[Senate Hearing 111-653, Part 5]
[From the U.S. Government Publishing Office]
S. Hrg. 111-653, Pt. 5
OIL SPILL LEGISLATION
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
TO
HEAR TESTIMONY ON THE FOLLOWING BILLS: S. 3497, A BILL TO AMEND THE
OUTER CONTINENTAL SHELF LANDS ACT TO REQUIRE LEASES ENTERED INTO UNDER
THAT ACT TO INCLUDE A PLAN THAT DESCRIBES THE MEANS AND TIMELINE FOR
CONTAINMENT AND TERMINATION OF AN ONGOING DISCHARGE OF OIL, AND FOR
OTHER PURPOSES; S. 3431, A BILL TO IMPROVE THE ADMINISTRATION OF THE
MINERALS MANAGEMENT SERVICE, AND FOR OTHER PURPOSES
__________
JUNE 24, 2010
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
BYRON L. DORGAN, North Dakota LISA MURKOWSKI, Alaska
RON WYDEN, Oregon RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont JIM BUNNING, Kentucky
EVAN BAYH, Indiana JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
McKie Campbell, Republican Staff Director
Karen K. Billups, Republican Chief Counsel
C O N T E N T S
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STATEMENTS
Page
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................ 1
Bromwich, Michael R., Director, Bureau of Ocean Energy
Management, Regulation and Enforcement, Department of the
Interior....................................................... 18
Brown, Hon. Scott, U.S. Senator From Massachusetts............... 4
Heiman, Marilyn, Director, Offshore Energy Reform Project, Pew
Environment Group, Seattle, WA................................. 42
Menendez, Hon. Robert, U.S. Senator From New Jersey.............. 8
Murkowski, Hon. Lisa, U.S. Senator From Alaska................... 3
Salazar, Hon. Ken, Secretary, Department of the Interior......... 11
Udall, Hon. Mark, U.S. Senator From Colorado..................... 9
Welch, David H., President & CEO, Stone Energy Corporation,
Lafayette, LA.................................................. 50
Appendix I
Responses to additional questions................................ 59
Appendix II
Additional material submitted for the record..................... 69
OIL SPILL LEGISLATION
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THURSDAY, JUNE 24, 2010
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 9:35 a.m. in room
SD-366, Dirksen Senate Office Building, Hon. Jeff Bingaman,
chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW
MEXICO
The Chairman. OK. Why don't we go ahead and get started
here? The hearing will come to order.
Today, we will continue the committee's work on issues
related to the disaster in the Gulf of Mexico. Today, we hear
testimony on legislation that has been introduced related to
the issue and to the management of the Outer Continental Shelf.
These matters are urgent. I am hopeful that we can proceed
quickly to consider legislation on these issues in the
committee next week.
We continue our work with the backdrop of oil still gushing
into the Gulf of Mexico more than 60 days after the initial
explosion of the Deepwater Horizon rig. As the Congress
formulates its overall response to the disaster, its first
order of business must continue to be to care for the families
of those who lost their lives in the rig explosion and those
Gulf residents who are suffering every day through loss of
livelihood and of places and wildlife.
At the same time, it also is essential we look to the
future and to create a better structure and system within the
regulatory agency with responsibility here. Creating this
structure is the particular responsibility of this committee.
Our goal must be, of course, to prevent future disasters. But
we can and we must do more than that.
Congress should create organizational resources and a set
of principles and requirements that will have safety,
environmental protection, and innovation at its core, which
require that both industry and agency employees have the
expertise, experience, and commitment to quality that is
necessary to handle the complex issues involved.
If we do this right, it is my hope that we can see tangible
results on all of these fronts and a shift away from the
cascade of failures that led to the Deepwater Horizon accident
and toward work of a much higher quality.
It is with this in mind that we have introduced S. 3516,
the Outer Continental Shelf Reform Act of 2010. Senator
Murkowski, Senator Dorgan, Senator Stabenow have joined me as
cosponsors in that, and I appreciate their input and their hard
work on these issues.
This bill clarifies the multiple responsibilities of the
Department of Interior in managing the Outer Continental
Shelf--appropriate energy and other economic development and
the protection of human health and safety and the marine and
coastal environment. It reforms the structure of the department
consistent with these responsibilities. The bill increases the
safety requirements for drilling wells, focuses on best
available technology, a systems analysis, risk assessment, an
evidentiary safety case, and a full engineering review.
In furtherance of the development of these standards and
the evolution of new and better technology, it requires new
research programs within the department, independent of the
leasing program, whose data must be considered by the
regulators. It provides dedicated funding for the highest
priority research, including the areas of well control and
spill response, and an independent science advisory board
outside the agency to provide oversight.
It establishes new requirements for investigation of all
accidents and the public sharing of data from these reviews so
that all can learn from mistakes before they become major
problems. It allows the National Transportation Safety Board to
provide an independent and highly skilled investigation of any
accident at the request of the Secretary.
In order to fully enforce the safety requirements, the bill
imposes an inspection fee on industry participants to fully
fund enough well-trained inspectors to perform real and
meaningful inspections more often. It also increases sanctions
on poor operators, including increased civil and criminal
penalties applicable to those who violate the law, and the
financial responsibility requirements to ensure that those who
participate in development of the Outer Continental Shelf can
afford to pay for any damage that they cause.
The bill provides the department with adequate time to
carry out necessary reviews, clarifies the issues that need to
be addressed, makes the input of other Federal agencies occur
in a transparent way. The result should be better decisions
that will be capable of being implemented with greater
certainty.
I believe these principles and resources can set us on a
new and constructive path forward in managing the incredible
natural resources of the Outer Continental Shelf. I very much
appreciate the work of other Senators on this committee whose
work has been reflected in this legislation. I look forward to
working with all members of the committee as we try to move
forward here.
[The prepared statement of Senator Nelson follows:]
Prepared Statement of Hon. Bill Nelson, U.S. Senator From Florida,
on S. 3431
Chairman Bingaman, Ranking Member Murkowski, thank you for your
consideration of legislation intended to restore integrity in the
agency that regulates the oil industry.
Your leadership on this issue comes at a critical time. As we
grapple with the results of loosely regulated drilling, we must look
ahead to make sure a catastrophe like the Deepwater Horizon spill never
happens again.
It was two years ago that I first warned publicly that we could not
trust the oil companies seeking to drill in the waters off our most
protected coastlines, nor could we trust the federal watchdogs charged
with keeping a watchful eye over them.
I did so because the inspector general at the Department of the
Interior was releasing a scathing report about the Mineral Management
Service in the U.S. Department of the Interior and specifically an
office that manages revenue from offshore oil drilling, and it
concluded:
``We discovered a culture of substance abuse and promiscuity in .
. . in concert with the industry. Several staff admitted to illegal
drug use as well as illicit sexual encounters. Alcohol abuse appears to
have been a problem when program staff socialized with the industry.''
Now, we see the Deepwater Horizon disaster. President Obama has
ordered BP to pay for the cleanup. But Congress is the place where we
need enact laws to clean up the mess in our government's regulatory
house, and the Energy Committee is the place to start.
The BP disaster has pulled back the curtain on something far more
hidden than the oil on our beaches and in our marshlands: It's shown
the public how little control our drilling regulators exercised over
Big Oil.
Someone wrote this week that the Gulf coast crisis is about many
things--corruption, deregulation and our country's addiction to fossil
fuels. But behind it all, it's about the unbelievable sloppiness on the
part of our regulators and the willingness by too many to believe the
bogus claims by the oil industry that it had mastered technology.
It has taken the biggest environmental disaster in U.S. history, it
seems, but Congress is ready to crackdown on the government's buddy-
buddy relationship with the oil industry.
The legislation by Sen. Robert Menendez and I would prohibit
employees of the Interior Department's Minerals Management Service from
taking oil industry jobs within two years of leaving their federal
government posts. The goal is to limit the degree of influence that Big
Oil has had on those hired to keep the drillers in line.
Besides closing the revolving door on jobs, our revived measure
would also prohibit MMS regulators from receiving gifts or buying
stocks in the oil industry.
And the teeth in the bill?
It would impose jail time up to 15 years for regulators found
guilty of making fraudulent statements and misrepresentations.
As I said, we first introduced a similar proposal two years ago,
after the inspector general found widespread corruption in MMS. It's
time we act to make sure our government agencies serve the public,
instead of the oil industry.
Let me call on Senator Murkowski for her opening statement.
STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR
FROM ALASKA
Senator Murkowski. Thank you, Mr. Chairman. Good morning.
Yesterday, in the appropriations hearing, we had an
opportunity to have Secretary Salazar and Mr. Bromwich in front
of us, and the purpose of the hearing was on the realignment
within Minerals Management Services. We didn't hear really very
much about that realignment at that point in time.
I think Senator Dorgan was there with me. I think both of
us have more questions today. So this is a very good hearing,
very timely.
I want to recognize and thank Senator Brown for being here
to testify on his bill. It is among a growing number of
targeted pieces of legislation to address the various issues.
We have a couple of members, Senator Udall and Senator
Menendez, that will speak to theirs this morning as well.
But, Mr. Chairman, I want to thank you for reaching out to
work toward a bipartisan effort to reform the MMS into its
current division of two bureaus and one revenue office. It has
become clear, I think, that our inspectors have been spread
thin, both in terms of how many operations they must oversee,
but perhaps more importantly in the amount of knowledge that
they must maintain in order to know what to guard against as
the technology advances so quickly, particularly in the deep
water.
I strongly support giving the Secretary the tools of more
people and more education to do their jobs, and I think that
this bill advances that. Where I am perhaps most eager to hear
feedback today is from our witnesses on the second panel, who
can describe their views of how this new Bureau of Ocean Energy
will truly balance this Nation's oil and natural gas
requirements.
We recognize that these are just going to continue to
increase over the years. But we need to balance it with very
visible demand for environmental safeguards. This legislation
does add several new elements of review and consultation,
establishing stronger roles for scientists in the Department of
the Interior and giving the department much more time to review
exploration plans.
These are, in and of themselves, certainly not bad ideas,
but I do want to get assurances that the details of this
legislation and its likely interpretations will not result in
even greater uncertainty for the Gulf economy and the Nation as
a whole. I hope we are close to achieving that. So the point of
this hearing is to perhaps obtain some perspective on how
successful we have been at drafting this.
Mr. Chairman, we have had a hearing on the Deepwater
Horizon spill all but two of the weeks since it occurred in
April. The common denominator I think here in this committee is
that all of us have a lot of questions, and this is certainly
very much the case as we try to determine sound and reasonable
policies on how to manage the OCS moving forward.
With that, Mr. Chairman, I thank you and look forward to
the testimony this morning.
The Chairman. Thank you very much.
As Senator Murkowski indicated, in addition to the bill
that I have described, S. 3431, the hearing today also will
consider 3 other bills that are pending before the committee.
Let us see, the one introduced by Senator Menendez is S. 3431,
I gather. The one introduced by Senator Brown is S. 3509, or
maybe I have got the numbers confused here?
Senator Udall--S. 3516 is the bill that I described. S.
3431 is Senator Menendez's bill. S. 3497 is Senator Brown's
bill, and S. 3509 is Senator Udall's bill.
So, Senator Brown, why don't you go ahead and make whatever
statements you would like in support of your bill, and then we
will afford the same opportunity to Senator Menendez and then
Senator Udall.
STATEMENT OF HON. SCOTT BROWN, U.S. SENATOR
FROM MASSACHUSETTS
Senator Brown. Thank you, Mr. Chairman. Through you to the
members of the committee, I want to thank you all for your
leadership in trying to get a handle on what is obviously very
important issues affecting not only the Gulf, but obviously the
oil industry and many other industries throughout the country.
You have a very great responsibility.
Ranking Member Murkowski, thank you also for your guidance
in a lot of what we have been working on.
I am here, obviously, to talk about the Oil Spill
Prevention and Mitigation Improvement Act of 2010, and there
are other colleagues that I have great respect for that are
trying to do the same thing, and I am hopeful that between the
3 of us, we can potentially come up with a solid bill that will
aid and assist not only the committee, but obviously address
some of the very serious things that we are faced with today.
I am in cosponsorship with Senator Dianne Feinstein.
Senator Stabenow obviously recently jumped on as well. As you
know, for over 2 months, our country has watched as millions of
gallons of oil have washed up in the Gulf of Mexico after the
collapse of the Deepwater Horizon oil rig. Oil continues to
wash up on beaches along the Gulf Coast, covering wildlife,
destroying ecosystems, and further hurting the region's fragile
economy.
Efforts to stop the leak continue to hit a snag.
Significant roadblocks are common, and the oil keeps spewing
from the ocean floor. Just yesterday, we learned that the
undersea robot bumped a venting system, which forced BP to
remove the cap. They have since replaced the cap, but it just
shows how the leak isn't quite under control, as we are
learning every day. There is a universal agreement that this is
the worst man-made environmental disaster in our Nation's
history.
Even more troubling are the startling details emerging that
this all could have been avoided. BP was astonishingly
unprepared and ill-equipped to deal with the leak. Worse yet,
the Federal Government has acknowledged that oil companies have
not been held to the highest standards that we demand when it
comes to having a fail-safe response plan in place to deal with
spills in deep water. I find that unacceptable, Mr. Chairman. I
know you all do, too.
While everyone understands that accidents can certainly
happen, Americans are rightly furious that there was neither a
viable nor urgent response plan in place to stop the leak or
begin mitigating the damages. While no one expects people to
zip down there with a wetsuit to plug the leak, they do expect
the emergency mitigation plans to be executed in a timely
manner so they can protect the environmental impact that are
affecting many of the Gulf States now.
To address this glaring error, not only me, but my
colleagues have filed legislation that would require oil
companies to have a viable, peer-reviewed plan, a response plan
to respond to significant leaks. The objective outside
scientists and experts should be vetting these plans as well to
make sure that they are viable.
The fact that the Minerals Management Service approved the
existing boilerplate plans written by BP and the other major
oil companies--full of references to dead scientists and
nonexistent Gulf walruses--rightfully undermines our faith in
objective standards and proper regulation of this situation.
The act being proposed would require BP and other oil
companies to do due diligence and provide a thorough, feasible,
and peer-reviewed response plan before any new offshore
drilling lease can be issued. Specifically, these response
plans must also be certified by the Secretary of the Interior,
who obviously has his hands full right now, but he will have to
prescribe the means and timeline for containment of a spill and
be specifically tailored to depth and location where the
drilling occurs. This is an essential step for preventing other
types of disasters as we have seen here from happening in the
future.
What I believe frustrates the American people the most has
been the lack of a clear, concise response plan that utilizes
all available resources. We should have had the best and most
brilliant scientists and engineers, oil folks, citizens in the
world--administration officials, military in the world together
to stop this spill and figure out how to remedy the impacts of
this extreme environmental disaster.
To address this need, this legislation, Mr. Chairman, would
immediately use and redirect existing funds within the
Department of Energy's deepwater program to build a team
comprised of private sector engineers and experts from the
National Academy of Sciences and others to stop the leak and
mitigate the damage to wildlife, the environment, and
businesses in the region and recommend best practices moving
forward.
Obviously, we can't do--we have a problem. We have to stop
it right now. But we have to move forward and make sure that
this doesn't happen again. If it does, how do we deal with it
quickly and effectively?
Most importantly--well, I shouldn't say most importantly.
Finally, we should find out what went wrong. There has been
much confusion about what existing authorities and resources
the administration can and should be using to stop the spill
and protect the environment in the Gulf. Our bill would require
the GAO to investigate whether or not the administration has
used all existing authorities and resources to respond to the
spill and to make recommendations if new authorities are
needed.
As you know, Mr. Chairman, the estimates show that at least
80 million gallons of crude oil have leaked into our waters so
far, and the number keep climbing on a daily basis. We need to
do something to stop this. Equally important, we must put a
viable prevention and response plan in place to make sure that
we can react quickly and decisively should the unthinkable ever
happen again.
This Oil Spill Prevention and Mitigation Improvement Act,
along with other suggestions from my colleagues and your
efforts and those of the committee's, I am hopeful will take a
common-sense approach to do just that. I would just ask, Mr.
Chairman and members of the committee, that when you do so, you
include us together in a bipartisan manner to just solve the
problem. It is time to just move past the politics and just get
down to business because the people need it. Our environment
needs it. We can do better, and I am hopeful to be part of that
process.
Thank you, Mr. Chairman and members of the committee.
[The prepared statement of Senator Brown follows:]
Prepared Statement of Hon. Scott Brown, U.S. Senator From Massachusetts
Thank you Mr. Chairman and Ranking Member Murkowski for giving me
the opportunity to be here today and testify in support of the Oil
Spill Prevention and Mitigation Improvement Act of 2010, which I have
introduced with Senator Dianne Feinstein.
Mr. Chairman, for well over 2 months now our country has watched
millions of gallons of oil gush relentlessly into the Gulf of Mexico
after the collapse of BP's Deepwater Horizon oil rig. Oil continues to
wash up on beaches along the Gulf Coast, covering wildlife, destroying
ecosystems, and further hurting the region's fragile, recovering
economy. Efforts to stop the leak continue to hit significant
roadblocks and oil keeps spewing from the ocean floor. Just yesterday,
we learned that an undersea robot bumped a venting system, which forced
BP to remove the cap that had been containing some of the oil. This
morning we learned that the cap has been put back on but this incident
serves as another reminder of how we are not yet in control of the
leak. In total there is universal agreement that this is the worst
manmade environmental disaster in our nation's history.
Even more troubling are the startling details emerging that this
all could have been avoided. BP was astonishingly unprepared and ill-
equipped to deal with their leak. Worse yet, the federal government has
even acknowledged that oil companies have not been held to the highest
standards when it comes to having a fail-safe response plan to deal
with a spill in deepwater. While everyone understands that accidents
can happen, Americans are rightly furious that there was neither a
viable nor urgent response plan in place to stop the leak or to begin
mitigating the damage. There should have been one on day one.
To address this glaring error, our legislation would require that
oil companies have a viable, peer-reviewed response plan, to respond to
a significant leak. Objective outside scientists and experts should be
vetting these plans. The fact that the Mineral Management Service
approved the existing ``boiler plate'' plans written by BP and the
other major oil companies--full of references to dead scientists and
non-existent Gulf walruses--rightfully undermines our faith in
objective standards and proper regulation. The Oil Spill Prevention and
Mitigation Improvement Act would require BP and other oil companies to
do due diligence and provide a thorough, feasible, and peer-reviewed
response plan before any new offshore drilling lease can be issued.
Specifically, these response plans, which must also be certified by the
Secretary of the Interior, will have to prescribe the means and
timeline for containment of a spill and be specifically tailored to the
depth and location where drilling will occur. This is an essential step
to preventing another disaster like this in the future.
What I believe has frustrated the American people the most has been
the lack of a clear, cohesive response effort that utilizes all
available resources. We should have the best and most brilliant
scientists and engineers in the world working to stop the spill and
figure out how to remedy the impacts of this extreme environmental
disaster. To address this need, our legislation would immediately re-
direct existing funds within the Department of Energy's deepwater
program to build a team, comprised of private sector engineers and
experts from the National Academy of Sciences, to stop the leak and
mitigate the damage to wildlife, the environment, and businesses in the
region and to recommend best practices going forward.
Finally, we must find out what went wrong. There has been much
confusion about what existing authorities and resources the Obama
administration can and should be using to stop the spill and protect
the environment in the Gulf of Mexico. Our bill would require the
Government Accountability Office to investigate whether or not the
administration has used all existing authorities and resources to
respond to the Deepwater Horizon spill, and to make recommendations if
new authorities are needed.
Mr. Chairman, estimates show that at least 80 million gallons of
crude oil have leaked into our waters so far, and the numbers keep
climbing. We must do something to stop this. And equally important, we
must put viable prevention and response measures in place to react
quickly and decisively should the unthinkable happen again, and we are
faced with another oil spill of this magnitude in the future. The Oil
Spill Prevention and Mitigation Improvement Act is a common-sense
approach to do just that, and I am hopeful the Committee will take a
close look at it.
Thank you, again, for inviting me here today to testify on our
legislation. I applaud your efforts to take a serious look at this
issue and try to work constructively to put forward legislative
proposals to address the Deepwater Horizon disaster.
The Chairman. Thank you very much, Senator Brown, for your
proposed legislation. We certainly will consider the various
provisions in there in whatever work we are able to do.
Let me call on Senator Menendez to discuss his legislation,
which is also the subject of today's hearing.
STATEMENT OF HON. ROBERT MENENDEZ, U.S. SENATOR FROM NEW JERSEY
Senator Menendez. Thank you, Mr. Chairman, for holding an
important hearing.
I am grateful for the opportunity to discuss legislation
that I have coauthored with Senator Nelson of Florida to put a
halt to cozy relationships with big oil and fundamentally
reform the way we regulate big oil.
I want to briefly call the committee's attention to the
history of the creation of the Office of Thrift Supervision,
which oversees AIG and other financial institutions involved in
our current economic crisis, because I think the lessons
learned there apply to the challenges we face in regulating
these industries.
Back in the late 1980s, savings and loans institutions were
collapsing. The agency then regulating this industry, the
Federal Home Loan Bank Board, started getting a lot of
attention. Under public pressure, President Bush announced the
closure of the agency and the creation of a successor agency.
Attorneys from the office stepped out to watch the
President speak. When they got back to the office, memos were
waiting on their desks announcing the old agency had a new
name, the Office of Thrift Supervision. Sure, some of the rules
changed and some of the leadership got replaced, but the
culture of lax oversight, laissez faire, let the market control
itself attitude that helped contribute to our financial
meltdown largely stayed the same.
I want to make sure that what we do to regulate these
industries is more than just a name change. So, I think the
committee well knows that I have real concerns about the
expansion of offshore drilling as an inherently risky
enterprise, as we are seeing all too clearly in the BP disaster
in the Gulf. In my mind, expanded drilling means expanded risk.
But if we must drill, then I think we need real reform to
address the problems we know exist. There are a multitude, as
we have seen in several Interior Department Inspector General
reports that revealed shocking behavior by officials at the
Minerals Management Service during the last administration.
Beyond the sex and drug use that occurred, MMS employees
accepted gifts like sporting event tickets, hunting trips from
the very people they were supposed to oversee. One MMS
inspector conducted 4 inspections on oil platforms belonging to
a company that was attempting to and eventually did hire him.
Some MMS employees held outside employment with oil and gas
interests while on the job as regulators. As outrageous as it
may sound, inspectors actually allowed oil and gas personnel to
fill out platform inspection forms in pencil before the
inspectors traced them over in pen.
These cozy relationships are summed up in the attitude
displayed by the manager of MMS's Lake Charles, Louisiana,
office, who said, ``Obviously, we are all oil industry.''
``Obviously, we are all oil industry.'' I think you have to
think about that statement, and you have to think that that
simply has to change.
I am concerned, Mr. Chairman, that nothing seems to have
been learned yet. The AP--the New York Times, I should say,
reported yesterday that BP's Liberty project off the coast of
Alaska is being exempted from the moratorium on Arctic drilling
because the drilling rig will sit on an artificial island
connected to land by a causeway that BP built. That somehow
makes it an ``onshore project.''
