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




 
OFFSHORE DRILLING: WILL INTERIOR'S REFORMS CHANGE ITS HISTORY OF FAILED 
                               OVERSIGHT

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

                                HEARING

                               before the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             JULY 22, 2010

                               __________

                           Serial No. 111-109

                               __________

Printed for the use of the Committee on Oversight and Government Reform


  Available via the World Wide Web: http://www.gpoaccess.gov/congress/
                               index.html
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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                   EDOLPHUS TOWNS, New York, Chairman
PAUL E. KANJORSKI, Pennsylvania      DARRELL E. ISSA, California
CAROLYN B. MALONEY, New York         DAN BURTON, Indiana
ELIJAH E. CUMMINGS, Maryland         JOHN L. MICA, Florida
DENNIS J. KUCINICH, Ohio             JOHN J. DUNCAN, Jr., Tennessee
JOHN F. TIERNEY, Massachusetts       MICHAEL R. TURNER, Ohio
WM. LACY CLAY, Missouri              LYNN A. WESTMORELAND, Georgia
DIANE E. WATSON, California          PATRICK T. McHENRY, North Carolina
STEPHEN F. LYNCH, Massachusetts      BRIAN P. BILBRAY, California
JIM COOPER, Tennessee                JIM JORDAN, Ohio
GERALD E. CONNOLLY, Virginia         JEFF FLAKE, Arizona
MIKE QUIGLEY, Illinois               JEFF FORTENBERRY, Nebraska
MARCY KAPTUR, Ohio                   JASON CHAFFETZ, Utah
ELEANOR HOLMES NORTON, District of   AARON SCHOCK, Illinois
    Columbia                         BLAINE LUETKEMEYER, Missouri
PATRICK J. KENNEDY, Rhode Island     ANH ``JOSEPH'' CAO, Louisiana
DANNY K. DAVIS, Illinois             BILL SHUSTER, Pennsylvania
CHRIS VAN HOLLEN, Maryland
HENRY CUELLAR, Texas
PAUL W. HODES, New Hampshire
CHRISTOPHER S. MURPHY, Connecticut
PETER WELCH, Vermont
BILL FOSTER, Illinois
JACKIE SPEIER, California
STEVE DRIEHAUS, Ohio
JUDY CHU, California

                      Ron Stroman, Staff Director
                Michael McCarthy, Deputy Staff Director
                      Carla Hultberg, Chief Clerk
                  Larry Brady, Minority Staff Director


                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on July 22, 2010....................................     1
Statement of:
    Rusco, Frank, Director, Natural Resources and the 
      Environment, GAO; Mary L. Kendall, Acting Inspector 
      General, Office of Inspector General, U.S. Department of 
      the Interior; Danielle Brian, executive director, Project 
      on Government Oversight; and Charlotte Randolph, president, 
      LaFourche Parish...........................................    60
        Brian, Danielle..........................................    95
        Kendall, Mary L..........................................    89
        Randolph, Charlotte......................................   106
        Rusco, Frank.............................................    60
    Salazar, Ken, Secretary, U.S. Department of the Interior; and 
      Michael R. Bromwich, Director, Bureau of Ocean Energy 
      Management, Regulation, and Enforcement....................    15
        Bromwich, Michael R......................................    29
        Salazar, Ken.............................................    15
Letters, statements, etc., submitted for the record by:
    Brian, Danielle, executive director, Project on Government 
      Oversight, prepared statement of...........................    97
    Bromwich, Michael R., Director, Bureau of Ocean Energy 
      Management, Regulation, and Enforcement, prepared statement 
      of.........................................................    31
    Connolly, Hon. Gerald E., a Representative in Congress from 
      the State of Virginia, prepared statement of...............   130
    Issa, Hon. Darrell E., a Representative in Congress from the 
      State of California, prepared statement of.................    10
    Kendall, Mary L., Acting Inspector General, Office of 
      Inspector General, U.S. Department of the Interior, 
      prepared statement of......................................    91
    Luetkemeyer, Hon. Blaine, a Representative in Congress from 
      the State of Missouri, prepared statement of...............   121
    Randolph, Charlotte, president, LaFourche Parish, prepared 
      statement of...............................................   108
    Rusco, Frank, Director, Natural Resources and the 
      Environment, GAO, prepared statement of....................    62
    Salazar, Ken, Secretary, U.S. Department of the Interior, 
      prepared statement of......................................    18
    Towns, Chairman Edolphus, a Representative in Congress from 
      the State of New York, prepared statement of...............     4


OFFSHORE DRILLING: WILL INTERIOR'S REFORMS CHANGE ITS HISTORY OF FAILED 
                               OVERSIGHT

                              ----------                              


                        THURSDAY, JULY 22, 2010

                          House of Representatives,
              Committee on Oversight and Government Reform,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 10:11 a.m., in 
room 2154, Rayburn House Office Building, Hon. Edolphus Towns 
(chairman of the committee) presiding.
    Present: Representatives Towns, Maloney, Cummings, 
Kucinich, Clay, Watson, Connolly, Kaptur, Norton, Van Hollen, 
Murphy, Welch, Speier, Driehaus, Chu, Issa, Burton, Mica, 
Duncan, Turner, McHenry, Bilbray, Jordan, Fortenberry, 
Luetkemeyer, and Cao.
    Staff present: John Arlington, chief counsel--
investigations; Kwame Canty, senior advisor; Lisa Cody, Craig 
Fischer, Katherine Graham, investigators; Brian Eiler and Neema 
Guliana, investigative counsels; Aaron Ellias, staff assistant; 
Linda Good, deputy chief clerk; Velginy Hernandez, press 
assistant; Adam Hodge, deputy press secretary; Carla Hultberg, 
chief clerk; Marc Johnson, assistant clerk; Mike McCarthy, 
deputy staff director; Leneal Scott, IT specialist; Ron 
Stroman, staff director; Lawrence Brady, minority staff 
director; John Cuaderes, minority deputy staff director; Rob 
Borden, minority general counsel; Jennifer Safavian, minority 
chief counsel for oversight and investigations; Frederick Hill, 
minority director of communications; Adam Fromm, minority chief 
clerk and Member liaison; Justin LoFranco, minority press 
assistant and clerk; Tom Alexander and Kristina Moore, minority 
senior counsels; and John Ohly, minority professional staff 
member.
    Chairman Towns. The meeting will come to order.
    Good morning and thank you for being here.
    The Interior Department is responsible for the regulation 
and oversight of offshore oil drilling. Unfortunately, the BP 
oil spill followed a long history of regulatory and ethical 
failures at the Interior Department and its Minerals Management 
Service [MMS].
    The Deepwater Horizon disaster has now exposed what appears 
to be continuing, major problems at MMS. Over the last decade, 
MMS has essentially permitted the oil industry to police 
itself.
    For example, in 2000, MMS issued an alert requiring oil 
companies to have a backup system to activate ``blowout 
preventers,'' one of the components that failed, contributed to 
the Deepwater Horizon explosion, and exacerbated the size of 
the oil spill. But MMS officials decided to let oil industry 
executives determine how they wanted to comply with this 
requirement.
    In other words, BP and the other oil companies were 
essentially on the honor system. The Deepwater Horizon disaster 
suggests this is not an effective approach to ensuring safe 
offshore drilling.
    Regulatory failures at MMS were made worse by the rapid 
growth of offshore oil drilling in the Gulf. Over the last two 
decades, the number of offshore oil rigs in the Gulf of Mexico 
has expanded dramatically, and extended further offshore into 
much deeper waters. Yet, at the same time, MMS remained 
relatively small, had trouble recruiting qualified engineers 
and inspectors, and could not keep up.
    Though drilling has expanded in the Gulf by tenfold, the 
number of inspectors has only grown by 13 percent. The result: 
fewer than 60 inspectors are currently responsible for 
conducting over 18,000 inspections annually.
    The agency was born with a built-in conflict of interest. 
When MMS was created, it was given the dueling responsibilities 
of promoting drilling and collecting royalty payments on the 
one hand, while also issuing and enforcing environmental and 
safety regulations on the other hand.
    It seems as though it was only a matter of time before 
these conflicting responsibilities would lead to the disaster 
we are seeing here today.
    In short, it was a tug-of-war between drilling and safety. 
As the BP disaster illustrates, safety found itself on the 
losing side of the struggle.
    Even worse, regulatory failures have been accompanied by 
ethical failures.
    In 2008, the Interior Department's Inspector General found 
a ``culture of ethical failure'' within MMS's Royalty-In-Kind 
program. The IG's investigation revealed that, over a 4-year 
period, senior employees within MMS improperly accepted gifts 
and engaged in sex and drug abuse with oil company employees.
    Unfortunately, this was not an isolated incident.
    Just last month, the IG released another report which found 
that inspectors improperly accepted gifts from oil companies. 
Additionally, at least one employee simultaneously conducted 
inspections of an oil company's operations while negotiating 
employment with the very same company.
    In addition, in a series of reports, GAO found that flaws 
in royalty collection have resulted in millions of dollars in 
lost revenue.
    We can and must do a better job overseeing offshore oil and 
gas activities.
    Today, we will hear directly from the Secretary and Mr. 
Bromwich about how exactly they plan to implement the 
reorganization and increase oversight and accountability at 
MMS, which we are anxious and eager to hear.
    Before we begin, however, I want to make one final 
observation.
    While the Interior Department is responsible for regulating 
the oil industry and they have been taking a lot of heat for 
that, it does not change the fact that BP was responsible for 
the safety of its oil well and BP was responsible in terms of 
responding to the oil spill. And it is BP that is ultimately 
responsible for the entire cleanup and the costs, as well as 
the job losses and lost income resulting from the spill.
    I am committed to ensuring that the Government has the 
authority and ability to effectively regulate the safety of 
offshore oil drilling.
    On that note, I now yield 5 minutes to the ranking member 
of the full committee, the gentleman from California, 
Congressman Issa.
    [The prepared statement of Chairman Edolphus Towns 
follows:]

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[GRAPHIC] [TIFF OMITTED] T3146.002

[GRAPHIC] [TIFF OMITTED] T3146.003

[GRAPHIC] [TIFF OMITTED] T3146.004

    Mr. Issa. Thank you, Mr. Chairman, and thank you for 
holding this important hearing.
    Five years ago we began looking at failures in the Gulf and 
more. In light of Hurricane Katrina, we knew that this was a 
sensitive area and one that would struggle for years to come, 
and one that was vulnerable to failures by the Federal 
Government in just an area or two. And whether it is the levies 
that failed to protect the people of New Orleans or the plan 
approved by Mineral Management Service that failed to even 
consider the possibility that oil could come ashore in a 
disaster of this size, we, the Federal Government, have failed.
    Every day every American here somewhere, it seems, a chain 
is only as strong as its weakest link. There were two weak 
links that led to this disaster: British Petroleum acting 
irresponsibly, failing to maintain safety standards well 
established in the industry, failing to maintain their own 
safety standards, and being in too big a hurry to cut corners, 
cut costs, ultimately leading to the loss of life and the loss 
of billions of dollars to the American people around the Gulf 
and beyond.
    But there is another weak link, a well noted weak link, one 
that this committee has been pursuing change for almost 6 years 
now from: Mineral Management Service, an organization that has 
checks and balances that mean nothing. Years ago we discovered 
that when a contract was signed, person after person after 
person was required to initial it. They initialed it and 
nothing else; they did not read it, they did not verify, they 
did not ask any questions.
    That kind of absence does not just go to the engineers that 
are hard to recruit; it goes to the very top of the 
organization, and has under multiple administrations. In fact, 
problems in our first set of hearings go all the way back to 
the Clinton administration. But let us make it very clear, 
those problems were well known during the entire Bush 
administration, and for those 8 years change did not occur.
    Sadly, Mr. Secretary, during the year and a half of your 
administration, change did not occur. I know that it seems like 
a very little bit of time, but if in fact the 20 or so findings 
that have occurred by your own IGs and GAO had been put 
together with the work of this committee sooner, and the 
urgency put onto it, I believe this could have been prevented.
    Having said that, we need to look to the future. We need to 
look to real change in the Mineral Management Service. I 
personally would not like to see it broken into three even 
smaller parts but, rather, have the real focus either as an 
independent agency or as one that has a level of clarity to the 
American people, much more similar to the EPA. We need to have 
that. We need to have the American people understand that the 
proper revenue that has not come to the American people is a 
factor; the proper controls and safeguards are a factor.
    Chairman Waxman, Mr. Kucinich, Mr. Towns, and the rest of 
us have all seen hearings, but we haven't seen the amount of 
hearings that we should have had, and we haven't had the 
followup by previous administrations or, to date, by your 
administration.
    I believe that there are a number of factors that we can 
deal with today that have to do with the current disaster, with 
a number of factors including, if you will, an overstatement of 
available resources, an over-reporting of available resources 
and when they were there, and a number of other areas. Those 
occurred under your watch.
    But ultimately this is the Committee on Oversight and 
Reform, and it is those published 20 reports that we want to 
deal with primarily; it is the discovery of documents that 
would allow us to take a first hand in the reorganization to 
ensure that, when this is over with, we can count on an agency 
that recruits and trains the kind of second guessers to an oil 
industry.
    I think it is important to note that there are many, many, 
many rigs that have been operated safely and responsibly. It 
only takes one operating irresponsibly and then a lack of 
oversight. In fact, to my amazement, the last inspection by 
Minerals Management Service of this rig before the disaster 
occurred, as required, with two individuals; two being part of 
the inspection team. That was because there was a requirement 
to have two separate people independently second-guessing each 
other. To my amazement, of course, it was a father-son team 
and, in fact, less likely to be independent.
    This is one of many too cozy relationships at MMS that have 
to change. This has to be an organization of professionals, not 
a family practice.
    The American people want us to take care of a number of 
items, but they want us to go further. I will note today that 
four other major oil companies have announced an investment in 
the construction of a very large dome designed to work in the 
Gulf, certainly on our part of the Gulf, but perhaps in Brazil 
and other areas, if a similar event happens. This kind of 
proactive thinking is important.
    In fact, Mr. Secretary, to the extent that you have been 
involved in it, either by urging or demanding, I would like to 
personally applaud you. I believe that when we look at the 
blow-off preventers next generation, something that has been 
needed since 2003, and we look at the recovery and response 
assets, not just for this event, but for any event, for a major 
shipwreck, a hurricane that destroys a refinery, or even 
chemical failures, we all have a responsibility to see that we 
go with a program much more similar to putting a man on the 
moon than simply business as usual in the Gulf.
    So, Mr. Chairman, I look forward to an extensive hearing 
today. I look forward to the balance of our discovery, and I 
look forward to working with you on trying to oversee over the 
next couple of years a real birth of an organization unlike the 
old MMS and much more like an organization that we can all be 
assured will keep the good actors doing what they are supposed 
to and the bad actors altogether out of the business.
    With that, I yield back the balance of my time.
    [The prepared statement of Hon. Darrell E. Issa follows:]

    [GRAPHIC] [TIFF OMITTED] T3146.005
    
    [GRAPHIC] [TIFF OMITTED] T3146.006
    
    [GRAPHIC] [TIFF OMITTED] T3146.007
    
    Chairman Towns. I also now recognize for 3 minutes the 
gentleman who is the chairman of the subcommittee from Ohio, 
Congressman Kucinich.
    Mr. Kucinich. Thank you very much, Mr. Chairman, for 
calling this hearing on ``Offshore Drilling: Will Interior's 
Reforms Change Its History of Failed Oversight.''
    It is important that we do our work of oversight, but I 
also have to tell you that while I am sitting here looking at 
the preparation for the hearing and thinking about how we are 
going to focus on things, for example, I am going to have some 
questions, so you can think about it now, about the Atlantis 
platform, how 19 Members of Congress wrote to the Minerals 
Management Service back in February raising questions about 
engineering documents and didn't get the answers that we were 
entitled to. The breach in the catastrophe occurred with 
Deepwater Horizon, but the questions that we raised with 
respect to the Atlantis platform were relevant not only to 
Atlantis, but Deepwater Horizon and other platforms that are 
out there in the Gulf.
    So we are going to get into that in the Q&A, but I just 
have to say something about this moment. There seems to be some 
feeling in this country that we can endlessly invade the 
natural world without any consequences. Well, the catastrophe 
in the Gulf put the lie to that, but we still believe we can do 
it. We are still moving forward with people talking about doing 
drilling and we have built our whole economy around this.
    So, Mr. Secretary, you are being asked to defend a system 
which truly is basically collapsing. It really is. And I thank 
you for your service, but the fact of the matter is the system 
itself is collapsing. We think we can keep interfering in the 
natural world without any consequences. We think we can 
postpone the delivery or the development of alternative 
energies. We think we can keep on living in this country the 
way we have been living, without any correction in our course, 
even in the face of a tremendous catastrophe in the Gulf.
    Well, we are going to have to start thinking again.
    I yield back.
    Chairman Towns. I thank the gentleman from Ohio.
    I now recognize the gentleman from Florida, Congressman 
Mica, for 3 minutes.
    Mr. Mica. Well, first of all, I want to thank Chairman 
Towns and Mr. Issa for convening this hearing. I am pleased to 
see the Secretary here. There are some very serious questions 
that need to be answered about what took place and also what 
measures we have in place to deal with the current spill that I 
see from Florida around the Gulf Coast, affecting people's 
life, the moratorium. We have so many questions, but I am 
pleased that you are here to hopefully shed some light on it, 
and your colleague.
    Mr. Issa stated that we knew something was rotten in the 
Minerals Management Service even under the Bush administration, 
and I will put in the record a copy of a letter that cites 
three criminal investigations were launched during the Bush 
administration on that agency, things we knew there were 
problems with. I would like to know from you, when you 
inherited that position, if that was one of your focuses.
    There are other questions that have been raised about the 
development of policy with the new administration. You know, I 
think a lot of people voted for President Obama on the other 
side; they thought they were the protectors of the environment 
and all this. And it turns out that they were asleep at the 
switch.
    What baffles me is how you could come up with proposals, 
and I want to know if you were consulted on this budget 
proposal in 2011 to cut the Coast Guard budget, which is one of 
the first responders whenever you have an oil incident or a 
disaster in this country. In addition, $2 million cut from MMS, 
Minerals Management Service's budget for environmental reviews. 
It is in here; these were proposals. I don't know if you had 
anything to do with this in February of this year. This is 
February, and then in March the administration develops a 
policy. Here is the headline from the New York Times, ``Obama 
to Open Offshore Areas to Oil Drilling,'' and it cites the Gulf 
of Mexico.
    So here we are cutting the assets and those responsible for 
oversight and permitting, and there are questions about the 
rubber-stamping carte blanche of the approval. This is the 
approval signed by your administration to drill in deepwater. 
And then the rush to do more deepwater drilling. This is the 
list of 33 approvals by the Obama administration. There is only 
a total of 27 deepwater operations in the Gulf after those are 
exploratory, half, approximately, production, but your rush to 
more drilling and cutting the assets.
    I think I would like to know how this policy was developed 
and if you had any part in it, or what the thinking was when 
they took this path.
    Chairman Towns. The gentleman's time has expired.
    Mr. Mica. I yield back the balance of my time.
    Chairman Towns. Thank you very much.
    Let me indicate that is the longstanding policy of this 
committee that we swear all of our witnesses in, so if you 
would stand and raise your right hands.
    [Witnesses sworn.]
    Chairman Towns. You may be seated.
    Let the record reflect that the witnesses answered in the 
affirmative.
    We are delighted to have Secretary Salazar with us. He is 
serving as the fiftieth Secretary of the U.S. Department of 
Interior. Prior to his confirmation, Secretary Salazar served 
as a Senator from the great State of Colorado. Before becoming 
Senator, Secretary Salazar spent two terms as Colorado's 
attorney general and served as chief legal counsel and 
executive director of the Colorado Department of Natural 
Resources in the cabinet of Governor Roy Romer.
    Welcome. We are aware of your time constraints, and we will 
respect them, no question about it.
    Then Mr. Michael Bromwich was sworn in to lead the Bureau 
of Ocean Energy Management, Regulation, and Enforcement, 
formerly known as MMS, on June 21, 2010. Director Bromwich 
previously served as inspector general for the Department of 
Justice and as an assistant U.S. attorney in the southern 
district of New York. Most recently, Director Bromwich was a 
partner at the law firm of Fried Frank, where he specialized in 
conducting internal investigations.
    We welcome both of you.
    At this time, I ask that each witness deliver their 
testimony within 5 minutes, which will allow the committee 
ample time to raise questions, also considering your time 
constraints, Secretary. Of course, you know the rules. They 
start out with the light on green; then, of course, you know, 
because you know all about these lights, then at the end it 
becomes red. So, Mr. Secretary, you may begin.

