[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

                               ----------
                         U.S. GOVERNMENT PRINTING OFFICE 

52-277 PDF                       WASHINGTON : 2010 

For sale by the Superintendent of Documents, U.S. Government Printing 
Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
Washington, DC 20402-0001 


















                     COMMITTEE ON NATURAL RESOURCES

              NICK J. RAHALL, II, West Virginia, Chairman
          DOC HASTINGS, Washington, Ranking Republican Member

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

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








                                CONTENTS

                              ----------                              
                                                                   Page

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

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

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














                                CONTENTS

                              ----------                              
                                                                   Page

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

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

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

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















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

                              ----------                              


                     Wednesday, September 16, 2009

                     U.S. House of Representatives

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

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

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

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

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

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

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

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

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

    Thank you Mr. Chairman.
    The specific topic of today's hearing is H.R. 3534. Under the 
schedule set by Chairman Rahall, Secretary Salazar is just the first of 
many witnesses that the Committee will hear from over the course of two 
days. This legislation needs very careful and thorough review. At a 
time our nation should be focused on creating jobs and producing more 
energy here in America, this legislation erects more roadblocks to 
energy job creation and production. For example, it creates a new 
bureaucracy, it raises the costs of producing energy with higher and 
new fees, and it potentially adds years of delay to energy development 
both offshore and on federal lands. In my view, all of this will cost 
us the high-wage energy jobs that America's economy desperately needs. 
These roadblocks impact not just oil and natural gas, but also the 
production of wind and solar renewable energy.
    It is difficult to discern how this legislation will result in more 
domestic energy production. Just as the Waxman-Markey National Energy 
Tax will drive up the cost of energy in America and send jobs overseas 
to foreign nations, this bill too fails to produce more energy and 
costs us jobs.
    The Republican ``all-of-the-above'' energy plan stands in stark 
contrast to the Democrat agenda to erect new obstacles and levy high 
taxes on more energy development in the United States. That bill, H.R. 
2846, was introduced in June and its consideration is under the 
jurisdiction of this Committee. This ``all-of-the-above'' plan has four 
main objectives:
      Increase production of American-made energy in an 
environmentally responsible and sound manner;
      Promote new, clean and renewable sources of energy such 
as nuclear, hydropower, clean-coal-technology, wind and solar energy;
      Encourage greater efficiency and conservation by 
extending tax incentives for energy efficiency and rewarding 
development of greater conservation techniques and new energy 
resources; and,
      Cut red-tape and reduce frivolous litigation.
    While many in Washington, DC want to pick and choose which energy 
jobs to create, the Republican ``all-of-the-above'' plan is focused on 
creating ALL of the energy jobs we can: green jobs, solar jobs, wind 
jobs, drilling jobs, nuclear jobs, clean-coal jobs. With unemployment 
reaching almost 10 percent nationally, our nation can't afford to only 
pursue green jobs, we need all the jobs we can get.
    In addition to questions about Chairman Rahall's legislation, I 
know many of my colleagues, likely on both sides of the aisle, will 
have additional matters they wish to raise with Secretary. There is a 
great deal that has happened during the first eight months of this new 
Administration and today's hearing is an opportunity to talk directly 
with the Secretary about matters under his jurisdiction at the Interior 
Department.
    For example, there is great concern over the six-month delay that 
has been imposed on development of the new five-year leasing program 
for offshore drilling. Last year, President Bush and Congress lifted 
the moratoria on offshore drilling. Yet, in spite of the broad, 
bipartisan support across the country for opening additional areas for 
drilling, among the first acts of this Administration was to put such 
plans on hold for six-months. Next Monday marks the end of this six-
month period and I hope the Secretary will detail for us the plans for 
moving forward promptly with the five-year offshore leasing program.
    At the same time that new offshore leases were being delayed, other 
actions were taken by the Department that also harmed the production of 
more American energy and creation of jobs. Oil and gas leases were 
suddenly withdrawn in Utah, oil shale research that would create new 
jobs in Colorado, Wyoming and Utah were delayed, and $31 billion in 
higher taxes on oil and gas production were proposed in the President's 
budget. I know there are Members of the Committee who wish to try and 
understand how the spoken words of this Administration in support of 
more energy production match-up against their actions to block and 
delay it.
    There is also the $3 billion in economic stimulus funds that the 
Department received. I'm sure many on the Committee are interested in 
hearing how this large sum of money is being spent and how many 
specific jobs have been created.
    So, in the interest of allowing as much time as possible to hear 
from the Secretary, I'll conclude my remarks by again thanking the 
Chairman for holding this hearing and the Secretary for appearing 
before us.
                                 ______
                                 
    The Chairman. Thank you, Doc. Members are reminded that 
pursuant to Committee Rule 3(c), they are required to limit 
their remarks to the subject matter under consideration today. 
Members are also advised that the Chair will be strictly 
enforcing the 5-minute rule during questioning, and that 
Members will be recognized in the order in which they arrived.
    It is now my honor to recognize a dear friend to each of us 
on this Committee, both sides of the aisle, and a former Member 
of the Congress of the United States, and now the 50th 
Secretary of the Department of the Interior, and the 9th with 
whom I have served, the gentleman from Colorado, The Honorable 
Ken Salazar. Mr. Secretary, welcome.
    Secretary Salazar. Thank you very much, Chairman Rahall.
    The Chairman. Let me mention who you are accompanied by: 
The Honorable Wilma Lewis, Assistant Secretary, Land and 
Minerals Management, U.S. Department of the Interior; The 
Honorable Bob Abbey, the Director of the Bureau of Land 
Management; and Ms. S. Elizabeth Birnbaum, the Director of the 
Minerals Management Service. Is that correct?
    Secretary Salazar. That is correct.
    The Chairman. Thank you. You may proceed.

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

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

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

Introduction
    Thank you, Chairman Rahall, Ranking Member Hastings, and Members of 
the Committee. I am here today to discuss H.R. 3534, the ``Consolidated 
Land, Energy, and Aquatic Resources Act of 2009.'' I look forward to 
working with you and the Members of this Committee over the coming 
weeks as we continue a dialogue on this legislation.
Background
    With its significant land, energy, and natural resource management 
responsibilities, the Department of the Interior is helping to lead as 
the United States achieves the President's goal of energy independence. 
The Department manages 500 million acres of land, one-fifth of the land 
mass of the United States, and another 1.7 billion acres of the Outer 
Continental Shelf. This land base includes areas which boast some of 
the highest quality renewable energy resources available for 
development today: solar in the southwest; wind in the Atlantic, on the 
Great Plains and in the west; and geothermal in the west.
    The BLM has identified a total of approximately 20.6 million acres 
of public land with wind energy potential in the 11 western states and 
approximately 29.5 million acres with solar energy potential in the six 
southwestern states. There are over 140 million acres of public land in 
western states and Alaska with geothermal resource potential. There is 
also significant wind and wave potential in our offshore waters. The 
National Renewable Energy Lab, a Department of Energy national 
laboratory, has identified more than 1,000 gigawatts of wind potential 
off the Atlantic coast ``roughly equivalent to the Nation's existing 
installed electric generating capacity--and more than 900 gigawatts of 
wind potential off the Pacific Coast. The scope of the Department's 
land ownership also gives it an important role, in consultation with 
relevant federal, state, regional and local authorities, in siting the 
new transmission lines needed to bring renewable energy assets to load 
centers.
    Since the beginning of the Obama Administration, the Department has 
been focused on these issues and has set Department priorities for the 
environmentally responsible development of renewable energy on our 
public lands and the OCS. Industry has started to respond by investing 
in wind farms off the Atlantic seacoast, solar facilities in the 
southwest, and geothermal energy projects throughout the west. Power 
generation from these new energy sources produces virtually no 
greenhouse gases and, when installed in an environmentally sensitive 
manner, they harness abundant, renewable energy that nature itself 
provides and with minimum impact.
Renewable Energy Successes
    On March 11, 2009, I issued my first Secretarial Order that made 
facilitating the production, development, and delivery of renewable 
energy on public lands and the OCS top priorities at the Department. 
These goals will be accomplished in a manner that does not ignore, but 
instead protects our signature landscapes, natural resources, wildlife, 
and cultural resources, and working in close collaboration with all 
relevant federal, state, Tribal and other agencies with natural 
resource stewardship authority. The order also established an energy 
and climate change task force within the Department, drawing from the 
leadership of each of the bureaus. The task force is responsible for, 
among other things, quantifying the potential contributions of 
renewable energy resources on our public lands and the OCS and 
identifying and prioritizing specific ``zones'' on our public lands 
where the Department can facilitate a rapid and responsible move to 
significantly increased production of renewable energy from solar, 
wind, geothermal, and biomass sources, and incremental or small 
hydroelectric power on existing structures.
    The task force is prioritizing the intra-Department permitting and 
appropriate environmental review of transmission rights-of-way 
applications on public lands for transmission lines to deliver 
renewable energy to consumers. The task force is also working to 
resolve obstacles within the Department to renewable energy permitting, 
siting, development, and production on federal lands without 
compromising environmental values.
    In April, Chairman Wellinghoff of the Federal Energy Regulatory 
Commission and I signed an agreement clarifying our respective 
agencies' jurisdictional responsibilities for leasing and licensing 
renewable energy projects on the U.S. Outer Continental Shelf. In late 
June we offered five limited leases to construct meteorological towers 
in support of offshore wind energy development off the coasts of New 
Jersey and Delaware, the first of their kind offered by the federal 
government. I am pleased to announce that the first of those leases has 
been signed, supporting our first OCS wind development. Senate Majority 
Leader Harry Reid and I also worked together to put forward ``fast-
track'' initiatives for solar energy development on western lands.
Responsible Development of Conventional Resources
    At the same time, we must recognize that we will rely on 
conventional sources--oil, gas, and coal--for a significant portion of 
our energy for many years to come. We have made great strides balancing 
the accelerated development of clean energy from renewable domestic 
sources with the responsible development of conventional energy sources 
while protecting our treasured landscapes, wildlife, and cultural 
resources.
    Since January the Department has offered more than 2.4 million 
acres on our public lands for oil and gas development in 21 lease 
sales, with over 780,000 of those acres going under lease and 
attracting more than $70.2 million in bonus bids and fees. We have 
plans for another 19 sales in the remaining months of this year. On the 
Outer Continental Shelf, we offered 52.9 million acres in two lease 
sales in the Gulf of Mexico; leased a total of 2.7 million of those 
acres; and collected total revenue of more than $815 million.
    I extended the public comment period on the Draft Proposed 5-year 
Program for the OCS produced by the previous Administration until 
September 21, 2009. At that time I also requested from Departmental 
scientists a report that detailed conventional and renewable offshore 
energy resources and identified where information gaps exist. I have 
held regional meetings with interested stakeholders to review the 
findings of that report and gather input on where and how we should 
proceed with offshore energy development. The additional information 
and input from states, stakeholders, and affected communities gained 
during this process will allow us to adopt, in a timely fashion, a 
truly comprehensive energy program for the OCS to succeed the existing 
2007-2012 Program.
The Consolidated Land, Energy, and Aquatic Resources Act
    The Consolidated Land, Energy, and Aquatic Resources Act is a 
comprehensive bill that would make significant changes in the way the 
Department carries out its energy and mineral leasing programs. The 
Administration has not had an opportunity to fully analyze and consider 
the impacts of many components of this legislation.
    However, we are in agreement with the legislation's primary goals 
of ensuring a balanced and responsible approach to energy development 
on our public lands and that dependable oversight and sensible reform 
of mineral royalty programs is achieved. Like you, I support reforms of 
the mineral leasing process and programs that will enable us to manage 
our onshore and offshore resources more effectively and responsibly. In 
my statement today I will speak generally about several of the major 
issues addressed by the bill and the work that we are doing to address 
these issues.
    I appreciate the opportunity to work with you on this legislation.
Mineral Reorganization and Reform
    Title I of H.R. 3534 would carry out a statutory reorganization of 
the Department's leasing programs. I am committed to working closely 
with the Congress to improve our management and our programs and to 
fulfill our stewardship responsibilities to the Nation. My energy team 
has come together in the past month as the Senate has confirmed key 
members. We recognize that an efficient and effective leasing program 
is integral to both the Department's rapidly developing renewable 
program and the existing mineral leasing program. I believe we can 
accomplish many reform-minded changes to these programs 
administratively.
    For example, I am developing options to improve the coordination 
between the Minerals Management Service and the Bureau of Land 
Management in on- and offshore leasing and revenue management policies 
related to domestic energy production--both conventional and 
renewable--from federal lands. I intend to bring needed coordination 
and strategic guidance to the Department's energy development programs 
and to its implementation of significant reforms, including 
recommendations for improvement from the reports of the Government 
Accountability Office and the Office of the Inspector General.
    My Interior team is also working hard at a fundamental 
restructuring of the Minerals Management Service's royalty programs, 
including the Royalty-In-Kind program. Today I am announcing a phased-
in termination of the program and an orderly transition over time to a 
more transparent and accountable royalty collection program. This 
transition will factor in the need for domestic oil supplies. This 
restructuring will be overseen by my Assistant Secretary for Lands and 
Minerals Management, Wilma Lewis, Liz Birnbaum, the Director of MMS, 
and Bob Abbey, the Director of the Bureau of Land Management. This team 
can and will properly implement these important policy decisions.
Conclusion
    Mr. Chairman, I again commend you for your insight and leadership 
in the interests of balanced, responsible energy development that is 
crucial to our Nation's economy, national security, and environmental 
future. I appreciate this opportunity to present some of my own 
thoughts about the Department's energy future. And as I have stated, I 
am fully committed to working with you and the Committee to ensure that 
we adopt a strong and effective program that will bring us energy 
independence and security and move us toward a new energy economy. The 
principles I have laid out today will help us accomplish this task.
    Thank you and I am happy to answer any questions that you might 
have.
                                 ______
                                 