But BP is going to drill under the Arctic Ocean, and it
will do so using a risky drilling technique that MMS itself
says is more prone to blowouts. That is bad enough. But then we
also learned that MMS regulators back in 2007 allowed BP to
write its own environmental review, which looks almost
identical to the Federal environmental review.
My legislation increases the penalties for these sorts of
false representations by regulators. How many of these sorts of
incidents do we need to uncover to get serious about the
integrity of how we regulate big oil?
The legislation I am proposing imposes tough, but obviously
necessary sanctions to end these cozy relationships. It
prohibits regulators from accepting gifts from industry,
increases the penalty for doing so. It closes the revolving
door by making it a felony for an oversight official to take an
industry job within 2 years of leaving the agency. It stiffens
the penalty for regulators making fraudulent statements or
false statements. It cracks down on financial conflicts of
interest by prohibiting regulators from working for industry at
the same time. It requires financial disclosure by senior
regulators. We think that those are all essential to create
integrity and an opportunity to have the public's confidence
restored.
I ask, Mr. Chairman, consent to enter into the record a
letter of the Project on Government Oversight that is
supporting this legislation. It is one of our good government
groups, and I appreciate that Senators Stabenow and Klobuchar
have joined us as cosponsors.
Senator Menendez. Finally, I know Secretary Salazar, from
the start of his tenure as Interior Secretary, has been
attempting to address ethics at MMS and continues to do so. I
appreciate and commend his efforts. But it seems to me that we
need to codify reform into law.
My concern is that a future administration may very well
not be as interested in keeping an arm's length relationship
between itself and big oil. So I hope and look forward to
working with the chairman as we incorporate some of these ideas
as we move forward to make sure that we have the integrity that
is necessary not just for integrity itself, but for the
purposes of ensuring that we have a system that ultimately does
not give us another situation as we have, another disaster as
we have in the Gulf.
The Chairman. Thank you very much for your statement in
support of the bill you have introduced.
Senator Udall, would you like to make a statement on your
bill?
STATEMENT OF HON. MARK UDALL, U.S. SENATOR
FROM COLORADO
Senator Udall. I would, Mr. Chairman. I am pleased that my
bill, the Safer Oil and Gas Production Research and Development
Act, is also going to be considered this morning. I want to
thank the chairman and Senator Shaheen for working with me on
this legislation.
The purpose of our bill is to prevent future disasters like
the one we are seeing unfold in the Gulf of Mexico. It focuses
existing Federal oil and gas research and development funds on
well safety and accident prevention. This oil spill has
highlighted many problems with the operation of the oil and gas
industry and the threat that accidents POSE to our families,
our economy, and of course, our environment.
While the industry has opened up new areas to oil and gas
production, developments in well safety and well control
technology have not always kept pace, and that is clearly
unacceptable. As you mentioned, Mr. Chairman and others, 11
people lost their lives during this tragedy, and we do not yet
know the full extent of the economic, health, and environmental
damage that will be caused by this ongoing spill.
Unfortunately, out of control wells are not a unique
circumstance, whether onshore or offshore. Over the last month,
two major onshore incidents also occurred--one in West Virginia
and another in Pennsylvania. Now it is clear, and I think we
are under no illusions, that oil is and will continue to be an
important energy source for us for many years to come,
especially for our transportation sector. But while we will
continue to drill for oil and gas, we cannot repeat the
mistakes, negligence, or recklessness that led to this
disaster.
We must learn from this accident and aggressively develop
better technology to stop these spills from happening in the
first place, both onshore and offshore. My bill would change an
existing oil and gas research and development program within
the Department of Energy to refocus it specifically on
technologies to improve the safety of exploration and
production activities, including well integrity, well control,
blowout prevention, and well plugging and abandonment.
In addition, the legislation requires that the Department
of Energy publish an annual update of the program's work and
outline recommendations for the implementation of its research
findings. This oversight is important so that we can ensure
this information is public, transparent, and readily available
to entrepreneurs and others who could further develop these
technologies.
I would also like to note, in addition to preventing future
accidents, we need to make sure that we are better prepared to
respond when they occur. In that spirit, I want to commend
Senator Shaheen for her work on an oil spill response research
and development measure. It is interesting--well, it is more
than interesting. It seems like the technologies we are using
are the same that we used back in the days of the Exxon Valdez.
So, to that end, she and the chairman and I have introduced
companion legislation to my bill that focuses on oil spill
containment, response, and cleanup. It is clear that the
industry was totally unprepared to respond to the BP disaster
once it happened, and we need to make sure that we have the
technologies in place to respond to future deepwater spills if
they happen. Senator Shaheen's bill would do just that.
This tragedy is a wakeup call that proves that we need to
begin changing the way we generate and consume energy. But
until we end our dependence on oil, we need to be smarter in
how we drill for it, and the two bills I have outlined will
take common-sense steps to improve drilling safety, prevent
accidents, and help ensure that if an accident does occur, we
are better prepared to respond.
Mr. Chairman, again, thank you for holding this important
hearing today.
The Chairman. Thank you. Thank you for putting your
legislation forward. I think there are very good provisions in
there, and I am glad to be a cosponsor.
Why don't we go ahead? Yes, Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman.
Before we move to recognize the Secretary and Mr. Bromwich,
I would like to recognize an individual in the audience today.
Fran Ulmer is with us from the State of Alaska. Fran has been
involved in our local governments for years, but she has just
recently been appointed by the President to serve on the oil
spill commission. So I appreciate her presence today and this
fact-finding mission.
Thank you.
The Chairman. Thank you for making that introduction.
Secretary Salazar, we welcome you back before our committee
and to this committee. Obviously, you are joined today by
Michael Bromwich, the new head of the Bureau of Ocean Energy
Management, Regulation, and Enforcement. We are anxious to hear
your views on some of the legislative proposals that we have
pending before the committee and get your input as to how we
should proceed.
So go right ahead.
STATEMENT OF HON. KEN SALAZAR, SECRETARY, DEPARTMENT OF THE
INTERIOR
Secretary Salazar. Thank you very much, Chairman Bingaman
and Senator Murkowski and Senator Udall and Senator Cantwell.
I am pleased to be joined here today by Mike Bromwich, who
is the new Director of the Bureau of Ocean Energy Management,
Regulation, and Enforcement. He obviously will be involved with
us as we move forward with the new organization beyond MMS.
Let me say at the outset in front of the committee that our
effort in the Gulf Coast continues. Our mission is simple. It
is to protect the Gulf and its people and the ecological
resources which are so important to our country and to the Gulf
Coast.
It continues to be our hope that out of this crisis, we
will see a catalyst for a safe program for Outer Continental
Shelf production. It is our hope that we will see out of this
crisis a catalyst for a Gulf Coast restoration program that
will be effective and can be put on steroids. It is our hope
that out of this crisis we will see a new conscience for
conservation, which this committee has supported in the past,
but which we need to move forward on in a major way in the 21st
century.
I want to just briefly tell the committee in terms of a
current update, the current leak containment levels are up
somewhere at between 25,000 to 27,000 barrels a day. There was
a short period yesterday where one of the recovery mechanisms
was down, and so for the last 24 hours, the total amount of oil
that was recovered was about 16,800 barrels. But the systems
are up and running, and hopefully, today we will see somewhere
26,000, 27,000 barrels of production of oil actually captured
from the Macondo well.
At the end of June, we are probably 4 or 5 days away from
having a capacity of 40,000 to 53,000 barrels. Our hope is that
when we get to that point, we will see whether we are starting
to capture 90 percent or upwards of the oil pollution.
Mid July, we will be at a capacity of 60,000 to 80,000
barrels of oil captured from the well. We have additional
capacity of another 10,000 that is being planned. Much of that
additional capacity has been brought about by BP as a result of
orders that we have issued, including work that Secretary Chu
and I have been doing with BP to make sure that there are plans
in place for redundancies, including plans in place that will
deal with the upcoming hurricane season.
As you know, the ultimate kill here will be when the relief
wells are drilled and the wells are killed, and those are on
track.
Now let me turn to the legislation in front of us and also
the reorganization effort. First, I am pleased with the people
who we have running the new Bureau of Ocean Energy Management.
We have moved beyond MMS. MMS is no more, and we will build on
the reforms of the last year to make sure that we have an
agency that has the capacity to provide the standards and
enforcement so that we can have safety with respect to
production in the OCS.
The personnel that will lead that effort and has been
leading that effort include Wilma Lewis, the Assistant
Secretary of Land and Minerals. She is a prosecutor, District
of Columbia prosecutor as U.S. attorney for many years, also
served as the Inspector General of the Department.
Today, we are joined by Mike Bromwich, appointed to run
what was MMS, now the new bureau. He has his own credentials,
including having served a number of years as Inspector General
for the Department of Justice, having been special counsel on
the Iran-Contra crisis, as well as having dealt with a number
of internal investigations during his time in the private
sector. He will be speaking a little bit more about his view of
the organization.
What I have tasked the Assistant Secretary and Director
Bromwich to work on is to build on the major reforms which we
have been working on very hard and very tirelessly for the last
year. Those reforms include ethics, making sure that we have
the right standards in place and the right enforcement, which
we started last January and have continued throughout the last
year. Those reforms have included the new Outer Continental
Shelf plan for oil and gas production, which we announced in
March of last year, and those reforms include moving forward
with standing up renewable energy in the Outer Continental
Shelf.
In conclusion, Mr. Chairman, the legislation that you have
in front of you, including the legislation which you have been
drafting, is a great step forward in helping us move forward
with an organization that addresses some of the difficult
issues that have faced MMS in the past, including dealing with
the separation of the parts of the agency that deals with
leasing and revenue collection from the parts of the agency
that deal with enforcement relative to both safety as well as
to environmental compliance.
So, we look forward to working with you to have organic
legislation for this agency, which carries on such important
missions for the United States of America--principally, the
oversight of energy production in the Outer Continental Shelf
in Federal waters and, second, the production of on average $13
billion a year for the United States of America.
Mr. Chairman, I would like to have, with your permission,
Mike Bromwich, on his first appearance before the committee,
also talk a little bit about himself and about some of his
vision for the new agency.
[The prepared statement of Secretary Salazar follows:]
Prepared Statement of Hon. Ken Salazar, Secretary, Department of the
Interior
Chairman Bingaman, Ranking Member Murkowski, and Members of the
Committee, I want to thank you for holding this hearing today as we
continue to address the issues and challenges associated with the
continuing reform of the Department of the Interior's offshore energy
program.
Before we begin, I want to introduce Michael R. Bromwich, the new
Director of the Bureau of Ocean Energy Management, Regulation, and
Enforcement. His impressive background includes time as the Inspector
General of the U.S. Department of Justice, as an Assistant U.S.
Attorney, and since 1999, as an attorney in private practice. His
extensive experience in government and the private sector in improving
the way organizations work make him an ideal choice to lead the
restructuring and reform of the Department's offshore energy program.
For the same reasons I chose Michael Bromwich for this position, I
chose Wilma Lewis who oversees the Department's energy bureaus as the
Assistant Secretary for Land and Minerals Management. A former U.S.
Attorney for the District of Columbia and Inspector General at the
Department, Wilma has played a central leadership role in some of the
most significant reforms during my tenure as Secretary. She has helped
shape reforms ranging from our new approach to offshore oil and gas
leasing and a new emphasis on renewable energy development on the Outer
Continental Shelf, to ethics reform, to the enhancement of leasing
programs and the development of renewable energy programs onshore, to
support for our study of policies designed to ensure fair return to
American taxpayers for the development of public oil and gas resources.
I have also appointed her to chair the Safety Oversight Board in the
aftermath of the Deepwater Horizon oil spill, and to help spearhead the
reorganization of MMS toward a new future.
Offshore Energy Reforms Completed
Although this unprecedented disaster, which resulted in the tragic
loss of life and many injuries, is commanding our time and resources,
it has also strengthened our resolve to continue reforming the OCS
program.
The reforms we have embarked on over the last 17 months, and upon
which we will continue to build, are substantive and systematic, not
cosmetic. The kind of fundamental changes we are making do not come
easily and many of the changes we have already made have raised the ire
of industry. Our efforts at reform have been characterized by some as
impediments and roadblocks to the development of domestic oil and gas
resources. We believe, however, that they are crucial to ensuring that
we carry out our responsibilities effectively, without compromise, and
in a manner that facilitates the balanced, responsible, and sustainable
development of the resources entrusted to us.
To review the reforms we have undertaken:
First, we focused our efforts on ethics and other concerns that had
been raised in the revenue collection side of the MMS. We began
changing the way the bureau does business and took concrete action to:
upgrade and strengthen ethics standards throughout MMS and
for all political and career employees;
terminate the Royalty-in-Kind program to reduce the
likelihood of fraud or collusion with industry in connection
with the collection of royalties; and
aggressively pursue continued implementation of the
recommendations to improve the royalty collection program that
came from the Department's Inspector General, the Government
Accountability Office, and a committee chaired by former
Senators Bob Kerrey and Jake Garn.
Second, we started reforms of the offshore oil and gas regulatory
program, which included actions to:
initiate in Fall 2009 an independent study by an arm of the
National Academy of Engineering to examine how we could upgrade
our inspection program for offshore rigs;
procure substantial increases in the MMS budget for FY 2010
and FY 2011, including a ten percent increase in the number of
inspectors for offshore facilities; and
develop a new approach to on-going oil and gas activities on
the OCS aimed at promoting the responsible, environmentally
sound, and scientifically grounded development of oil and gas
resources on the Outer Continental Shelf.
In that effort, we cancelled the upcoming Beaufort and Chukchi
lease sales, removed Bristol Bay altogether from leasing under the
current 5 year plan, and removed the Pacific Coast and the Northeast
entirely from any drilling under a new 5 year plan. We made clear that
we will require full environmental analysis through an Environmental
Impact Statement prior to any decision to lease in any additional
areas, such as the mid and south Atlantic, and launched a scientific
evaluation, led by the Director of USGS, to analyze issues associated
with drilling in the Arctic.
Third, we laid the groundwork for expanding the mission of MMS
beyond conventional oil and gas by devoting significant attention and
infusing new resources into the renewable energy program, thereby
providing for a more balanced energy portfolio that reflects the
President's priorities for clean energy. Toward that end, we took
action to:
finalize long-stalled regulations that define a permitting
process for off-shore wind--cutting through jurisdictional
disputes with FERC in the process and ultimately approving the
Cape Wind project;
announce the establishment of a regional renewable energy
office, located in Virginia, which will coordinate and
expedite, as appropriate, the development of wind, solar, and
other renewable energy resources on the Atlantic Outer
Continental Shelf; and
commence discussions and enter into an MOU with governors of
East Coast states, which formally established an Atlantic
Offshore Wind Energy Consortium to promote the efficient,
orderly, and responsible development of wind resources on the
Outer Continental Shelf through increased Federal-State
cooperation.
Offshore Energy Reforms and Related Activities Underway
Since the Deepwater Horizon explosion and oil spill, the reforms
and associated efforts have continued with urgency, with particular
focus on issues raised by, and lessons being learned from, the
circumstances surrounding the event. We are aggressively pursuing
actions on multiple fronts, including:
inspecting all deepwater oil and gas drilling operations in
the Gulf of Mexico and issuance of a safety notice to all rig
operators;
implementing the 30 day safety report to the President,
including issuing notices to lessees on new safety
requirements, and developing new rules for safety and
environmental protection; defending the moratorium on new
deepwater drilling, which is currently the subject of
litigation; and
implementing new requirements that operators submit
information regarding blowout scenarios in their exploration
plans--reversing a long standing exemption that resulted from
too much reliance on industry to self-regulate.
Additional reforms will be influenced by several ongoing
investigations and reviews, including the Deepwater Horizon Joint
Investigation currently underway by the Bureau of Ocean Energy
Management, Regulation and Enforcement, and the United States Coast
Guard. In addition, at my request, a separate investigation is being
undertaken by the National Academy of Engineering to conduct an
independent, science-based analysis of the root causes of the oil
spill. I also requested that the Inspector General's Office undertake
an investigation to determine whether there was a failure of MMS
personnel to adequately enforce standards or inspect the Deepwater
Horizon.
Further, on April 30th I announced the formation of the Outer
Continental Shelf Safety Oversight Board to identify, evaluate and
implement new safety requirements. The Board, which consists of
Assistant Secretary for Land and Minerals Management Wilma A. Lewis,
who serves as Chair, Assistant Secretary for Policy, Management and
Budget Rhea Suh, and Acting Inspector General Mary Kendall, will
develop recommendations designed to strengthen safety, and improve
overall management, regulation, and oversight of operations on the
Outer Continental Shelf.
Finally, the President established the independent bipartisan
National Commission on the BP Deepwater Horizon Oil Spill and Offshore
Drilling tasked with providing options on how we can prevent and
mitigate the impact of any future spills that result from offshore
drilling. The Commission will be focused on the environmental and
safety precautions we must build into our regulatory framework in order
to ensure an accident like this never happens again, taking into
account the other investigations concerning the causes of the spill.
Supplemental Legislation
The Administration will make sure that BP and other responsible
parties are held accountable, that they will pay the costs of the
government in responding to the spill, and compensation for loss or
damages that arise from the spill. We will do everything in our power
to make our affected communities whole. As a part of the response
efforts, we expect to spend a total of $27 million through June 30,
2010 for Interior's response activities.
As part of our reforms, we are also building on the efforts we
undertook in the last sixteen months to strengthen the OCS budget. As I
already mentioned, the 2011 budget includes a ten percent increase in
the number of inspectors. Our restructuring of the OCS program will
require additional resources to aggressively pursue the reforms I
outlined earlier, to implement the 30 day report to the President, and
to potentially address the results of ongoing investigations and the
President's Commission. We are currently hiring an additional twelve
inspectors, six more than we proposed in the 2011 budget, and we are
taking other actions that are outlined in the 30 day report to the
President. Over the course of the next several years, our restructuring
of a more robust OCS regulatory and enforcement program will dictate
the need for engineering, technical, and other specialized staff.
The President's supplemental request of May 12, 2010 includes $29
million that will fund the near term resources we need for these
activities. I appreciate the Senate's prompt action in passing the
supplemental on May 27. As you know, it is critically needed to support
our full and relentless reforms--to bolster inspections of offshore oil
and gas platforms, draft enforcement and safety regulations, and carry
out environmental and engineering studies. The President's request
included a proposal to extend the time allowed by statute for review
and approve of oil and gas exploration plans from 30 to 90 days--this
is also needed and I hope Congress will include it in the final version
of the supplemental.
Reorganization of the Minerals Management Service
On June 15, I appointed Michael R. Bromwich as the Director, of the
Bureau of Ocean Energy Management, Regulation and Enforcement. Michael
will lead us through the reorganization--the foundation for the reforms
we have underway. He will lead the changes in how the agency does
business, implement the reforms that will raise the bar for safe and
environmentally sound offshore oil and gas operations, and help our
Nation transition to a clean energy future.
Michael will join the team that has been working out the details of
the reorganization. In a May 19 Secretarial Order I tasked Rhea Suh,
the Assistant Secretary for Policy, Management and Budget, Wilma Lewis,
the Assistant Secretary for Land and Minerals Management, and Chris
Henderson, one of my senior advisors to develop a reorganization plan
in consultation with others within the Administration and with
Congress. The report will provide the plan to restructure the Bureau of
Ocean Energy Management, Regulation and Enforcement in order to
responsibly address sustained development of the Outer Continent
Shelf's conventional and renewable energy resources, including resource
evaluation, planning, and other activities related to leasing;
comprehensive oversight, safety, and environmental protection in all
offshore energy activities; and royalty and revenue management
including the collection and distribution of revenue, auditing and
compliance, and asset management.
The Deepwater Horizon tragedy and the massive spill have made the
importance and urgency of a reorganization of this nature ever more
clear, particularly the creation of a separate and independent safety
and environmental enforcement entity. We will responsibly and
thoughtfully move to establish independence and separation for this
critical mission so that the American people know they have a strong
and independent organization ensuring that energy companies comply with
their safety and environmental protection obligations.
The restructuring will also address any concerns about the
incentives related to revenue collections. The OCS currently provides
nearly 30 percent of the Nation's domestic oil production and almost 11
percent of its domestic natural gas production and is one of the
largest sources of non-tax and non-trust revenue for the Treasury. The
MMS collected an average of more than $13 billion annually for the past
5 years. There will be clear separation between the entities that
collect and manage revenue and those that are responsible for the
management of the OCS exploration and leasing activities.
Sustained Response Efforts in the Gulf
Of utmost importance to us is the oil spill containment and clean
up of the Gulf. I have returned to the Gulf Region numerous times to
witness the work Departmental staff and volunteers are carrying out to
protect the coasts, wetlands, and wildlife threatened by this spill. We
have deployed approximately 1,000 employees to the Gulf and they are
directing actions to contain the spill; cleaning up affected coastal
and marine areas under our jurisdiction; and assisting Gulf Coast
residents with information related to the claims process, health and
safety information, volunteer opportunities, and general information on
the efforts being carried out in the region.
Under the direction of National Incident Commander Admiral Thad
Allen, the Flow Rate Technical Group, which is led by U. S. Geological
Survey Director Dr. Marcia McNutt, and a scientific team led by Energy
Secretary Steven Chu recently announced an improved estimate of how
much oil is flowing from the leaking well. That estimate, suggests that
the flow rate is at least 35,000 barrels per day, based on the improved
quality and quantity of data that are now available.
The Department's senior staff continues to offer coordination and
guidance to the effort. Deputy Secretary David J. Hayes is devoting his
time to coordinating the many Gulf-related response activities we are
undertaking. Assistant Secretary for Fish, Wildlife and Parks Tom
Strickland has been leading the Department's efforts for onshore and
near shore protection. National Park Service Director Jon Jarvis and
Acting Director of the Fish and Wildlife Service Rowan Gould continue
to supervise incident management personnel and activities that their
bureaus are taking to respond to the spill and clean up oil impacts. To
protect the eight national parks and 36 wildlife refuges and the
numerous wildlife, birds, and historic structures they are responsible
for in the Gulf of Mexico, the NPS and FWS dispatched approximately 590
employees.
Representatives from the FWS also participated with the U.S. Coast
Guard, the Environmental Protection Agency, and state and local
governments in a series of public meetings with local residents to
answer questions and offer information on a variety of topics related
to the spill and response activities.
Finally, there are many, many people in the Department who are
devoting significant time and energy to this event; to the various
investigations and inquiries, both within the Administration and in
Congress, that are being carried out; and to the ongoing reorganization
and reform. I want to acknowledge their work and let them know their
efforts are appreciated and are not going unnoticed.
In the last 60 days we have also seen what the employees in the
Bureau of Ocean Energy Management, Regulation and Enforcement are
capable of, their professionalism, their dedication to the Department,
and their enthusiasm for the reforms underway. With Michael's help we
will be able to cast aside the shadow on the many dedicated employees
that has been left by an errant few, and by previous policies that have
prioritized production over ethics, safety, and environmental
protection.
Legislative Efforts at Reform
All four of the bills before you today address reform of the
Department's offshore energy and mineral resource development program.
I would like to provide you some general comments on each of these
bills and a few provisions in particular.