 STATEMENTS OF KEN SALAZAR, SECRETARY, U.S. DEPARTMENT OF THE 
 INTERIOR; AND MICHAEL R. BROMWICH, DIRECTOR, BUREAU OF OCEAN 
         ENERGY MANAGEMENT, REGULATION, AND ENFORCEMENT

                    STATEMENT OF KEN SALAZAR

    Secretary Salazar. Thank you very much, Chairman Towns, and 
thank you, Congressman Issa, and all the distinguished members 
of the committee who are here. At the outset, let me just say 
thank you to the committee for the work that it has done in the 
prior years relative to putting into the spotlight some of the 
necessary reform efforts that are required of the Minerals 
Management Service, many of those which we have been working on 
since day one, when I became Secretary of the Interior.
    Let me, at the outset, just say to the members of the 
committee I know you are all wondering about the status of 
where we are with respect to the containment of the oil leak 
out in the Gulf of Mexico. Since day one, and today is day plus 
93, we have been working from early morning until late at night 
making sure that the entire arsenal of the United States of 
America is focused on the problem and getting it resolved.
    Myself and Secretary Suh, other members of the Cabinet, 
have been working on this from day one, and as of today we see 
the light at the end of the tunnel. There is a shut-in that has 
occurred of the well and the monitoring that we have required 
of BP is showing that it is holding. But the weather patterns 
that we are seeing may have some interruption in terms of 
getting to the ultimate solution here, which is the ultimate 
kills that have to occur of this well. But we are seeing the 
light at the end of the tunnel.
    Let me move to the subject area that I think this committee 
wants to explore, and that is the issue of responsibility and 
what is it that has happened here. Let me frame it for this 
committee the way that I see it. This is a collective 
responsibility, and I do not believe that, at the end of the 
day, the blame game is going to help us relative to how we move 
forward and develop the broad energy portfolio and the 
comprehensive energy plan that is required of America; that we 
need to work together to fix the problem, make sure we learn 
the lessons from this incident, and that we move forward with 
an energy portfolio that I think, at the end of the day, will 
include oil and gas. That has been the position of the 
President and my position as Secretary of Interior.
    In terms of the responsibility for this incident that 
brings us here today, certainly, BP and other companies that 
were involved have broken the rules and have strayed from the 
best practices of the industry. Many investigations are going 
on. Much of that has already been reported in the press.
    Second, industry has made the wrong representations, both 
to the Congress as well as to the Department of Interior and 
others, with respect to drilling safety, with respect to the 
ability to contain blowouts, and with respect to oil spill 
response. The efforts announced yesterday by the four major 
companies in moving forward with a billion dollar effort, on 
which I was briefed, will need significant additional work 
before we can be satisfied with at least one of those 
particular prongs that I think are essential to be righted.
    Third, the Congress serves a responsibility. This committee 
has been at the forefront, at least, of exposing some of the 
ethical lapses, but, at the end of the day, the drilling that 
has occurred in the deepwater drilling has been something which 
this Congress has also embraced. And I recognize that I too was 
a Member of the U.S. Senate. The passage of the 2005 Energy 
Policy Act which you, Congressman Issa, and other members of 
this committee, voted on essentially was part of a national 
framework.
    Fourth, there is a reality that this is an issue which 
requires looking back not just at one administration, but it is 
multiple administrations. The MMS was formed in 1981, and you 
think about the fact that there have been Republican and 
Democratic administrations that essentially have allowed this 
organization to continue by fiat of Secretary Lauder, and it 
was for that reason that even as early as last year proposed to 
the Natural Resources Committee, Congressman Rahall's 
committee, that we move forward with organic legislation 
because the missions of this agency are so important.
    So let me just say it is a shared responsibility and we 
need to move forward and fix the problems.
    I believe that we started, in my tenure as Secretary of the 
Interior, moving forward implementing the reform agenda, much 
of which had been uncovered through some of the work of this 
committee. On ethics, from day one, we put together a strong 
and robust ethics program, working with the findings of the 
Inspector General and moving forward to clean up the corruption 
that occurred in Lakewood and other places. People have been 
fired; people have been sent over for criminal prosecution; 
people have been suspended; and we have done everything that we 
can to clean house from an ethics point of view.
    We eliminated the Royalty-in-Kind program which had existed 
for a long time and which had been one of the magnets for 
corruption. That has been eliminated and we move forward with a 
comprehensive review and change with respect to the Outer 
Continental Shelf plan that had been proposed by the prior 
administration. Finally, we have worked very hard to stand up 
the renewable energy resources out in the oceans of America.
    With respect to what has happened since April 20th and how 
we move forward with that reform agenda, it is a continuing 
effort. We have proposed and developed a report on safety to 
the president of the United States. It was a 30-day report that 
laid out a number of different majors from prevention 
mechanisms to moving with cementing, encasing, and the like.
    We have proposed, in the last 2 years' budgets, efforts to 
expand the number of inspectors that we have at MMS and we are 
moving forward with the reorganization of MMS now into the 
Bureau of Ocean Energy Management, Enforcement, and Regulation, 
and that is being done under the leadership of Wilma Lewis and 
Michael Bromwich.
    Let me just say that both of them have incredible 
credentials as prosecutors, as well as Inspectors General, and 
they were chosen by me to run the agency in large part because 
of the ethical improprieties which this committee and which the 
Inspector General had uncovered.
    So we have been working hard on making sure that those 
ethical lapses are not there, and we understand that there is 
still significant reform that we have to undertake in the days 
and months ahead, and we will be focused on it like laser beam 
and look forward to working with you, Mr. Chairman, Congressman 
Issa, and members of this committee, to make sure that the new 
organizational ultimately gets it right.
    Let me finally say I know some of you will have questions 
on the moratorium. I would be delighted to answer those 
questions.
    Finally, just in terms of what I hope the legacy of this 
crisis is. I would hope that, as we learn the lessons from this 
crisis, that at the end of the day we will look back at this 
time and we will say that we have, together as a Nation, 
developed safer oil and gas production in the Outer Continental 
Shelf that does in fact protect the environment and protect the 
safety of the workers.
    I would hope that we can move forward as a Nation and say 
that we have restored the Gulf Coast to a place that it is in a 
better condition than it was before April 20th, and I would 
hope that we are able to move forward and embrace the new 
energy future of America with a much broader portfolio that 
includes solar and wind and geothermal and all the rest of the 
portfolio that is part of the renewable energy initiative of 
President Obama and Members of this Congress.
    Thank you, Mr. Chairman.
    [The prepared statement of Secretary Salazar follows:]

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    Chairman Towns. Thank you, Mr. Secretary, for your 
statement.
    Mr. Bromwich.

                STATEMENT OF MICHAEL R. BROMWICH

    Mr. Bromwich. Thank you very much, Chairman Towns, Ranking 
Member Issa, and other distinguished members of the committee. 
It is a pleasure to be here and to testify before you, and to 
answer any questions you may have.
    As the chairman noted and as the Secretary noted, I am new 
on this job; I have been on the job exactly a month yesterday 
as head of the newly renamed Bureau of Ocean Energy Management, 
Regulation and Enforcement. The change of name was made by 
Secretary Salazar with a point, which was to stress and 
emphasize the regulation and enforcement part of the 
organization's mission that many people have fairly suggested 
has been ignored or neglected in the past.
    Let me focus very briefly on three things that we have been 
doing since I got there. No. 1, on the second day after I was 
named Director, with Secretary Salazar's approval, we created 
an Investigations and Review Unit within the organization that 
will have several primary functions, but the principle function 
will be some self-policing. It will be authorized in 
conjunction and cooperation and communication with the Office 
of the Inspector General to do investigations into ethical 
lapses, into misconduct, and so forth. To my surprise, there 
had not been that capability within the organization 
previously. I believe that any healthy and robust organization 
should have that capability. This organization now has that.
    Second, that unit, the Investigations and Review Unit, will 
spearhead a heightened enforcement program that will be focused 
on oil and gas companies, and that will launch aggressive 
investigations in those cases in which there are allegations 
that the rules have been violated. Too often in the past I have 
heard and I fear enforcement has not been vigilant, it has not 
been aggressive. That will change.
    Finally, as the ranking member and the chairman noted, 
there have been many, many reviews and investigations by 
various entities, including the Office of the Inspector 
General, GAO, and so forth. One of the duties of this 
Investigation and Review Unit will be to followup on those 
reviews to see whether the remedial steps that should have been 
taken and where statements may have been made that those 
remedial steps had been taken, whether they in fact have been 
taken. So that kind of followup work will be a central mission 
of the Investigations and Review Unit.
    The next subject I would like to touch on briefly are the 
new regulations that have already been implemented and that 
will be implemented in the future. Following the Deepwater 
Horizon blowout and the 30-day safety report that the Secretary 
mentioned, a new safety regulation, NTL-5, was issued that is 
binding on the industry. That was followed by the issuance of 
NTL-6, which is a more environmentally oriented regulation. 
These are tough new rules and regulations that govern oil and 
gas companies as they do work in the Outer Continental Shelf, 
and I think they are fair and appropriate new rules and 
regulations.
    There are other rulemakings that are in process that are, 
in part, the product of learning that has gone on in the 
Interior Department both previously and that is going on in an 
accelerated way over the last 2 months, and we hope to be 
putting out those rules in the near future. Again, I think we 
feel that those are necessary and appropriate.
    Finally, the Secretary mentioned briefly the moratorium. 
One of the charges he gave me in connection with the moratorium 
issued on July 12th was to conduct a series of public forums 
around the country to gather information on three central 
issues, drilling safety, spill containment, and spill response, 
with an eye to gathering as much information from industry, 
from academia, from stakeholders, from NGO's, from 
environmental groups to determine whether there are ways in 
which the moratorium might be shortened before the November 
30th current expiration date, but generally to learn as much as 
we can on what additional measures need to be taken on those 
three dimensions to ensure that when deepwater drilling is 
resumed it is done in a safe and appropriate manner.
    We will begin those meetings starting August 4th in New 
Orleans. We will follow those with a series of meetings in 
Mobile, AL, Pensacola, FL, Santa Barbara, CA, Anchorage, AK, 
Biloxi, MI, Houston, TX, and Lafayette, LA. Those will be 
conducted between August 4th and September 15th with a call to 
report back to Secretary Salazar with the results of those 
public forums no later than October 31st.
    It is a lot of work, but it is a lot of important work, and 
we look forward to doing it and I look forward to working with 
you. Thank you very much.
    [The prepared statement of Mr. Bromwich follows:]