    Chairman. Bravo, bravo, bravo. I salute you on your 
announcement today that by administrative decision you will end 
the Royalty-In-Kind program. As you know, I've been calling for 
that for several years, Mr. Secretary, and I do think it will 
end the opportunity for mischief, or the temptation, and 
perhaps provide a more decent return to the American taxpayer. 
So, I salute you for that announcement that you just made.
    I want to turn to the LWCF that you also mentioned in your 
testimony. I know that throughout your career in the Congress 
you have been an ardent supporter of the Land and Water 
Conservation Fund. I just wondered if you could share your 
thoughts with us on the importance of full funding for that 
program.
    Secretary Salazar. Chairman Rahall, I think you asked one 
of the most important questions which this Committee and the 
Administration, and I as Secretary of the Interior, will 
grapple with in the days and months ahead. On the one side, you 
have the reality that we are dealing with some very difficult 
times in this country relative to deficits which are inherited 
in a large part by this administration, deficits that have been 
created over the last 15, 20 years. And so that enters into 
this equation about how exactly we move forward with LWCF.
    On the other hand, I think it is important, Mr. Chairman, 
to recognize that those visionaries in the days of President 
Kennedy really felt that the Land and Water Conservation Fund 
was being created in order to be able to give something back to 
the earth when we are taking something from the earth. And yet, 
in the time that LWCF has operated, we essentially have seen 
what is a broken promise to the American Nation relative to the 
failure of funding for the Land and Water Conservation Fund.
    I sat in my office with Bill Grosvenor and Pat Noonan and 
others who were involved in the initial effort on Land and 
Water Conservation Fund, and they told me about the 
conversations with Stuart Udall and Bobby Kennedy at the time 
on LWCF. And the thought then and the letter that President 
Kennedy sent to Congress was that we would be taking resources 
from our oil and gas production in the Outer Continental Shelf 
and other places, and that that money would be invested in the 
Land and Water Conservation Fund for generations to come.
    We are taking a finite resource from the earth. It was 
owned by the American taxpayer. It was important to invest it 
in land and water conservation and wildlife and habitat issues 
that this Committee is so familiar with. And yet, when one 
looks back at the history of LWCF it has not been funded at 
that level. There is an accounting mechanism that gets entered 
into the books every year, and if you look at the current 
accounting it will show that there is $17 billion, over $17 
billion that should have gone into LWCF that simply hasn't 
gotten there. And when you compare that to the amount of money 
that was generated by the Department of the Interior on behalf 
of the people of the United States of America last year, we 
collected $24 billion. And yet just a smidgeon of that gets 
reinvested back into the great outdoors and into the land and 
water conservation.
    On an average year--and last year was an aberration in 
terms of the amount of money that comes into LWCF--on an 
average year it is more in the neighborhood of about $13 
billion. Well, when one looks back at the history of LWCF, Mr. 
Chairman, LWCF was only fully funded one time, in 1977. And in 
1977 it was funded to the extent of $900 million, which was the 
full authorization of LWCF. If that amount were to be adjusted 
for inflation, the amount today would be $3.2 billion.
    So, I think when one looks at the needs, what we have in 
the United States of America, whether it is the Appalachian 
Range or the Great Lakes or the Bay Delta in California or the 
need for the restoration of rivers and urban parks and historic 
preservation and habitat for hunters and anglers and wildlife 
watchers, there is a need to have a very robust Land and Water 
Conservation Fund.
    I am proud of the fact that the President's budget started 
us down that track with the idea of putting additional money 
into LWCF, hoping that we will get to the point where we have 
it fully funded. But I am very interested, Mr. Chairman, in 
working with you, working with members of the Committee, 
working with the Office of Management and Budget and others to 
try to get us to a point where we are making the kinds of 
investments in the great outdoors.
    There are some members here from Colorado who I know will 
remember this, but Congresswoman Diana DeGette, Congressman 
Coffman, and Congressman Lamborn know that in my State of 
Colorado we created an initiative called the Great Outdoors 
Colorado program, and through that initiative, Colorado Springs 
and Denver will never grow together because of the 200,000 acre 
conservation program between Colorado Springs and Denver. 
Rivers like the Colorado River and the Yampa and the Cache La 
Poudre and the Fountain Creek have all been restored, and they 
have become part of the economic renaissance of the State of 
Colorado, but they also have introduced important environmental 
values, and we have done it in way that has protected private 
property and in a way that also has invested in those things 
that are truly important for our future.
    I won't monopolize this conversation, but I want to end 
with just one comment on that question. There is a biography of 
T.R. Roosevelt which I would encourage all of to you read at 
some point in time. But it is a biography of Teddy Roosevelt by 
Doug Brinkley, which is titled ``The Wilderness Warrior.'' When 
one thinks about this Republican President over 100 years ago 
and the legacy that he left for the United States of America 
that includes our wildlife refuges, our national parks--which 
are, as Ken Burns will shortly say--America's best idea, in my 
view it is time for a 21st conservation agenda, and I can think 
of no better source of funding than using some of the revenues 
that actually come from American-owned assets as those are 
produced and put into beneficial use to help with the funding 
of LWCF.
    The Chairman. Thank you, Mr. Secretary.
    In conclusion, I do highly commend you for your leadership 
during these 8 months at the Department of the Interior, for 
your stewardship of our public lands, and very highly commend 
you for your decision today to end the Royalty-In-Kind program.
    Mr. Hastings.
    Mr. Hastings. Thank you very much, Mr. Chairman. And once 
again, welcome, Mr. Secretary. In my opening remarks, I 
referenced the moratoria that the Congress had lifted and 
President Bush had lifted on the OCS. And you also made a 
reference to that in your testimony. And you simply said that 
you developed something in a, I think, in a timely fashion.
    Now, the 6-month period is up next Monday. President Obama, 
in April I think it was, on Earth Day, when he was in Iowa, 
stated, and I quote, If there is oil and gas in the United 
States, we should use it, end quote.
    My question to you is, with the moratoria ending and with 
the fact that Americans, certainly last year, when gasoline 
went up to $4 a gallon, and Americans all across the country 
discovered that we have a tremendous amount of reserves in the 
OCS and in the inner mountain west of crude, but particularly 
on the OCS, what do you anticipate will come out of the end of 
the 6-month moratoria, 6-month comment period on Monday? And 
what do you mean by a timely fashion? And how will that be 
incorporated into an energy plan?
    Secretary Salazar. Congressman Hastings, we hope to move 
expeditiously on finalizing a new 5-year plan for the Outer 
Continental Shelf, and we will do that in the months ahead.
    We also, Congressman Hastings and members of the Committee, 
have always recognized that oil and gas from the Outer 
Continental Shelf will be part of our energy portfolio for the 
future. And that is part of the President's vision for our 
comprehensive energy plan. You will grapple with that energy 
plan as you all move forward, and this Committee obviously will 
have a major role in all of that.
    I want to make two comments on timing here. First, it is 
important that we get it right. It is better to get it right 
than to get it wrong and then have to go back through the 
uncertainty of litigation.
    I will give you the example of the 2007 and 2012 plan under 
which we are operating now. Subjected to litigation, the 
District of Columbia District Court found that the 
inappropriate environmental analysis had been done. This is not 
a crazy court that was doing this. It was a court that was just 
looking at the law. And it said because of the issues that have 
been raised here relative to the environmental analysis missing 
from those areas that are going to be impacted from oil and gas 
development, we are going to throw out the 2007/2012 plan. And 
they did.
    And so we came back in with the Department of Justice and 
my Department and said we need to narrow that decision. And it 
was narrowed down so it didn't affect the Gulf and didn't 
affect other areas in that 2007/2012 plan. But it underscores, 
Congressman Hastings, the importance of us doing it right as we 
come up with a plan.
    I will make some generic comments just about where we are 
at this point in time relative to information gathering. We 
will complete the 6-month moratorium on September 20. My staff, 
led by Wilma Lewis and Liz Birnbaum and others, will be working 
on moving forward with the creation of a new 5-year plan. There 
are realities that we know are out there. For example, on the 
Atlantic, we know that there is not a lot of information out 
there; that it has been 30 years since we have developed any 
seismic information on the Atlantic. On the Gulf, on the other 
hand, we have extensive information. We have new discoveries. 
So, there is huge potential.
    Mr. Hastings. Mr. Secretary, if I may, my time is--I 
apologize, but my time is running out. I know Mr. Rahall wants 
to keep us as much as we can. But technology, new technology 
has certainly come into play, advantageously, from an 
environmental standpoint. We saw that when Rita and Katrina, 
for example, went through the Gulf of Mexico. So, we know that 
there is technology to do things environmentally right.
    Now, I interrupted you when you were referencing the 
Atlantic. But it seems to me we certainly have the ability, I 
would hope that whatever you come up with would be very robust 
from the standpoint of utilizing these resources. If we are 
going to be energy independent, certainly we have to use the 
OCS. I apologize for interrupting you midway through, but if 
you would like to respond I would appreciate it.
    Secretary Salazar. The OCS is important for us. It is part 
of our energy portfolio for the future and we will be devising 
a plan that is protective of the environment, that takes into 
account what the stakeholders in those affected communities 
want, and that takes into account the imperative which I know 
this Committee agrees on, and that is getting us to a new 
energy future for the country.
    Mr. Hastings. Thank you, Mr. Chairman.
    The Chairman. Would it be fair, Mr. Secretary, to say you 
are not the first Secretary of the Interior to address the need 
for a comprehensive energy plan and the need to end our 
reliance upon foreign oil, but you intend to be the last?
    Secretary Salazar. I want to be very much so. We want to be 
the last. We want to get it done.
    The Chairman. Following the order of appearance, the Chair 
will now recognize the gentleman from California, Mr. Costa.
    Mr. Costa. Thank you very much, Mr. Chairman. And I 
appreciate the importance of this hearing today and to have the 
Secretary of the Interior here.
    As the Chairman of the Subcommittee on Energy and Mineral 
Resources, we have held extensive hearings on the challenges 
facing the Mineral Management Services over the last 2 years. 
And clearly, the Secretary's statements this morning I find 
refreshing. But I would be remiss if I did not note, and I 
believe that the Secretary commented on it a moment ago, about 
his efforts with regards to restoration of the various 
ecosystems. The Sacramento San Joaquin River Delta area is one 
that is experiencing tremendous drought conditions today. The 
Secretary is aware of it. He has flown over it. And we thank 
you for your attention to it. It is a constant concern of the 
devastation of the impacts, economic impacts to the people in 
my communities of this drought, and we are going to urge you to 
continue your efforts to provide that support. I know funding 
is being considered that would provide support for this effort.
    But much more work needs to be done, and we could have a 
fourth dry year in California, God forbid, next year. And we 
are going to need all of the flexibility and the attention of 
the Department of the Interior to help us if, in fact, that 
occurs.
    My questions as it relates to today's hearing on oil and 
gas leasing are somewhat covering a broad swath. And in the 
time remaining, let me get quickly to the point. Our 
Subcommittee has tried to look at using all the energy tools in 
our energy tool box. You say comprehensive energy efforts. I 
think we are saying the same thing. My concern is that we use--
as we look at the reform in Minerals and Management Services, 
you talk about ending the in-kind-royalty program. In a measure 
that Congressman Abercrombie and I have introduced, a 
bipartisan bill that takes the long term in the next 10 years, 
the next 20 years and beyond, to reduce our dependency on 
foreign sources of energy and to build up this robust, 
renewable portfolio, that we take advantage of those revenues 
on onshore and offshore oil and gas leases to build that robust 
portfolio.
    And I guess, Mr. Secretary, my first question to you is, do 
you believe that this comprehensive effort that we are 
advocating in this bipartisan approach will be realized? I 
mean, our environmental friends talk about this robust 
renewable portfolio, but they don't have, I think, a 
commonsense path to financing it. We are talking about using 
those revenues from oil and gas, both onshore and offshore, 
over a programmatic period of time to finance that robust 
renewable portfolio. Could you please comment?
    Secretary Salazar. Congressman Costa, I very much 
appreciate your leadership on this issue as well as on dealing 
with the major water issues which many of you here have been 
dealing with in California, and we will continue to work with 
you on those.
    You know, the question of how we ultimately finance the 
green energy economy, Congressman Costa, we have already been 
working on that in a variety of different ways. Through the 
economic recovery package, which this Congress approved, there 
are huge investments that are going on with respect to building 
up the green energy economy. And I think when you look at what 
is happening across the country, I can tell you that in the 
areas that I am most familiar with, if you look at the Atlantic 
coast, there is tremendous interest in what we do to stand up 
the offshore wind energy potential which we believe to be in 
the neighborhood of over 900 gigawatts off the Atlantic. And 
every State along the Atlantic coast has projects which they 
believe, many of those States, that they have already financed 
before taking on those projects. You are talking money. You are 
talking money. You are talking solar, Jim Costa.
    But on the solar projects, we have many of these projects 
which we are standing up, including 13 solar major commercial 
projects in the Southwest.
    Mr. Costa. Right. I have 1 minute left or less than that, 
so let me quickly--I sent you a letter to the Department of the 
Interior to talk about the policy of allowing companies to 
invest in Iran that bid on oil and gas leases in the United 
States. The Department provides those grants to those leases. I 
think it is counterproductive to encourage companies that are 
investing in Iran when we have an economic boycott on Iran. 
Have you looked into that?
    Secretary Salazar. I will take a look at the letter. I have 
not seen it
    Mr. Costa. OK. And finally the CLEAR Act seeks to encourage 
the diligent development of resources, yet the DIO Inspector 
General found in a 2009 report that Interior suffers from such 
information systems' inconsistencies and data integrity 
problems it cannot credibly track what activity is occurring on 
these leases that are producing and nonproducing. How do you 
intend to fix these deficiencies?
    Secretary Salazar. There is much that I agree in that 
statement that we have information systems which, frankly, have 
not been very good. And much of what the Office of Inspector 
General and the General Accounting Office have recommended are 
recommendations that we have under consideration and will be 
making the management changes to that as we move forward. And 
part of it is being able to track what is happening out there, 
both on the onshore and the offshore with respect to what is 
producing and what is not produced.
    Mr. Costa. That is important. My time is expired. Thank you 
very much, Mr. Chairman, and I will submit the following 
questions on the other areas and continue to look forward to 
working with you.
    The Chairman. The gentleman from Colorado, Mr. Lamborn.
    Mr. Lamborn. I thank you, Mr. Chairman. It is good to have 
you here. Welcome.
    In your statement you made reference to energy independence 
and security and having a new energy program to accomplish 
that. So in light of that, looking at the Atlantic and Pacific 
coasts in particular where we had a recently expired moratorium 
after 30 years, which expired, can we look forward to new oil 
and gas permit areas off of the Atlantic and Pacific Ocean that 
were previously under that moratorium as we develop an energy 
plan that gives us independence and security vis-a-vis less 
imports from our country, is how I would interpret that.
    Secretary Salazar. Congressman Lamborn, first, the offshore 
oil and gas potential and its contribution to the Nation's 
energy portfolio is something which we have very much supported 
in the first 7 months of this administration, and we will 
continue to support that, I expect, in the future as we come up 
with a new 5-year plan for the Outer Continental Shelf. That is 
point one.
    Point two is, as I said earlier in response to Congressman 
Hastings's question, it is important that we get it right. And 
so part of what we did is we have held hearings in Atlantic 
City, in New Orleans and San Francisco, and Dillingham, Alaska 
and Anchorage, Alaska to get the communities to tell us what it 
is that their views are with respect to the development in the 
OCS.
    In addition to that, because I don't believe that this just 
ought to be driven by what the stakeholders are saying, we also 
have had the United States Geological Survey work with the 
Minerals Management Services and other agencies to come up with 
their review of what it is that we know and what it is that is 
we don't know. And so we are developing that information and we 
are still in the process of taking comments.
    The comment period will expire on the 20th of September. 
And at that point, with all the information before us, I will 
work with this team and figure out exactly where it is that we 
are going to move forward on development of the Outer 
Continental Shelf.
    Mr. Lamborn. Well, if it is going to be released in 5 days, 
I am assuming it is about 99 percent done. So, can't you tell 
me today whether or not we are going to have new leases off of 
the Atlantic and the Pacific in areas that were previously 
under the moratorium?
    Secretary Salazar. You know, I think it is much more 
complex than that. I think when, for example, you look at the 
Atlantic Ocean, the fact of the matter is that there is no 
seismic information that we have had in the last several 
decades that tells us what is out there on the Atlantic. It 
could be that it is a big to-do about nothing. And so we are 
going to have to make some decisions, based on the information 
that we have and based on what we think is realistic for us to 
do. But we will have a new 5-year plan.
    My own view is that when you are talking about an area that 
is as important as the subject area of energy, and when you are 
talking about an area that is as large as the Outer Continental 
Shelf is, 1.75 billion acres of land, it is important to do it 
thoughtfully. And we are doing it thoughtfully and it will be 
part of our comprehensive energy program from the President's 
administration working with all of you as we move forward.
    Mr. Lamborn. Have we done any seismic off of the Atlantic 
or the Pacific?
    Secretary Salazar. Not for a very long time.
    Mr. Lamborn. OK.
    Secretary Salazar. There is a dearth of information, and 
that is one of the places where there is a dearth of 
information.
    Mr. Lamborn. And also, sort of along the same line, you 
made mention in your comments about up to 1,000 gigawatts of 
wind potential off of the Atlantic Coast and almost the same, 
900 gigawatts, off of the Pacific. And I had this conversation 
with some folks in from the Sierra Club last week.
    But if you look at the numbers, under current technology, 
with a tower producing 3.25--I believe it is--megawatts of 
energy to produce 1,000 gigawatts, you would have to have 
300,000 windmills off of the Atlantic coast, and almost that 
same number off of the Pacific coast. And with roughly--and I 
am using round numbers here--1,800 miles of coast off the 
Atlantic, you would have 166 towers per every mile of shore. Of 
course that might go out 10 or 20 miles, but still you are 
talking about a tremendous crowding effect, I think, and 
possibly a tremendous environmental impact, just that sheer 
number of towers with all the infrastructure that goes into 
each one of those.
    I personally don't think that it is realistic to look for 
1,000 gigawatts off of the Atlantic coast. I mean, I wish it 
was. But I don't want to see us ignore oil and gas when we are 
pursuing what to me is--and pardon the pun--tilting at 
windmills, pursuing something that is not going to pan out.
    And so, do you agree with me that off the Atlantic and 
Pacific coasts we should have oil and gas in addition to 
whatever we might in the future obtain from wind or solar?
    Secretary Salazar. I am glad, Congressman Lamborn, that you 
are meeting with the Sierra Club and all of the organizations 
that are in the broad spectrum of your constituency.
    Let me just say this about wind energy off the offshore of 
the Atlantic. If I may, Mr. Chairman, just take a second about 
this. It is absolutely true, there is no way that we are going 
to stand up renewable energy potential in offshore wind that 
the lab in Colorado, at the National Renewable Energy Lab has 
said is there. They have said it is almost 1,000 gigawatts off 
of the Atlantic. But the converse is also true that we are not 
going to do anything, because there is a lot that we can do.
    When one looks at Norway and Denmark and the United Kingdom 
and the amount of energy that they currently are producing from 
the offshore, there are elements of great potential off of the 
Atlantic. And let me just mention three of them. The first is 
that the wind measurements that we have off the Atlantic show 
that it is a much higher quality wind than we have on the 
offshore of the mainland of the United States. It blows more 
steady. And so that is what our scientists are telling us.
    Number two, the way that the Atlantic coast goes off from 
the mainland, it is a very shallow coast. And so we believe 
that you can actually construct the kind of offshore facilities 
there that have been constructed in other places around the 
country; not around the country, but around the world.
    Number three, when you look at the energy contribution that 
is being made from wind energy in places like Denmark, it is 
very, very significant. And so that is how it is that States 
like New York, Delaware, New Jersey, North Carolina, Rhode 
Island and Maine have made this one of their highest 
priorities. And they have portfolio standards that they believe 
they are going to be able reach significantly from wind energy 
production, in some cases as high as 40 percent of their energy 
coming from wind energy.
    And I guess the fourth point I would make about the 
Atlantic is that one of the major challenges that we face with 
renewable energy, Congressman Lamborn, is the question of 
transmission. How do you get the energy from the place it is 
being produced to the place where it is going to be used?
    Well, one of the great positive factors that we have with 
the Atlantic is you basically are just bringing in a cable and 
plugging it into an already existing grid system. Whether it is 
Washington, D.C. or Delaware or New York or Boston, you can 
actually do that in a way that is much easier from a 
transmission perspective than when you are on the onshore.
    So, notwithstanding that, I know there are some skeptics 
out there on wind energy, but it is something that can in fact 
be done off the Atlantic. And here it is not pie-in-the-sky 
kind of stuff, because when you look at what Denmark has done, 
for example, if they can do it, there is no reason why the 
United States can't get itself in the position of leadership on 
that issue.
    The Chairman. The gentleman from Michigan on his 80th 
birthday is recognized.
    Mr. Kildee. Thank you, Mr. Chairman. Welcome to you Mr. 
Secretary, and also welcome to my former chief of staff, 
Christopher Mansour, who now works for you. You took one of the 
top people here. You have good judgment but I certainly miss 
him.
    I appreciate the work you are doing. The Land and Water 
Conservation Fund has been very, very important to this Nation, 
very important to my State. The lands of Isle Royal, a 
beautiful island which became part of the United States only 
because of the wisdom of Benjamin Franklin, and Sleeping Bear 
Dunes; all these came about because of the Land and Water 
Conservation Fund.
    What problems does the lack of full funding of the land and 
water conservation present? And could you give some examples 
where we weren't able to get some property from the Land and 
Water Conservation Fund because it was not fully funded?
    Secretary Salazar. Congressman Kildee, first of all, thank 
you for training Christopher Mansour. He is doing a herculean 
job in the Department of the Interior, dealing with a whole 
host of issues, including, I must imagine, probably 2,000 
letters that we get from the Members of Congress just about 
every week. So, he has a lot on his plate. But thank you for 
your help on that.
    On your question on the Land Water Conservation Fund, we 
simply, in my view, have not invested enough in our major 
landscapes of America and river restoration and urban park ways 
and historic sites. And you see this throughout the country. 
And if we had the opportunity to make these kinds of 
investments, I think it would be good for the economic health 
of our Nation and of our States.
    Yesterday, Secretary LaHood and I spoke in front of the 
tourism directors of the 50 States who were here in Washington, 
D.C. We spoke about how the quality of life and the strength of 
our economy was so dependent on the opportunities that we have 
for people in the outdoors.
    The State of Montana, for example, I know gets 11 million 
visitors a year who go there to hunt, who go there to fish, who 
go there to see the great wonders of the State of Montana. It 
is second only to agriculture in terms of that particular 
economy.
    And I think you can make the same argument with respect to 
each of our States in this Nation; that if we can take care of 
our outdoors, it also is a great way in which we can create 
economic vitality for the United States.
    It also, Congressman Kildee, is in my view an imperative 
that is driven from a health perspective. When we have our 
young people connected to the outdoors, it makes for a 
healthier society. And today our young people are spending many 
hours in front of televisions and computers and yet they end 
up, as I understand the last statistics I saw, less than 5 
minutes, frankly, playing in the outdoors. And so how we 
connect up our young people to the landscapes also ultimately 
is tied in to the health of our community
    Mr. Kildee. You know, we had similar funds in government, 
the highway fund. And there are 50 very visible Governors out 
there who are making sure we don't raid the highway fund. And I 
am not sure how aware they are of advocating and pushing that 
we fully fund the Land and Water Conservation Fund.
    I think it is as important, when I travel through the 
country, particularly through Michigan, I know the Governors 
would never let us take money from the highway fund. But very 
often they themselves aren't as great protectors of the Land 
and Water Conservation Fund as they should be.
    And I look forward to working with you because you have a 
great reputation of concern for our natural resources. I was 
kind of taken back when you said the last year that was fully 
funded was 1977, I believe you stated. And that was my first 
year in Congress.
    So, perhaps I bear some responsibility for not pushing 
harder that we fully fund that. But I look forward to working 
with you to do that.
    Secretary Salazar. Thank you Congressman. Happy Birthday.
    Mr. Kildee. Thank you very much, Mr. Secretary.
    Mr. McClintock. Mr. Secretary, welcome to the Committee. 
It's a pleasure to make your acquaintance.
    I wanted to follow up on the issue that Mr. Costa raised 
that affects the credibility of the Department on this and all 
issues, and that is the dispute over the regulatory drought in 
California.
    As you know, this is not a minor matter. More than 200 
billion gallons of water have been cut off to the Central 
Valley of California. These diversions have resulted in massive 
unemployment, water rationing, food lines in various 
communities. We are at the point where local communities that 
once boasted that they were feeding the world now can't feed 
themselves. I am sure you will appreciate the irony of a food 
line in the Central Valley where they are handing out carrots 
imported from China in a community that once exported carrots 
to China. Some farming towns like Mendota are running 40 
percent unemployment.
    Yet on September 9th, in a response to a Wall Street 
Journal editorial, you dismissed the crisis by writing, ``The 
fish are a sliver of the problem. The pumps are already on, and 
pointing fingers can't make it rain.''
    Mr. Secretary, do you deny that more than 200 billion 
gallons of water have been diverted from the Central Valley to 
meet environmental regulations protecting the delta smelt?
    Secretary Salazar. What I would say is that the situation 
in California is, frankly, in chaos because of the water issues 
that, frankly, have been in the making for a very long time. It 
was a water system that was built, frankly, to provide water to 
about half of the population that currently lives in 
California.
    We are in the third year of drought; and, at the end of the 
day, developing a comprehensive solution that addresses the 
conservation needs of the Bay Delta as well as providing 
additional water supply is an agenda that we have to figure out 
together. And I do think that finger pointing doesn't get us to 
that kind of a comprehensive solution.
    We are working in my Department to facilitate a number of 
different projects, including those that Congressmen Costa and 
Cardoza and Napolitano have said were very important, such as 
the Two Gates project, as well as the investment of money into 
water conservation and water banking and a host of other 
things.
    On the 30th of September, I will be meeting with the 
leadership involved in these water issues in California here in 
Washington. I have appointed David Hayes as the Deputy 
Secretary of the Interior to focus on this issue. I have a 
person on the ground trying to pull things together. And, at 
the end of the day, I think that what has happened is that 
California today and its water issue is suffering from the fact 
that it did not have the kind of attention that it should have 
had or the leadership to try to bring in the different values 
that are being debated in the future of the Bay Delta, one of 
those values being water supply, making sure there is water for 
agriculture.
    So, I hope--and we have been working closely with the 
Governor--that we are able to come together with a 
comprehensive way forward with respect to water supply for the 
State of California.
    Mr. McClintock. No one would argue for the need for 
additional water facilities, but I think you would have to 
agree that 200 billion gallons of water would have made all of 
the difference in the world in the Central Valley if it hadn't 
been diverted for the delta smelt. And while you are correct 
that we are in the third year of a drought, it is a relatively 
mild drought. Our reservoirs have received about 80 percent of 
their normal amount of water. The precipitation of the northern 
Sierras has been about 95 percent of its yearly average.
    How do you explain the fact that in far more severe 
droughts in 1977 and 1991, the Central Valley Project was 
delivering 25 percent of its water and today it is only 
delivering 10 percent?
    Secretary Salazar. We are doing everything we can under the 
law to deliver as much water as we can and to facilitate things 
such as water transfers that will provide water supply to the 
communities that are affected. There are water rights issues, 
including the fact that many of the farmers who have relied on 
water have a very junior water right within the scheme of water 
rights in the State of California.
    Mr. McClintock. Doesn't the law provide for the waiver of 
these regulations in an economic emergency, and why isn't the 
Department following through on that?
    Secretary Salazar. The law does provide for a God Squad to 
essentially override the requirements of the law.
    My own view--I have said this before; I will say it here 
today--is that that is an admission of failure; and, frankly, 
it would be a way in which we ultimately would not address the 
comprehensive nature of the issues that need to be addressed in 
the Bay Delta and conversations that I have had with Members of 
the California delegation. I think it is recognized, for 
example, that the huge water quality issues that are affecting 
the Bay Delta, including urban runoff and a whole host of other 
things are also contributing factors to the species issues that 
we have today.
    Mr. McClintock. I think the Central Valley would define 
failure as 40 percent unemployment in Mendota and an 
agricultural industry that has literally been brought to its 
knees. Thank you.
    The Chairman. The Chair will note that it was the Minority 
that first broke the Chair's warning about going outside of the 
jurisdiction. I guess I will have to allow the Majority to do 
that as well.
    On another point, just very quickly, Mr. Secretary, I have 
been advised--and again warned by the gentlelady from Guam--
that when you are referring to the 50 Governors, that we also 
have to recognize the territories and they have governance as 
well, which means we have 56 Governors.
    The Chair recognizes the gentleman from Arizona, Mr. 
Grijalva.
    Mr. Grijalva. Mr. Secretary, let me first tell you how many 
of us are pleased with the administration of your Department, 
many initiatives, much movement in the first 7 months with an 
Interior than we saw for the previous 10 years. So, I want to 
congratulate you for that and for the initiatives and the 
leadership that you are lending to many issues and, in 
particular, to the public lands.
    The question, if I may, Mr. Secretary, is this: We are 
going to realize--I think some of the maps that came out 
initially of all of the unharnessed potential that we have, 
particularly in wind and solar on the public lands--that with 
the potential comes the inevitable conflict in the protection 
and preservation of very sensitive land and the need to get 
renewables on the ground as quickly as possible, as you 
indicated in your opening comments.
    How are we going to mitigate that? Is there a way to 
prioritize which land is on the immediate list and which other 
public land is going to require more attention and mitigation? 
And in the language under title V, do we need authority and 
exclusion to exclude certain lands, whether they be wilderness, 
wildlife corridors from the potential of development?
    I see that there will be conflicts in those areas, and I 
know you have anticipated them. How are you approaching that, 
sir?
    Secretary Salazar. Congressman Grijalva, I appreciate that 
question. It is a very good question and something that we are 
very much focused on.
    And let me reiterate what I said. I do believe that, when 
history looks back at this period, we will have stood up for 
the renewable energy potential of the Nation on solar, 
geothermal, wind--and much of that will occur on public lands.
    Now, as we engage and embrace that imperative, it is also 
important for us to do it in a way that recognizes that we 
should not do it in a helter-skelter way or a lottery way or 
whatever comes in the door that we end up taking but that we do 
it in a thoughtful way and in a proactive way; and we believe 
we have the authorities to do that.
    An example that I will throw out to you is we are currently 
doing with a thousand square miles that we have set aside for 
an intensive environmental analysis through a programmatic 
environmental impact statement. In those thousand square miles, 
what will happen is we will look at those spaces that are best 
suited for the standing up of solar energy projects on the 
public land and those areas within those thousand square miles 
which are not. In my view, it would be inappropriate for us to 
have solar energy projects located on our national monuments or 
places where we have sensitive and ecological values that we 
are trying to protect.
    In many ways, Congressman Grijalva, I think what the Nation 
and all of you who are Members of this Committee and Congress 
should look at as we look at the renewable energy future is to 
think about the analogy of a local land use planning process, 
local land use planning process, whether it is a city in 
Colorado Springs or Tucson, Arizona.
    They will go through and, frankly, make determinations 
about where it is most appropriate for the siting to occur. And 
so you don't put a house next to an industrial factory any more 
because of the way that we do land use planning at the local 
level. We need to do that kind of land-use mining at the land-
scale level, and that is what we are committed to doing within 
the Department of the Interior and do believe we currently have 
the authority to do that.
    The Chairman. Mr. Coffman.
    Mr. Coffman. Secretary Salazar, welcome to the Committee. I 
just want to thank you for your long service to the State of 
Colorado as our former Attorney General and then our United 
States Senator and now the country's Secretary of the Interior.
    You know, as somebody who served in the first Gulf War and 
more recently in Iraq, I am more concerned about energy 
independence as it relates to national security. Currently, we 
import more than 60 percent of petroleum that we use and nearly 
90 percent of the uranium that we use for nuclear energy.
    Secretary Salazar, in your time at the Department of the 
Interior, you have blocked domestic energy development
    across the board. On February 4th, you canceled approved 
oil and gas leases in Utah. On February 10th, you essentially 
restored the moratorium on the Outer Continental Shelf by 
delaying the 5-year leasing program. On February 25th, you 
stifled the development of oil shale by officially denying oil 
shale research. On July 20th, you placed a moratorium on mining 
in an area containing 40 percent of our Nation's uranium 
supply. And, since taking office, your agency hasn't approved a 
single new solar project, even though the Department is facing 
a backlog of almost 200 applications.
    So, we can't drill on shore, we can't drill offshore, we 
can't develop oil shale, we can't develop nuclear, and we can't 
develop renewables by solar. Mr. Secretary, when will Americans 
develop American energy?
    Mr. Salazar. First of all, my good friend--since we are all 
good friends in Washington--I would like to say that I, too, 
very much enjoyed serving with you and being your lawyer. You 
didn't get in trouble. I was your Attorney General. It is good 
to see you here in Washington.
    Let me just say, on the other hand, I totally disagree with 
your characterizations of our action.
    I think when you consider in the opening statement the fact 
that we have leased out over 2 million acres on the onshore, 
made available over 50 million acres as well on the Outer 
Continental Shelf, you see a development part of our agenda in 
developing a comprehensive energy plan.
    Let me also say that you, in your service in Iraq, which I 
very much admire, know that this country has absolutely failed, 
as it did in the last 8 years, to get us to any sense of energy 
independence. You and the members of this Committee will know 
well President Nixon's timing in coining the term ``energy 
independence'' and President Carter saying that we needed to 
embrace energy independence with the moral imperative of war; 
and, in the decades that have passed since then, we have gone 
from 30 percent importation of our oil and now the last 
statistic I saw was at 67 percent.
    So, the fact is we have been living on a very failed energy 
policy; and that is why it is imperative that we move forward 
with the vision that President Obama has, that this time we 
will not fail.
    And to Chairman Rahall's question, I do want to be the last 
Secretary of the Interior that does come before this Committee 
and says we want to get to energy independence. We are going to 
get it done, and we are going to get it done in a lot of 
different ways.
    With respect to specific issues which you raised on the 
Utah lease sale, many of those leased parcel parts are going 
forward. The fact is that I don't believe that we should drill 
everywhere, because not every place is appropriate to drill. We 
shouldn't be drilling near Arches National Park and Canyonlands 
and Dinosaur. Those are important treasures that we need to 
protect.
    With respect to the Outer Continental Shelf, in my view, 
when you are talking about 1.75 billion acres of ocean, you 
should not simply do it with a 60-day comment period and you 
need to be thoughtful in terms of how you move forward with 
OCS. As I said earlier, we have moved forward to push 
development on the OCS in a number of different ways, including 
litigation.
    Mr. Coffman. If you could give us specific dates on when 
you move forward with the Outer Continental Shelf with 
additional R&D leases on oil shale and also solar projects--if 
you could give us dates on those, I would appreciate that.
    Secretary Salazar. Oil shale, we are looking at moving 
forward with research and development leases on oil shale. 
Again, there are issues there; and I don't believe we should 
engage in the wholesale giveaway of public lands, which is what 
the previous administration did.
    With respect to the OCS, I commented on that. We currently 
have a plan in place, and we are issuing leases under the plan 
on the Outer Continental Shelf. We will have a new plan in 
place and will be putting it out over the next several months.
    The Chairman. The gentlelady from the Virgin Islands, Dr. 
Christensen.
    Mrs. Christensen. Thank you.
    Welcome to the Secretary, and I appreciate your opening 
statements which I think touched on many of the issues that I 
was concerned on. I am very reassured by you and your team that 
those issues that we have been trying to deal with in the 12 
years that I have been on this Committee, the royalties and 
leases, the Energy Department and so forth, will be made more 
efficient, accountable, and transparent under your 
administration.
    I want to take a point of personal privilege, though, to 
especially welcome the Assistant Secretary Wilma Lewis, who is 
from the Virgin Islands, a person of impeccable credentials and 
character. I know she will be a great asset to you as you move 
forward with the issues that we are discussing this morning and 
in other areas in your Department.
    So, we just--I don't have any questions. We look forward to 
working with you on this. Our Chairman has introduced the CLEAR 
Act; and under his leadership this is going to be a very 
productive partnership, I can see. I am particularly pleased 
that you support many portions of the bill. I am particularly 
interested in the Regional Outer Continental Shelf Councils 
that will employ the use of marine spatial planning, capturing 
a holistic view of our resources to guide OCS development and 
the full support of funding the Land and Water Conservation 
Fund and Ocean Resources Conservation and Assistance Fund, 
something that we have been waiting for for a long time.
    So, I just want to commend your leadership, welcome you and 
your team, and look forward to working with you.
    Secretary Salazar. Thank you.
    The Chairman. The gentleman from Utah, Mr. Bishop.
    Mr. Bishop. I would also like to add for the record my 
congratulations to Mr. Kildee. I thank you for recognizing him 
on his birthday today and maybe also to let people know that it 
is the fact that he has worked with the Pages for the last 30 
years that has kept his spirit, if not his knees, in a useful 
condition. So, I appreciate that very much.
    Mr. Secretary, this is your first appearance before us in 
the 8 months you have been there, and you are in fact the de 
facto ruler of 67 percent of my State. We only have 5 minutes 
to actually go through this stuff, so let me ask you the four 
questions I have, and I will let you answer them in the end--
or, ironically enough, you can send me a written statement if 
you would like to. Unlike the Senate, we have a limited amount 
of time, and the Chairman is particularly ruthless and 
heartless when it comes to time, so I will speak as fast as I 
possibly can.
    The Chairman. Only for you.
    Mr. Bishop. I sometimes feel so special in here.
    The bill before us actually talks about a limitation of 
development, and so I would like to ask a question that deals 
with other issues that you have unilaterally made that deal 
with limitations of development. This will be administered by 
your Department. I also want to deal with how prior actions of 
your Department should indicate how this would be administered; 
and in your opening statement you talked about questions this 
brought, one of which was interdepartmental cooperation.
    My second question goes directly to that issue with 
interdepartment cooperation. At 7 months ago, we asked for 
communication between the Park Service and advocacy and 
lobbying groups. We asked for something covering a limited 
period of time, specific individuals; and it was based on press 
reports that we had seen that bought the possibility of 
improprieties and lobbying between your Department and that 
organization. The President said he was committed to creating 
an unprecedented level of openness in government.
    So far, I am sorry, your Department has been foot-dragging, 
stonewalling; and the only thing we have received is the 
apparently false claim that there are only seven such 
communications.
    Now I don't know if there is something to hide in the 
Department--I hope not--but certainly the actions so far give 
that appearance, and I would love to tell people there have 
been no improprieties, but your Department has provided no data 
so far to allow me to do that.
    I am told that the Department's response to another 
congressional office looked like this: I have four pages of the 
response that was given to them. Everything except the 
addressee and the statement that this one was about a committee 
bill, this one was about another meeting, there was another one 
about an amendment, have simply been blacked out. I don't know 
what--I don't know if you are talking about nuclear weapons, or 
you are talking about national security. Maybe you are giving 
account information to a bank in Nigeria where you can get 
money back. But there are rules for redacting, and they are 
very specific. It doesn't cover this.
    I do hope when the Department finally gives that 
information you don't have Rosemary Wood-style 18-minute gaps 
in the tape that come to us. Because, as the President said in 
his campaign, transparency promotes accountability, provides 
information for citizens about what their government is doing; 
and that is what we are after, what the public should be able 
to find out and know.
    The second issue, which goes directly to your question 
about interdepartmental relationships and cooperation, we have 
