of
    all forms of energy--plus greater focus on energy efficiency.
    Alternative energy sources, in which our members have made major
    investments, will grow in importance. However, oil and gas are the
    lifeblood of the nation's economy and will continue to be vital to our
    energy security for decades to come. Oil and gas keep our
    transportation systems running, heat and cool our homes, and are the
    basic components of thousands of consumer products used daily.
        Oil and natural gas production from federal lands plays a key role
    in supplying our nation's energy. These areas account for almost 25% of
    our domestic oil and natural gas production, provide thousands of jobs
    for Americans, and are a major source of revenue for the government.
        For decades, federal policy prevented the development of the
    hydrocarbon reserves located beneath most of the OCS. Now, for the
    first time in many years, the Secretary of the Interior has the
    opportunity to open these areas to exploration and production--and he
    should do so by moving forward in a timely manner with the draft
    proposed Five-Year Leasing Plan. New lease sales in the Atlantic,
    Pacific, and Eastern Gulf of Mexico will help meet our future energy
    needs, support our future growing economy, and create thousands of
    well-paying jobs.
        Earlier drafts of this bill would have seriously hampered
    development of oil and natural gas on federal lands. We thank the
    Chairman for eliminating many of these onerous provisions. However, we
    do have concerns with this legislation.
        First, this legislation does nothing to encourage development of
    oil and gas resources. In fact, it creates additional layers of
    bureaucracy that could, in fact, slow down leasing.
        For example, it has the potential to interfere with the OCS Five
    year Leasing Plan process that has worked well for 30 years. This
    process includes three separate public comment periods, two separate
    draft proposals, development of an environmental impact statement, and
    the final proposal.
        And, even after the Secretary approves a final program, there is a
    lengthy public comment period for each lease sale that includes
    consultation with stakeholders at several stages and additional
    environmental analysis.
        This process ensures that the Secretary receives extensive public
    input enabling a full consideration of all economic, social, and
    environmental values and encourages approval of Five-Year Programs that
    contribute to the nation's energy security.
        Unfortunately, this legislation creates new regional planning
    councils--a new independent tier of decision makers--which appears to
    duplicate many of the activities that are currently being performed in
    the 5 year Plan Leasing Process. Furthermore, these councils have the
    potential to interfere with OCS development since leasing cannot occur
    if regional plans do not identify an area as being suitable for oil and
    gas leasing. By vesting this authority within regional councils, the
    bill could very well put areas effectively under moratoria for years to
    come.
        The bill would also eliminate the Royalty in Kind (RIK) program and
    the use of categorical exclusions. The RIK program was intended to
    simplify payments to the federal government. It has the potential to
    eliminate a range of thorny regulatory and compliance issues. The use
    of categorical exclusions is designed to eliminate unnecessary and
    redundant environmental studies.
        Problems with the management of either of these programs, whether
    perceived or actual, can and should be addressed by the Interior
    department. We believe that Secretary Kempthorne resolved many of them
    and that Secretary Salazar will continue the process. Elimination of
    programs that have so much potential to increase efficiency is both
    unnecessary and unwise.
        And finally, provisions such as requiring the promulgation of
    benchmarks for the development of each lease and the addition of a
    ``production incentive fee'' could increase the burden on lessees and
    the Interior department with little or no positive impact on the
    development of federal leases.
        In summary, we believe that it is important to develop policies
    that provide more access to federal lands and remove barriers that
    delay the development of these resources. We should not be erecting
    additional obstacles to development, which, unfortunately, would be the
    unintended consequence of this legislation.
        Delays in oil and gas developments do have a direct impact on our
    economy. A preliminary study on the impact of a two year delay in
    developing unconventional natural gas resources shows that about 5.8
    Tcf would not be produced from federal lands over the next 30 years.
    This 18% drop in production would amount to a $37 billion loss to the
    economy.
        We look forward to working with you on the continued development of
    a pro-access policy that best meets the energy needs of our nation.
                                     ______

        Response to questions submitted for the record by Doug Morris,
                          American Petroleum Institute

    Questions from the Majority:
    1.  Mr. Morris, in your testimony you cite a study that finds that a 2-
            year delay in developing unconventional natural gas resources
            could result in a $37 billion loss to the economy. That study,
            performed by Advanced Resources International, Inc., was
            purportedly an assessment of the impacts of the CLEAR Act.
            However, the authors of that study do not analyze any part of
            the CLEAR Act itself--they simply assume that ``a more
            complicated onshore federal leasing process'' would result in
            two-year or four-year delays. Testimony from the DOI Inspector
            General and the Government Accountability Office, however,
            indicates that higher rental rates, production incentive fees,
            and diligent development requirements could act as inducements
            for faster production. Leaving aside API's position on those
            provisions, which was made clear in testimony and comments
            provided to the committee, could you provide any evidence that
            the provisions of the CLEAR Act that affect the onshore federal
            leasing process would actually slow down that process?
        RESPONSE: The elimination of the use of categorical exclusions in
    Section 308 of CLEAR will delay by years the development of a large
    number of leases that currently utilize this streamlining process.
    Furthermore, elimination of this option can even introduce delays in
    the development of leases that do not utilize the categorical exclusion
    process. This is because BLM resources (staff and funding) will be
    stretched even further to meet the agency's responsibilities, fulfill
    statutory mandates to complete NEPA reviews of projects and regional
    planning documents, and to issue permits required for exploration and
    production operations.
        API also believes that many of the proposals contained in H.R.3534
    will increase the cost of the permitting process or the cost of holding
    federal leases, and add administrative burdens to federal lessees.
    Thus, in addition to ``slowing down'' the federal leasing process,
    certain measures in this bill may discourage acquiring and operating
    leases on federal lands in favor of private lands, by affecting the
    economics of operating federal leases at the project level.
        The increase in costs and fees for onshore leases found in Section
    304 of the bill may appear modest, if considered on the scale of a
    single lease in the context of energy commodity prices and quarterly
    earnings reports in recent years. The Committee should understand that
    more than 80 percent of the exploratory wells drilled on public lands
    in the American West are drilled by independent companies, many of them
    small enterprises with narrow profit margins. Drilling and associated
    exploration costs remain high, and in the case of frontier exploration
    wells that many of these energy-finding independents drill, are wholly
    at risk when these expenditures are committed by the companies. An
    increase in the costs to hold federal leases, aggregated over the lease
    holdings of some of these companies, may be incremental, but it may
    also affect the decisions of some of these companies at the margin,
    leading to diminished interest in federal leases, or to fewer
    exploratory wells drilled.
        The notice requirements set forth in Section 303 are unnecessary.
    API's concern is that adding a new statutory notice requirement to the
    requirements BLM must now observe is likely to benefit parties who are
    motivated to oppose any drilling activity. Extending BLM's regulatory
    notice requirements is likely to provide a seed-bed for litigation that
    will add cost to BLM's budget, and cause delay and disincentives for
    future development of federal leases.
        Section 306 requiring the use of best management practices (BMPs)
    could also delay the development of leases. Existing regulatory
    guidance, under which BLM operates, already calls for the use of best
    management practices for exploration and production operations on
    federal leases. Best management practices should be determined at the
    BLM field office level, by the petroleum engineers, wildlife
    biologists, reclamation scientists, and other land use management
    professionals working with operators who understand the land in their
    area. Flexibility and adaptation to the operations and environmental
    contexts of particular projects are keys to the success of this
    program, and to its utility both as a marker for proposed and future
    projects, as well as a touchstone for BLM lease administration and land
    management. API's concern is that blunt statutory direction that best
    management practices will be used will diminish this flexibility and
    the adaptive management practices that flexibility encourages and
    fosters, and will drive this valuable program toward outcomes of basic
    compliance rather than innovative solutions.
        API is also concerned that the ``Diligent Development'' and
    reporting requirements found in Section 301 and Section 302 of the bill
    will add to the paperwork burdens of operators, and to the document
    review burdens of BLM staff, and will lead to no new production.
    Federal leases grant federal lessees the right, and impose the
    obligation, to explore, develop and produce commercial quantities of
    hydrocarbons. A federal lease terminates if the lessee is not
    performing diligent drilling operations on or for the benefit of the
    lease during the primary term. It takes several years for a lease
    operator to analyze the underlying geology, perform the necessary
    technology and engineering assessments, and arrange the logistics of an
    exploration or development project on federal lands before a company
    can determine if a lease contains commercial quantities of oil and
    natural gas. The reality is that because a company's investment to
    acquire, assess and maintain the lease is lost if the lease is returned
    to the government at the end of its primary term, a significant
    incentive exists for companies to expeditiously develop these leases if
    sufficient oil and natural gas is found
        In our view, the 2-year delay in developing unconventional natural
    gas resources that is assumed in the ARI study is a very realistic
    scenario. Based upon each of the provisions discussed above, it is
    likely that there will be delays in developing these resources and a 2-
    year delay is an entirely reasonable assumption given these provisions.
    The $37 billion loss to the economy that is attributable to a 2-year
    delay should thus be seriously considered.
    2.  Mr. Morris, please provide API's data on total U.S. petroleum
            imports (crude & products), total imports as a percentage of
            total domestic petroleum deliveries, U.S. crude oil production,
            total petroleum products delivered to the domestic market, and
            average active rotary drilling rigs in the United States, for
            each month from January 2000 through September 2009.
        RESPONSE: In response to your request, please find API data
    (attached at the end of these responses) on total U.S. petroleum
    imports (crude & products), total imports as a percentage of total
    domestic petroleum deliveries, U.S. crude oil production, total
    petroleum products delivered to the domestic market, and average active
    rotary drilling rigs in the United States, for each month from January
    2000 through September 2009.
    3.  Mr. Morris, the American Petroleum Institute recently released a
            report showing that the U.S. oil and natural gas industry
            supports more than 9 million jobs. This figure combines jobs
            due to domestic production, i.e., oil and gas exploration,
            development and extraction, with those that would exist
            regardless of the source of the production (such as gasoline
            stations and fuel dealers). Please provide the percentage of
            those 9 million jobs that are strictly attributable to domestic
            oil and natural gas production.
        RESPONSE: The recent report that you refer to, prepared by
    PriceWaterhouse Coopers, found, as you state, that the U.S. oil and gas
    industry supports more than 9 million jobs nationwide. As your question
    implies, this is far more than the numbers of jobs we observe directly
    involved in the extraction of oil and gas. As shown in the following
    table, the direct impact of the upstream sector accounts for 7% of the
    total jobs impact.

    [GRAPHIC(S) NOT AVAILABLE TIFF FORMAT]

    4.  Mr. Morris, on August 21st a drill rig in the Timor Sea
    northwest of Australia suffered a blowout while drilling a well,
    starting an uncontrolled release of oil that has continued at least
    through September 23rd. The blowout is believed to have released
    anywhere from half a million gallons to four million gallons of oil
    into the ocean--resulting in an oil slick that stretches extends over
    roughly 7,500 square miles. During testimony earlier this year, the
    committee was assured by executives of oil and gas companies that the
    chances of such a blowout happening with modern drilling technology is
    exceedingly small, and that there have been no major blowouts in the
    United States since 1969. However, the safety record for drilling
    operations offshore Australia was almost as impressive, with no
    blowouts since 1984--until this year. The fact remains that even one
    such blowout, whether due to human error, equipment failure, or other
    unforeseeable event, could be absolutely catastrophic to the economy
    and ecosystems of coastal communities in the United States. What are
    the differences in technology used in drilling wells offshore the
    United States versus offshore Australia that would make it impossible
    to experience a similar blowout (or any other type of blowout) off our
    own shores?

        RESPONSE: The policies followed by our member companies and MMS
    regulations ensure that wells on the U.S. OCS are cased, cemented,
    protected with internal plugs, and monitored to prevent this type of
    occurrence. Details of what actually occurred have not been released,
    but based on reports we have read, the main issues appear to be a
    questionable well plan and casing program, poor cementing procedures,
    the apparent absence of barriers in the suspended wells, and the
    inability to monitor casing pressure (mudline suspensions). We believe
    that this type of accident would not occur in U.S. waters for the
    following reasons:
            1.  MMS would not have approved the casing program as we
            understand it.
            2.  MMS would have required a second barrier (in addition to
            the cement at the casing shoe) in the suspended wells.
            3.  MMS would have required a means of monitoring casing
            pressure.
            4.  It is not apparent that they pressure-tested the 9 5/8
            casing to 70% of the Minimum Internal Yield as is required by
            MMS.
        Furthermore, the Australian regime is complicated by the split
    jurisdiction between State and Federal agencies. In this case, the
    Northern Territories were responsible for well planning and integrity
    while the Commonwealth regulator (NOPSA) was responsible for surface
    facilities. We believe that the MMS would have been able to respond in
    a more timely manner to the incident.
        Note that over the past 30 years, an average of only approximately
    6300 bbl/yr of oil has been spilled in U.S. Federal waters from all
    4000 production facilities. During this period of time almost 30,000
    wells have been drilled. Natural seeps have accounted for the discharge
    of more than 1,200,000 bbl of oil into U.S. OCS waters every year.
    Questions from the Minority:
    1.  H.R. 3534 supports an assumption that categorical exclusions are
            utilized by land management agencies to allow for the
            circumvention of NEPA requirements by oil and gas producers.
            How would you respond to this assertion?
        RESPONSE: API disagrees with the statement that ``categorical
    exclusions are utilized by land management agencies to allow for the
    circumvention of NEPA requirements by oil and gas producers''.
        Section 390 of the Energy Policy Act of 2005 (EPAct) allows federal
    agencies to categorically exclude oil or gas drilling from
    environmental review and public input under the NEPA under certain
    circumstances. In reviewing an Application for Permit to Drill (APD),
    Surface Use Plan of Operations, or pipeline application involving a
    proposed activity that fits into one of five categories identified in
    Section 390, applicability of a categorical exclusion is presumed. Put
    another way, there is a ``rebuttable presumption'' that no further NEPA
    analysis is required. The limited circumstances where categorical
    exclusions under Section 390 of EPAct may be used were designed to
    enable energy development where the environmental impact is minor, that
    make use of an existing operations footprint or are located in
    developed fields, or where drilling was already analyzed in a NEPA
    document as a reasonably foreseeable activity. Thus, the specific
    categorical exclusions created under EPAct do not circumvent NEPA,
    because they are limited to situations where further analysis is not
    necessary.
        The ability to approve certain projects using categorical
    exclusions where justified provides BLM and other federal agencies the
    flexibility to direct the attentions of staff toward those projects for
    which greater time and effort for environmental review is warranted.
    The ability to use categorical exclusions can provide for more
    efficient pursuit of the agency's NEPA responsibilities. Thus, rather
    than rather than spending time in the office on redundant paperwork,
    agency staff can spend more time in the field inspecting and monitoring
    operations, where commitments and practices described on paper can be
    validated, and where on-the-ground environmental protection can be
    assured.
        H.R. 3534 would, if enacted, completely do away with this tool that
    is authorized in the National Environmental Policy Act (NEPA), as well
    as in the regulations developed to implement NEPA found at 40 CFR parts
    1500-1508. The bill seems to take the position that categorical
    exclusions are unusual or exceptional agency actions under NEPA, when
    they are expressly provided for under Sections 1500.4, 1500.5, 1507.3
    and 1508.4 of CEQ's regulations when an activity can reasonably be
    shown not to have an effect, cumulatively or individually, on the human
    environment, or in situations when prior environmental and/or project
    review has occurred and additional environmental assessment is
    unnecessary.
        The recent Government Accountability Office (GAO) study on Section
    390 Categorical Exclusions [1] has been cited in support of
    the claim that categorical exclusions have been the subject of
    widespread abuse by BLM. In fact the report details mostly
    administrative errors, rather than egregious actions or violations of
    law, stating at one point: ``...our findings reflect what appear to be
    honest mistakes stemming from confusion in implementing a new law with
    evolving guidance''. GAO's report recommends that BLM can remedy these
    errors with improved guidance, implementation templates, and better
    oversight from the agency's offices. However, the GAO report also notes
    the fact that five BLM field offices that process APDs failed to
    approve a single categorical exclusion - Miles City, MT; Great Falls,
    MT; Rock Springs, WY; Newcastle, WY; and Roswell, NM--but fails to
    explore why this situation occurred. Given the guidance provided by
    NEPA and its implementing regulations, and the direction provided in
    Section 390 of EPAct, API believes it is equally important to
    investigate circumstances where categorical exclusions were not used as
    it is to examine when they might have been applied in error.
    ---------------------------------------------------------------------------
        \1\ United States Government Accountability Office, Energy Policy
    Act of 2005: Greater Clarity Needed to Address Concerns with
    Categorical Exclusions for Oil and Gas Development Under Section 390 of
    the Act, GAO-09-872, September 2009.
    ---------------------------------------------------------------------------
        Properly used, categorical exclusions remain an appropriate and
    important tool in the NEPA toolbox for BLM, minimizing redundant
    analysis and paperwork and the demands these place on staff and agency
    resources. Categorical exclusions enable BLM to employ a balanced
    approach to managing the development of vital energy resources while
    still meeting its obligation to protect the environment.
                                     ______

        The Chairman. Thank you. Mr. Zorn.