Your legislation, Mr. Chairman, S. 3516, the ``Outer Continental
Shelf Reform Act,'' would provide general organic authority for the
restructuring of the offshore energy and minerals program in the
Department and would make additional changes reforming some of the
underlying laws governing management of these resources.
I have previously testified in support of organic legislation for
the functions performed by MMS, noting that an organization with such
important responsibilities should be governed by a thoughtfully
considered organic act. It is important for organic legislation to
provide the Secretary with the discretion to implement the details of a
reorganization as complicated as this.
The provisions in S. 3516 authorizing the creation of the three new
entities are consistent with the changes I have directed in my
Secretarial Order. The report and schedule for implementation that I
will receive on July 9th will provide a detailed roadmap for this
reorganization and will greatly inform the process. The Administration
would like to continue discussion with the Committee regarding the
specifics in this legislation of the appointment and confirmation of
the new bureau and office directors.
A number of the changes contained in this bill highlight the need
for increased safety of operations and consideration of the marine and
coastal environment, including the need for integrated programs for
both environmental research and technological research and development.
In this same vein, S. 3509, the ``Safer Oil and Gas Production Research
and Development Act'', would amend certain research and development
provisions contained in the Energy Policy Act of 2005 to provide an
additional focus on research and development on safety and reduced
environmental impacts from development of these resources.
A focus on strengthened safety and oversight and the environmental
impacts of offshore oil and gas operations are priorities of the
Administration. These issues, and several others in the bills before
you today, will require the Department to work closely with the
Committee and other relevant federal agencies to ensure a coordinated
approach to attaining these important objectives.
S. 3516 also includes new planning requirements, including a
requirement for detailed descriptions of equipment and plans to address
potential well blowouts. S. 3497, the ``Oil Spill Prevention and
Mitigation Improvement Act,'' includes a similar focus, amending the
Outer Continental Shelf Lands Act to require that leases entered into
under that Act include a plan for containment and termination of
discharges of oil, and a timeline for accomplishing those actions.
Recognizing the importance of this information, on June 18, 2010,
the Department issued a Notice to Lessees (NTL) requiring that new
filings for drilling permits, exploration plans, or development plans
to contain information specifically addressing the possibility of a
blowout and the detailed steps that lessees or operators would take to
prevent blowouts. This reverses a 2003 policy and a 2008 NTL that
exempted many offshore oil and gas operations in the Gulf from
submitting certain information about such a scenario and is consistent
with the requirements contained in these bills.
S. 3516 would also extend the deadline for the Department to review
and approve exploration plans; require that lessees obtain a drilling
permit after approval of an exploration plan; and require that, prior
to approval of such a permit, an engineering review of the well system
be completed and reviewed. The Administration supports authority to
provide for longer review time and for stronger reviews of exploration
plans prior to drilling. We would like to work with the Committee on
this important issue.
We are also supportive of the changes in S. 3516 intended to
strengthen civil and criminal penalties contained in the OCSLA. These
provisions are generally consistent with the support for increasing
these penalties that Deputy Secretary Hayes expressed before this
Committee on May 25th.
It is also important to provide the Department with the tools
necessary to appropriately staff critical and hard-to-fill positions in
these new entities. We look forward to continuing the dialog on this
issue, as well.
Strengthening the Way We Do Business
Over the past several weeks I have talked about the many ways we
have changed the direction of the MMS, both programmatically and
structurally. S. 3431 would change laws governing ethical standards and
fraudulent statements by MMS employees.
I have already mentioned the actions in this regard that I ordered
last year. I am also pleased to have two former Inspectors General, in
Michael Bromwich and Wilma Lewis, to help lead our reform efforts. But
my interest in strengthened ethics standards isn't limited to employees
of the MMS. President Obama made it clear from the earliest days of
this Administration that ethical behavior, among both political and
career employees, was to be held to a premium standard. On January 26,
2009, I issued a memorandum to all employees regarding the high ethical
standards with which we were all expected to carry out our duties. I
also directed the Department's Ethics Office to review Department-
specific regulations and recommend areas where improvements could be
made. On August 19, 2009, I issued a Secretarial Order laying out
additional clarifications to enhance and promote a stronger ethical
culture at the Department.
S. 3431 would codify portions of the new standards made applicable
to MMS employees in January 2009. The Department's Ethics Office is
currently preparing updates to statutory language, including updates to
provisions applicable to Departmental offices and to lands and energy
and mineral development programs. I look forward to working with you
and the sponsor as we move to modernize these important obligations.
Conclusion
Much of my time as Secretary of the Interior has been spent working
to promote reform of prior practices in the Minerals Management Service
and to advance the President's vision of a new energy future that will
help us to move away from spending hundreds of billions of dollars each
year on imported oil. A balanced program of safe and environmentally
responsible offshore energy development is a necessary part of that
future. We are also involved in a multi-agency process to develop a new
national ocean policy that is intended to look ahead in the long term
to help the United States think comprehensively about how we make
better informed management decisions regarding the use and conservation
of ocean, coastal, and Great Lakes resources.
As we evaluate new areas for potential exploration and development
on the OCS, we will conduct thorough environmental analysis and
scientific study, gather public input and comment, and carefully
examine the potential safety and spill risk considerations. The
findings of the Joint Investigation and the independent National
Academy of Engineering will provide us with the facts and help us
understand what happened on the Deepwater Horizon. Those findings, the
work of the Outer Continental Shelf Safety Oversight Board, the OIG
investigation and review, and the findings of the Presidential
Commission will help inform the implementation of the Administration's
comprehensive energy strategy for the OCS.
We are taking responsible action to address the safety of other
offshore oil and gas operations, further tightening our oversight of
industry's practices through a package of reforms, and taking a careful
look at the questions this disaster is raising. We will also work with
you on legislative reforms and the finalization of a reorganization
that will ensure that the OCS program is effectively managed to achieve
these goals.
Lastly, let me assure you this Administration will continue its
relentless response to the Deepwater Horizon tragedy. Our team is
committed to help the people and communities of the Gulf Coast region
persevere through this disaster, to protect our important places and
resources, and to take actions based on the valuable lessons that will
help prevent similar spills in the future.
The Chairman. We are glad to have you here, Mr. Bromwich.
Why don't you go right ahead? We are glad to hear from you.
STATEMENT OF MICHAEL R. BROMWICH, DIRECTOR, BUREAU OF OCEAN
ENERGY MANAGEMENT, REGULATION AND ENFORCEMENT, DEPARTMENT OF
THE INTERIOR
Mr. Bromwich. Thank you very much, Chairman Bingaman and
other distinguished members of this committee.
I will be very brief. There is a prepared statement that
has been submitted that describes and summarizes my background
and my credentials.
As I think you know, I was sworn in on Monday. So this is
day 4 on the job for me. I am only beginning to understand the
agency and the substantive issues that I will be having to deal
with over the next weeks and months. It has been a quick
immersion process. So I am getting there, but it will take a
little while until I am the master of many of the substantive
issues that I know you and other members of the committee care
about.
I have been a lawyer for 30 years. As the Secretary
mentioned, I was the Inspector General for the Department of
Justice for 5 years. This is a set of challenges at the
Department of the Interior that I look forward to embracing and
meeting.
The truth is I knew comparatively little about the agency
until I was asked to take this position a couple of weeks ago.
But I am determined to learn fast. Let me very briefly mention
a couple of the changes that have already been made. I think
the Secretary mentioned the change of name. I think that is
much more than cosmetic. That is substantive.
Regulation and enforcement have been added to the title of
the agency because those elements, I think by consensus, have
been lacking in the approach of the agency. I am determined to
strengthen those functions, and I thought there was no better
way to do it, in consultation with the Secretary, than to put
those words in the name to underscore the point.
The second thing that I have done is to create a new unit,
which was approved, I am thankful to say, incredibly rapidly by
the Secretary to create an investigations and review unit in
the front office of my agency that will enable me to use it as
a SWAT team to investigate allegations that are made both
against personnel in my agency, but also with respect to the
companies that my agency regulates.
We are going to be hiring some of the top people available.
In the meantime, I am hoping to get on detail people from the
Department of Justice with whom I have worked in the past and
perhaps other people in Government so that we will be able to
get up and running immediately to address some of the very
significant issues that are on my plate right now.
So I look forward to working with all of the members of
this committee to deal with the challenges that my agency faces
and look forward to answering any questions you may have.
[The prepared statement of Mr. Bromwich follows:]
Statement of Michael R. Bromwich, Director, Bureau of Ocean Energy
Management, Regulation and Enforcement, Department of the Interior
Thank you, Chairman Bingaman, Ranking Member Murkowski, and Members
of the Committee for the opportunity to be here today with Secretary
Salazar. I appreciate being included in this hearing and being part of
the discussions about reorganization of the Outer Continental Shelf
program.
Overview
My appointment as the new Director started on Monday, and therefore
I have had only a short amount of time to begin to understand the
Bureau's programs, operations, and challenges. I would like to take my
time to introduce myself and give you an overview of my vision and
goals.
When the President and Secretary Salazar asked me to take this
assignment, I was a partner in the firm of Fried Frank. I headed the
firm's Internal Investigations, Compliance and Monitoring practice
group and concentrated on conducting internal investigations for
private companies and other organizations; providing monitoring and
oversight services in connection with public and private litigation and
government enforcement actions; and representing institutions and
individuals in white-collar criminal and regulatory matters. I also
provided crisis management assistance and counseling.
Even while in private practice I have had significant experience
with turning around troubled government agencies. I served for six
years as the Independent Monitor for the District of Columbia's
Metropolitan Police Department and had just begun performing the same
role for the Virgin Islands Police Department, which involved
overseeing sweeping reforms of those Departments' use of force
programs. I also conducted a comprehensive investigation of the Houston
Police Department's Crime Lab and provided HPD with extensive
recommendations for reforming its Crime Lab, which had a long history
of very serious problems.
In the private sector, I have conducted many major internal
investigations for companies, including in the energy industry;
reviewed the compliance programs and policies of major companies in a
variety of industries, conducted extensive field reviews of such
programs and made recommendations for their improvement; and
represented companies and individuals in state and federal enforcement
proceedings and criminal investigations.
From 1994 to 1999, I was the Inspector General for the Department
of Justice. I conducted special investigations into allegations of
misconduct, defective procedures and incompetence in the Federal Bureau
of Investigation Laboratory; the FBI's conduct and activities regarding
the Aldrich Ames matter; the handling of classified information by the
FBI and the Department of Justice in the campaign finance
investigation; the alleged deception of a Congressional delegation by
high-ranking officials of the Immigration and Naturalization Service;
and the Justice Department's role in the CIA crack cocaine controversy.
From 1987 through 1989, I served as Associate Counsel in the Office
of Independent Counsel for Iran-Contra. In January through May 1989, I
was one of three courtroom lawyers for the government in the case of
United States v. Oliver L. North. I supervised a team of prosecutors
and law enforcement agents that investigated allegations of criminal
misconduct against government officials and private citizens in
connection with provision of aid to the Contras in Nicaragua and
serving as overall coordinator of the Iran-Contra grand jury.
From 1983 to 1987, I served as an Assistant U.S. Attorney in the
U.S. Attorney's Office for the Southern District of New York. During my
tenure, I tried many lengthy and complex cases and argued many
appellate matters before the Second Circuit. I served as Deputy Chief
and Chief of the Office's Narcotics Unit.
From those experiences dealing with many organizations and
institutions, I have accumulated substantial experience in seeing what
works and what does not in organizations. I have had experience leading
government agencies, as well as reviewing the leadership styles in many
agencies. Based on that experience, I am confident that I can lead this
organization and implement the changes that are necessary.
Bureau of Ocean Energy Management, Regulation and Enforcement
As I said, I began my service as the Director, Bureau of Ocean
Energy Management, Regulation and Enforcement on June 21, 2010. So far,
my understanding of the events surrounding the Deepwater Horizon
catastrophe are primarily based on the news coverage, what I have read,
and initial conversations with Department of the Interior personnel.
Therefore, my knowledge of the Bureau, its employees and its programs
is at a very early stage.
I look forward to becoming well-versed in the complex regulatory
regime governing offshore oil and gas exploration and drilling and the
nation's emerging and promising offshore renewable programs. It already
is apparent that the programs that this Bureau manages are
technologically complex and involve a highly specialized workforce. As
an agency, we will be thinking carefully about, and proceeding quickly
with, reforming the way the Bureau does business and oversees energy
exploration and development.
My goal is to develop a set of recommendations for the Secretary
and the President that will improve the way the organization works. I
am committed to eliminating improper incentives and influences,
creating a culture for the OCS program that is devoted to vigorous and
effective regulation and enforcement, and establishing the Bureau as an
agency that is focused on safety and environmental protections. To
provide us with the capacity to meet these commitments, I announced
yesterday the establishment of an investigations and review unit within
the Bureau that can act quickly and will report directly to me.
I understand that the Department has been conducting an extensive
analysis of the organization, its programs, and best practices in other
countries and other agencies. I will take advantage of the work that
has already been done. We expect to release a plan in the coming weeks
that will guide the reorganization. I look forward to talking with you
and getting your input to educate this process.
These are important issues for the President, the Congress and the
Nation. Under Interior's management, the Outer Continental Shelf
currently provides 30 percent of the Nation's domestic oil production
and almost 11 percent of its domestic natural gas production. The
Nation currently relies on the OCS program to continue to make
available the energy resources that we and our economy need. I look
forward to the challenges ahead, and to ensuring that we manage the
development of the Nation's energy resources, while at the same time
enforcing the law and aggressively regulating oil and gas exploration
and drilling to ensure that this activity is conducted in a manner that
is safe for workers and the environment.
The Chairman. Thank you very much.
Let me start with some questions, Secretary Salazar and Mr.
Bromwich. First, let me just comment I think it is refreshing
to have a witness before the committee acknowledging his need
to learn. We don't have a lot of those witnesses, and I
appreciate that attitude.
Let me focus on the legislation that we have put forward,
Senator Murkowski and I and Senator Dorgan, Senator Stabenow
here, that we are considering today. I think that I appreciate
your statement that it is moving in the right direction and
will strengthen the ability of the department to carry out its
responsibilities.
I guess that one obvious question relates to the level of
resources needed to really ensure safety in the Outer
Continental Shelf and to make the kind of systemic change that
we are trying to bring about, that you are trying to bring
about, and we are trying to support bringing about through this
legislation. How many inspectors does the department now have
working on this set of issues, and how many do you think we
will need? Or is that something that is still being determined?
Secretary Salazar. Chairman Bingaman, we are in the process
of looking at exactly what the new organization will look like
and the number of inspectors. But let me just say that over the
last 2 years, we essentially changed the budgets for MMS to try
to bring in additional people to help us with inspection and
enforcement and have had about a 10 percent growth relative to
the inspection and enforcement capacity of MMS.
Having said that, in my view, it is insufficient. Today,
there are authorized some 62 inspectors to essentially provide
the inspection capacity for nearly 4,000 production facilities
and all the other activities in the Gulf of Mexico. It is
extraordinarily and woefully inadequate. Our view,
preliminarily, having taken a look at the matter, is that we
will need an additional approximately 330 FTE in the areas of
inspection and enforcement and environmental compliance.
We had a hearing yesterday in front of Senator Feinstein's
committee, the Subcommittee in Appropriations on Interior, and
had a conversation about the need to have these additional
resources. My conclusion is that without a doubt, the need to
have a robust agency that can go out and do the proper level of
inspections and the proper level of enforcement cannot be done
with the resource levels that MMS has today.
The Chairman. Let me ask the circumstance of this
particular disaster are that BP has the financial wherewithal
to come forward and pledge $20 billion to address the effects
of this accident. Obviously, there are other companies that
operate in the OCS who may not have been in a position to do
this.
Our bill increases your authority as Secretary to require
demonstration of financial responsibility by companies that
operate in the OCS. Do you think that the authority we are
proposing in this legislation is adequate to ensure that all of
the operators that are permitted can, in fact, cover whatever
damages they cause?
Secretary Salazar. I believe the legislation, Senator
Bingaman, is moving in the right direction. Obviously, BP is
one of the largest companies in the world, third and fourth by
most measures that I have seen, last year with a profit of $16
billion.
So, this herculean effort that is underway in the Gulf
today, which includes over 30,000 personnel, over 6,000 vessels
responding to the oil spill, and the major technological and
engineering effort, which we have likened to that of Apollo 13,
which is taking place subsea, would not be happening, frankly,
if they did not have the kinds of resources that they have.
So I think the demonstration of financial ability to be
able to respond to this kind of a circumstance is something
that we need to have. So I think the legislation is correct on
that point.
The Chairman. Let me ask one other question on coastal
restoration, which I know is an issue that Senator Landrieu is
very focused on and so are others here in the Senate. What
structure does the administration plan to put in place to
accomplish coastal restoration? Would the effort be structured
along the lines of Everglades restoration, or is this a very
different circumstance which requires a very different
structure? Or has that decision been made?
Secretary Salazar. Chairman Bingaman, the decision has not
yet been made. We have had meetings with Secretary Mabus. The
President has made it very clear that our end goal here is to
have a better Gulf, that it will be restored to a condition
that was better than it was before April 20th. We are very
committed to doing that.
The exact mechanism by which that will be done is something
that we are still working on. I will say this, that when you
look at all of the ecosystem restoration projects that are
underway all across this country, many of them now 20 or 30
years old, probably the only one that we can herald as a major
success has really been the Everglades, where we are truly
restoring the river of grass. There are some in Washington as
well, Senator Cantwell, and a few others around the country.
So that is the kind of template that I think should be
considered, and we may want to come and work with this
committee and to work with the Senate to see how it is that we
might be able to create a Gulf Coast restoration authority so
that we don't end up essentially being caught up in the kind of
paralysis that sometimes affects restoration projects where you
simply are not able to move with the kind of speed to achieve
what the President's goals are here.
The President is clear. He wants action, and he wants to
have the Gulf Coast left in a better place than it was on April
the 20th. In order to do that, one has to be cognizant of the
history.
Senator Landrieu and I spent time flying over the
marshlands and wetlands of Louisiana long before this event
happened, and you can see the degradation that has occurred
there, decade after decade after decade. Frankly, many plans
have been put forward on how you restore the Gulf Coast, but at
the end of the day, little action has been taken.
So Secretary Mabus, at the direction of the President,
working with me and with Administrator Jackson and others, will
put together a plan that ultimately will deliver to make the
Gulf Coast better.
The Chairman. Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman.
Welcome, and good morning, Secretary.
I appreciate your comments about the legislation that we
have been working on. In your opinion, is there any reason that
we would hold off in advancing a bill like this restructuring
as we await the outcomes of the investigation of the
Presidential commission?
Secretary Salazar. No, Senator Murkowski. I think this kind
of legislation has been long in coming, and it should have come
long ago. An agency that has such a herculean mission for the
American people is one that should have organic legislation.
So, it is absolutely the right thing to do. It is the right
time to do it, and it ought to be done.
I would ask the chairman and the ranking member and members
of the committee to work with us, and I know the chairman wants
to do a markup on this bill I think next week. As I work with
Michael and I work with the team that has been working on
this--Rhea Suh, who is the Assistant Secretary of Policy,
Management, and Budget, and Chris Henderson in my office--to
try to pull this together in a way that ultimately will make
sense, what you have in front of you in your bill is a very
good bill. But I want to make sure that Mike Bromwich has an
opportunity also to provide his input so that we have an agency
at the end of the day that you have legislated, that will have
the organic legislation to enable it do the job we all want it
to do.
Senator Murkowski. Let me ask you this, Mr. Bromwich. It
came up in the Appropriations hearing yesterday. I believe it
was Senator Alexander that noted that as we are dealing with
the crisis in the Gulf, we are all learning that there is an
awful lot of players that have a piece of jurisdiction and
oversight. It is not just MMS. It is the Coast Guard. It is the
alphabet soup of all the agencies.
I think it is my understanding you have got at least 8. You
are going to have a split within the current MMS. So you are
just, again, expanding the entities that are involved. One of
the concerns I think has been--and we are seeing this play out
in the Gulf--is who is in charge? Who is really running things?
Can you--and I appreciate that this is day 4, but you said
you are a quick learner. Yesterday was day 3. So we are going
to expect real answers today.
[Laughter.]
Senator Murkowski. But from where you are sitting and
looking at just this organizational structure within the new
Bureau of Ocean Management, how do you integrate all of these
players? How do you integrate this in a way that is
transparent, in a way that allows for a level of efficiency?
Because what I am hearing from those that are the consumers, if
you will, it is a very complex, a very complicated process that
leads to inefficiencies and delays and perhaps just oversight.
So can you speak to that, about how we do this? I know we
are trying to make separations within an agency where you had
either conflict or certainly the appearance of conflict. But
how do we better integrate this, this new bureau?
Mr. Bromwich. It is a very, very good question, and I think
certainly I have been in Government long enough to have seen
the kind of inefficiencies that you are talking about. I think
you know more than I do about the specific inefficiencies that
have been displayed here. I need to learn about those because I
think in a lot of instances, it is a matter of leadership. It
is a matter of clearly delineated responsibilities. It is a
matter of communication.
I am not sure you can legislate the cooperation and
communication that is necessary. But I think those are
absolutely key.
I agree with you and understand the reluctance to think
that creating yet more pieces is a cure-all. One of the things
that the Secretary has been consistently supportive about is my
ability to look at all the hard and I think good work that has
been done and to provide my perspective and advice on that
because I don't have a reflexive view that multiplying agencies
is necessarily a good thing.
I remember when I was at the Justice Department back in the
late 1990s, and there was a proposal to divide up the
Immigration and Naturalization Service, as it was then called,
into two pieces. I testified at a hearing that I didn't know
whether that was a good solution. It might create two bad
agencies instead of one bad agency.
Senator Murkowski. That is clearly what we want to try to
avoid.
Mr. Bromwich. But I have been very impressed with the work
that has been done so far. I have had, unfortunately, a limited
amount of time to sit down and hear about the rationale behind
the specific proposal in the kind of detail that I will need
to. Hopefully, this can happen in the next few days or week or
week and a half so that either I am quite comfortable with it
or I am not comfortable with it.
So, that is the best answer I can provide at this time.
Senator Murkowski. I appreciate that.
Secretary, just one last question for you. Yesterday, we
had an opportunity to talk about the moratoria and the effect
just on the economy there in the Gulf and really around the
country the effect of that moratoria. I think we are starting
to see what I am calling this flight of investment from the
Gulf not only because of the moratoria, but I think offshore
companies are--I don't know that it is concern, but there are
signals coming that this regulatory pendulum that they deal
with is really going to swing very far and introduce a level of
even greater complexity that leads to even greater
inefficiencies, time consumption.
As you are assessing what needs to happen within the new
bureau, are you concerned about this flight of investment? Is
that calculated into some of the discussions here?
Secretary Salazar. Senator Murkowski, it is a very good
question and a very honest question because it has impacts on
the lives of people and jobs of people not only in the Gulf
area, but really around the country and, indeed, in Alaska, as
you so well know. So we are looking at all of the issues
relating to the moratorium.
The President and I have been very clear that we want to
keep the moratorium in place until we get to a level where we
can provide a sense of safety to the American people that
drilling can, in fact, continue. How that will all come
together is something that we are working on, and I don't have
a specific answer for you today, other than to tell you that it
is a high-priority issue for me right now.