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    Chairman Towns. Thank you. Thank you for your statement.
    Let me begin with Secretary Salazar. Will you commit today 
that the reorganization process will be transparent and this 
committee will be provided with all the critical details?
    Secretary Salazar. Yes, we will absolutely be working with 
the committee, with Members of Congress relative to legislation 
on the reorganization, as well as keeping you up to date on the 
implementation of the new organization.
    Chairman Towns. Now, I want to know how will the 
reorganization help to prevent further future disasters.
    Secretary Salazar. Well, first, in terms of dealing with 
some of the ethical lapses, which I agree have been abhorrent 
in the past and which this committee has appropriately pointed 
out, as well as our Inspector General of the Department of 
Interior, we are dividing up the agency into different units so 
the revenue functions that were formerly in the MMS will move 
over into an office of Natural Resources Revenue.
    So the dollar collectors will be separated from those who 
are in charge of granting the leases and doing the enforcement. 
The rest of the agency which Director Bromwich will oversee 
will be split into a Bureau that essentially manages the 
resource out in the Outer Continental Shelf, both conventional, 
as well as renewable, and another unit that essentially will be 
in charge of safety and enforcement.
    So that is the essential concepts around the 
reorganization, to ensure, first of all, that conflicts of 
interest are avoided in the future, the kinds that you have 
pointed out in your investigations, and, second of all, that 
there is a kind of enforcement with respect to safety and 
environmental requirements.
    Chairman Towns. The GAO and, of course, DOI IG have made 
numerous recommendations to improve royalty collection. Have 
you implemented any of these recommendations up to this point?
    Secretary Salazar. Mr. Chairman, the answer to that is we 
have in major ways relative to the elimination of the Royalty-
in-Kind program. We are also looking at other ways in which we 
can provide a more effective calculation of royalties and have 
been working at putting together a program so that the American 
taxpayer receives the return from the royalties from oil and 
gas production that the American taxpayer deserves.
    Chairman Towns. Let me ask you have you looked at the 
turnover process in terms of people that work for MMS moving on 
based on the fact that they are so poorly paid?
    Secretary Salazar. The revolving door issue is one that has 
troubled us and one that we are working on. It is my personal 
view that if you have been an MMS Director, that you ought not 
to go out and then work with the industry. But I will have 
Michael Bromwich, if I may, Mr. Chairman, just quickly answer 
that question, because it is something that we have been 
focused on.
    Chairman Towns. Sure.
    Mr. Bromwich. I think it is a serious issue and a serious 
problem. There have been historical problems in recruiting 
qualified inspectors, and many of the qualified inspectors do 
come from industry and then seem to want to go back to 
industry.
    Now, it is my view that we can do a couple of things about 
that. One is to create tighter rules to ensure that if people 
who are agency government inspectors do go back into the 
private sector, that at least they don't deal directly with the 
agency that they just left on any of the matters that they 
worked on, and for some period of time perhaps not deal with 
the agency at all. So that is one set of issues that we are in 
the process of addressing.
    I think a more fundamental issue, though, is how do you 
enlarge the pool of qualified inspectors. One of the things 
that I have begun conversations about is talking to some of the 
schools of engineering around the country to see if we can 
develop recruiting programs so that this becomes a desirable 
public service career path. Let's recruit the best and the 
private out of some of the petroleum engineering schools around 
the country, people who have no prior ties with industry, and 
let's make it a sustainable career path so that they are not 
tempted by more dollars in the private sector, but they can 
make a decent living serving as a qualified inspector.
    I had a conversation yesterday with the Dean of the School 
of Engineering at UC Berkeley. He said there are a number of 
schools of engineering deans around the country who are 
interested in working with us on precisely this point. So we 
are at the very beginning stages of this, but I am very hopeful 
that we will have some robust alternatives to the back and 
forth revolving door system that has existed up until now.
    Chairman Towns. That is very encouraging.
    I now yield 5 minutes to the ranking member, Congressman 
Issa.
    Mr. Issa. Thank you, Mr. Chairman. First, I would like to 
do just a little technical housework.
    Mr. Secretary, your staff, up until last night, told us 
that there was a policy which they would not provide in 
writing, that you only deliver document requests to the 
majority. Now, the majority has been kindly making copies and 
giving them to us; however, under Ranking Member Waxman and the 
Bush administration, we never saw such a policy and we were not 
able to get it in writing.
    Would you pledge that both the rest of the discovery would 
be coming, which you have already said before the committee 
hearing started, but also that the discovery would be 
transparent to both sides? The chairman may have requests that 
are slightly different than we have, but that what we request 
would be granted to both sides at the same time, rather than 
relying on somebody to go through and try to make an effective 
copy, rather than your knowing that you delivered both sides 
the same information?
    Secretary Salazar. Congressman Issa, we delivered thousands 
of pages of documents both to the chairman, as well as to you, 
and we are working with you to try to get all the additional 
documents----
    Mr. Issa. And I appreciate your participation and your 
promising that. It was actually more technical than that. Until 
last night, any documents we got we got because they were 
delivered to the majority and not to the minority, and the 
majority then made copies. And that is not a normal practice 
from government.
    Each of us has independent requests and usually they are 
shared by delivering them either to the person who requested 
them, if only one requested, but in most cases administration 
delivers to both sides so that both sides know exactly what is 
being delivered. This was troubling, particularly when, last 
night, your folks suddenly changed, probably because you were 
going to be here, and gave us both copies. We would like to 
know that would continue, that each of us would get information 
independently, but copied to the other.
    Secretary Salazar. Congressman Issa, let me just say that 
we will follow the processes that the Department of Justice and 
others have required of the executive branch of Government. My 
view is that transparency is important. We have provided 
tremendous documents to this committee and will continue to 
work with you to provide you the information that you need so 
that you have absolute information relative to what it is that 
you are seeking.
    Mr. Issa. OK, I won't belabor the point; I will trust that 
if you gave it to us directly last night, you are probably 
going to continue giving it to us directly, and not the way 
your staff had decided to do it prior to that time.
    The questions I have are a number, and I will try to be 
brief. The culture at MMS, we can talk about changing. Mr. 
Bromwich, I am looking forward to your helping change that. But 
in our earlier investigations one of the things we discovered 
was that not only was this organization cozy, it was inept. We 
had testimony in evidence that now what you own, or maybe what 
you own, Mr. Secretary, the portion that was collecting the 
money completely relied on the energy companies to deliver how 
much was owed from where; that there was no independent 
accounting and that no audit ever basically found a different 
number, meaning if Kerr-McGee, when they were still in 
business, said we got X amount out and delivered X amount of 
dollars, they just took the money and recorded it; that they 
had no independent ability to know whether that was the right 
number or not.
    Do you, one or both of you, have plans to implement a 
system so that you can independently discover how much oil or 
natural gas or other resources are being taken out and verify 
them, not just take the word of the good players and the bad 
players alike?
    Secretary Salazar. The answer to that, Congressman Issa, is 
yes, and we have already done it, indeed, with BP. We just sent 
them a notice for some, I think, $5 million with respect to 
royalty under-payments on an onshore activity. Second, with 
respect to the Office of Natural Resource Revenue, which we 
have created, there will be the auditing functions so that we 
can do that independent verification, and perhaps Director 
Bromwich may want to comment on that as well.
    Mr. Bromwich. I agree with you, Congressman Issa, that is 
an inappropriate and unacceptable system. The Secretary has 
just said that has been changed and that is absolutely the 
right way to do it. You cannot rely on the regulated entity to 
report without checking that, auditing it, and coming up with 
an independent assessment.
    Mr. Issa. I appreciate that. Very quickly, I might suggest 
that every year the Army Corps of Engineers has huge amounts of 
senior engineers retire who still would like to work for 
government. I would hope that you look at both ends of the 
spectrum, those coming directly out of universities that have 
never worked with oil companies, but perhaps senior engineers 
who have 5, 10, or 15 more good years to give that also are not 
tainted by an ambition to work for seven figures for an oil 
company.
    Mr. Bromwich. I think that is a great idea. Last week I 
found out that there may be a pool of people in the Coast 
Guard, I think they are called warrant officers, who similarly 
have useful experience that we can count on. So I think there 
are actually pockets of experienced personnel all over 
government that people just haven't thought of tapping into in 
the past, but that we are going to try to tap into now.
    Mr. Issa. Thank you.
    Thank you, Mr. Chairman.
    Chairman Towns. The gentleman's time has expired.
    I now yield to the gentleman from Ohio, Congressman 
Kucinich.
    Mr. Kucinich. Thank you very much, Mr. Chairman.
    I indicated in my opening remarks that I had some questions 
about the way that the Minerals Management Service handled the 
British Petroleum's Atlantis platform issues in the Gulf of 
Mexico. I was 1 of 19 Members of Congress who signed a letter 
to the Minerals Management Service back in February 2010.
    Mr. Bromwich, this was about 2 months before the Deepwater 
Horizon incident. Ms. Birnbaum, the former director, received a 
letter about BP Atlantis's platform. We requested an 
investigation to verify a whistleblower claim that 90 percent 
of the final construction plans for the platform, almost 7,000 
plans, were never approved. So if there is an accident on that 
rig, there would be no plans for response teams to use to try 
to deal with it.
    Though I am happy to see that an investigation is now 
underway, I am concerned that it is not expected to conclude 
until September. It is important to keep in mind that this 
platform is in waters deeper then the Deepwater Horizon 
platform, and BP's own worst case scenario for a catastrophe 
with Atlantis would put over 200,000 barrels of oil per day 
into the Gulf, which is about anywhere from 4 to 10 times the 
size of the Deepwater Horizon catastrophe.
    My first question, Mr. Bromwich, is whether BP would be 
found in violation of the law if it does not maintain certified 
as-built drawings on file.
    Mr. Bromwich. I don't know the answer to that. Let me get 
back to you on that. My intuition is----
    Mr. Kucinich. I am disappointed that----
    Mr. Bromwich. My intuition is that the answer----
    Mr. Kucinich. I am disappointed you don't have the answer 
to that because that is your job. I will give you the answer. 
The answer would be yes.
    Now, I am told that it should not take that long to review 
the plans. That raises a question: that the plans might not 
even exist. I am concerned that Atlantis is the rule, and not 
the exception. Given what we know about the Horizon accident, 
and how BP Atlantis does not have engineer-certified documents 
for its subsea components, as required by law, wouldn't it make 
sense for the Bureau of Ocean Energy Management, Regulation, 
and Enforcement to close the Atlantis project, as well as any 
deepwater drilling production operations in the Gulf that lack 
final plans until an independent third party have proven that 
they are operating with complete sets of engineer-approved 
drawings for their above- and below-sea components? Mr. 
Bromwich.
    Mr. Bromwich. Congressman, you are correct that there is an 
investigation ongoing. You are also correct that it is going to 
be completed by the end of September. I am advised that there 
is a letter that is on its way to me that will update you and 
other interested members of the committee with what I 
anticipate will be preliminary results of that investigation.
    The truth is I have spent the bulk of the month since I 
came onboard dealing with various offshoots of the Deepwater 
Horizon matter, so I am not as fully aware of the Atlantis 
matter as you would like me to be, but I will make it my 
business to become more knowledgeable about it and am very 
happy to talk to you further about it in the near future.
    Mr. Kucinich. Mr. Bromwich, I appreciate that response, but 
I think it would be useful for you to review the letter that 
was sent back on February 20, 2010, signed by 19 Members of 
Congress, including myself, which provides a very powerful 
warning about the consequences of not having an appropriate 
inspection of the issue relating to engineering plans at that 
BP Atlantis platform.
    Mr. Bromwich. I will review that.
    Mr. Kucinich. You understand the concern here. You are 
dealing with a catastrophe from the lack of appropriate 
oversight at Deepwater Horizon. What I am maintaining to you, 
and what other Members of Congress have all joined together in 
asserting, is that lack of appropriate oversight also exists 
with respect to a BP Atlantis platform, which would have even 
more catastrophic implications than the Deepwater Horizon 
disaster.
    I thank the gentleman. I yield back.
    Secretary Salazar. If I may, Mr. Chairman. Congressman 
Kucinich, I would want to just supplement what Director 
Bromwich said by saying, one, the investigation is underway and 
he will keep you posted as to the results of the investigation. 
No. 2, we have sent inspectors out into the Gulf to look at the 
drilling, as well as the production platforms, so there is an 
ongoing inspection effort underway.
    And, No. 3, one of the things that should come out of the 
lessons learned here is that you cannot have 60 inspectors 
essentially having the responsibility of conducting the massive 
job that has been assigned to these inspectors, and that is why 
there is a budget amendment in front of this Congress to try to 
beef up the level of inspection and investigation capability 
within the agency.
    Mr. Kucinich. Mr. Chairman, I just want this committee to 
be on notice that we have to find out whether BP has certified 
as-built drawings on file. This is a serious matter, especially 
in light of Deepwater Horizon. Thank you.
    Chairman Towns. The gentleman's time has expired.
    I now yield 5 minutes to the gentleman from Florida, 
Congressman Mica.
    Mr. Mica. Thank you.
    Again, we appreciate your being here, Mr. Secretary. I 
raised some questions in my couple of minutes of opening 
statement, and I think everyone has to be baffled by the 
administration's development of policy. You were one of the 
first people nominated, I think, back by the President. People 
were pleased we had somebody from the Congress and your 
experience in the position.
    So you came in in 2009. You had an opportunity to develop 
budget and policy, I would imagine. I was kind of shocked, 
again, when the staff gave me the budget and it showed cuts 
like $2 million in the mineral management environmental permit 
activity that was proposed by your agency. Did you participate 
in making decisions on that?
    Again, the primary agency for response in these kinds of 
disasters would be the Coast Guard. The administration proposed 
1,100 positions cut, cutting assets; ships, planes, 
helicopters, all the things that you would use in a response. 
Were you part of the decision to make those cuts either in your 
agency, maybe not the Coast Guard?
    Secretary Salazar. Congressman Mica, with respect to the 
budget that had been submitted to MMS, you will, if you look at 
the 10-year history of the budget, there had been erosion 
within the Department of Interior MMS, as well as with all----
    Mr. Mica. But you were proposing----
    Secretary Salazar. Well, let me just finish. With respect 
to the rest of the other agencies within Interior, including 
MMS, a very significant erosion until we came onboard. Now, you 
will note that the inspectors that are set forth in the budget 
for MMS are a significant increase from what had been there in 
the past. Now, the question is appropriate, I think, for this 
committee and for the Congress is is that number sufficient; 
and in our view it is not. We need to have additional capacity.
    Mr. Mica. Well, again, all I can go by is the budget. I 
asked if you were there when the decision was made to cut the 
environmental review activities, which also reviewed permits.
    Then the next thing is this is February it came out. In 
March did you participate in the decision to expand drilling in 
the Gulf and other areas?
    Secretary Salazar. The----
    Mr. Mica. Were you consulted? Is there any documentation--
--
    Secretary Salazar. Not that I was consulted; it was my 
decision and it was my plan, and it is a plan that is a very 
well thought out plan relative to moving forward in a 
thoughtful way that changes the direction that we are going on 
in the OCS that does different things with respect to what was 
being planned on the Atlantic and does different things than 
was being planned in Alaska, and brings in the kinds of 
environmental reviews that are necessary.
    Mr. Mica. Well, again, let's go to that. You were there 
when they issued this one-page permit, and this is the person 
to drill for BP, one page. This is backed up by a 500-page 
cleanup spill plan. I am sure you didn't review this.
    But you told me that people who were responsible and all 
were fired and people changed.
    Have we got that organization chart?
    The guy that was responsible for signing this, we have two 
people here, Saucier and then Tolbert signed it for Saucier. He 
is still there. That circle there, the yellow thing. So he 
wasn't fired. He gave carte blanche. This is the approval for 
BP to drill and the conditions by which they drill, and it 
refers to a 500-page document.
    That 500-page document my staff tells me it says it has 
spill provisions for dealing with cleanup for seals, walruses, 
and polar bears, none of which I have seen in the Gulf. It 
looks like all this was sort of carte blanche approval. Is that 
what it appears to be? And is this guy going to get fired? This 
guy is still making the decisions. This is Saucier, and here is 
Saucier here making the decision on implementing the 
moratorium.
    Secretary Salazar. Congressman Mica, let me respond with 
two points. First, while it is true that there were people who 
committed both criminal and ethical conduct that is wrong----
    Mr. Mica. And he signed or was responsible for issuing the 
permit----
    Secretary Salazar. Well, hold on, let me finish. Let me 
finish, Congressman Mica. The reality of it is that there are 
many good people within the agency. There are some bad people. 
Those are being dealt with. With respect to the document that 
you referred to and with respect to people that were involved 
concerning the approvals of the Macondo well and what happened 
there, I have asked the Inspector General to take a look at 
that, and the Inspector General----
    Chairman Towns. The gentleman's time has expired.
    Secretary Salazar [continuing]. Will provide us their own 
independent review, which I would be happy to share, as 
appropriate, with members of this committee.
    Mr. Mica. I would appreciate a list on the status of those 
who were held responsible. Thank you. Maybe we could submit 
that to the committee.
    Chairman Towns. Without objection.
    Mr. Mica. Thank you.
    Chairman Towns. I now yield 5 minutes to the gentlelady 
from California, Ms. Speier.
    Ms. Speier. Thank you, Mr. Chairman.
    Thank you to the Secretary and to Mr. Bromwich. A series of 
questions. From the outside, there is an ethical crisis at MMS, 
whether you change the name or not. There has been a history of 
drugs, sex, rock and roll concerts, and I am concerned, based 
on the Post article today that says that there is a much higher 
degree of revolving door that exists in the oil industry than 
anywhere else in that three out of every four lobbyists had 
some relationship to the Government. We know there are 12 
former employees of MMS that are now lobbying for the oil 
industry.
    Mr. Bromwich and Mr. Secretary, I would like to know what 
you are going to do now to freeze out those 12 former employees 
from interacting with MMS.
    Mr. Bromwich. Well, we will certainly make sure that they 
observe the current ethical rule that exist that restrict their 
contacts to some extent. But one of the things I have to do is 
to gather information from people who have the information. If 
they happen to be former employees of the agency, I am not 
going to exclude them for that reason, but I am certainly not 
going to give their information any more weight than anyone 
else's.
    I agree, I read the same article you did and I am troubled 
by it. I think what I can tell you and tell the committee, that 
you will never see me in that position. I will say right now 
that I will self-impose a lifetime ban on contacts with the 
agency, and I hope that sets an example for other people in the 
agency and other people throughout government. I agree it is 
unseemly----
    Ms. Speier. Well, I guess from our perspective can you take 
action, independent of Congress passing a bill, to restrict 
former employees from having access to the agency?
    Mr. Bromwich. Well, let me give you an example. I have 
actually met with two of the former directors who are now part 
of trade associations within the last couple weeks.
    Ms. Speier. But that was at your request.
    Mr. Bromwich. No, it was at their request. But I am in the 
business right now of trying to gather information from a 
variety of sources, including from trade associations, because 
they have relevant information to provide bearing on some of 
the issues that the Secretary and I are working on. I am going 
to give them a hearing, but I am also going to give all other 
groups, including environmental groups, including----
    Ms. Speier. OK, I understand that. I have a limited amount 
of time, so----
    Mr. Bromwich. OK.
    Ms. Speier. My question was can you act independent of 
Congress in creating some restrictions around access to the 
agency after employees have left.
    Mr. Bromwich. Yes, we can, but----
    Ms. Speier. All right, thank you.
    Mr. Bromwich [continuing]. We need to do it in a thoughtful 
way.
    Ms. Speier. All right. So you will report back, once you 
have decided on what you are going to do, to the committee?
    Mr. Bromwich. Sure.
    Ms. Speier. All right. The GAO report to this committee 
indicated that the revenue share the Government collects for 
oil and gas produced in the Gulf ranks 93rd out of 104 revenue 
collection regimes around the world. I think most of us find 
that stunning and shocking.
    What are you going to do to change that so that the 
royalties being received from the Gulf are reflective of the 