      STATEMENT OF JAMES E. ZORN, EXECUTIVE ADMINISTRATOR, GREAT
               LAKES INDIAN FISH AND WILDLIFE COMMISSION

        Mr. Zorn. Mr. Chairman, Members of the Committee, the
    advantage of having a name that starts with Z right before
    lunch. It is an honor and a privilege to be here today on this
    constitution day to talk about how the other governments of
    this nation, the Indian Tribal governments, might fit in, how
    and why they should fit in under this bill and under this
    Committee's efforts.
        My name is James Zorn. I am the Executive Administrator of
    the Great Lakes Indian Fish and Wildlife Commission. I direct
    you to Attachment 1 of our statement to show the 11 tribal
    nations that have formed GLIFWC, as we call ourselves, our
    acronym, to help them secure their treaty rights to hunt, fish
    and gather in these areas of land with which they treated with
    the United States. The United States gained title to the land.
    In exchange for the bargain the United States guaranteed the
    tribes the right to continue to use that land to meet their
    subsistence, their economic, their spiritual, their cultural,
    and their medicinal needs consistent with their
    interrelationship with the natural world.
        And it is from that perspective that when, whether it is a
    regional policy commission under this bill or in other context,
    when decisions are made that affect the tribes and their
    resources the tribes need to be at the table. Not only do they
    need a seat at the table, but they need the capacity to be able
    to get there. An empty seat does the tribes no good. So the
    funding mechanisms in which the other governments participate
    in really need to be made available to the tribal governments
    as well.
        What we have tried to do in our written testimony is to
    provide the story about our tribes and their rights in the
    Great Lakes context to help the Committee have a record to
    support these nice provisions that are in the bill, to enable
    and help tribal participation. We are sure there are other
    stories in other parts of the country that can be told and we
    encourage the Committee to talk to tribes throughout the
    country as well.
        The whole notion of having tribes to participate really is
    the status quo. As this Committee knows, the policy of self-
    determination and self-governance of the United States toward
    tribes has been in place for many, many years. It is just the
    way of doing business. It is not a matter of one government
    trying to control another government. It is really a matter of
    getting the effective governments who have their respective
    authorities and responsibilities together to coordinate what
    they do to make sure that they can try to reach consensus to
    meet mutual goals.
        The commission just celebrated our 25th anniversary this
    past summer, and we reflected on the history of the
    relationship of tribes and states and the Federal agencies in
    our particular context with respect to these treaty rights.
    Twenty-five years ago when the tribes first began to exercise
    their treaty rights to spear fish in northern Wisconsin they
    were met by protestors at the boat landings throwing rocks,
    spitting on women and children, planting pipe bombs at the boat
    landings.
        We are happy to report that 25 years later the issue is not
    about who has the right to take what fish where, at what time
    of the year, and with what method. We have come together as
    governments, a communities to figure out how to keep fish there
    for everyone. And so as the Committee looks at this bill and
    how tribes might fit in that is the lesson that we would offer
    to the Committee; that when you get the people together it is
    not about how the communities are different, it is about how
    they are alike.
        When Justice Sandra Day O'Connor asked one of the tribe's
    attorneys in a case that came before the Supreme Court
    involving these treaty rights, ``So tell me, Mr. Sloan, why is
    it that the tribes cannot engage in their life ways under the
    state system of regulation and management here in the State of
    Minnesota,'' the answer was very simple, and it was very down
    to earth. ``Your Honor, babies are not born during the state
    fishing season. People do not die during the state hunting
    season. There is a life-long cycle of events that the tribal
    communities rely upon these resources to help commemorate in
    their own way. They need these resources to do things that are
    consistent with the very purpose for which those treaties were
    entered into.''
        So there is a role that tribes need to play at the table,
    that there is no other government that is in the position to do
    that for them. It is only the tribes that can and should be
    there to do that for themselves.
        It is a great honor and privilege to be here today to help
    the Committee think through of how tribes fit in, and I would
    be happy to answer any questions. Thank you very much.
        [The prepared statement of Mr. Zorn follows:]

          Statement of James E. Zorn, Executive Administrator for the
            Great Lakes Indian Fish and Wildlife Commission (GLIFWC)