also asked for certain documents relating to how the Department 
of the Interior is working with the Department of Homeland 
Security to coordinate responsibilities on our border security. 
Now, these documents, once again, are not a trivial fishing 
expedition that can be ignored. They are serious issues that 
the public simply needs to know.
    We have obtained from the Interior a study from 2004 that 
has never been released to the public or Congress. It says 90 
percent of the Oregon Pipe National Monument is destroyed 
because of drug trafficking and human smuggling. We obtained 
another 2002 document threat assessment that has never been 
shared with Congress. It says our Federal lands are a national 
security disaster. We are hearing reports from border patrol 
agents that their hands are shackled when dealing with Interior 
officials on Interior lands.
    Yet when we request these documents and communications to 
find out what is actually being done, all we are getting is, 
once again, more stonewalling. This does not speak well for an 
open Department or an open government, and I would seriously 
like these issues to be addressed so we know what indeed is 
going on.
    Now, third, I would like to have you look back there at the 
door and have the Harrison couple, if they would, wave at you 
so you know who they are. They are going to try and meet you in 
the hallway in some time. The Harrisons are from Vernal, Utah; 
and they have organized out there an Alliance for Public Lands, 
truly a grassroots group.
    They met with Mr. Hayes when he was out in Vernal. He said 
he would meet with them again. Mr. Hayes set a time to meet 
with that couple. On Friday, when we called to verify it before 
they came here, everything was all right. The afternoon before 
the appointment, after they had already arrived here, your 
office, the Department, once again called and said Mr. Hayes 
could not meet with them at that time or any other time this 
week, once again giving me the idea that we may have open-door 
policies for interest groups but not necessarily for citizens.
    We talked about environmental impact statements. They wish 
to hand to you, which is what they would have given to Mr. 
Hayes, what we are calling human impact statements: 150 letters 
from people who live in the Uintah Basin as to the direct 
results of the decisions that your Department has already made. 
These are results that is not part of legislative action, it is 
not part of an economic cycle, not coming from oil and gas 
companies but collateral commitments that have been made to 
those individuals.
    I am going to have letters in there about a waitress who 
has been cut from 30 hours to 13 hours in Vernal; about the 
superior mud--undercarriage mud removal that went from nine to 
two employees.
    I am talking about Heather, who is a 9-year-old who moved 
from your State of Colorado over there with her grandfather and 
mother to get a job where they had enough land for a horse as 
well as a yellow lab; and they lost that job and were forced to 
move to Vernal, in which they had to sell the horse--not for 
human consumption. You can be OK. And also they had to sell the 
yellow lab because of decisions that were made by this 
Department of the Interior that had a collateral damage, net 
result and net impact on the people of that particular area.
    I am asking you if you would actually accept those 
documents from them finally and please look at what is 
happening to real human beings on the ground as a direct result 
of decisions the Department of the Interior has made which 
affects my home State of Utah.
    And, fourth, I would like you to express your opinion on 
the particular bill before us.
    I don't have time to yield back, do I, sir?
    And since we don't the opportunity to have the Secretary 
with us very often, I have used it well.
    The Chairman. Mr. Secretary, we will allow you to respond. 
If you would rather do it in writing, we will allow you to do 
that as well.
    Secretary Salazar. I would appreciate the opportunity to 
respond to Congressman Bishop.
    First, you are not lacking in passion, and that comes 
across loud and clear. And I appreciate the passion with which 
you represent your constituents.
    Mr. Bishop. I am lacking in documents.
    Secretary Salazar. Sir, let me take, if I can, each of the 
four and just be as brief as I can.
    First, on the Departmental communications, we have 
thousands of pages, frankly, that have been sent over, are 
being sent over. You are getting additional documents. So, we 
are getting you everything we can, and that is both with 
respect to your issues concerning communications between the 
National Park Service and the National Park Conservation 
Association and other entities as well as the documents you 
requested between the Department of the Interior and the 
Department of Homeland Security. So, you have gotten a lot of 
those documents. You are getting a lot more.
    With respect to the Harrisons, I would be happy to take 
whatever documents that they do have.
    I do have to say this with respect to the issue as you 
raise it. Sometimes what ends up happening is when the 
government does things in a rushed and wrong way you end up 
having consequences to human beings like the Harrisons that you 
don't have when you do it the right way. And what happened with 
those 77 lease parcels, which I know you are very passionate 
about, Congressman Bishop, is that there was simply not the 
consultation that should have taken place there between the 
Bureau of Land Management and the National Park Service. And 
because that did not take place, there was a need to review 
that to assure that the other legal interests of the United 
States of America were being protected. We are going through a 
process now, and those 77 lease parcels are being screened to 
determine which ones are appropriate for leasing and which ones 
are not appropriate for leasing.
    I believe that, ultimately, if we do things right, we can 
avoid bad consequences to people.
    And, finally, on your question on the opinion of this bill, 
it is absolutely targeted on the right set of issues that have 
been raised by the Inspector General and the General Accounting 
Office, as well as my Department; and we will work closely with 
the Chairman and members of this Committee to get the bill to 
the place where we believe it needs to go. So, even though the 
Chairman is a very powerful chairman and those of you who 
worked on the bill have spent a lot of time thinking about this 
bill, we have some ideas that we will continue to try to 
contribute to make the bill a better bill. And I appreciate the 
opportunity to work with the members of this Committee in so 
doing.
    The Chairman. The gentlelady from California, Mrs. 
Napolitano.
    Mrs. Napolitano. Thank you, Mr. Chairman.
    Welcome, Secretary Salazar. It is good to see you again, 
finally.
    And, Mr. Bishop, I feel sorry for you but also feel sorry 
for me. Because I have been trying to see him for a long time, 
along with Assistant Secretary Hayes; and I finally saw 
Assistant Secretary Connor at one of the hearings we held last 
week. So, don't feel like the Lone Ranger.
    Now that leads to a question, Mr. Secretary, as to whether 
are not you have enough staff to be able to do all of the jobs 
that are thrown at you. And I am wondering about Assistant 
Secretary Hayes' ability to deal with Cal Fed if he is already 
working on these other great issues that are before us and 
whether or not it is possible for you to let us know whether 
this is indeed going to be a problem that we may have to help 
with in allowing your Department, your agency, to look at 
whether you have enough qualified staff to complete the 
environmental oversight of the areas along with processing 
those drilling permits.
    Are you going to restructure? What is it we can look 
forward to and how can we help?
    Secretary Salazar. Congresswoman Napolitano, thank you for 
your leadership as well on the California water issues and so 
many other issues you work on.
    We do have the staff, and we will make sure that Deputy 
Secretary Hayes and Commissioner Mike Connor and others are 
working on this issue we have. Because it is such a difficult 
and complex issue. You can't just wave magic wands or through 
platitudes resolve the water issues in California.
    I have assigned a person, David Nowey, who will be there 
full time to work with the California interests as well as with 
us here in Washington, D.C., to see how we can try to come up 
with a comprehensive way forward on the Bay Delta in 
California.
    Let me take the opportunity also, Congresswoman Napolitano, 
to say there is a reality within the Department of the Interior 
and that is that, in the last 8 years, because this Department 
was not a priority for the prior administration, that its 
capacity has been eroded day after day. Even when you compare 
the budget of this Department, we do not have the budget of 
this Department that the Department even had in 2001; and so we 
are trying to do everything we can to stand up to the new 
challenges that you, the Congress, and the President has placed 
in front of us, an agenda which I very much believe in and am 
working very hard on. But it is difficult.
    I can give you lots of statistics about how the guts of 
this Department were essentially wrenched out under the last 8 
years of the Bush Administration.
    Mrs. Napolitano. Thank you, Mr. Secretary. That was very 
enlightening.
    While we are at the issue of energy, which we have been 
talking broadly on energy independence, my concern, as Chair of 
the Subcommittee of Water and Power, is the ability to ensure 
that the grids are able to produce enough energy; and if there 
isn't any water in the rivers and dams because of climate 
change, the warming, whatever, and that leads me then to title 
XVI. I am going to request this, with the permission of the 
Chair and you, a review of the title XVI budget.
    There is $600 million still in backlog. Last year's budget 
was $9 million for this year, which, in essence, would give us 
roughly under 50 years to catch up. That would help relieve 
some of the pressure off the rivers and the dams and certainly 
Cal Fed, and we are not even putting that into the equation.
    And by that I would also like to ensure that the Army Corps 
of Engineers be included at the table on some of the 
discussions, because they do have a relevance in the Bay Delta 
area, the levees. And so those are areas that, while it doesn't 
completely involve this particular bill, it does in the sense 
of energy production.
    So, I would very much love to sit with you. And, yes, we 
have tried to get meetings. We have yet to be able to meet with 
your Commissioner on the issue or with your Under Secretary--we 
look forward to it--and certainly with you, because there are a 
lot of other ideas that have come forth, and we would like to 
be able to share them with you.
    My understanding is the California Legislature has been 
working on this almost 24/7 to be able to come up with 
solutions. They haven't yet. Political will, whatever you want 
to call it. But that Two Gates program is going to be another 
way to be able to save that water for California. While there 
are all kinds of, still, finger pointing, I still believe that 
there are some solutions in sight.
    But I would love to be able to sit with your agency, with 
you, and all of your staff to be able to follow through and be 
able to save some of this water to produce more energy.
    I thank you for your hard work. You have had 9 months, and 
you have done a marvelous job. I congratulate you and look 
forward to working with you and having you be part of our 
solutions for our water problems. Thank you.
    Thank you, Mr. Chair.
    The Chairman. The gentleman from Louisiana, Mr. Cassidy.
    Mr. Cassidy. Thank you, Mr. Secretary.
    First, I will point out that when you said--you know, I 
have heard your quote before: The rush to do something in a 
wrong way has harmful consequences for humans that would not 
have occurred if done in the right way. I heard that in my town 
hall about health care. With that said, I think you must have 
attended that.
    The Office of the Inspector General of your Department put 
out this report February, 2009, Oil and Gas Production on 
Federal Leases: No Simple Answers. And as I looked at the 
Chairman's bill, it almost seems like it is running counter to 
your own OIG's analysis, if you will.
    For example, we, in the bill, institute more regulatory 
barriers to production and, at the same time, express 
impatience that production is not happening in a more timely 
fashion. And yet your OIG said that onshore Federal oil and gas 
leases are much more difficult, time-consuming, and expensive 
compared to State and private leases due in considerable part 
to regulatory restrictions and requirements.
    Among this is that there is--they speak about litigation 
and public opposition having a significant impact on the 
ability of lease holders to conduct developmental activities, 
and the bill before us seems to
    increase the likelihood of litigation, et cetera. It says 
it could cause a dramatic increase in opposition that occurs 
even prior to lease issuances and continues throughout the 
development process. I will say that some of the pulling of 
leases already issued that you have all done seems to be 
consistent with your OIG's report.
    And then again, as I look at this bill's impatience with 
the rapidity with which oil and gas is developed, the 
conclusions have a quote from somebody from the Colorado School 
of Mines. I kind of like that he is from Colorado. It says that 
we shouldn't necessarily do faster production but rather 
smarter production. You can drill everything at once, but you 
lose the pressure pushing it up, and therefore your total 
volume produced may be less than if you just, say, do a single 
point but allow the pressure to gradually deplete.
    So again, as I look at the bill before us and I look at the 
OIG report, there seems to be little in the OIG report that 
supports some of the main tenets of this bill or, frankly, some 
of the approaches your office has taken today.
    So, I just wanted your comments upon that.
    Secretary Salazar. Thank you very much, Congressman 
Cassidy.
    If I may, Chairman Rahall, may I say have 30 seconds to 
respond to Congresswoman Napolitano?
    I appreciate the questions and wanted to just make you 
aware that I will have Commissioner Connor meet with you on 
title XVI. I think that is been in the works, and they have 
been trying to get that scheduled. September 30th we are trying 
to put together a major meeting on the California water issues 
and look forward to your participation and also helping us 
frame the agenda for that meeting.
    Congressman Cassidy, on your questions relative to our own 
process, our view is that there is room for us to improve 
relative to how we are leasing for oil and gas both in the 
ocean as well as on the onshore. And we have a number of 
recommendations, some of which are included in the bill and 
some of which are not, and we will work with the Committee as 
the legislation does move forward.
    I do agree with you very much that technology has made 
major changes and major opportunities. What was not considered 
to be conceivable on horizontal drilling even a few years ago 
now is opening up great opportunities relative to how we can 
get to the resource with lesser surface disturbance.
    There are private landowners of some huge lands that I am 
very familiar with where I know that those landowners are, 
frankly, doing different things in terms of oil and gas 
production because of technology and what is being done even on 
our public lands.
    So, one of the things that the Assistant Secretary Lewis 
and Director Abbey will be doing is try to help figure out how 
we can best do it on public lands as well.
    Mr. Cassidy. Let me come back to the point that your OIG 
made that actually some of the things that delay this process 
is, frankly, regulation and litigation inspired by the Federal 
Government. And, again, it seems that this bill exacerbates 
some of those problems. So, on that specific question, any 
comments?
    Secretary Salazar. I will take a look at the specific 
language that you raise.
    I will say this, that it was, frankly, because of missteps 
that were taken in the 2007-2012 plan on the OCS that we, 
frankly, find ourselves in the litigation that we are in. That 
was done a long time ago. But the level of environmental 
assessment that should have been conducted with respect to that 
plan--according to the court. This is not according to some 
interest group. It is not according to the Secretary of the 
Interior, not according to the Congress--but that missteps were 
made.
    Mr. Cassidy. Now, in fairness, I understand the court fuled 
that it was without precedent, and previous courts had not 
ruled that way on that specific item. So, in a sense, the court 
created an issue which previously had not existed. I think I 
know that.
    Secretary Salazar. What I will say, Congressman Cassidy, is 
that this is a very--the second highest court in the land that 
reached that finding unanimously, and they were judges 
appointed at court by Republican Presidents, and I don't think 
they were playing with the law. They were calling the facts and 
the law as they saw it.
    Mr. Faleomavaega. [presiding.] The gentlelady from 
Massachusetts, Ms. Tsongas.
    Ms. Tsongas. Thank you, Secretary Salazar, for your very 
forthright and engaging testimony. I appreciate very much 
hearing your point of view and the new direction you are taking 
at the Department.
    As I am sure you know, the Administration has an Ocean 
Policy Task Force that is in the process of determining the 
best way forward to develop and implement a national oceans, 
coast, and Great Lakes policy and marine spacial planning 
framework to protect, maintain, and restore these resources.
    As you go about your planning process, particularly in the 
Outer Continental Shelf, when do you anticipate and are you 
looking forward to the results of this task force, planning to 
use their findings in any way as you go about your thoughtful 
process, as you describe it?
    Secretary Salazar. Congresswoman Tsongas, thank you for 
that very important question.
    We are participating as the Department of the Interior in 
the Oceans Task Force. I think it is important that we take a 
look at what is happening with our oceans and that we move 
forward with the best science and the best mitigation 
approaches to some of the issues that we are seeing affecting 
our oceans today. So, I think it is a very important 
initiative; and I know you will be hearing more from my 
colleague, Jane Lubchenco, who is Under Secretary for Commerce 
and NOAA who will be speaking more to that.
    But we are very much involved in it, and I do believe that 
the information coming from the Oceans Task Force will be very 
helpful to us relative to how we move forward on OCS planning.
    Ms. Tsongas. That is good to hear.
    We have heard testimony about the grave state that our 
oceans are in; and as much as they are a potential resource for 
renewable energy, I think it is important that we take into 
account the impact of whatever we happen to do in our oceans. 
So, I am grateful to hear that.
    A follow-up question really is, as you know, the Georges 
Bank off the coast of Massachusetts in New England is an 
irreplaceable resource; and I am committed to keeping it off 
limits to drilling. What are your thoughts as you go forward 
with your planning process as to how to protect very fragile 
ecosystems that are in our oceans?
    Secretary Salazar. We should be able to do that both with 
respect to the 5-year planning efforts but then also with 
respect to particular projects. Because before a lease is 
ultimately issued for a particular parcel, before we go through 
the lease sale, we do additional environmental analysis, and 
that analysis should help us make sure that those places that 
have ecological values and the oceans that need to be protected 
are in fact protected.
    Ms. Tsongas. Thank you. I yield back.
    Mr. Faleomavaega. The gentleman from Virginia, Mr. Wittman.
    Mr. Wittman. Mr. Secretary, welcome here today. Good to 
have you here.
    As you have heard other members of the Committee here, I 
think we are all on the same page as having an all-of-the-above 
energy policy here for the United States, making sure that we 
are developing our oil and gas resources here as well as 
renewable and alternative energy sources; and Virginia is going 
to be an extraordinarily important part of that. In fact, a 
study by a university found that natural gas production off the 
Atlantic coast could create over 25,000 jobs in Virginia. And 
Virginia is also poised to be a significant player in renewable 
energy, both in jobs and in manufacturing. So, I couldn't agree 
with you more and your statement about seeking energy 
independence and also making sure we stop the exporting of 
dollars and jobs that are related to our dependence on foreign 
sources of energy. So, I think this is a great way for us to 
accomplish that.
    Looking specifically at Virginia lease sale 220, can you 
tell us where you are with expediting that and getting that 
done in a timely manner so that lease sale can take place and 
when do you believe that we will see energy produced from our 
offshore oil resources--oil and gas resources off the Atlantic 
coast?
    Secretary Salazar. The question of how we move forward on 
the Atlantic and how we move forward with the area off the 
Virginia coast is something which we are currently taking a 
look at. And we know some things that I think you know, 
Congressman Wittman, and that is that we have very little 
information on the Atlantic and what is there and what is not. 
And, frankly, we don't have that information because, for 30 
years, that information hasn't been collected. And so one of 
the active questions that we are looking at right now is how 
best do we develop the information from seismic so that we can 
make a determination as to what is there and what is not. So, I 
will be happy to get back to you with more specific questions 
on the Virginia lease sale.
    Mr. Wittman. I think we are all anxious to make sure--in 
Virginia, the lease sale 220 is the first on the list of leases 
to be considered in the Atlantic, and we are certainly anxious 
to see that go forward. I think we have the ability there in 
Virginia both with oil and gas resources out there and our 
renewables to be poised to be a leader there. So, we look 
forward to making sure we are aggressively getting that done.
    Secretary Salazar. If I may, Congressman Wittman, just one 
point that I think you put your finger on which I think is very 
important. I think where you will find some bipartisan support 
will be what we do with natural gas. I think there is 
significant potential there for it to be very much a part of 
our energy portfolio for the future.
    Mr. Wittman. I agree. It has got to be something that we do 
in a timely fashion to make sure we are developing those 
sources to transition to that next generation of energy. So, we 
appreciate all you can do to expedite that process, especially 
off of Virginia, since we are anxious to create some jobs from 
that there.
    The Land and Water Conservation Fund. As you know, I am a 
dedicated outdoors man and very interested in preserving 
habitat and ensuring the continued outdoor recreation 
opportunities for all Americans. I am interested in your 
comment earlier when you talked about securing full funding and 
dedicated sources of funding for our Land and Water 
Conservation Fund.
    Looking at that, I would like to get your thoughts about 
how you think we accomplish that and how would full and 
dedicated LWCF funding impact the Department's efforts to 
provide continued outdoor recreational opportunities for my 
constituents?
    Secretary Salazar. Thank you very much for the question.
    In my view, Congressman Wittman, we have, as a Nation, 
underinvested in these wildlife areas and places where we can 
restore the outdoors in a way that hunters and anglers and 
outdoor enthusiasts can participate in. It is an area where we 
know from information that we have developed that we create 
about 6\1/2\ billion jobs a year in the United States through 
hunting and fishing and other outdoor recreational activities. 
And those things don't happen by themselves.
    It doesn't matter whether it is Shenandoah or any of the 
other great parks or places of our Nation. They become great 
economic generators. All you have to do is to visit a town or a 
community that is close to one of our great outdoors 
facilities, and we know how excited they get when hunting 
season comes by and when the summer comes by for National Parks 
and those sorts of things.
    So, my view is we need to make additional investments in 
those great outdoors, and I hope that we are able to work with 
the Congress to be able to find a way to do it.
    Mr. Wittman. Just the other day at the Migratory Bird 
Conservation Commission, as you know, there are 34 projects 
that were jointly funded with the LWCF funding. It is so 
critical; and we know that opportunities there, especially as 
we see populations grow, are going to become more and more of a 
challenge.
    So, I think the funding and the efforts there become even 
more critical for us to make sure those opportunities are 
available. I appreciate your efforts there; and, hopefully, we 
will stand up as aggressively as we can to make sure the 
resources are there for those opportunities for recreational 
experiences.
    Secretary Salazar. If I may, Congressman Wittman, I think 
that the Migratory Bird Commission on which you sit, and you 
saw the investments that are being made there, it is an 
incredible testimony of what happens when you have the Congress 
and the executive working with States and private landowners; 
and what is happening is that we reached the billion dollar 
mark in investments in wildlife refugees through that 
Commission at that last meeting that you participated in. But 
through that $1 billion, there were thousands upon thousands of 
other organizations that contributed out of their own private 
money in the kinds of partnerships that really allowed us to 
leverage that into a multi-billion-dollar effort over the 
years. So, you and Senator Cochran and Congressman Dingell and 
Senator Blanche Lincoln have been very much a part of making 
that happen. Thank you.
    The Chairman. [presiding.] The gentleman from New Jersey, 
Mr. Holt.
    Mr. Holt. Thank you, Mr. Chairman.
    Mr. Secretary, as the Chairman said earlier, we applaud you 
for your testimony today, for the good job you are doing, the 
strong and good appointments in your secretariat and in the 
agencies and offices under you.
    I won't dwell on this, but I must underscore your good 
words about the Land and Water Conservation Fund and your 
intentions to make it what it was intended to be and your 
comments about the Royalty-In-Kind program. That really is 
music to our ears and thank you very much.
    I want to ask questions about the sustainable energy 
resources, the renewable energy resources offshore.
    You came to New Jersey and presented some figures to us--I 
could hear jaws drop all over the room when you talked about 
the large amounts of wind energy in the mid-Atlantic offshore 
region. I think there is a real future there. And I wanted to 
ask if you were taking proactive steps now, not waiting for 
individual applications but taking steps to conduct all of the 
studies that might be useful in understanding exactly what that 
resource is and how it could be harvested with environmental 
sensitivity. It is, I think, very important to what--you have 
addressed it in passing this morning, and I would like you to 
say a little bit more. I think it is very important to what the 
President has outlined in his energy talks.
    Secretary Salazar. Congressman Holt, thank you very much. I 
appreciate your question, and I appreciate your leadership in 
New Jersey on this issue. New Jersey is one of 10 States on the 
Atlantic coast, really, that is at the point of the spear in 
terms of standing up this new energy potential.
    In response to your question, we have two sets of data and 
are developing additional sets of data. The first set is a set 
of data that has been developed over a long period of time by 
the National Renewable Energy Lab, and they have done extensive 
analysis. It is the premier energy lab of the country.
    When you have conversations with Director Arvizu at ENRL, 
he can tell you where he thinks we can go on renewable energy. 
And I think his bottom line, if he were testifying here, it is 
only we who can limit where we ultimately will go because there 
is so much potential with wind and solar and geothermal and 
biomass.
    We have our information in terms of the wind energy 
potential that we have developed through the National Renewable 
Energy Lab. We also have developed information within our own 
agency through MMS, as well as through the United States 
Geological Survey, and that is information that we currently 
have that leads us to the conclusion that we have this great 
opportunity to move forward with wind energy.
    The second answer to your question really has to do with 
what we are doing to make that possible. We have, since the 
beginning of the Administration, issued five exploratory 
leases, including off the shore, off the coast of New Jersey 
where there actually are--the construction of the pilots are 
going on out there to measure the exact level of the wind so 
that then, based on those tests, then the commercial aspects of 
these developments can move forward. So, we are hoping to do 
everything we can to facilitate this process that we have 
opened up.
    We have opened up renewable energy offices in some places 
around the West. It is my hope and we are still working with 
OMB and others to try to figure out how we can open up a 
renewable energy office in the Atlantic. So, it is very much on 
our radar screen.
    The Chairman. Mrs. Lummis.
    Mrs. Lummis. Thank you, Mr. Chairman.
    Good morning, Mr. Secretary. I can't talk as fast as Mr. 
Bishop, but I might try a little bit of his strategy on you. 
So, I am going to make some statements for which I hope to 
receive a written response and then follow with a question that 
I hope you will have a chance to answer today.
    This is the question for which I hope to receive a written 
response.
    Less than 3 weeks ago, the BLM announced it was rescinding 
over 23,000 acres of oil and gas leases in the Bridger Teton 
National Forest in Wyoming. My understanding is that these 
leases were properly auctioned and that your Department 
accepted payment. My question is, what statutory authority does 
the BLM have to rescind the leases?
    The Wyoming Range Legacy Act which passed the Senate 
indicated, as Senator Barrasso stated on the Senate Floor, that 
everyone should keep in mind that the acres currently leased or 
currently leased but under protest represent the area where the 
most promising reserves exist and that the Wyoming Range Legacy 
Act does nothing to touch that. Yet the leases we are talking 
about are the ones that Senator Barrasso mentioned.
    And then, furthermore, it is my understanding that if the 
BLM accepts a bid at an oil and gas lease sale that the agency 
has a mandatory statutory obligation under the Mineral Leasing 
Act to issue that lease to the qualified winning bidder within 
60 days following payment by the successful bidder of the 
remainder of the bonus bid, if any, and the annual rental for 
the first year.
    This did occur in this case, so my question that I am 
asking that you follow up in writing is, by what authority were 
these leases rescinded?
    Second, I would like to commend to your attention the 
report of a seven-member committee on which I served under 
Secretary Kempthorne called the Subcommittee of the Royalty 
Policy Committee that dealt with mineral collections and 
enforcement. It was co-chaired by former U.S. Senators Bob 
Kerrey and Jake Garn. There was a member of the Navaho Nation 
on the committee. I was on the committee as the former 
treasurer of the State of Wyoming, Wyoming being the State that 
receives the most Federal mineral royalties from onshore 
production.
    And we did an entire performance audit of the Mineral 
Leasing Enforcement and Collection Program. So, we looked at 
both BLM and MMS programs, and we came to some different 
conclusions than are expressed in the CLEAR bill. And 
regardless of whether this bill passes or not, I sure commend 
that study to your attention because I think we made some very 
good recommendations with regard to policy.
    We came to some slightly different conclusions than you did 
about RIK. We recommended the royalty-in-kind onshore be 
discontinued but that offshore be continued. Because we found 
that when there is an excess in takeaway capacity, as there is 
in the Gulf of Mexico region, that the government was actually 
able to negotiate a better net return for the taxpayers in 
those situations than exists when you have a dearth of takeaway 
capacity.
    So be that as it may, I just think there are some really 
good suggestions in that report that was done under Secretary 
Kempthorne, and former U.S. Senator Bob Kerrey was deeply 
involved in that effort. He attended those meetings and was 
engaged. So, I strongly recommend that.
    And, finally, here is the question.
    As you know, this bill would shift both BLM's oil and gas 
program as well as the MMS responsibilities to a new Office of 
Federal Energy and Mineral Leasing, and we looked at that in 
the report that I am referencing that was done under Secretary 
Kempthorne, and we came to a different conclusion than this 
bill comes to.
    I would like to know, do you believe that this new 
Department would speed or slow the development of the 
approximately 70 percent of Wyoming's natural gas production 
and 65 percent of Wyoming's oil production that occurs on 
Federal lands and how?
    Secretary Salazar. Thank you very much, Congresswoman 
Lummis. I know, given the State of Wyoming, your great interest 
on these issues. We will get back to you on the question of the 
authority on the 23,000 acres that you spoke about first.
    Second, on the royalty policy committee which Senator 
Kerrey and others have served on, I appreciate the 
recommendation; and, in fact, that is what part of this team 
has been reviewing as we move forward on the reorganization of 
the Department. It will be part of what we will continue to 
work on with the Chairman and others. There are some great 
ideas that are included in that report.
    Third, on your question as to whether this will speed up or 
slow down the proposal in the Office of Energy and Mineral 
Leasing proposed in this bill, whether it will slow it up or 
speed it up, my answer to that is we have to get it right. I 
think the most important thing that this bill is doing for us 
right now is it is putting the spotlight on an issue that 
needed to have a spotlight put on it. When one looks at the 
Minerals Management Service, it was created a long time ago, 
not created by Congress, created by a secretarial order signed 
by a person who was in my position at the time.
    The Chairman. And yet, at the end of the day, we have given 
huge authority to the Minerals Management Service. And so some 
of the issues that are being raised in this Committee and in 
this bill, and which have been addressed by both the General 
Accounting Office and the Office of Inspector General need to 
be addressed. And so we need to come to some conclusion about 
how we are going to move forward.
    At the end of the day, I think it is important for all of 
us who will work on this issue to keep in mind that what we 
want to do is we want to have a government process and a 
government organization here that works and that works 
efficiently and that works effectively. And I will be the first 
to say, as Secretary of the Interior, that we have a long ways 
to go. We have a lot to learn and we will work with all of you 
to put together the best organization that addresses the 
interests of Wyoming as well as the rest of the country.
    Mrs. Lummis. Thank you, Mr. Secretary. Thank you, Mr. 
Chairman.
    The Chairman. The gentlelady from Guam, Ms. Bordallo.
    Ms. Bordallo. Thank you very much, Mr. Chairman and Mr. 
Secretary.
    Along with the Virgin Islands, who earlier had introduced 
their Assistant Secretary, I would like at this time to share 
with my colleagues that we are very proud of a son of Guam who 
has recently been confirmed as the Assistant Secretary of 
Insular Areas, Mr. Tony Babauta. He served with this Committee 
in Congress for many years, and I want to thank both you, Mr. 
Secretary, and Mr. Chairman, for recognizing his talent. We in 
Guam are very, very proud.
    Also, Mr. Secretary, I think you have done a very excellent 
job in the short time that you have been at the helm of the 
Department of the Interior. I know that the Department of the 
Interior is a very important agency in our government, 
especially when it comes to the territories, because you 
oversee the territories of the United States.
    I have a question here and, of course, I guess people might 
say I am very passionate about Guam and the territories. 
Currently, the Department's authorities under the Outer 
Continental Shelf Lands Act does not encompass the territories. 
So, do you and the Department support amendments to the law 
that would bring the territories under the OCSLA?
    Secretary Salazar. Thank you very much for the question, 
Congresswoman Bordallo. First, thank you again for mentioning 
Tony Babauta, and it is important that this Congress has helped 
us move forward to make him Assistant Secretary for Insular 
Affairs, because the territories are places that are far away 
from the mainland of the United States, and yet the strategic 
interest and historic relationship and current relationship is 
so important.
    You mentioned Guam, which I know you are more familiar with 
some of these issues than even I am. But the fact that we are 
moving 8,000 marines into Guam and the kind of consequence that 
that will have to the island and to the issues that affect it 
is something that is very important, and it is therefore 
important to have someone like Tony, and like you, being an 
advocate for Guam and for the territories.
    Let me--with respect to the application of the Outer 
Continental Shelf laws of the United States to the territories, 
it is one of the questions that we need to grapple with and we 
will be formulating a position and getting something back to 
you on that.
    Ms. Bordallo. I thank you very much, Mr. Secretary. And 
thank you, Mr. Chairman.
    The Chairman. The gentleman from Louisiana, Mr. Fleming.
    Mr. Fleming. Thank you, Mr. Chairman.
    I want to bring to your attention, Mr. Secretary, to Title 
III of the CLEAR Act. It establishes a new requirement for 
diligent development, diligent development of Federal oil and 
gas leases. This seems to be an extension of the old 
disapproved and discredited idea of the ``use it or lose it'' 
theory from the last Congress. So, I guess part one of my 
questions is, can you clearly define diligent development?
    Second, I want to bring your attention to your own OIG 
report which was released early this year talking about the 
lease development process. It says, and I will quote, It has 
many variables that are not self-evident, end quote. And quote, 
there is no guarantee that any given lease contains oil and 
gas.
    The report also states that, quote, Mandating production on 
all Federal leases and increasing fees would not necessarily 
increase production and could, in fact, reduce industry 
interest in Federal leases, end quote.
    I guess what it is suggesting here is, instead of 
increasing production, that this could--this idea of diligent 
development could actually reduce or even stop. And so after 
this period of moratoria, where we have not been able to drill 
OCS, or at least advance leasing, are we not really through 
more regulation achieving the same goal as the moratoria?
    Secretary Salazar. Thank you, Congressman Fleming, for the 
questions. First, let me say that we recognize at Interior that 
just because a company acquires a lease, it doesn't mean that 
they are going to be able to turn that lease into production in 
a month or a year or even 5 years; that the phases, including 
the environmental assessments that have to take place, will 
require a significant amount of time before those lease areas 
are put into production. And it is also very capital-intensive 
on the part of the companies who are out there doing the 
exploration and, ultimately, the development. So, we recognize 
that there is that time lapse.
    How you define diligent development--you know, there is an 
effort to try to do it in this legislation. There have been 
other efforts at trying to get it done. It seems to me that 
there is a time-honored doctrine, at least with respect to 
water and public lands, that it is a public resource and that 
you can create incentives to try to get that public resource 
developed.
    Now, whether it is the concept that is included in this 
bill or some other concept, I think that it is worthy to pursue 
some kind of standard on diligent development. What exactly 
that will be and where we will end up, I don't have an answer 
for you today.
    Mr. Fleming. Well, just to respond to you. Of course the 
OIG is suggesting that perhaps that is not the intention to 
reduce production, but that is what the OIG expects will 
probably happen. So, again, what I am suggesting is that that 
is something that needs to be looked at; that there may be 
perhaps unintended consequences.
    Secretary Salazar. I think, as with all major matters of 
legislation--and that is a major aspect of this legislation--it 
is important to be able to project the kinds of consequences. I 
think that is part of the analysis that this Committee and 
other people who are involved will do.
    Mr. Fleming. Thank you, Mr. Secretary. Thank you, Mr. 
Chairman.
    The Chairman. And the Chair would remind the gentleman from 
Louisiana as well that we have due diligence in coal 
development with Federal leases.
    The gentlelady from South Dakota, Ms. Herseth Sandlin.
    Ms. Herseth Sandlin. Thank you, Mr. Chairman. Thank you, 
Mr. Secretary. It is good to see you. As you know we have 
extended an invitation to you to join us in South Dakota to 
discuss a number of important issues particularly as it relates 
to the jurisdiction of your Department over the BIA and the 
nine sovereign tribes that I represent in South Dakota.
    With regard to today's topic and the work of Chairman 
Rahall and the bill that is the subject of today's hearing, I 
was wondering: In light of the recent GAO reports and the IQ 
investigations, what steps has the Department of the Interior 
already taken to address many of the problems with the oil and 
gas lease management? Do we have to wait until this bill 
becomes law before we see more accountability in the leasing 
programs? Or, to put it another way--and I know my colleague, 
Mr. Boren from Oklahoma, was interested in posing the question 
this way--do you believe you can address the needed changes 
administratively and without legislation?
    Secretary Salazar. Congresswoman Herseth, thank you for the 
question. And let me say that when I see someone like you from 
South Dakota, it tells me once again how important this 
Department is. It really is the department of all the Americas, 
it is not just the department of the West.
    But when we look at whether it is Mount Rushmore or whether 
it is the Indian issues or whether it is the energy issues that 
affect your State, we very much have a major role in working 
with you on the future of South Dakota.
    With respect to your question on waiting to act, we are not 
waiting, and we have not waited. From day one when I came in to 
the Department of the Interior, we went out to the Minerals 
Management Service and issued orders with respect to a new way 
of ethics, standards for MMS. We assigned a lawyer to work with 
our employees there. And I will say this as well. I know some 
of our employees are probably listening to this testimony. The 
fact is that 99 percent, 99.9 percent of our employees are good 
public servants. They work very hard every day. They are career 
employees. And the job that we do on behalf of the United 
States with our 67,000 employees is a job that I am very, very 
happy with. However, they were having problems in the past, and 
so we have taken that kind of action to try to make sure that 
those ethical lapses that have occurred in the past don't occur 
in the future.
    In addition, Secretary Wilma Lewis, or Under Secretary 
Wilma Lewis who has just joined us, she and her team have been 
actively looking at a whole array of management issues, many of 
which are addressed in this legislation today. And there will 
be two tracks with respect to how we move forward. One will be 
a track that we can accomplish administratively within our 
Department and that I can do through existing authorities and 
secretarial orders, and we will, we are working on that and 
will have more on that in the near future. And the second will 
be organic legislative changes, which are attempted to be 
achieved in the CLEAR Act, some of which we will be supportive 
of, some of which we will have a dialogue to see how at the end 
of the day we accomplish what the Chairman wants to accomplish 
here, and that is to have a good bill with respect to energy 
development off of our public lands.
    Ms. Herseth Sandlin. Thank you, Mr. Secretary.
    And then along the lines of Mrs. Lummis' question, assuming 
the Department moves forward, either now in terms of the two 
tracks you described, administratively or with some of the 
legislative changes that are put forth in the Chairman's bill, 
how long would you anticipate a reorganization to take? And 
have there been any estimates to date in light of what you just 
described in terms of actions already taken and what the 
reorganization will cost the taxpayer?
    Secretary Salazar. We are taking a look at those issues 
right now. I will give you my philosophical approach to the 
whole concept of reorganization. I don't think it does our 
government a lot of good and the people that we serve simply by 
rearranging the boxes, OK? That there are functions which are 
essential, including leasing and royalty collection and the 
transparency issues that are addressed in this legislation. And 
what we have to do is to make sure that that ultimate 
administrative framework that we put together addresses those 
fundamental issues in the very best way. There is a lot, I 
think, that can be done with royalty simplification, for 
example. We have spent a lot of time now chasing what is a very 
complex way of royalty collections for the United States of 
America. We have spent a lot of time thinking about ways in 
which to simplify royalty collections. So, we will be able to 
move forward with some of those changes, some of them sooner, 
some of them phased in over time. But at the end of the day, 
the goal here is to have a government agency that can provide 
efficiency and effectiveness.
    Ms. Herseth Sandlin. Thank you very much, Mr. Secretary.
    The Chairman. The Chair will advise members that we are in 
the process of voting on the House Floor. Two votes will occur. 
The Secretary does have to leave and will be unable to return. 
So, the remaining members, can you do it in 30 seconds?
    Then I would ask--of course all members have the right to 
submit their questions in writing to the Secretary. He has been 
very gracious with his time today, well over 2 hours, and we 
appreciate it. And I know that he and his dedicated staff that 
are with him here today would be glad to respond to members' 
questions in writing. Am I correct?
    Secretary Salazar. Yes, Mr. Chairman. Indeed. Thank you.
    The Chairman. Thank you. And the Committee will stand in 
recess until 1:00, which should allow the two votes on the 
House Floor to occur. And then, Dr. Lubchenco will be our next 
witness when we come back. And another warning that she does 
have to leave at 2:00. The Committee stands in recess.
    [Whereupon, at 12:20 p.m., the Committee recessed, to 
reconvene at 1:00 p.m., the same day.]
    [1:10 p.m.]
    Mr. DeFazio. [Presiding.] We will proceed now. The 
Committee will resume sitting and we will proceed to the second 
panel. And it is my pleasure to have the opportunity to 
introduce Dr. Jane Lubchenco, who is Under Secretary and 
Administrator for the National Oceanic and Atmospheric 
Administration, most notably; also a resident of Oregon and an 
esteemed professor at Oregon State University.
    I assume you are on leave or something.
    Dr. Lubchenco. That is correct.
    Mr. DeFazio. You want to keep your day job in the 
background, just in case. Madam Administrator, proceed with 
your testimony.