world as a whole, at least the international average of 
royalties received around the world?
    Secretary Salazar. Congresswoman Speier, let me just say 
that the royalty issue in getting a fair return to the American 
taxpayer is foremost in our minds. We have been working on it; 
we are working on it. We have proposals to change how royalties 
are in fact collected to make sure that the American taxpayer 
is getting a fair return for royalties not only in the 
offshore, but also on the onshore, where you have a 
circumstance that probably is even worse, where you still have 
the same royalty rate that existed since the 1920 Mineral 
Leasing Act was passed at 12.5 percent. So we are making the 
kinds of changes that will bring in the right level of 
royalties and, at the same time, make sure that there is 
accountability with respect to the auditing functions related 
to that.
    Ms. Speier. And when will those be put into place and do 
you need congressional action to do that?
    Secretary Salazar. We are already working on it; we are 
moving forward with it. It is being put into place as we speak. 
The elimination of the Royal-in-Kind program was part of that 
effort and there are continuing efforts to address the issue.
    Ms. Speier. That is good news to hear. One last question. 
My understanding, along with Congressman Mica's reference, is 
that this particular 600-page document was reviewed by two 
people for a total of 10 hours. So by anyone's measurement it 
was inadequate. I don't care if you are a speed reader; there 
is no way that, in 10 hours, you can give the kind of attention 
to that document. What are you doing, moving forward, to make 
sure the employees doing that kind of review are both qualified 
and have adequate amount of time to do the review?
    Secretary Salazar. With the reorganization that we have put 
on the table and the resources that we have asked from Congress 
to be able to do the right kind of work ensuring safety and 
ensuring environmental protection should address those issues.
    Chairman Towns. The gentlelady's time has expired.
    I now yield to the gentleman, Mr. Turner.
    Mr. Turner. Thank you.
    Mr. Secretary, I have a few items on a time line that lead 
up to the explosion in the oil field and the oil leak, and I 
would like to go over those items and get some of your 
responses to them. We focus a lot on what happens after the 
explosion. I would like to focus on the period leading up to 
it.
    And, Mr. Chairman, I would like this time line included in 
the record.
    The time line begins with January 29, 2009, and the 
Secretary being declared the Secretary; he is appointed on that 
date and declares himself the new sheriff in town. That is 
January 2009.
    In February 2009, in a site-specific exploration plan filed 
by BP, it states that it was ``not required'' to file a 
scenario for a potential blowout of the Deepwater well.
    In March 2009, as we have a new sheriff in town, a 
whistleblower brought forth an issue of a safety breach by BP 
in the Gulf of Mexico to the attention of MMS. ``The 
whistleblower who was hired to oversee the company's data bases 
that housed documents related to its Atlantis project 
discovered that the drilling platform had been operating 
without a majority of the engineer-approved documents it needed 
to run safely. No action was taken by the agency.''
    But the most important thing was 2 months after the 
whistleblower came forward, May 2009, MMS fails to perform a 
standard monthly inspection of Deepwater Horizon. But what is 
happening in the Secretary's office May 2009? Our Interior 
Secretary is speaking at the Wind Energy Conference in Chicago.
    June 17, 2009, MMS proposes new rules to require oil and 
gas operators to develop and implement ``safety environmental 
management systems for offshore drilling.'' The rule is still 
not finalized 1 month and 1 year later.
    In June, that same month that these rules were provided but 
not finalized, Secretary Salazar hires Sylvia Baca away from BP 
America to become his Deputy Assistant Secretary of Lands and 
Materials Management, according to this time line.
    Summer 2009, the MMS awards Transocean's U.S. Gulf of 
Mexico operation a safety award for excellence and our 
Secretary directs MMS to begin focusing on promoting wind 
energy. Elizabeth Birnbaum assumes duties as the Director of 
MMS. The U.S. Times reported that, ``In particular, she was 
tasked with handling the politically charged issue of citing 
the 25 mile cape wind farm off of Cape Cod.
    But what happens the next month, August 2009? MMS fails to 
perform a standard monthly inspection of Deepwater Horizon.
    August of that same month, at the White House's request, 
Secretary Salazar takes a break from your wind energy efforts 
to begin the big effort of selling health care reform.
    August 2009 you travel throughout the West to tout Obama's 
stimulus plan. I understand from this time line that on August 
21st you were in Grand Canyon, South Rim highlighting $10.8 
million of stimulus dollars. On August 20th you were in Utah, 
$3.6 million of stimulus dollars, and August 20th again you 
were in Oregon on stimulus dollars.
    That very next month the National Oceanic Atmospheric 
Administration sends MMS a letter about the offshore drilling 
proposal, saying MMS understated environmental impacts of the 
new drilling proposal.
    September 8th of that month Salazar says, during an 
interview at Reuters, right now we are focused on health care 
reform.
    In fact, CBS reports, in November 2009, that anticipating a 
struggle, the White House deputized Interior Secretary Ken 
Salazar and former Senate Majority Leader Tom Daschle to join 
Vice President Joe Biden in trying to clear the way for health 
care bills overhaul perform of the next several weeks.
    But MMS is busy. MMS has a renewable energy task force 
meeting in Rhode Island, Massachusetts, and New Jersey, and 
with all this activity happening in November, what happens in 
the Gulf in December? December 2009, MMS fails to perform the 
standard monthly inspection of Deepwater Horizon.
    They again failed to perform the inspection in January, and 
then through a series of notifications that BP provides to the 
agency, the specifications from Deepwater are continued to be 
adjusted; MMS responding in 7 minutes to one request for a 
modification, 4\1/2\ minutes to another after having routinely 
not shown up for standard inspections.
    And in April the Deepwater Horizon rig explodes and then 
sinks, and I believe the Secretary is there by April 30th, 
after attending, on April 27th, participating in a ceremony on 
wind turbines, April 28th announcing the approval of the Cape 
Wind Project, and then your attending in the Gulf to take a 
look at what has occurred.
    Chairman Towns. The gentleman's time----
    Mr. Turner. It sounds like a significant amount of 
inactivity----
    Chairman Towns. The gentleman's time has expired.
    Mr. Turner [continuing]. And I would appreciate your 
response. I believe my staff has a copy of the time line which 
they can also provide to you.
    Secretary Salazar. Mr. Turner, if I may, Mr. Chairman, 
respond, even though the gentleman's time has expired.
    The fact is the U.S. Department of the Interior has a major 
mission to protect and preserve the natural resources of 
America, both onshore as well as offshore, as well as being the 
custodian of America's history; and in that mission we work on 
the set of issues relating to Native Americans and all of the 
other assignments that we have within the Department of 
Interior.
    Specifically, with respect to many of the things that you 
cite in there, I have spent probably more time on the 
comprehensive energy program for the Nation that the President 
and I have been championing than on almost any other issue. But 
I can tell you that within that comprehensive energy plan, 
which we are confident we will see unfold for this Nation, that 
you will have a broad energy portfolio that will include oil 
and gas and, at the same time, include the new energy frontier 
of solar and wind and geothermal, which we have worked on very 
hard.
    Now, I will say this to you, Mr. Turner, that, without 
equivocation, we have spent a huge amount of time with respect 
to all of the issues relating to MMS, and they have included 
changing the ethics culture, moving forward with a new 
direction on the Outer Continental Shelf from what was left 
over from the prior administration, and moving forward standing 
up a renewable energy program.
    So we work hard, we cover a lot of ground, and we have a 
lot of ground to cover in the future.
    Chairman Towns. Thank you very much. The gentleman's time 
has expired.
    I now yield 5 minutes to the gentlewoman from California, 
Ms. Chu.
    Ms. Chu. Thank you, Mr. Chair.
    We know that the blowout preventers failed with BP and with 
enormously tragic consequences. Now, it is my understanding 
that an inspector does not actually have to witness in person 
the blowout preventer test, but can simply review paperwork 
from the oil company operators, and they can basically take 
their word for it. We know that these tests can be successfully 
faked, as illustrated by several cases. This practice is just 
unimaginable, and it cuts corners and compromises the oversight 
mechanism and validity of the test.
    So how will the reorganization of MMS work to improve these 
inspection practices and what specific improvements do you 
anticipate making to make this BOP test actually effective? And 
what are your thoughts about having these types of tests 
certified as safe by independent third-party inspectors that 
are selected by Federal regulators, and not the oil companies?
    Secretary Salazar. Congresswoman Chu, it is a very good 
question and it is something which we have been working on. It 
really relates to two parts of the reforms within the OCS. The 
first of those is having the right standards in place, and many 
of those standards were set forth in the 30-day report which 
President Obama directed that I deliver to him. Many of those 
standards are now being implemented with respect to the notice 
to lessees that Director Bromwich spoke about a little bit 
earlier.
    And then, finally, with respect to the enforcement of those 
standards, there needs to be a significantly beefed up effort 
with respect to the agency's inspection capabilities, because 
right now it is a fool's errand to think that 60 inspectors can 
essentially go out and inspect all of the different OCS 
facilities, including production facilities, that are out 
there.
    Ms. Chu. So you will be coming forth with new regulations 
pertaining to this particular practice?
    Secretary Salazar. Yes.
    Ms. Chu. Well, then it leads to another question, which is 
about new regulations. One of the problems with the current 
regulatory system is that it takes a long time for any 
improvements. In fact, it took 9 years for regulations related 
to pipeline safety to work its way through the process and take 
effect. So how will the reorganization of MMS work to resolve 
this issue of this delayed implementation of new and necessary 
regulations?
    Secretary Salazar. Well, the reorganization itself, there 
will be two parts to essentially dealing with the Outer 
Continental Shelf beyond the revenue side, and one of them will 
be to manage the resource; the other unit will be to provide 
the safety and enforcement. And we will make sure that we are 
moving forward to address all the issues and all the lessons to 
be learned from this tragedy.
    Ms. Chu. But my question is how long will it take and what 
will you do to make sure that it is accelerated?
    Secretary Salazar. Congresswoman Chu, I think some people 
might say that we should have waited for another 6 months, 8 
months until we found out exactly all of the results of all the 
investigations. Our view from day one has been that we would 
work on the issue as fast as we can, so the 30-day report that 
was delivered to the President is a report that has many rules 
and requirements and standards which are already being 
implemented, some of them through notice to lessees and some of 
them through rulemaking that will be conducted by Director 
Bromwich.
    Ms. Chu. And, finally, let me ask this. Under Interior 
Department regulations, oil companies use models developed by 
MMS to predict the likelihood of oil reaching the shore 
following a spill. In the Deepwater Horizon case these models 
incorrectly predicted that there was a zero percent likelihood 
of oil reaching most shores in Florida, Alabama, and Louisiana. 
It suggests, of course, that these models are outdated and that 
the regulations relating to the oil response plans need to be 
revisited.
    So my question is does MMS need to reexamine all of these 
oil spill response plans, particularly with regard to these 
kinds of predictions, which are clearly incorrect and way off? 
And how will the MMS reorganization help this process?
    Secretary Salazar. The answer is yes on drilling safety and 
containment measures and oil spill responsibilities, and I 
would like Director Bromwich to comment on it as well.
    Mr. Bromwich. You are quite right, Congresswoman, that the 
oil spill response plans are plainly inadequate, and that is 
one subject on which I am going to be gathering information on 
the public forums that we are going to be holding over the next 
month and a half, with an eye toward not only insisting in the 
short-term, before any new regulations are implemented, that 
those oil spill response plans be substantially revised if they 
are going to pass muster, but also, with an eye toward getting 
out new regulations in the future, we will make sure that is 
the standard from now on.
    Ms. Chu. And you are reviewing all the oil response plans?
    Mr. Bromwich. Yes.
    Chairman Towns. The gentlelady's time has expired.
    I now yield to the gentleman from Tennessee, and let me 
also wish him happy birthday.
    Mr. Duncan. Well, I have the honor of sharing a birthday 
yesterday with the chairman, and he sent me a note saying that 
he thinks we should make it a national holiday, and that was a 
very nice note.
    Mr. Secretary, thank you for coming here. I have sat 
through hearings in the Transportation Committee and the 
Resources Committee on the BP oil spill, and in both of those 
hearings witnesses have mentioned that over 40,000 wells have 
been drilled in the Gulf since 1960, and my staff got some 
information from your Department earlier today saying since 
1947 more than 50,000 wells have been drilled in the Gulf of 
Mexico.
    Would you not agree it is almost an astonishingly safe, 
clean history that we have there in the Gulf? I mean, there has 
never been anything even close to this BP spill. In fact, I am 
told there are more spills out of ships than there are from 
these rigs.
    Secretary Salazar. Congressman Duncan, I agree with you. In 
fact, I think it was that history of safety over all of those 
times, 50,000 wells, which essentially was the empirical 
foundation upon which the national framework has been built 
with respect to oil and gas production in the Outer Continental 
Shelf.
    Mr. Duncan. And I am told that there are now 3,600 
structures in the Gulf right now.
    Governor Engler wrote a column for the Washington Times a 
few weeks ago, and the headline says, Drilling Moratorium Is A 
Jobs Moratorium. And he said this, he said, the moratorium 
immediately shut down 33 deepwater rigs in the Gulf, including 
22 near Louisiana. This action could cost 3,000 to 6,000 
Louisiana jobs in the next 2 to 3 weeks, and potentially 20,000 
by the end of next year. For every one employee on an oil rig, 
there are nine employees onshore supporting that one employee.
    That is my main concern, because not only did I read this 
by Governor Engler, but repeatedly I have seen on the news 
reports these oil workers in the Gulf area almost in a panic 
situation about all the thousands of jobs that are being 
destroyed or potentially could be destroyed.
    Secretary Salazar. Congressman Duncan, let me just say that 
we too are concerned, and we are aware of the issues. Our view 
and my view in issuing the moratorium is that it was the right 
way to move forward, to put the pause button in place until we 
can answer three fundamental questions: drilling safety, 
blowout containment capability, as well as oil spill response 
capability.
    If we were to have another blowout in the Gulf of Mexico 
today or next week, we could not have the oil spill response 
capability to deal with those blowouts. The effort which Exxon 
and Shell and Chevron and Conoco Phillips came up with 
yesterday is a beginning point of that conversation relative to 
how we address one of those three fundamental issues, and 
Director Bromwich's set of meetings and hearings around the 
country will help us answer those three fundamental questions 
so that we can determine how to move forward with respect to 
the pause button in place.
    Mr. Duncan. On another point, Charles Krauthammer, the 
columnist and commentator who I think almost everybody agrees, 
even if they don't agree with him, they think he is one of the 
smartest men in this city, he wrote recently, he said, 
``environmental chic has driven us out there.'' He asks the 
question why we were drilling in 5,000 feet of water in the 
first place, and he says, ``Environmental chic has driven us 
out there. Environmentalists have succeeded in rendering the 
Pacific and nearly all the Atlantic coast off limits to oil 
production and, of course, in the safest of all places, on 
land, we have had a 30-year ban in the Arctic wildlife 
refuge.''
    I have seen articles that say something like 83 or 84 
percent of the Outer Continental Shelf is off limits to oil 
production, and that also is a concern of mine.
    Then, finally, before my time runs out, I see the yellow 
light on, I would say to Mr. Bromwich I am concerned we have 
changed the name and there seems to be a goal of emphasizing 
enforcement, and I am just wondering are we going to have a 
gotcha type agency now? Let's forget about BP; let's consider 
them a bad actor. But most of these companies are doing a good 
job and complying with all the laws.
    Mr. Bromwich. I agree with you. We are not going to have a 
gotcha culture, but we are going to have clear rules and we are 
going to have aggressive inspections, and violations of those 
clear rules will be dealt with severely. I think that is the 
right kind of regulatory regime to have.
    Mr. Duncan. And if you find a violation, are you going to 
give the company a chance to correct it, or are you going to 
immediately come down on them and just shut them down?
    Mr. Bromwich. That is a very fact-specific determination. 
We will have to take it on a case-by-case basis.
    Mr. Duncan. All right.
    Chairman Towns. The gentleman's time has expired.
    I now recognize the gentleman from Maryland, Congressman 
Cummings.
    Mr. Cummings. Thank you very much, Mr. Chairman.
    Secretary Salazar, I head up the Coast Guard Subcommittee 
on the Transportation Committee and one of the things that we 
were concerned about is what role do you all see the Coast 
Guard playing in the future. You know, the legislation passed 
by the Committee on Transportation and Infrastructure will 
require a much more significant role for the Coast Guard in 
their approval of oil spill response plans, which is crucial 
given that the Coast Guard is responsible for managing the 
response to the spills.
    So what steps, if any, are MMS and the Coast Guard taking 
now to strengthen the role of the Coast Guard? And, by the way, 
that has been one of their complaints, that they are asked to 
be responsible for overseeing the cleanup, but they don't have 
enough say in creating the plan. Did you know that? They have 
actually testified to that. Either one of you.
    Secretary Salazar. Congressman Cummings, if I may, the role 
that we have seen playing out with respect to the response to 
the Deepwater Horizon blowout and the BP oil spill has been one 
where we have been working hand-in-hand with Admiral Allen as 
the national incident commander, and it has been continuous. 
You know, we will look back at the Deepwater Horizon tragedy 
and look at the lessons learned, including the capacities that 
are out there with respect to the Coast Guard and others, but 
the fact of the matter is that the relationship in terms of the 
structure that has been set up to respond to the oil spill 
response has worked well between Interior and the Coast Guard 
and other agencies that are also involved.
    Mr. Cummings. Well, I have to tell you, again, we have had 
testimony within, I would say, the last 3 weeks, and I will get 
you that information, and this is not Admiral Allen, where they 
have told us that they want they want more say in the 
development of the emergency response plan because they just 
feel like, by the time you are going to call on them to oversee 
the cleanup, they should be more involved in it at the 
beginning. So I will get that to you. You might want to take a 
look at that.
    Secretary Salazar. Let me just say----
    Mr. Cummings. I am surprised you didn't know that.
    Secretary Salazar. No, I do know it. Let me just say this, 
Congressman Cummings. The fact is that the oil spill response 
issue is one of the three most central issues that we are 
looking at, and that issue will necessarily involve, should 
involve and will involve, I will make sure that it happens, a 
close collaboration with the Coast Guard, because we are not 
going to move forward until we have an assuredness with respect 
to the adequacy of oil spill response plans.
    Mr. Cummings. Now, Mr. Secretary, although the Deepwater 
Horizon was registered in the Republic of the Marshall Islands, 
Captain Hennin, the Deputy Commissioner of Maritime Affairs 
with the Republic of the Marshall Islands, is reported to have 
testified before the joint MMS-Coast Guard panel examining this 
accident that the RMI, as a flag state, did not inspect the 
drilling equipment and systems on the Deepwater. He reportedly 
indicated that such inspections are left up to the MMS. And we 
understand that MMS often relies on offshore facility operators 
to perform key safety tests and that MMS inspectors only review 
the paperwork associated with the test.
    How can we make sure that we have adequate approval of 
these reports, because there is a question of inspection, that 
some of the inspections are not actually done by our people, 
but they are done by the Marshall Island folks and people that 
they contract. So how can we guarantee that those inspections 
which are so important are properly done?
    Secretary Salazar. Let me say first there were inspections 
that were conducted of the Deepwater Horizon, including 
inspections in April and testings, including of the oil 
preventer, that occurred in the days leading up to the 
explosion. Second, we will have a significantly more robust 
inspection regime and is part of what Director Bromwich will be 
working on, and he may want to comment on that.
    Mr. Bromwich. No, that is absolutely right. That is one of 
the things we are going to be focusing on most intently. 
Important inspections can't be paper inspections; they need to 
be done by human beings and they need to be done by human 
beings with experience, demonstrated competence, and an arm's 
length relationship, at least, to the entities that own the 
facilities.
    Mr. Cummings. I see my time is up. Thank you very much.
    Ms. Norton [presiding]. The Secretary has to leave at 12, 
and I am going to try to get in as many Members as we can 
before they have to leave to go to vote.
    Mr. Burton, 5 minutes.
    Mr. Burton. Mr. Secretary, you know, 50,000 wells have been 
drilled in the Gulf without a problem, and yet the President 
put a moratorium on the drilling. As a result, you have had 
some of the rigs go to Egypt, to the Congo, Brazzaville. In 
Canada they are talking about new wells being drilled up to 
6,500 feet in the Arctic waters.
    So we are going to lose a lot of those rigs and they 
probably won't come back, at least not for a long, long time. 
It makes no sense to me to cutoff the drilling in the Gulf when 
you have not had any real problems except for this one 
catastrophe, and I just don't understand why the administration 