        Mr. Chairman and Members of the Committee, my name is James E. Zorn
    and I am the Executive Administrator for the Great Lakes Indian Fish
    and Wildlife Commission (GLIFWC). On behalf of GLIFWC's eleven member
    tribes, thank you for the opportunity to appear before you today,
    September 17, 2009, to testify on H.R. 3534, the Consolidated Land,
    Energy, and Aquatic Resources Act of 2009.
    I. GLIFWC's Membership and Purpose
        GLIFWC is a natural resources management agency exercising
    delegated authority from its 11 member federally-recognized Ojibwe
    1 tribes in Wisconsin, Michigan and Minnesota regarding
    their ceded territory (off-reservation) treaty rights. 2
    ---------------------------------------------------------------------------
        \1\ The tribes also are referred to as Chippewa, or, in their own
    language, Anishinaabe.
        \2\ GLIFWC member tribes are: in Wisconsin--the Bad River Band of
    the Lake Superior Tribe of Chippewa Indians, Lac du Flambeau Band of
    Lake Superior Chippewa Indians, Lac Courte Oreilles Band of Lake
    Superior Chippewa Indians, St. Croix Chippewa Indians of Wisconsin,
    Sokaogon Chippewa Community of the Mole Lake Band, and Red Cliff Band
    of Lake Superior Chippewa Indians; in Minnesota--Fond du Lac Chippewa
    Tribe, and Mille Lacs Band of Chippewa Indians; and in Michigan--Bay
    Mills Indian Community, Keweenaw Bay Indian Community, and Lac Vieux
    Desert Band of Lake Superior Chippewa Indians. See Attachment 1 for a
    map showing where these tribes and the treaty cession areas are
    located.
    ---------------------------------------------------------------------------
        Each of its member tribes has entered into one or more treaties
    with the United States, under which the tribes reserved off-reservation
    hunting, fishing and gathering rights in the lands ceded to the United
    States. 3 These treaties represent a reservation of rights
    by each signatory Tribe individually and by all signatory Tribes
    collectively, as well as a guarantee of those rights by the United
    States.
    ---------------------------------------------------------------------------
        \3\ See Treaty of 1836, 7 Stat. 491; Treaty of 1837, 7 Stat. 536;
    Treaty of 1842, 7 Stat. 591; and Treaty of 1854, 10 Stat. 1109.
    ---------------------------------------------------------------------------
        Courts, including the United States Supreme Court in its 1999
    Minnesota v. Mille Lacs ruling, consistently have recognized and upheld
    the treaty rights of GLIFWC's member tribes. 4
    ---------------------------------------------------------------------------
        \4\ See People v. Jondreau, 384 Mich 539, 185 N.W. 2d 375 (1971);
    State of Wisconsin v. Gurnoe, 53 Wis. 2d 390 (1972); Lac Courte
    Oreilles v. Voigt (LCO I), 700 F. 2d 341 (7th Cir. 1983), cert. denied
    464 U.S. 805 (1983); U.S. v. Bresette, 761 F.Supp. 658 (D. Minn. 1991);
    Minnesota v. Mille Lacs Band, 199 S.Ct. 1187 (1999).
    ---------------------------------------------------------------------------
        The rights apply to public lands and waters located within the
    ceded territories, and include the right to harvest virtually all
    natural resources found there. The ceded territories include portions
    of Lake Superior, as well as parts of the Lake Superior and Michigan
    watersheds. With these treaties and treaty rights in mind, GLIFWC was
    established in 1984 pursuant to a Constitution developed and ratified
    by its member tribes. It is an intertribal organization within the
    meaning of the Indian Self-Determination and Educational Assistance Act
    (PL 93-638). Since its inception, GLIFWC has entered into a contract
    with the Bureau of Indian Affairs pursuant to the Act, with funding
    provided on a regular basis by Congress.
        GLIFWC's ultimate responsibility is twofold: 1) to ensure that its
    tribes and their tribal members are able to meet their subsistence,
    economic, cultural, medicinal and religious needs through the exercise
    of their ceded territory natural resource harvest and management treaty
    rights; and2) to ensure a healthy, sustainable natural resource base in
    the ceded territories through cooperative management partnerships with
    other governments and agencies.
    II. The Circle of the Seasons--Ojibwe Culture and Lifeways
        GLIFWC's member tribes share a common origin, history, language,
    culture and treaties. They share a traditional and continuing reliance
    upon fish, wildlife and plants to meet religious, ceremonial,
    medicinal, subsistence and economic needs.
        It is precisely to maintain this lifeway that the tribes reserved
    the rights to hunt, fish and gather in the ceded territories. In proper
    perspective, this reservation of sovereign rights is part of the
    Ojibwe's on-going struggle to preserve a culture--a way of life and a
    set of deeply held values--that is best understood in terms of the
    tribes' relationship to Aki (earth) and the circle of the seasons.
        For the Ojibwe,
            Culture is not merely a way of doing things that all human
            beings living in a society do to survive, such as eat, build
            homes, and arrange their relationships with each other. Culture
            also must be understood as a system of beliefs and practices
            that organize these activities. For example the collection of
            wild rice, the spearing of sturgeon, and the hunting of deer
            are fundamentally different activities for these Indian people
            in contrast to non-Indians. When Indians undertake these
            activities, the harvesting, processing, distribution, and
            consumption of natural foods, they are not only perpetuating
            their ancient cultures but the resources themselves. As
            Algonquian people take from the environment for their own use,
            they conceptualize their role as hunters, gatherers, and
            fishermen as part of the supernatural as well as the natural
            world. The manner of hunting, the ritual offering left to
            assuage the souls of collected plants, and the use of [wild]
            rice, venison, and sturgeon as integral components of
            ceremonial feasts are activities which themselves assure the
            perpetuation of these creatures as well as themselves.
            5
    ---------------------------------------------------------------------------
        \5\ Charles Cleland, et al., The Potential Cultural impact of the
    Development of the Crandon Mine on the Indian Communities of
    Northeastern Wisconsin 110 (1995).
    ---------------------------------------------------------------------------
        Thus, the Ojibwe are closely tied to the natural environment by a
    system of beliefs and practices that organize everyday life. This
    environmental human relationship involves a notion of geographic place
    that embodies the Ojibwe's human origin and historical identity, as
    well as the way the Ojibwe conceive their cultural reality in the
    modern world. 6
    ---------------------------------------------------------------------------
        \6\ In addition to the court decisions themselves, other sources
    documenting the essential role that natural resources play in Ojibwe
    culture include: Fish in the Lakes, Wild Rice, and Game in Abundance
    (James M. McClurken et al. eds., (2000); and Ronald N. Satz, Wisconsin
    Academy of Sciences, Arts, and Letters, Chippewa Treaty Rights: The
    Reserved Rights of Wisconsin's Chippewa Indians in Historical
    Perspective (1991).
    ---------------------------------------------------------------------------
    III. Exercising Tribal Sovereignty to Preserve the Circle of the
            Seasons
        In accordance with these types of traditions and teachings, the
    Ojibwe seek to preserve a balance between the human being and the
    natural resources that humans rely upon, as well as between the natural
    world order and the supernatural world order. They understand the need
    to match human needs with Aki's capability to produce and sustain, and
    the need to nourish the body as well as the spirit.
        Thus, for the tribal governments involved, the exercise of retained
    sovereign authority to manage natural resources and to regulate tribal
    members in the exercise of treaty rights is a necessary element of
    Ojibwe cultural preservation. Simply stated, ecological sustainability
    equates to Ojibwe sustainability.
        GLIFWC and its member tribes are committed to natural resource
    management programs that sustain Aki's bounty for present and future
    generations. They recognize that perpetuation, enhancement and
    restoration of the natural resources upon which they rely are essential
    to sustaining tribal sovereignty, culture and society.
        The court decisions affirming the Ojibwe's treaty rights serve as a
    reminder that tribes and tribal governments have a legal status not
    only in their own right but also under the United States Constitution.
    In exercising their treaty rights to harvest and manage natural
    resources, the tribes carry out sovereign powers of self-government and
    undertake a wide array of activities that perpetuate their culture.
    This means that other governments, particularly states, cannot maintain
    exclusive control of natural resource use and management in the ceded
    territories.
    IV. GLIFWC's Off-Reservation Natural Resource Management Program
        Just as the tribes' relationship to Aki is all encompassing during
    the course of the seasons' circle, with the harvest of each resource at
    its proper time (e.g. maple sap and fish in spring, plants in summer,
    wild rice in fall) so too is GLIFWC's natural resource management
    program. It is part of its member tribes' comprehensive intertribal
    self-regulatory system of management plans and conservation codes that
    govern a broad range of treaty rights activities, including fishing,
    deer hunting, bear hunting, small game and furbearer hunting/trapping,
    wild rice gathering, and wild plant and forest products gathering.
        GLIFWC's program is designed to secure the exercise of treaty
    rights to meet subsistence, economic, ceremonial, medicinal, and
    religious needs, as well as to protect and enhance the natural
    resources and habitats involved. The information, data and analysis
    resulting from GLIFWC's management and research activities can be used
    in adaptive management, and are available to and used by conservation
    agencies of other jurisdictions as they carry out their own natural
    resource management programs.
        We do this work through our Biological Services Division, which
    conducts a variety of fish, wildlife and plant assessments, monitors
    tribal harvests, assists in tribal permit issuance and animal
    registration, and provides other management assistance. Particular
    areas of work include:
        1.  Harvest Management--Determine available harvestable surpluses
    and then monitor and prepare regular reports on tribal ceded territory
    harvest levels for a wide range of species, including fish (such as
    walleyes, muskellunge, lake trout, and whitefish), wildlife (such as
    white-tailed deer, black bear, and furbearers), and plants (such as
    wild rice and other wild plants).
        2.  Population Studies, Assessments, and Research--Conduct a
    variety of population studies, assessments, and related research.
        3.  Habitat Enhancement and Exotic Species Control--With the goal
    of providing healthy, fully-functioning ecosystems that will provide
    for the sustainability of the natural resources they support.
        4.  Contaminant Studies/Human Health Research--Research projects
    and fish consumption advisories to help prevent contamination of
    natural resources and to help tribal members maximize the health
    benefits from a traditional diet.
        GLIFWC recognizes that its responsibility for regulating and
    managing Great Lakes resources is one that it shares with local, state,
    federal and foreign governments. Because treaty rights extend to areas
    of shared jurisdiction and use, we along with these other governments
    are compelled, whether legally or practically, to acknowledge the
    rights and responsibilities that we each share. Thus, we undertake many
    cooperative research and management projects including:
        1.  Fish Population Assessment Activities--GLIFWC works with the
    Michigan, Minnesota and Wisconsin departments of natural resources to
    coordinate an agreed-upon assessment program for ceded territory
    waters, both for Lake Superior and inland. For Wisconsin, much of this
    work stems from the joint fishery assessment, begun in 1991, and
    undertaken by the USFWS, BIA, WDNR, tribes, and GLIFWC. 7 In
    May 2009, this joint effort received a Department of Interior
    ``Partners in Conservation'' award, recognizing those who make
    exceptional contributions in achieving conservation goals through
    collaboration and partnering. For Minnesota, the state and the tribes
    are undertaking a joint walleye population study on Mille Lacs Lake as
    part of the co-management responsibilities set forth in the Mille Lacs
    Band v. State of Minnesota case.
    ---------------------------------------------------------------------------
        \7\ See Bureau of Indian Affairs, U.S. Dep't of the Interior,
    Casting Light Upon the Waters: A Joint Fishery Assessment of the
    Wisconsin Ceded Territories (1991).
    ---------------------------------------------------------------------------
        2.  Upper Peninsula Coastal Wetland Project--This project is
    designed to protect and enhance nearly 3,000 acres of wetlands and
    associated uplands in the Lake Superior and St. Mary's River
    watersheds. Funds were provided to GLIFWC and its member tribes by the
    BIA through the tribal Circle of Flight initiative and to Ducks
    Unlimited by the North American Wetlands Conservation Fund grant.
    Partners include the tribes and GLIFWC, and the State of Michigan,
    USDA-Forest Service, Gogebic County (Michigan), Ducks Unlimited, and a
    number of other non-governmental conservation organizations.
        3.  Furbearer Research--GLIFWC's biologists have undertaken a
    multi-year study of fishers, pine martens, and bobcats in the
    Chequamegon-Nicolet National Forest. Aspects of this study include home
    range and habitat usage, species interaction, and developing a habitat
    suitability index model. The USDA-Forest and WDNR are cooperators and
    financial contributors to this research.
        4.  Lake Sturgeon Project--GLIFWC, the Bad River Tribe, and the
    USFWS have joined to gather data on the distribution and movement of
    juvenile sturgeon in and around the Bad River and its tributaries. This
    river has one of only four known sturgeon populations that spawn in
    Lake Superior tributaries.
        5.  Lake Superior Research Institute, UW-Superior--GLIFWC and the
    University of Wisconsin-Superior have entered into an agreement
    establishing the Environmental Health Laboratory within the
    University's Lake Superior Research Institute. This laboratory has
    undertaken a number of studies regarding the health effects for Indian
    people associated with consuming fish contaminated with toxics. It is a
    major partner in GLIFWC's mercury-in-fish project and tests most of the
    fish samples as part of that study.
        6.  Purple Loosestrife Invasive Species Project--GLIFWC has
    undertaken a long-term project to control and reduce purple loosestrife
    (an invasive non-native plant that supplants native species including
    wild rice) in the Bad River watershed. Among its cooperators on this
    project are the USDA-Natural Resource Conservation Service, local
    county highway departments, local town and municipal governments, the
    Nature Conservancy, local 4-H Clubs, and private landowners. One part
    of the project is to educate private landowners about loosestrife
    control and to provide eradication services at a landowner's request.
        Achieving the goals of these projects benefits not only the eleven
    tribal communities that GLIFWC serves, but also the broader communities
    of northern Wisconsin, east central Minnesota and Michigan's Upper
    Peninsula. These partnerships: i) provide accurate information and data
    to counter social misconceptions about tribal treaty harvests and the
    status of ceded territory natural resources; ii) maximize each
    partner's financial resources; iii) avoid duplication of effort and
    costs; iv) engender cooperation rather than competition; and v)
    undertake projects and achieve public benefits that no one partner
    could accomplish alone.
    V. Consolidated Land, Energy, and Aquatic Resources Act, H.R. 3534
        It is with this twenty-five years of history and experience in
    protecting and enhancing ceded territory resources, including portions
    of the Great Lakes and its watershed, that the Great Lakes Indian Fish
    and Wildlife Commission is before you today. As an initial matter,
    GLIFWC greatly appreciates the Committee's and Chairman Rahall's
    efforts to ensure that tribal governments and tribal treaty rights are
    acknowledged and protected as you consider the Consolidated Land,
    Energy, and Aquatic Resources Act, H.R. 3534 (CLEAR Act). GLIFWC was
    given an opportunity to comment on the draft legislation earlier in the
    spring. We are pleased that the CLEAR Act as introduced reflects some
    our comments. This is an important component of effective consultation
    and is an example of how tribes and the Federal Government can interact
    positively to achieve shared goals.
        These comments are purely from the perspective of our member
    tribes' off reservation rights in the western Great Lakes region and,
    as such, GLIWFC would not purport to pass judgment on H.R. 3534's
    provisions with regard to the Outer Continental Shelf leasing process
    or the bill's proposed federal leasing or royalty reforms.
    Nevertheless, GLIFWC does support the inclusion of ``affected Indian
    tribes'' as defined in the bill, in any planning process that has the
    potential to lead to impacts on treaty and trust resources.
        We are most heartened by the Act's specific inclusion of affected
    Indian tribes in Section 605--the Ocean Resources Conservation and
    Assistance Fund. We would ask that this language be amended to create a
    set-aside, perhaps of 5%, for affected Indian tribes. In our experience
    where there is no tribal set-aside for programs such as this, tribal
    natural resource programs are vulnerable to politics and the vagaries
    of the appropriations process. With a set-aside, tribes would be able
    to plan and execute in a way that complies with the bill's mandate for
    a five year plan.
        We appreciate the Indian savings provision in Subtitle A of Title
    V. However, consultation with affected Indian tribes is still necessary
    and should be explicitly required under section 501(e) before the
    Secretary approves or issues leases for commercial solar or wind energy
    development on federal lands. Just as consultation with affected
    governors and other stakeholders is required, so too should tribal
    consultation be explicitly mandated. The western Great Lakes region is
    home to a number of national forests and parks--public lands that
    tribes rely on to provide the natural resources that maintain their
    lifeways. This region is also witnessing a significant interest in
    exploring the potential of wind in particular as a power source, and
    consultation with tribes will be vital in planning for any eventual
    development. We note that the state of Wisconsin has already committed
    to such consultation in its ``Wind on the Water'' analysis of potential
    wind development in Lakes Superior and Michigan.
        While we appreciate the CLEAR Act's inclusion of tribes as eligible
    members of the Ocean, Coastal, and Great Lakes Council, we ask that a
    tribal representative on the Council be mandatory. Tribes rely on
    coastal resources not just for economic livelihood or recreational
    activities, but because they serve as the very essence and life blood
    of their communities and cultures. Thus, the interests and concerns of
    tribal governments with regard to how to use, protect, and preserve
    these resources is often complicated and not always consistent with
    that of States, the federal government, or other agencies and
    interests. Consequently, we cannot depend on these other agencies to
    adequately represent tribes in these forums and have found that the
    most effective way to ensure that tribal concerns are addressed is to
    ensure that tribes have a place at the table. Making a tribal
    representative mandatory would achieve this.
        Finally, with regard Title IV and the Reauthorization of the Land
    and Water Conservation Fund, tribal governments have long advocated
    that Congress include a Tribal set-aside in this Program. In the past
    Tribes have advocated for a 2-5 percent set-aside for this program. We
    support these efforts to ensure that there is parity between tribal
    natural resource agencies and their State cohorts.
    VI. Conclusion
        Tribal natural resource management programs touch the very core of
    federal Indian law and policy--the preservation of historically and
    culturally significant activities of Indian people, the fulfillment of
    federal promises made to the tribes by treaty, the protection of
    significant Indian subsistence and economic activity, the enhancement
    of self-government by the tribes, and the encouragement of government-
    to-government dealings between tribes, the federal government, and
    other governments. Congress carries an important obligation to promote
    and support these programs upon which tribes rely to maintain their
    sovereignty, culture and society.
        Thank you for the opportunity to testify.

    [GRAPHIC(S) NOT AVAILABLE TIFF FORMAT]