Senator Murkowski. I would hope, as we are figuring the
direction from the regulatory perspective, we also keep in mind
that it is important that we put in place processes that work,
that allow for a level of efficiency and effectiveness and
soundness and safety. That is obviously first. But not
something that chases everybody away.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Udall.
Senator Udall. Thank you, Mr. Chairman.
Good morning, Mr. Secretary. We are pleased you are here.
Let me talk initially about the blowout preventer
situation. It stunned me that the emergency response plan, as I
understand it, didn't include plans for the blowout preventer
to fail, and it seemed unrealistic, obviously, in hindsight
since blowout preventers have failed even in shallower water.
I think we are all disappointed in the fact that the
industry itself and MMS couldn't peer over the horizon and plan
for scenarios like the one that has unfolded tragically. What
are you going to instruct MMS to do in this reconfigured form
that it will have to make sure that something like this never
happens again? How do we push on the regulators in the industry
to think about the unthinkable?
Secretary Salazar. Senator Udall, first, let me say that
there has been a track record, which is I think well publicized
about the safety record of oil and gas production, including
drilling, including in the deep waters of the Gulf of Mexico.
In the context of a four-decade history where more than 40,000
wells have been drilled in the Gulf of Mexico, no incident like
this had ever been seen before. So, the essence of what that
empirical evidence tells you is that in most cases, you have
safe operations that have actually been operating in the Gulf.
Now, having said that, this horrific disaster, which is
happening, is still under investigation. From some of the
initial reports that I have seen, there were actions that were
taken 10 days before April 20 which might have ended up
creating this disaster, and perhaps no level of enforcement or
regulation could ever have prevented that because of the
recklessness that occurred here.
Now, having said that, I will tell you that it is my view,
having reviewed the rules and the orders with respect to
blowout preventers, that a lot more can be done. There has to
be a requirement, for example, that you have multiple shears in
the blowout preventers. You ought not to simply require a
blowout preventer, but then allow the industry to go ahead and
decide for economic reasons that it is not going to put in the
levels of redundancies to really make this a fail-safe system.
So those are some of the things that are already included
in the 30-day safety report, which I prepared and submitted to
the President in May. We are continuing to work on additional
safety measures. It will be part of what the President's
Deepwater Horizon commission will also take a look at, and it
obviously will be part of what I will direct Mike Bromwich and
his team to address.
Senator Udall. Thank you for that, and I think that also
speaks to the importance of the legislation I have introduced,
which would give us more research. I know everybody is going to
want to--when the well is capped. I am going to be optimistic
here. When that well is capped, when it is killed, we are going
to get a hold of that blowout preventer and find out what
happened, get into the guts of that particular technology.
Let me turn to the moratorium in the remaining time I have
left, and I know there are some on the dais who may have a
different point of view than I do, and I think this will be an
important discussion today. But I was disappointed to read and
hear about the judge's ruling. I support the President and your
decision to immediately appeal the decision of the District
Court.
The well bore is spilling, and you know well, thousands of
barrels of oil a day. We still don't know what happened. It
seems to me to be common sense to just understand, particularly
when we are developing these wells, not when they are
producing, but what is going on.
I challenged, hopefully in the right tone, the oil
companies that are operating in the Gulf to bring forward what
they know to prove that what they are doing is safe. We cannot
afford another spill of this magnitude, obviously.
Have you seen anything, Mr. Secretary, that convinces you
that the companies that are out there are safely operating and
should resume drilling?
Secretary Salazar. Senator Udall, first, production
continues in the Gulf of Mexico. There has been very little
effect from this blowout on the production of both oil and
natural gas in the Gulf of Mexico. So that continues in its
robust contribution to the national need for oil and gas. So
that has continued.
Second, in terms of the moratorium, the fact is that the
moratorium was right when it was imposed. The moratorium is
right today. We are in a dynamic situation and in a crisis, and
much is being learned.
I will give you one example, Senator Udall, of something
that is being learned, and that is the testing of blowout
preventers in the subsea. There was a thought that it could not
be done. Yet, with respect to the relief wells that are being
drilled to come in on the ultimate kill on the Macondo well,
the subsea tests have actually occurred.
So, there is tremendous learning that is actually occurring
as we deal with this dynamic crisis, which, in my view, is
further evidence of the need to have this moratorium in place.
Senator Udall. Mr. Chairman, my time has run out. But if I
can ask an additional question for the record and perhaps make
a statement in the process?
As I understand it, Mr. Secretary, as you have just pointed
out, there are many, many, many wells producing right now. This
moratorium would apply to those wells that are being drilled
now, like the Deepwater Horizon situation. That is where we
face the most dangerous time. It is where wells can get away
from us and where we can have incidents like the one that
occurred.
But how many wells are affected by this moratoria? I
understand it is just in the tens of wells. This is not
hundreds of wells, and we are not shutting down production in
the Gulf.
Secretary Salazar. There are 33 of what they call mobile
drilling units in the Gulf of Mexico that essentially are rigs
that were involved in drilling deepwater wells. Some of the
wells that were being drilled and had permits to drill actually
would go to depths far below the mile below the sea that the
Macondo well was drilled at.
So, when you are looking at wells that are going to be
drilled at 7,000 or 8,000 feet, it introduces a whole set of
technological challenges that would make it perhaps even more
difficult than the level at which the Macondo well exists. So,
that is part of the learning that we have to take.
The President has been very clear. We need to fix the
problem, and we need to learn the lessons. That is the job.
That is the job of Congress. That is the job of everybody who
is involved in this issue. Right now, we don't yet know enough
to be able to say that it is time to lift the pause button. So,
the moratorium will continue until we can have that level of
safety assuredness.
Senator Udall. Thank you.
The Chairman. Senator Barrasso.
Senator Barrasso. Thank you, Mr. Chairman.
Mr. Secretary, thanks so much for being here to testify
again today. Improving management of our offshore energy
resources is critical. We are now day 66 of the spill, day 66
of an economic and environmental catastrophe in the Gulf, which
is affecting not just the Gulf region, but our entire country.
One thing that the American people know for certain right
now is that neither BP nor the administration have any idea of
how to stop the leak today. That is why today's hearing is so
important. We need to improve offshore exploration, and that
requires an honest and a thoughtful response and approach.
We have to get to the issues of preventing future spills,
of protecting coastal businesses, whether it is the shrimpers
or the drilling rig workers, to ensure responsible exploration
for American offshore oil and natural gas in the short run as
well as the long run, and to improve the Government's ability
to respond. It is a response that has been called delayed,
sluggish, bureaucratic, and ineffective.
The administration, it seems to me, is now putting ideology
over scientific integrity. The administration put together a
group of experts to review safety recommendations for offshore
oil and gas exploration. The administration proudly stated that
the safety recommendations were peer reviewed.
Afterwards, the American people found out that the most
significant recommendation, which was the moratorium, was not
actually peer reviewed. The moratorium was added after the
experts had been consulted. The majority of the experts
consulted say that their names were used to justify a political
decision made by the administration.
So here I am looking at a moratorium that, to me, is
causing additional unnecessary economic harm to a region that
is already suffering. Now, according to the Interior
Department's own report, the OCS oil and gas industry provides
relatively high-paying jobs in drilling and production
activities. It goes on to say offshore operations provide
direct employment estimated at 150,000 jobs.
We know that the Federal judge overturned the moratorium on
Tuesday, saying the court is unable to divine or fathom a
relationship between the findings and the immense scope of the
moratorium. To make matters worse, Mr. Secretary, the
President's newly appointed 7-member oil spill commission, it
seems to me to be stacked with people who philosophically
oppose offshore exploration.
The President said he wanted an objective look. The
commission's background and expertise doesn't really include an
oil or a drilling expert. So people in the Gulf, people across
the country are wondering about the administration's goals. Is
it really about making offshore energy exploration safer, or is
it shutting down our offshore and American oil and gas?
When they see that the president of the Natural Resource
Defense Council is one of the 7 members of the committee, and
this group has just intervened as a defendant in the court case
wanting to continue the moratorium, it is no surprise that the
American people are asking questions. So I want to applaud the
members of this committee for taking a less political approach,
including our chair and our vice chairman, and the thoughtful
bills that are under consideration today.
I wanted to ask about the Jones Act. More than a dozen
foreign countries have offered to help. BP and the
administration have been slow to accept the assistance is what
I am hearing from Senators who represent the States in that
area. Apparently, we heard from the Coast Guard captain that we
have exhausted all of our east coast supply of skimming
vessels. We are now looking at Norway, France, Spain, and other
European vessels.
Under the Jones Act, foreign skimmers are prohibited from
skimming within 3 miles of the U.S. coast. No. 1 is do we have
enough skimmers in the Gulf, and are there currently any
outstanding offers that have been rejected that we really ought
to reconsider and accept?
Secretary Salazar. Senator Barrasso, let me make 4 quick
points. First, with respect to the Jones Act, I will get that
information back to you from Admiral Allen, who has been in
charge of the effort in terms of skimmers. I can tell you no
resource has been spared in terms of getting vessels out there
to do the job.
Second, let me say that there is nothing political about
this. This is not a Republican or a Democratic issue, and
frankly, I would believe that it is the President who has
transcended partisan politics. This is not an ideological
issue. It is an issue about safety and making sure that we are
protecting the environment and the people of the Gulf Coast and
the economy of the United States. Those are the marching
orders, which the President has articulated for all of us.
Third, with respect to your point on the engineers and
their point of view, I have put together, at my request, the
group that developed the 30-day safety report to the President
of the United States. I called the National Academy of Sciences
to get those engineers involved.
Their charge, as I articulated in the letter that I gave to
the President, was to come up with safety recommendations.
Their charge was not to come up with a decision on the
moratorium. The decision on the moratorium was separate from
what I had the engineers and the peer review group do. The
moratorium was the President's decision and my decision.
The final point I would make is the Presidential commission
on the Deepwater Horizon is headed by very distinguished
people. Bill Reilly, former head of EPA, served in a Republican
administration, and he is known for his problem-solving
approach to issues. Senator Bob Graham was a colleague of many
of you who are still here. Maybe some of you were younger at
the time he left. But in any event, he also is a person who
understands the Gulf Coast and the Gulf of Mexico very well.
So we are confident that this commission will do the job,
and they will get to the root causes of what happened here and
make recommendations that will help guide the future energy
program in the Outer Continental Shelf.
Senator Barrasso. Thank you, Mr. Chairman.
I would like to ask consent to put two articles* into the
record, one from the Wall Street Journal, June 17, called
``Crude Politics: The Drilling Experts Speak Out on the Obama
Deepwater Moratorium,'' and the second from Wall Street
Journal, June 22, called ``The Anti-Drilling Commission: The
White House Choices Seem To Have Already Made Up Their Minds.''
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* See Appendix II.
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The Chairman. Are these articles, or are these opinion
pieces?
Senator Barrasso. They are editorials from the Wall Street
Journal.
The Chairman. We will include them in the record.
Senator Barrasso. Thank you, Mr. Chairman.
The Chairman. Senator Landrieu.
Senator Landrieu. Thank you, Mr. Chairman.
Welcome again, Mr. Secretary, Mr. Bromwich. I look forward
to working with you as we reshape this important agency to find
the right path forward for both the environment and our economy
and the great need that our country has for us to get this
right.
I want to begin, Senator Barrasso, just responding to
something that you said, if I might? You and I generally agree
on the importance of drilling in the country. But respectfully,
I want to take issue with what you said in your statement when
you said the President and Secretary Salazar, I believe, can't
seem to find a way to plug this well.
When your team was in charge, which would be under the
previous administration, you all didn't leave a very clear
instruction book as to how to do this. In defense of this
administration, as the Secretary said, the President is trying
to rise above partisanship, and I think we all have to make our
best effort to do this. This is not a time to try to take what
I would consider a cheap shot.
No. 2, to Senator Udall, it is true that the entire Gulf
has not been shut down. But what is true from any map that you
would look at in the Gulf is that this administration's
decision, which I fiercely disagree with, to stop all activity
with the 33 deepwater rigs as defined by these major floating
vessels. There are only 33 of them in the deep water. According
to the economic analysis of my State, each one of these rigs
has 1,400 workers onshore and offshore.
This moratoria will affect as many as 46,200 jobs may be
idled. Lost wages reach from $5 million to $10 million per
month per rig, or $330 million a month in lost wages. Long-term
job losses, if we don't find a way to get this right, could
reach 120,000 jobs by 2014.
While Senator Stabenow, my good friend, has been on the
floor righting for jobs, if we don't get this right, we are
going to eliminate every job that we are trying to create by
putting people out of work in the Gulf. This isn't going to
even cover the hundreds of businesses that are not big oil, but
that support the efforts of this country to produce the 20
million barrels that we continue to use today.
Secretary Salazar, let me ask you and let me say there are
25 shallow wells drilling. They have been--under the
Secretary's leadership, he is trying to get them back to work.
There is some permitting difficulties we are working through,
but they have not been working full bore.
There are 4,000 producing wells. They are still producing,
let me say, sending oil to every one of your States. Those have
not been shut down. That oil is flowing through pipelines, and
every single one that showed up at this committee this morning
pumped some gas into their automobile to get here. Those are
producing.
What is not working are the rigs drilling with the people
along the Gulf Coast. Half of them can't work because now their
fishing waters are polluted. The other half of them can't work
because the administration has laid down a blanket
inappropriate, in my view,6-month moratoria with no end in
sight.
I thank you, Secretary Salazar, for your words lately about
trying to find, since the judge ruled pretty strongly against
the administration, trying to find a way to modify our approach
so that we can provide the safety that we all want, but also
not cause an economic meltdown.
So let me ask you, one of the recommendations that I sent
to you to allow the 33 wells to try to resume without any risk
would be what we call top-hole section drilling. It would allow
them to drill, but before they can penetrate any hydrocarbons,
which would cause actual pressure. Have you considered that, or
are you thinking through some ways that we might either shorten
the 6-month time, not compromise our safety, but try to reach
our safety in a different way? Is that a possibility?
Secretary Salazar. The answer, Senator Landrieu, is we are
looking at everything. We looked, for example, on the shallow
water drilling, I drew the demarcation at 500 feet because the
shallow water drillers and others gave us the information that
essentially gave us a sense of comfort that that could, in
fact, continue. We have additional requirements, safety
requirements on blowout preventers and the like that we also
have instituted. But that was a demarcation that to us made
some sense.
As we move forward, looking at the moratorium across the
Gulf Coast, we are going to look at a number of different
factors, and we will have some additional information to you on
that in the days ahead.
Senator Landrieu. Thank you.
Just for the record, Mr. Chairman, I found this very
disturbing, and I think the members of the committee would like
to have it, particularly you. You have been a strong advocate
for the environment and the industry. The title is--it is very
disturbing--``Far from the Gulf, a Spill Scourge Five Decades
Old.''
This is about what is happening in the Delta of Niger, and
it is hard to read. So if any of you are a little emotional
this morning, you might want to wait until tomorrow.
I just want to say ``small children swim in the polluted
estuary here. Fishermen take their skiffs out even further.
There is nothing we can catch here. Perched anxiously over his
boat, and market women trudge through oily streams.''
Senator Landrieu. They are shocked that the world is tuned
in to what is happening in the Gulf because they live with it
every day. My point being if our Government drives our
production off of our shores, all we do is increase misery in
places that we have no control of. I caution us before we move
forward.
Thank you.
The Chairman. Thank you very much.
Senator Bennett.
Senator Bennett. Thank you, Mr. Chairman.
Again, welcome, Mr. Secretary.
I continue to have sympathy for the challenges you face
here, not the kind of thing that any Secretary of the Interior
looks forward to or expects when he puts his hand on the Bible
and, in that one guaranteed good moment of your tenure, gets
sworn in. That is the good day that occurs with Federal
service.
I want to follow up a little on what Senator Barrasso had
to say and Senator Landrieu's comments about it. I understand
how difficult a challenge this is, but I have reviewed what the
judge had to say, and it was pretty tough language. The judge
was not particularly in doubt, shall we say, as to his view of
the administration's position with respect to the moratorium or
the administration's reasoning in support of it.
Without rehashing some of the things that Senator Barrasso
raised, I would like to talk just a little bit about the oil
spill commission. Now you have talked about Senator Graham, and
I have respect for Senator Graham. We served with him, know him
well.
But this is a commission that has a particular assignment
to review this whole thing, and as you said in your own
comments just a few minutes ago, these are really technical
challenges. As I look at the membership of the commission, I
don't find any technical people on it. Senator Graham has broad
wisdom and ideas and a view or understanding of the Gulf, but
he doesn't have an engineering background that can address the
technical side of it.
As nearly as I can tell, there are only two members of the
commission who have a scientific background, and neither one is
a petroleum or environmental engineer. The most troubling
appointment there, of course, is Frances Beinecke, who has an
ideological position with respect to drilling and, indeed,
heads an organization that has filed a lawsuit on this area.
Now let us just turn it around for a minute and say how
would you feel if the Congress, because the President wouldn't
do this, I am sure, this President wouldn't. But let us say
that the Congress insisted that one of the members of the
commission be an executive in an oil company, be an executive
of the company that was involved in the actual drilling
experience so that that experience would be represented.
I think the outcry would be very, very strong. There is a
huge conflict of interest here, and such an individual should
not be included. If we are going to have a technician that
understands environmental engineers, it ought to be somebody
who comes more out of an academic kind of background, but this
was his or her specialty.
I see a serious similarity between the president of the
National Resource Defense Council on one side of the
ideological argument and an executive from an oil company on
the other side of the ideological argument. I don't mean she
shouldn't be listened to, just as I don't think the oil
executive shouldn't be listened to. But you have made a special
effort to address ethics issues within the department. Doesn't
this strike you as a conflict of interest that comes under the
purview of an ethics examination?
Secretary Salazar. Senator Bennett, with all due respect,
the President, in choosing the members for this commission,
chose the kinds of statesmen who I believe will transcend
partisan politics and ideology. Their charge is to get to the
root causes of what happened here, to provide the results of
that investigation and to provide recommendations on how to
move forward.
I will note that the Graham-Reilly commission, that Bill
Reilly, he was a member, as I understand it, of one of the
boards of the oil and gas companies. So, we will have an
opportunity as this commission goes forward to make sure that
all the points of view are heard.
The commission will have a staff, and that staff will be
able to make sure that all of the expertise is being provided
to the commission so that they can make considered judgments.
You have to understand, too, Senator Bennett, that there are a
number of different investigations that are already underway.
There is an investigation which is being conducted by the
marine board, and the results of that investigation will be
known. There are investigations that are going on which are
congressional investigations. There are other investigations.
They all have to come together in one place.
That effort is what the President has assigned to the
Deepwater Horizon commission, and we are confident that they
will produce a good report for the American people.
Senator Bennett. Thank you for that. I appreciate your
point of view. I am not sure I am completely convinced. But I
understand you are acting in good faith, and I acknowledge
that.
The only other comment I would make in support of what
Senator Landrieu had to say, I can understand the impulse for a
moratorium. I am not at all sure that a blanket moratorium as
broad as this one will produce any higher degree of safety than
a more targeted kind of thing. As I read the judge's decision,
I think that is where the judge is.
I don't think the judge says you can't have a moratorium,
but as I say, some of his language is pretty tough language. He
takes on the comments of people in the administration very
directly and says he sees no connection whatsoever.
So, as you wrestle with this very difficult problem, I
would just ask that you see if you can't fashion something that
is a little more targeted and a little less broad than the one
you have here.
Thank you, Mr. Chairman.
Secretary Salazar. I appreciate that, Senator Bennett. I
will only say that from our point of view, the judge is wrong
in his decision.
But I will also say, as I have said to Senator Landrieu,
this is a complicated issue, and we are looking at a number of
different factors related to the moratorium. So we will have
some more to say on that in the coming days.
Senator Bennett. Thank you.
The Chairman. Senator Cantwell.
Senator Cantwell. Thank you, Mr. Chairman.
Mr. Secretary, it is good to see you. But I am more
interested in talking to Mr. Bromwich. We are glad you are
here, and let me just say that I have a very healthy respect
for the role that Inspector Generals play in our Government.
Oftentimes, we have agencies that don't do their job or are
negligent, and it is very frustrating to the American people.
Whether that is the CFTC or the FERC or the Federal minerals
management agency, oftentimes the only true way that we can get
at these problems is to have an Inspector General show the
bright light of day onto these what can be somewhat agencies in
the dark, as it relates to their uniqueness and the lack of
oversight that they sometimes get.
So I thank you for that service in that role. But now you
are the Inspector General in charge of reorganization of an
agency in great trouble, in my perspective. Or I should say I
am a firm believer it is time to think about of the box. This
is not a simple reorg, but a time to be bold in this particular
problem with MMS.
So could you tell me what your top 3 priorities are going
to be as it relates to the restructuring and focus of MMS?
Mr. Bromwich. My first priority is to examine carefully the
proposal that is currently on the table and, based on the
information that I gather over the next couple of weeks, to
make a judgment so I can advise the Secretary whether I think
that the proposed reorganization makes sense. So that is first.
No. 2 is to create and stand up a capability within the
organization so that we can begin to police ourselves. The
history of problems in the agency are well known. They have
been the subject of multiple Inspector General reports.
I have been involved in a number of organizations over the
last few years. I monitored the D.C. police department, did an
investigation of the Houston police department crime lab,
worked in the Department of Correction for the State of
Delaware. In almost every case where those institutions had
grave problems, it was at least in part because they did not
have an internal investigations and an internal audit and an
internal review capacity.
So, I made that recommendation to the Secretary on Monday.
He approved it on Tuesday, and we announced it yesterday. I
think that is critical----
Senator Cantwell. What do you hope to get--what problem do
you think at MMS would that solve by having that internal
investigation?
Mr. Bromwich. You are not the hostage of waiting for
another entity--in this case, the IG--to look at problems that
you have. You are able, as managers of an agency, to jump on
those problems yourself and try to fix them. The delicate
balance is not to in any way usurp the jurisdiction or the
purview of the Inspector General.
So, I spoke specifically with her about what I envisioned
in creating this unit, and she immediately felt very
comfortable with my building that capacity and, in fact, said
we are glad you are doing it. We think it will actually help us
and it will lead to the agency being better run.
No. 3, and this is related to standing up the new entity,
we need to be able, the agency needs to be able to respond
rapidly not only to allegations of misconduct, but to important
issues that emerge within the agency and to put really smart
and good people quickly on a problem to address them and to
provide answers both to me and to the Secretary.
We need--any organization needs the capacity to do that,
and I am sure there are good people in the agency that can
contribute to that effort, but I need an entity in my front
office that reports directly to me whose charge is to do
precisely that.
Senator Cantwell. One of the accusations and obviously
concerns--I shouldn't say accusation--I guess it has probably
been founded and people probably have lost jobs over it is the
notion of the cozy relationship between the agency and the
entity it is supposed to regulate. One of the questions I have
is the use of more third-party validators from the private
sector on whether things are functioning or operating.
I mean, the American Bureau of Shipping, for example, to
play a larger role on whether the blowout preventers work
systematically, and having that, as opposed to having the
industry just say, yes, they work. So what are your
recommendations in the area of having more oversight?