is taking this carte blanche approach. Can you explain that?
    Secretary Salazar. Congressman Burton, having been involved 
in this matter in response to the Deepwater Horizon blowout 
every single day since the blowout, I can tell you that there 
are three fundamental questions that have to be answered before 
we take our hand off the pause button, and those are the issues 
of drilling safety, oil well blowout containment, as well as 
oil spill response capacities. And that is what we are working 
with Director Bromwich, as well as with a whole host of other 
efforts.
    Mr. Burton. Well, you have already stated that there is 
more of a chance of a leak from a tanker than there is from one 
of these rigs. It just doesn't make any sense, with a 50,000 
drilling of wells in the Gulf and you have one spill, that you 
are going to cutoff everything. And the rigs are already moving 
to Brazzaville and the Congo.
    In Brazil, we just sent $1 billion down to Brazil to help 
them drill in deepwater areas. So what we are doing, in effect, 
is shoving oil production away from the United States and we 
are costing us jobs when there is really no reason for it 
except for this one exception. And what you are talking about, 
in my opinion, really doesn't make a great deal of sense.
    Now I want to ask a couple other questions real quick. I 
have a video I would like to show to you real quick; it is 
about 15 seconds long.
    So can you cue up that video?
    [Video played.]
    Mr. Burton. This is Deano Bonano, who is the Homeland 
Security Director down there and the fire chief, Mark Scardino. 
They said that you have never been down to that parish, and it 
is one of the most toxic areas that has been hit since this 
spill took place. Why haven't you been down there?
    Secretary Salazar. Congressman Burton, first of all, I 
believe that the last count that I saw had 11 times that I have 
been in one of the Gulf Coast States or in Houston.
    Mr. Burton. Have you been to this parish? This is one of 
the hardest hit.
    Secretary Salazar. I have been through Louisiana, 
Alabama,----
    Mr. Burton. Have you been to this parish?
    Secretary Salazar [continuing]. Mississippi, Florida. I 
don't know the exact parish-by-parish, but let me just say that 
since April 20th, and even before that, I spent a lot of time 
in the Gulf Coast, and I continue to spend a lot of time down 
there, and will, and we will work relentlessly on this problem 
until we get it fixed and we chart the ways forward. And I will 
just say, Congressman Burton----
    Mr. Burton. It seems like this would have been one of the 
top priorities. I don't understand why you weren't there. And 
they were complaining very vigorously that you had ignored 
their problems there.
    Secretary Salazar. The President, the Vice President, and 
members of the Cabinet have been down there countless times. My 
Assistant Secretary----
    Mr. Burton. Well, you are the guy.
    Secretary Salazar. My Assistant Secretary for Fish and 
Wildlife has taken 17 trips down into that area to deal with 
these issues.
    Mr. Burton. Well, Mr. Secretary, you are the guy. You 
should have been there, in my opinion.
    Now, the last thing I want to ask is I know the Jones Act 
was referred to. There were a number of countries that wanted 
to bring skimmers in as soon as this thing took place. We could 
have eliminated an awful lot of these ecological problems if 
those skimmers had been brought in. Why in the world didn't we 
let all these other countries bring those skimmers in as 
quickly as possible?
    Secretary Salazar. Mr. Burton, I disagree with you. The 
fact is the Jones Act has not kept a single vessel from coming 
into the country, No. 1.
    Mr. Burton. Well, then why weren't the skimmers brought in?
    Secretary Salazar. The shortage of skimming vessels has not 
been an issue and the Jones Act has not been an issue.
    Mr. Burton. Why weren't those skimmers brought in from 
other countries? Why weren't they allowed in?
    Secretary Salazar. They were brought in as they were 
required, and Thad Allen and the national incident commander 
have been in charge.
    Mr. Burton. After, what, 70 days?
    Ms. Norton. The gentleman's time has expired.
    Mr. Driehaus, 5 minutes.
    Mr. Driehaus. Thank you, Madam Chair.
    My intent wasn't to rebut my Republican colleagues in this 
hearing, but given what was just said about the exception of 
this disaster, it is like suggesting that 9/11 was an exception 
to air traffic control regulations and that we shouldn't react 
to that. The fact is this has been an environmental disaster, 
and the fact is that we should look at the regulation 
appropriately of oil wells in the Gulf, and I think it is very 
appropriate that the administration take the steps that it has 
to make sure that all of the wells are safe.
    I further heard my Republican colleagues suggest that it is 
limitations on onshore drilling in other parts of the country 
that is driving BP and others to go to the Gulf. I assume that 
they are making money in the Gulf; that the reason we have all 
these wells in the Gulf is because there is oil there and they 
are making money. Is that correct?
    Secretary Salazar. That is correct.
    Mr. Driehaus. So the reason that BP and the other oil 
companies are in fact drilling is because they are making a 
profit in the Gulf.
    Secretary Salazar. That is correct.
    Mr. Driehaus. I would like to move on. And I think the 
issue here is one that is important, and it dates back to the 
2005 Energy Act and the issue of categorical exclusions. I am 
concerned, as are others, with regard to the number of 
categorical exclusions that we have seen for wells in the Gulf, 
and I would appreciate if you would help us better understand 
how categorical exclusions are determined and whether or not BP 
advocated aggressively for categorical exclusions for its 
drilling operations in the Gulf.
    Secretary Salazar. Congressman, let me just say, first of 
all, just back on the moratorium, it is a prudent position that 
we have taken, and I appreciate the support that you echo for 
that moratorium because of these fundamental issues that we do 
need to have addressed.
    Second, with respect to your question on categorical 
exclusions, they appear at a time, after significant 
environmental analysis has been done because the process is 
that, in developing a 5-year plan, you do an environmental 
impact statement. Before you have a lease sale, there is 
another environmental impact statement that is reviewed. So 
there are a series of reviews that happen.
    Now, the categorical exclusions, in part, in the Gulf of 
Mexico, which have been granted more than BP, those occur in 
large part because there is a 30-day window of approval 
required by statute when an exploration plan itself is filed as 
part of the leasing and development process. So we have asked 
the Congress to extend that 30-day window to a 90-day window, 
and I hope that it is something that you enact in the oil spill 
legislation that is before you.
    Mr. Driehaus. When you say that 30-day window is in 
statute, when was that 30-day window implemented and why was it 
implemented, why was it only 30 days, and who advocated for the 
30-day window?
    Secretary Salazar. I do not have the specifics on when that 
requirement was put into the law, but I can get that for you.
    Mr. Driehaus. What is your opinion as to how long it should 
be for the review? You said 90 days. Is 90 days appropriate?
    Secretary Salazar. Thirty days I believe is too short, and 
I do think that what we need to do, especially in places like 
the Gulf of Mexico, you have tremendous environmental 
information and reviews that have already been conducted, so we 
just need to make sure that the environmental reviews that are 
being conducted are worthwhile and that we are doing the right 
thing in terms of the aim of the environmental analysis, which 
is to understand what impacts there will be to the environment 
from the activity.
    Mr. Driehaus. Do you believe that there has been an overuse 
of categorical exclusions under the previous administration and 
the 30-day window is a primary cause of that?
    Secretary Salazar. I do believe that there was an overuse 
of the categorical exclusions and, indeed, with respect to what 
we have already done on the onshore under the Bureau of Land 
Management is we have changed that practice, and obviously we 
are now conducting a comprehensive review with the Council of 
Environmental Quality relative to the environmental reviews and 
changes that need to happen with respect to OCS.
    Mr. Driehaus. Thank you, Madam Chair. I yield back.
    Ms. Norton. Mr. Murphy.
    Mr. Murphy. Thank you very much, Madam Chair. I know we are 
about to go to votes and, Secretary Salazar, you have been 
great to spend so much time with us. I appreciate your measured 
response to Mr. Burton's question. I think we could be here for 
days on end if we were going to play videos of single 
individuals who are upset that one particular Federal official 
didn't visit them. I think we are very lucky to have you in 
this position. So many of us have been impressed by your 
immediate and robust response to this tragedy.
    Mr. Bromwich, you have a reputation as a no-nonsense 
administrator in everything you have done, and I think you are 
the right guy for the job.
    I just have a couple quick questions, one relevant to 
funding sources moving forward. The reorganization, as you 
split into three different entities, is going to require more 
people in and of itself; three directors, maybe three offices 
of congressional relations. We know that we need more people to 
do the inspection work. As you look down the road at how you 
think the agency should be funded and you look at a potential 
diminishing reliance on royalty payments, how do you expect 
that, moving forward, the new functions of these agencies are 
going to be funded?
    Secretary Salazar. Congressman Murphy, thank you for your 
comments. We are in the midst of working with the appropriators 
in developing the budget amendments to make sure that the 
funding is there to be able to do the job. The funding sources 
themselves and where they will come from, that will be part of 
that discussion that we will engage with Congress on.
    Mr. Murphy. And with respect to royalty payments, do you 
have ideas today as to what components will continue to be 
funded by royalty payments or what components you no longer 
want to be funded with respect to royalty payments?
    Secretary Salazar. That is part of the review that we 
currently have underway in the implementation programs that we 
are developing.
    Mr. Murphy. Maybe I will direct this question to Mr. 
Bromwich, but I would be happy to have the Secretary weigh in 
as well. One of the things that has been a great frustration to 
us is the technology that we are using right now to deal with 
this spill, and the fact that we have had a fairly slow pace of 
innovation within the industry in developing new technologies 
to address spills. Maybe it is moving a lot faster right now as 
we speak, but over a long period of time it has been relatively 
slow given the threat.
    Can you talk a little bit about how you foresee, either 
within your agency or in putting pressure on the industry, how 
do we more quickly advance oil spill disaster mitigation 
technology, oil spill response technology going forward?
    Mr. Bromwich. Yes, it is a very good question. I think one 
of the things that this disaster has focused people's attention 
on generally is the lack of advances in containment 
technologies, as well as in oil spill response technologies. 
That has not only been recognized by Secretary Salazar and me 
and many others; it has been recognized by players in the 
industry, and I think that is one of the reasons why, 
yesterday, we saw the four largest majors come forward with the 
outlines of a plan to deal with oil spill containment in the 
Gulf of Mexico.
    I think that this disaster has focused people's energies; 
it will stimulate innovation. We will obviously be directly 
involved in that process. The proposal that was made yesterday 
is an interesting one, it is an intriguing one, but we are 
going to want to review and study it carefully. We will ask for 
more elaboration on it by the companies. It is one that not 
only we, but you and the American public is going to need to 
have confidence in.
    Ms. Norton. Mr. Issa for 5 minutes.
    Mr. Issa. Thank you, Madam Chair.
    Just one quick question. You know, Mr. Secretary, that your 
decision was, by definition, for 6 months of a moratorium, 
arbitrary. In light of what you said earlier today, would you 
say that resources that are freed up at the time of the kill of 
this well could just as easily be the end of the moratorium? As 
you said earlier, clearly there were resources that you didn't 
want to have not available if something, one in 50,000 wells, 
happened a second time, but wouldn't a target of the killing of 
this well be just as appropriate for considering limited well 
supervised rolling back into exploration of the existing 22 
rigs?
    Secretary Salazar. Congressman Issa, I appreciate your 
observation and I also appreciate the sense of urgency that you 
have that these issues be addressed, but let me say there is a 
tremendous amount of work that is unfolding. I will have a 
report back from the Oversight Safety Board, which I 
established, which includes great work from the Inspector 
General and her staff that are focused in on some of these 
safety issues. That is due, I believe, on August 15th.
    The National Academy of Engineering arm of the National 
Academy of Sciences will have an interim report for me by 
October 31st; and obviously the multiple investigations that 
are underway are informing us. So if there is a point in time 
between now and November 30th where the three fundamental 
questions that I have already addressed are addressed to our 
satisfaction, we will revisit that time line for the 
moratorium.
    Mr. Issa. I appreciate that.
    I yield the balance of the time to Mr. Fortenberry.
    Mr. Fortenberry. Thank you, Mr. Secretary, for joining us 
today, and Mr. Bromwich. This oil spill is an environmental 
catastrophe. BP was a reckless actor and clearly all of us must 
work together to ensure three things: that this leak is 
continued to be stopped, that the environment is cleaned up, 
and that we work with all the resources we have to ensure that 
this never happens again.
    In that regard, I think Mr. Issa has made a reasonable 
point and you have answered it reasonably, that your reasoning 
for the moratorium is that our resources are currently deployed 
and perhaps depleted, and in case there was a second spill or 
catastrophe like this, we would not have the sources to work 
against it. But given that there is the potential for this leak 
to be permanently stopped in the near term, your consideration 
of that factor in terms of the moratorium deadlines I think is 
reasonable.
    The second point, though, being given that the resources 
that are applied are under intense pressure to potentially move 
overseas, and that this would cause more imported oil to come 
into our waters, more tankers, which are inherently more 
environmentally dangerous than the drilling itself, is the 
moratorium time line potentially more risky?
    A related point is that all drilling is not the same. Now, 
BP was clearly engaged in the riskiest type of drilling. There 
is partial drilling, there is development drilling. Is there a 
consideration that those may be exempted as well, given that 
their risk profile is lower?
    Secretary Salazar. Congressman, the answer to that is yes, 
and that is part of what Director Bromwich will be gathering 
information on. There may be different activities and different 
zones of risk that might be allowed to go forward. We have 
already made one of those findings with respect to the shallow 
water drilling and there may be others as we move forward.
    Mr. Fortenberry. So a segmentation of risk, risk profiling 
based upon the actual historical analysis of risk based upon 
the type of drilling, rather than a blanket moratorium----
    Secretary Salazar. There may be, for example, Congressman, 
the differentiation between the exploration wells in the 
deepwater and wells that are being drilled into already 
developed reservoirs, where you know exactly what it is that 
you are drilling into, as opposed to the exploratory type of 
wells which the Macondo well was one. So those are the kinds of 
distinctions that we will be taking a look at in the months 
ahead.
    Mr. Fortenberry. Well, I think the last thing we want to do 
is increase pressures for more imported oil, which puts more 
tankers into our water, which, again, traditionally has a 
higher environmental risk of spillage than the drilling 
operations.
    With that said, I also would like to point out that I 
visited the area recently, one of the coastal communities. 
These people are exhausting themselves trying to save their 
land, save their way of life, and save the environment. I think 
you have heard----
    Ms. Norton. The gentleman's time has expired.
    Mr. Fortenberry. I have a good video for you, Mr. 
Secretary, but we will have to do it another time.
    Ms. Norton. Mrs. Maloney.
    Mrs. Maloney. Thank you, Madam Chair.
    And I thank Secretary Salazar and Mr. Bromwich for your 
testimony. The devastation of the BP oil spill has highlighted 
many problems in worker safety and containment and oversight, 
but it has especially highlighted the mismanagement of the MMS, 
the Minerals and Management Service agency, which, if managed 
appropriately, could literally bring in millions, if not 
billions, to our Treasury from oil extracted from land owned by 
the American people.
    Under the current structure, the Government Accountability 
Office has found that the MMS should do a great deal more to 
improve the accuracy of the data used to collect and verify the 
oil royalties. I have a bill in, H.R. 1462, which would require 
the National Academy of Engineering to study and come forward 
with improvements and recommendations of ways that we could 
more accurately collect the royalties on the production of oil. 
I would like, Mr. Secretary, if you would review it, and 
certainly this could be helpful in defining it in a way that we 
could be more successful in giving the American people, the 
taxpayers, their just reward or their just revenues from this 
oil.
    According also to the Government Accountability Office 
report that was given to this committee, the revenue share that 
the Government collects from oil and gas produced in the Gulf 
ranks 93rd, among the lowest, of the 104 revenue collection 
regimes around the world. Is that an accurate statement? Are we 
93rd in collection?
    Secretary Salazar. I cannot comment on that statistic, but 
I will say this, that we have been implementing many of the 
recommendations from the Government Accountability Office, as 
well as recommendations that came forth from the Kerry-Garns 
Commission, that addressed many of these issues, and at the end 
of the day what we are looking at is to achieve the objective 
which you outlined, which is to make sure that we are getting a 
fair return back to the American taxpayer, and we would be 
delighted to take a look at your bill.
    Mrs. Maloney. Did you testify earlier that this has not 
been updated since the 1920's, in your statement?
    Secretary Salazar. No, I did not. That was a referral to 
the royalty rate that is established under the 1920 Mineral 
Leasing Act with respect to onshore oil and gas leasing, and 
that is something which we have been reviewing and do believe 
it should be changed.
    Mrs. Maloney. So that has not been updated since the 
1920's. We certainly should look at that and bring it into the 
21st century.
    Also, the GAO report reported that MMS does not audit oil 
and gas company royalty numbers. Is that correct? At this 
point. That was the GAO report.
    Secretary Salazar. There are auditing functions that do 
occur and, in fact, that is why we go back and do collections 
from companies where they have underpaid, and that does happen 
on an ongoing basis. But, as I said, we are in the process of 
implementing numerous recommendations that have come from GAO, 
the several commissions, as well as recommendations from our 
Inspector General.
    Mrs. Maloney. But is it fair to say that we could be under-
collecting by millions, possibly billions in this royalty 
program?
    Secretary Salazar. I think it is fair to say that there is 
under-collection that is taking place, and it really revolves 
around two key issues. One of them is the measurements relative 
to the oil and gas that is being produced against which the 
royalties are being levied; and, second, the royalty level 
itself, and whether or not that is the appropriate royalty 
level.
    Mrs. Maloney. And that is what my bill would look at, to 
look at more accurate measurements and compare with other 
countries.
    They are calling me to a vote, but this is an important 
area and we need to move into the 21st century. Why in the 
world are we rated so low, 93rd in the world, in the royalty 
payments coming from the Gulf? And did you testify earlier that 
you had written BP for royalty payments of $5 billion? Is that 
what you said?
    Secretary Salazar. No. There was an underpayment by BP with 
respect to onshore activities in the West. The royalty program 
now in effect in the----
    Mrs. Maloney. How much was their underpayment?
    Ms. Norton. The gentlewoman's time has expired.
    Mrs. Maloney. Can he answer that question? May I ask for--
--
    Secretary Salazar. As I recall, and it has been several 
weeks ago, I think for that particular issue it was about $5 
million.
    Mrs. Maloney. $5 million. Thank you.
    Ms. Norton. Mr. Salazar, I announced that you had to leave 
at noon, and I will abide by that and not even ask my own 
question. I know that you understand, as a former Member of 
Congress, when bells ring, but I know I speak for the chairman 
when I thank you and Mr. Bromwich for very important testimony 
here today.
    The hearing is in recess until after the vote.
    [Recess.]
    Chairman Towns [presiding]. I would like to reconvene and 
welcome our distinguished second panel. As with the first 
panel, of course, it is committee policy to swear in all of our 
witnesses, so before you sit, Ms. Randolph, let me have you 
stand and raise your right hands.
    [Witnesses sworn.]
    Chairman Towns. You may be seated.
    Let the record reflect that all the witnesses answered in 
the affirmative.
    Mr. Frank Rusco is the Director of the Government 
Accountability Office of the Natural Resources and Environment 
Team. Mr. Rusco has been at GAO for 11 years and his work there 
focuses on energy issues, including oil and gas royalty 
collection and policy. We want to welcome you to the committee.
    Ms. Mary Kendall has been at the Department of Interior 
Office of the Inspector General since 1999, when she first 
served as Deputy Inspector General. Ms. Kendall became Acting 
Director in 2009. Before joining the Inspector General's 
Office, Ms. Kendall served as an attorney at the Environmental 
Protection Agency for over a decade. We welcome you to the 
committee.
    Ms. Danielle Brian has been the executive director of the 
Project On Government Oversight since 1993. Ms. Brian has led 
numerous investigations that have exposed wasteful government 
spending and helped bring policy reform to government programs. 
We also welcome you to the committee.
    Ms. Randolph is the parish president for Lafourche. As well 
as serving as parish president, Ms. Randolph is the owner of a 
public relations and advertising company and was previously an 
editor at the Lafourche Gazette. We welcome you.
    At this time, I ask that each witness deliver their 5 
minute testimony, which will allow us an opportunity to raise 
questions with you.
    Let me just sort of go through the procedure. You start 
out, the light is on green; then it goes to yellow, which means 
you have a minute to sum up; and then, of course, it is on red. 
Then, at that time, the Members will raise questions with you.
    So I would like to begin with you, Mr. Rusco, for your 5 
minutes, and just come right down the line. Again, we welcome 
you to the committee, Mr. Rusco. You may begin.