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

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

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

    Good morning Chairman Rahall, Ranking Member Hastings, and Members 
of the Committee. My name is Jane Lubchenco and I am the Under 
Secretary of Commerce for Oceans and Atmosphere and the Administrator 
of the National Oceanic and Atmospheric Administration. Thank you for 
the opportunity to testify before you today on the Consolidated Land, 
Energy, and Aquatic Resources Act of 2009. NOAA appreciates the 
continued efforts of the bill's sponsors and the members of this 
committee to strengthen comprehensive planning for energy resource use 
both on land and in the ocean and to take action to improve the 
integrated management and conservation of our oceans. Comprehensive 
planning supports ecosystem-based management and NOAA's efforts to 
protect its trust resources. As part of the Department of Commerce, 
NOAA has a critical interest in comprehensive ocean planning that both 
protects existing jobs, including those in ocean-dependent industries 
such as fishing, marine transportation, and coastal tourism, and 
fosters the creation of new clean energy jobs.
    While NOAA has an interest in, expertise on, and responsibilities 
relevant to energy planning on a variety of levels, the majority of my 
comments will focus on Title VI--Outer Continental Shelf Coordination 
and Planning--of H.R. 3534 and the importance of framing OCS activities 
as part of a broader strategy for integrated use of oceans. Before I 
discuss NOAA's comments on the bill, let me give you a brief overview 
of NOAA's roles in energy planning and permitting.
NOAA's Involvement in Energy Planning and Permitting
    NOAA's involvement with the energy sector is wide-ranging. NOAA 
works with the following energy sectors: offshore oil and gas 
(exploration and production); liquefied natural gas (LNG); hydropower; 
offshore and land-based wind power; hydrokinetic ocean energy (wave, 
tidal, and current); ocean thermal energy conversion (OTEC); ocean 
methane hydrates; solar power; biomass and biofuels. NOAA provides 
data, scientific research, technical products, management and conflict 
resolution expertise, as well as operational services that are used by 
the energy industry, state and local governments, and agency partners 
for energy-related issues. Under the Ocean Thermal Energy Conversion 
Act (OTECA), NOAA is responsible for issuing licenses to any entity 
wishing to construct or operate an OTEC facility within the U.S. 
territorial sea. In addition, NOAA actively participates in many of the 
energy licensing processes by conducting a variety of environmental 
consultations required for federal agencies to complete energy facility 
licensing.
    Federal agencies, states, and the private energy sector are 
increasingly requesting NOAA's scientific and technical expertise in 
coastal policy and management, fisheries science and management, 
Coastal Zone Management Act federal consistency reviews, Endangered 
Species Act consultations, and mediation. NOAA also provides a broad 
range of oceanographic, meteorological, and climate services used by 
the energy sector and federal agencies in charge of leasing and 
permitting projects. In the emerging field of renewable energy, 
industry and federal partners will need enhanced NOAA products and 
services in order to make reliable investments in renewable sources of 
energy such as wind, wave, solar and water. For example, NOAA data on 
weather and oceanographic patterns could inform critical siting 
decisions for these renewable energy industries.
    NOAA's mission includes ensuring that energy exploration, 
production and transport in the ocean and coastal zone occur in an 
environmentally responsible way and that these activities minimize 
adverse interactions with other uses. Many potential impacts of energy 
exploration, production or transport impinge upon NOAA's 
responsibilities, including:
      physical, biological or chemical impacts on marine biota 
and benthic habitats;
      acoustic impacts to marine mammals, other protected 
species, and fisheries;
      impacts on navigation, including increased ship traffic;
      interference with weather radar; and
      impacts on archaeological and historic preservation.
    In particular, NOAA has several legislative mandates to protect 
marine species and their environment, some of which provide strict 
guidance related to allowable levels of impact on living marine 
resources. I've included a listing of these mandates in an attachment 
to this statement. Under these laws and associated regulations, NOAA 
must examine coastal and ocean energy projects to evaluate potential 
and actual impacts of within the U.S. Exclusive Economic Zone. NOAA 
works to implement these statutes in a manner that allows it to 
protect, manage, and conserve coastal and marine resources, while also 
generating solutions that recognize the importance of the Nation's 
energy needs and implications for national security.
Comments on H.R. 3534
Use of Comprehensive Marine Spatial Planning
    NOAA commends Chairman Rahall and this Committee for drawing much-
needed attention to comprehensive energy planning, an important issue 
for the Nation and our ecosystems and we look forward to working with 
the Committee on this issue. NOAA's legislative responsibilities 
dictate the need to embed energy considerations into the broader 
perspective of other ocean uses. The broad construct within which we 
believe it is appropriate to consider these issues is marine spatial 
planning (MSP). MSP is a tool to evaluate the suite of activities that 
can coexist in a place with the goals of ensuring that legislative 
mandates are met, minimizing conflicts, and protecting the health of 
the ocean for future uses. MSP is a process for determining in an 
objective and transparent fashion which combination of compatible human 
uses are allocated to specific ocean areas in order to sustain critical 
energy, ecological, economic, national security and cultural services 
for future generations. The purpose is simply to minimize conflicts 
among activities, identify efficient combinations of activities, 
streamline decision-making, provide predictability in planning 
investments, ensure the continued provision of key benefits to society, 
reduce impacts in ecologically sensitive areas, and protect the overall 
health of the oceans.
    Both the U.S. Commission on Ocean Policy and the Pew Oceans 
Commission emphasized throughout their reports the necessity of a more 
comprehensive integration of multiple uses and the importance of 
framing MSP relative to the full suite of uses, not just one sector 
such as energy.
    President Obama's June 12, 2009 memorandum that created an 
Interagency Ocean Policy Task Force reinforced the importance of this 
broader perspective. The President's memorandum directed the Task Force 
to develop a recommended framework for effective coastal and marine 
spatial planning. Specifically, the memorandum called for, ``A 
comprehensive, integrated, ecosystem-based approach that addresses 
conservation, economic activity, user conflict, and sustainable use of 
ocean, coastal and Great lakes resources...''. In keeping with the 
direction outlined in the President's memorandum we recommend that MSP 
principles be applied more broadly. Indeed, we believe that that is the 
only way to ensure the many legislatively mandated responsibilities in 
oceans are met. Over the next three months, the Task Force will be 
preparing its recommendations on a framework for coastal and marine 
spatial planning. Included as part of this process, are a series of 
regional public listening sessions and stakeholder roundtables from a 
variety of ocean use sectors, designed to hear public input on what 
this framework should look like. NOAA is an active member of the Task 
Force and believes this process offers an excellent opportunity to 
consider the most appropriate ways to manage for multiple ocean uses.
    This bill addresses a particular and important subset of ocean 
uses. However, we believe it is important to consider these uses as 
part of a more comprehensive planning process that includes the full 
suite of key competing and complementary uses. An improved, thoughtful, 
transparent, and goal-oriented process for due consideration of 
multiple compatible uses will minimize future conflicts, greatly 
facilitate planning, and ensure overall goals can be met. In addition, 
there will be a need to increase synergistic relationships between 
existing ocean uses.
    Competing uses of the ocean are developing faster than our current 
capacity to manage them. Rapid growth of most uses will only exacerbate 
existing conflicts. The prevailing sector-based management approach is 
being increasingly challenged to ensure healthy and resilient ocean 
ecosystems and the ecological services they provide to all Americans. 
To succeed, MSP must be designed to recognize existing and emerging 
competing uses as well as ensure the appropriate balance among them. 
MSP should be conducted in a comprehensive, holistic manner in which 
society's desired uses of ocean places are optimized by conscious 
design, not inadvertent and, possibly, counterproductive competing 
uses.
    Of specific concern is Section 602, which creates Regional Outer 
Continental Shelf Councils that will prepare spatially explicit 
Regional Outer Continental Shelf Strategic Plans for energy development 
only. An alternative is to consider the critically important energy 
uses in a more comprehensive context. As urgent as energy needs are 
today, a broader strategy that recognizes the importance of energy 
along with other critical uses of oceans is more likely to produce 
long-lasting benefit to the Nation. As such, the Administration cannot 
support the Regional Outer Continental Shelf Councils or Strategic 
Plans outlined in H.R. 3534. A comprehensive, national approach to 
marine spatial planning must first be established.
Aquaculture
    NOAA believes that aquaculture must be conducted in an 
environmentally responsible fashion, and that a national aquaculture 
policy that vests NOAA with authority to ensure that aquaculture is 
practiced in a sustainable fashion is the best approach. We would like 
to work with the Committee to address the current ambiguity in 
authority and create a durable structure for responsible management of 
aquaculture. NOAA therefore strongly opposes Section 704, the offshore 
aquaculture language within this bill. Section 704 would remove 
Department of Commerce/NOAA authority to permit or regulate offshore 
aquaculture under the Magnuson-Stevens Fishery Conservation and 
Management Act (Magnuson-Stevens Act) and invalidate existing permits 
that have been issued under that authority. NOAA recommends deleting 
Section 704 in its entirety.
    NOAA is in favor of a national aquaculture policy and is currently 
working towards developing one. Aquaculture has the potential to 
provide a safe and nutritious local seafood supply to complement supply 
from U.S. commercial fisheries, create jobs in U.S. coastal 
communities, and maintain working waterfronts. NOAA believes that 
aquaculture must be conducted in a manner that safeguards U.S. coastal 
and ocean environments.
    Without authority to regulate aquaculture, NOAA would be less able 
to implement ecosystem-based management of ocean resources and ensure 
the sustainability of marine fisheries. Additionally, Section 704 would 
create a regulatory gap because there would not be an overarching 
statute to address environmental and fishery concerns for aquaculture 
operations in the Exclusive Economic Zone. While the U.S. Army Corps of 
Engineers and the Environmental Protection Agency have some regulatory 
authority over siting and monitoring the water quality impacts of 
offshore aquaculture operations, and the U.S. Food and Drug 
Administration has the regulatory authority over the safety of 
aquaculture products, NOAA has the mandates, research portfolio, 
technical expertise, outreach and extension network, and appropriate 
infrastructure to ensure that such operations adequately safeguard our 
Nation's living marine resources. Additionally, because NOAA is within 
the Department of Commerce, it is well placed to balance the goals of 
developing an economically viable offshore aquaculture industry while 
protecting our Nation's valuable living marine resources and the 
ecosystems and communities they support.
    If Section 704 is not deleted, a grandfather clause should be 
added, allowing existing permitted aquaculture activities to continue 
and the applicable Fishery Management Plans to be amended by the 
Fishery Management Councils pursuant to their Magnuson-Stevens Act 
authority. Invalidating current permits unduly interferes with existing 
efforts by Fishery Management Councils to manage fishery resources 
pursuant to existing aquaculture-related Fishery Management Plans. 
Furthermore, invalidating these existing permits would be detrimental 
to ocean conservation efforts and would negatively impact coastal 
community economies.
Conclusion
    Comprehensive energy planning and comprehensive ocean management 
are important for our Nation's future, if we are to use resources 
efficiently and sustainably. Our ocean resources support many jobs in 
the fishing, recreation, and maritime transportation sectors, and 
present an opportunity for new clean energy jobs moving forward. NOAA 
supports the Committee's desire to create a framework for such 
management, but believes that a framework for true marine spatial 
planning must be more comprehensive than what is articulated in the 
bill. NOAA will continue engaging on these critical issues through the 
work of the Ocean Policy Task Force. We look forward to working with 
you to address these issues once the Task Force develops its 
recommendation for a comprehensive marine spatial planning framework. I 
have mentioned some of our general comments in this testimony and look 
forward to providing more detailed, specific comments to the Committee 
as this legislation evolves. Thank you very much for the opportunity to 
provide testimony.
                                 ______
                                 