        The Chairman. Thank you very much. Let me begin with Mr.
    Campbell.
        The bill, as you know, requires sealed bids for onshore oil
    and gas leases rather than the current oral bidding process.
    From our perspective and, of course, that is why I put it in
    the bill, I think sealed bidding has the potential to enhance a
    return for the taxpayers. So, my question to you is I would ask
    you to elaborate on why you are opposed to sealed bidding. Is
    it because money might be left on the table?
        Mr. Campbell. Sir, what happens during an oral auction is
    you do a significant amount of analysis before the bidding. You
    go in, and I believe my experience has been, having formerly
    participated in sealed bids many years ago onshore, was that
    you get a fair representation at the table of those bidders who
    have done an analysis and can come up with what the value is or
    what they perceive the value to be for the property.
        The Chairman. OK, let me ask you one further questions and
    it is not a matter that is addressed in the bill, but do you
    see any benefit in conducting lease sales via the Internet?
        Mr. Campbell. You know, they just started doing those and I
    am going to have to reserve my response until I see how
    successful they are. From a personal standpoint, I will tell
    you there is something to be said for sitting there looking at
    the guy across from you who is bidding against you.
        The Chairman. Yes. OK, let me ask Mr. Mataczynski. You are
    critical of the competitive leasing process for renewable
    energy, saying it was once tried by BLM and it has not worked
    well. But in that process bidding started at $5,000 and the
    winning bid was over $225,000. So it appears that our public
    lands are being drastically undervalued right now. Oil, gas,
    geothermal, offshore, wind, all have competitive lease
    processes so it certainly can work. You claim there is little
    competitive interest in many Federal areas, but if that is the
    case it would appear the bids would not go very high.
        How can you argue that a competitive process allows the
    market to find the proper value for those lands is not in the
    best interest of the American taxpayer?
        Mr. Mataczynski. Well, the first thing I will point out is
    that I think on the wind projects where the BLM did use a
    competitive process none of the projects were ever actually
    constructed, which does not then yield the benefit that
    everybody is looking for.
        Relative to the current market conditions, the current
    lease rate that the BLM has used or is using for wind projects
    is approximately 5 percent, which is very close to the rate
    that would be received on private lands. An auction process may
    push that rate up. It may push that rate down. I think the more
    likely it would be is that it would push it down given the
    amount of time that it takes to develop on government lands.
        Specifically, we do see this headed in the direction of an
    auction, but we think that the better effort in the near term
    would be to work on fixing the processes that would speed up
    the development of sites on government lands before institution
    the auction process.
        The Chairman. Thank you. Mr. Zorn, let me ask you. Are the
    Great Lakes states able to unilaterally manage the Great Lakes
    without consulting and coordinating with your organization and/
    or your member tribes?
        Mr. Zorn. No, sir, they are not. The situation, especially
    for tribal reservations, you know, the tribes have a
    significant amount of control over their internal affairs. So,
    as you look at the map of the Great Lakes, there are
    significant reservations there bordering on the Great Lakes and
    in the basin where clearly, if other governments want to try to
    accomplish something with the tribes, they are going to have to
    work with them.
        In the off-reservation context where these treaty rights
    apply, as we just found out, for example, with the wind power
    issue in Wisconsin. The Wisconsin Public Service Commission was
    commissioned to look at if or how the wind power could be
    developed in the Great Lakes, and it was concluded that because
    of these treaty rights the states really needed to consult with
    the tribes. And so the state management authority exists, but
    it certainly is not unfettered, and there is that requirement
    that they need to integrate tribes into the process.
        The Chairman. Does your organization have a written
    management agreement with any of the Great Lakes states or
    Canada----
        Mr. Zorn. Oh, absolutely.
        The Chairman.--management of the Great Lakes?
        Mr. Zorn. Absolutely. There are tons of agreements. You
    have the strategic Great Lakes Joint Fishery Management Plan.
    You have under the auspices of the Great Lakes Water Quality
    Agreement between the United States and Canada, the Buy
    National Program to restore and protect Lake Superior. You have
    consent decrees between states, tribes, and the United States,
    and the treaty rights context in Michigan, and so on and so
    forth. There is a long list of them.
        The Chairman. Recognize the gentleman from Utah, Mr.
    Bishop.
        Mr. Bishop. Mr. Chairman.
        The Chairman. Or we will advise the members that we have
    just begun a series of at least 10 votes I am advised on the
    House Floor, so I hope we can wrap this up before breaking for
    the votes so the panel will not have to come back.
        Mr. Bishop. Could I request, Mr. Duncan has not had a
    chance to ask any questions today. Can he be the first one on
    this side to go?
        The Chairman. Sure.
        Mr. Duncan. Well, thank you, Mr. Bishop, and thank you, Mr.
    Chairman. Let me just get out four questions and since we may
    not have time to answer these questions I would appreciate it
    if you would submit comments for the record later unless you
    can make some brief comments now.
        But I am concerned that we have unemployment of almost 10
    percent, so we have many millions unemployed. Some people say
    we have an underemployment problem that is even worse with many
    college graduates working at very low paying jobs, and my first
    question will be: Will this bill drive up energy costs and make
    it more difficult for poor and lower income and working people
    to pay their utility bills and their other energy costs?
        Second, will this bill give even greater advantages to
    foreign energy producers? Mr. Stover testified that we use or
    consume 56 million pounds of uranium each year in this country,
    that we only produce 4.5 million pounds. So I am a little bit
    concerned that this bill will really only help foreign energy
    producers who are already making a killing off us in the first
    place.
        Third, I understand from staff that it takes an average
    right now of 10 years from the beginning of the leasing process
    to actual drilling. That is what I was told yesterday by staff.
    Will this bill speed up that process or delay it further? I am
    concerned that it may delay it further.
        And fourthly, in every highly regulated industry it seems
    to end up in the hands of a few big giants because first the
    little guys go out, or they are forced to merge, then the
    medium-sized companies go out, or they are forced to merge, and
    I am wondering will this bill make it more or less difficult
    for small businesses to survive in the industries affected by
    this bill, and I am a little bit afraid that it is going to
    make it more difficult for the small guys, for the little guys
    in the business and it is going to play in the hands of the big
    giants.
        Do any of you have any comments you wish to make about
    either one of those four questions?
        Mr. Campbell. Sir, if I may. Alex Campbell, Enduring
    Resources. I will touch on a couple of your points.
        From an unemployment standpoint, obviously the key here is
    to be economically profitable in the extraction of the product.
    I have shareholders that demand a return just like every other
    business, and I have to answer to them as to cost. To give you
    an example, where we have a high cost for a natural gas
    commodity last year, we had a net profit of 20 cents per mcf.
    This year my projections are looking at a net loss of over $3.
    We had a 20 percent staff reduction. We are trying to be as
    economical as possible. We have had to curtail our drilling
    efforts. There is a significant impact to the community. The
    socio-economic impact is dramatic when you see the number of
    people that are out of job and the impact it has on the tax
    base.
        From a regulatory standpoint as far as leasing, you are
    absolutely correct. There are a host of things that have to be
    done in parallel or in tandem, if you will, from the point in
    time before you get a lease, you buy a lease analysis. You
    analyze it. Then there are a host of regulatory issues as well
    as you have to finance that project. You have to go out and
    secure the funds just like a ranching operation. I have to have
    the money to go out and develop the properties and then produce
    the properties.
        I have a specific property that I started. It is called my
    rock house area. It is a six section project. It is a natural
    gas project, immediately adjacent to a very large field of
    attributes. This process started August 23rd of 2004. Before
    the sale even got off, there were protests. There is current
    litigation, September 2009, In this particular area, I have
    about $30 million invested, and I still am not able to finish
    drilling the project as I prescribed in my EA.
        So the answer to your question is yes. By adding one more
    layer of regulatory oversight, especially if it is removed from
    the area that immediately is best able to manage it, you will
    see an impact on the timing.
        Mr. Duncan. Thank you.
        The Chairman. The gentleman from American Samoa, Mr.
    Faleomavaega.
        Mr. Faleomavaega. Thank you, Mr. Chairman, and probably
    some of my colleagues are wondering why I am sitting in on this
    really because we do not have oil and gas in my district, but
    it does have serious implications no matter where you live as
    far as the energy needs of our country.
        Mr. Zorn, I was touched by your comments saying about the
    tribes need to have a seat on the table. I recall a saying ``If
    you are not at the table, you are going to be on the menu.''
    And I think our tribes have been too long, too often being on
    the menu, and never been given proper treatment from the
    Federal government as far as I am concerned.
        But I wanted to ask you, what do you think of the
    possibility of including a provision in this proposed bill
    establishing some kind of an advisory council composed of
    representatives from tribes? I know that there is the Council
    of Energy Resource Tribes based, I believe, in Colorado
    composed of about 30 tribes that have energy-related resources
    just as good as the mining, the other mining companies. And I
    was wondering what do your 11 tribes think of the possibility
    of something like that--to advise the Secretary of the Interior
    on interests that affect these tribes that do have energy
    resources?
        Mr. Zorn. It is a good idea. The question is how you
    organize that and how you organize it at a scale in a way that
    affords the tribes the maximum opportunity to participate. I
    think there is----
        Mr. Faleomavaega. I do not think you have to meet every
    day, but certainly the proper way that----
        Mr. Zorn. Exactly.
        Mr. Faleomavaega.--would give the Secretary of the Interior
    best possible opinion and judgment on how to better deal with
    our Indian tribes.
        Mr. Zorn. What we find, sir, is that the resistance to get
    tribes in the door is soon changed to welcoming them, because
    what you find is that tribes offer expertise that others may
    not have, and you soon find that some of our scientists and
    some of our experts are leaders.
        Mr. Faleomavaega. And I would like to have Mr. Stover to
    help us. I certainly admire the experience that you have, sir,
    in dealing with uranium mining operations, and I go back to
    what I said earlier about what we did to the Indian Navajo
    Reservation, and their lands that contain uranium is
    disgraceful as far as I am concerned. I do not know how we
    dealt with this Indian tribe, and I suspect that other tribes
    are probably dealt in the very bad way in how we went about
    extracting uranium, and then leaving the poor tribes flat the
    way they are not only health-wise, but in so many other ways.
        Mr. Stover, I notice that your company is Canadian-owned.
    That is great because this is what we are doing right now.
    Canada is currently doing explorations of natural gas on its
    waterways, and then they turn around and sell it to the United
    States, and here we are still grappling with the way and how we
    can do this technology clean and in the best way possible to
    maximize the consumer needs of our country and our people here
    in the U.S.
        I just wanted to ask you, Mr. Stover, basically you have
    some very serious concerns about provisions of the bill? To
    redo the uranium mining is a better method, I suggest. If it is
    possible for Australia and Kazakhstan to extract uranium with
    the best technology available, why is it that our country
    cannot do the same?
        Mr. Stover. In fact, we do. The technologies, particularly
    the institute recovery technology that is applicable to certain
    deposits in the U.S., particularly those in parts of Wyoming
    and Texas, is state-of-the-art technology, and actually was
    developed in the U.S. 30 years ago.
        Mr. Faleomavaega. Yes, why is it that France depends on
    nuclear power for its electricity; Japan, 60 percent; and here
    we have not built a nuclear reactor in the last 20 or 30 years
    or something like that. I am not clear specifically on the
    history. But I just wanted to ask you, do you think that maybe
    the technology could be shared with our Indian tribes that have
    uranium mining potential for their development and for their
    benefit?
        Mr. Stover. Certainly. You know there is no reason that it
    cannot. The mining companies themselves, you know, when we are
    in those areas, have attempted, particularly in the last few
    years as the industry has undergone a resurgence, we are very
    much interested in opening dialogues with the Native American
    tribes and trying to work with them not only to do what we can
    to assist in resolving these legacy issues, but also to help
    create new economic opportunities within the tribal alliance.
        Mr. Faleomavaega. And our friend who is the wind expert, I
    am told, and this is my concern about wind, no wind, no power,
    and I am told that you have to have wind generation of about 11
    miles per hour in order for these propeller wind generating
    machines to function. Is that correct?
        Mr. Mataczynski. It varies depending on the manufacturer,
    but there is a cut-in speed that is somewhere in the
    neighborhood of 10 miles per hours where the wind turbines
    actually begin to operate.
        Relative to the intermittence of the wind resource, we see
    that wind has to be part of the picture. It is complemented
    certainly by natural gas and other resources that you had to
    the grid to be able to ensure that you can provide service to
    people when they turn the switch on to turn the light bulb on
    and so forth.
        Mr. Faleomavaega. I am sorry my time is up, Mr. Chairman.
        Is Boone Pickens part of your organization?
        The Chairman. Let me call the time on the gentleman and ask
    that he come take the chair while we go vote, but I want to
    recognize the gentleman from Colorado, Mr. Coffman, first.
        Mr. Coffman. Thank you, Mr. Chairman.
        Mr. Campbell, I have been told that in 2001 approximately
    21 percent of leases were protested and that last year 100
    percent of all lease sales were protested. Is this accurate,
    and if so, how does it affect your ability to produce?
        Mr. Campbell. Did you say 2001? I believe that is a correct
    statement. Last year my experience in Utah was that all of the
    lease sales were protested and all of the leases were in fact
    protested, and it impacts dramatically because it adds yet one
    more risk component to an otherwise very risky endeavor, which
    is drilling for natural gas. You are not always sure it is
    going to be there. You do not always know that once you buy a
    lease and you have to pay for it if the lease is going to
    issue. You end up in, for example, I have one lease that has
    been tied up now for over four years in litigation, and I have
    two others that are in the similar circumstances.
        Mr. Coffman. OK. Mr. Campbell, again I believe that you
    have 19 employees in Colorado?
        Mr. Campbell. That includes two field people in Vernal and
    one person in Texas.
        Mr. Coffman. As a small business, can you tell me what does
    an increase in rental rates and bonus fees and the addition of
    a production incentive fee mean to your company? How would that
    affect your ability to acquire lease holds, your drilling
    budget, and your business model?
        Mr. Campbell. As I indicated, my Utah properties were
    significantly under water at this point. Even at our best with
    a 20 percent--excuse me--with a 20-cent per mcf profit, we have
    to focus on our cost accounting all the time. Even though they
    sound like small incremental adjustments, certain of those
    adjustments are, you know, a doubling almost of fees from my
    perspective, and they impact my bottom line dramatically. If I
    have to make a choice between an investment on a public
    property or private property, depending on the fees, it may
    steer me in a different direction.
        Mr. Coffman. Again, Mr. Campbell, the oil and gas industry
    is often criticized for not diligently developing on Federal
    leases. MMS reports last year that about 60 percent of leases
    are nonproducing. Are you concerned with the attempts by
    Congress and DOI to slow the leasing process when companies
    already seem to have plenty of leases?
        Mr. Campbell. I can speak to my own database. Of
    approximately 190,000 acres that we hold that are public lands,
    75 percent of those are producing. I have 25 percent remaining,
    of which would be developed or in the process of being explored
    but for the regulatory process I spoke of impeding me from
    continuing to move forward to drill those lands. So I am not
    sure where to get that data. I can only speak from my own
    database.
        Mr. Coffman. Why do companies not always immediately
    develop leases that they hold? Is there a reason why some
    companies sit on leases? Does litigation play a role in this?
    And if it does, can you give me an idea of about how many
    leases were protested last year, Mr. Campbell, and if anyone
    else would like to answer that?
        Mr. Campbell. That is a very good question, sir. It is a
    multiple part question.
        First, as I tried to explain in my testimony, when you are
    able to acquire a lease several things have to happen. You have
    to do the geologic, geophysical analysis to determine where
    best to drill, and it takes time. That also takes money. That
    is another component. You have to raise the funds necessary to
    finance this very expensive operation. A typical well for me in
    Utah will run anywhere from three to four million dollars. That
    includes buying the lease, drilling the well, completing the
    well, and connect it to a pipeline.
        Litigation plays a significant role in how we analyze our
    risk when we go to develop properties. If I have a lease
    potential for litigation, then I may not make that investment
    in the lease and the next two phases as far as the geophysical
    assessment and the drilling because I do not know what the
    probability is of the outcome of the litigation.
        Mr. Coffman. Anybody else care to answer?
        Mr. Morris. Let me add to that. I think sometimes we
    confuse nonproducing with inactive. Reality is only a small
    percentage of leases are going to have commercial quantities of
    oil and gas, but it takes several years to make that
    determination. Our analysis of the offshore leasing shows that,
    in any given year, there are about 20 percent that are
    producing. There is about a 12 percent return back to the
    government, and the rest of them are in some stage of
    development. So inactive and nonproducing, there is a little
    bit of confusion on those terms because even if they are
    nonproducing companies are actually out doing work, committing
    resources and funds to determine whether or not there are
    commercial quantities of oil and gas.
        Thank you, Mr. Chairman. I yield back.
        The Chairman. The gentleman from Utah, Mr. Bishop.
        Mr. Bishop. Let me just say I am going to submit some
    questions for the record. The first gentleman whose name I
    could not pronounce even if I could see it from there, I do
    want to know how you talked about the consolidation in this new
    office would retire new development of renewable energies. I
    would like specifically that addressed in a written form, if I
    could. Same thing for Mr. Morris. You talked about the regional
    councils being a redundancy, and could they indeed be
    politicized. I would like that kind of response.
        Mr. Campbell, I noticed that yesterday Secretary Salazar
    said that the leases, 77 controversial leases in Utah were moot
    because they were too close or adjacent is actually the word he
    said to national parks. I understand you had four of those
    leases that were canceled, and I believe, if I am correct, your
    lease are over 80 miles away from the national park.
        Mr. Campbell. That is correct, sir.
        Mr. Bishop. I would like those. I would like to also ask
    you specifically to comment on categorical exclusions and how
    the business community views those as why they are there, and
    if that is indeed an end run around environmental analysis or
    not. And we have to vote so I will cut it off right there.
    Those will be coming. Thank you, sir.
        Mrs. Lummis. Mr. Chairman, thank you. I too will submit my
    questions, and ask you to respond in writing. Dr. Stover, I
    would just like to welcome you as a fellow Wyomingite to the
    Committee, and ask you if you would not mind in writing to
    explain what regulatory framework currently overseas your
    uranium mining to ensure that environmentally sound production
    occurs.
        I asked a witness on the last panel to explain what
    incentives the bill provides for uranium exploration in the
    United States. I would love to have you take a stab at that
    question, and answer it in writing if you would be so kind.
        Mr. Morris, would you be willing to submit in writing a
    little response to an assertion that was made earlier? The bill
    supports an assumption that categorical exclusions are utilized
    by land management agencies to allow for the circumvention of
    NEPA requirements by oil and gas producers. So I am interested
    in your reaction to that assertion.
        Mr. Mataczynski, you expressed concerns in your testimony
    with several provisions of the legislation. I would like to
    know if you would agree that if the bill were enacted as
    currently drafted it would put at risk the progress that has
    been made toward expanding the leasing and development of
    renewable resources in America. Thank you.
        And I know that Mr. Faleomavaega--I can never pronounce his
    name either--has left, but I share some of his concerns about
    the way that Indians are treated differently from non-Indians
    within the Department of the Interior with regard to mineral
    valuation rules, and so I will visit with him. If the bill
    moves to markup, I would like to work with him to try and co-
    sponsor something that says unless the Indians exempt
    themselves, that mineral valuations between non-Indian and
    Indian mineral royalties will be the same, because the Indians
    have had to fight for like 15 years to get their mineral
    valuation rules to confirm to non-Indian rules, and the non-
    Indian rules were better for the government, and they should
    have the same advantages for tribal governments that non-
    Indians have for their government. So thank you, Mr. Chairman.
        The Chairman. Thank you. Gentlemen, we appreciate your time
    and patience with us today, and thank you for your testimony.
    The Committee stands adjourned.
        [Whereupon, at 12:47 p.m., the Committee was adjourned.]