Mr. Bromwich. It sounds like you have thought about this
issue, that specific issue more than I have. I agree that
certainly I have heard and I have seen enough evidence so far
in the IG reports that I have reviewed that there has been, in
many instances, a too cozy relationship between industry and
the people in my agency. So, I think there is a very
significant role that third-party validators can play in making
sure and imposing a check, if you will, a check and balance to
make sure that that is not shaping judgments.
But beyond that, I think it is in some ways even more
important for me to send a message, which I think I have
already begun to do, that is the responsibility of people in my
agency to behave properly and to regulate aggressively and to
enforce aggressively. That can't come from outside validators.
That has to come internally, and I am committed to making that
happen.
Senator Cantwell. Good luck on instilling that culture.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Menendez.
Senator Menendez. Thank you, Mr. Chairman.
Secretary, good to see. Let me ask you a question. A whole
host of the 33 drilling companies that are covered by the
moratorium, several of them are worth less than a billion
dollars. So if, in fact, God forbid, one of them would spill,
their liability right now would be $75 million--not the
cleanup, but the liability.
Now, what would happen if that was still the law?
Secretary Salazar. As you know, Senator Menendez, the
President and the administration have supported a change in the
law. In addition, I know that you are considering legislation
with respect to additional financial assurances for these
companies to be able to make sure that problems that they
create are, in fact, dealt with, and that is something that----
Senator Menendez. I appreciate that. But my point simply is
wouldn't it be a true statement that but for your moratorium,
if one of those entities worth less than a billion dollars had
a spill and the law had not been changed, right now, they would
be subject only to a $75 million liability cap?
Secretary Salazar. That is correct.
Senator Menendez. So, therefore, your moratorium not only
figures out how to move forward in a way that is safer, because
I know that the administration still has a view that we have to
have drilling. But the bottom line is until we either change
the liability cap or have a safer process, we run the risk if
we were to lift this moratorium tomorrow and one of these
entities would spill, they would only have a $75 million
liability cap, and they are not a BP. The risk would be equally
as high.
So I think it is something for all of us to think about how
important it is what is going on here. It is great to know that
BP can pay for its massive mess, but there are other entities
that clearly could not.
The New York Times reported yesterday that BP's Liberty
project off the coast of Alaska is being exempted from the
moratorium on Arctic drilling because the drilling rig is going
to sit on an artificial island connected to land by a causeway
that BP built. That somehow makes it an ``onshore project.''
But BP is going to drill under the Arctic Ocean. It will do
so using a risky drilling technique that MMS itself says is
more prone to blowouts, which seems to me to be bad enough. But
then we learned that MMS regulators back in 2007, before you
took office, allowed BP to write its own environmental review,
which looks almost identical to the Federal environmental
review. Isn't this something we should be looking at? Isn't
this the very essence of what we want to change at MMS?
Secretary Salazar. Senator Menendez, we are looking at that
issue right now. In fact, I have asked Mike Bromwich to take a
look at it. Even though he is new on the job, I am going to ask
him to comment on the issue that you raise in Alaska.
Mr. Bromwich. Senator----
Senator Menendez. Yes, please. Go ahead.
Mr. Bromwich. I was first made aware of this issue when I
looked at the article at 5 this morning. I don't know that much
about the specifics there. I can tell you that we have already
called out to our regional office in Alaska, and we will get to
the bottom of it very quickly.
Now my understanding is that companies, in this case, BP,
submit their own environmental analysis, and that is as it
should be. But the responsibility for doing the NEPA reviews
belongs to my agency, which is supposed to do an independent
review, which can certainly take account of and include the
environmental analysis that a company submits, but it is not
bound by it. It is required to do its own independent work and
make its own independent judgments.
I am troubled by the suggestion that that was not done
here. That is what I am going to get to the bottom of. But
right now, I don't have the answers for you.
Senator Menendez. I will look forward to the answers
because, you know, we have a history of MMS allowing, for
example, on inspections, the Inspector General, where they let
the company go ahead, in pencil do the inspection report, and
then the MMS inspectors just filled it in, you know, in ink
over the penciled part. That is why we have to change the
nature.
I know the Secretary has been doing a whole host of things.
I hope that we will look at some of the elements that are all
being offered here, my legislation, to close the revolving
door. Right now, between regulators and big oil, what prohibits
an inspector from signing off BP's exploratory plan today and
accepting a job with BP tomorrow? Nothing.
Under existing rules, if an inspector was inspecting a
Transocean rig, would they be prohibited from negotiating for a
job with Shell? No. These are the sort of things that I think
that were pointed out in the IG report and that we need to
respond to, but I particularly want to look forward to hearing
your results on this.
Thank you, Mr. Secretary, for what you have begun to do in
this whole respect with MMS. It is critical in order to both
have safety for whatever drilling is going to take place. You
know my views on drilling, which are quite different than the
majority of this committee. But nonetheless, we have to have a
process that is safe, and we have to have integrity of the
system at the end of the day.
Thank you, Mr. Chairman.
The Chairman. Senator Shaheen.
Senator Shaheen. Thank you.
Thank you both for being here.
I was pleased, Director Bromwich, to hear your announcement
about setting up an independent investigative unit, and I
wondered if this unit is going to be looking only prospectively
at future allegations of misconduct and violations of
regulations or if it is also going to look back at what
contributed to the culture that developed within MMS?
Mr. Bromwich. I haven't really considered that, Senator
Shaheen. I think we will have our hands full dealing with new
issues that arise. I think that just as a manager of this
organization, I will develop a sense over time as to what
elements led to the creation of a culture that has troubled so
many people and I know troubles many of you.
So I don't know that a formal investigation or review is
necessary or appropriate. But in order to change the culture, I
need to understand the culture, and I am determined to do that.
Senator Shaheen. I don't know if this question is for you
or for the Secretary, but do you feel like you have the
authority right now to remove people within the agency who may
be acting inappropriately? By that, I don't mean somebody who
has violated the regulations and has clearly done something
unlawful.
But I guess my question goes to if we can't change the
people within the agency who have contributed to this kind of a
culture developing, then how do we do that, and can you change
some of the people who may have contributed to that culture
developing?
Secretary Salazar. Let me answer that, and then Mike can
supplement in whatever way he wants. First, Senator Shaheen,
you should recognize that the efforts that we have undertaken
over the last year essentially were efforts intended to try to
root out this culture of corruption. The sex and drugs scandal
in Lakewood, which was related to the royalty-in-kind program,
was something which was hugely troublesome, and there were
people who were prosecuted, people who were let go, and that
was an initial part of our effort at dealing with that issue.
There was a more recent report by the Inspector General
also covering periods back in 2004 and 2005, and appropriate
personnel action has, in fact, been taken. There are ethics
standards that are, in fact, in place.
My view from the beginning was that we had a problem that
we were inheriting from what had been a Department that
essentially was issuing out oil and gas leases and conducting
an oil and gas production program for the country without
paying much attention to environmental safeguards or other
requirements of the law. So, it is an issue that goes beyond
MMS and deals with other parts of the Department of the
Interior.
Now we have more work, obviously, to do. Sometimes when I
hear about someone at MMS who has been conducting some kind of
effort that is problematic, yes, we take appropriate action.
But we are also bound by personnel rules that sometimes keeps
us from moving those people out, and Michael and I actually had
a conversation about this yesterday. So let me have him also
respond.
Mr. Bromwich. There are really 2 related issues here. One
is the issue of employees engaging in misconduct. The other is
people who, although not engaging in misconduct, are not doing
their jobs the way they should.
As to misconduct, we will work jointly with the Inspector
General's Office in the face of allegations of misconduct
against individuals or groups of people. When permitted by the
Inspector General, we will investigate them. If she wants to
assert jurisdiction over them, she will investigate them. But
it is my responsibility as a manager, once those investigations
are complete, to make decisions about what sanctions are
appropriate.
Now there are limits, as the Secretary said, and you can't
go totally outside the box of precedent that has been created.
The civil service rules prohibit it. But there is always a
range of permissible punishments under the law, and I will be
at the very top end of what is permitted.
As for performance, non-misconduct performance-related
issues, this is obviously a group of people, a group of
executives in the organization that I am just getting to know.
I am going to assume that there are many who know their jobs
and do their jobs well. The Secretary and others who have had
substantial contact with them have said nice things about
certain people.
So just because there have been problems with the agency
doesn't mean that I am going to order collective beheadings.
Senator Shaheen. Sure.
Mr. Bromwich. Not everybody in the organization is guilty.
Not everybody in the organization has done bad things. It is
important to stop and recognize that so that we don't throw the
baby out with the bath water and we don't lose very good people
who are mission-critical people.
But I am going to be looking both at misconduct issues and
at performance issues as we try to move this agency forward.
Senator Shaheen. Thank you.
The Chairman. Senator Stabenow.
Senator Stabenow. Thank you very much, Mr. Chairman.
Welcome again, Secretary Salazar. Welcome, Director
Bromwich.
First, Secretary, I want to thank you for what I know is
around-the-clock effort. Anyone that knows you knows that you
are doing everything humanly possible in a horrendous
situation. As I said many, many times, both you and the
President really inherited a perfect storm of an oil company
with more violations, safety violations than any other in the
industry. Most of them, I think 97 percent, being given the go-
ahead to drill a mile down in the Gulf, and unfortunately, an
agency that you inherited that I believe has more than just
some individual problems.
It really was given--it was under the umbrella of a
philosophy or a belief that oil companies should police
themselves and I think a general belief that was there at the
time that industry should police themselves that we have seen
some horrendous effects from.
But, and I know that that is changing. I know that while
the individual issues, Mr. Bromwich, that you are having to
deal with in the agency will take time and certainly not
everyone has the same culpability and so on, but the philosophy
has changed. For that, I at least am reassured that you are
focused in a very different way in terms of public
accountability and responsibility.
The question that I have is that the lack of preparation by
an industrial corporation for dealing with a significant
pollution problem really isn't new in this country.
Unfortunately, we have seen this in other industries as well.
We have learned, unfortunately, from experiences in Michigan
around brownfields, where this has been another kind of--
brownfield sites, another kind of example of poor regulatory
oversight in the past with industrial companies not requiring
them to prevent contamination and contain contamination of
pollutants if they are leaked into the environment.
This lack of regulation to ensure planning, corporate
planning and adequate resources leaves, as you know, taxpayers
on the hook in terms of incredible economic and health burdens.
So the spill in the Gulf is another sign, in my mind, that we
have to require more upfront preparation, upfront planning,
resources be set aside to prevent pollution, to prevent the
kind of catastrophes that we have seen.
Last week, we heard through a House hearing that the oil
company executives basically all had the same response plan,
literally the same words, despite the individual differences in
rigs and areas where they were drilling and so on. So I am
wondering, a number of us have sponsored legislation--Senator
Brown, Senator Feinstein are the leaders on--that would ensure
that each lease holder includes a peer-reviewed oil spill
management plan in their application materials.
This would help stop, in our judgment, the inaccuracies or
blatant false statements within applications that have gone on
and ensure that before any drilling starts that there is an
adequate response for emergencies. So my question would be
could you discuss how you will incorporate or might incorporate
this idea into the changes that you are making at MMS, and how
requiring companies to prove on the front end that they are
technically and financially able to manage a spill would ensure
the safety of our offshore oil and gas operations?
Secretary Salazar. Thank you very much, Senator Stabenow.
The obvious conclusion when one looks at what is happening
in the Gulf today is that the several hundred thousand barrel a
day spill capacity which was represented to be there on behalf
of BP simply has not worked. So, there will be a review of a
number of issues relating to oil and gas production, and the
issue of oil spill response will be one of those key issues
that will be looked at and so will be central to the reforms
that we will be working at Interior, working closely with
others who can provide some input to us on how we move forward
with that agenda.
Senator Stabenow. So, as you do that then, I guess our
legislation would require on the front end that those plans be
in place so that--is that what you are planning on including?
Secretary Salazar. I think that is a concept that makes
tremendous sense, and it is part of what we have been moving
forward on already with respect to Notice to Lessees on several
different fronts of reform that have to take place, including
new requirements with respect to blowout preventers and other
kinds of things. So the reform that has to be undertaken is not
something that is going to happen overnight with the waving of
a wand.
But I will tell you this, when you look at the people who I
have placed in charge of this effort--I have Wilma Lewis, who
was the prosecutor for the District of Columbia and who was a
former Inspector General of the Department of the Interior, and
Mike Bromwich, Inspector General and his long history in terms
of working on these kinds of issues--I am confident that we
will get the job done.
Senator Stabenow. Thank you.
The Chairman. Senator Wyden.
Senator Wyden. Thank you, Mr. Chairman.
Once again, we have a Secretary that I am very fond of and
an individual who is offering proposals that I am not yet
convinced are going to get the job done, particularly on this
question of moving the organizational boxes around at Minerals
Management. Let me be very specific about it.
As you know, I am particularly concerned about the overly
cozy relationship between the industry and the Government. We
are seeing all this back-scratching and all these deals we
heard about in the previous period, people out talking to folks
about jobs they were supposed to be regulating.
Your response, I know, is you are bringing Mr. Bromwich in
to be a tough cop on the beat, and there is no question he is a
good man. But what I want to do is I want to see the rules
changed and the law changed. Let me give you an example that
touches on what we talked about before.
At the beginning of the administration, an individual who
was the previous Director of Minerals Management went to become
president of the National Ocean Industries Association. That is
a trade group that represents the oil and gas folks that he
used to regulate. On June 7 of this year, this individual wrote
a letter to Bob Abbey saying that the President was pretty much
off base in implementing his proposal for the moratorium on
deepwater drilling.
I think there ought to be some ground rules on this stuff,
some ground rules that have real teeth, Mr. Secretary. So my
first question is I am going to, at a minimum, if I support
this proposal--and I am not yet there, and I am going to ask
you one other question to get your views with respect to issues
I care about before I support it. I want to see strict limits
on MMS employees going to work for companies that he or she
regulated in the year before leaving MMS. Will you support
that?
Because that, to me, closing this revolving door, ending
these sweetheart relationships between industry and Government
is a prerequisite to regaining some credibility here. That is
not in the proposal now. We have talked about it, and I want to
hear if you will support that at this time.
Secretary Salazar. Senator Wyden, the answer is that, yes,
I do believe that we need to put into place a revolving door
ban, and my own view, it ought to be a 2-year revolving door
ban so you don't have people essentially moving from MMS and
going over to the industry. It is something that we will work
on closely in terms of what we will do as an executive agency,
but also would look forward to working with you on how those
rules are changed.
Let me add one other thing----
Senator Wyden. Mr. Secretary, just on that point, you would
favor a 2-year ban?
Secretary Salazar. It may be a lifetime ban, depending on
where you are, the level of the agency. If you are an
administrative assistant within MMS--that is, it is a central
issue that needs to be dealt with in terms of the revolving
door, and the specifics of how we ultimately put it together
will be something that I will work closely with Wilma Lewis and
with Mike Bromwich on.
Senator Wyden. We will get you the amendment I am going to
offer on that. But certainly, unless there is a tough,
enforceable ban on this revolving door, there is no way I am
going to support this proposal next week when we vote.
Second point, you have got a new director for enforcement
and inspection. That is certainly constructive. But I am still
concerned about whether some of these problems are going to
just disappear into the bureaucracy at Interior.
Now the 2 areas that I am especially concerned about are
how we are going to make sure that folks doing the leasing and
the folks collecting the royalties are going to be doing a
better job? So those are two important areas, in addition to
this question of enforcement and inspection.
Can you tell me how you see the reorganization proposal
making sure that we make these additional changes so that the
problems don't just kind of disappear into the bureaucracy, but
we really get it right in leasing, we get it right in royalty
collection because I am not yet convinced we are there in those
subjects.
Secretary Salazar. Senator Wyden, I have no interest in
cosmetic changes. I have zero interest in cosmetic changes.
Senator Wyden. We know that. That is your desire.
Secretary Salazar. This is the real deal, and the people
that I brought in to help me get this done will get it done. We
have been doing a lot of it in the last 16 months. Part of the
proposal that is included in Senator Bingaman's legislation
would essentially move the revenue collectors over to the
Assistant Secretary of Policy Management and Budget so it would
be totally out of this part of the agency, to create that kind
of separation.
You raised last year the issue of corruption and the
royalty-in-kind program in one of the conversations that I had
with you at some point. Frankly, that was an issue, which we
took on, and we eliminated the royalty-in-kind program because,
in my view, it created the kind of opportunity for the kind of
corruption which you have been fighting against, which I very
much agree with.
So we will work with you to make sure that at the end of
the day, what we have in here is a reformed agency capable of
doing the job. That these changes that we are making through
organic legislation, that you will be making through organic
legislation are not cosmetic in nature.
Senator Wyden. My time has expired. Mr. Secretary, let us
dig in, your staff folks and mine, between now and Wednesday
because I want to make sure that we don't just move folks doing
leasing and royalties, you know, somewhere else and just have
the same kinds of problems.
As far as I can tell, it appears there are going to be the
same people. Maybe they are going to report to somebody
different, but I need more detail about how we are actually
going to get these changes, start with the revolving door
because that is a prerequisite to credibility.
Mr. Bromwich is a good man. We are glad that he is there. I
want to see the revolving door restrictions written into the
law, and then I want to make sure that people who are going to
report to somebody different are actually going to be doing
something different other than just kind of punching in with a
different individual.
Thank you, Mr. Chairman.
The Chairman. Thank you.
All Senators have had a chance to ask the Secretary
questions, and we have gone through one round. We have a second
panel of two distinguished witnesses, which I would like to go
to at this time, unless some member has a burning question they
want to ask.
If not, Mr. Secretary, thank you, and Mr. Bromwich, thank
you very much for being here. We will continue to work closely
with you to try to get whatever legislation this committee
considers to address the problems that you have identified.
Secretary Salazar. Thank you very much, Mr. Chairman.
If I may, while I know Director Bromwich is new on the job,
the work that has been going on with respect to the
organizations reflected in your legislation, we will look
forward to working with you. I will direct Mike to work with
Wilma Lewis and the other members of the team and your staff
and Senator Wyden and others on this committee to move forward
with legislation that gives us a framework that can give the
American people comfort that they have an agency that can do
the job.
The Chairman. I hope that can happen in the next few days.
We hope to mark this legislation up on Wednesday of next week,
just so that everyone has got that on their schedule.
Thank you very much.
Secretary Salazar. Thank you.
The Chairman. We will excuse both of you and call the other
panel to the witness table.
Ms. Marilyn Heiman is the Director of the U.S. Arctic
Program, an offshore energy reform project with the Pew
Environment Group from Seattle, Washington. Mr. David Welch is
the president and chief executive officer with Stone Energy
Corporation in Lafayette, Louisiana, and we appreciate both of
them being here.
Why don't we--our normal practice is we will take your full
statement and include it in the record as if read, but if you
could take about 5 minutes each and summarize the main points
you think we need to understand, then we will have some
questions.
Ms. Heiman, why don't you go right ahead?
STATEMENT OF MARILYN HEIMAN, DIRECTOR, OFFSHORE ENERGY REFORM
PROJECT, PEW ENVIRONMENT GROUP, SEATTLE, WA
Ms. Heiman. Chairman Bingaman, Ranking Member Murkowski,
and members of the committee, thank you for the opportunity to
testify and comment on the oil and gas legislation that you
have before you today.
I will focus most of my comments on the Outer Continental
Shelf Reform Act of 2010. Our comments today were developed in
coordination with the Ocean Conservancy.
I just want to give a little bit of information about
myself. I have worked on oil and gas policy for about 27 years
now and both in a State government and working for the Federal
Government for a former Secretary of Interior. During the Exxon
Valdez oil spill, I served as staff to the oil spill
commission.
Before I begin, I want to extend my condolences to the
families who lost their lives in the Deepwater Horizon and
those whose livelihood and beautiful coastline are being so
negatively affected.
As with the Exxon Valdez oil spill, complacency by the
Government, industry, and citizens is central to the BP
Deepwater Horizon disaster. Regulators accepted assurances that
offshore drilling technology had become so advanced that a
blowout was virtually impossible, and citizens have few tools
to question any of those statements. We didn't do what was
necessary to prevent a catastrophic oil spill, and the Gulf and
its communities will suffer for decades to come.
Congress has not made amendments to OCSLA in over 30 years,
and since then, there has been a lot of change in the industry,
as we have heard, and that we have also heard that the
technology to drill has far outstripped the technology of spill
response and containment.
Just OPA 1990, although is more recent, only dealt with--or
basically dealt with tanker safety and oversight. So it is time
for change in the legislation that oversees these issues.
The structural reforms by the Department of Interior are a
first good step, but reforming the way we regulate the industry
is a very complicated and difficult task. Unless we have a
change in culture and unless we have a change in the laws that
have clear standards, we will not be able to change the way
business is done and that we will continue to experience the
disasters like the Deepwater Horizon.
We support several of the improvements to OCSLA that are in
this bill. We want to thank you very much for introducing the
bill, and what I want to talk about are ways that the bill
could be strengthened.
Section 4 should be amended so that the environmental
concerns of the marine environment are not just considered or
balanced but are actually protected through standards. Language
about protecting the marine environment should not be
discretionary in any way.
Section 6 of the bill should require that the Secretary
adopt regulations to identify important ecological areas and
assure adequate collection of baseline data before leasing can
occur.
Additional changes should be made to ensure adequate time
for environmental analyses, and the legislation should be
changed to remove compensation for disapproval of an
exploration plan. In frontier areas, such as the Arctic, the
Secretary should be given more discretion to extend the time to
conduct a full EIS.
We would also like to see changes that will allow NOAA to
play a greater role. One way to do this would be to require
joint oversight of the preparation of the 5-year plans. Another
way would be to require concurrence on the part of the
Secretary of Commerce before a 5-year plan is finalized.
We really would like to see more of a strengthened role
with authority by agencies such as U.S. Fish and Wildlife
Service, U.S. Coast Guard, NOAA, EPA, and USGS in the areas
where they have jurisdiction, and we would like to see more--or
see it required that the Secretary have to take into account
traditional knowledge and concerns of affected communities.
Over the last several decades, MMS has defined the
geographic scope of the 5-year leasing schedule far too
broadly. Some of the areas offered for lease are tens of
millions of acres. Because of the enormous size of these
planning areas, environmental analyses are far too generalized
to support informed decisions about where, when, and how to
authorize responsible development.
The size of planning areas should be smaller and more
carefully defined, and alternatively, the Secretary could--the
bill should be amended to require the Secretary to focus lease
sales on specific tracks.
Finally, I would like to say that we support the idea of
regional citizens advisory councils, and we feel that they
should be modeled after the model in the Oil Pollution Act of
1990, which set up the Prince William Sound Regional Citizens
Advisory Council. We believe that will maintain vigilance that
is necessary, and we have seen great improvements and good
oversight of the industry since we have had that.
I want to commend Chairman Bingaman and Senator Murkowski
for introducing the bill and the members of the committee that
have now signed on, and I do believe this bill goes a long way
toward improving the OCS Leasing Lands Act, and we look forward
to working with you on the bill.
Thank you.