              RELEVANT NOAA LEGISLATIVE MANDATES FOR THE 
           PROTECTION OF MARINE SPECIES AND THEIR ENVIRONMENT
      Magnuson-Stevens Fishery Conservation and Management Act 
(MSA; 16 U.S.C. Sec. Sec. 1801 et seq.): Pursuant to the MSA, NOAA is 
responsible for the conservation and management of marine fishery 
resources and their habitats. NOAA is also responsible for establishing 
programs to prevent overfishing; rebuilding overfished stocks; insuring 
conservation; facilitating long-term protection of essential fish 
habitats (EFH); and realizing the full potential of the Nation's 
fishery resources. The MSA requires federal agencies to consult with 
the Secretary of Commerce, through the National Marine Fisheries 
Service (NMFS), with respect to ``any action authorized, funded, or 
undertaken, or proposed to be authorized, funded, or undertaken, by 
such agency that may adversely affect any essential fish habitat 
identified under this Act.'' When a federal action agency determines 
that an action (such as issuance of a license for an energy project) 
may adversely affect EFH, they must initiate consultation with NMFS and 
prepare an EFH Assessment. NMFS then conducts the EFH consultation and 
responds to the action agency with EFH Conservation Recommendations to 
avoid, minimize, mitigate, or otherwise offset adverse effects on EFH. 
Federal agencies must provide a detailed response in writing to NMFS 
that includes their proposed measures for avoiding, mitigating, or 
offsetting the impact of the proposed activity on EFH. If the federal 
agency chooses not to adopt the suggested NMFS Conservation 
Recommendations, it must provide an explanation. Depending on the 
degree and type of habitat impact, compensatory mitigation may be 
necessary to offset permanent and temporary effects of the project.
      Endangered Species Act (ESA; 16 U.S.C. Sec. Sec. 1531 et 
seq.): The purpose of the ESA is to provide a means whereby ecosystems 
upon which endangered and threatened species depend may be conserved, 
and to provide a program for the conservation of such listed species. 
The ESA prohibits the ``take'' of endangered or threatened species, 
with ``take'' defined as, ``to harass, harm, pursue, hunt, shoot, 
wound, kill, trap, capture, or collect, or to attempt to engage in any 
such conduct.'' Section 7 of the ESA requires federal agencies to 
consult with NOAA to insure ``any action authorized, funded, or carried 
out by such agency...is not likely to jeopardize the continued 
existence of any endangered species or threatened species or adversely 
modify or destroy [designated] critical habitat...''. If a proposed 
federal activity (such as the issuance of a license for an energy 
project) may affect a listed species or designated critical habitat, 
the agency proposing to issue the license must consult with NOAA and/or 
the U.S. Fish & Wildlife Service pursuant to section 7 of the ESA.
      Marine Mammal Protection Act (MMPA; 16 U.S.C. 
Sec. Sec. 1361 et seq.): Pursuant to the MMPA, it is generally illegal 
to ``take'' a marine mammal without prior authorization from NOAA. 
``Take'' is defined under the MMPA as harassing, hunting, capturing, or 
killing, or attempting to harass, hunt, capture, or kill any marine 
mammal. Except with respect to military readiness activities and 
certain scientific research conducted by or on behalf of the federal 
government, ``harassment'' is defined as any act of pursuit, torment, 
or annoyance which has the potential to injure a marine mammal in the 
wild, or has the potential to disturb a marine mammal in the wild by 
causing disruption of behavioral patterns, including, but not limited 
to migration, breathing, nursing, breeding, feeding or sheltering. 
Under the MMPA, NOAA authorizes the take of small numbers of marine 
mammals incidental to otherwise lawful activities (except commercial 
fishing), provided the takings would have no more than a negligible 
impact on those marine mammal species and would not have an immitigable 
adverse impact on the availability of those species for subsistence 
uses. An activity has a ``negligible impact'' on a species or stock 
when it is determined that the total taking is not reasonably expected 
to reduce annual rates of survival or annual recruitment (i.e., 
offspring survival, birth rates). In the event that any aspect of a 
proposed energy activity will result in a ``take'' the project 
applicant, or the lead agency acting on behalf of the applicant, would 
be required to obtain an incidental take authorization in advance from 
NOAA.
      National Marine Sanctuaries Act (NMSA; Title III of the 
Marine Protection, Research, and Sanctuaries Act, 16 U.S.C. 
Sec. Sec. 1431-1445c-1.): The NMSA and implementing regulations 
regulate certain activities within sanctuaries that might cause adverse 
impacts on sanctuary resources. In certain cases, actions that would 
otherwise violate these regulations may be authorized by permit. In 
addition, pursuant to NMSA section 304(d), any federal agency action 
that is likely to injure the resources of a sanctuary (whether that 
action occurs within or outside of the boundaries of a sanctuary) 
should consult with NOAA prior to taking such action, and NOAA may 
recommend alternatives to the proposed action to protect sanctuary 
resources. These requirements apply to energy projects proposed to be 
located within, near, or that would affect a sanctuary. This has 
included LNG projects proposed in the North Atlantic, California and 
Gulf; oil and gas projects in the Gulf; and hydrokinetic projects in 
the Pacific Northwest. The Energy Policy Act of 2005 clarified that 
authorizations for alternative energy projects on the outer continental 
shelf that would occur within a national marine sanctuary would be 
issued by NOAA's Office of National Marine Sanctuaries under the NMSA 
and not by the Minerals Management Service under the Outer Continental 
Shelf Lands Act.
      Coastal Zone Management Act (CZMA; 16 U.S.C. 
Sec. Sec. 1451 et seq.): The CZMA encourages states to preserve, 
protect, develop, and where possible, restore and enhance natural 
coastal resources. Federal actions having reasonably foreseeable 
effects on any land or water use or natural resource of a state's 
coastal zone must be consistent with a state's federally-approved CZMA 
enforceable policies. NOAA administers the CZMA and facilitates 
cooperation between states, federal agencies and others. The Secretary 
of Commerce, on appeal by a non-federal applicant, may override a 
state's CZMA objection to a federal authorization or funding 
application. The CZMA provides incentives for states to address energy 
issues through ocean management/Marine Spatial Planning (MSP) efforts. 
States use CZMA section 309 funds to develop MSP/ocean management/
energy components for coastal management programs. In addition, the 
section 309 grant program provides an additional avenue for NOAA's 
Office of Ocean and Coastal Resource Management (OCRM) to provide 
assistance to determine how states may want to approach MSP/ocean 
management/energy.
      National Environmental Policy Act (NEPA; 42 U.S.C. 
Sec. Sec. 4321 et seq.): NEPA requires federal agencies to prepare 
Environmental Impact Statements (EIS) for major federal actions that 
significantly affect the quality of the human environment. The Council 
on Environmental Quality (CEQ) regulations implementing NEPA require 
each lead federal agency to invite the participation of other affected 
entities, including federal, state and local agencies, throughout the 
NEPA process. Furthermore, after the lead federal agency prepares a 
Draft EIS, it is required to ``obtain the comments of any federal 
agency which has jurisdiction by law or special expertise with respect 
to any environmental impact involved or which is authorized to develop 
and enforce environmental standards.'' NOAA maintains jurisdiction and 
special expertise over marine resources as contemplated by CEQ's 
regulations. In those instances where NOAA receives a Draft EIS from 
the lead agencies (for example, the Federal Energy Regulatory 
Commission (FERC), Minerals Management Service, etc.), NOAA is required 
to comment on statements within its jurisdiction, expertise, or 
authority.
      Fish and Wildlife Coordination Act (FWCA; 16 U.S.C. 
Sec. Sec. 661-666c.): The FWCA requires federal departments and 
agencies that undertake an action, or issue a federal permit or license 
that proposes to modify any stream or other body of water, for any 
purpose including navigation and drainage, to first consult with the 
U.S. Fish and Wildlife Service, NOAA, and appropriate state fish and 
wildlife agencies. NOAA responds with comments and recommendations to 
conserve the fish and their habitat. The action agency then must give 
equal consideration to the conservation of fish and wildlife resources 
in making water resource development decisions. NOAA fulfills its 
responsibilities under FWCA by consulting with the Army Corps of 
Engineers on permits and water resource development projects, with FERC 
in decisions regarding hydroelectric project licensing, and on various 
other federal actions involving water resources and energy development.
      Ocean Thermal Energy Conversion Act (OTECA; 42 U.S.C. 
Sec. Sec. 9101 et seq.): Under OTECA, no person may construct or 
operate an ocean thermal energy conversion facility located within the 
territorial sea of the United States, except pursuant to a license 
issued by the NOAA Administrator. No applications have been received, 
but OCRM is ramping up an OTEC program since several companies and the 
Navy is moving forward with OTEC pilot projects and commercial scale 
projects. NOAA is closely coordinating with Department of Energy and 
the Navy.
      Federal Power Act (FPA; 16 U.S.C. Sec. Sec. 791a, et 
seq., as amended by the Energy Policy Act of 2005 (EPAct 2005)): 
Pursuant to Sections 10(a) and 10(j) of the FPA, NMFS has authority to 
recommend that FERC include measures in licenses for hydroelectric 
power projects for the protection, mitigation, and enhancement of fish 
and wildlife and their habitats. Under FPA section 18, NMFS has 
authority to issue mandatory prescriptions for ``fishways'' to ensure 
the safe, timely and effective passage of fish past hydroelectric power 
projects. In addition, NOAA may also issue mandatory conditions for the 
adequate protection of a federal ``reservation'', for example national 
marine sanctuaries
      Oil Pollution Act of 1990 (OPA90; 33 U.S.C. 
Sec. Sec. 2701, et seq.): OPA90 greatly increased federal oversight of 
maritime oil transportation, and improved the Nation's ability to 
prevent and respond to oil spills, including contingency planning 
requirements for both government and industry. Under OPA90, NOAA and 
other federal and state agencies and Indian tribes act as Trustees on 
behalf of the public to assess the injuries to natural resources from 
spills, scale restoration to compensate for those injuries, and 
implement restoration. NOAA is a full partner with industry and the 
U.S. Coast Guard in mounting effective responses to oil spills in 
coastal and offshore environments. On more than 150 spills each year, 
NOAA scientists support response efforts with a number of scientific 
services including trajectory predictions for the spilled oil, 
identification of critical resources that need to be protected, 
shoreline assessment that guide deployment of cleanup teams, and 
weather predictions to ensure safe and effective operations. In this 
way, NOAA science helps industry responders make better decisions that 
reduce both response costs and environmental impacts. The agency also 
helps train responders. For example, the agency is now working with 
Shell Oil and the USCG to prepare for a major ``Spill of National 
Significance'' exercise that will be held next March in New England and 
involves a spill scenario that threatens to oil northeast beaches from 
Portland to Cape Cod. NOAA also helps the oil industry by working 
cooperatively to resolve liability of natural resource damage claims. 
By working cooperatively with responsible parties, costs are lowered 
and restoration of injured resources is able to happen more quickly.
                                 ______
                                 

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

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

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

    Answer 5: As explained in answering question one above, while the 
Regional OCS Strategic Plans are binding on the Department of the 
Interior with respect to the OCS Program, it is unclear whether the 
Plans will be binding on other federal activities and, if they are 
binding, how an agency's decisions will be compelled to comply with the 
provisions of a Strategic Plan. It is also unclear what recourse, if 
any, would exist if a federal activity does not follow a Strategic 
Plan. Assuming that Strategic Plans would contain binding restrictions, 
however, and given the theoretical possibility of the scenario outlined 
above, a state that is potentially affected by the decisions of a 
Regional OCS Council would not likely opt out of membership in the 
Council. At any rate, whether a state has opted out or not, states 
would have CZMA federal consistency review as described in response to 
question 4.
 Question 6: There appears to be a requirement for a census of living 
        marine organisms and habitats but not energy resources or 
        minerals. Shouldn't the Regional OCS Councils collect data on 
        energy resources available to our country? Shouldn't decisions 
        about whether to consider an area for any type of leasing be 
        made with information about living marine resources and energy 
        resources in the area?
    Answer 6: Comprehensive planning should take into consideration the 
best available information on all human uses and natural resources, 
including energy resources. Many challenges exist to collecting the 
relevant and necessary information for an area. Appropriate and 
sufficient data will lead to beneficial outcomes in the long term, 
especially for emerging ocean uses, the impacts of which may not be 
ascertainable based on currently available information.
 Question 7: H.R. 3534 requires the establishment of Regional Outer 
        Continental Shelf Councils, it also recognizes the voluntary 
        Regional Ocean Partnerships established by the States under 
        CZMA authorities. While the Councils allow for any Regional 
        Ocean Partnership to have representation on the Council, do you 
        believe there will be overlap and duplication between these two 
        entities? Would it be possible for the Regional OCS Councils to 
        overrule actions taken by the Regional Ocean Partnerships?
    Answer 7: To clarify the terms of the question, it is important to 
explain that the Coastal Zone Management Act (CZMA) does not currently 
authorize interstate compacts. The definition of ``Regional Ocean 
Partnership'' in Section 2(16) of H.R. 3534 includes initiatives 
``created by interstate compact--through authority granted to [states] 
by the Coastal Zone Management Act.'' The CZMA originally provided 
authority for such interstate compacts, but that authority was removed 
from the CZMA in 1990. The Committee has previously proposed restoring 
that authority, for example in the proposed Federal Lands and Resources 
Energy Development Act of 2009. The current definition of ``Regional 
Ocean Partnership'' is problematic in that it does not appear to 
address the need for statutory authorization of interstate compacts. 
Additionally, specific interstate compacts are authorized by federal 
legislation such as the Delaware River Basin Compact. If Section 2(16) 
is intended to include interstate compacts authorized by separate 
federal legislation, NOAA supports revising the definition accordingly.
    Section 2(16) also defines ``Regional Ocean Partnership'' to 
include ``voluntary, collaborative management initiatives developed and 
entered into by the Governors of two or more coastal States.'' 
Presumably, this may allude to entities such as the Northeast Regional 
Ocean Council, Mid-Atlantic Regional Council on the Ocean, Gulf of 
Mexico Alliance, and West Coast Governors Agreement on Ocean Health, 
which act in an advisory capacity but lack federal authorization to 
issue binding restrictions similar to an interstate compact.
    Both the proposed Regional OCS Councils and Regional Ocean 
Partnerships (as defined) generally seek to use an ecosystem-based 
approach to address key issues facing coastal and marine areas. As a 
result, some overlap is likely. Section 602(c) provides that each 
Regional OCS Council ``shall build upon and complement current State, 
multistate, and regional capacity and governance and institutional 
mechanisms to manage and protect ocean waters, coastal waters, and 
ocean resources.'' This language seems to suggest that there should be 
strong sensitivity to ensuring that Regional OCS Council actions do not 
override or conflict with actions taken by a Regional Ocean 
Partnership. However, to avoid potential jurisdictional conflicts we 
would like to work with the Committee to further define this 
relationship.
 Question 8: Dr. Lubchenco, in remarks you made to the Regional Fishery 
        Management Council Chairs on May 19, 2009, you said this about 
        ecosystem-based management - ``We talk a lot about managing on 
        an ecosystem basis, but we really don't have the fundamental 
        understanding of ecosystem-based science to really underpin 
        those decisions. There is a huge amount that we don't know 
        about oceans that is desperately needed to inform the kinds of 
        management decisions, especially in light of the dual 
        challenges posed by climate change and ocean acidification.'' 
        H.R. 3534 would require ecosystem-based management. Has the 
        ability of National Oceanic and Atmospheric Administration to 
        grasp the underpinning science for this type of management 
        changed since May of this year?
    Answer 8: NOAA has already made substantive steps toward 
implementing ecosystem-based management. A primary goal for NOAA is to 
improve the agency's ecosystem-based management mechanisms to take 
stock of the range of human activities that can coexist with one 
another, to minimize conflicts and ensure ecosystems remain healthy. To 
that end, NOAA has developed, or is in the process of developing:
      Integrated Ecosystem Assessments - frameworks to assess 
ecosystem status and trends by integrating ecosystem observing, 
research, modeling, forecasting, and assessment efforts;
      A regional ecosystem data management system that makes 
related ecosystem data accessible; and the
      Comparative Analysis of Marine Ecosystem Organizations 
(CAMEO) Program--a research program geared toward understanding the 
complex dynamics controlling ecosystem structure, productivity, 
behavior, and resilience, with the overriding objective of supporting 
comprehensive ecosystem evaluations.
    Much of the single-species information, such as stock assessments 
and habitat characterization that NOAA has developed, will be critical 
information underlying ecosystem-based management.
    Ecosystem-based management uses current knowledge as a base and 
incorporates new information as it becomes available. As in all 
scientific endeavors, there will always be things that are unknown 
about marine ecosystems. In ecosystem-based management, NOAA uses its 
current understanding of the ecosystem to inform decisions. While NOAA 
does not yet have a complete understanding of ecosystem science, the 
agency can begin to implement this type of management with its current 
knowledge, which will grow over time. The challenge is to synthesize 
research and observation to elucidate the complex and geographically 
varied dynamics, relationships and processes that comprise an 
ecosystem.
 Question 9: If the National Oceanic and Atmospheric Administration 
        were to implement the ecosystem-based management provisions, 
        how would the agency implement the impact assessment, which 
        requires the agency to consider the cumulative impacts of the 
        range of activities affecting an ecosystem? How would the 
        agency weigh impacts of different types of activities, such as 
        oil and gas, military exercises, fishing, or recreational 
        boating?
    Answer 9: Integrated Ecosystem Assessments (IEA) can support 
ecosystem-based approaches for the management of marine, coastal, and 
Great Lakes resources. IEAs will provide management strategy evaluation 
through a comprehensive system that manages and integrates diverse 
information about biological, physical, chemical, and geological 
interactions that occur within ecosystems. In addition, IEAs will 
incorporate economic and social science data to evaluate impacts to 
social sectors that could result from various management strategies. 
The likely consequence of alternative management scenarios can be 
compared using ecosystem models that simultaneously evaluate potential 
positive and negative impacts on the ecosystem, including the human 
dimension. This integrated information will supply resource managers 
with the best-available science to assess competing resource uses and 
allow them to implement effective ecosystem-based management to achieve 
multiple objectives.
    Coastal and marine spatial planning and IEAs would provide the 
information to weigh impacts of different types of activities on 
coastal and marine systems. Both coastal and marine spatial planning 
and IEA processes would incorporate and develop information to assess 
the ecological, economic and social costs and benefits of alternative 
management strategies or uses in these ecosystems.
 Question 10: The definition of Important Ecological Area states that 
        it ``means an area that contributes significantly to local or 
        larger marine ecosystem health...'' ``Significantly'' is a very 
        subjective term, how would the agency define it?
    Answer 10: NOAA would likely not attempt to establish a definition 
of ``significantly'' in the context of the statute without first 
seeking public input through a notice-and-comment rulemaking. Most 
likely, an ironclad definition of ``significant'' will not be possible 
because the significance of an area type may vary by ecosystem. Rather, 
it will probably be determined on a case-by-case basis, as is done in 
implementing the National Environmental Policy Act.
 Question 11: Paragraph (A) of the definition of ``Marine Ecosystem 
        Health,'' requires ``a complete diversity of native species and 
        habitat wherein each native species is able to maintain an 
        abundance, population structure, and distribution supporting 
        its ecological and evolutionary functions, patterns and 
        processes'' to be present for a marine ecosystem to be 
        considered healthy. Do you believe this language would require 
        NOAA to deem a marine ecosystem unhealthy if there were an 
        endangered or threatened species within it?
    Answer 11: As explained in answering question two above, the 
presence of species listed as endangered or threatened with extinction 
under the Endangered Species Act of 1973 (ESA) within a marine 
ecosystem identified under this legislation would not require NOAA to 
deem the ecosystem unhealthy. Species are listed under the ESA not only 
due to the present or threatened destruction or modification to their 
habitat, but also based on commercial and scientific use, disease and 
predation, lack of adequate regulatory mechanisms, and other natural or 
human-caused factors. Any one of these factors may be sufficient to 
list a species, even though such species inhabit a healthy marine 
ecosystem that meets their biological needs. The ESA also requires NOAA 
to designate, with some exceptions, critical habitat for listed 
species. In these cases, critical habitat may be healthy and the 
designation allows for special management of the area to ensure 
conservation. Equally important, NOAA may designate and consider 
impacts to critical habitat that is a part of the species' historical 
range and essential to the conservation of the species, even if such 
habitat is not currently occupied by the species. The ESA has its own 
mechanisms for analyzing and managing threats to ESA-listed species and 
the ecosystems upon which they depend. Under this legislation, 
information on the habitat needs of ESA-listed species may be one 
consideration in the determination of marine ecosystem health, but 
would not be the sole basis for, or preclude, the agency from making a 
``healthy'' determination.
 Question 12: Paragraph (B) of the ``Marine Ecosystem Health'' 
        definition states ``a physical, chemical, geological, and 
        microbial environment that is necessary to achieve such 
        diversity''. Does NOAA have the ability to make ecosystem 
        assessments down to these levels? How accurate is the 
        information available to decision makers?
    Answer 12: NOAA collects large volumes of physical, chemical, 
geological and microbial data regarding marine ecosystems every day. 
However, data collection varies extensively by region and ecosystem. 
NOAA usually carries out assessments to address specific issues related 
to its legal mandates. The adequacy of information for addressing 
management issues is a function of the specific issue being addressed, 
the degree to which the issue is known in terms of basic scientific 
understanding, and the availability of the relevant data for assessing 
the management issue.
    In some cases, NOAA has the ability to make detailed ecosystem 
assessments at very small scales, such as within Marine Protected 
Areas, National Marine Sanctuaries, Habitat Areas of Particular 
Concern, or habitat restoration sites. For example, NOAA provides 
accurate assessments of ecosystems at this level through programs that 
identify harmful algal blooms, track contaminants in shellfish, or 
characterize habitats and ecosystems in National Estuarine Research 
Reserves. These programs provide information to managers to protect 
human health or to conserve relatively small areas. However, there are 
issues for which the basic scientific understanding is inadequate, and 
many regions for which comprehensive data at this resolution are not 
available for every relevant variable.
    Other data collected by NOAA, such as sea surface temperature from 
satellites, salinity and currents from buoys, and bathymetry from 
hydrographic surveys, cover broad areas (up to the ocean or basin 
scale). These data are available for large-scale assessments, but the 
degree to which the available data at these larger scales are adequate 
for decision makers also depends on the specific management issue. For 
example, it is possible to generate a regional map of fish habitat 
based on general information on depth preferences and bathymetry. 
However, generating a comprehensive analysis and high-resolution 
forecast, such as how a massive oil spill or changes in climate or land 
use would affect ecosystem productivity, may not be feasible due to the 
lack of comprehensive data sets, as well as the lack of detailed 
scientific knowledge of the relevant ecosystem functions.
                                 ______
                                 