STATEMENTS OF FRANK RUSCO, DIRECTOR, NATURAL RESOURCES AND THE 
 ENVIRONMENT, GAO; MARY L. KENDALL, ACTING INSPECTOR GENERAL, 
 OFFICE OF INSPECTOR GENERAL, U.S. DEPARTMENT OF THE INTERIOR; 
   DANIELLE BRIAN, EXECUTIVE DIRECTOR, PROJECT ON GOVERNMENT 
 OVERSIGHT; AND CHARLOTTE RANDOLPH, PRESIDENT, LAFOURCHE PARISH

                    STATEMENT OF FRANK RUSCO

    Mr. Rusco. Thank you, Chairman Towns, members of the 
committee. Thank you for the opportunity to speak today about 
Interior's reorganization of the Minerals Management Service.
    This reorganization takes place in the context of the 
disastrous Deepwater oil spill, and it is hoped that some of 
the proposed changes to Interior's management of oil and gas 
will reduce the risks of future spills. It is also important, 
however, to recognize that Interior faces multiple challenges 
in effectively and efficiently managing its Federal oil and gas 
program.
    Over the past 5 years, GAO and others have evaluated many 
aspects of Interior's management of oil and gas production on 
Federal lands and waters and have found many deficiencies. As a 
result, we have recommended numerous changes to the program.
    In fairness, Interior has responded to many of these 
recommendations with actions that we hope will result in 
improved efficiency and effectiveness. Many specific challenges 
remain, however, and we hope that Interior will keep its focus 
on addressing the deficiencies we have found, even as it 
undergoes organizational change.
    The findings and recommendations from GAO's recent 
evaluations are detailed in my written statement for the 
record. In the remainder of my oral comments, I want to discuss 
three key examples that illustrate a fundamental challenge for 
Interior. While each of the examples come from separate 
evaluations and will require separate actions to resolve, I 
hope that my discussion will make it clear that all three share 
an important common thread. Specifically, each of these 
problems illustrates the importance to Interior of keeping up 
with and adapting to change.
    First, until recently, Interior had gone over 25 years 
without fundamentally reevaluating its approach to leasing oil 
and gas properties. When we evaluated Interior's lease 
management practices, we found that Interior did less than 
other resource owners to encourage diligent development. 
Specifically, other resource owners did more than Interior to 
require or incentivize rapid development of promising oil and 
gas leases, while offering more time for development of less 
promising or more speculative leases.
    Second, until recently, Interior had gone for over 20 years 
without fundamentally reevaluating its approach to collecting 
revenue for oil and gas production. When we evaluated 
Interior's approach in the context of what other resource 
owners do, we found that the Federal Government collected among 
the lowest levels of revenue from over 100 systems evaluated.
    Further, we found that because Interior's revenue 
collection system was inflexible to changes in oil and gas 
prices, that Interior was at an increased risk of succumbing to 
ad hoc changes to royalties in response to price changes. For 
example, in the mid-1990's, low oil and gas prices and pressure 
from oil companies led to royalty relief for deepwater leases. 
With the subsequent increase in oil and gas prices, this 
royalty relief will cost the Federal Government billions of 
dollars of lost revenue over the lifetime of the affected 
leases.
    Finally, in recent evaluations, we found that Interior's 
oil and gas program utilizes data systems that are mutually 
incompatible, lack key functionality, and lag far behind 
similar systems used by industry. This poses risk to the 
effective and efficient management of the oil and gas program, 
and the collection of revenues. Part of the cause of these 
problems is that the IT systems were developed in a piecemeal 
fashion over a long period of time, with little to no 
centralized oversight or planning.
    We are encouraged that Interior has begun recently to 
reevaluate its leasing policies, its revenue collection, and 
that Interior recognizes it faces significant IT challenges. 
However, the potential for future management problems will 
remain until and unless Interior adopts an effective risk-based 
approach that periodically evaluates and adapts to changes in 
the oil and gas industry, the practices of other resource 
owners, the IT environment, as well as other significant facets 
of oil and gas management.
    There is risk inherent in all activities, and completely 
eliminating the risk associated with oil and gas development is 
not possible. However, if Interior builds risk management into 
its internal structure and applies it consistently to important 
management decisions over time, it can do much better at 
identifying risk and mitigating that risk to the extent 
possible. This is true regardless of how Interior is ultimately 
restructured, and Interior will not be fully successful until 
it addresses this fundamental challenge.
    This concludes my oral statement. I would be happy to 
answer any questions the committee may have.
    [The prepared statement of Mr. Rusco follows:]

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    Chairman Towns. Thank you very much for your statement.
    Ms. Kendall.

                  STATEMENT OF MARY L. KENDALL

    Ms. Kendall. Mr. Chairman, thank you for the opportunity to 
testify today about the proposed reorganization of the Minerals 
Management Service. As you well know, we have identified in MMS 
programmatic weaknesses and some egregious misconduct.
    In the report released in May of this year, we found more 
of the same. Although the misconduct is considerably less 
salacious than that in our report issued in 2008 about 
misconduct in the Royalty-in-Kind program, both highlight a 
challenge that the successor agencies to MMS face, that is, the 
potential conflicts of a regulatory body that is inherently 
tied to the industry it regulates.
    I am concerned about the environment in which these Federal 
employees operate and the ease with which they move between 
industry and Government. I am also concerned about the conduct 
of industry representatives. That they should think it 
permissible to fraternize and provide Federal Government 
employees with gifts after all the media coverage about this 
practice is somewhat hard to fathom, but may be informed by the 
environment as well.
    While not included in our May 2010 report, we discovered 
that the individuals involved in the fraternizing and gift 
exchange, both Government and industry, have often known one 
another since childhood. Their relationships were formed well 
before they joined industry or Government. MMS has relied upon 
the ability to hire employees with industry experience.
    With the announcement that MMS will be reorganized, the 
Department is poised to reconsider some of our recommendations 
for programmatic improvement. These must, however, be bolstered 
with an emphasis on ethics to include controls and strong 
oversight.
    Let me focus on the last element of strong oversight. In 
the fall of 2008, Inspector General Earl Devaney testified 
before the House Committee on Natural Resources, which is a 
correction to my written testimony, describing what was then a 
fledgling office within the Office of Inspector General, now 
called our Royalty Initiatives Group. Since that time, we have 
also established an investigative unit dedicated to energy 
issues and have expanded our oversight coverage beyond MMS to 
the energy and minerals programs at the Bureau of Land 
Management.
    Until recently, these two offices have been dedicated to 
royalties-related oversight and improvements. Since the events 
of April 20th, however, it has become increasingly clear that 
we must expand their scope to provide oversight of the 
operational, environmental, safety, inspection, and enforcement 
aspects of energy production on Federal lands and in the Outer 
Continental Shelf.
    We are also hopeful that the newly created Investigation 
and Review Unit will provide an additional element of oversight 
to the successor MMS agencies. The OIG is, to a significant 
degree, reactive in our investigative efforts. We hope that the 
IRU will provide continuous compliance review of the program 
offices to identify potential weaknesses before they become 
serious problems. We also rely on the bureaus to conduct 
internal investigations and reviews of allegations which simply 
do not rise to the level of OIG attention. The IRU will be a 
dedicated point of contact to which we can refer such matters.
    Presently, the Office of Inspector General is well into a 
multi-pronged effort to address multiple areas of concern 
relative to offshore drilling. We have dedicated most of our 
Central Region staff to this undertaking. We are also 
participating in the investigations being led by the Department 
of Justice into the events that led to the disaster on the 
Deepwater Horizon and the catastrophic events following. In 
addition to these efforts, we will continue building our 
oversight capacity beyond royalties, into the areas of safety 
and oversight of drilling operations both on- and offshore.
    The ongoing OIG efforts regarding OCS safety and 
environmental concerns are also addressing a two-pronged 
request from Secretary Salazar. First, to the Outer Continental 
Shelf Safety Oversight Board, a body created by secretarial 
order on April 30th of this year, the Secretary requested that 
the Board make recommendations to improve and strengthen the 
Department's overall management regulation and oversight of OCS 
operations.
    Second, the Secretary asked the OIG to address specific 
deficiencies in MMS policies or practices that need to be 
addressed to ensure that operations in the OCS are conducted 
safely, protective of human life, health, and the environment. 
Since these two requests were so similar in scope, the OIG 
effort will respond twofold to these requests by the Secretary. 
While we will provide the Safety Oversight Board our findings 
and recommendations by mid-August, we have already found 
several areas that call for further review and we will continue 
to pursue these to conclusion.
    Mr. Chairman, that concludes my prepared testimony today 
and I would be happy to answer any questions.
    [The prepared statement of Ms. Kendall follows:]

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    Chairman Towns. Thank you very much. Appreciate your 
testimony.
    Ms. Brian.

                  STATEMENT OF DANIELLE BRIAN

    Ms. Brian. Thank you, Chairman, for inviting me to testify. 
I also want to thank Ranking Member Issa and Representative 
Maloney for their unrelenting oversight of this troubled 
agency. We have been working with Representative Maloney for 
about 15 years on this issue.
    MMS was created in 1982 because royalty collections had 
been buried inside the USGS. Yet, the oversight functions again 
were buried in MMS, beneath their other mission of promoting 
oil and gas production. If there is any small silver lining to 
the Gulf disaster, it is that it has called attention to long-
needed reforms. And while the reorganization is a good step, we 
have real concerns about its implementation and whether those 
who are planning it are really consulting the appropriate 
stakeholders.
    We also have to fix the frequency with which officials have 
gone through the revolving doors, as has been discussed many 
times this morning, but I really think the egregious example of 
the two recent MMS directors going to become presidents of an 
offshore drillers association needs a little bit further 
discussion, because the MMS director was joining a trade 
association whose explicit mission was to secure ``a favorable 
regulatory environment'' for offshore oil and gas drillers; 
yet, they were the very regulators, when they had been working 
in the public sector. So you have to ask whose interests were 
they actually serving when they were the regulator.
    There have been several major improvements to ethics at 
Interior, and further steps to slow the revolving door are in 
legislation passed by both the Senate Energy and House Natural 
Resources Committees. We do hope the House's stronger provision 
is soon passed into law.
    The second problem is that MMS has always been dependent on 
industry for technical knowledge and allowed industry to 
operate largely on what the GAO described as an honor system. 
Representative Maloney's legislation will significantly help 
MMS gain back some of its upper hand.
    When it comes to inspectors, it is hard for Interior to 
attract and keep the talent it needs when inspectors are 
starting as a GS-7, and this is a very important point. There 
is so much emphasis on the revolving door, which is very 
important for us to be focusing on, but if we only look at that 
and not on how we are compensating those who are working as 
inspectors, I think it is a huge problem. POGO has learned of 
one inspector, for example, who, after 3 years on the job, has 
still had no training.
    So we need to be investing in these inspectors. The last 
inspection conducted on the Deepwater Horizon was performed by 
an inspector who was still in training. The Government must 
establish Federal training academies, like those for mine 
safety and the FBI, to ensure that inspectors, both on- and 
offshore, are receiving regular training not paid for or run by 
industry.
    So changing the culture requires more than reorganization 
and it requires more than new leadership; they will need to dig 
deep into the management of the agency. And no matter what 
reforms are put in place, they can only be effective with 
increased transparency about MMS's operations. Despite the 
administration's Open Government Directive, which has focused 
on each agency providing new information to the public, 
Interior, for example, has only focused on disclosures of 
things like the Nation's national treasures, which were already 
online anyway, rather than information about oil and gas 
leases.
    The kind of information we all need to know coming from 
Interior are the kinds of things that policymakers would learn 
if we actually started investigating and talking to some of the 
people online. For example, even after the Deepwater Horizon 
explosion, inspector concerns are still being ignored. For 
example, an MMS inspector discovered that a deepwater 
production facility was operating days after he had issued a 
cease and desist order because he believed it was in dangerous 
noncompliance. When he contacted his supervisor for approval to 
issue another order, his supervisor overruled him. And this is 
in the wake of the Gulf crisis.
    We have learned that this incident is not unique, but has 
become a common practice where inspectors feel they need to ask 
permission from their supervisors because they are more likely 
to get in trouble for issuing an incident of noncompliance than 
for not issuing one. This is where the real work will have to 
happen, changing that culture.
    MMS inspectors are just beginning to speak out, despite the 
fact that they have no real whistleblower protections. And I 
can tell you with experience that MMS has been a hostile place 
for whistleblowers. If there is another takeaway from the 
disaster, it is that whistleblower protections for Federal 
employees are urgently needed and would be offered through the 
legislation sponsored by Representative Van Hollen and Platts, 
the Whistleblower Protection Enhancement Act.
    Ultimately, MMS must reorganize its priorities to serve 
taxpayers and protect their resources, and not industry. As an 
important first step, Congress must enact H.R. 3534 and S. 
3516.
    Thank you again for your oversight of MMS, and I look 
forward to answering your questions.
    [The prepared statement of Ms. Brian follows:]

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    Chairman Towns. Thank you very much for your testimony.
    Ms. Randolph.

                STATEMENT OF CHARLOTTE RANDOLPH

    Ms. Randolph. Thank you, Mr. Chairman.
    On May 8th, oil first appeared on the shores of our parish 
from the Deepwater Horizon blowout, an event caused by 
reckless, tragic, disastrous decisions made by BP personnel who 
obviously did not follow established safety guidelines. We have 
now endured 74 days of relentless effort to protect our 
wetlands and our wildlife. Birds don't fly, fish don't swim, 
and fishermen can't make a living.
    Then came the moratorium on deepwater drilling, literally 
adding insult to injury.
    Research conducted by the LSU Center for Energy Studies has 
revealed that this moratorium, suspension, pause, ban, whatever 
the term du jour is, will not only impact a few parishes in 
Louisiana, 43 in Florida, 42 in Texas, Louisiana 32, and 
Mississippi 7. In the Department of the Interior's own report, 
DOI estimated about 120,000 jobs would be lost.
    Nine of the top 10 taxpayers in Lafourche Parish are 
located at Port Fourchon, which services all 33 rigs singled 
out in the initial moratorium. The spill has decimated the 
fishing industry. The moratorium will essentially end life as 
we know it in our parish. No business can survive a 6-month 
pause and this much uncertainty.
    Up to 40 percent of our property tax base could be lost by 
2012 as a result of the drilling ban. Rig owners have stated in 
testimony to the President's Commission on the Oil Spill that 
they intend to leave the Gulf for other opportunities elsewhere 
in the world. Some service company employees have been offered 
transfers to locations in other States. Families are now making 
decisions as to whether the husband and father or the wife and 
mother will live elsewhere, with the rest of the family staying 
behind to finish schooling. These are the lucky ones; the rest 
will be terminated. In Lafourche, that could be 10,000 people.
    This ban is sending a mixed message. In April 2010, the 
unemployment rate in our parish was 4.4 percent, the lowest in 
the Nation. By November 30th, the stated end of the moratorium, 
the number of unemployed will increase dramatically. In this 
country, a whole lot of money has been borrowed to create jobs 
to stimulate the economy. People in Lafourche Parish and those 
associated with the oil and gas industry and its support 
services are not expendable Americans; we fuel this country.
    On May 28th, I had the opportunity to personally ask 
President Obama to reconsider his decision based on the 
devastating economic blow we would suffer. He declined, but he 
did offer to send down an economic team to assess the 
moratorium's impact on our parish. Again, that was May 28th. 
The team will arrive July 26th.
    President Obama, in early May, announced that no permits 
for drilling new wells will go forward until the 30-day safety 
and environmental review I requested is complete. That was the 
first intense scrutiny of the industry. Some of these 
commissioners disagreed with the moratorium decision; yet it 
was established anyway. The President formed another 
commission, with its members asked to restudy this for at least 
6 months. We will die a slow death.
    Statistics indicate that an oil tanker has a four times 
greater chance of spilling its cargo than an oil well has of 
blowing out. Tankers from around the world carrying up to 3 
million barrels of oil traverse the Gulf all the way to Port of 
Houston daily. Eleven thousand tankers traversed the Gulf last 
year. The moratorium's own language emphasizes a shortage of 
resources available to respond to another spill in the Gulf as 
a reason for pause. In order to resume activities, operators 
must submit evidence that they have the ability to respond 
effectively to a potential spill.
    There are those who call for an immediate halt to oil and 
gas. What is being overlooked in the rationale behind the 
suspension is that all of these tankers traverse the Gulf.
    Based upon the rationale behind the new moratorium on 
deepwater drilling, issued July 13th by the Secretary of the 
Interior, I am today challenging the President, Secretary 
Salazar, and the Federal Government to protect all Gulf States 
from another spill as completely as possible. Stop all oil 
tanker traffic in the Gulf of Mexico.
    Mr. Chairman, I await your questions.
    [The prepared statement of Ms. Randolph follows:]