        [Additional material submitted for the record follows:]

        [The prepared statement of Congressman Adrian Smith
    follows:]

     Statement of The Honorable Adrian Smith, a Representative in Congress
                           from the State of Nebraska

        There are a number of challenges facing domestic oil and gas
    production, and I thank you, Mr. Chairman, for holding this hearing
    today. While I appreciate your commitment to address a path to energy
    development--the most important issue within this Committee's
    jurisdiction--I do have serious concerns with the proposed legislation,
    the Consolidated Land, Energy, and Aquatic Resources Act of 2009 (H.R.
    3534).
        During my time in Congress a number of energy bills have been
    introduced which, on the surface, seem to encourage the further
    development of our nation's energy portfolio. The means by which they
    seek to do this, however, would imperil our nation's energy supply by
    raising taxes and imposing duplicative, cumbersome regulations on
    domestic oil and gas industries. Policies which force a decrease in
    production would have a devastating effect on our economy just as it
    struggles to recover.
        Unfortunately, the Consolidated Land, Energy, and Aquatic Resources
    Act of 2009 (H.R. 3534) is one such bill, and falls short of addressing
    the need to facilitate public access to domestic sources of energy.
    Instead, H.R. 3534 creates new levels of bureaucracy which inevitably
    will slow new American energy. And all the while, the current
    Administration has independently postponed plans for new offshore
    energy development. Now is not the time to further delay the
    advancement of American's energy. Such policies stifle our economy,
    which is especially crippling given our global competition.
        Finding solutions to our country's dependence on foreign energy is
    a top priority for me. As a member of this Committee, I am committed to
    promoting policies which secure America's position as a world leader
    new in energy technology without putting consumers in jeopardy. While I
    strongly support programs to enhance alternative and renewable energy,
    I also am very encouraged by the investments in innovation and
    technology by the oil and gas industry.
        Again, I thank you Mr. Chairman for holding this hearing, and I
    look forward to working with you to improve this bill. Also, Mr.
    Chairman, I would like to thank all of our witnesses, especially The
    Honorable Ken Salazar, Secretary of the U.S. Department of the
    Interior. His role is critical to moving forward with a national energy
    policy, and Mr. Secretary, I look forward to your upcoming visit to
    Western Nebraska.
                                     ______

        [A statement submitted for the record by Kathy DeCoster,
    Vice President and Director of Federal Affairs, The Trust for
    Public Land, follows:]

     Statement submitted for the record by Kathy DeCoster, Vice President
    and Director of Federal Affairs, The Trust for Public Land, in Support
          of Land and Water Conservation Fund provisions of H.R. 3534

        Chairman Rahall and Honorable Members of the Committee:
        I would like to thank you, Mr. Chairman, for the opportunity to
    present this testimony today on behalf of The Trust for Public Land
    (TPL) in support of Title IV of H.R. 3534, the Consolidated Land,
    Energy, and Aquatic Resources (CLEAR) Act. This title would provide
    extended, full, and dedicated funding to the Land and Water
    Conservation Fund (LWCF), the nation's premier land protection program.
        Since 1972, TPL has worked in communities across the country to
    assist national, state, and local public agencies, private landowners
    and concerned citizens working to protect our country's heritage of
    natural, cultural, recreation and other vital resource lands. Our work
    runs the spectrum of conservation initiatives: creating community
    gardens to help revitalize urban neighborhoods; preserving working
    forests with public and private partners; maintaining wildlife
    corridors and enhancing public recreation opportunities in state parks;
    and acquiring critical inholdings in the magnificent landscapes that
    lie within federal boundaries.
        In total, TPL has completed more than 4,000 land conservation
    projects that together have protected some 2.5 million acres in 47
    states. Roughly one-third of these special places were conserved either
    through outright federal acquisition of lands or easements, or through
    federal assistance to state and local governments.
        That is why we are excited and grateful that Chairman Rahall has
    introduced legislation that, among other provisions, would provide
    extended, full, and dedicated funding to LWCF. The program provides
    funds to the Bureau of Land Management, the U.S. Fish and Wildlife
    Service, the National Park Service, and the U.S. Forest Service to
    acquire priority inholdings and other areas within established
    boundaries from willing sellers. When Congress acts on this committee's
    legislation to establish new federal units or expand boundaries, LWCF
    is often the actual source of federal funding used to protect these
    lands. Congress has appropriated LWCF funds to protect Civil War
    battlefields and other historic sites, the Appalachian and Pacific
    Crest national trails, recreational access sites for anglers and
    hunters in Montana, Wyoming, and Colorado, important wildlife habitats
    in diverse settings from New Jersey to Hawaii, and stretches of
    forestland critical to clean water supplies from California and
    Washington to New Hampshire and West Virginia.
        The stateside part of the program ensures Americans have close-to-
    home places for recreation, outdoor education, and healthy play. Over
    the history of the program, more the 41,000 projects in every state and
    almost every county have received stateside grants. These grants also
    bring in significant non-federal contributions; a total federal
    investment of $3 billion has leveraged more than $7 billion in matching
    funds. A stateside LWCF grant helped the Town of Dunstable,
    Massachusetts protect 149 acres of rolling forestland and an adjoining
    historic home. Stateside funds were an essential part of land
    protection in Maine's famed 100-Mile Wilderness, the northernmost and
    wildest stretch of the Appalachian Trail. There are countless examples
    of stateside projects providing recreational, economic, and health
    benefits to communities across the country.
        The economic benefits of land conservation cannot be overstated,
    particularly during recessions. A 2006 report from the National Parks
    Conservation Association determined that visitors spend over $11
    billion annually in and around national parks supporting 267,000 jobs.
    The U.S. Fish and Wildlife Service reported in a 2006 national survey
    that 87.5 million hunters, anglers, and wildlife watchers spent more
    than $122 billion on their activities (travel, equipment, licenses, and
    land ownership or leasing). In addition to visitation, expenditures,
    and jobs, land conservation improves housing values through nearby
    access to recreation and by preserving the historic, scenic, and rural
    characteristics of many towns and counties.
        For nearly 45 years, LWCF has been the cornerstone that sustains
    our federal public lands heritage and remains a compelling program.
    Interior Secretary Salazar said it well earlier this year: ``I believe
    we can also find common purpose in a vision for land conservation that
    President Kennedy first dreamed in [the early 1960s]. President
    Kennedy's idea was simple: We should be using the revenues we generate
    from energy development and the depletion of our natural resources for
    the protection of other natural resources, including parks, open space,
    and wildlife habitat.'' TPL supports the continued quest to fulfill
    this vision.
        Full and dedicated funding for LWCF as proposed in the legislation
    would enable federal agencies and state and local governments to better
    meet every year the growing needs of an expanding population for clean
    water, healthy outdoor activity, and economic vitality. Unfortunately,
    for nearly every year of the program's history, congressional
    appropriations have not reached the full authorization of $900 million.
    Because of this key properties available for conservation from a
    willing seller for a limited time are not protected and unique natural,
    recreational, historical, cultural, and ecological resources are lost.
        The promotion of LWCF as highlighted in this testimony and by the
    legislation introduced by Chairman Rahall will determine the fate of
    our nation's most treasured public lands and our local communities'
    real needs. Just as much, they make a real difference in the lives of
    countless Americans. Whether we walk in a local park, cross-country ski
    through a protected forest, hike on a trail, or canoe across a lake or
    a bayou, our daily lives are healthier and reinvigorated by the public
    land experiences these programs foster.
        The Trust for Public Land will continue to invest its resources to
    protect our nation's natural, cultural and recreational heritage. As
    ever, we are deeply thankful for the Committee's recognition of the
    importance of these efforts. We urge you to renew the investment in
    these programs and stand ready to work with you to accomplish great
    things.
        Thank you for your consideration of this testimony.
                                     ______

        [A letter submitted for the record by the Land and Water
    Conservation Fund Coalition follows:]

          Statement of the Land and Water Conservation Fund Coalition

        Chairman Rahall, Ranking Member Hastings, and distinguished members
    of the Committee, we appreciate the opportunity to submit testimony
    regarding H.R. 3534, the Consolidated Land, Energy and Aquatic
    Resources (CLEAR) Act of 2009. As conservation and recreation
    organizations from across the country concerned with conserving
    America's natural, recreational, and cultural resources and heritage,
    we wish to express our strong support for the provision included in
    Title IV of H.R. 3534 to provide full and dedicated funding of the Land
    and Water Conservation Fund (LWCF).
        As you know, the LWCF is America's most important tool for
    acquiring lands within our national parks, forests, refuges, BLM and
    other federal lands and for supporting acquisition, expansion and
    development of state and local parks. From the New River Gorge National
    River (WV) to the Appalachian National Scenic Trail, from Sleeping Bear
    Dunes National Lakeshore (MI) to Channel Islands National Park (CA),
    from Cape May National Wildlife Refuge (NJ) to the Fredricksburg and
    Spotsylvania National Military Park (VA), LWCF funding has helped
    acquire and protect some of our nation's most cherished and iconic
    public landscapes.
        The LWCF state assistance grants helps states and local communities
    protect parks, trails, recreation fields and other park facilities.
    Running the gamut from wilderness to neighborhood playgrounds, the LWCF
    has supported projects in almost every county in America providing
    matching funding to over 41,000 projects. From Brooklyn's Coney Island
    Board Walk, to Griffith Park in Los Angeles, from Myrtle Beach State
    Park (SC) to Rangeley Lake State Park (ME), from the Patuxent River
    Greenway (MD) to Tualatin Hills Nature Park (OR), and thousands of
    places in between, LWCF projects provide partnerships with communities
    to ensure that families have everyday access to parks and open space,
    hiking and riding trails, and neighborhood recreation facilities.
        The LWCF is a visionary and bipartisan program. It was created by
    Congress in 1965 and is authorized to receive $900 million annually in
    federal revenues from oil and gas leasing of the Outer Continental
    Shelf (OCS). It made good economic and environmental sense in 1965, and
    it remains good sense today, to reinvest a small fraction of federal
    leasing revenues in permanent natural resource protection
        Despite this decades-old promise, the LWCF program has been
    chronically underfunded. It has received full funding only once in its
    history and in recent years has steadily declined to a low in
    appropriated funding of $155 million in 2008. Full and dedicated
    funding is needed for the LWCF to fulfill its congressionally mandated
    purpose. If enacted, this provision will provide the necessary level of
    federal investment in parks, trails, refuges, forests, spaces, and
    historical and cultural resources across the nation. We are delighted
    that Chairman Rahall has provided the leadership to include this Title
    IV provision in HR3534.
        Parks and other public lands enhance the economic vitality and
    quality of life of our communities, making them places where people
    want to live, as well as vacation destinations. Our communities enjoy
    innumerable benefits from proximity to protected forests, parks,
    trails, refuges, and other areas for hiking, picnicking, hunting,
    fishing, mountain biking, camping, wildlife viewing, paddling, and
    mountain climbing. A renewed investment in the LWCF and public land
    protection is crucial to ensure this legacy.
        Increasingly, it is recognized that a healthy environment and
    abundant recreational opportunity not only promote human health and
    quality of life, but also are good for the economy. The Outdoor
    Industry Association reports that active outdoor recreation activities
    generate $730 billion in revenues annually to our nation's economy and
    support 6.5 million (1 in 20) jobs. Further, the U.S. Fish and Wildlife
    Service estimates that over 87.5 million people engage in wildlife-
    related recreation each year and that hunting, fishing and wildlife-
    watching combined generates over $122 billion annually to the U.S.
    economy.
        Conserving forests, watersheds, and wetlands has other significant
    social and economic benefits, among them ensuring clean, adequate, and
    affordable drinking water supplies for our communities. In addition, it
    is becoming increasingly clear that conserving our forests, which
    currently store upwards of half the carbon emitted each year, is
    critical in the fight against climate change. Strategic land
    conservation also provides an important tool to manage wildfires and
    reduce the costs of fire fighting surrounding our communities. And,
    whether it is a visit to a local playground or an outing to a national
    park, getting outdoors connects families, promotes a healthy lifestyle,
    and builds community.
        As the Committee considers H.R. 3534, we urge you to retain in any
    final legislation this important Title IV provision to secure full,
    permanent and dedicated funding of the LWCF. Mr. Chairman, we applaud
    your leadership in including this provision in the bill and appreciate
    your support and that of other Committee members to protect America's
    most treasured landscapes, strengthen our local economies, and ensure
    the future of our natural, cultural, and recreation heritage. We pledge
    the full support of the LWCF Coalition and our many partners across
    America towards the enactment of this provision. We look forward to
    working with the Chairman and Committee to bring the vision of LWCF to
    reality, at long last.
        Thank you,
    National and Regional Partner Organizations:
    The Access Fund
    American Canoe Association
    American Hiking Society
    American Forests
    American Whitewater
    Appalachian Mountain Club
    Appalachian Trail Conservancy
    Center for Biological Diversity
    Choose Outdoors
    The Conservation Fund
    City Parks Alliance
    Civil War Preservation Trust
    Eastern Forest Partnership
    The Forest Guild
    Highlands Coalition
    International Mountain Bicycling Association
    National Park Trust
    National Parks Conservation Association
    National Recreation and Park Association
    National Wildlife Refuge Association
    The Nature Conservancy
    North Country Trail Association
    Northern Forest Alliance
    Northern Forest Center
    Outdoor Alliance
    Outdoor Industry Association
    Outdoors America
    Pacific Crest Trail Association
    Pacific Forest Trust
    Partnership for the National Trails System
    Rocky Mountain Elk Foundation
    Sierra Business Council
    Southern Appalachian Forest Coalition
    Southern Appalachian Highlands Conservancy
    Sporting Goods Manufacturers Association
    The Trust for Public Land
    The Wilderness Society
    Western Resource Advocates
    World Wildlife Fund
    State and Local Partner Organizations:
    Aiken County Parks, Recreation, and Tourism (SC)
    Aiken Land Conservancy (SC)
    Amigos de la Sevilleta (NM)
    Association of Northwest Steelheaders (OR)
    Audubon Society of Portland (OR)
    Audubon New Mexico (NM)
    Androscoggin Land Trust (ME)
    Androscoggin River Watershed Council (ME)
    Angel Island Immigration Station Foundation (CA)
    Brandywine Conservancy (PA)
    Boston Harbor Island Alliance (MA)
    California Cultural Resources Preservation Alliance
    California Parks Foundation
    California State Coastal Conservancy
    Carolina Mountain Land Conservancy (NC)
    Central Coast Land Conservancy (OR)
    Chattanooga Parks & Recreation (TN)
    Chickasaw-Shiloh RC&D Council, USDA-NRCS (TN)
    Cumberland Trail Conference (TN)
    City of Berlin (NH)
    City of San Jose (CA)
    Crystal Cove Alliance (CA)
    Center for Native Ecosystems (CO)
    Colorado Council of Land Trusts (CO)
    Colorado Environmental Coalition (CO) Parks and Recreation
    City of Barnwell (SC) Parks and Leisure Services
    City of Hartsville (SC)
    Cultural and Leisure Service Department
    City of Myrtle Beach (SC)
    Charleston County Park and Recreation Commission (SC)
    Coastal Conservation League (SC)
    Connecticut Audubon Society (CT)
    Chateauguay--No Town Conservation Project (VT)
    Clinch Coalition (VA)
    The Chewonki Foundation (ME)
    The Cohos Trail Association (NH)
    Chattanooga Parks & Recreation (TN)
    Damariscotta River Association (ME)
    Delaware River Greenway Partnership (PA)
    Deschutes Land Trust (OR)
    Easton Conservation Commission (NH)
    El Camino Real de Tierra Adentro Trail Association (NM)
    Edisto Island Open Land Trust (SC)
    Elk River Land Trust (OR)
    The Forest Guild (ME)
    Friends of Acadia (ME)
    Friends of Rachel Carson National Wildlife Refuge (ME)
    Friends of Unity Wetlands (ME)
    Friends of Las Vegas National Wildlife Refuge (NM)
    Friends of Wallkill National Wildlife Refuge (NJ)
    Forest Trust (NM)
    Friends of Congaree Swamp (SC)
    Friends of Santee National Wildlife Refuge (SC)
    Friends of Assabet River National Wildlife Refuge (MA)
    Fr iends of Pondicherry & Friends of Silvio O. Conte National Wildlife
    Refuges (NH)
    Friends of Potomac River Refuges (VA)
    Friends of Virgin Islands National Park (VI)
    Fayette County Rod & Gun Club (TN)
    The Freshwater Trust (OR)
    Friends of the Columbia Gorge (OR)
    Friends of the Cumberland Trail State Park (TN)
    Friends of the New River Gorge National River (WV)
    Friends of Radnor Lake (TN)
    Friends of Tennessee National Wildlife Refuge (TN)
    Grand Canyon Trust
    Grand Canyon Wildlands Council
    Great Old Broads for Wilderness (CO)
    Georges River Land Trust (ME)
    Great Pond Mountain Conservation Trust (ME)
    Greater Lovell Land Trust (ME)
    Greater Worcester Land Trust (MA)
    Recreation and Community Services Georgetown County (SC)
    Goose Creek Parks and Recreation (SC)
    Greenbelt Land Trust (OR)
    Greenville County Recreation District (SC)
    Greensboro Land Trust (VT)
    High Country Citizens' Alliance (CO)
    Houston Parks Board (TX)
    Harris Center (NH)
    Irmo Chapin Recreation Commission, Columbia, SC
    Kent Land Trust (CT)
    Kittery Land Trust (ME)
    The Land Conservancy of New Jersey
    Lancaster County Parks and Recreation (SC)
    Lexington County Recreation and Aging Commission (SC)
    Litchfield Garden Club (CT)
    Los Angeles Parks Foundation (CA)
    McKenzie River Trust (OR)
    Monadnock Conservancy (NH)
    Mahoosuc Land Trust (ME/NH)
    Maine Audubon
    Maine Coast Heritage Trust
    Maine Recreation and Park Association
    Mass Audubon
    Massachusetts Land Trust Coalition
    Montgomery County Lands Trust (PA)
    Narrow Ridge Earth Literacy Center (TN)
    Natural Resources Council of Maine
    New Hampshire Association of Conservation Commissions (NH)
    New Hampshire Recreation and Park Association (NH)
    New Hampshire Preservation Alliance (NH)
    New Jersey Highlands Coalition
    New Mexico Audubon
    New Mexico Wildlife Federation
    New River Alliance of Climbers (WV)
    Ne w York State Office of Parks, Recreation and Historic Preservation
    (NY)
    Nonotuck Land Fund, Inc (MA)
    Northeast Wilderness Trust (MA)
    NorthWoods Stewardship Center (VT)
    Oregon Council Trout Unlimited
    Oregon Habitat Joint Venture
    Oregon Natural Desert Association
    Oregon Recreation & Park Association
    Park Pride Atlanta (GA)
    Peninsula Open Space Trust (CA)
    Placer Land Trust (CA)
    Pleasant River Wildlife Foundation (ME)
    Portland Trails (ME)
    Portland Parks Foundation (OR)
    Richland County Recreation Commission (SC)
    Randolph Town Forest Commission (NH)
    Rio Grande Agricultural Land Trust (NM)
    San Diego River Coalition (CA)
    Save Crows Nest (VA)
    Sempervirens Fund (CA)
    SEWEE Association (SC)
    Sheepscot Valley Conservation Association (ME)
    Skylands Sierra Club (NJ)
    Sierra Club, Maine Chapter
    Society for the Protection of New Hampshire Forests (NH)
    South Carolina Recreation and Parks Association
    Southern Environmental Law Center (VA)
    Southwest Environmental Center (NM)
    Southern Oregon Land Conservancy
    Southern West Virginia Convention and Visitors Bureau
    Stowe Land Trust (VT)
    Sumter County Recreation and Parks (SC)
    Tennessee Ornithological Society (TN)
    Tennessee Parks & Greenways Foundation (TN)
    Tri-County Community Action Programs (NH)
    Upstate Forever (SC)
    Vermont Land Trust
    Vermont Natural Resources Council
    Vermont Woodland Owners Association
    Virginia Forest Watch
    Virginia Wilderness Committee
    Virginia Native Plant Society
    Volunteers for Outdoor Colorado (CO)
    Wallowa Land Trust, Inc.(OR)
    Western Rivers Conservancy (OR)
    Western Foothills Land Trust (ME)
    Western Pennsylvania Conservancy (PA)
    White Mountains Conservation League (AZ)
    West Virginia Mountain Bike Association
    West Virginia Professional River Outfitters
    West Virginia Park and Recreation Association
    WildEarth Guardians (NM)
                                     ______