[The prepared statement of Ms. Heiman follows:]
Prepared Statement of Marilyn Heiman, Director, Offshore Energy Reform
Project, Pew Environment Group, Seattle, WA
Chairman Bingaman, Ranking Member Murkowski and Members of the
Committee, thank you for the opportunity to testify and comment on the
legislation you have before you today. I will focus most of my
testimony on S. 3516, the ``Outer Continental Shelf Reform Act of
2010'' and provide more general recommendations for Outer Continental
Shelf (OCS) reform, many of which are relevant to the other bills under
consideration by the Committee.
My name is Marilyn Heiman and I direct the Offshore Energy Reform
Project and the US Arctic Program at the Pew Environment Group. I have
27 years of experience working on oil and gas policy issues. I served
as Natural Resources Special Assistant to the Governor of Alaska and
later as the Senior Advisor to the Secretary of Interior for Alaska,
during the Clinton Administration. I also served as staff to the Exxon
Valdez Oil Spill Commission.
As with the Exxon Valdez oil spill complacency by the government,
industry and citizens appears to be one of the central causes of the BP
Deep Water Horizon disaster. There has been a systematic breakdown in
the safety and management by industry of offshore drilling operations
and a breakdown in the government`s oversight of these operations.
Regulators accepted assurances that offshore drilling technology had
become so advanced that a blowout was highly unlikely, if not
impossible, and citizens had few tools with which to verify those
assurances. We did not do what was necessary to prevent a catastrophic
oil spill, and the Gulf and its communities will suffer for decades as
a result.
For all these reasons, the President`s decision to suspend offshore
drilling in deep water and the Arctic show a great deal of leadership.
New problems and shortcuts associated with the BP Deep Water Horizon
operation are emerging daily. It is very responsible to wait for the
Presidential Commission to make their recommendations prior to
proceeding with any more drilling in deep water, the Arctic Ocean or
any new areas of the OCS.
Congress has not enacted significant amendments to Outer
Continental Shelf Lands Act (OCSLA) since 1978. In the 32 intervening
years, advancements in technology have allowed extraction of oil and
gas from ever-deeper waters. However, the technology for extraction
appears to have far outstripped the quality of oil spill prevention and
response capabilities. The Oil Pollution Act (OPA `90)-enacted in
response to the Exxon Valdez oil spill-focused primarily on the direct
cause of that spill: tanker accidents. This time we should not limit
our attention only to the current disaster. It is time for a
comprehensive updating and modernization of OCSLA and OPA--90, the laws
that govern mineral extraction from our oceans, and oil spill
liability, response, and recovery. In our view there is little doubt
that the flaws in these two statutes opened the door for a process that
enabled the Gulf disaster to occur.
The structural reforms within the Department of Interior proposed
by the Administration are an important step toward providing competent
and independent oversight of oil and gas development but they are not
sufficient to ensure that oil and gas development in ocean waters is
safe and conducted in the nation`s best interest. Congress must amend
OCSLA to establish a new approach that fully and accurately assesses
and manages the risks of offshore energy development.
The Pew Environment Group commends the Committee for taking a
holistic look at the Outer Continental Shelf Lands Act and proposing
important substantive changes.
We appreciate the opportunity to provide comments on S.3516, the
``Outer Continental Shelf Reform Act of 2010''. These comments were
developed in coordination with the Ocean Conservancy. You will also
find our general recommendations on OCS reform in Attachment A*.
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* Attachment has been retained in committee files.
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We support key concepts in the bill including:
1) Recognizing the need for protection of the marine
environment;
2) Requiring the Secretary to acknowledge comments of other
agencies such as the National Oceanic and Atmospheric
Administration (NOAA), the U.S. Fish and Wildlife Service
(USFWS) the U.S. Geological Survey (USGS), the Environmental
Protection Agency (EPA), and the U.S. Coast Guard (USCG) in the
development of the 5-year oil and gas leasing program;
3) Establishing new, independent science bodies charged with
collecting baseline data before leasing, undertaking ecosystem
research and addressing risk; and
4) Extending the time to allotted to review exploration
plans; and
5) Requiring a complete description of a response plan to
control any blowout and to manage the accompanying discharge of
hydrocarbons including the timeline for regaining control of
the well.
These steps will begin to address the causes of and help to prevent
future spills like the BP Deepwater Horizon. However, Congress can and
should do more. The following comments contain a series of
recommendations on how this legislation should be strengthened. They
also address some issues, including spill prevention and response that
may fall outside the jurisdiction of this Committee but should be
addressed in any comprehensive reform package.
I. Policy Statement and Substantive Standards
The nation`s current OCS policy-set forth in OCSLA Section 3, 43
U.S.C. Sec. 1332-does not place sufficient emphasis on protection of
coastal and ocean ecosystem health. S. 3516 includes positive steps to
address this problem, but the proposed changes do not go far enough.
Congress should clarify OCS policy to underscore and prioritize
protection of ecosystem health. We recommend the following changes:
A. Clarify OCS policy by adding Congressional findings and
strengthening Section 4 of S.3516
(1) Add Congressional Findings:
Before setting forth a national policy for the OCS, Congress should
articulate findings that place OCS oil and gas activities in a broader
context. Congress should find that:
OCS lands are part of a complex and dynamic marine
ecosystem that includes numerous resources that are of national
importance including: fish species that support economically
valuable commercial and sport fisheries as well as provide a
critical source of food for the nation; marine mammals that
provide subsistence food for certain coastal communities and
support recreational businesses in other communities; and
corals and other living organisms that are an essential part of
a healthy, functioning marine ecosystem;
substantial questions exist regarding the complex nature of
and functioning of marine ecosystems; and
development of OCS oil and gas resources must be undertaken
with full recognition of the complexity and value of marine
ecosystems and can proceed only when and where it can occur
with the least possible risk of adverse impact on living marine
and coastal resources.
(2) Strengthen Section 4 of S. 3516 to emphasize protection
of the marine environment.
Although Section 4 of S. 3516 suggests positive changes to OCSLA`s
declaration of national OCS policy, additional changes are necessary to
strengthen the protection of marine and coastal ecosystems in any oil
and gas development.
OCSLA Section 3, paragraph 3, subparagraph (B) should be
further amended to require that the OCS be managed in a way
that minimizes-not just recognizes-the potential impacts
associated with developing OCS resources. We recommend the
following language:
(3) the outer Continental Shelf is a vital national
resource reserve held by the Federal Government for the public,
which should be managed in a manner that----
(A) recognizes the need of the United States for domestic
sources of energy, food, minerals, and other resources;
(B) minimizes the potential impacts of develop of those
resources on the marine and coastal environments and on human
health and safety; and
(C) acknowledges the long-term economic value to the United
States of the balanced and orderly management of those
resources that safeguards the environment and respects the
multiple values and uses of the outer Continental Shelf.
OCSLA Section 3, redesignated paragraph 6 should be further
amended to provide that ``exploration, development, and
production of energy and minerals on the outer Continental
Shelf shall be allowed only when those activities can be
accomplished in a manner that protects life, health, the marine
and coastal environment, property, or other users of the
waters, seabed, or subsoil; and
OCSLA Section 3, redesignated paragraph 7 should be further
changed by striking the words ``or minimize the likelihood
of.''
B. Incorporate substantive standards to ensure protection
of marine and coastal ecosystems
As currently written, OCSLA lacks meaningful, substantive
standards. For example, when developing a five-year leasing program,
OCSLA requires the Secretary of the Interior to ``consider[ ]''
environmental values and ``balance'' impacts on the environment with
oil and gas development. 43 U.S.C. Sec. 1344(a). OCSLA should be
amended so that environmental concerns and marine resources are not
just ``considered'' or ``balanced,'' but are protected pursuant to a
discernable, enforceable standard.
(1) Make additional changes to OCSLA Section 6, 43 U.S.C.
1334(a), to require the Secretary to promulgate specific
regulations designed to safeguard the marine environment.
The amended section 6 should require the Secretary to promulgate
regulations to:
establish procedures for participation in and compliance
with any coastal and marine spatial planning process
established by the President and/or Congress;
identify (a) important ecological areas that will be
excluded from oil and gas leasing and exploration and (b)
measures necessary to preserve the integrity and function of
important ecological areas;
establish procedures for collecting baseline data concerning
ocean water characteristics, wildlife, and the benthic
environment that will be required before leasing can proceed in
an area;
establish procedures for involving other expert agencies in
decision making concerning oil and gas leasing; and
identify the most effective safety technology to be used for
exploration and development
(2) Make additional changes to OCSLA Section 8, 43 U.S.C.
Sec. 1337, to ensure that OCS oil and gas leases are sold only
when lessees can meet environmental standards.Congress should
amend OCSLA to require potential lessees to meet environmental
standards before leases are sold. This will ensure that
potential lessees do not acquire rights until they have
demonstrated their ability to operate safely. Section III in
Attachment A of this document, below, describes realistic
response standards.
(3) Make additional changes to OCSLA Section 11, 43 U.S.C.
Sec. 1340, to ensure adequate time for environmental analyses
and to remove compensation for disapproval of an exploration
plan.
S. 3516 includes a number of amendments to OCSLA Section 11,
subsection (e). While these changes are primarily positive, additional
changes are necessary. Section 6(e) of the S. 3516 extends the deadline
by which the Secretary must approve an exploration plan. In this
section, the description of redesignated paragraph (5)(A)(ii) should be
changed to read ``(ii) if the Secretary makes a finding that additional
time is necessary to complete any environmental, safety, or other
reviews, a date not later than 30 days after the completion of the last
such review.'' This will ensure that the Secretary has adequate time to
complete the necessary reviews.
S. 3516 changes the circumstances under which the Secretary may
disapprove an exploration plan. The proposed bill sets the bar much too
high. The language should be changed to strike all three instances of
the word ``exceptional'' from redesignated subsection (e)(1). In
redesignated subsection (e)(1)(A), the words ``would probably'' should
be changed to ``could.''
S. 3516 contains language that would compensate lessees in the
event that their exploration plans are disapproved. This section should
be deleted. An OCS lease is not a conditional right to conduct
exploration and compensation is not due if the Secretary determines
that exploration is inappropriate.
(4) Make additional changes to OCSLA Section 18, 43 U.S.C.
Sec. 1344, to incorporate substantive standards for
environmental protection.
Currently, OCSLA gives the Secretary of the Interior broad
discretion to develop five-year oil and gas leasing programs. In
addition to the S.3516 amendments, Congress should amend OCSLA Section
18 to incorporate substantive, discernable standards that will guide
the Secretary`s decision-making and ensure that oil and gas activities
will not adversely affect ecosystem health. These amendments should:
guide the development of the five-year plan by stating that
``management of the OCS shall be conducted in a manner that
protects economic, social, and environmental values of the
renewable and nonrenewable resources contained in the OCS and
restricts to the greatest extent possible the potential impact
of oil and gas exploration on other resource values of the OCS
and the marine and coastal environments.''
require the identification of any important ecological areas
(IEAs) within the areas proposed for inclusion in the program.
Areas identified as IEAs should be excluded from the five-year
leasing program or-at the least-IEAs should be subject to
specific, stringent precautions that must be satisfied before
the sale of any leases wholly or partially within IEAs;
require the collection of specific types of baseline science
information on OCS areas before they can be included in a five-
year program. For example, before an area of the OCS is
included in a five-year program, Congress should require at
least three years of baseline weather, water, wind, ocean
chemistry, and other environmental data. It should require
similar baseline studies for wildlife-including fish, birds,
invertebrates, and marine mammals-and of the benthic
environment. Unless and until such data is compiled for a given
area of the OCS, that area should not be eligible for inclusion
in a five-year program. In addition, Congress include specific
requirements designed to ensure a more rigorous and meaningful
evaluation of environmental sensitivity and marine
productivity. This requirement should be integrated into and
coordinated with baseline science information;
require that the Secretary select a leasing schedule that
best protects marine and coastal environments while helping to
meet national energy needs from a range of alternatives.
II. Expert resource and safety agencies should have a much greater role
in decisions about and preparation of environmental analyses
for OCS oil and gas activities
S.3516`s requirement that the Secretary of the Interior respond to
the concerns of the ``heads of interested federal agencies'' is a
positive first step but not sufficient to address the inadequacies in
the science and environmental review.
Congress should amend Section 18 of OCSLA to give the Secretary of
Commerce, who has resource protection responsibilities under the Marine
Mammal Protection Act, the Endangered Species Act, and the Magnuson-
Stevens Fishery Conservation Act, a greater role in making initial
decisions about if, when, where, and how to allow oil and gas leasing,
exploration, and development on the OCS. For example, Congress could
amend Section 18 so that the Secretaries of Commerce and of the
Interior have joint and equal responsibility for preparing five-year
oil and gas leasing programs. Alternatively, Congress could amend
Section 18 to require the concurrence of the Secretary of Commerce
before any five-year leasing program is finalized and implemented.
To ensure that environmental analyses for OCS oil and gas actions
are sufficiently comprehensive, Congress should amend OCSLA to require
that NOAA play a more significant role in the National Environmental
Policy Act (NEPA) process for OCS oil and gas decisions. Congress could
accomplish this by requiring MMS and NOAA to jointly prepare NEPA
documents for OCS oil and gas activities. Or, Congress could require
MMS to obtain the concurrence of NOAA before MMS issues any record of
decision or finding of no significant impact concerning any OCS oil and
gas action. With NOAA`s broad ocean expertise and its role as a natural
resource trustee, greater involvement by NOAA will help ensure that
environmental analyses contain a proper range of reasonable
alternatives and assess accurately the risks of oil and gas activities.
Congress should also specify that other administrative agencies
with relevant expertise, including USFWS, USGS, EPA, USCG, and others,
contribute to the NEPA process, at a minimum, as cooperating agencies.
The statute should also require that the Secretary solicit and take
into account local and traditional knowledge from affected communities.
This would ensure that expert concerns are heard from the outset, and
could help avoid complications later in the process. Affected local
governments and tribes must also be partners in preparation of the NEPA
analyses.
III. Narrowing the Area for Lease Sales
As a matter of policy, over the past several decades, the Secretary
of Interior has defined the scope of the five-year leasing schedule far
too broadly. Rather than narrowly targeting leasing on areas with the
highest potential for oil and gas production coupled with the least
risk to the marine environment, the Secretary's plans define ``planning
areas'' that encompass tens or even hundreds of millions of acres.
Because of the enormous scope of these planning areas, environmental
analyses are too generalized to support informed decisions about where
to authorize oil and gas development. S. 3516 should address this issue
by amending OCSLA to require that five-year programs identify, with
greater precision, the portions of planning areas that will be open to
oil and gas leasing.
In order to narrow the scope of planning areas, the Secretary
should be required to seek information and defer to the recommendations
of agencies, with expertise in marine resources and safety including as
NOAA, USFWS and the USCG as to which areas should be excluded from the
planning process due to their importance to marine or coastal resources
or because of the safety risks involved in developing those areas.
Narrowly tailoring planning and leasing decisions will lead to smaller
areas being offered for lease and will enable environmental analyses to
be more targeted, specific and capable of reasonably supporting
decisions as to where development should occur. OCSLA should include
standards that place an upper limit on the percentage of a planning
area that may be included in any one five-year leasing program.
Alternatively, OCSLA could be amended to require the Secretary to focus
individual lease sales on specific lease tracts, rather than offering
enormous portions of planning areas.
IV. Independent Science
One of the principal challenges confronting managers and decision-
makers is the lack of information about the composition, structure, and
functioning of marine ecosystems. Decisions regarding oil and gas
development in the outer continental shelf should be part of a
comprehensive, ecosystem-based management plan that ensure the health
of the marine ecosystem, coastal economies and opportunities for a
subsistence way of life.
We are pleased that S.3516 directs the Secretary to develop and
carry out a comprehensive research program that includes the collection
of baseline data and monitoring. To ensure that the program meets its
stated goals and is truly independent and programmatically separate and
distinct from the leasing program, we believe that it should be housed
under the USGS biological services division.
Membership of the safety and environmental advisory board created
by S. 3516 should include not only Department of Interior employees
from USGS and USFWS but also employees from NOAA and the EPA, as well
as members from academia. The board should also be charged with
reviewing research and other scientific work of the comprehensive and
independent studies program. In addition the board should review the
science included in NEPA analyses associated with oil and gas
activities to ensure analyses are complete, accurate and do not contain
information gaps that preclude an accurate assessment of the risk and
scope of harm to the environment from any oil and gas activities. Any
deficiencies in the NEPA analyses identified by the board must be
resolved before those analyses are finalized.
V. Best Available Technology
Section 6(h) of S. 3516 rewrites OCSLA`s best available technology
standard. While the new language is a step forward, it still falls
short of that what is necessary to ensure that offshore oil and gas
operations are as safe as possible. S.3516 should be further amended to
describe a more rigorous standard as follows:
(b) BEST AVAILABLE TECHNOLOGIES AND PRACTICES--
(1) IN GENERAL.----
(A) In exercising respective responsibilities under this Act,
the Secretary, and the Secretary of the Department in which the
Coast Guard is operating, shall require
(i) the use of the best available and safest technologies and
practices whenever equipment failure may have an effect on
safety, health, or the environment; and
(ii) the use of technologies and practices that have been
proven safe and effective under the site-specific conditions in
which they will be used.
(B) For all new drilling and production operations, the
requirements described in subparagraph (A) apply as of the date
this bill takes effect.
(C) For drilling and production operations already in
existence on the date this bill takes effect, the requirements
described in subparagraph (A) will apply not later than
September 1, 2015 unless
(i) the operator of the existing drilling or production
operation submits to the Secretary documentation showing that
converting the operation to comply the requirements of
subparagraph (A) is impossible or dangerous; and
(ii) the Secretary issues a written determination that
converting the operation to comply with the requirements of
subparagraph (A) is in fact impossible or dangerous.
VI. Regional Citizens Advisory Councils
Congress could help prevent future oil spills by authorizing and
funding citizens` oversight councils for all areas of the country with
existing or proposed oil and gas development .. These councils should
follow the model of the Prince William Sound Regional Citizens`
Advisory Council (PWSRCAC). In Prince William Sound, the RCAC has
proven to be effective at ensuring the best spill response and
prevention capabilities have stayed in place since the Exxon Valdez oil
spill. Preventing complacency and maintaining vigilance by citizens has
proven to be one of the most important methods for preventing oil
spills and ensuring that proven, well-maintained response capability is
in place should a major spill occur.
In the aftermath of the 1989 Exxon Valdez oil spill in Prince
William Sound, Congress established citizens` councils as part of OPA--
90 to help combat the complacency in industry oversight that was
identified as a major factor in the 1989 spill, and to provide a needed
layer of scrutiny to increase public confidence in the safety of the
Alaska oil transportation system. The PWS RCAC has kept in place key
requirements for spill prevention since the Exxon Valdez oil spill
including the stationing/escort of 2 powerful tractor tugs in Prince
William Sound and an emergency response/firefighting vessel that
escorts all tankers to open water. The RCAC also performs an important
independent oversight function by reviewing oil spill contingency
plans.
In areas where oil and gas development exists or is proposed, RCACs
could provide advice and recommendations to the Secretary of Interior
and the industry on development activity as well as associated
pipelines and tankers in the region. They would also provide advice to
the Department of Interior regarding the 5 year leasing schedule, lease
sales, and exploration and production in the region.
VII. Coastal Conservation and Restoration
The Deepwater Horizon spill provides a harsh reminder of the
impacts of human activities on the health of marine ecosystems. To
address these threats, Congress should establish permanently
appropriated, dedicated funding for ocean, coastal, and Great Lakes
conservation and management. The proposed trust fund would be used to
support three classes of activities for protection, maintenance and
restoration of marine ecosystem health: grants to states based on a
formula similar to that used to allocate funds under the Coastal Zone
Management Act; competitive grants for ocean conservation and
management available to public and private entities; and grants to
support regional ocean partnerships.
In addition, as the events of the last two months have revealed,
the technology and capacity to prevent, respond to and restore damage
from oil spills is woefully inadequate. We need to find balance between
extraction capability and response and recovery capability. Congress
should revitalize the Oil Spill Liability Trust Fund by increasing
revenue going into it, and by making substantial funding available for
research and development of oil spill prevention, response and recovery
technologies and techniques.
VIII. Conclusion
The Committee should be commended for introducing S. 3516. This
legislation goes a long way toward improving oversight of activities in
the Outer Continental Shelf. S. 3516's amendments to OCSLA in addition
to our recommendations detailed in this document will help minimize to
the maximum extent practicable the threat of future catastrophic
spills. We are more than happy to work with the Committee to assist in
any way possible to ensure the necessary improvements to OCSLA are
made. Thank you again for the opportunity to testify.
Please see Attachment A for more specific recommendations regarding
changes to OCSLA and OPA 90.
The Chairman. Thank you very much.
Mr. Welch, go right ahead.
STATEMENT OF DAVID H. WELCH, PRESIDENT & CEO, STONE ENERGY
CORPORATION, LAFAYETTE, LA
Mr. Welch. Thank you, Chairman Bingaman and Ranking Member
Murkowski, for the opportunity to testify. It is nice to see
you again.
I would like to also acknowledge the 11 people. The
families of these people are mostly from my home State, and
they left behind wives and children. That is, indeed, a
tragedy. But I would also like to point out that our region has
suffered two tragedies. First, the spill and now the loss of
our primary industry.
I will provide the committee with some general thoughts on
the legislation before you but would caveat my comments, given
the fact that I have not had an opportunity to analyze the
legislation in full detail.
My name is David Welch, and I am the president and CEO of
Stone Energy Corporation. I am an engineer and economist by
education and have been in the oil and gas industry for 38
years. This includes a stint as an adjunct professor at Tulane
University and 5 years working as a petroleum engineer at the
U.S. Geological Survey. I followed that with 26 years at Amoco
and was absorbed into BP Amoco for a time and then went on to
Stone Energy about 6 years ago.
Stone is an independent oil and natural gas exploration and
production company headquartered in Lafayette, Louisiana, with
additional offices in Houston, Morgantown, and soon to be New
Orleans, Louisiana. We employ about 300 people with an equal
number of contractors and an equal number of companies that we
do business with as suppliers.
Stone employs people who have dedicated their lives to
providing energy to a needful world. We employ people like
Jerry Wenzel, a mechanical engineer by training and who has
overseen the safe and efficient development of multiple
deepwater development projects, as well as deepwater pipelines.
We employ people like John Pantaleo and Jimmy Reed, our
drilling manager who actually helped design the dynamically
positioned drill ship that is now collecting the oil on the
Horizon incident. So these are very experienced people. Jimmy
Reed, our superintendent, who has held just about every company
position there is on an offshore rig.
As you are aware, on Monday, the Secretary officially
reorganized the previous MMS. From our perspective, the
Government has the best understanding of how it should be
organized, and the administrative changes sound reasonable.
From an industry perspective, I am less concerned about the
acronym for the agency, but more concerned with the people that
are competent and professional.
If you charge the Government with new functions and
responsibilities, please also ensure they have the funding to
carry those out. These changes are going to be judged by the
results they are able to achieve.