    Mr. DeFazio. We will now proceed with the questions. I have 
both some on the subject matter before us and something that 
will be a bit off topic, but topical as relating to the 
biological opinion in the Pacific Northwest. Why don't I just 
start there?
    My staff was involved in the briefing yesterday and I have 
seen a number of news stories and different people are 
basically characterizing the position of the Administration in 
different ways; in particular, as relates to any possible study 
of dam removal. And I just want to make certain we have this 
straight for the record.
    I will quote to you one from the Oregonian and another 
story from the New York Times. And one, it says: We believe the 
actions in the plan will prevent further declines, but we have 
added these contingencies just in case.
    You go on to say: Possible breaching of the Snake River 
dams remains on the table in this plan, but it is considered a 
contingency of last resort, and would only be implemented if 
the analysis concludes it would be appropriate and, in fact, 
beneficial.
    And then you go on in the New York Times story to say, in 
speaking of the energy produced, say: They allow integration of 
wind into the grid. It is not clear what impact the removal 
would have on salmon. We believe the removal of them is not 
necessary in the short term. We want to give these other 
actions a chance to work.
    Are those accurate representations of what you have said?
    Dr. Lubchenco. Yes, they are.
    Mr. DeFazio. OK. I guess my question is, and I am one who 
is a great skeptic of--and having waded through the last 
analysis which was done mostly by the Clinton Administration 
but not released until the next administration, the Bush 
Administration had taken office, on dam removal. They talked 
about myriad problems that would result in addition to cost, 
loss of power, with the sedimentation and the spread of 
sedimentation throughout the river system, the need to 
basically transport generations of salmon while the dams were 
being removed because of the increased sedimentation. And then 
they pointed to the fact that actually most of the prime 
spawning habitat was above the private dams, which don't have 
fish passage, unlike the Federal dams, and for whatever strange 
reason, none of the environmental groups has ever raised the 
issue regarding relicensure of those high private dams which 
provide no fish passage and which block the formerly prime 
spawning habitat. So, I am a skeptic.
    But as I see it here, you have developed sort of a new 
series of short-term measures or sort of immediate or crisis 
measures that could be taken if there was a certain percentage 
drop in one or another of the runs, none of which go to dam-
breaching. But what you are saying here is basically there 
would be a study of whether there should be a study of the dam-
breaching, or that certainly is the way I would characterize 
it.
    Could you just sort of, since there is a lot of controversy 
swirling around this, just sort of make it as clear as you can 
what is being proposed and how it relates to that?
    Dr. Lubchenco. I would be happy to try, Congressman. We did 
file a report to the Court yesterday that was the result of a 
5-month very intensive review of the 2008 biological opinion 
dealing with, as you know, the 13 listed species in the 
Columbia River Basin system. The report includes an adaptive 
management implementation plan which provides for significant 
enhancement of a series of actions to be taken to strengthen 
protection for these endangered and threatened species. We 
believe that those actions, which encompass habitat, hydro 
measures, control of invasive species, both predators and 
competitors of the salmon, and other types of measures will 
indeed be very strong. And if they play out the way we 
anticipate they do, they will be sufficient to provide for not 
jeopardizing those species and providing adequate potential for 
recovery.
    We believe, though, that out of an abundance of caution, 
especially in light of climate change and other things which we 
might not anticipate, that it is critically important that we 
have the ability to monitor fish constantly and to have backup 
measures in place should they not be performing the way we 
expect them too.
    Hence we have identified specific triggers and contingency 
actions that would go into place if the triggers were tripped. 
Those contingency actions are both rapid response actions, 
things that could be done immediately and that would bring 
immediate benefits to the fish, and some actions that would 
take longer to implement and would have benefit farther down 
the road.
    Breaching of the dams is in this last category. We do 
consider it an option of last resort but have not taken it off 
the table completely. We do not think that it will be 
necessary, but we believe that it is important to have all 
options on the table in the eventuality that everything else 
fails.
    So, what will be done immediately is twofold relative to 
dams. The Corps of Engineers would create essentially a 
blueprint for the studies that would be needed to be done 
should the triggers be tripped. And second, the NOAA Northwest 
Fishery Science Center would develop a new life-cycle analysis 
for the different species of salmon so that we are better able 
to identify which actions would benefit a particular species 
that is in trouble, as identified by the triggers.
    So, because there are so many--it is a huge area, as you 
know--there are so many different species, it is impossible to 
know ahead of time exactly what actions would be appropriate 
for any one place and any one species. And so this analysis 
will help prepare us and give us the tools so that if a species 
is in trouble, we can more finely tune the actions needed to 
help it, not just start doing things that may or may not be 
useful. So, those two actions are done immediately, the 
blueprint and the life-cycle analysis.
    Nothing else would be done until a trigger is tripped, in 
which case there would be immediate rapid response actions set 
in motion, as appropriate to the problem. And if the analysis 
across all habitats--I mean all of the H's, habitat, hydro, 
harvest and hatcheries--across all of those, suggests that dams 
would be beneficial, a dam-breaching might be beneficial, then 
would be set in motion the studies that have a shelf life that 
need to look at the technical issues, the socioeconomic issues, 
the biological issue, the engineering issues. Those studies 
have been done in the past but are no longer current and they 
would need to be refreshed, if you will. So, that process would 
be set in motion.
    Only if those analyses continue to say that everything else 
is failing, this population is in serious trouble, would there 
then be a decision to come to Congress and raise the 
possibility of breaching the dams.
    So, as you can tell, that is a pretty lengthy process, and 
the bottom line is we believe that the actions, the 
strengthened and enhanced actions that are proposed in the 
plan, will be sufficient to uphold our responsibility under the 
Endangered Species Act for these fish. But we also want to have 
a precautionary approach, have checks and balances and things 
ready to go in case it doesn't work.
    Mr. DeFazio. All right. Well, thank you. Thanks for that 
comprehensive response. I appreciate it. It is obviously very 
important to the region of the Nation and some other members of 
the Committee.
    And I am not going to ask another question, but just one 
quick reflection. And I think the Chairman is going to follow 
up on the planning approach. But having been involved in 
terrestrial planning--that is, just zoning a county the size of 
the State of Connecticut--and having larger and angrier crowds 
than I had at my town hall meetings in doing that this summer, 
this sort of--I am going to urge you to look again at what the 
Committee is proposing and seeing whether, you know, we want to 
put all of the planning into one basket and try and move the 
entire thing forward--because I think it is going to be a 
gargantuan task--as opposed to perhaps rethinking where the 
Committee is at and discussing whether or not we could move 
ahead as we proposed and integrate it into your larger scheme, 
which I think will take quite some time. With that, I don't 
have a question.
    Dr. Lubchenco. We would welcome the opportunity to have 
that discussion with you. I think there are some real 
opportunities there.
    Mr. DeFazio. Thank you. I thank the Committee for its 
indulgence. And, Doc, you may be recognized right now.
    Mr. Hastings. Thank you, Mr. Chairman. I wasn't sure I was 
going to bring up the issue of a buyout, but since my friend 
from Oregon brought it up, I think I will take advantage to 
revise and extend my questions on that.
    Let me follow up, though, on what Mr. DeFazio mentioned. 
And briefly. With this action, do you think that the Obama 
Administration was legally required to put dam removal back on 
the agenda? And if it was not legally required, what specific 
reasons were there that dam-breaching was put back on the 
table?
    Dr. Lubchenco. Congressman, it is my understanding that our 
legal obligations are to ensure that the species of salmon and 
steelheads, for which we have responsibility, are not 
jeopardized and have adequate potential for recovery.
    Mr. Hastings. So, you are saying, then, that you believe 
that you are legally required then to do so; is that correct?
    Dr. Lubchenco. I am saying that our responsibility is to 
ensure the survival and potential for recovery for the fish, 
and therefore we have created a package of actions that we 
believe will do that. But understanding that there are 
uncertainties in how these fish will respond to some of the 
actions, we want to have a series of backup contingencies at 
the ready in case the initial actions do not work as we think 
and hope they will.
    Mr. Hastings. Well I don't want to get down--I just want 
to--this is to me kind of a yes or no question. I understand 
you want to save the species. I don't think there is anybody in 
the Northwest that wants to see these runs go extinct. But the 
previous administration in their proposal did not have dam-
breaching on the table. You came in with dam-breaching. Do you 
think that you were doing that because you were legally 
required to do so? That is my--I mean it is a pretty 
straightforward question, I think.
    Dr. Lubchenco. Congressman, we believe we need to have a 
fully stocked tool box to address this problem.
    Mr. Hastings. From a legal standpoint?
    Dr. Lubchenco. Yes.
    Mr. Hastings. OK. Now, you mentioned in response to Mr. 
DeFazio in a quote you made, that dam-breaching would be the 
last resort. I think you were talking about different 
categories of triggers. You said last category, last resort. 
Yet in the press release that you sent out yesterday, you said: 
Starting immediately, the U.S. Corps of Engineers will prepare 
a study plan to develop scope, budget, and schedule of studies 
needed regarding potential breaching of the Lower Snake River 
dams.
    Now, if it is the last resort, by your testimony, it seems 
to violate common sense to put last resort starting 
immediately. I would just like for you to explain that.
    Dr. Lubchenco. Congressman, I think we were envisioning 
this as good responsible planning. The actions that would 
happen immediately would create, for example by the Corps, the 
blueprint for if the contingency is needed down the road, then 
we would know what would need to be done. It doesn't initiate 
any actions other than to create a blueprint.
    Mr. Hastings. OK. But is it fair--well, I don't want to 
speculate. But I would suggest just because you are starting 
studies earlier, there may be somebody else, maybe not within 
the Administration, but somebody that has a very strong view on 
breaching the dams may have some court action. We can't control 
that, but that is a possibility, I assume.
    Let me go on. As you know, there are only four of the ESA-
listed runs that go by the Snake River dams. Why does the Obama 
Administration single out only these four dams as a contingency 
of last resort? Because if you are taking the approach that 
every option needs to be considered if the fish population is 
determined to be in a state of decline, is the Administration 
then opening the door to the potential removal of any dam 
within the Columbia River system?
    Dr. Lubchenco. Mr. Congressman, those four are the ones 
that have been the subject of much discussion and are ones for 
which these four are relevant to these four species, which have 
historically represented about 50 percent of the fish passing 
through that entire Columbia River Basin system. So, they are 
not insignificant runs.
    Mr. Hastings. So, the decision is based simply because of 
the discussions on this and not anything other--I mean, the 
reason I ask that is because--and it is very significant--
people within the Northwest say well, if those dams go, then 
others will go.
    This strikes me as being a political decision rather than a 
scientific decision if you are only singling out those four 
dams with four runs. Because you answered my response that you 
felt that you were legally required to take this action in 
order to protect runs of fish. You answered in the affirmative 
on that.
    Now, there are 13 runs of endangered fish within the 
Columbia River system. Thirteen runs come up: Bonneville, 
Vidals, John Day and McNeary. Now, if you are legally required 
to take this action and put dam-breaching on the table, even 
though you single out these four, with the intent of doing 
whatever you can to save species of runs, and the fact that 
there are 13 runs that come up the Columbia River before it 
gets to the Snake River, aren't you by default or de facto 
putting those dams in potential of breaching, because the 
idea--you feel you are legally required to save these salmon 
runs, fish runs I should say, not just exclusively salmon. So, 
am I way off base on that?
    Dr. Lubchenco. Congressman, the analysis that we did 
suggested that the whole package of actions that we proposed 
are a comprehensive set.
    Mr. Hastings. Right. But my question was specifically on 
dam-breaching and specifically your response that you were 
legally required to do this to save these runs, and what you 
just pointed out, that these are significant runs on the Snake 
River. But there are 13 runs on the lower Colombia on those 
dams that I am talking about, starting with Bonneville, 
starting with--and up to the John Day. I mean Vidals, John Day, 
and McNeary; 13 runs there. And if you are legally required, 
aren't you putting all of those potentially at risk of being 
breached?
    Dr. Lubchenco. Congressman, we don't think that those 
actions will be needed. The rest of the package that we 
proposed. We believe should be sufficient to not jeopardize the 
species and provide adequate potential for recovery. So, we 
don't believe that----
    Mr. Hastings. So, specifically, you are saying then--and if 
I may, and I thank you for your indulgence, Mr. Chairman--
specifically, you are saying that there is no potential of 
putting the other dams on the Potential Breaching List.
    Dr. Lubchenco. The only ones that were mentioned in our 
report were those four for the lower Snake River.
    Mr. Hastings. OK. In view of your testimony I must say it 
sounds to me that the decision of putting the Snake River dams 
on the list or on potential breaching is more of a political 
decision and not a scientific decision, simply based on your 
testimony, if the intent--if the intent is to save runs of fish 
up within the Columbia River system. I can't draw any other 
conclusion from that, unfortunately, based on your testimony.
    Now, if you have a different view of my conclusion, I would 
welcome you to write me and explain that in more depth, because 
as I hear the reasoning and the reason why the Obama 
Administration took this position, it is just hard to conclude, 
to me, that all the dams in the Snake River system would be 
potentially in jeopardy on this. And if you have a different 
view, I will more than welcome that correspondence.
    So, thank you very much. Thanks, Mr. Chairman.
    The Chairman. [Presiding.] The gentlelady from Guam, Ms. 
Bordallo, is recognized.
    Ms. Bordallo. Thank you very much, Mr. Chairman. And good 
afternoon, Dr. Lubchenco.
    As you stated, Doctor, in your testimony, the uses of the 
ocean are increasingly exponentially. In particular, there is a 
growing interest in developing renewable energy projects 
offshore as well as increasing the amount of oil and gas 
development. Isn't comprehensive planning that takes into 
consideration all uses of the OCS when you are deciding where 
to site energy projects the best way to ensure these activities 
take place most efficiently and with the least environmental 
impact? And wouldn't a requirement to look comprehensively at 
offshore energy siting and development complement a larger 
marine spatial planning effort such as that which the Ocean 
Policy Task Force is looking at right now?
    Dr. Lubchenco. Chairman Bordallo, thank you very much for 
raising that issue and providing me an opportunity to comment 
on it. We believe that the siting of energy use should ideally 
be done in a comprehensive fashion, exactly what you mentioned, 
in a way that takes into account the variety of other 
activities, the other uses of oceans that are in that area. And 
we would very much look forward to working with the Committee 
to make sure that the ways in which that is designed truly is 
comprehensive. It really does take into account the other uses, 
be it shipping, recreational, commercial fishing, aquaculture, 
tourism, the wide variety of other uses that may, in fact, 
interact with energy uses.
    We believe that all of these activities should be 
considered in a comprehensive fashion, so that we really 
understand how each affects the other, what combination of 
activities can coexist without conflicts, where we can separate 
out areas that might be in conflict, where we can ensure that 
the combined activities do not adversely impact the health of 
the ocean on which many of those activities depend, so that 
there is good economic benefit but also environmental 
responsibility. So, our interest is not at all in stopping 
energy development.
    We believe that that is critically important for the Nation 
and that the point is simply that that needs to be done in a 
larger context of the trade-offs, the other activities that 
coexist in that same area, or that might.
    Ms. Bordallo. Thank you, Doctor.
    I have another question. Do you think it is surprising that 
revenues generated by OCS energy development currently fund a 
variety of programs, yet none of these programs benefit ocean 
and coastal resource conservation programs?
    Dr. Lubchenco. Chairman, are you asking that--could you 
just rephrase that for me, please?
    Ms. Bordallo. All right. Do you think it is surprising that 
revenues generated by the OCS energy development currently fund 
a variety of programs, yet none of these programs benefit ocean 
and coastal resource conservation programs?
    Dr. Lubchenco. Thank you, Chairwoman. I believe that the 
multiple uses and activities in the oceans are sufficiently 
important, that they need to have adequate funding to ensure 
that they are sustainable, that we are managing the programs in 
the ways that we need to, and that we are accomplishing the 
greater good for that full suite of programs.
    It is certainly appropriate that revenues that are 
generated be used for the most comprehensive purposes, and from 
our perspective there are some extant and continuing needs for 
resources to address ocean uses specifically.
    Ms. Bordallo. Are you making that known?
    Dr. Lubchenco. I would welcome an opportunity to work with 
you to do that.
    Ms. Bordallo. All right. I have a few more questions of 
follow-up. Do you think dedicating 10 percent of the OCS 
leasing revenues to the conservation, protection, maintenance, 
and restoration of our oceans, coasts and Great Lakes is an 
appropriate amount?
    Dr. Lubchenco. As a general matter of policy, the 
Administration opposes the creation of new mandatory spending. 
Should Congress choose to move ahead with establishing a trust 
fund, we would like to see more revenues from offshore gas and 
oil leasing applied to ocean, coastal, and Great Lakes 
protection maintenance and use.
    Ms. Bordallo. And a quick follow-up, Doctor, on that 
question. How would better management and conservation of these 
resources benefit our economy?
    Dr. Lubchenco. Our economy is strongly dependent on 
activities around the coastal margins of our Nation. That is 
most clearly seen in many coastal communities and coastal 
States. Certainly, from your perspective, Guam is very 
dependent on its marine and coastal resources. But so, too, are 
many other States around the United States.
    Although I grew up in Colorado, my father was from South 
Carolina, and South Carolina has a very vibrant tourism 
industry that is dependent on the health and well-being of a 
variety of activities in and around the coastal region. The 
National Oceanic and Economics program gives us information 
that says that the leisure and hospitality industry of coastal 
counties in South Carolina contributed over $3 billion to the 
GDP of the State in 2007. So, that is just one sector of the 
economy of that State, and it clearly benefits significantly 
from having vibrant ocean and coastal healthy ecosystems that 
drive a lot of the economy. That is just a single State. Many 
other States depend on those revenues.
    Fishing, both commercial and recreational fishing, 
shipping, are two other examples of activities that bring 
tremendous economic benefit to the Nation. And if we sum up the 
sum total of revenues generated by the coastal communities 
throughout the United States, it is over 60 percent of the GDP 
of the entire Nation. So, clearly, these coastal States and 
territories have very significant dependence on the health of 
ocean ecosystems.
    Ms. Bordallo. Well I guess, Doctor, in wrapping up I would 
agree with you that the coastal areas of these States are 
important. But always remember that in Guam and the other 
territories, we have a coastal area all around our territory, 
so we are very important, Mr. Chairman.
    The Chairman. I would say to the gentlelady, yes, she does; 
and I was very honored and privileged to see it all during the 
last August district work period.
    The gentleman from Virginia, Mr. Wittman.
    Mr. Wittman. Thank you, Mr. Chairman. Dr. Lubchenco, 
welcome. Glad to have you here today with us.
    I want to ask you about one particular section of H.R. 
3534. It is in Title VII, section 704, as it relates to 
offshore aquaculture. In looking at that section, do you 
believe that that would in any way limit NOAA's ability to 
really look at creating a working framework for permitted 
offshore aquaculture? And in looking at that in the framework 
of Magnuson-Stevens, do you believe that it sort of takes away 
the directive from Magnuson-Stevens in where it directs to you 
manage fisheries in relationship to putting together a 
framework for offshore aquaculture?
    Dr. Lubchenco. Congressman, we believe that there needs to 
be a strong national policy on aquaculture with clear 
authority, responsibility, mandates, et cetera. And we would 
very much welcome an opportunity to work with Congress to 
ensure that that happens.
    Until we have such a policy, the existing authority under 
the Magnuson-Stevens Act is important to maintain, because 
there are existing policies in place, existing permits that are 
in place, and we would not want to be in a situation where 
there is a vacuum that is created.
    So, I think the intent, certainly our intent, is to move 
toward a situation where we have a clearly defined policy that 
provides the kinds of checks and balances, enables us to grow 
our national ability to provide healthy, safe seafood in an 
environmentally responsible fashion, to provide good jobs, and 
to do so in a way that is cognizant of the other activities 
happening in an area. We would like to move ahead in doing that 
because of the growing importance of seafood to the Nation, our 
continued reliance on imports, the opportunities that we see 
for having environmentally sustainable and responsible 
aquaculture. And therefore the time has come to create a 
national ocean policy, a national aquaculture policy that 
clearly defines what the responsibilities are.
    Mr. Wittman. As you know, right now there are a lot of 
cooperative efforts going on between the Regional Fisheries 
Management Councils, Congress, and the Administration to try to 
find ways that we can come to agreement on how aquaculture 
should be pursued within those areas.
    Do you think the particular provisions here in H.R. 3534 
might get in the way of that? Do you think it might be counter 
to that? Do you think it is complementary to that? I guess my 
concern is there seems to be, rather than parallel tracks here, 
there seems to be some divergence in what is going on 
cooperatively between the Councils, the Congress, and the 
Administration in what is portrayed in this bill, especially as 
it relates to the directions the councils have been given. And 
then going back to Magnuson-Stevens, with there being some 
counter to what Magnuson-Stevens proposes for us to do.
    Dr. Lubchenco. I believe that the provisions that are in 
the bill would make it challenging for us to--for NOAA to be 
helpful in existing aquaculture operations at present. I think 
a much preferable approach is to develop a national aquaculture 
policy that clearly describes who is responsible, and for what 
and where, with permitting, with all the kinds of checks and 
balances that are appropriate to include in such legislation.
    We currently don't have a clear description of who is in 
charge and under what authority. And that would greatly 
facilitate our being able to grow an industry in an 
environmentally responsible fashion without the ambiguities 
that currently exist.
    Mr. Wittman. I appreciate that. I believe that to be 
exactly the case, that we need a national policy that sort of 
cuts through all of the--call them stovepipes, whatever you 
want to call them, but to make sure there is continuity in 
decision making. And as we know, right now there is either some 
ambiguity, or even conflicts, in how decision making should 
take place and who has authority to do what, when, and where.
    So, I would agree. I think a national policy is the way to 
cut through that and to make sure everybody is clear as far as 
what their authority is and the direction they need to take.
    If I can ask one more question. I am going to shift gears 
here a little bit. In looking at developing OCS spatial plans, 
I am wondering--we look at everything that is above the bottom. 
I am trying to look at all the different resources there. I am 
just wondering, do you believe that we should have information 
on sub-surface minerals and the data that is available there in 
this whole OCS spatial plan? And what part does that play in 
developing the entire plan?
    Dr. Lubchenco. Congressman, having good information about 
the variety of resources on the seabed as well as on the water 
column, is incredibly valuable to helping understand what 
combination of activities can coexist and be sustained through 
time and ensure that the health of the system is protected. 
More information is absolutely useful.
    Mr. Wittman. So, you think having that sub-surface mineral 
data would be critical in any kind of OCS spatial plan that you 
would look in putting forward?
    Dr. Lubchenco. For that, as well as a lot of other types of 
information. We don't have all the information that we would 
like to have, including that. I don't believe that we need to 
wait for all of that to come in before we can begin to make 
decisions based on the information at hand; and so that we 
should proceed in two parallel tracks, acquiring that 
additional information that would enable us to make better 
decisions down the road, while at the same time utilizing the 
information that we do have at hand to make more comprehensive 
plans based on the variety of uses for which we have some data 
already.
    Mr. Wittman. Thank you, Dr. Lubchenco. Thank you, Mr. 
Chairman.
    The Chairman. Dr. Lubchenco, I had questions similar to the 
gentleman from Virginia, Mr. Wittman, in regard to agriculture, 
but I will submit those in writing in the interest of time. I 
know you have a plane to catch and I want the other members to 
have an opportunity.
    The gentleman from Indiana, Mr. Holt, is recognized.
    Mr. Holt. Thank you, Mr. Chairman. Thank you, Dr. 
Lubchenco, for your testimony. I often use you as an example of 
the President's wisdom in making appointments and his 
appreciation of science and his environmental sensitivity. In 
the interest of your time and the Committee's, your answers to 
my several questions can be in summary form and as brief as you 
care to make them.
    How important is it, do you think, that you have a 
dedicated fund for dealing with ocean and coastal issues? Does 
ORCA fill the bill? Do we need something else?
    Dr. Lubchenco. Mr. Congressman, let me say, first, just how 
much I appreciate the strong leadership that you have shown on 
behalf of science throughout the time that you have been in 
Congress. And I have appreciated that for a long time and 
continue to do so. I know that you believe not only in 
promoting science, but in using the best available science to 
make decisions, and I obviously agree with that very much.
    The President I think has made clear that protecting and 
restoring ocean and coastal environments is a high priority of 
this administration. That is reflected in the Ocean Policy Task 
Force and in the reports that we will be providing to him for 
the first part of our activities that the task force is 
releasing tomorrow. The Administration recognizes the need to 
step up our efforts to protect oceans and coasts and to have 
the resources to do that.
    As a general rule, the Administration opposes creating new 
mandatory programs or converting programs that have been funded 
through discretionary appropriations to mandatory funding. So, 
I think it would be in order for us to work closely with the 
Committee to try to define the ways in which the resources that 
are needed could be acquired in ways that would work for 
everyone.
    Mr. Holt. Thank you. In light of the task force report that 
we will be hearing about, does it have implications for the 
legislation that we are considering and moving forward with 
that legislation?
    Dr. Lubchenco. The report that we will be releasing 
tomorrow is a draft report. It outlines a national ocean 
policy, a governance framework for achieving that, and an 
implementation plan that is pretty broad, big picture. That 
report is going to the President. It remains to be seen exactly 
what he will do with it. And the report will be available for 
public comment. It does lay out, as alluded to in the 
Presidential memo that set up the task force, the urgent need 
to have more comprehensive integrated spatial planning in 
oceans to get away from the sector-by-sector, issue-by-issue 
approach that has characterized the way we have managed oceans 
in the past and that has, indeed, created lots of gaps, and in 
sum has not been sufficient to ensure that we have healthy 
oceans and coasts or vibrant coastal communities that depend on 
those.
    And so the task force will be making a series of 
recommendations that are designed to draw attention to the need 
to have more integration, more collaboration across various 
departments and agencies, and better structures for integrating 
across those different sectors. So, yes it does, indeed, relate 
to the approach that is highlighted in this bill.
    And I think that there is a wonderful opportunity for us to 
work together in figuring out how to move ahead with 
comprehensive energy legislation, because it is so important to 
the Nation, but to do so in a way that is cognizant of the 
breadth of other activities and the other important 
considerations that are also playing out in areas where energy 
might be appropriate to develop.
    Mr. Holt. Thank you.
    I believe the legislation that the Chairman has before us 
here will be very consistent with what you are talking about. 
And since my time has expired, I will just finish with a 
comment following on the question I asked of the Secretary of 
the Interior.
    I hope that your folks are moving forward as energetically 
as possible on studies of what we need to know about offshore 
wind potential. I think there are many studies to be done. I 
think we shouldn't wait for them to come up sequentially; we 
should be thinking now about what questions need to be 
addressed and vigorously pursuing answers to those questions.
    The Chairman. The gentleman from Louisiana, Mr. Cassidy.
    Sorry, didn't mean to wake you.
    Mr. Cassidy. I am trying to get my head around this. So, I 
am exploring this with you. I don't quite comprehend it.
    It seems like in these regional planning councils, the very 
nature of who is placed on the council and their relative 
representation will tilt itself toward the result.
    Do you follow what I am saying?
    Dr. Lubchenco. I believe so.
    Mr. Cassidy. So, it almost seems--for example, Chairman 
Rahall's bill, on page 47 it says that the council that is set 
up would not allow leasing to occur unless the regional council 
had established it as being suitable for leasing.
    And so I gather--I've gotten a memo on all of these things 
that you have to go through, and in my mass of papers--I've 
lost it, but there are four huge steps that you have to go 
through regulatory-wise in order to develop an offshore lease. 
It still seems you go through all of that and then be trumped 
by this regional council.
    Is that a fair understanding of the bill as you understand 
it?
    Dr. Lubchenco. I think it is.
    Mr. Cassidy. So, I have to ask, if we are going to make 
energy development a priority in our country, and we have, 
earlier, an Interior Department OIG report that speaks about 
much of the cost of developing oil and gas on Federal lands 
comes from the regulatory environment, which is more onerous on 
the Federal lands, and litigation which offers results from 
said regulations, it is like one more thick layer, a barrier to 
developing oil and gas leases offshore.
    Would you disagree with that?
    Dr. Lubchenco. What I am hearing is a plea for being able 
to develop energy resources as rapidly as possible.
    Mr. Cassidy. What I am very frustrated by is that I am from 
Louisiana. We have the Flower Gardens coral reef, which is one 
of the healthiest in the United States, in the midst of all of 
these drilling activity.
    We had testimony from folks from Massachusetts who said 
that they were not going to do drilling because they wanted to 
protect their environment. Another fellow from the Chesapeake 
Bay, he would not allow drilling.
    I am sitting there thinking, I am eating Maryland crab 
cakes with Louisiana crabs because they can't grow crabs in the 
Chesapeake Bay; and in Louisiana, where we drill, it seems we 
have a healthier coastline in terms of productivity.
    It seems naive to think we are going to be guided by 
science as much as we are going to be by the prejudice of the 
people on the Committee.
    In your testimony you mentioned how we have inadequate 
information of the ecosystems of the ocean. So, we have 
inadequate information on the ecosystems, yet we are going to 
be making decisions regarding not developing, based on 
inadequate understanding but perhaps on prejudice regarding the 
ecosystem.
    Does that follow? I mean disabuse me if I am wrong, but 
that really seems like where my thoughts are taking me.
    Dr. Lubchenco. We never have as much information as we 
like. But we have an abundance of information that could be 
utilized to make good decisions about how to balance the 
variety of uses that exist in offshore areas, with the intent 
that allowing development of energy is appropriate, making sure 
that that is done in a way that does not negatively impact 
other types of very important activities--fisheries, for 
example, in Louisiana.
    Mr. Cassidy. If I am correct and empirically I am correct 
that the Flower Gardens coral reef coexists quite nicely with 
an area of intense drilling offshore, and if somebody came to 
you and said, We don't want it in our particular marine spatial 
area because we have coral reefs to protect, would you use the 
science to trump that argument to, say, take it off the table 
because we have empiric evidence that indeed you can coexist 
between the environment and drilling without a problem?
    Dr. Lubchenco. I think the role of science in these 
decisions is to inform an understanding of the tradeoffs. The 
decisions about the tradeoffs are going to be made; those are 
societal decisions.
    Mr. Cassidy. But my question is, frankly I have found in 
this Committee we are guided often by prejudice as opposed to 
science. So, people say that it is harmful to the environment 
without empiric evidence based upon incidences from 20 years 
ago, and so therefore they proscribe things which, frankly, 
demonstrably would not hurt their environment.
    So, I guess I am a little suspicious about this, which may 
be, if you will, stacked with folks hostile to energy 
development unless I know absolutely that we could take some of 
their prejudices off the table if we have compelling empiric 
evidence.
    Do you see these MSPs as having the ability to do so?
    Dr. Lubchenco. Marine Special Planning provides an 
opportunity to think about the tradeoffs across different types 
of activities in a way that you can design--you can identify 
those activities that can coexist without conflicts and the 
total of activities that can coexist without degrading the 
environment. It is simply a tool.
    Mr. Cassidy. I may not be making my point.
    But clearly commercial fishing, recreational fishing, 
energy development and coral reef preservation is coexisting 
very nicely in the western Gulf and yet the arguments that I 
hear about bringing it to the eastern Gulf is that it would 
endanger recreational fishing and things such as coral 
structures.
    So, granted, I will accept what you just said. It gives us 
a way to balance societal demands.
    My question is, though, if I have a bunch of folks on there 
who, despite the evidence placed before them, are going to 
insist that they are not going to allow something based on what 
is effectively their prejudice, trumping MMS and four other 
agencies on the Federal level which have granted approval, that 
doesn't seem like a very good system to me.
    Do you follow what I am saying? If all we are given is a 
place for people to vent their prejudices, how does that 
advance our cause?
    Dr. Lubchenco. I think there are many examples of 
committees that are designed to bring different perspectives 
together and to, in the best of all cases, draw on scientific 
information to help inform those decisions, but where there may 
be legitimate differences of opinion. And that is part of the 
political process.
    Mr. Cassidy. Thank you.
    The Chairman. The Chair would respond to the gentleman from 
Louisiana regarding the opening part of his question about the 
council's decisions on leasing.
    Mr. Cassidy. I should have asked that of you.
    The Chairman. The Council would recommend to the Secretary 
up front, before the lease is issued, before the permit is 
issued and taking into account all of the information. These 
councils then make their recommendation up to the Secretary who 
has the ultimate decision on issuing release.
    Mr. Cassidy. Mr. Chairman, in all due respect, just because 
I don't understand this then, because on page 47, line 7, it 
says, ``shall not include in any such leasing program any 
location unless identified and a strategic plan is suitable.''
    I took that to limit the Secretary's latitude of action, 
but is that not true? The Secretary could override the decision 
of the regional planning council?
    The Chairman. That is correct. They are recommendations 
from the regional councils.
    Mr. Cassidy. So, ``shall not include''--the ``shall'' is 
messing me up here because the ``shall'' seems like it is 
saying that the Secretary cannot lease that land, ``shall 
not,'' so that is what I am asking.
    The Chairman. It is my intent that the Secretary had the 
ultimate authority. If the ``shall'' or whatever in there to 
which did gentleman is referring is a problem, then we have to 
look at that, and we will look at that together.
    I know the Director has to leave, and we appreciate your 
time with us today, and we do look forward to working with you 
as we continue to advance this legislation.
    Dr. Lubchenco. Thank you so much. I appreciate your 
leadership on this very important issue; and the areas that we 
have flagged in the bill for which we have concerns, we would 
welcome an opportunity to work with you. We agree with the 
overall goals and intent and think that we could have some very 
productive discussions.
    So, thank you for the opportunity to testify.
    The Chairman. I commend you for your leadership
    We will now proceed to our third panel composed of the 
following individuals:
    Ms. Mary L. Kendall, Acting Inspector General, U.S. 
Department of the Interior;
    Mr. Frank Rusco, the Director of Natural Resources and 
Environment, U.S. Government Accountability Office.
    We welcome the panel with us today. We appreciate the 
patience that you had during the course of the morning and 
early afternoon here.
    The Chairman. And Ms. Kendall, we will call upon you first.