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    Chairman Towns. Thank you very much. I really appreciate 
your testimony.
    Let me begin with you, Ms. Brian. You said something I want 
to make certain I understand. You said ``dig deep into the 
management.'' What do you mean by that?
    Ms. Brian. I am concerned that what we are dealing with 
right now is really sort of the top layer, and what we have 
learned over the many years of looking at MMS is that a bulk of 
the problem is still there just because you change the people 
at the top. We have known for years about the auditors who had 
been stifled by their supervisors, and now we are learning 
about inspectors with the same kinds of problems, where the 
mid-management is still in line and nothing has really changed 
from that perspective.
    Chairman Towns. So changing the name doesn't get us there?
    Ms. Brian. Breaking it apart and changing the name is just 
not enough.
    Chairman Towns. OK.
    Ms. Randolph, before I move any further, I want to know in 
terms of how big is a parish. How many people?
    Ms. Randolph. We have 95,000 people, sir.
    Chairman Towns. How many?
    Ms. Randolph. We have 95,000 people, sir.
    Chairman Towns. Is that an elected position?
    Ms. Randolph. Mine? Yes, sir.
    Chairman Towns. OK. That sounds like mine. You have to run 
for it.
    Mr. Rusco and Ms. Brian, I want to ask, and you too, Ms. 
Kendall, do you think that the proposed reorganization plan can 
successfully reform MMS?
    Mr. Rusco. I am sorry, the current proposed plan?
    Chairman Towns. Yes.
    Mr. Rusco. Well----
    Chairman Towns. And get us where we need to go. I sort of 
heard Ms. Brian on it, but----
    Mr. Rusco. Yes. Our position on that is that there have 
been, in the last 5 years, dozens, over 100 recommendations to 
address specific deficiencies that have been identified, and we 
have looked deeply at the process and found deficiencies 
everywhere we look. So all of those must be addressed for 
Interior to effectively manage oil and gas program. But that is 
true no matter what the organization is. Changing the 
organization will not implement automatically those needed 
reforms, so they are going to have to do both. If they are 
going to reorganize, they are also going to have to implement 
all of the reforms.
    Chairman Towns. Ms. Kendall.
    Ms. Kendall. I share the sentiment of both Mr. Rusco and 
Ms. Brian that reorganization, in and of itself, is not an 
answer to resolving profound management challenges. It will be 
in the implementation and the other reforms that the Department 
makes relative to the management of oil and gas, leasing, 
oversight, and royalty collection.
    Ms. Brian. If I could add a little more meat to my overall 
comment on that. While we certainly agree that splitting up 
that conflict and mission is an essential change, it also could 
create more problems, because what we now have are three 
smaller agencies inside a bureaucracy and, as we know, we are 
all sort of students of government, it is all about how big you 
are in the government and how powerful you are. So now you have 
smaller entities.
    And we are particularly worried from the audit perspective. 
We have been thinking for some time that there may be some 
efficiencies created by looking at those small audit shops 
across the Federal Government and thinking about housing them 
in one place, where you would actually create an efficiency and 
have them actually be an entity where there is more value 
placed on their role as auditors, for example.
    The other thing that worries us is that some of the people 
who really need to be at the table as we are talking about this 
reorganization aren't there. The States and tribes that MMS is 
responsible for collecting royalties from are not adequately 
being consulted and participating in the process, and that is 
of great concern to us as well.
    Chairman Towns. Does the Department of Interior have the 
expertise to be able to do the kind of monitoring and oversight 
that we are really expecting? Because I am looking at a GS-7. 
That is, what, $38,000 a year?
    Ms. Brian. Isn't that awful, yes, to think of the 
responsibility that we are placing on them and we are so 
undervaluing them by how much we are paying them.
    The other part of what we think is important that hasn't 
been on the table at all yet is BLM at Interior also is 
conducting these inspections, and we are not talking about 
them. So shouldn't there be some conversation about at least 
merging those missions in one entity as well?
    So I think there are a lot of important things that should 
be part of the conversation that haven't been yet.
    Chairman Towns. Right.
    Do you think they have the expertise?
    Mr. Rusco. No. We have found many cases in which the level 
of expertise, the level of training, and just the sheer number 
of people to do the job are inadequate, especially in the 
inspection area and in the area of petroleum engineers to 
evaluate drilling plans and to evaluate processes.
    Chairman Towns. I guess my 5 minutes is up. I don't think 
they started the clock.
    Mr. Issa. Mr. Chairman, I would ask unanimous consent you 
have all the time of the other Members here on your side.
    Chairman Towns. I would be delighted to take it, but I will 
yield 5 minutes to you before we do that.
    Mr. Issa. Thank you, Mr. Chairman.
    Like the chairman, I think there is no limit to the amount 
of questions we would like to ask each of you. I will start 
with Ms. Randolph. I asked Secretary Salazar, a moment ago, an 
hour ago, now, about why an arbitrary 6 months, rather than 
when the existing well, which is certainly a danger until it is 
killed, once it is killed, why he couldn't reconsider, at that 
moment, changing; and he gave me an answer that, over the next 
6 weeks, 8 weeks, he was going to have all these studies come 
back.
    You have seen the President make a personal promise to you. 
You have sat there watching people be laid off in an industry 
that is not being compensated at all for being laid off; they 
are not like the fishermen. The oilmen themselves are just on 
their own if they get laid off; they cannot go to Mr. Feinberg 
to ask for any money because they are not part of the 
``affected directly.''
    What do you need to see from this administration in order 
to have the confidence that they care enough about Louisiana to 
actually put people back to work?
    Ms. Randolph. Well, the immediate response would be to lift 
the moratorium and----
    Mr. Issa. But do you agree with the premise that if 
Secretary Salazar were to reconsider a date shorter, that when 
the well is actually killed, which hopefully will be in a 
matter of weeks, that might be the appropriate time to say, OK, 
it no longer is a danger; therefore, resources could be 
available; therefore, we could lift the ban? Would you be 
satisfied if he used that instead of 6 months and then we will 
re-look at it with no expectation that would be a hard 
reopening?
    Ms. Randolph. We would be very satisfied with that. There 
would be a finite date. The industry itself could make 
decisions based upon that date and, therefore, we would not 
lose all the service company jobs that are associated with it. 
Yes. But my concern this morning is Mr. Bromwich talked about 
another study that begins or additional hearings that begin on 
August 4th and end on September 15th, with a report due on 
October 31st. So it is another study that doesn't provide us 
any direction.
    Mr. Issa. Well, unfortunately, that will be 2 or 3 days 
before the mid-term elections. I suspect no one is going to 
look at them until after that date, too.
    Ms. Brian, you and I have worked together on transparency, 
and we will continue to. Ms. Randolph particularly has 
experience about ghost assets, all the parishes do, where there 
are claims in writing that X amount of skimmers, X amount of 
various assets are brought to bear, and then we find out they 
actually weren't there; and we, to be honest, do not know if 
the total number of skimmers that each were claimed is greater 
than the total number of skimmers ever contracted.
    Do you have any better transparency at all? Have you been 
able to get any better information on what the real assets that 
brought to bear were? And if not, why do you think you are not 
seeing it?
    Ms. Brian. We have not had any better access to information 
and we do think that there is a tremendous problem with the 
lack of transparency in this entire cleanup operation. I think 
part of the problem is there has been an acceptance that BP was 
in charge for a long time, and sort of leaving it to the 
private sector, which we really believe this is something where 
the Government should be in charge and making all information 
public to the general public, and that just hasn't been the 
case.
    Mr. Issa. Well, you know, one of the interesting things 
that I discovered with the chairman when we went down there is 
that they run consensus management, which is a nice way of 
saying one group is in charge except, really, they are not in 
charge; it takes everyone to have a decision. Therefore, nobody 
is really accountable. Therefore, the decision to release is 
probably beyond the expertise of everybody. It is no way to run 
a railroad.
    I guess I am going to sort of pose to both of you for a 
second, and I think Mr. Rusco, because of your past studies I 
think you see it, but you both have been asked. This 
reorganization, if you will, moving the deck chairs on the 
Titanic, doesn't it inherently delay the ability of the 
organization, while they are busy reorganizing, from getting to 
the various failures that both of you have seen in past 
inspections and studies?
    Mr. Rusco. That is a concern that we have. We know that 
organizational change is very difficult; it is disruptive and 
it takes a lot of agency resources. At the same time, they are 
dealing with this catastrophic oil spill. They are also dealing 
with trying to do the work that they feel they need to before 
they can lift the moratorium, and then they have this backlog 
of recommendations that they are trying to address to improve 
their systems. It is a concern.
    Mr. Issa. Ms. Kendall, the same for you. I assume that it 
is very hard for your various IGs and so on, the people that 
work for you, to actually figure out who you are supposed to 
look at and what you are supposed to oversee if the chairs are 
moving around. I am assuming that one of the problems right now 
is you really don't know which one of these three entities to 
focus on. Is that correct? Just during the reorganization.
    Ms. Kendall. During the reorganization?
    Mr. Issa. Yes, ma'am.
    Ms. Kendall. What we are really trying to do is focus on 
issue areas. But following those issue areas as they are being 
moved around has not yet become a challenge because the actual 
movement hasn't taken place, but I imagine it would be in the 
future.
    Mr. Issa. One quick last question, if I could, Mr. 
Chairman.
    The chairman and I enjoy the title of Oversight and Reform, 
and the theory of that is that Congress has an absolute right 
to, if you will, intervene in the organization of Government. 
Congress actually authorizes who gets to be a cabinet or not; 
we created the cabinet position for Homeland Security and so 
on. If the GAO were tasked, in combination with this committee, 
to look at the various revenue entities, not just in the 
Department of Interior, but primarily in the Department of 
Interior, well, maybe include the IRS, they would clearly be 
outside, the various parts of inspection that go on throughout 
the Government, but particularly Department of Interior.
    And, of course, contracting, and ask the bigger question of 
should this entity really be truly consolidated with other 
areas of, if you will, cultural excellence by comparison, do 
you believe that is something you could deliver at least a 
preliminary report back to us during this Congress? In other 
words, are the basic facts of these other entities, their 
existence for consideration by this committee, something that 
we could begin working on before the lights go out at the end 
of December?
    Mr. Rusco. I think it is something we would be willing to 
talk to your staff about. I would hate to commit at this point 
to anything without further information.
    Mr. Issa. Well, Mr. Chairman, there is more than enough if 
there is a second round, but that would be something that I 
would like to have our staffs explore, is whether we could take 
an active role in looking at a much larger reorganization, 
particularly when it comes to the following, which is I heard 
the GS-7, and I appreciate that, but I happen to know that the 
inspectors go up to about $100,000, GS-13s and 14s. So there 
are some that are paid relatively well and, in fact, paid 
better than their counterparts in the Corps of Engineers who 
oversee public construction, including NASA.
    So, with that, I yield back, Mr. Chairman.
    Chairman Towns. And I would also like to add maybe we need 
to look in terms of stability, in terms of how long people 
actually stay with the agency. I think that is another issue 
that we need to consider as well.
    Mr. Issa. Absolutely.
    Chairman Towns. At this time, I would like to recognize the 
gentleman from Ohio, Mr. Jordan.
    Mr. Jordan. Thank you, Mr. Chairman.
    All of you were here for the first panel; you listened in 
on the questioning. I wanted to ask Secretary Salazar some 
questions, but just because of votes was unable to get back in 
time before he was dismissed. But I was intrigued by 
Congressman Turner's time line prior to the terrible accident 
in the Gulf with the Deepwater Horizon. So I want your 
thoughts.
    Obviously, BP is at fault here, and we understand that, but 
do you believe--well, let me go back to this. In Mr. Turner's 
time line he referenced four different occasions where standard 
inspections were not performed. So I want your thoughts. Do you 
believe that this accident could have been prevented if MMS 
would have done those inspections? And we will just go down the 
line.
    Mr. Rusco. It is difficult to say, but I think that there 
is a bit of a misconception about what these inspections are 
about. Most of the inspections that take place on the rigs 
offshore are dealing with safety of equipment, such as 
railings, stairways, slippery surfaces; they are dealing with 
environmental issues, such as any noticeable leaks of 
hydrocarbons; and they are dealing with production verification 
issues, looking to make sure that the metering is done 
correctly and that there are no bypasses of meters and that 
everything is accounted for.
    Mr. Jordan. So you are saying, those inspections, people 
aren't actually out on the facility, in the equipment itself?
    Mr. Rusco. They are out there and they also do look at 
records; they look at records to ensure that the approved plans 
are being followed and they have----
    Mr. Jordan. Well, but certainly the fact that if those 
inspections would have been done, there would have been a 
better chance to detect those problems. Fair statement?
    Mr. Rusco. I can't argue with that.
    Mr. Jordan. Ms. Kendall.
    Ms. Kendall. I would echo everything Mr. Rusco said, but I 
would also add that, based on what I know, and I am far from a 
petroleum engineer, but I believe that what is coming sort of 
to the fore is that things like the well design and review and 
approval of that, the actual practices of when to pull the mud 
and replace it were the kinds of things that there are any 
number of sort of decision points along the way that may have 
prevented what we are dealing with now. But I don't know that 
inspectors are the answer to that sort of issue, that there has 
to be some much more careful review of those kinds of issues.
    Mr. Jordan. Not disagreeing. We are talking about 
restructuring and reorganization. That all is probably 
necessary, but the law said do these inspections and they were 
not done, and a bad thing happened that could have been maybe 
prevented if in fact those inspections had been done. It seem 
pretty logical to conclude maybe we would have caught 
something. They didn't even do their job.
    Ms. Kendall. I think maybe is certainly reasonable.
    Mr. Jordan. And you can cut to the chase. They didn't do 
their job, and because now we have this terrible incident where 
lives were lost, where economies are affected, Ms. Randolph 
knows that firsthand, people's lives, families' lives, small 
business owners, and now we have the President saying because 
our people screwed up and didn't do what they are supposed to 
do and now we have this terrible accident, we are going to stop 
drilling everywhere, and make a bad situation even worse. That 
is where we are at, and maybe it could have been prevented if 
in fact they would have done what they were supposed to do.
    Ms. Brian.
    Ms. Brian. I also don't really know enough about those 
inspections. I think in general there is no question that MMS 
has been not doing its job for many, many, many, many years. So 
I think there is no doubt that if MMS was held accountable, 
these are issues that have been raised by the Congress, by the 
GAO, by the IG, by POGO for 15 years, so there is no question 
that if MMS had reformed in the many times it was told it 
needed to, then we wouldn't have seen what we have in this 
accident.
    Mr. Jordan. Thank you.
    Ms. Randolph.
    Ms. Randolph. I think it is a shared responsibility. Not 
only did MMS not do its job; BP didn't do its due diligence.
    Mr. Jordan. I yield back.
    Thank you, Mr. Chairman.
    Chairman Towns. I thank the gentleman for yielding.
    I now yield to the gentleman from California, Congressman 
Bilbray.
    Mr. Bilbray. Thank you, Mr. Chairman.
    Chairman Towns. I am sorry. I am sorry. I yield to 
Congressman Welch.
    Mr. Welch. [Remarks made off mic.]
    Chairman Towns. I now yield to you.
    Mr. Bilbray. Thank you.
    Mr. Rusco, I would like to talk about the response to the 
crisis. Does anybody have any information at all, did the Army 
Corps use the spillways upstream from New Orleans to divert 
water into the Pontchartrain to try to get that flow to keep 
the oil out of the Pontchartrain and Lake Borgne?
    Mr. Rusco. I am sorry, that is something we have not 
studied.
    Mr. Bilbray. OK.
    Madam President, I was a county chairman myself, so I kind 
of relate to the frustration that when you want to do things, 
those who are always saying no continue to say no, even though 
things need to be done.
    Do you have a clip of what happened? Does staff have a clip 
of that piece about the berm in Grand Isle? Can we play that?
    [Video played.]
    Mr. Bilbray. Madam President, I married a girl from your 
part of the world and the fact of the frustration of the people 
down there when they want to do something, being told, no, no, 
we have to study it. Grand Isle is over where Jean Lafitte used 
to hang out. It is not your part of the world, but did you have 
any kind of situations like that where you basically ran into 
this issue where everybody said stop, we have to study 
something, don't do things, and basically we are always telling 
the locals no; or did we get a lot of support saying, go ahead 
and we will work it out later?
    Ms. Randolph. It was very similar to what David was 
describing in this video. They are our neighbor, so these berms 
are very important to us. And now I am watching a storm that 
may be coming into the Gulf. Our response in those situations 
is from the bottom up. We do what we know best. We respond 
naturally, instinctively, as humans should, with plans in 
place. This has been a very unique situation and a very 
frustrating one, yes.
    Mr. Bilbray. I mean, I really related to the fact that the 
Army Corps always love to say we need to study the 
environmental impact of building a sand berm, and not realizing 
that there are times that you have to call an audible. 
Leadership means dropping the rule book and doing what you can, 
where you can, in the best common sense way, and this one was 
really kind of an interesting one of, well, we have to make 
sure that a berm doesn't hurt the environment while the oil is 
coming in over the top of it; and it is almost as if inaction 
is justifiable and less of a concern to bureaucracy than the 
possibility of possibly doing something wrong. And I guess that 
is the part that I really think we have to talk about. We have 
to not only empower people to make those calls.
    I have spent a lot of quality time over in Coca Tree on 
Bayou Terrebonne at the camp there, so the family loves that 
area. But to sit there and have somebody that basically the 
system rewards those for inaction, and it is safer for a 
bureaucrat to say no than to say yes, we accept that most of 
the time, but during a crisis there should be a way of burning 
a fire that says, look, if you don't call an audible, if you 
don't do extraordinary things, if you don't throw the play book 
away and use innovation, you are going to get in more trouble 
than if you do something wrong. I think we have to figure out 
how do that.
    Ms. Brian, do you have any comments or any concerns about 
that? I have been waiting to call on you, anyway, just for your 
name.
    Ms. Brian. I know, you love my name.
    Well, what you are describing is very similar to what we 
saw happening with these inspectors, where their supervisors 
are making them scared to actually assess noncompliance orders, 
because they are afraid if they do something they are more 
likely to get in trouble than if they don't do something, and 
that is even after this incident. So it is really insight to 
me.
    Mr. Bilbray. Mr. Chairman, I will just tell you I 
personally witnessed the results of Hurricane Katrina; I was in 
Louisiana and I was in Mississippi, and I saw the difference 
between the mind-sets. The feeling seemed to be in New Orleans 
of don't do anything because you may do something or not have 
something done approved, and when I went over to Picayune, just 
on the other side of the Pearl River, it was, look, do what you 
can do, we will worry about whose jurisdiction it is later, and 
I saw a real difference.
    I just hope, somewhere down the line in our Federal 
responses, we can sort of adopt that Mississippi mentality that 
I saw during that disaster, rather than what I saw down south. 
And no offense, Madam President, but there was a distinct 
difference; it was astonishing that two different political 
jurisdictions could respond so absolutely different to crisis, 
and I think there is a lot to learn there.
    So thank you very much for your testimony.
    Chairman Towns. I thank the gentleman from California for 
his statement.
    Just before I call on Congressman Welch, I would like to 
ask unanimous consent that I include Mr. Luetkemeyer's 
statement in the record.
    [The prepared statement of Hon. Blaine Luetkemeyer 
follows:]