One concern the committee should consider is the use of
ambiguous words that give too much discretion, too much
latitude in terms of interpreting what you really mean. Things
like ``reasonable,'' ``acceptable,'' ``relevant,'' ``other
exceptional circumstances,'' ``would probably cause.'' These
words can tend to lead to an ambiguous meaning that will just
lead to years of litigation. Providing clarity should be an
outcome of your committee.
The reorganization is one that may have been necessary
regardless of the Deepwater Horizon accident. However, efforts
to significantly change the environment without a full
understanding of the facts could also likely lead to unintended
consequences, just as the drilling in the Horizon has led to
the unintended consequences of this spill.
Therefore, I would encourage you to be as deliberate as you
can under your time constraints to try to understand the far-
reaching consequences of your actions. The Presidential
commission hasn't even conducted its initial organizational
meeting yet.
While the regulatory environment is getting plenty of
attention, my understanding is the largest cause of the
Deepwater Horizon appears to be critical errors made during
operations. For the thousands of workers in the Gulf, whatever
changes you are considering, we are counting on Congress to get
it right, not just right now. Economically, we can't afford
decisions that are going to result in rigs leaving the Gulf and
the inability to produce energy here in the United States.
The problem that we have with the shutdown of drilling is
that the Gulf of Mexico has very high-porosity rocks, high
permeability, and the decline rate is very large, 33 percent
per year. So even a 1-year loss of production represents
potentially losing up to 30 percent of our production. It is
required to have continuous drilling to be able to make that
amount of production up.
I definitely don't want to try to minimize the disaster
playing out in the Gulf, but I do hope that you will examine
the safety record of our industry. It has been 40 years since
we had a blowout in the Gulf of Mexico, and out of that blowout
came the subsurface safety valve, which has prevented many,
many blowouts from happening during that 40 years.
I am convinced that what you have learned through this
investigation, you will be able to enact regulations that will
prevent us from having accidents for many, many decades to
come, hopefully never.
Also, over the last 60 days or so, we have seen the
development of a new technology, which is the development of a
containment technology. Imagine the mitigation had one of those
been ready at Port Fourchon ready to deploy in 2 days instead
of in 60 days. That is the technology now available to us to
mitigate the circumstances.
So I would just like to close by saying Louisiana is my
home. I was raised in New Orleans. My family has a place in
Grand Isle, where you have seen the oil coming ashore, for 50
years. I presently live in Lafayette, and it is important that
we protect not only our people and our environment, but also
our major industry.
So the regulatory reforms will achieve the safety that you
are looking for. We just need to get back to work as soon as we
can. So thank you very much for your time.
[The prepared statement of Mr. Welch follows:]
Prepared Statement of David H. Welch, President & CEO, Stone Energy
Corporation, Lafayette, LA
Thank you Chairman Bingaman and Ranking Member Murkowski for the
opportunity to testify. I will provide the Committee with some general
thoughts on the legislation before you but would caveat my comments
given the fact that I have not had an opportunity to fully analyze the
legislation.
My name is David Welch and I am the President & CEO of Stone Energy
Corporation. I am an engineer and economist by education and have been
working in the oil and gas industry for thirty eight years. This
includes a stint as an adjunct professor at Tulane University and five
years working as a petroleum engineer and economist at the United
States Geological Survey. In addition, I worked for 26 years at Amoco,
and was absorbed into the merged BP Amoco for a short time, after which
I went on to Stone Energy where I have been for the last six years.
Stone Energy is an independent oil and natural gas exploration and
production company headquartered in Lafayette, Louisiana with
additional offices in Houston, Texas and Morgantown, West Virginia and
a soon to be opened office in New Orleans, Louisiana. We employ about
300 people and have a similar number of contract employees.
Stone employs people who have dedicated their lives to providing
energy to a needful world. We employ people like Jerry Wenzel, a
mechanical engineer by training who has overseen the safe and efficient
development of multiple deepwater development projects as well as
deepwater pipelines. We employ people like John Pantaleo and Jimmy
Reed. John is our drilling manager who helped design the the
dynamically positioned dual derrick drill ship with storage capacity
now being used to capture oil from the spill. Jimmy Reed is our
deepwater superintendent that has held just about every job there is on
an offshore drilling rig. These are sincere, conscientious men with the
sole aim of safely and effectively drilling and completing the wells
which produce the product that allow all of us to drive and fly and to
heat and light our homes.
As you are aware, on Monday, Secretary Salazar officially re-
organized the previous Minerals Management Service. From my
perspective, the government has the best understanding as to how it
should be organized and the administrative changes sound reasonable.
From an industry perspective, I am less concerned with the acronym
associated with the agencies than I am getting a timely response and
working with people that are competent and professional. If you charge
the Government with new functions and responsibilities, ensure that
those people are funded and trained to meet those responsibilities in a
timely manner. These organizational changes will be judged by the
results and the answer to the question of whether people were placed in
the best position to succeed.
One concern the Committee should look at is the use of ambiguous
words that give so much discretion in making certain decisions which
can lead to administrative and judicial wrangling over what they mean.
Examples include ``reasonable,'' ``acceptable,'' ``relevant,'' ``other
exceptional circumstances,'' and ``would probably cause.'' These words
and their ambiguous meaning may result in more litigation. Instead,
providing clarity should be a goal.
The reorganization of the Minerals Management Service is one that
may have been necessary regardless of the Deepwater Horizon accident.
However, efforts to significantly change the regulatory environment
without a full understanding of facts could likely lead to unintended
consequences that are difficult to undue. Therefore, I would encourage
you all to be deliberative and understand the consequences of your
actions. I would also point out that the Presidential Commission hasn't
even conducted their initial organizational meeting.
While the regulatory environment is getting plenty of attention,
based on what I have been able to understand the largest cause of the
Deepwater Horizon appears to be critical errors made during operations.
For the thousands of workers within the Gulf, whatever changes you are
looking at, we are counting on Congress to get this right, not just
right now. Economically, we can't afford decisions that are going to
result in rigs leaving and the inability to produce energy here in the
United States.
While I don't want to try to minimize the disaster playing out in
the Gulf, Congress will hopefully examine the safety record of the last
forty years before making wholesale changes. I believe that with a few
additional requirements such as independent verifications of blow out
preventers and safety system functions, plus increasing the number of
inspectors will significantly reduce the likelihood of a future
disaster. Also, we have seen over the last 60 or so days development of
a deepwater containment technology that did not really exist to my
knowledge before this spill. Going forward think of the mitigation if
one of those devices was already built and sitting at Port Fourchon
ready to deploy in 2 days instead of 2 months. The size of the spill
would be materially smaller with much less impact to our environment.
There is geology throughout the world that is easier to access the
resource. There is water that is shallower to access. There are
regulatory regimes that are not as stringent as the U.S. What the Gulf
of Mexico has always offered was a legal and regulatory climate that
offered certainty. Louisiana is my home and it is important that we
have an environment that keeps jobs in Louisiana. It is also important
that the country maintain its own resources and the Gulf is a very
important part of that resource.
While I am certain measured regulatory reforms can help make the
offshore safer, I ask the committee to consider whether the proposals
before us today will lead to more or less energy. Energy demand won't
go down as a result of the spill. The only thing that will happen with
drilling being shut down or reduced in the Gulf is an increased
transfer of wealth out of our country into the oil exporting countries.
Given the current tenuous state of our economy that does not make
sense.
Most of us took transportation to work today that was either
petroleum powered or petroleum manufactured. According to the Energy
Information Agency, the United States will still need oil and natural
gas for the foreseeable future. Companies like Stone Energy are ready
to meet these challenges safely and responsibly but we need a
regulatory environment that allows us to operate in the Outer
Continental Shelf safely and economically.
Thank you and I look forward to answering your questions.
The Chairman. Thank you very much. Thank you both for your
testimony.
Let me ask a few questions here. Ms. Heiman, let me ask you
about these regional citizens advisory councils. How do these
councils work? What role do they have with respect to agency
decisionmaking? I am just unclear on that.
Ms. Heiman. Mr. Chairman, the Prince William Sound Regional
Citizens Advisory Council is--there are 2 councils. One was
created in Cook Inlet, and one was created in Prince William
Sound. The way they work is they have citizens from each
community who are represented that actually really get trained
and become very knowledgeable about the industry.
They provide recommendations to the industry, actually,
directly through an association. But they also play a role in
guiding legislation and policy, and I can give an example if
you would like?
The Chairman. Yes. I am mainly interested in knowing how
they would affect or impact on decisionmaking by the agency
with responsibility.
Ms. Heiman. For example, when I worked for the Governor of
Alaska, the regional citizens advisory council came to us and
said we believe there should be tractor tugs that would be
stationed in the sound and also have--there were already escort
vessels. But they needed really high-powered tractor tugs to be
able to move and push a tanker or pull a tanker if it were to
head for the rocks.
They brought that to our attention, and we were able to
make some decisions, and the Governor was able to talk to the
president of BP and get those changes made.
The Chairman. OK. Let me ask, you suggest that the
Secretary of Commerce, because of the location of NOAA in the
Department of Commerce, that the Secretary of Commerce have
joint and equal responsibility with the Secretary of Interior
for preparing 5-year plans. How would that work? That sounds
like a recipe for inaction to me.
Ms. Heiman. The way our Government is set up right now, we
divide up how we manage our oceans, and it is challenging. The
way that MMS has handled issues in the past that I have seen is
that when they are making decisions about a 5-year schedule or
a lease sale or exploration plan, they can listen to the other
agencies, or they don't have to unless there is an endangered
species involved.
We think that there is a way--I know it might be
challenging, but there is a way to make sure that the agency
that is responsible for the oceans and the protection of the
oceans, including not just NOAA, but U.S. Fish and Wildlife
Service and USGS and some of the other agencies, would actually
have more authority in the approvals of those plans.
They have been up to now, and I have witnessed them being
dismissed in their comments and their----
The Chairman. Obviously, I think they should have an
opportunity to make input and have that input considered. I
don't know if I think having joint and equal authority between
the two Secretaries is something that is going to work too well
in practice. That is my concern.
Mr. Welch, did you have any thought either about this idea
of giving the Secretary of Commerce more of a role here or
about this idea of these advisory committees, these citizens
advisory committees?
Mr. Welch. Obviously, that is for you to consider, Senator.
But we would be in favor of something that gets input from all
the stakeholders but has a single point of accountability so
that decisions don't get bound up in red tape. In the Gulf of
Mexico particularly, it is one of the few places where we can
actually explore in this country. To put more delays, et
cetera, into the program would be very difficult.
We are trying, we are scrambling right now trying to figure
out how to stay alive as a company as a result of this
moratorium. There are hundreds of companies like mine that are
in the similar position right now.
The Chairman. All right. Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman.
I appreciate you bringing up the issue of the regional
advisory councils. This stemmed, of course, from the Exxon
Valdez, and it was actually my father who went over to
Scotland, looked to see what they were doing over there, took
that idea and incorporated that into the RACs, the regional
advisory councils. I do think that they have worked well. I
think that they have been a good guide. It allows for a level
of not only community participation, but doing it upfront.
Right now, what you are facing in the Gulf is a lot of
scrambling, trying to figure out who knows what. The way it has
been set up in Alaska is those who are familiar with the
waters, those that make their living off it, they are standing
by in the event that their vessels are needed to operate or to
haul boom. They know that you can't put boom in front of a
certain area because the tides don't work.
So it takes a plan that might look good on paper, but it
incorporates those that live and breathe in the area, and it is
a model that we think has worked well. I have incorporated the
concept in a draft that I am working on now, the Oil Spill
Compensation Act of 2010. We establish a council, a 2-member
council, nonbinding authority to make recommendations for
Government and industry practices.
There is voting representation from all of the stakeholder
groups--the industries, the local governments--and then we have
nonvoting reps that come from the stakeholder States, the
Federal agencies. But what we have done in our legislation is
pattern it off the Alaska model, and I would be curious to get
the input from both of you as to the direction that we are
taking with this.
I don't know that you can always transfer what we have done
in Alaska to other parts of the country, but it is a model that
I think is certainly worth looking at, and I am going to
encourage my colleagues to do so.
Ms. Heiman, I want to ask you a question based on I
appreciate your perspective from the Alaska view. In your
testimony, you indicate that current law should mandate that
the Interior Department prepare full and comprehensive analysis
at both the programmatic and the site-specific project stage.
So what I am curious about is whether it is your position or
Pew's opinion that every single new operation that we have in
the Gulf moving forward should undergo its own full-scale EIS?
I will just let you answer that question then.
Ms. Heiman. We have not taken a position on that, and just
to be clear, the Pew Environment Group does not oppose all
offshore drilling. What I think and we have said in our
testimony is that in new frontier areas, where there is no
existing major response capability or challenges that haven't
been foreseen, in those cases, full EIS, I believe, should be
conducted.
In the Gulf, I understand there are a lot of rigs that
operate in similar areas, and so it may not make sense in all
cases. I think it really should be based on what the
environmental conditions are and what the safety conditions
are.
Senator Murkowski. So there is a recognition there that at
some point you can be duplicating efforts, essentially, that
may or may not be constructive.
Let me ask you this, Mr. Welch, and I suggested this in my
comments to the Secretary. This is the concern that I have
about this investment flight and whether it is the action of
the administration in imposing this blanket moratoria or
whether it is the discussion that is at hand as we revamp MMS
and look to different, a different regulatory approach.
Certainly, we heard from Mr. Bromwich that it is going to
be a SWAT team type of approach in terms of not only
enforcement within the department, within the agency itself,
but among the operators out there. Can you tell me what is
going on from your perspective as an operator out there? Are we
seeing companies and operators in the Gulf looking at what is
going on here in Washington, D.C., and some of the policies or
the hinted direction toward policy and having them make
decisions that take them out of the Gulf?
Mr. Welch. Yes, actually, that is a very important
question. Let me just clarify one thing. The moratorium, of
course, is 500 feet or deeper, but all permits in the Gulf have
been rescinded and have to be reapplied. So there are very
little, if any, drilling.
Senator Murkowski. What does that mean to you as a company?
Mr. Welch. What it means to me as a company is I have a rig
sitting on a platform. It is not in deep water. It is in
greater than 500 feet of water. It is in about 1,000 feet of
water. It is a platform rig, not a floating rig like the
moratorium describes.
But that rig is actually just sitting there, shut down. I
am paying standby costs every day. The rig is doing nothing.
Senator Murkowski. What does it cost----
Mr. Welch. We had to cement the well that it was drilling,
and it is sitting there doing nothing until we get to the
point. So I would very much support the idea of not just having
a blanket moratorium.
As facts become available, there are ways to minimize any
threat of any further pollution right now. The idea that
Senator Landrieu put through of allowing even the floater rigs
to drill down to the point, or top drill where you are not
actually drilling in the zones that have hydrocarbons--
generally, you have to drill 10,000, 20,000 feet before you get
to the objective zone. You could drill a lot of that, case off
the well, and those rigs could be busy doing something that is
valuable work during the time the moratoria on hydrocarbon
drilling is imposed.
But we are already starting to see deepwater rigs leaving
the Gulf. We were a 15 percent partner in a prospect that now
looks like that rig is going to leave and be gone from the Gulf
of Mexico. Wwhen these rigs leave, they don't just go for one
well and come back. They go for a fairly extended period of
time, 3 to 5 years typically.
If we start losing those rigs, the ability to recover the
moratorium may not just be a 6-month ordeal, it may actually
have impacts for years and years to come, which would be very
difficult. Because as these rigs move, they are developing oil
in countries other than ours.
Our demand isn't going down. We are still buying the oil.
But the money that we are paying for that oil, instead of going
to people that are in the U.S., is now going overseas to
exporting countries. I think that is tragic, given the tenuous
state of our economy right now.
Senator Murkowski. I think it is an important statement
that needs to be made, and I think people need to understand
that when we talk about a 6-month moratoria, what has happened
as a consequence of that 6 months extends well beyond the 6
months. As you say, whether it is the cost of or the commitment
of a rig in another country, that is one thing. But being able
to just hit the play button now that the pause button is off, I
think we recognize is not necessarily realistic.
I suggested to the Secretary yesterday that in the 33
deepwater wells that have been shut down with this moratoria,
that of the 33, 28 of them are not necessarily in that active
exploration stage. They are in the development appraisal stage,
which is different from a risk perspective, and is it possible
that they could consider looking at those types of
distinctions?
I remain hopeful that there will be that type of an
assessment that will allow decisions to be made in the Gulf
that, again, ensures the soundness and the safety of the
operations, but doesn't encourage this investment flight that I
am really quite concerned is not going to be short term and the
economic impact is going to be quite considerable.
Mr. Welch. Correct.
Senator Murkowski. Thank you, Mr. Chairman.
The Chairman. Thank you very much.
Thank you both for being here and your excellent testimony,
and we will take it into consideration as we try to move ahead
with some legislation.
That will conclude our hearing. Thank you.
[Whereupon, at 11:52 a.m., the hearing was adjourned.]
APPENDIXES
----------
Appendix I
Responses to Additional Questions
----------
Response of Ms. Marilyn Heiman to Question From Senator Murkowski
Question 1. Ms. Heiman, your written testimony advocates several
areas in which legislation must minimize any adverse risks or impacts
to the ocean before development can move forward. It's obviously small
comfort now, but the risk of one major incident like Deepwater Horizon
in over 40,000 wells drilled in over 30 years is at least statistically
a small fraction of a percentage of a risk. Again, that's small comfort
when the consequence of a risk is now obviously so high. The debate is
obviously over the definition of minimizing a risk--because as we all
know it is impossible to eliminate a risk without simply forgoing the
underlying activity. Can you talk more about your definition of
``minimizing'' a risk?
Answer. Minimizing risk means undertaking oil and gas exploration
and development activities in a manner that will result in either no
harm or the least possible harm to marine and coastal resources. Under
current law, too much focus is on promoting oil and gas development and
there is far too little attention on the consequences of that
development on our other valuable marine and coastal resources.
Minimizing risk will occur only with a more rigorous, transparent and
multi-agency process for approving oil and gas exploration and
development activities. OCS planning, exploration and development must
be subjected to full and meaningful environmental disclosure and
analysis which must be conducted with the participation of those
agencies with expertise in marine and coastal resources and safety:
NOAA, USFWS, and USCG. In addition, requiring that specific standards
for resource protection and safety be met before oil and gas activities
can occur will serve as an incentive to drive technological and
operational developments and will lead to safer and less harmful oil
and gas development. After the Timor Sea and Deepwater Horizon Spills
we no longer have the luxury of believing that oil and gas development
is without risk. However with specific operational and safety standards
and a process in which expert agencies can participate in assessing the
potential harm to marine and coastal resources, oil and gas development
can be targeted to those areas and in the manner that will minimize
risk.
The risk assessments that underlie our offshore exploration
planning and permitting seem to be overly focused on the probability of
a spill, and not on the consequences of a spill, however unlikely.
Future policy decisions on oil and gas development should be based on
both the chance of a catastrophic spill and the damage that can be
caused if a catastrophic spill occurs. An independent third party
should be involved in reviewing risk assessment methodologies and
certifying the results for accuracy and scientific vigor. Industry and
government oil spill plans must adequately prepare for activities where
the probability is low but the consequences high, like a catastrophic
blowout. Industry must be required to demonstrate that they have the
capacity to respond to a catastrophic spill and that the response can
be sustained the full time it takes to get a blowout under control.
There must also be an assessment of the percentage of time that a
response is possible in the area where the activity is to occur. Even
if another thirty years and 40,000 wells elapse before another, an even
worse spill occurs--we have no choice but to plan for the inevitable.
Minimizing risks will require making changes in decision making at
every stage of oil and gas development--planning, leasing, exploration,
production, safety and prevention and spill response preparedness.
Planning and Leasing/Exploration and Production
Risks can be minimized beginning at the planning and leasing stages
of oil and gas development. The 5-year planning process is the place to
ensure that exploration and development will not occur in places where
the risk of harm to marine and coastal resources is determined to be
unacceptable by expert resource agencies. It should also not be
conducted where effective spill response is not possible. Areas
identified for leasing should be small enough so that environmental
analyses are meaningful and can effectively gauge the extent to which
resources can be protected.
Expert resource agencies including NOAA, U.S. Fish and Wildlife
Service and U.S. Coast Guard should be consulted in all decisions
regarding the location, timing and scope of oil and gas activities on
the OCS. NEPA analyses must be conducted as early as possible and fully
assess the impacts, including the cumulative impacts, of exploration
and development. Again, expert agencies must be consulted in the NEPA
process and their recommendations must be accepted by the Bureau of
Oceans and Energy Management. Full NEPA compliance at every stage of
activity must be mandated; categorical exemptions or any other means to
short circuit a full assessment of the environmental and safety impacts
of oil and gas activities should be prohibited.
Safety and Prevention
Oversight of safety and operational practices is also important to
minimize spill risks. Requirements should be added to current law to
mandate that:
1) All drill ships that operate in American waters meet the
same regulatory review whether they are foreign or American
flagged.
2) Federal inspectors are required to be present on drill
rigs at all times to ensure safety standards are being met and
risks are minimized.
3) Adequate funding exists to ensure there are enough
regulators and inspectors to cover all offshore operations and
ensure they are adequately paid and trained to a level
commensurate with the technology they are overseeing. One model
for this is the Oil Companies International Marine Forum
(OCIMF) SIRE (ship inspection report) inspection program, which
is based on very strong inspector training and knowledge
requirements and standardized inspection criteria that would
help agencies to identify risky operating practices or
conditions, and possibly prevent incidents like the Deepwater
blowout.
Spill Response Planning
As we have seen with the Deepwater response, MMS has had a practice
of rubber-stamping contingency plans that made claims about response
capability that were never tested and thus could not be backed up. The
responsible federal agency should ensure that the owners and operators
demonstrate that they have the equipment, vessels, personnel, and
planning in place to respond to a blowout and stop the oil flow in the
shortest possible time. This information should be required in a
separate blowout plan that must be in place before any drilling is
allowed.
The spill response plan must include enough effective spill
response equipment, such as skimmers and boom, and adequate trained
personnel to remove the oil from the water and protect sensitive areas
that are important fish or wildlife habitat. These plans need to
include a process for sustaining a major response for weeks or months.
The requirements need to be concrete and strictly enforced. A company
must be required to demonstrate that they have enough equipment and
personnel to clean up a 60,000 barrel a day spill and show how they
plan to sustain it for 90 days or the time it will take to drill a
relief well, whichever is shorter. The owner and operator of wells that
have less pressure or are not as deep should have to certify through an
independent 3rd party that the pressure is less and the time to drill a
relief well shorter if they want their response planning standard to be
lower.
Without a specific standard there is no incentive to purchase the
boom, train the workers and deploy the necessary equipment. For
example, in Prince William Sound 300 fishermen are on contract and are
trained at least annually to respond. This is due to a specific
standard in state law that requires the plan holder--Alyeska-to
demonstrate they have the capacity to respond to a 300,000 barrel spill
in 72 hours. Currently there is no such standard in federal law.