        [A letter submitted for the record by Patrick Lyons,
    President, Western States Land Commissioners Association,
    follows:]

    September 17, 2009

    Dear Representatives Rahall, Hastings, Costa and Lamborn

    Re: House Natural Resources Committee hearing of September 1617, 2009

        On behalf of the Western States Land Commissioners Association
    (WSLCA) member States and their beneficiaries, please enter this letter
    into the record of the September 16 and 17, 2009, House Natural
    Resources Committee hearing covering pending energy and land
    conservation legislation. The WSLCA member agencies in 23 States manage
    several hundred million acres of surface, subsurface and submerged
    State trust lands for the benefit of public schools and other public
    institutions.
        The following three issues are of particular concern:
        (1)  States having onshore federal lands, as well as those States
    adjacent to federal offshore lands, urge that State revenue sharing be
    extended to renewables, in addition to development under the Mineral
    Leasing Act and geothermal energy, which are addressed in existing law.
    This would be consistent with the spirit of the Mineral Leasing Act,
    which acknowledged State expenditures for public infrastructure and
    public services in support of development, while States could not tax
    federal land to support those expenditures.
        (2)  Consistent with transparency and prevention of any conflicts
    of interest, the Inspector General's responsibilities should continue
    to focus on department-wide oversight and audits of suspected problem
    areas, rather than taking on a new primary auditing role. Some of our
    member states such as Texas have ensured that financial management
    functions such as royalty reporting, audit and collections are separate
    and apart from lease management and administrative functions. We urge
    that you take a similar approach at the federal level.
        (3)  As a longstanding, strong supporter of the Land and Water
    Conservation Fund (LWCF), the WSLCA appreciates efforts to obtain full
    funding for both the federal and Stateside of the program. Among other
    purposes, this fund can buy State trust land inho1dings in federal
    conservation areas, allowing trust lands to generate income for
    education and other public services as originally intended and enabling
    conservation areas to serve their authorized purposes. Stateside LWCF
    funds are also highly valued by our sister agencies for public
    recreation.
        Thank you for your consideration of these comments.

    Sincerely,

    Patrick Lyons
    President
    Western States Land Commissioners Association
    310 Old Santa Fe Trail
    Santa Fe, NM 87501
                                     ______

        [A statement and report submitted for the record by The
    Nature Conservancy follow:]