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

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

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

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

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

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

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

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

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

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

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

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

[GRAPHIC(S) NOT AVAILABLE TIFF FORMAT]

    Overall, we have found these site visits and interviews with 
key staff in those locations to be instrumental to our efforts to 
identify ways to improve oversight of royalty collections and mineral 
leasing and development within Interior. Over the course of our work in 
these field offices, the staffing levels, experience, expertise, and 
overall level of performance across these offices have varied widely at 
given points in time and over time. As such, we cannot provide a report 
on the quality and competence of the oil and gas programs in these 
offices. We have examined some of these issues as part of our 
production verification work and expect to release a report in a few 
months about our findings that may provide insights about staffing and 
experience.
    Regarding compliance with environmental laws and regulations, in 
previous reports, we have identified instances where BLM staff have not 
complied with laws and regulations and noted what we believed to be the 
causes, as well as any recommendations we had for addressing them. In 
particular, see our September 2009 report 2 on the use of 
Categorical Exclusions and our September 2008 report 3 that 
examined Interior's ability to inspect oil and gas wells. We have 
identified staffing levels and experience as issues of concern in past 
reports, and our ongoing work examining oil and gas production 
verification has revealed similar problems. Beyond the work I have 
cited, I cannot speak to specific other causes for issues at BLM.
---------------------------------------------------------------------------
    \2\ GAO, Energy Policy Act of 2005: Greater Clarity Needed to 
Address Concerns with Categorical Exclusions for Oil and Gas 
Development under Section 390 of the Act, GAO-09-872 (Washington, D.C.: 
Sept. 16, 2009).
    \3\ GAO, Mineral Revenues: Data Management Problems and Reliance on 
Self-Reported Data for Compliance Efforts Put MMS Royalty Collections 
at Risk, GAO-08-893R (Washington, D.C.: Sept. 12, 2008).
---------------------------------------------------------------------------
3.  Mr. Rusco, are the problems that you found with BLM's use of 
        Section 390 Categorical Exclusions indicative of a broader 
        problem with BLM's management of oil and gas, and if so, what 
        is at the core of that deficiency?
    Given that the review of BLM's use of section 390 categorical 
exclusions conducted for our September 2009 report only examined BLM's 
management as it related to this oil and gas tool, we cannot draw 
conclusions about the overall management practices of BLM's oil and gas 
programs. 4
---------------------------------------------------------------------------
    \4\ GAO-09-872.
---------------------------------------------------------------------------
Questions from the Minority:
1.  In the GAO report Oil and Gas Leasing: Interior Could Do More to 
        Encourage Diligent Development, your office suggested 
        increasing rental rates and escalating royalty rates as a way 
        to promote more development of federal oil and gas leases. How 
        is making it more expensive to develop on federal lands an 
        incentive, when federal lands already present a higher cost to 
        operators because of the additional regulatory burdens that 
        accompany them?
    In our October 2008 report, we identified increasing rental rates 
and other tools as ways to increase the speed of moving from leasing to 
production. 5 Such tools, which effectively increase the 
cost of holding land or delaying production, may give companies that 
lease federal land an incentive to complete the work needed to begin 
producing oil or gas. As we noted in our report, some private and state 
lands may be more costly to lease than federal lands are now, so it is 
not clear that such efforts would necessarily make it more expensive to 
produce oil or gas from federal land. Certainly, not all the tools we 
cited in our report may be appropriate for all federal lands leased for 
oil and gas production; however, we believe these tools would be useful 
for Interior to evaluate.
---------------------------------------------------------------------------
    \5\ GAO, Oil and Gas Leasing: Interior Could Do More to Encourage 
Diligent Development, GAO-09-74 (Washington, D.C.: Oct. 3, 2008).
---------------------------------------------------------------------------
2.  In the Oil and Gas Leasing report, your office compared the federal 
        leasing procedures to states such as Texas, Alaska and 
        Louisiana. However, as alluded to in the report, there may be 
        ``...important restrictions on development activity that do not 
        apply to the same extent for state or private leases.'' Do you 
        think that the CLEAR Act adequately takes into consideration 
        the additional regulatory burden placed on federal lands 
        compared to state and private lands? What about the legal 
        challenges from environmental groups and others? How should 
        federal lands leasing be different than state and private lands 
        to account for these regulatory and legal differences?
    We have not examined the CLEAR Act to determine whether it 
adequately considers the important differences in leasing federal 
lands, as compared to state or private lands. As we noted in our 
report, there are specific statutory and regulatory requirements 
associated with developing oil and gas leases on federal land. We have 
not developed a view of what specific differences in federal leases are 
needed to fairly address these differences. We have recommended that 
the Secretary of the Interior consider the information we provided in 
our October 2008 report on diligent development as well as identified 
for Congress that it consider directing Interior to conduct a 
comprehensive review of leasing practices. 6
---------------------------------------------------------------------------
    \6\ GAO-09-74.
---------------------------------------------------------------------------
3.  In your investigations have you found that states or private 
        landowners are more eager to see development of their lands 
        than the federal government? Do developers on private lands 
        face protests from environmental groups at the same rate as 
        developers on federal lands?
    We have not evaluated the relative interest of private and state 
mineral and landowners to those of federal policies and officials. I 
believe that it would be difficult to determine such differences. We 
have not evaluated the relative rates of environmental or other 
protests of oil and gas development on federal, state, and private 
lands.
4.  Your report on Categorical Exclusions stated that while they have 
        been a benefit that they are frequently used differently by the 
        agency due to a lack of clear direction. Do you believe that 
        clearer direction will result in more frequent or less frequent 
        use of categorical exclusions on federal land?
    Whether clearer direction on the use of section 390 categorical 
exclusions would result in more frequent or less frequent usage would 
depend on the nature of the clarification. For example, two of the 
areas that we identified in our September 2009 report that needed 
clarification and that could impact the frequency with which section 
390 categorical exclusions are used include clarifying (1) whether the 
extraordinary circumstances checklist should be used to screen the use 
of section 390 categorical exclusions and (2) whether section 390 
categorical exclusions are mandatory or discretionary. 7 
Using the extraordinary circumstances checklist to screen the use of 
section 390 categorical exclusions would reduce their use to the extent 
that any extraordinary circumstances were identified. Conversely, if 
section 390 of the Energy Policy Act of 2005 was clarified to indicate 
that the use of section 390 categorical exclusions was mandatory, then 
their usage would increase. There may also appear to be an increase in 
usage if BLM field offices begin to apply a separate section 390 
categorical exclusion to each well; however, this would be an increase 
on paper only and not reflect a real increase in usage.
---------------------------------------------------------------------------
    \7\ GAO-09-872.
---------------------------------------------------------------------------
                                 ______
                                 
    The Chairman. Thank you both.
    Mrs. Kendall, it seems like a major problem here is the BLM 
and MMS computer systems are completely inadequate for the task 
at hand. You testified to the lack of communication between the 
two as being a major problem.
    Is it computers or is it a philosophy from above?
    Ms. Kendall. Computers contribute to it.
    For instance, in the report we did on nonproducing leases, 
we discovered that they have two separate systems that, for 
instance, do not even use the same lease number nor the 
identical lease. So, they can't even overlap to ensure that 
lease 1 at BLM may be lease 29 at MMS.
    So, there are no tracking systems between the two systems, 
and it is something as fundamental as not even using the same 
leasing numbers. And that is one of many examples.
    The other is the example I used of beneficial use, which is 
something that--BLM allows operators to utilize a certain 
amount of oil and gas during the actual production of oil and 
gas, but they have to either meet regulatory criteria or BLM 
has to affirmatively approve this beneficial use.
    MMS has no idea whether that approval has been given or 
not, and operators may claim it and MMS wouldn't know whether 
it has been approved or whether they met the regulatory 
criteria and would have no reason to question whether it was a 
legitimate deduction or not.
    These are just two examples of many that we have come 
across that comprise the communications issue.
    The Chairman. Mr. Rusco, do you wish to follow up on that?
    Mr. Rusco. Yes. Our work has also found numerous instances 
in which BLM and MMS practices are inconsistent with each 
other. In our ongoing work, in particular on production 
verification, we have found cases in which the data that is 
collected at BLM, that could help MMS in their royalty 
collection activities, are not transmitted in a usable format 
to MMS for that purpose; and similarly, the data that comes 
from audits and royalty activities are not always transmitted 
back to BLM in ways they could use for their oversight in 
managing ongoing leases.
    So, there are many cases in which there are opportunities 
for improvements in the communication, in the data that is 
shared and in the systems, so that the systems can be updated 
and can talk to one another.
    The Chairman. Do both of you believe that provisions in the 
CLEAR Act may help clear up and coordinate and address some of 
these inefficiencies?
    Mr. Rusco. Yes, there are several areas where the bill 
focuses on addressing specific issues that we have raised in 
our past work, and I can give you a few examples. But--overall 
we have not looked at the bill in its entirety in our work, and 
I cannot comment on the entire bill; but in the areas where the 
bill has touched on areas in which we have made 
recommendations, we are in accord with those provisions.
    Ms. Kendall. Likewise, Mr. Chairman, we really believe that 
a single bureau managing leases and royalties would really help 
standardize management practices and policies and would, 
hopefully, eliminate many of the communication issues that we 
have identified that really do impact the royalty collection 
process.
    The Chairman. Last year there was some debate, when we had 
the issue in pending legislation of whether diligent 
development was already existing law. I am aware that there is 
a requirement for lessees to drill a well in the first 5 years 
of an 8-year lease. But are there any other specific 
performance requirements on other leases, or is it possible to 
obtain a lease and then hold it for almost the entire length of 
the primary term where you are actually trying to bring the 
lease into production or not?
    Mr. Rusco. That is currently correct, yes.
    The Chairman. I have no further questions.
    The gentleman from Idaho.
    Mr. Lamborn. Ms. Kendall, I am somewhat confused by 
statements in your testimony relative to title III and title 
VII and how they fit together. So, if you could help me by 
clarifying.
    In your statement regarding title III, you said in relation 
to diligent development that, quote, ``Increasing nonproducing 
lease annual rental rates might help encourage lease holders to 
develop the leases.'' But in your statement regarding title VII 
you said, ``It would also establish an index and annual fee $4 
per acre for nonproducing leases. Imposing lease fees on 
nonproducing leases may have the unintended negative impact of 
reducing industry impact of Federal leases.''
    Now, I tend to agree with the second of those two 
statements, but I am confused about the inconsistency between 
those two. Can you help clarify that for me?
    Ms. Kendall. The comment in the first one, I think, ties 
into the comment in the second one.
    I can't say definitively that increasing fees on leases is 
going to have a negative effect in the report that we issued on 
nonproducing leases. Some of the sources that we interviewed 
suggested that this may have a negative impact. On the other 
hand, adding some increased rental rates may, in fact, urge 
people to do something quicker and faster.
    I think I am straddling a line in my testimony clearly, 
because I can't take a position one way or the other. I don't 
have evidence strongly one side or the other.
    Mr. Lamborn. So, it is still, in your mind, somewhat of an 
open question as to what the effects would be?
    Ms. Kendall. I would say so, yes.
    Mr. Lamborn. So, it could be that it would be a 
discouraging thing?
    Ms. Kendall. It could be
    Mr. Lamborn. So, the jury is still out?
    Ms. Kendall. My jury is still out.
    Mr. Lamborn. Thank you for that.
    And second, doesn't the Royalty-In-Kind program, should it 
continue, simplify the process by eliminating the need to 
calculate the value of oil and gas at particular points in time 
in particular market conditions, et cetera?
    Ms. Kendall. My personal feeling on this, Congressman, is 
that the entire oil and gas royalty process, if you will, could 
be improved, if simplified, pretty much across the board, not 
just royalty-in-kind.
    Mr. Lamborn. On simplification, is simplification enhanced 
when a producer has to turn over a particular quantity 
regardless of what the markets are doing that particular day or 
that month or that week?
    Ms. Kendall. I am not sure I understand your question, or 
may not be qualified to answer it.
    Mr. Lamborn. If an assessment is made based on quantity 
produced, you are going to have to peg that to win that barrel 
of oil or win that cubic foot of gas that came out of the 
ground because markets fluctuate continually, they are 
volatile, they change hour by hour. So, the value of that 
barrel of oil or that cubic foot of gas varies from hour-to-
hour, from day-to-day.
    Ms. Kendall. I recognize that.
    Mr. Lamborn. So, isn't it simpler for the producers just to 
turn over a percentage and not have to have them calculating 
and then you auditing on a continual basis, when did that come 
up from the ground and what was the price at that moment in 
time? Doesn't that get into a lot of complications?
    Ms. Kendall. I think it is very complicated. The suggestion 
that there is auditing of the royalty-in-kind, there really 
isn't. There is very little auditing of the royalty-in-kind. 
So, I am not sure that we actually have the data to suggest 
that one over the other is the more beneficial to the taxpayer, 
to the Treasury.
    And I am trying to think of a concrete example that I can 
give, and I am failing at the moment
    Mr. Lamborn. Are you saying that you are going to come back 
and ask, or the Department will come back and ask, for more 
personnel, more staff, and more resources because it is going 
to involve a lot more monitoring and auditing and calculating 
and everything else?
    Ms. Kendall. I am not saying that, no, sir.
    Mr. Lamborn. That is my suspicion. And I wanted to get your 
view on that.
    Ms. Kendall. Well, I would say, though, with the 
elimination of royalty-in-kind, if it is eliminated, there 
would be a need for some additional auditors to audit the way 
the auditors are now conducting their work; I wouldn't say 
significantly, but there may be a need for some additional 
auditors because there simply aren't auditors covering the 
Royalty-In-Kind program.
    Mr. Lamborn. Are you in a position to say how many people 
you think that would involve?
    Ms. Kendall. I am certainly not.
    Mr. Lamborn. And then with the people who are currently in 
the royalty-in-kind office, like in Denver in my State, are 
they going to be transferred to another division? Or will they 
just be let go, or do you have any idea of what would happen to 
them?
    Ms. Kendall. I don't know.
    I heard the Secretary's statement this morning for the 
first time, as well as I think many of the members here did. 
But there are certainly processes in place in the Federal 
personnel rules that would protect them to a certain extent; 
and to the extent that they could be protected or transferred 
to another function, I wouldn't imagine that you would see a 
massive elimination of employees--perhaps a transfer of 
function.
    Mr. Lamborn. That is something we certainly want to be 
looking at as we go forward.
    Thank you.
    The Chairman. The Chair wishes to thank the panel very much 
for your patience and being with us through this day and also 
for your work on behalf of the American taxpayers to ensure 
that they do receive fair value for the use of their resources.
    And we look forward to continuing to use your expertise in 
investigations as we move forward with this legislation and 
other legislation.
    Mr. Lamborn. Before we adjourn, I would like to ask 
unanimous consent to submit for the record the collection of 
letters from the Harrison family, mentioned by Mr. Bishop of 
Utah earlier, regarding the consequences of actions in Utah by 
the Secretary and unanimous consent to submit for the record 
the CRS report on land leasing, correcting the earlier record 
on the volume of land under the Clinton and Bush 
Administrations.
    The Chairman. Without objection, so ordered.
    [NOTE: The information submitted for the record has been 
retained in the Committee's official files.]
    The Chairman. With that, the Committee on Natural Resources 
stands adjourned.
    [Whereupon, at 2:35 p.m., the Committee was adjourned.]

                                 


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

                              ----------                              


                      Thursday, September 17, 2009

                     U.S. House of Representatives

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

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

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

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

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

    Thank you, Mr. Chairman. Today is the second day of hearings on 
this legislation.
    Yesterday, I discussed how this bill will set up road blocks on the 
path to energy development. Instead of opening additional areas for 
drilling, this bill raises fees and taxes, balloons government 
bureaucracy, rolls out more red tape, and delays greater wind, solar, 
oil and natural gas production.
    Today, I would like to explain how these roadblocks would directly 
impact Americans.
    First, these roadblocks will slow America's oil, natural gas, wind 
and solar energy production and ultimately make energy more expensive. 
While the average price of gas is about $2.55 a gallon right now, this 
unfortunately won't always be the case. Before we know it, the American 
people will be forced to pay more at the pump again. And when they 
reach for their wallets, they'll ask ``why didn't the Administration 
and Congress take action to actually increase all types of domestic 
energy?'' Americans won't like the answer. Because unless the 
Administration and Democrat Leaders in Congress take action on an all-
of-the-above energy plan, they'll have to explain that they were 
focused on legislation that will actually make it harder and more 
expensive to produce American energy.
    Second, the roadblocks in this bill will increase our reliance on 
foreign sources of energy from countries that don't live up to 
America's high environmental standards. Saudi Arabia, Cuba, Russia, 
Venezuela, and other nations are increasing their energy supply at a 
break neck pace--but America is at a standstill. And our Committee is 
considering legislation that will make our nation less energy 
independent and less secure. As the American Chemistry Council recently 
wrote ``the bill fails to contribute in any way to the energy security 
of the United States.''
    And finally, these roadblocks threaten current energy jobs and 
prevent the creation of new American energy jobs at a time when almost 
ten percent of Americans are unemployed. Last week, a PriceWaterhouse 
study confirmed that oil and gas industries contribute 9.2 million 
full-time and part-time jobs, accounting for 5.2 percent of our 
Nation's total employment. When 14.7 million Americans are out of work, 
the last thing our country needs is for Congress to pass a bill that 
will eliminate even more jobs in our country. Instead, we should be 
focused on helping even more Americans take advantage of high-paying 
jobs in all parts of the energy sector.
    But unfortunately, Democrat Leaders in Congress are focused on 
passing a National Energy Tax bill and a Roadblock to Energy bill that 
will only make our current economic problems worse.
    I continue to urge my colleagues on both sides of the aisle to 
choose a better path forward by supporting the Republican all-of-the-
above energy plan that will help Americans by creating new high-paying 
jobs, protecting our environment, and providing affordable energy.
                                 ______
                                 
    The Chairman. Do any of the other Members wish to make 
opening statements? If not, we will proceed with the panel.
    The first panel is composed of The Honorable Stephen B. 
Smith, the Mayor of Pinedale, Wyoming; Ms. Danielle Brian, 
Executive Director of the Project On Government Oversight; Mr. 
Christopher Mann, the Senior Officer, Pew Environment Group, 
the Pew Charitable Trusts; Mr. Mark Squillace, Professor and 
Director, Natural Resources Law Center, University of Colorado 
School of Law; and Mr. Lyle E. Hodgskiss, Rancher/Senior Loan 
Officer, Rocky Mountain Front Advisory Committee.
    Lady and gentlemen, we welcome you to our Committee today, 
appreciate your being with us. We do have copies of all your 
prepared testimony. They will be made part of the record as if 
actually read. You may proceed in the order in which I 
announced you and in the manner you wish in the five-minute 
time limit.
    Mr. Mayor, you go first.

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

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

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

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

                Categorical Exclusions (CXs) Fact Sheet

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

[GRAPHIC(S) NOT AVAILABLE TIFF FORMAT]

What are the solutions?
    1.  EPA could initiate discussions with Council on Environmental 
Quality (CEQ) to amend the Energy Policy Act and rescind all statutory 
CX provisions.
    2.  APDs could be issued with a ``contingency rights'' clause, so 
that permits that may cause environmental damage are not grandfathered 
in.
    3.  If used, all proposed categorical exclusions authorized by Sec. 
390 of the Energy Policy Act of 2005 should conform with 40 CFR 1507.3, 
which states that BLM must, (a) ...utilize a systematic, 
interdisciplinary approach which will insure the integrated use of the 
natural and social sciences and the environmental design arts in 
planning and in decision making which may have an impact on the human 
environment. (b) Identify methods and procedures--to insure that 
presently unquantified environmental amenities and values may be given 
appropriate consideration.
    4.  If used, all proposed categorical exclusions authorized by Sec. 
390 of the Energy Policy Act of 2005 should conform with current 
Department of the Interior policies for applying the ``extraordinary 
circumstances'' screen to categorical exclusion proposals found at 69 
FR 10878, in which: ``a normally excluded action may have a significant 
environmental effect thus requiring additional analysis and action.--
Any action that is normally categorically excluded must be subjected to 
sufficient environmental review to determine whether it meets any of 
the extraordinary circumstances, in which case, further analysis and 
environmental documents must be prepared for the action.''
    5.  Promote better planning and use of superior strategies for 
evaluating landscape-scale cumulative impacts to wildlife habitat and 
ecological communities while minimizing the amount of well-by-well 
consultation and mitigation planning. Instructional Memorandum IM 2003-
152 (April 13, 2003), outlines the use of geographic area NEPA analysis 
and comprehensive development plans and strategies.
    (For more information: Linda Baker, Upper Green River Valley 
Coalition: 367-3670 or email: [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.
---------------------------------------------------------------------------
    \1\ Deal Consulting & Dispute Resolution, LLC, ``Federal Oil & Gas 
Royalty Valuation, Royalty in Kind and Royalty Relief 1980-2008,'' 
August 2008. http://www.dtdeal.com/pdf/chronology-
valuation_royalty_relief1980-2008.pdf (Downloaded September 15, 2009)
---------------------------------------------------------------------------
    As this Committee is well aware, MMS's RIK program has been a 
failure on many fronts. The Government Accountability Office (GAO) 
found in 2003, 2 2004, 3 2007, 4 2008, 
5 and 2009 6 that MMS could not accurately 
account for the RIK program's cost and benefits. In light of that, 
according to the GAO, RIK operated as an honor system. As the Inspector 
General discovered and reported to the full committee last fall, this 
honor system resulted in a culture of ``ethical failure'' and 
``substance abuse and promiscuity.'' 7
---------------------------------------------------------------------------
    \2\ General Accounting Office, Report to Congressional Requesters 
on Mineral Revenues: A More Systematic Evaluation of the Royalty-in-
kind Pilots is Needed (GAO-03-296), January, 2003, Summary page. http:/
/www.gao.gov/new.items/d03296.pdf (Downloaded September 15, 2009)
    \3\ General Accounting Office, Report to Congressional Requesters 
on Mineral Revenues: Cost and Revenue Information Needed to Compare 
Different Approaches for Collecting Federal and Gas Royalties (GAO-04-
448), April 2004, Summary page. http://www.gao.gov/new.items/d04448.pdf 
(Downloaded September 15, 2009)
    \4\ Government Accountability Office, Testimony Before Committee on 
Natural Resources, U.S. House of Representatives on Royalties 
Collection: Ongoing Problems with Interior's Efforts to Ensure A Fair 
Return for Taxpayers Require Attention (GAO-07-682T), March 28, 2007, 
Summary page. http://www.gao.gov/new.items/d07682t.pdf (Downloaded 
September 15, 2009)
    \5\ Government Accountability Office, Testimony Before the 
Subcommittee on Energy and Mineral Resources, Committee on Natural 
Resources, House of Representatives on Mineral Revenues: Data 
Management Problems and Reliance on Self-Reported Data for Compliance 
Efforts Put MMS Royalty Collections at Risk (GAO-08-560T), March 11, 
2008, p. 4. http://resourcescommittee.house.gov/images/Documents/
20080311/testimony_rusco.pdf (Downloaded September 15, 2009)
    \6\ Government Accountability Office, Royalty-In-Kind Program: MMS 
Does Not Provide Reasonable Assurance It Receives Its Share of Gas, 
Resulting in Millions in Forgone Revenue (GAO-09-744), August 2009, 
http://www.gao.gov/new.items/d09744.pdf (Downloaded September 15, 2009)
    \7\ Department of Interior, Office of Inspector General, 
``Memorandum on OIG Investigations of MMS Employees,'' September 9, 
2008, p. 2. http://www.doioig.gov/upload/Smith%20REDACTE%
20FINAL_080708%20Final%20with%20transmittal%209_10%20date.pdf 
(Downloaded September 15, 2009) (hereinafter ``Memorandum on OIG 
Investigations of MMS Employees'')
---------------------------------------------------------------------------
    The reform most fundamental to making this program functional would 
be a dramatic increase in auditing capacity, yet this fix would wholly 
undermine MMS's original justification for the program--that the RIK 
program would reduce the need for auditing and so would decrease 
oversight costs. This alone should be reason enough to cancel the 
failed program. However, the legitimacy of the program is also called 
into question given the Inspector General's findings that MMS employees 
consider themselves exempt from standard ethical provisions that 
protect the public's interest. 8 MMS's close relationship 
with industry has been instrumental in preventing the public from 
getting what is owed to them for industry's use of public resources. 
Extensive corruption and collusion in the RIK program, given that it is 
charged with managing billions of dollars of federal revenue, should be 
the final nail in the program's coffin.
---------------------------------------------------------------------------
    \8\ ``Memorandum on OIG Investigations of MMS Employees.'' pp. 1-2.
---------------------------------------------------------------------------
    POGO supports the CLEAR Act for seeking to eliminate RIK as a 
method for paying federal oil and gas royalties. However, we are 
concerned that the language is not strong enough. We recommend that the 
CLEAR Act be strengthened to cancel the RIK program, or to place the 
program on a moratorium until an independent audit shows that it is 
accurately collecting all of the royalties owed to taxpayers.
Taxpayers Deserve Assurances Royalties Are Collected Accurately
    As outlined in our most recent report, Drilling the Taxpayer: 
Department of Interior's Royalty-In-Kind Program, MMS's problems go far 
deeper than the ethical failures of individuals. The biggest problem is 
that the royalty management system is broken.
    There are three basic and significant structural weaknesses to the 
MMS's royalty management program. The first is an organizational 
conflict. The sole mission of a federal royalty management and 
collection program should be determining and enforcing revenue 
obligations of private companies operating on public and Indian lands. 
Yet, currently, auditors and other compliance and enforcement personnel 
report to officials within MMS whose responsibilities also include 
leasing and development, and who may be more inclined to make the 
royalty management program look successful rather than be successful. 
As POGO discovered, in some instances MMS told their professional 
auditors to stop auditing, even when the auditors had discovered 
evidence that companies were underpaying royalties.
    The second structural flaw is methodological. MMS's preference has 
been to perform compliance reviews rather than audits. compliance 
reviews are based entirely on the self-reported data provided by 
industry--meaning that no third-party reporting is required.
    Third, a recent GAO report revealed that the MMS computer system is 
incapable of identifying in a timely manner instances when industry 
fails to report revenue and royalty at all. 9
---------------------------------------------------------------------------
    \9\ Government Accountability Office, Mineral Revenues: Data 
Management Problems and Reliance on Self-Reported Data for Compliance 
Efforts Put MMS Royalty Collections at Risk (GAO-08-893R), September 
12, 2008, p. 5. http://www.gao.gov/new.items/d08893r.pdf (Downloaded 
September 15, 2009)
---------------------------------------------------------------------------
    When it comes to royalty collection, both MMS and its technology 
are untrustworthy, and these weaknesses may have cost taxpayers 
hundreds of millions of dollars in much-needed revenue.
    The CLEAR Act addresses these structural weaknesses.
    First, delegating the compliance and auditing functions to the 
Inspector General strengthens the independence of those functions, 
which is essential for the royalty management system to be effective. 
However, POGO is not sure if the Office of the Inspector General (OIG) 
is ultimately the right place for these functions to reside, given the 
OIG's other statutory responsibilities and the need to maintain 
independence from the federal agencies and programs it oversees. We are 
also concerned that the CLEAR Act continues some aspects of the current 
conflict of mission problems between leasing and oversight functions. 
The Office of Federal Energy and Minerals Leasing that this bill would 
create will be responsible for both managing leases for development and 
conducting oversight and inspections of those leases--one of the 
problems that moving compliance and auditing duties to the OIG seeks to 
remedy. POGO believes that royalty management independence must include 
regulatory and enforcement independence, and the Committee should 
consider the importance of severing oversight functions from the Office 
of Federal Energy and Minerals Leasing.
    Second, the CLEAR Act strengthens royalty accountability by 
prohibiting compliance reviews from constituting or substituting for 
audits. The Committee is also taking important steps to restore leasing 
offices' accounting and auditing credibility by requiring employees who 
conduct compliance reviews to ``meet professional auditor 
qualifications that are consistent with the latest Government Auditing 
Standards.'' In addition, the CLEAR Act's requirement to refer for 
audit disparities revealed by any compliance reviews is also a step in 
the right direction.
    Finally, POGO sees potential in the CLEAR Act's proposed pilot 
program for automated transmission of oil and gas volume and quality 
data to improve production verification systems and ensure accurate 
royalty collection and audits.
Ending Ethical Misconduct in Royalty Collections
    While POGO believes that removing the core auditing functions from 
MMS--and thereby the conflict of mission within the agency--will go a 
long way to improve the structural and ethical problems, past 
investigations reveal that there are significant cultural problems at 
MMS that also need to be resolved. As the Inspector General discovered, 
MMS's inappropriate relationship with industry--which included ``gifts 
and gratuities''--compromised their objectivity. 10 
Additionally, POGO is concerned about industry's entrenched influence 
at MMS.
---------------------------------------------------------------------------
    \10\ Department of Interior, Office of the Inspector General, 
Royalty Initiatives Group, Evaluation Report: Minerals Management 
Service Royalty-in-Kind Oil Sales Process (C-EV-MMS-0001-2008), May 
2008, p. 4. http://www.doioig.gov/upload/2008-G-0021.pdf (Downloaded 
September 15, 2009)
---------------------------------------------------------------------------
    Our investigation revealed that MMS justified the expansion of the 
RIK program over the objections raised by state auditors, Members of 
Congress, and POGO 11 by relying on a so-called 
``independent'' study by Lukens Energy Group. 12 Not only 
was the Vice President of Lukens a vocal advocate for the RIK program, 
13 the Inspector General determined that Lukens Vice 
President Hagemeyer was considered a ``trusted advisor'' by RIK Program 
Director Greg Smith, and that the two communicated extensively during 
the contract selection process despite regulations clearly prohibiting 
such contact between bidding companies and MMS officials. The IG 
reported that during the same time period Lukens' contract bid was 
being considered by MMS, Hagemeyer assisted then-RIK Deputy Program 
Manager Smith in his efforts to market Geomatrix, a firm with which 
Smith was improperly consulting on the side. 14 POGO remains 
concerned that Smith was never prosecuted. This sends the wrong message 
to employees in MMS--that blatant misconduct will go unpunished.
---------------------------------------------------------------------------
    \11\ Innovation & Information Consultants, Inc. ``Memorandum on MMS 
Report in RIK Pilot Program in Wyoming,'' April 24, 2001, p. 1. http://
www.pogoarchives.org/m/ep/ep-rikmemo.pdf (Downloaded September 15, 
2009); Representative Carolyn Maloney, ``Maloney Cautions Against 
Republican Plans to Bolster Oil Industry,'' June 12, 2001. http://
maloney.
house.gov/index.php?option=com_content&task'view&id=688&Itemid=61 
(Downloaded September 15, 2009); House Subcommittee on Energy and 
Mineral Resources, ``Statement of Danielle Brian at Oversight Hearings 
on Royalty-In-Kind for Federal Oil and Gas Production,'' July 31, 1997, 
pp. 101-102. http://commdocs.house.gov/committees/resources/
hii45026.000/hii45026_0.htm (Downloaded September 15, 2009)
    \12\ Lukens Energy Group, Assessment of the Federal Royalty-in-Kind 
(``RIK'') Program and Development of RIK Business Plan, September 30, 
2003.
    \13\ American Petroleum Institute, ``Hagemeyer gets API honor,'' 
API EnCompass: News, November 13, 2000. http://web.archive.org/web/
20001213110900/www.api.org/release.cgi?days=90 (Downloaded September 
15, 2009)
    \14\ Department of the Interior, Office of Inspector General, 
Investigative Report: Gregory W. Smith, August 7, 2008, p. 16-17. 
http://www.doioig.gov/upload/Smith%20REDACTED%
20FINAL_080708%20Final%20with%20transmittal%209_10%20date.pdf 
(Downloaded September 15, 2009)
---------------------------------------------------------------------------
    POGO is also deeply troubled by the revolving door between the 
Department of the Interior and industry. A number of the individuals 
who went through the revolving door have actually been sentenced to 
prison for violations of conflict-of-interest laws or obstruction of 
justice. 15 As long as the door continues to revolve between 
industry and Interior or MMS, the public cannot be sure that their 
interests are being served.
---------------------------------------------------------------------------
    \15\ For a list of these individuals, see our report: Project On 
Government Oversight, Drilling the Taxpayer: Department of Interior's 
Royalty-In-Kind Program, September 18, 2008, pp. 13-14 http://
pogoarchives.org/m/nr/rik/report-20080918.pdf (Downloaded September 15, 
2009)
---------------------------------------------------------------------------
    Fortunately, there have already been several improvements to ethics 
policies in the Department of the Interior since our report. POGO 
applauds President Obama's Executive Order for Ethics Commitments by 
Executive Branch Personnel, 16 and Interior Secretary Ken 
Salazar's Memorandum to Employees on their ethical responsibilities. 
17 POGO particularly wants to praise Secretary Salazar for 
enhancing the ethical culture of the agency by urging employees to seek 
the assistance of bureau or office ethics officials for guidance to 
avoid even the appearance of impropriety.
---------------------------------------------------------------------------
    \16\ White House, ``Executive Order--Ethics Commitments by 
Executive Branch Personnel,'' January 21, 2009. http://
www.whitehouse.gov/the_press_office/ExecutiveOrder-EthicsCommit
ments/ (Downloaded September 15, 2009)
    \17\ Department of the Interior, ``Secretary Salazar Outlines High 
Ethical Standards for Interior Department in Memo to All Employees,'' 
January 26, 2009, http://www.doi.gov/news/09_News_Releases/012609a.html 
(Downloaded September 15, 2009)
---------------------------------------------------------------------------
    While these are important steps, POGO is also happy to see that the 
CLEAR Act requires the Secretary of the Interior to annually certify 
that all employees involved in royalty production oversight are in full 
compliance with all federal employee ethics laws and regulations.
Increasing Transparency in Royalty Management and Collections
    Just as adequate auditing is essential to revealing problems, 
transparency is essential to getting those problems fixed. But copies 
of RIK contracts and vital information about who operates the program 
are usually not publicly available to be scrutinized by watchdogs, 
other issue-area experts, the news media, or the public in general. 
Many of the problems that have occurred in the RIK program and within 
MMS could have been prevented or resolved sooner if the Interior 
Department's actions had been more transparent to Congress and other 
stakeholders.
    Due to the opaqueness of the royalty management system, many of the 
insights into its problems have come from whistleblowers. As this 
Committee is well aware, many whistleblowers have tried to draw 
attention to management and underpayment problems as they saw them 
occurring, only to be discouraged or retaliated against. For example, 
the Audit Manager for the North Dakota State Auditor's Office told this 
Committee's Subcommittee on Energy and Mineral Resources that a high-
ranking MMS official advised him and other members of the State and 
Tribal Royalty Committee not to testify before Congress: ``This 
official expressed to us that Congress only requests that you testify 
so you aren't obligated to testify and that it is best to keep any 
problems in house.'' 18 This is clearly unacceptable and 
undermines the public interest. We hope that the members of this 
Committee will keep in mind how essential it is for there to be real 
protections for whistleblowers.
---------------------------------------------------------------------------
    \18\ Dennis Roller, ``Written Testimony of Dennis Roller, Audit 
Manager for the North Dakota State Auditor's Office--Royalty Audit 
Section For the Minerals Management Service Before the Natural 
Resources Subcommittee on Energy and Mineral Resources United States 
House of Representatives,'' March 11, 2008, p. 2. http://
resourcescommittee.house.gov/images/Documents/20080311/
testimony_roller.pdf (Downloaded September 15, 2009)
---------------------------------------------------------------------------
    POGO is also concerned that there is not enough transparency about 
the influence of organizations outside of MMS that help the agency to 
shape policy. In our investigation of the development of the RIK 
program, we learned that industry had a disproportionate amount of 
influence over the program's development. Because of this, we are 
particularly concerned about the Regional Outer Continental Shelf 
Councils created under the CLEAR Act. We hope that this Committee will 
continue to be vigilant in its oversight to make sure that the public 
interest is sufficiently represented on the Councils, which will 
develop future natural resources policies. Additionally, we urge the 
Committee to remove the current language in the bill that would exempt 
these Councils from the Federal Advisory Committee Act. The Federal 
Advisory Committee Act's requirements to make membership, 
administrative procedures, and hearings public knowledge provide 
precisely the kind of openness and accountability that our natural 
resource management system so desperately needs.
    POGO also supports provisions in the CLEAR Act that will ensure 
federal agencies have access to proprietary information for wind and 
solar projects to assure compliance, but we hope that the Committee 
will extend this provision to include uranium leases.
    And lastly, as a member of the Publish What You Pay Coalition, we 
hope that the Committee will consider in the future increasing 
transparency of the U.S.'s royalty revenue collections in order to 
serve as a model to other countries. As Secretary of State Hillary 
Clinton recently stated, ``Sustainable progress is not possible in 
countries that fail to be good stewards of their natural resources, 
where the profits from oil and minerals line the pockets of oligarchs 
who are corporations a world away, but do little to promote long-term 
growth and prosperity. The solution starts with transparency.'' 
19 Companies ``publishing what you pay'' and governments 
``publishing what you earn'' is a necessary first step towards a more 
accountable system for the management of natural resource revenues.
---------------------------------------------------------------------------
    \19\ Secretary of State, Hillary Rodham Clinton, ``Remarks at the 
8th Forum of the African Growth and Opportunity Act,'' August 5, 2009. 
http://www.state.gov/secretary/rm/2009a/08/126902.htm (Downloaded 
September 15, 2009)
---------------------------------------------------------------------------
    Thank you again for your oversight of royalty collections and for 
asking me to testify. I look forward to answering any questions you may 
have, and to working with your Committee on this issue.
                                 ______
                                 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

