[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
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\5\ GAO-05-418.
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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.
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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.
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\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
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\13\ GAO-09-74.
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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.
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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.
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\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.
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\17\ GAO-09-549.
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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
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\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,
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\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 [email protected]. 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
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\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).
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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: [email protected].)
______
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.
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\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'')
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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.
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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
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\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)
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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.
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\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)
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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.
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\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)
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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)
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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.
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\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)
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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.
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\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)
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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.
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\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)
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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.
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\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.
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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
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\3\ Copies of these documents are attached.
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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.
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\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.
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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
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\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.
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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.
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\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).
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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.
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\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.
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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.''
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\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).
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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.
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\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
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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
[email protected]
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.
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\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.
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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
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\3\ ``Analysis of Concentrating Solar Power Plant Siting
Opportunities: Discussion Paper for WGA Central Station Solar Working
Group,'' M. Mehos, NREL, July 2005
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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.
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\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.
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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.
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\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).
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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
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\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.
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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.
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\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.
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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.
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\8\ BLM used a multiple round bidding process in the Palm Springs
case, which is one of the reasons it took 18 months.
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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.
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\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.
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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.
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\1\ See http://www.awea.org/policy/regulatory_policy/pdf/
080123_AWEA_supplemental_
comments_on_USFS_draft_directives.pdf
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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.
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\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
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\3\ Congressional Research Service. Energy Tax Policy: History and
Current Issues.. http://www.ncseonline.org/nle/crsreports/08Oct/
RL33578.pdf
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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.
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\4\ U.S. Department of Energy, 20% Wind Energy by 2030 (Jul. 2008),
available at http://www1.eere.energy.gov/windandhydro/wind_2030.html.
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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.
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\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.
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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
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\7\ National Research Council, Environmental Impacts of Wind-Energy
Projects (2007) http://dels.nas.edu/dels/viewreport.cgi?id=4185
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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
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\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.
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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.
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\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.
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\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
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______
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.
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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
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\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.
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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.
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\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
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\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
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\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).
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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
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\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).
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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.
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\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).
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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
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\1\ National Parks Second Century Commission report ``Advancing the
National Park Idea'' September 2009, p 42
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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
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\2\ NAPA, ``BACK TO THE FUTURE: A Review of the National Historic
Preservation Programs'' December 2007, p. 29
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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
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\3\ New York Preservation League, Profiting Through Preservation
2002 pp 6.
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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
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\4\ Center for Urban Policy Research at Rutgers University,
Economic Impacts of Historic Preservation 1997:11
\5\ Rypkema publication 13, pp 11-12.
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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
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[A letter submitted for the record by Jerry R. Simmons,
Executive Director, National Association of Royalty Owners
(NARO), follows:]
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