          Statement submitted for the record by The Nature Conservancy

        Mr. Chairman and members of the Committee, I appreciate this
    opportunity to present The Nature Conservancy's recommendations for
    H.R. 3534. My name is Robert L. Bendick, Jr. and I am the Director of
    U.S. Government Relations at the Conservancy.
    Introduction
        The Nature Conservancy is an international, non-profit conservation
    organization working around the world to protect ecologically important
    lands and waters for nature and people. Our mission is to preserve the
    plants, animals and natural communities that represent the diversity of
    life on Earth by protecting the lands and waters they need to survive.
    We are best known for our science-based, collaborative approach to
    developing creative solutions to conservation challenges. Our on-the-
    ground conservation work is carried out in all 50 states and more than
    30 foreign countries and is supported by approximately one million
    individual members. We have helped conserve nearly 15 million acres of
    land in the United States and Canada and more than 102 million acres
    with local partner organizations globally.
        We believe this is an extremely important piece of legislation for
    the future of America's lands and waters. Our testimony focuses on
    three sections of the bill that are particularly important to the
    Conservancy's mission of ``preserving the plants, animals and natural
    communities that represent the diversity of life on Earth by protecting
    the lands and waters they need to survive'':
        1.  Full and dedicated funding for the Land and Water Conservation
    Fund;
        2.  The siting of energy facilities and the overall use of revenues
    derived from such siting for conservation purposes; and
        3.  Creation of an Ocean Resources Conservation and Assistance Fund
    and the adoption of planning and coordination processes for the
    effective management of ocean resources.
        We commend Chairman Rahall and the Committee for including these
    provisions in the bill. Taken together, they can play a critical role
    in the conservation of America's watersheds, natural areas and marine
    ecosystems for their many long term benefits to our society.
    Land and Water Conservation Fund
        The Nature Conservancy strongly and enthusiastically supports
    Chairman Rahall's commitment to fully fund the Land and Water
    Conservation Fund (LWCF). This is the most significant proposal to
    invest in federal land protection in nearly a decade and can be an
    important step to a comprehensive program to conserve by various means
    America's most significant watersheds, ecosystems and metropolitan
    greenways.
        More specifically, Title IV of H.R. 3534 would provide full,
    permanent and dedicated funding for the LWCF, the principal source of
    land acquisition funding for the National Park Service, U.S. Fish and
    Wild Service, Bureau of Land Management and the U.S. Forest Service.
    Such an action would accelerate the fulfillment of the President's
    promise to fully fund LWCF by FY14. It would also provide core funding
    to fulfill Secretary of the Interior Ken Salazar's call for a renewed
    commitment to protecting our nation's treasured landscapes. Funding of
    the State side of LWCF would allow state governments to match their own
    ongoing conservation funding initiatives and would allow the states to
    play an even more significant role in protecting natural areas for
    their multiple benefits and in providing places for outdoor recreation
    for America's families.
        The U.S. has been a leader in conservation for well over a century.
    Even during the struggles of the Civil War, President Lincoln provided
    protection for Yosemite Valley. In 1872, the Congress set aside
    Yellowstone National Park as the world's first national park. And at
    the turn of the last century, President Theodore Roosevelt created
    numerous National Monuments, National Forests and the first national
    wildlife refuge.
        In 1965, responding to a commission created by President Eisenhower
    and legislation proposed by President Kennedy, Congress created the
    Land and Water Conservation Fund to provide a reliable source of
    funding to conserve landscapes throughout the nation. Since then, it
    has been the source of funding for numerous federal protected areas,
    including West Virginia's Monongahela National Forest and Canaan Valley
    National Wildlife Refuge, Washington's North Cascades National Park,
    Colorado's Great Sand Dunes National Park, Montana's Rocky Mount Front
    Conservation Area, Florida's Everglades National Park, the Appalachian
    National Scenic Trail and a host of other irreplaceable components of
    our natural heritage.
        We are, today, faced with unprecedented threats to the integrity of
    natural, recreational, scenic, and cultural resources and the long-term
    conservation of our nation's lands and waters. From our nation's cities
    and metropolitan areas to remote backcountry locations, Americans
    depend on natural areas, working landscapes and cultural sites in
    fundamental and diverse ways. Accelerating climate change, continuing
    population growth, development and other land-use pressures,
    alternative and traditional energy production, constrained federal and
    state budgets, and the increasing separation of young people from
    experiences with nature all demand rapid action if our most important
    lands and waters are to be protected.
        The need to invest in land conservation is well appreciated by
    voters throughout the nation. Last November, nearly three-fourths of
    state and local ballot measures for new land and water funding were
    approved, authorizing $8.4 billion in new land and water conservation
    investments. Yet, there continue to be unmet conservation needs in
    federal conservation areas and in many of our states.
        The Conservancy also looks forward to working with other groups and
    in other forums to meet the promise of ``Great Outdoors America,'' the
    recent report of the Outdoor Resources Review Group.'' The honorary
    Chairmen of the group are Senators Jeff Bingaman (D-NM) and Lamar
    Alexander (R-TN). Among the key recommendations of this report is to
    fund LWCF at $3.2 billion, the present inflation adjusted value of its
    1978 authorization level of $900 million.
        There is a national need for expanded and new land and water
    programs to conserve the network of natural lands and waters,
    recreational open spaces, working landscapes, urban and metropolitan
    parks, and cultural and historic sites that:
          Provide a foundation for our economy through sustainable
    jobs, including within working rural landscapes of forest and
    agricultural lands and in the expanding tourism and recreation
    industries. (A more detailed description of the economic and other
    benefits of land conservation is attached).
          Provide sufficient clean water and other ecological
    services for a growing U.S. population.
          Help ecosystems withstand the impacts of climate change
    so that they can continue to provide habitat for the full range of
    native species and serve the needs of human communities.
          Provide access to outdoor recreation and healthy exercise
    for every American from young people living in cities and suburbs to
    hunters and fishermen seeking traditional outdoor activities.
          Reflect the natural and historic heritage and cultural
    diversity of the American people.
        Full and dedicated funding of the Land and Water Fund through this
    legislation would be an immensely important step forward, but in itself
    it is not sufficient to create the network of healthy natural areas and
    metropolitan greenspaces needed to sustain the character and quality of
    the lives of all Americans. A revitalized Land and Water Conservation
    Fund should be the foundation for the efforts of states, federal
    agencies, local communities and non-profit organizations to work
    together to restore and conserve whole watersheds and large landscapes
    for their multiple benefits.
        The Conservancy also urges the Committee to include in any final
    legislation provisions to provide full and permanent funding to both
    the Payments in Lieu of Taxes (PILT) and Refuge Revenue Sharing
    programs. These important programs provide payments to counties where
    land has been taken off the local property tax roles and put into
    federal ownership. In some counties, protection of nationally
    significant natural resources impacts the tax base that funds local
    government services, including schools and public safety. Fully funding
    PILT and the Refuge Revenue Sharing programs would provide an important
    complement to fully funding LWCF and would honor the federal
    government's commitment to impacted communities.
        Conservation of our country's land and water is not a luxury but is
    an essential part of our economy, our health and welfare and our way of
    life. While our country has made wonderful conservation progress over
    the last hundred years, we have not yet conserved sufficient land and
    water to protect the many values of natural lands and working
    landscapes against the threats they now face. We applaud Chairman
    Rahall for his leadership in proposing to fully fund the LWCF, the core
    component of a renewed commitment to conserve landscapes throughout the
    nation.
    Energy Facility Siting
        The Nature Conservancy supports the development of renewable
    sources of energy as an important strategy to mitigate climate change
    emissions. While desirable to reduce greenhouse gas emissions,
    renewable sources of energy require much larger areas of land to
    produce the same amount of energy as the fossil sources they will
    replace. The combination of the Renewable Fuels Standard (RFS--36
    billion gallons of biofuels must be blended by 2022), a Renewable
    Electricity Standard (RES--20% of electricity must be from renewable
    sources by 2025) and a long-term cap and trade program for climate
    change will result in very significant land areas committed to
    renewable energy production. The impacts are likely to be the most
    noticeable for solar energy in the Southwest, wind energy in the High
    Plains region (with associated transmission impacts) and for biomass in
    the forests of the Southeast. We, therefore, urge that renewable energy
    development be carefully planned and that any adverse impacts to
    wildlife habitat and ecosystem functions be fully remedied. We have
    comments in four major areas with respect to onshore leasing for
    renewable energy development.
        First, we support the committee's inclusion in the bill of
    provisions that apply the ``mitigation hierarchy'' (avoid, minimize,
    compensate) to oil and gas and wind and solar leases on federal lands.
    In partnership with the Environmental Law Institute, the Conservancy
    has recently completed extensive research on the use of mitigation in
    the U.S. We believe that the rigorous application of the mitigation
    hierarchy by Federal agencies using an ecosystem framework for making
    decisions can avoid severe environmental damage and can result in the
    much more effective expenditure of compensatory funds. We urge the
    Committee to apply these same requirements for mitigation to energy
    development of all kinds on the Outer Continental Shelf and to uranium
    leases on federal lands. A comprehensive approach to mitigation using
    new and existing Federal plans as a framework for decision-making can
    both improve environmental protection and facilitate siting of
    alternative energy facilities.
        Second, we would address the issue of comprehensive planning for
    the siting of renewable energy facilities on federal lands. The
    original draft of this bill contained very thoughtful provisions that
    established a regional planning process to identify renewable energy
    zones that would minimize impacts on other uses of federal lands. These
    provisions were dropped from the introduced bill. We urge that a
    planning component be restored.
        The current process for siting renewable energy facilities is
    hampered by a lack of the necessary scientific data on biodiversity
    impacts and governmental mechanisms to employ such data in
    comprehensive plans. Currently, the decision-making process is driven
    by applications from energy developers to use particular locations for
    electricity generation (including associated infrastructure such as
    roads and transmission lines) or feedstock production. This structure
    for decision-making has at least three negative results:
          Impacts on biodiversity, especially those related to
    habitat fragmentation and severance of wildlife migration corridors,
    cannot be fully considered before the siting decision is made, greatly
    increasing the likelihood of conflict with respect to environmental
    impacts after the applications for governmental approval are filed,
    with resulting delay, uncertainty, and increased transactional costs.
          Government decision-makers are essentially trapped by the
    current approach into making isolated impact determinations on a
    sequential, site-by-site basis and are unable effectively to consider
    cumulative impacts from the development over time of multiple
    facilities in the same region.
          Facility siting decisions are not coordinated with
    transmission decisions, creating a ``chicken or egg'' problem with
    regard to the most cost-effective, time-efficient, and least impactful
    ``build out'' of renewable energy facilities and associated
    infrastructure in a given area.
        Although decisions to site facilities on federal lands generally
    offer opportunities for public input, quite often substantial
    investments have been made for leases or production rights on private
    lands before the public becomes aware of the proposed land use change.
    Attempting to modify siting decisions after leases have been signed can
    be very difficult and conflict, delays, and increased transactional
    costs may be high. Federal government incentives and mandates should
    only apply to facilities that have given notice to appropriate state
    authorities well before significant economic commitments are made on
    the project.
        It is possible to use a ``coarse'' mapping process to identify
    areas where siting should not occur at all or where conflicts with
    wildlife habitat or other land uses (e.g., recreation, military
    training and testing operations, and cultural heritage) may be
    significant. The result of such a mapping process would also to
    identify sites where conflict may be low and siting may proceed with
    some expectation of success. However, these ``go'' zones may not have
    significant capacity or the most productive renewable energy resources
    and pressure to develop other areas will continue.
        A comprehensive long-range regional planning framework should be
    developed to collect the scientific data necessary to optimally site
    renewable energy facilities, consider cumulative impacts, provide for
    the full application of the mitigation hierarchy (avoid, minimize, or
    offset) with regard to environmental impacts, and coordinate energy
    production facility development with other land uses and transmission
    development. This planning framework should include federal agencies,
    state and local officials, industry participants, environmental
    organizations, and other stakeholders. The scope should cover
    development on both public and private lands. Authorities to mitigate
    for impacts on species not already listed as threatened or endangered
    and on natural communities as a whole may need to be enhanced,
    especially for development on private lands. Government incentives and
    authorities should be used as leverage to assure that energy developers
    engage in such planning at the earliest stages of project consideration
    and comply with the planning results.
        These planning efforts should define the total capacity (load
    limits) for renewable energy production from various sources in the
    geographic region covered by the plan and should include an analysis of
    the impact of full capacity utilization on other competing land and
    resource uses in the region.
        Final site selection and operational criteria should incorporate
    the best available science on biodiversity impacts and must avoid the
    conversion of high conservation value areas. Restoration and mitigation
    (offset) expectations need to be well-defined to ensure they are fully
    integrated into the business plans of energy developers and the capital
    markets. This will require the development of new mechanisms (i.e.,
    investments in public land management and restoration in addition to
    private land acquisition) for some locations, especially in areas such
    as the Mojave with a high concentration of federal lands relative to
    state and private lands.
        The Conservancy supports the provisions of the bill that substitute
    competitive leasing for the current ``right-of-way'' decision-making
    process. A leasing framework is most appropriate in the context of a
    comprehensive planning process such as we urge above.
        The third issue we would ask you to consider is water use by solar
    thermal facilities in desert basins. Given the extremely dry conditions
    in the regions likely to host significant solar energy development,
    even the modest water requirements of dry-cooled concentrating solar
    and photovoltaic facilities may represent considerable stress on the
    limited local water resources. In addition, climate change models
    project that the desert will become even drier in the future, making
    water resources in the desert all the more precious and subject to
    overuse. Wet-cooling of solar-thermal facilities may be incompatible
    with these dry ecosystems.
        Therefore, we recommend that as a pre-condition of being granted a
    permit or lease, every solar energy developer should be required to
    submit for approval an evaluation of their water supply needs, a
    proposal for the source of that water, an assessment of potential
    impacts of their water use on biodiversity, a comprehensive water
    monitoring plan to identify any adverse impacts on the local water
    resources, and detailed mitigation measures for estimated water
    resource impacts including contingency measures for unforeseen impacts
    detected by later monitoring. As a condition for operation, the
    permitted entity should be required to pay for implementation of the
    approved water monitoring plan.
        The fourth issue with respect to renewable energy that we wish to
    address relates to the appropriate level of rental and other payments
    to require from producers who own or operate facilities on federal
    lands and waters that generate renewable energy. With respect to
    onshore wind and solar energy facilities, the bill now instructs the
    Secretary to recover an amount that 1) encourages the development of
    renewable energy, 2) ensures a fair return to the United States, and 3)
    is commensurate with similar payment for development on private lands.
    We think there may be an internal inconsistency in these goals at the
    present time.
        For instance, it is generally assumed that a royalty payment on the
    order of one-eighth of the value of oil and gas produced on federal
    land is part of an appropriate return to the American public. If a
    similar royalty rate were to be imposed on electricity generated by
    wind turbines and solar energy facilities, the Department of Interior
    would be requiring a payment to the Treasury of approximately one cent
    for every kilowatt hour generated on federal lands. At a time when
    federal policy offers a production tax credit of two cents per kilowatt
    hour to encourage the development of renewable energy, it would be a
    curious land management policy that turned right around and discouraged
    production by taking half of that tax credit away from the producer.
    And, therefore, the instruction in the bill to require a fee that
    encourages the development of renewable energy would presumably result
    in fees much lower than one cent per kilowatt hour.
        But times will change. Eventually, the costs of producing wind and
    solar energy will come down relative to the average price or
    electricity on the grid (in part because of policies that put a price
    on carbon released from fossil sources of generation) and it will not
    be necessary to provide tax incentives to stimulate generation from
    renewable sources. At that time, a royalty of some amount may be
    appropriate. However, and if the mining law is to serve us as an
    example, it may be very difficult to impose that royalty requirement
    for the first time at some point in the future for an industry that has
    by then a very substantial presence on federal land and has developed
    long-range business plans without consideration of future royalty or
    other such costs.
        Therefore, it would be our suggestion that the Committee impose an
    explicit and appropriate royalty requirement now that reflects a fair
    return to the United States, but that the bill also place a temporary
    moratorium on collecting that royalty to a specified future date when
    electricity from renewable sources is projected to be fully cost-
    competitive with electricity from fossil fuel sources.
        We believe that this approach should also be applied to wind and
    other renewable energy sources in federal waters, which under current
    policy would be required to pay a substantial royalty today.
        Finally, we believe that revenues derived from renewable energy
    production on federal lands and waters should be allocated on a formula
    basis among the states and the federal government, with specified
    purposes for which such funds may be used, including principally
    conservation and land and water management measures designed to ensure
    the long-range health of the terrestrial and aquatic ecosystems in
    which renewable energy facilities and associated infrastructure are
    located. We strongly recommend that a special trust fund be established
    with regard to a specified portion of the funds allocated to the
    federal government under such a formula approach, with the funds
    deposited in the trust fund made available on a recurring, predictable
    basis to appropriate federal land managing agencies for the specified
    purposes, including deposits to the Land and Water Conservation Fund
    over and above the current $900 million authorization or a related
    program designed to restore and conserve whole ecosystems, watersheds
    and landscapes.
    Offshore Energy Development and the Creation of an Ocean Resources
            Conservation and Assistance Fund
        The Nature Conservancy applauds the proposed creation of the Ocean
    Resources Conservation and Assistance Fund in Title VI of H.R. 3534.
    Reinvesting a portion of OCS revenues into the protection, maintenance,
    and restoration of ocean, coastal and Great Lakes ecosystems, is long
    overdue and was called for by both the Pew Ocean Commission and the
    U.S. Commission on Ocean Policy. We strongly support these provisions
    in the bill.
        In addition, the regional coordination and planning provisions for
    offshore energy development in Title VI could lead to significant
    improvements over the current processes. In particular, the ecosystem-
    based context for planning, regional approach, and greater reliance on
    spatial data and spatial planning approaches would be significant
    improvements. However, we recommend additional changes to ensure that
    regional planning maximizes ecological, economic, and social objectives
    for the allocation of ocean space, and adequately considers
    conservation priorities and ecosystem considerations.
        Specifically we suggest the following changes to Title VI:
        1.  Assessments and planning should be done to meet multiple
    objectives, moving towards comprehensive planning rather than
    continuing the single sector approach, which has led to fractured
    governance and permitting systems and no overall safeguards for the
    comprehensive protection of ocean ecosystems. Planning objectives
    should be specified to include: conserving, protecting, maintaining,
    and restoring ecosystem health; and fostering sustainable development,
    including energy resources. Ensuring the protection of marine ecosystem
    health should be an explicit, primary principle to guide planning
    processes. Councils should also be encouraged to identify and address
    other shared federal-state priorities.
        2.  To achieve science-based, multi-objective planning that
    appropriately accounts for ecosystem conditions and impacts,
    assessments and plans need to be administered jointly by
    representatives from the Department of the Interior and the National
    Oceanic and Atmospheric Administration (NOAA). The Secretaries of
    Commerce and Interior should be co-chairs of the Councils and share
    equal responsibility for appointing members and guiding and approving
    the work of the Councils.
        3.  We support stakeholder involvement in the development of
    regional plans but, we are concerned that direct participation by
    stakeholders on the Councils--particularly in the absence of any
    criteria for balanced representation of interests or other
    qualification criteria--could lead to an intractable or skewed process.
    We suggest removing the ``Other Representation'' paragraph altogether.
    However, if this paragraph remains in the bill we would be interested
    in working with the Committee to ensure appropriate structural
    safeguards are included.
        4.  The Atlantic Council, as currently structured, would include
    too many members, and cover too broad a range of marine ecology. We
    recommend creating three Councils along the Atlantic, possibly
    mirroring the boundaries of the existing regional ocean partnerships
    that have developed.
        We also note that the Administration is working to develop a
    framework for marine spatial planning. We are supportive of their
    efforts and hope that their recommendations will lead us to a more
    comprehensive, ecosystem-based approach to ocean planning. We would
    like to see this draft legislation support moving towards more
    comprehensive approaches rather than reinforcing single sector silos.
    Summary
        The provisions of H.R. 3534 discussed here are critically important
    to America's well being. This bill is about giving the American people
    the means to shape the future of the land and water so critical to the
    health of our citizens and to the character and quality of their lives.
    It is about carrying on the highly successful conservation tradition
    that film-maker Ken Burns calls in his upcoming film on our National
    Parks, ``America's best idea'' in the face of a new wave of threats
    that could undo those conservation accomplishments. It is, in this very
    difficult and contentious world, about our being responsible citizens
    and remembering at this critical period in history what Theodore
    Roosevelt said a hundred years ago:
            It is time for us now as a nation to exercise the same
            reasonable foresight in dealing with our great national
            resources that would be shown by any prudent (person) in
            conserving and wisely using the property which contains the
            assurance of well-being for (ourselves and our) children.
        Thank you for the opportunity to present The Nature Conservancy's
    recommendations for H.R. 3534, The Consolidated Land, Energy, and
    Aquatic Resources Act of 2009.