                 Statement submitted for the record by 
              Sportsmen for Responsible Energy Development

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

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

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

[GRAPHIC(S) NOT AVAILABLE TIFF FORMAT]

Statement
For Immediate Release September 16, 2009
Contact: Jennifer Scott, ACC, (703) 741-5813
[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.
---------------------------------------------------------------------------
    \1\ AWEA is the national trade association of America's wind 
industry, with more than 2,300 member companies, including project 
developers, manufacturers, and component and service suppliers.
    \2\ SEIA is the national trade association of the solar energy 
industry, representing over 900 member companies. As the voice of the 
industry, SEIA works to make solar a mainstream and significant energy 
source by expanding markets, removing market barriers, strengthening 
the industry, and educating the public on the benefits of solar energy. 
RES Americas currently is serving as Chair of the Siting & Permitting 
Work Group.
---------------------------------------------------------------------------
Status of the Wind and Solar Energy Sectors
    Let me start by giving you a sense of the current scope and 
potential of renewable energy to power our country, employ Americans in 
good jobs, and rebuild our manufacturing base.
    Last year, wind accounted for 42% of all new generating capacity, 
second only to natural gas for the fourth year running. Total wind 
energy capacity is now over 29,440 megawatts, enough to power nearly 8 
million homes. Thirty-five states have utility scale wind projects. The 
U.S. solar industry has demonstrated remarkable growth as well, with 
the annual rate of PV installations alone growing by more than 80% in 
2008. New utility-scale solar power plants have been announced in 
states ranging from California to Texas, Florida, Pennsylvania, New 
York and more, and projects totaling more than 10,000 MW are currently 
operational or under development.
    The renewable sector has seen significant growth in manufacturing 
as well. Wind turbine and component manufacturers announced, added or 
expanded over 70 facilities in the past two years. Wind-related 
manufacturing is occurring in over 40 states. U.S. solar panel 
manufacturers currently have production capacity in excess of domestic 
demand, and domestic manufacturing capacity is keeping pace with demand 
growth. Suppliers of components for Concentrating Solar Power (CSP) 
plants have also significantly increased their domestic presence in the 
last two years.
    The wind industry employs at least 85,000 workers in the U.S. in 
good paying jobs. The solar industry supports thousands of small 
businesses and tens of thousands of employees nationwide.
    This is just the beginning.
    The U.S. Department of Energy has concluded that achieving 20% of 
our nation's electricity from wind energy alone by 2030 is feasible 
with no technological breakthroughs and that achieving that level of 
deployment would have significant benefits for the environment and our 
economy. The industry views 20% as a floor for our potential, not a 
ceiling.
    There is also significant potential for growth of solar energy in 
the United States. A study conducted by the Department of Energy for 
the Western Governors' Association determined that the seven states in 
the Southwest have a combination of solar resources and available 
suitable land to generate up to 6,800 GW of electricity. This compares 
to today's nameplate capacity for all electricity generation of 1,000 
GW. 3
---------------------------------------------------------------------------
    \3\ ``Analysis of Concentrating Solar Power Plant Siting 
Opportunities: Discussion Paper for WGA Central Station Solar Working 
Group,'' M. Mehos, NREL, July 2005
---------------------------------------------------------------------------
Wind and Solar Industries Appreciate Improvements Made from Earlier 
        Draft
    With respect to the specifics of H.R. 3534, I want to be clear that 
renewable energy developers are generally supportive of the existing 
federal processes for permitting projects. These processes are not 
perfect; but, the problems that do exist--such as inconsistent 
implementation of the rules by some field offices, lengthy delays in 
processing, and inadequate financial resources for the agencies--do not 
require a major overhaul of the rules. Further, the current 
Administration is already taking steps to address many of the problems 
areas. 4 At the same time, we understand the Committee's 
interest in reforming the rules for wind and solar to more closely 
mirror those applicable to other technologies. So, I will spend much of 
my testimony on recommendations to improve the workability of the 
overhauls proposed in H.R. 3534 even as our industries have some 
reservations about those overhauls.
---------------------------------------------------------------------------
    \4\ For example, Secretary Salazar issued a Secretarial Order 
prioritizing renewable energy development on public lands. FERC and MMS 
resolved a long-standing dispute over energy regulation on the outer-
continental shelf, which allowed the MMS rules governing offshore 
renewable energy development to be finalized. Secretary Salazar 
established renewable energy coordination offices. And, the BLM just 
held an informational conference for field staff in the Western U.S. on 
wind and solar energy.
---------------------------------------------------------------------------
    I want to begin my discussion of the specific provisions of H.R. 
3534 by acknowledging some improvements that were made from an earlier 
draft version of the bill.
    The wind and solar industries greatly appreciate the removal of the 
provisions requiring mapping of federal lands and the creation of 
strategic plans that would put potentially broad areas off-limits to 
renewable energy regardless of whether site specific reviews would 
reveal no conflicts or concerns.
    We also appreciate the addition of a provision to the onshore 
competitive leasing provisions that allows the Secretary to provide 
preference during the competitive process to a company that has gone 
through the expense of putting up a meteorological tower (``met 
tower'') or another measurement device to collect resource and other 
data for a given site. This is a key change because without some right 
to develop a site where a company has spent time and money verifying 
that the wind or solar resource is viable; there will be little 
interest in developing on public lands. However, we would urge that 
this ability to develop be made more explicit by giving the companies 
that are actively doing resource assessments the right of first refusal 
to build on a given site. We would also request that this language be 
further clarified to ensure the resource and other data collected by a 
company is considered proprietary and is not subject to release to 
competitors. These are competitive industries and no one wants to give 
a competitor an edge by turning over expensive data for free.
    Finally, we appreciate the expanded grandfathering provisions for 
both onshore and offshore projects that are intended to ensure prior 
investments by developers are not lost during the transition to a new 
system. Though we believe further refinement is necessary in this area 
and look forward to having discussions with the Committee on this in 
the future.
    At the same time, renewable energy developers continue to have 
concerns with the bill that I will summarize below. These concerns 
relate to the following areas:
      Consolidation of energy leasing programs
      Competitive leasing for onshore projects
      Offshore strategic plans and ocean zoning
Consolidation of Energy Leasing Programs
    Renewable energy has often been neglected and poorly understood by 
federal lands agencies. This is changing slowly, and Secretary 
Salazar's leadership in this area has been beneficial. The development 
process, economics and other aspects of renewable energy projects are 
different than the oil and gas projects with which agency staff are 
familiar. For example, electricity sold from a renewable generation 
project is the refined product which means that the levels of royalties 
available are not going to be at the same level as oil or natural gas 
because the value of electricity isn't as high as petroleum products. 
In addition, renewable energy development does not deplete finite 
resources.
    The wind and solar industries are concerned that the consolidation 
of all energy leasing into a new office will undermine the Renewable 
Energy Coordination Offices the Secretary has created to establish and 
focus expertise on renewable energy permitting. This has the 
possibility of disadvantaging renewable energy vis-a-vis oil and gas; 
maybe not with this Administration, but with future ones.
    Our industry is also concerned that undertaking this reform at this 
time will delay the resolution of the large and growing backlog of 
pending renewable energy applications 5, as well as 
complicate the processing of applications by the Minerals Management 
Service (MMS) under the new offshore renewable energy rule, as staff 
and managers are forced to devote time to reorganizing.
---------------------------------------------------------------------------
    \5\ According to a fact sheet accompanying a June 2009 BLM press 
release, BLM has received 158 solar applications (up from 135 in 
January 2008) and 281 wind energy applications (up from 150 in January 
2008).
---------------------------------------------------------------------------
    If you move forward with consolidation, we would respectfully 
request that you maintain within the new office a separate and 
adequately sized staff dedicated solely to reviewing and processing 
renewable energy applications. We would also suggest including 
legislation along the lines of H.R. 2662, introduced by Rep. Heinrich, 
to dedicate a portion of the fees paid by renewable energy developers 
back to Interior to provide a steady stream of funding to improve the 
processing of additional renewable energy applications.
Competitive Leasing for Onshore Development
Competitive Leasing Generally
    Our industries understand the interest in moving all energy sources 
to the same type of leasing program.
    At the same time, there has not been much historical competition 
for areas in which a given onshore wind or solar developer proposes a 
project on federal lands. The Bureau of Land Management (BLM) does have 
the authority to run competitions today, but has largely chosen not to 
because of the lack of competitive interest.
    BLM has run competitive processes for wind energy development a 
handful of times. These have resulted in the expenditure of significant 
funds by both BLM and developers but the results have been that no wind 
projects have been developed on sites where a competition has been 
held. 6
---------------------------------------------------------------------------
    \6\ One of the competitions was around 2005 for a parcel in Palm 
Springs and one was out of the Ridgecrest field office in the 1990s. 
With respect to Palm Springs, it took a year and a half from the first 
bid to the awarding of the right to apply to put up a met tower (not 
even the right to put it up, but the right to apply to put it up). And, 
it took this length of time despite the fact that the Palm Spring 
office was experienced with wind energy development, and despite the 
fact that the parcel had previously been developed and decommissioned. 
The winning bidder still has not been able to get a project constructed 
on this parcel despite having a signed power purchase agreement (PPA). 
The Ridgecrest process became so drawn out and complex that it 
eventually collapsed.
---------------------------------------------------------------------------
    Additionally, the solar industry is even less mature than the wind 
industry. To date, the BLM has not issued a right-of-way permit for a 
solar project. While competitive bidding may work for established 
industries like oil and gas or mining, it may not be appropriate for 
less mature market entrants like solar.
    The industry therefore, recommends that instead, the BLM should 
focus on improving the process for granting permits to companies with 
the financial and technical expertise to bring solar projects to 
fruition.
    Also, keep in mind that the BLM has recently adjusted the rental 
fees paid by wind energy developers to include a royalty calculation of 
five percent of project revenues. This approximates the current 
royalties received by private land owners; and, therefore, does not 
reflect a loss of revenues from federal lands.
    We are, also, concerned that moving to competitive leasing will 
delay renewable energy development on federal lands. Competitive 
leasing will take enormous government and developer resources to engage 
in. It will make federal lands potentially less attractive to develop 
by adding complication and expense to a process that is already 
difficult and generally more expensive 7 than developing on 
private lands.
---------------------------------------------------------------------------
    \7\ Here are some examples to better understand how the cost to 
develop a wind project on BLM lands compares to private lands:
    The relative cost of BLM rent is generally high relative to private 
land on lower wind sites, and low compared to private land on high wind 
sites. This is because the BLM rent is fixed regardless of how much 
electricity is generated, and private leases are often (though not 
always) based on a percentage of the revenue paid by the power 
purchaser. However, most of the very windy BLM sites are already being 
developed and in the future the less windy sites will be the most 
common BLM projects, so this cost disparity will become less and less 
favorable toward developing on BLM land in the future.
    BLM charges 5101 Account Reimbursement fees for yearly 
administration of the right-of-way beyond the cost of rent. This can 
add up to more than $100,000 over the project life, an expense that is 
not incurred on private land. Secondly, BLM reviews and increases rent 
every 5 to 10 years, unlike private leases which are fixed at the time 
of option negotiation, so BLM rent is unpredictable compared to private 
land rents. Thirdly, BLM typically requires an EIS to satisfy the NEPA 
process, which is both costly and time consuming. When you add these 
costs to BLM right-of-ways compared to private land, the costs on BLM 
land are comparable to private land or higher.
    BLM requires $10,000 per turbine decommissioning bond, which may be 
the very highest anywhere in the US, and is above the actual net cost. 
Previous BLM bonds were $3,000 per turbine. Private land 
decommissioning bonding is typically $0. Since a wind company cannot 
post a surety bond on BLM rights-of-way, and typically must post cash 
for the entire life of the right-of-way, this is a time cost of money 
expense that does not occur on private land.
---------------------------------------------------------------------------
    If the Committee elects to move forward with competitive leasing, 
we would recommend some additions to the provisions in H.R. 3534 to 
ensure the process is fair, does not add time to the development 
process, and results in a more rapid deployment of megawatts.
    The Secretary should be required to establish standards that 
bidders will have to meet to demonstrate they have the development 
capabilities and financial wherewithal to complete a viable project. 
The Secretary should require bidders to demonstrate an understanding of 
the technology they're using and the experience and knowledge to 
construct the project. This should also require that the bidder be able 
to demonstrate a history of successfully completing such projects. 
These recommendations, combined with the due diligence language already 
in the bill, will work to discourage speculation.
    Second, bidding should be done in a single round 8. This 
should be accompanied by strict timelines under which the new leasing 
office is required to act. For example, once a bid is released, bidding 
should be open for a set period of time, say 60 days, after which the 
office would be required to announce the winner bidder within 15 days. 
Timely resolution of the bidding process with strict timelines is the 
key to any competitive bidding process that seeks to encourage the 
development of renewable energy projects.
---------------------------------------------------------------------------
    \8\ BLM used a multiple round bidding process in the Palm Springs 
case, which is one of the reasons it took 18 months.
---------------------------------------------------------------------------
    Finally, the bidding should be based on a package of what companies 
are willing to pay in rental fees prior to a project being operational, 
the date a project could be placed in service, and the royalties a 
bidder is willing to pay after the project is operational.
Grandfathering
    With respect to grandfathering for onshore projects, currently, the 
language in the bill applies to projects that have submitted a Plan of 
Development (POD) or have a met tower or other measuring device in 
place prior to enactment of the bill. This is an improvement from the 
earlier draft that just grandfathered projects that had reach the POD 
phase. However, some companies cannot get met tower right-of-ways 
(ROWs) from federal agencies in a timely manner, let alone get to the 
POD stage, due to agency backlogs. One quick example from my company. 
We've been waiting for over five years to get a met tower lease from 
BLM for one of our projects. We've spent money doing environmental 
reviews for the met tower and preparing a POD for the tower. With the 
existing grandfathering language, despite the money and time we've 
already spent, we'd be out of luck on this project and would have to 
bid to continue it.
    We believe that additional projects deserve to be grandfathered. 
Penalizing developers by failing to grandfather them in because of 
delays attributable to agency backlogs or related inaction would have a 
chilling effect on development.
    We strongly urge the Committee to consider establishing a broader 
threshold: a date prior to which all projects with pending applications 
would be grandfathered. We propose grandfathering all projects with 
applications pending as of the date of enactment of the bill. This 
would hold harmless those applicants who have filed papers, spent time 
and money, but may have seen delays in processing for one reason or 
another.
Royalties
    H.R. 3534 requires wind and solar development to move away from the 
rental-fee model for renewable energy and toward a royalty-based 
approach. 9 The rental fees paid by wind energy developers 
already incorporate a royalty calculation by BLM of five percent of 
project revenues. This was raised from three percent by BLM last year.
---------------------------------------------------------------------------
    \9\ The Committee should not underestimate the difficulty of 
calculating royalties. And, keep in mind that a royalty does not 
necessarily mean a higher return to taxpayers. It is our understanding 
that the Palm Springs BLM office was the entity that actually 
recommended to BLM headquarters that the Bureau move from royalties to 
rental payments because it was extremely difficult to determine whether 
the proper royalties were being paid. The paperwork submitted by the 
generators and the utilities that bought the power was complex and BLM 
had a lot of trouble understanding it. With rental payments--
particularly since BLM increased the payments last December--projects 
in high wind areas may pay a little less than they would under 
royalties, but projects in lower wind areas (which are generally the 
only areas left unclaimed) would be paying more than they would under a 
straight royalty system. In the competitive process envisioned by H.R. 
3534, the level of royalties a bidder is willing to pay will be set by 
the market. That may or may not be the 5% currently used in BLM's 
calculation of the rental payments charged to wind projects.
---------------------------------------------------------------------------
    Under the current system, solar developers pay an annual rental fee 
based upon a BLM valuation of the permitted land. BLM is currently 
conducting its valuation for the first solar project anticipated to 
receive a Right-of-Way permit.
    Should the Committee move forward with an explicit royalty process, 
we would request that there not be any net increase in the amount 
renewable energy projects pay the federal government, as the current 
payment levels are consistent with those in place on privately owned 
lands. As discussed above with respect to how to make a competitive 
bidding process workable, I believe the best way to accomplish this 
would be through a competitive bidding process that would establish the 
current market value for royalties at a particular site in much the 
same way royalty rates are established for private lands; but does not 
result in additional impositions of cost or time as part of the 
process.
    We also suggest that to ease the administration of any suggested 
change over to royalties that they be based on the revenue stream 
(dollar-per-megawatt-hour basis) for wind development. Royalties for 
solar development need to consider both megawatt-hour output and 
permitted acreage. Finally, it would be important to have a fixed 
royalty for the life of the project at the start so that it could be 
factored into financing up front. Predictability is critically 
important for renewable energy projects because all of the capital 
costs are paid at the outset.
Offshore Wind Energy Development
    While RES Americas is not currently building any offshore wind 
farms, I will share the concerns of AWEA's offshore wind developers 
with the Committee. The U.S. recently marked the end of a de facto 
four-year freeze on offshore wind development with the publication of a 
long-delayed Minerals and Management Service leasing rule for renewable 
energy projects on the Outer Continental Shelf (OCS). Publication of 
the rule followed issuance of a comprehensive Programmatic 
Environmental Impact Statement that was itself two years in the making.
    Creation of the strategic plans and ocean zoning envisioned in 
Title VI of H.R. 3534 adds a new layer of regulation for offshore wind 
at a time when the ink is barely dry on the latest regulatory 
framework. Even with the grandfathering language, adding this new 
process signals that the U.S. is still not ready to commit to a single 
rulebook for offshore renewable energy development. From the 
perspective of offshore wind developers and potential investors, 
including firms that are considering substantial investment in key 
elements of the supply chain and service infrastructure, there is 
strong concern about a new process to add a new layer of regulation and 
delay when the rules of the road were originally just set a few months 
ago.
Grandfathering
    While we appreciate the addition of offshore grandfathering 
language, we have concerns about the existing thresholds and would like 
to work with the Committee to find the most appropriate thresholds to 
ensure the offshore wind industry is fairly treated, investments in 
manufacturing and services can go forward, and viable projects are not 
delayed (for example, but not necessarily limited to, those with met 
towers installed or leases for met towers and those moving forward as a 
result of state competitive processes).
Marine Spatial Planning
    The wind industry is not opposed in principle to ocean zoning, or 
marine spatial planning (MSP). If properly implemented, MSP could lead 
to more accurate analyses of potential environmental threats and wiser 
resolutions of conflicts among users.
    However, existing information bearing on the economic viability of 
offshore wind sites is particularly sparse. The siting of offshore wind 
turbines depends on detailed physical data, including hub-height wind 
speed, site-specific geophysical and geotechnical information, and 
information on wave conditions through the seasons. This information 
does not now exist on the scale or level of detail that would be 
required to reach sensible OCS-wide judgments about where offshore wind 
farms should be sited.
    The language as written recognizes the need for additional data but 
it still directs plans to be created and decisions to be made with 
admittedly limited facts. The lack of information specific to offshore 
wind energy development could unnecessarily limit offshore wind 
projects to areas that are not, in fact, economically viable.
    Siting factors relating to human systems and policies add further 
complexity to any effort to zone for offshore wind projects. Offshore 
wind projects require access to onshore transmission grid connections 
and access to markets in which there is public support for renewable 
energy development (through, for example, renewable electricity 
standards). An attempt by planners to zone for (and against) offshore 
wind development without reference to these (changeable) political and 
legal factors could confine offshore wind projects to unnecessarily 
narrow areas that developers cannot pursue due to poor economics.
Conclusion
    The wind and solar industries appreciate the Chairman's willingness 
to make changes to the earlier draft to reflect comments from our 
sectors on how the bill would impact development. We look forward to 
continuing to work with interested members and the Committee staff on 
improving the bill as it moves forward.
                                 ______
                                 

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

[GRAPHIC(S) NOT AVAILABLE TIFF FORMAT]

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

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

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

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

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

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

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

    [Additional material submitted for the record follows:]

    [The prepared statement of Congressman Adrian Smith 
follows:]

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

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

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

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

      Statement of the Land and Water Conservation Fund Coalition

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

September 17, 2009

Dear Representatives Rahall, Hastings, Costa and Lamborn

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

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

Sincerely,

Patrick Lyons
President
Western States Land Commissioners Association
310 Old Santa Fe Trail
Santa Fe, NM 87501
                                 ______
                                 
    [A statement and report submitted for the record by The 
Nature Conservancy follow:]

      Statement submitted for the record by The Nature Conservancy

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

    [The attached report follows:]

[GRAPHIC(S) NOT AVAILABLE TIFF FORMAT]

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

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

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

[GRAPHIC(S) NOT AVAILABLE TIFF FORMAT]

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

                           September 15, 2009

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

Dear Representative,

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

                               Sincerely,

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

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

[GRAPHIC(S) NOT AVAILABLE TIFF FORMAT]

                               