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[GRAPHIC] [TIFF OMITTED] T3146.071

    Chairman Towns. Now I yield to Mr. Welch.
    Mr. Welch. Mr. Chairman, thank you.
    I am concerned about a lapse in the royalty collection for 
the period of leases between 1996 and 2000, and I just want to 
ask a few questions about that.
    Ms. Kendall, the Department of Interior, you probably have 
become aware of this, there was a set of leases that were 
issued between 1996 and 2000. They were under a law that was 
passed by Congress that was intended to try to encourage 
domestic drilling, but it was when oil was under $25 a barrel.
    As I understand it, the law said there would be no 
royalties until a trigger price of, I think, $26 a barrel was 
hit. Oil now is, I don't know, $75 or $80 a barrel; at one 
point it was $140 a barrel. According to the report that I have 
seen from the GAO, unless we change this so that we can collect 
the royalties on what would be due on these leases for the oil 
that is above the trigger price, the taxpayers could be out 
about $60 billion. Are you familiar with that?
    Ms. Kendall. Yes, sir, I am.
    Mr. Welch. And are there any specific actions? The question 
of the loophole was litigated by Anadarko Petroleum. They 
argued that the way the law was written, there was not explicit 
authority to charge the regular royalty rate above the trigger 
price. Many Members of Congress who voted on that legislation 
had no idea that there was going to be an exemption no matter 
how high the price went. But the court decision was that the 
law has to be changed in order for the taxpayers to collect the 
royalties that was the intention of that act. Is that your 
understanding?
    Ms. Kendall. Yes, sir.
    Mr. Welch. So is it your understanding that in order for 
there to be a collection on these royalties, we would have to 
pass a law to make that permissible?
    Ms. Kendall. Congressman, I am familiar with the case that 
you are talking about and I am familiar with the act generally. 
I am not familiar specifically to any degree. I don't know if--
and this is just my thinking off the top of my head--whether 
Congress could successfully go back and pass a law that 
addressed those years specifically retrospectively. I would 
just guess that there would be a challenge for that as well.
    Mr. Welch. Well, we would have to get our legal advice and 
do it right, but I think all I am asking you to indicate is 
whether there appears to be any administrative remedy to what 
appears to be essentially a loophole by which the companies 
that are drilling on public lands are doing so without paying 
royalties to the public for that profit-making privilege.
    Ms. Kendall. I am going to have to rely on fairly limited 
memory, but I don't believe that there are administrative 
remedies when there was a fundamental flaw in the law as found 
by the court.
    Mr. Welch. All right, then I think, Mr. Chairman, 
Congressman Markey and I will be introducing legislation that 
would be designed to remedy that loophole and provide to the 
public the royalties that they are due for drilling on the 
public lands.
    Ms. Brian, are you aware of this?
    Ms. Brian. I am certainly aware of the problem, and I think 
it would be terrific if legislation were passed to correct it.
    Mr. Welch. You do?
    Ms. Brian. I do.
    Mr. Welch. All right.
    Ms. Randolph, I just want to welcome you. I think all of us 
are heartbroken. I went down to the Gulf, and as heartbreaking 
as it was for me to fly out over that magnificent, beautiful 
marshland at the Delta, what was the hardest was coming back 
and meeting people who were fishermen in the oil industry and 
just seeing how lives down there have been turned upside down. 
So I just want to express to you my heartfelt sadness about 
what the people of the Gulf Coast are enduring, and will long 
after Congress has moved on to other things. So thank you for 
coming and all you do down there.
    Ms. Randolph. Thank you, sir. And as a recipient parish of 
some of those royalty revenues, I look forward to you 
increasing that.
    Mr. Welch. All right, thank you.
    Mr. Chairman, I yield back. Thank you very much.
    Chairman Towns. I thank the gentleman for yielding back.
    Let me just sort of, I guess, again, Mr. Rusco and, of 
course, Ms. Brian, and Ms. Kendall, how has this cozy 
relationship between the industry and MMS impacted oversight 
and safety standards? Do you think it has interfered with it?
    Mr. Rusco. I would like to just second what Ms. Brian said, 
that there are sort of two problems. There is one that you 
could describe as a revolving door issue. That may be a bigger 
problem at higher levels of management than it is at the level 
of inspectors and engineers. But there is a second problem, and 
that is that they, by and large, don't pay a competitive wage 
with industry.
    So when the industry is in good shape, they can pay a lot 
more than what Interior is paying the people with comparable 
skills; then, when times are bad, Interior can hire people. So 
there is sort of a structural problem that could be dealt with 
by addressing the amount that they can pay people; and there 
are other compensations as well. But I think that is part of 
the problem. It does, though, the lack of the proper number and 
amount of expertise that they can bring to bear does affect 
their ability to do their job.
    Chairman Towns. Ms. Kendall.
    Ms. Kendall. I would also say that some of the exceptions 
in the ethics regulations have allowed folks to kind of get 
away from the intent of the regs, for instance, the acceptance 
of gifts because of a personal friendship. These people are all 
friends. The folks in industry and in MMS that grew up 
together, they married each other's sisters or cousins, they 
have been playing on the same teams since they were in high 
school. So the exception to the gift rule, which says if it is 
based on a personal friendship, could be exploited.
    On the other hand, if someone were to say I am accepting 
this on the basis of a friendship, they should also be 
prohibited or recused from inspecting the rigs or the 
facilities of the people who they have this friendship with.
    I go back to the ethics regs. These are the floor, not the 
ceiling of conduct, and I think MMS has an opportunity to make 
stricter rules apply to a very unique and a very specific 
problem that they have.
    Chairman Towns. They could do it administratively; they 
don't need us.
    Ms. Kendall. They could do it administratively.
    Chairman Towns. Ms. Brian.
    Ms. Brian. Mr. Chairman, I have the benefit of having 
looked across the Federal Government for many years, and I 
continue to think MMS is probably the worst in the Government 
when it comes to its coziness between the regulator and the 
regulated. As I mentioned when the Congress people were voting, 
Mr. Issa certainly has known that, he has been working on this 
for years, and Mrs. Maloney, I have been working with her for 
15 years on this issue. I mean, I think that there is no 
question that the coziness in this particular agency has been 
sort of extraordinary across the Federal Government. There is 
no comparison, in our experience.
    Chairman Towns. Right. Even in the Congress, when you 
leave, you have to stay out a certain amount of time before you 
can come back and lobby the Congress. That is the Congress. So 
I am wondering if maybe something along those lines shouldn't 
be instituted here.
    Ms. Brian. Oh, there is absolutely no question we need to 
change the rules when it comes to the revolving door, and there 
is strong legislation that has been worked through the House 
Natural Resources Committee that would be addressing this 
particular issue, and I certainly hope the committee members 
support that legislation.
    Chairman Towns. I notice you didn't start the clock, so 
that is good.
    I now yield to----
    Mr. Issa. Mr. Cao hasn't gone.
    Chairman Towns [continuing]. Mr. Cao, the gentleman from 
Louisiana, who is really familiar with this subject.
    Mr. Cao. Thank you very much, Mr. Chairman.
    I want to focus on the issue of shallow water permitting. I 
was reading one of the articles from Louisiana today, and they 
were saying about the slow process of shallow water permitting, 
and this is the question to President Randolph of Lafourche: 
How has this permitting process affecting the shallow drilling 
industry in your parish?
    Ms. Randolph. The Department of the Interior and MMS's 
ability or charge to issue permits can create a defacto 
moratorium, and MMS has done so because the response to the 
request for permits has been very, very, very slow in the 
shallow waters. In the deep waters what has been addressed in 
media, but shallow waters, there is a defacto moratorium there 
as well.
    Mr. Cao. And how has this defacto moratorium affected some 
of the industry in your parish, how has it affected the people 
who are being employed by this industry, some of the businesses 
that are directly or indirectly related to this industry?
    Ms. Randolph. The shallow water defacto moratorium 
essentially has put independent contractors out of business. 
The fact that they cannot get permitted or re-permitted under 
the new guidelines affects a lot more the small business owners 
in the community. We talk about the four or five major 
companies in this country, the oil companies.
    But when we talk about the shallow water, that is where the 
independents are, and the majority of the exploring companies 
are independents; they don't have the resources or the 
resources to sustain any type of long-term moratorium. They 
cannot survive that long and, therefore, they have begun to lay 
off people, yes.
    Mr. Cao. Well, do you know of any rigs or any low drilling 
companies that either have moved rigs or have shut down because 
of this slow permitting process?
    Ms. Randolph. In the shallow waters?
    Mr. Cao. Yes.
    Ms. Randolph. Yes, sir.
    Mr. Cao. Do you have the names of them?
    Ms. Randolph. No, I don't have the names for you, but I 
can----
    Mr. Cao. But based on your knowledge, there have been rigs 
that have moved out of Louisiana or companies that have shut 
down because of this moratorium, or at least defacto 
moratorium?
    Ms. Randolph. Yes, sir.
    Mr. Cao. Ms. Kendall, are there ways under the new rules 
and regulations implemented by MMS that would allow greater 
speed of permitting to some of the shallow water rigs?
    Ms. Kendall. I am sorry, I couldn't hear much of your 
question.
    Mr. Cao. Are there ways or procedures to expedite some of 
the permitting process through the MMS within the new rules and 
regulations that were implemented after Deepwater Horizon?
    Ms. Kendall. I simply don't know the answer to that 
question. I am not familiar with the newly implemented 
regulations; I can just speak to sort of in general terms. I 
know, in having discussions with people, I think part of the 
contributing factors MMS has now become a little gun-shy and is 
being extraordinarily cautious in their review and their 
processing. Not that excuses them. And I know that it puts a 
toll on the folks who are reliant on those permits, but I just 
don't know if there is anything in the new regs that would 
speed that up.
    Mr. Cao. Thank you, and I yield back.
    Chairman Towns. The gentleman's time has expired.
    I now yield to the gentlewoman from New York who has done a 
lot of work in this area, Congresswoman Carolyn Maloney.
    Mrs. Maloney. I want to thank the chairman for focusing on 
this important area of Government, an area that clearly needs 
reform and I believe an area that would not have had this focus 
if we hadn't had the catastrophe in the Gulf with BP, and it is 
long overdue.
    I wanted to mention that earlier today in our hearing with 
Commissioner Salazar we were talking about a recent GAO report 
that was really developed for this committee on the revenue 
share the Government collects from the oil and gas produced in 
the Gulf, and this report ranked our country 93rd, one of the 
lowest of the 104 revenue collection regimes around the world. 
I find this absolutely scandalous. He also testified that the 
revenue royalty collection system had not been changed since 
1920. I would like to ask Ms. Brian to respond to this.
    I know that we worked together to end the Royalty-in-Kind 
program and have been trying to have one set of books, not two 
or three, and to really get a fair deal for the taxpayer. Could 
you comment on this? With our technology, our expertise, why do 
we rank 93rd? We should be first. Ms. Brian.
    Ms. Brian. I absolutely share your outrage, Mrs. Maloney. 
It is ridiculous and there is certainly no excuse for it. I 
think this has, for reasons I have never been able to 
understand, as we have said, we have been working on this for 
so many years, this is not news to us. This is an agency that 
has been sort of left to fester by itself, without really 
breaking it open and fixing it, and I am hope that, as I 
mentioned before, if there is a small silver lining in the 
catastrophe, it is that the long-needed reforms will finally 
happen.
    Mrs. Maloney. How will this change take place and how long 
will it take before the royalties increase and we have more of 
an accurate reflection of the value that is extracted from 
publicly owned lands?
    Ms. Brian. Well, at the moment there is nothing pending 
that will actually change the collection of royalties at all. 
None of the reforms that we are hearing about today will 
actually fix that; that is something that is still up to the 
Congress to tackle.
    Mrs. Maloney. Well, also in the GAO report that we have 
had, it found that the MMS area should do more to improve the 
accuracy of data used to collect and verify oil royalties, that 
it really hasn't been changed or updated. And I have put in a 
bill, H.R. 1462, and this bill would require a National Academy 
of Engineering study regarding improving the accuracy of 
collection of royalties on production of oil.
    Literally, the first panel testified that they need better 
indicators, and I feel personally that this would be an 
important step forward. I would like to make sure that all of 
the panelists have a copy of the bill, and if you would get 
back in writing whether or not you support it, it might be a 
way to move this legislation forward so that we actually can 
increase the royalties from these publicly owned lands.
    Exactly what will the reorganization do to help improve the 
accuracy of this data? Is there anything that will improve the 
accuracy of the data that is taking place now?
    Mr. Rusco. The reorganization itself says nothing about 
that. There are many, many things that need to happen in order 
to improve the accuracy of the data, including rationalizing 
data bases across the many units of the oil and gas management 
program so that they are actually compatible; fixing the 
functionality of these data bases so that they are collecting 
the data they need to do audits and oversight. And all of this 
needs to be done with some sort of central vision of bringing 
the IT system up to date, because it is horribly behind what 
the industry uses.
    Mrs. Maloney. Well, why in the world aren't we updating it? 
I would invite all panelists to submit in writing ways that we 
can update it.
    Another important GAO report said that there are no audits 
of the oil and gas company royalty numbers, that the audits are 
done by the companies themselves; and in so many cases MMS is 
probably under-collecting by hundreds of millions of dollars. 
Can you comment on the lack of audits of the oil and gas 
company royalty program?
    Mr. Rusco. We found that there were problems with the self-
reporting of data and the fact that there weren't automatic and 
very quick checks of that, or the use of third-party data as 
one would expect in a system like this. For example, the IRS, 
you voluntarily provide your tax return, but your employer 
sends in information and your bank sends in information, and 
the IRS looks at that and compares them. In the case of 
royalties, often there is an absence of third-party 
verification.
    Now, what the industry does is they use metering technology 
that reports every 1 second on volumes and they look at each 
other's data when there is a dispute between a pipeline 
company, say, and an oil producer, they look at each other's 
data and they resolve it based on data. However, Interior has 
not adopted the kinds of technology it would need to collect 
those sorts of data, and they could; they could collect it 
directly from lessees.
    Mrs. Maloney. Mr. Chairman, we need to look at that, we 
need to move into the 21st century, and we need to protect the 
taxpayers in this area. I find it scandalous that we haven't 
moved to modernize, to have audits, to have third-party 
verification, and that we haven't updated this law since 1920.
    Chairman Towns. I agree with the gentlelady from New York, 
and her time has expired.
    I now yield 1 minute to the ranking member.
    Mr. Issa. Thank you, Mr. Chairman.
    Very quickly, in closing, for Mrs. Maloney, we did publish, 
last October, something on this with the GAO's help on this 
absence of audit.
    Ms. Kendall, you were mentioning the too cozy and the 
various rules related to these friends, but in the case of 
Colorado, where, you know, these people didn't know each other 
before they got there, but they got to know each other so well 
that one of the women ended up pregnant. They very clearly 
exchanged gifts at a very high level with people that were not 
their friends, completely in violation, and then felt that they 
needed even more leniency. To a great extent, isn't this really 
simply an organization who justifies that somehow, because they 
do the revolving door, they are all friends and, therefore, 
they have a special relationship? Isn't that a culture that has 
to be changed, period?
    Ms. Kendall. Oh, absolutely.
    Mr. Issa. OK. I think we have made our point on that. I 
will mention that Mr. Waxman, when he was chairman, held an 
interesting hearing, and that was the analysis of the 
difference between fuel at temperature and wanting to hold our 
retailers accountable for the differences in the temperature of 
the fuel being delivered to the retail point, because on a 90 
degree day versus a 60 degree day, the amount of fuel you get, 
the BTUs available expand or contract. And the amazing thing 
was that the technology does exist to do this sort of 
comparison to ensure that the density that you buy equals the 
density that you agree to pay for BTUs.
    So I would suggest strongly that if we get an organization 
that cares about the American people getting the revenue they 
deserve, getting the safety they deserve, we will get there.
    And I would like to close by, Ms. Brian, I appreciate your 
wanting to have the transparency, and Ms. Randolph, but for the 
GAO and the IG, I want to personally thank you for time and 
time and time again doing the studies, doing the reports, 
pointing out these failures and staying with it even when 
administration after administration, at least three that I have 
been around for, failed to do what you asked them to do, and I 
am glad to see that we are all united getting it done today. 
But I want to thank you for sticking with it. Probably, if 
there is anyone who has pay should be increased, perhaps it 
should be the people who did their job during this period of 
time, rather than those who didn't.
    Thank you, Mr. Chairman. I yield back.
    Chairman Towns. Thank you very much.
    Let me thank all the witnesses for their time.
    It is not every hearing where the witnesses and the Members 
on both sides of the aisle agree on the issues, but I think 
this is one of those rare days in the U.S. House of 
Representatives. Federal oversight of offshore oil drilling has 
for decades been inadequate and ineffective. The agency 
formerly known as MMS suffered from an institutional conflict 
of interest, and repeated regulatory and ethical failures, as 
my colleague from California just described some of the things 
that went on.
    All that has to change. The recipe for reform is not 
complicated at all: Offshore oil drilling can no longer be 
regulated on the ``honor system.'' That is No. 1. There must be 
rigorous Federal oversight and effective enforcement.
    Conflicts of interest must be eliminated. The royalty 
collections must be separate from regulation and enforcement.
    Sham environmental reviews cannot be tolerated any longer. 
I don't want to see environmental assessments that talk about 
protecting, but the point is we have to make certain that from 
this point on that we do that.
    Oil spill response plans must be realistic and we must 
understand that. The entire world now knows that we were not 
prepared for the BP oil spill.
    There must be an effective and proven technology available 
to prevent blowouts in deepwater before we allow deepwater 
drilling to resume.
    I want to thank you again for your testimony. You have been 
extremely helpful.
    And let me just say to the Department of Interior we want 
to help them in terms of their reorganizing the Department, and 
I think that sessions like this, where we can extract 
information from people who have worked on these issues for so 
long, I think would be very, very helpful to the Department.
    So thanks again for your input.
    I want to thank the Members who attended today and on that 
note the hearing now adjourns.
    [Whereupon, at 1:37 p.m., the committee was adjourned.]
    [The prepared statement of Hon. Gerald E. Connolly 
follows:]

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