        [The attached report follows:]

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        [A statement submitted for the record by Ruth Pierpont,
    Director, Division for Historic Preservation, New York State
    Office of Parks, Recreation and Historic Preservation,
    follows:]

       Statement submitted for the record by Ruth Pierpont, Director of
        Historic Preservation, New York Office of Parks, Recreation and
      Historic Preservation, New York State Historic Preservation Office,
     President, National Conference of State Historic Preservation Officers

        I would like to thank Chairman Rahall, Ranking Member Hastings, and
    the members of the House Natural Resources Committee for the
    opportunity to provide testimony. I am Ruth Pierpont, Director of the
    Division for Historic Preservation, New York State Office of Parks,
    Recreation and Historic Preservation and President of the National
    Conference of State Historic Preservation Offices. I appreciate this
    first opportunity to present our thoughts on the proposed legislation.
        The National Conference of State Historic Preservation Officers
    (NCSHPO) is the statutorily recognized, professional association of the
    State government officials who carry out the national historic
    preservation program as delegates of the Secretary of Interior pursuant
    to the National Historic Preservation Act of 1966. The NCSHPO acts as a
    communications vehicle among the SHPOs and their staffs and represents
    the SHPOs with Congress, federal agencies and national preservation
    organizations
    NCSHPO H.R. 3534 Recommendations
        Title IV of The Consolidated Land Energy and Aquatic Resources
    (CLEAR) Act will make a dramatic difference in improving the quality of
    recreation and park land in the United States by making the Land and
    Water Conservation Fund (LWCF) a true trust fund. The NCSHPO proposes
    expanding that vision to conservation of the total environment
    including ``human habitat'' by amending the CLEAR Act to include
    permanent, guaranteed funding for the Historic Preservation Fund (HPF).
        There are many synergies between the LWCF and Historic Preservation
    Fund (HPF). Historic preservation defines and enhances those aspects of
    the man-made environment that define our heritage. Historic
    preservation and its accompanying programs and incentives encourage the
    recycling, the use and re-use of buildings, neighborhoods, Main
    Streets, urban and rural areas. In addition to the educational and
    community-build advantages of saving our heritage, historic
    preservation betters the places people live and work; it provides an
    attractive and practical alternative to turning open space into
    subdivisions and strip malls. Historic preservation facilitates
    reinvestment and stewardship initiatives for the natural environment;
    it is an essential element to the success of any comprehensive
    conservation plan. Congress, led by Senator Henry Jackson (D-WA),
    acknowledged the synergy when it created the Historic Preservation Fund
    in 1976, following the Land and Water Conservation Fund model and using
    a portion of the funds from the depletion of non-renewable petroleum
    resources for the enhancement of non-renewable historic assets. House
    Natural Resources Chairman Nick Joe Rahall, Rep. Morris Udall (D-AZ),
    Rep. George Miller (D-CA) and Rep. Don Young (R-CA) reinforced that
    synergy by including the HPF in their efforts to create permanent
    funding (American Heritage Trust, Conservation and Reinvestment Act).
        The NCSHPO supports the conversion of the HPF (16 USC 470h) into a
    permanent trust fund for the State Historic Preservation Officers and
    the Tribal Historic Preservation Officers. NCSHPO requests that the
    following language be a part of whatever bill is reported out by the
    Committee on Natural Resources, passed by the House of Representatives,
    adopted by the Congress and signed in to law.
    SEC------AVAILABILITY OF AMOUNTS.
        Section 108 of the National Historic Preservation Act (16 USC 470h)
    is amended-
              (1) By inserting ``(a)'' before the first sentence:
              (2) In subsection (a) (as designated by paragraph (1) of this
            section) by striking
                  ``There shall be covered into such fund'' and all that
            follows through ``(43 USC 1338),'' and inserting ``There shall
            be covered into such fund $150,000,000 for each fiscal year
            after Fiscal Year 2010, from revenues due and payable to the
            United States as qualified Outer Continental Shelf Revenues (as
            that term is defined in Section 4 of the Resources 2000
            Act),''.
              (3) By striking the third sentence of subsection (a) (as so
            designated) and all that follows through the end of the
            subsection and inserting ``Such moneys shall be used only to
            carry out the purposes of this Act.''; and
              (4) By adding at the end the following:
                     (b) Subject to section 5 of the Resources 2000 Act, of
                amounts credited to the fund, $150,000,000 shall be made
                available annually for each fiscal year after September 30,
                2010, to States and tribes for obligation or expenditure
                without further appropriations to carry out the purposes of
                this Act.
        Unlike the LWCF, the federal interest in heritage conservation is
    one of assistance, not acquisition. As a team effort, historic
    preservation reaches conservation goals with the private sector and
    state and local governments. The Historic Preservation Fund supports
    the identification, evaluation and protection of America's heritage by
    encouraging property owners to re-use historic places and to conserve
    archeological heritage through regulatory consideration of preservation
    in federal planning processes and through commercial redevelopment of
    historic buildings. Federal ownership, or acquisition, does not play a
    role in the national program.
    Support for HPF and SHPOs
    2009 Second Century Commission Report
        The 2009 Second Century Commission Report, released this week,
    advocates for permanent funding for the Historic Preservation Fund. The
    report states ``a permanent appropriation for the Historic Preservation
    Fund at the full authorized level is vitally important so that the NPS
    can provide financial and technical assistance to state, tribal and
    local governments, and other preservation organizations, and ensure
    that America's prehistoric and historic resources are projected within
    and beyond park boundaries.'' 1
    ---------------------------------------------------------------------------
        \1\ National Parks Second Century Commission report ``Advancing the
    National Park Idea'' September 2009, p 42
    ---------------------------------------------------------------------------
    2007 National Academy of Public Administration Report
        In December 2007 the National Academy of Public Administration
    (NAPA) released ``BACK TO THE FUTURE: A Review of the National Historic
    Preservation Program.'' NAPA, a non-profit, independent coalition of
    top management and organizational leaders, found that the National
    Historic Preservation Program ``stands as a successful example of
    effective federal-state partnership and is working to realize Congress'
    original vision to a great extent. And while the program's basic
    structure is sound, it continues to face a number of notable
    challenges.'' The Panel concluded ``that a stronger federal leadership
    role, greater resources, and enhanced management are needed to build
    upon the existing, successful framework to achieve the full potential
    of the NHPA on behalf of the American people.'' 2
    ---------------------------------------------------------------------------
        \2\ NAPA, ``BACK TO THE FUTURE: A Review of the National Historic
    Preservation Programs'' December 2007, p. 29
    ---------------------------------------------------------------------------
        Specific report recommendations included the following:
          increased funding for SHPOs to address the increased
    workload since Fiscal Year 1981 in Section 106 reviews, National
    Register eligibility opinions, tax credit reviews, and HPF grants
    administration and to redress, at least in part, the significant
    decline in inflation adjusted funding;
          the NPS expand its mission to make building the capacity
    of State Historic Preservation Officers and Tribal Historic
    Preservation Officers a top priority and that it pursue this goal
    aggressively in cooperation with its national partners; and
          the Department of the Interior and the NPS strengthen the
    performance of the National Historic Preservation program and expand
    resources based on its demonstrated effectiveness in cooperation with
    the ACHP;
    Expert Historic Preservation Panel
        Ten leaders in historic preservation from across the nation were
    selected to explore improvements in the program structure of the
    federal preservation program. In their 2009 report ``Recommendations to
    Improve the Structure of the Federal Historic Preservation Program,''
    the panel recommended fully funding the Historic Preservation Fund and
    allocating additional funds Tribal Historic Preservation Officers. The
    panel stated that ``the current $45 million (SHPO) funding level fails
    to provide adequate resources to fully address the responsibilities and
    mandates that the NHPA requires.''
    PART Audit
        Under the Administration's Program Assessment Rating Tool (PART),
    in 2003 management of historic preservation programs received a score
    of 89% indicating exemplary performance of mandated activities. The
    review also indicated that a lack of an independent evaluation of the
    program was a program deficiency. Following the PART recommendations,
    the NPS hired NAPA to conduct this review. As stated in the preceding
    NAPA report section, NAPA found the program to be successful and in
    need for increased funding to be able to meet increased workloads and
    to keep pace with inflation.
    Historic Preservation is Economic Development
        Preserving the physical reminders of our past creates a sense of
    place and community and generates a wide range of economic benefits.
    Historic preservation creates jobs, brings people to downtowns and Main
    Streets, supports affordable housing and small businesses and generates
    tax revenues while revitalizing communities and neighborhoods.
        The Federal Historic Rehabilitation Tax Incentives Program (FRTC)
    has spurred private investment on a 5 to 1 ratio and is a powerful job
    creation tool. Over $50.82 billion in private investment has been
    leveraged from its inception in 1976 and each project approved by the
    NPS creates, on average, 42 new and principally local jobs. The
    following statistics are typical of the positive findings of
    preservation's economic benefits:
          Historic preservation activities generate more than $1.4
    billion of economic activity in Texas each year.
          Each dollar of Maryland's historic preservation tax
    credit leverages $6.70 of economic activity within that State.
          Massachusetts benefits from historic preservation include
    a gain of about 87,000 jobs; $2.6 billion in income, $3.5 billion in
    GSP, $944 million in taxes.
          In New York State, $1 million spent rehabilitating an
    historic building ultimately adds $1.9 million to the state's economy.
    3
    ---------------------------------------------------------------------------
        \3\ New York Preservation League, Profiting Through Preservation
    2002 pp 6.
    ---------------------------------------------------------------------------
        Dollar for dollar, historic rehabilitation creates more jobs than
    most other investments. According to a 1997 study on the economic
    impacts of historic preservation, ``preservation's benefits surpass
    those yielded by such alternative investments as infrastructure and new
    housing construction.'' 4 In Michigan, $1 million in
    building rehabilitation creates 12 more jobs than manufacturing. In
    West Virginia, $1 million of rehabilitation creates 20 more jobs than
    mining $1 million worth of coal. 5
    ---------------------------------------------------------------------------
        \4\ Center for Urban Policy Research at Rutgers University,
    Economic Impacts of Historic Preservation 1997:11
        \5\ Rypkema publication 13, pp 11-12.
    ---------------------------------------------------------------------------
    Historic Preservation is Conservation and Sustainability
        Historic preservation can--and must--be an important component of
    any effort to promote sustainable development. The conservation and
    improvement of our existing natural and built resources, including re-
    use of historic and older buildings, greening the existing building
    stock, and reinvestment in older and historic communities, is crucial
    to using our past to create a better future for generations to come.
        The National Historic Preservation Program and SHPOs are
    responsible for the administration of public and private initiatives
    that advance sustainability. Environmental responsibility is achieved
    in the preservation industry through reducing land development
    pressures, recycling, waste reduction, saving landfill space, saving
    energy, reducing carbon emissions and promoting renewable resources.
    The sustainable economic benefits include fiscally viable communities,
    the use local labor forces, increases in property values and tax bases
    and heritage tourism. Historic preservation also promotes social and
    cultural responsibility through creating affordable housing, giving
    people a sense of place and community and incorporating smart growth
    principles.
        According to the Smart Growth Network, ``smart growth invests time,
    attention, and resources in restoring community and vitality to center
    cities and older suburbs. It also preserves open space and many other
    environmental amenities.'' Preserving and revitalizing historic
    buildings provides a key component to smart growth and simultaneously
    reduces development pressures on land and natural resources,
    complementing the efforts of the Land and Water Conservation Fund.
    Conclusion
        Congress stated in 1966 that ``The spirit and direction of the
    nation are founded upon and reflected in its historic heritage.'' In
    1976, Congress created the Historic Preservation Fund, using proceeds
    from non-renewable resources to help secure a future for other non-
    renewable resources--our Nation's historic heritage. We look forward to
    working with the Committee to ensure full and guaranteed funding for
    the Historic Preservation Fund so that our historic heritage will exist
    fifty, one hundred or five hundred years from now.
                                     ______

        [A letter submitted for the record by Hon. Sean Parnell,
    Governor, State of Alaska, follows:]

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        [A letter submitted for the record by the Sierra Club
    follows:]

                               September 15, 2009

    US House of Representatives
    Committee on Natural Resources
    Washington DC, 20515

    Dear Representative,

        On behalf of Sierra Club's more than 1.3 million
    members and supporters, we are writing in support of H.R. 3534, the
    Consolidated Land, Energy and Aquatic Resources Act of 2009 (CLEAR
    Act). Thi legislation is an important first step in reforming energ
    development on America's public lands and the outer continental shelf.
        While we oppose any new off shore oil and gas drilling, the Sierra
    Club believes that this bill takes an important first step towards
    balancing the need for energy production, reducing the impacts of
    global warming, and the protection of the environment. The bill
    contains several provisions which we support and a few places where we
    believe improvements can still be made. We are grateful to Chairman
    Rahall for his efforts to address these issues and we look forward to
    working together to improve and pass this bill. In Titles I, II, and
    III, we are supportive of the Chairman's efforts to improve the
    transparency and accountability in the onshore oil and gas leasing and
    royalty programs. The bill will increase public participation in the
    process, eliminate non-competitive leasing, provide for the
    implementation of best management practices. Specifically, we are most
    excited that the bill will repeal Section 390 of the Energy Policy Act
    of 2005 (EPACT), which allowed important environmental laws to be
    circumvented through categorical exclusions for oil and gas leases.
        The Sierra Club supports Title IV, which provides for full and
    dedicated funding for the Land and Water Conservation Fund (LWCF) at
    the authorized annual level of $900 million. The LWCF provides critical
    federal investments in America's natural, cultural, and recreational
    heritage by acquiring and protecting public lands and developing new
    recreational facilities in the regional, state, and local parks near
    where 80% of Americans live.
        The Sierra Club also supports Title V, which will establish
    statutory authority to enable the Secretary of Interior to create a
    competitive leasing program for the permitting of renewables on
    Interior and Forest Service lands. This new program will provide needed
    clarity and certainty for an industry in need of consistent and
    predictable regulation and help move America towards a new energy
    future based on renewable sources of clean energy, while moving us away
    for dirty fossil fuels.
        However, while we are grateful for the efforts of Chairman Rahall
    to emphasize and facilitate the development of renewable energy on
    public lands, we feel that some improvements are still needed to this
    title;
          Current language is insufficient in explicitly providing
    protection for wildlife and landscape values. We believe that
    protections for such areas as wilderness quality lands and important
    wildlife migration corridors are necessary in order to properly protect
    these critical areas while also strategically guiding development
    toward properly vetted lands.
          As introduced, the bill dedicates all royalty revenues
    collected from renewable leases to the Treasury. This contrasts
    significantly with other leasing activities such as oil & gas
    permitting, where funds are distributed to a number of varying accounts
    and impacted communities. We believe that some portion of renewable
    royalty revenues should be directed towards the management and
    mitigation of the impacts associated with renewables development.
        Regarding Title VI, the Sierra Club opposes any new off shore oil
    and gas drilling, especially in areas previously protected by the
    Congressional drilling moratoria, and continue to support having the
    Department of Interior develop 5-year plans. However, we understand the
    need for long-term planning, and marine spatial planning, on the outer
    continental shelf, and support Title IV's call for regional councils,
    councils that would include stakeholders such as alternative energy
    industries, coastal tourism associations, and environmental and public
    interest organizations. The Sierra Club believes that the DOI should
    retain final decision-making authority, but feel that the regional
    councils could aid in the development of new 5-year plans. While the
    Sierra Club strongly opposes state revenue sharing we support
    establishing the Oceans Resources Conservation and Assistance Fund to
    provide grants to states and other entities for the protection of local
    ecosystems.
        Finally, the Sierra Club supports the repeal of unnecessary
    Deepwater Royalty Relief provisions. In sum, the Sierra Club supports
    the aims of Chairman Rahall and applauds him for his efforts to reform
    the current oil and gas leasing and royalty program, especially the
    repeal of Sec 390 or EPACT 2005. We support the full and dedicated
    funding of the Land and water Conservation Fund. We also support the
    effort to promote the development of renewable energy resources on
    public lands. As this legislation moves forward we look forward to
    working with the Chairman and his staff to make a few improvements and
    eventually passing H.R. 3534.

                                   Sincerely,

            Carl Pope                       Athan Manuel
            Executive Director              Director, Lands Protection
            Sierra Club                       Program
                                            Sierra Club

                                --------
        [A letter submitted for the record by Jerry R. Simmons,
    Executive Director, National Association of Royalty Owners
    (NARO), follows:]

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