A specific quantity of oil to be cleaned up in a specific time
frame must be set out in federal law or regulation for facilities
including offshore drilling rigs in federal waters. This should include
a realistic timeframe for drilling a relief well. These standards would
give industry specific requirements regarding what they need to have in
place to adequately respond to a spill, and it would give regulators
specific mandates they would need to follow to approve a spill
contingency plan. The determination of how much spill prevention and
response equipment is necessary would no longer be discretionary or
subjective. Rigs at different water depths and drilling depths and in
different operating environments could have different standards. Areas
with extreme conditions where spill response is challenging or near
impossible should require additional prevention measures in addition to
the assurance of response capacity. We cannot continue to ignore or
dismiss the risks of a catastrophic spill.
To summarize, we can minimize risks by improving full understanding
of the consequences of a catastrophic spill, and then requiring that
operators demonstrate that they are prepared to respond to such a spill
with sufficient, appropriate equipment, personnel, vessels, logistics,
and planning. We need to enhance our safety inspections to verify
operator preparedness and thorough audit operating practices. Our lease
sale process must reflect a more comprehensive consideration of risk,
both probability and potential consequences. We should then be prepared
to make informed decisions for cases where there are risks of an
uncontrolled blowout that exceeds our existing response technologies.
Response of Ms. Marilyn Heiman to Question From Senator Lincoln
Question 1. In your testimony, you stated that advancements in
technology for extraction of oil and gas in deeper and deeper waters
have far outpaced the technology available in spill prevention and
response. In addition to structural reforms within the Department of
Interior, how can we begin to change this divergence in technology,
given the ongoing disaster in the Gulf?
Answer. Improvements in spill response efficacy and capacity (in
addition to prevention) will occur only if specific requirements are
added to governing statutes. Without statutory directives making
effective spill response a precondition to development, industry has no
incentive to invest in technological improvements in spill response.
To ensure that spill response technology to keeps pace with
drilling technology;
1) Industry should be required to clean up or remove oil at a
higher percentage of spilled oil than the current norm of 20%.
Instead of allowing industry to rely on a 20% or less removal
rate, the government should phase in a requirement for owners
and operators to clean up or remove 100% of the spilled volume.
This will drive research into improved technology and will
require proof that sufficient equipment is readily available;
and
2) Incentives need to be included in law in order to
encourage advances in spill response technologies. We have seen
more novel technologies emerge during the Deepwater response
than we have in the last 20 years. Technological advances
should occur at times other than during catastrophic spills.
Incentives to encourage technological advances should be
considered, perhaps in the form of tax relief such as has been
provided to promote drilling in deeper waters. In addition,
funding from the Oil Spill Liability Trust Fund should be
increased to ensure adequate funding for spill response,
particularly in Arctic conditions.
In addition to spill response technology not keeping pace with
drilling technology there is also a major gap in the adequacy and
quantity of equipment in place if a catastrophic spill occurs. As I
mentioned in my answer to Senator Murkowski's question, one of the keys
to improving response capability is to shift from our current system
under which spill response plans merely describe response capabilities,
to a system in which spill response technology is tested and operators
demonstrate that sufficient equipment is readily available to manage a
catastrophic blowout. Drills and exercises should be used to show how
quickly this equipment can be transported and operational on-scene.
Operators should be required to foresee the possibility of having to
carry on a response for 90 days or longer, and they must demonstrate
that they have enough equipment and capacity to do so.
I also mentioned that the State of Alaska has established response
planning standards that set out a requirement to clean up a certain
quantity of oil within the first 72 hours of a spill, based on the type
of operation. We need to look at similar federal standards. One
possibility is to adopt a tiered approach to requiring that a certain
quantity of oil be cleaned up in within 72 hours, one week, and over
the duration of the spill. The requirement for offshore drilling rigs
in federal waters should reflect a 90-day worst case blowout. These
standards would give industry specific requirements regarding what they
need to have in place to adequately respond to a spill, and they would
give regulators specific mandates to approve a spill contingency plan.
Without a specific standard there is no incentive to purchase the boom,
train the workers and deploy the necessary equipment. This type of
standard must be set out in federal law for facilities including
offshore drilling rigs in federal waters. It would ensure far more
equipment is in place in the event of the next catastrophic spill.
After the passage of OPA-90, new spill federal response standards
were established for tank vessels based on the vessels worst case
scenario.\1\ These standards were relaxed or temporally capped based
solely on the amount of equipment that was available to the industry at
that time. Promised 5-year increases in the caps to ramp-up capability
as the spill response equipment capabilities improved never
materialized. Today, almost 20 years after the standards were
established, tank vessels still do not have to meet those standards
because these temporary caps are still in place. We cannot let new
standards be based solely on the technology available today, because
that technology is clearly not adequate.
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\1\ 33 CFR Part 155.2230 Appendix B
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Responses of David H. Welch to Questions From Senator Murkowski
Question 1. Mr. Welch, you have dealt with the Interior Department
and several other government agencies for decades. Is it your opinion
that they have grown more lax in terms of regulating or more stringent
over that time period?
Answer. During my almost four decades of experience, the regulatory
agencies have actually grown more stringent in their enforcement over
time. The last U.S. well blowout in the Gulf of Mexico to my knowledge
occurred in 1971 and out of that incident came the sub surface safety
valve technology and requirements by the regulators for its deployment,
and there has not been a producing well blowout of since then. Other
examples of more stringent regulations are:
a. added requirements for training of personnel and auditing
of same
b. more frequent emergency response drills initiated by
regulators
c. regular annual performance reviews
d. more frequent inspections and issuance of non-compliance
incidents
e. added numerous requirements and rules based upon hurricane
events ie, platform inspection requirements, storm survival
capabilities, rig mooring requirements, etc.
As a result of this, the offshore exploration and production
industry has a safety record according to U. S. Government reports that
ranks at or near the top of American industries.
Question 2. Mr. Welch, one of the proposals in the legislation is
to provide that the Secretary promulgate regulations requiring a safety
plan to be submitted along with each new application for a permit to
drill. Does this sound like a reasonable addition to an APD?
Answer. Regarding a safety plan submission with each APD, I believe
it is redundant. Requiring a universal Safety Management System for
each company and a specific plan for each broad type of activity such
as Outer Continental Shelf drilling and Deepwater drilling, similar to
a Regional Oil Spill Response Plan seems to make more sense. This is
something each operator should be required to have in place. This would
help ensure safety of operations equally as well as including it in the
APD and would also save the taxpayers from paying for additional
regulation that does not improve the safety of operations. Any
significant variances to these plans, however, should be required in an
APD.
Responses of David H. Welch to Questions from Senator Menendez
Question 1. Your company, Stone Energy, has a market cap of less
than $700 million dollars and has been drilling in over 1,000 feet of
water in the Gulf. One of your competitors, ATP Oil & Gas Corporation,
is also worth less than $700 million and is drilling in almost 7,000
feet of water.
Answer. It is true that many smaller independents operate in the
Gulf of Mexico, in both shallow and deepwater. Individually, no single
independent company may be nationally important, but in aggregate the
independents comprise the vast majority of the 163 companies that are
qualified designated operators in the Gulf of Mexico. These represent a
large and very important component of our nations energy supply and
must be respected as such.
Our company has an excellent safety record and even won the
Department of Interior National Safe Award within the last few years.
We have reduced our OSHA recordable incident rate from 1 accident per
200,000 hours worked 5 years ago to 0.38 last year as a concerted
emphasis on safe, environmentally responsible continues.
Some might argue that only the major companies should be operating
in the Gulf of Mexico. However, we all use the same drilling
contractors and service companies and thus have similar equipment and
technology. I would also argue that because of our size each individual
well gets more and higher levels of attention within independents and
thus we are as safe or safer than the majors, not despite of, but
because of our size.
Unlike what we have heard in the testimony of at least one of the
major companies, when we have a well issue, our senior management, up
to and including myself as CEO, become engaged in the solution and
decision making. Our management team has worked together for over 30
years, successfully and safely drilling and completing well after well
in the Gulf of Mexico. Ninety seven percent of our production comes
from the gulf, and each well gets full, high level and careful
attention.
There are creative ways the Senate can use to protect the
environment and the taxpayers as well as foster the entrepreneurism of
smaller businesses that have made our nation great. Some details are
discussed in answer to your second question below.
Question 2. According to a recent analysis by Credit Suisse, BP's
clean-up costs, economic damages, and other costs could total $37
billion dollars. If this spill had happened at your well or at ATP's
well, wouldn't taxpayers be on the hook for tens of billions of dollars
in estimated damages?
Answer. Your question is an excellent one and raises the greater
liability concerns that I know the Senate is grappling with right now.
As you know, with the current spill, BP has waived the liability cap.
The current fund, which has been paid for by the oil and gas industry
currently stands at approximately $1.6 billion and it does not appear
that it will be needed for the Macondo incident.
However, the Senate is in an excellent position to create a new and
significantly better industry funded system that would take the burden
off of the taxpayer, protect the environment and maintain a broad and
healthy industry that is good for our security, our balance of
payments, our jobs, our economy and our people.,
This system could be called ``Cap and Trust''. Under this method a
reasonable liability cap would be set and the cap would proportionately
apply to the owners of a well This would be the punitive portion
charged directly to the owners according to their ownership percentage
of the well. This is a critical feature to enable the independent
companies to stay in business as we manage our financial exposure by
taking ownership percentages in deepwater prospects commensurate with
the amount of risk we can afford.
The second portion of the plan would be to use the trust fund or
some similar mutual insurance type mechanism as the industry's
financial assurance that it could fund payment for any expenses related
to a potential incident regardless of the size of the operator. The
present trust fund of $1.7B was generated using an 8 cents per barrel
contribution for each barrel produced; that figure has been proposed to
rise to 49 cents per barrel. At this level, the fund will build up an
amount far beyond what will likely ever be needed.
It is also important to remember that the independents do not have
retail customers, whatever the per barrel fee is charged comes directly
out of our revenue. There is little doubt in my mind that this funding
fee will come directly out of the profitability of the independent
producers. Since the retail market is a competitive environment with no
one retailer having a dominant market share, the fee will also likely
come out of the profitability of the integrated companies as well.
Under the ``Cap and Trust'' system the resources would-be able to
deal with an unlikely future event no matter who is the operator. The
resources of the entire industry would be available to each operator.
It is also very important to note that with the structural changes
already made in the BOEMRE and a very few regulatory modifications,
prevention of future incidents is greatly enhanced and the likelihood
of another blowout is very remote.
Finally, since the Macondo blowout, an entirely new deepwater spill
containment technology has been invented and has now proven to be able
to capture most of the deepwater oil presently spilling.
Once again, the Senate is in a unique position to ensure that such
a system be built and maintained in Port Fourchon or some other
accessible location along the coast where the technology can then be
deployed in days and not months. Then the amount of oil spilled from
any highly unlikely future event would be a very small fraction of the
size of the Macondo spill. Thus this new technology with rapid
deployment could protect our sensitive coastal environment and beaches
from future harm.
Question 3. I noticed that you worked for BP earlier in your
career. What is so dramatically different about your company's
exploration risk assessment and drilling operations? Why should we
believe that it is safe, and that residents of the Gulf are protected?
Answer. Yes, I worked for the Department of Interior, Amoco and BP
Amoco for over 30 years before joining Stone where I have been for the
last 6 years. For many years I was involved with, or in charge of,
operations in the Gulf of Mexico and my safety and environmental record
there stands for itself; but more importantly during this time, my
teams and I learned the importance of instilling a safety culture and
the folly and false economy of taking shortcuts.
There are many unknowns to be managed during planning and
throughout the implementation of drilling projects. There are risks
that raise the element of safe practices and safety assurance. As an
industry, for over 40 years, these risks have been managed successfully
without catastrophic consequences. From what we presently know about
the Macondo incident, neither new technology, a better exploration risk
assessment, or even more frequent regulatory inspections would have
prevented its occurrence.
However, the solutions to eliminate this tragedy already exist and
are routinely implemented in the industry. Why these specific solutions
were not chosen by BP on the Macondo well is for the investigation to
determine.
What is in place at Stone and many other independents as well, is a
safety culture. We have a habit of safety and of stopping the job and
changing our operating plan when situations in the well bore change. We
foster a culture of open communication and of management of changes to
the plan; our culture is one of team work and mutual participation by
Stone and its Contractor companies as equals and not as servants.
It is also worthwhile to note that a deepwater well is a much
bigger event to an independent than it is to a major integrated
company. Inside of Stone, the day to day operations of such wells gain
the attention of not only field, engineering and drilling management;
they gain the attention of senior executives. At Stone, the CEO, Sr.
V.P. of Operations, Drilling Manager and Drilling Superintendent have
worked together for over 30 years. This type of continuity is found at
many if not most independents in the Gulf of Mexico and is a best line
of defense against errors in judgment on safety matters. We all know
safety and integrity of operations is paramount and we practice it
daily.
Response of David H. Welch to Question from Senator Lincoln
Question 1. I am interested in the statement in your testimony that
additional requirements may be needed such as independent verifications
of blow out preventers and safety system functions, and an increase in
the number of inspectors in order to prevent a future disaster. You
also stated that it is clear in the Gulf disaster that the development
of a deepwater containment technology did not exist before this spill,
but if it had, could have made a huge difference.
Could you elaborate on the need for independent verifications of
blow out preventers? Also, how far do you think we are from such spill
containment devices that could be ready to deploy in the case of
another disaster?
Answer. Failure of BOPs to perform as intended is extremely rare,
but a dire consequence is attached to this outcome. For this reason,
independent 3rd party verifications of blow out preventer equipment
could provide an additional level of quality control assurance and
provide an intermediary between Operator and Contractor for acceptance
of this key equipment. A 3rd Party verification is not needed on every
job performed, but on an appropriate reoccurring basis could play a
role in a qualifying equipment to a common standard.
The spill containment system designed, developed and deployed
during the course of the Macondo spill response is proving to be
extremely effective in capturing a significant volume of the blow out
fluids. With the learnings from the Macondo spill, and with containment
equipment already constructed and readily stationed at Port Fourchon or
elsewhere along the coast, the industry will be capable of deploying a
containment device of this nature in a matter of days instead of a
number of weeks if ever faced with a similar event.
A Joint industry task force on subsea well control and containment
has been formed to review current containment options and determine
gaps if any in equipment design, evaluate testing protocols, R&D,
regulations and documentation to determine any improvements needed. As
this event has proven, even though this tragedy had only one operator,
it affects the entire industry and it is incumbent upon the industry to
learn and improve so that we can mitigate the risks associated with
developing our natural resources.
There is little doubt that containment technology will get better
and better over time. However, the successful systems deployed by BP
over the last few months should be available to the industry to use as
soon as the mandate to share the technology and the framework for
readiness are issued.
______
Responses of Hon. Ken Salazar to Questions From Senator Menendez
Question 1. How can we be certain that the reforms you are doing
will not be rolled back or ignored by a future Administration?
Answer. We discussed at this hearing the reforms you mention in
your question. Some of these reforms stem from recommendations made by
the Department's Inspector General, the Government Accountability
Office, and a committee chaired by former Senators Bob Kerrey and Jake
Garn. Others we have made, and will doubtless make in the future, are
based on the results of studies and investigations being carried by the
National Academy of Engineering, which is examining how we might
upgrade our offshore inspection program, and the several ongoing
investigations and reviews in response to this explosion and spill,
including the National Commission on the BP Deepwater Horizon Oil Spill
and Offshore Drilling, established by President Obama on May 22, 2010.
This tragedy has shown us that the American people want a strong and
independent organization ensuring that energy companies comply with
applicable safety and environmental protection obligations, and we are
aggressively pursuing this course.
Congress also plays a key role in the reform process. We have
supported the enactment of organic legislation to guide the offshore
program, the foundation of the reforms we have underway. Moreover, the
Committee's legislation, S.3516, the ``Outer Continental Shelf Reform
Act of 2010,'' makes many important changes to the authorities under
which the program operates. For example, it extends the deadline for
the Department to review and approve exploration plans; requires that
lessees obtain a drilling permit after approval of an exploration plan;
and requires that, prior to approval of such a permit, an engineering
review of the well system be completed and reviewed. The Administration
has supported authority to provide for longer review time and for
stronger reviews of exploration plans prior to drilling. We have also
supported statutory changes that strengthen civil and criminal
penalties contained in the Outer Continental Shelf Lands Act.
Question 2. I appreciate that Chris Oynes, the associate director
for offshore energy, has stepped down, as well as former MMS director
Elizabeth Birnbaum. But doesn't there need to be more accountability
than that? Have others been asked to leave? What have you and the new
leadership done to weed out the worst offenders?
Answer. The vast majority of people in the Department, including in
the Bureau of Ocean Energy Management, Regulation and Enforcement
(BOEMRE), do their work every day and do it well. Many have been
working long hours as we have moved through this crisis, and have
devoted significant time and energy to various investigations and
inquiries that are and have been carried out, and to the ongoing
reorganization and reform. I want to acknowledge their work and let
them know their efforts are appreciated and are not going unnoticed.
Since the beginning of this Administration, the reform agenda of
the Department has been a high priority. Specifically, with respect to
the former Minerals Management Service, we moved forward with an ethics
reform program in the Department to address the irresponsible/
unethical behavior that had previously occurred. Most of the activity
that has been uncovered by the Inspector General has been either
referred for prosecution or other appropriate actions have been taken,
such as firings, suspensions, or other disciplinary actions. We also
moved forward with the reform agenda by terminating the royalty-in-kind
program, which had attracted unacceptable behavior. BOEMRE Director
Michael Bromwich is committed to the agency's integrity, and to
implementing policies that prioritize ethics, safety, and the
environment. Director Bromwich has established an Investigations and
Review Unit (IRU), a team of professionals with law enforcement
backgrounds or technical expertise whose mission is to: promptly and
credibly respond to allegations or evidence of misconduct and unethical
behavior by Bureau employees; pursue allegations of misconduct by oil
and gas companies involved in offshore energy projects; and assure the
Bureau's ability to respond swiftly to emerging issues and crises,
including significant incidents such as spills and accidents.
Responses of Hon. Ken Salazar to Questions From Senator Lincoln
Question 1. As you may know, government inspection reports show
BP's Deepwater Horizon oil rig was only inspected six times in 2008
even though drilling rigs are required to be inspected every month. The
report also showed that the rig missed 16 inspections since 2005.
Question 2. In addition to the planned increase in the number of
inspectors, how can we ensure that inspections are conducted according
to regulation, and conducted thoroughly? Can and should the number of
inspections of these rigs be increased?
Answer. Over the course of the next several years, the
restructuring of the Department's Outer Continental Shelf (OCS)
programs will dictate the need for engineering, technical, and other
specialized staff, particularly in the regulatory and enforcement
program. This in an important issue and one the Department and
Administration are already addressing.
Our reform actions include strengthening the OCS program budget.
The President's 2011 budget amendment, released on September 13, 2010,
includes an additional $100 million for BOEMRE reform efforts,
including funding for more inspectors. The amendment also proposes
raising inspections fees from $10 million to $45 million to partially
offset these added costs. We are in the process of hiring additional
inspectors and are taking other actions that are outlined in the 30-day
report to the President. Our restructuring of a more robust OCS
regulatory and enforcement program will dictate the need for
engineering, technical, and other specialized staff. The President's
enacted supplemental request includes $27 million to fund near term
resources for these activities.
These funds are critically needed to bolster inspections of
offshore oil and gas platforms, draft health, safety, and environmental
protection regulations, develop the required enforcement measures for
these new regulations and carry out environmental and engineering
studies. And the legislation supported by the Administration at this
hearing contains provisions that will help advance this effort.
Question 3. It is clear to me, and many others, that BP did not
have the appropriate contingency plans in place to respond to a
catastrophic event. BP has been criticized, along with other oil
companies, of providing ``cookie-cutter'' response plans to MMS that,
at least in the case of Deepwater Horizon, are not practicable.
Question 4. Do you believe, whether through legislation or
regulation, that specific backup plans need to be required for each
rig? Should additional requirements be put in place particularly for
deepwater rigs?
Answer. In response to the Deepwater Horizon oil spill in the Gulf
of Mexico, the Administration has launched the most aggressive and
comprehensive reforms to offshore oil and gas regulation and oversight
in U.S. history. Those reforms are raising the bar for safety,
oversight, and environmental protection at every stage of the review,
permitting, drilling, and development process for offshore oil and gas
operations.
Following the Deepwater Horizon explosion and spill, the Department
issued several important documents, including the 30-day safety report
requested by the President, and new Notices to Lessees addressing
safety and blowout response efforts. The latest NTL clarifies the
information that operators, when filing for a new drilling permit,
exploration plan, or development plan, need to submit to address the
possibility of a blowout and to detail steps they are taking to prevent
blowouts. It reverses a policy adopted in 2003 and included in a 2008
NTL under the previous Administration that exempted many offshore oil
and gas operations in the Gulf of Mexico from submitting certain
information--to accompany exploration or development plans--about a
blowout scenario and worst-case discharge. The required information
includes:
An estimated flow rate, total volume, and maximum duration
of the potential blowout;
A discussion of the potential for the well to bridge over,
the likelihood for surface intervention to stop the blowout,
the availability of a rig to drill a relief well, and rig
package constraints;
Estimates of the time it would take to contract for a rig,
move it onsite, and drill a relief well; and
A description of the assumption and calculations used to
determine the volume of a worst case discharge scenario.
In addition, the BOEMRE submitted to the Federal Register the
interim final Drilling Safety Rule. The Drilling Safety Rule became
effective immediately upon publication in the Federal Register, on
October 7, 2010. The Drilling Safety Rule imposes requirements that
will enhance the safety of oil and gas drilling operations on the Outer
Continental Shelf (OCS). It addresses both well bore integrity and well
control equipment and procedures.
Well bore integrity provides the first line of defense against a
blowout by preventing a loss of well control. It includes the
appropriate use of drilling fluids and the well bore casing and
cementing program. Provisions in the rule addressing well bore
integrity are:
Making mandatory the currently voluntary practices
recommended in the American Petroleum Institute's (API)
standard, RP 65--Part 2, Isolating Potential Flow Zones During
Well Construction (an industry standard program);
Requiring submittal of certification by a professional
engineer that the casing and cementing program is appropriate
for the purposes for which it is intended under expected
wellbore pressure;
Requiring two independent test barriers across each flow
path during well completion activities (certified by a
professional engineer);
Ensuring proper installation, sealing and locking of the
casing or liner;
Requiring approval from the BOEM District Manager before
replacing a heavier drilling fluid with a lighter fluid; and
Requiring enhanced deepwater well control training for rig
personnel.
Well control equipment includes the Blowout Preventer (BOP) and
control systems that activate the BOP. Provisions in the rule on well
control equipment include: Submittal of documentation and schematics
for all control systems;
Requirements for independent third party verification that
the blind-shear rams are capable of cutting any drill pipe in
the hole under maximum anticipated surface pressure;
Requirement for a subsea BOP stack equipped with Remotely
Operated Vehicle (ROV) intervention capability (at a minimum
the ROV must be capable of closing one set of pipe rams,
closing one set of blind-shear rams, and unlatching the Lower
Marine Riser Package);
Requirement for maintaining a ROV and having a trained ROV
crew on each floating drilling rig on a continuous basis;
Requirement for auto shear and deadman systems for
dynamically positioned rigs;
Establishment of minimum requirements for personnel
authorized to operate critical BOP equipment;
Requirement for documentation of subsea BOP inspections and
maintenance according to API RP 53, Recommended Practices for
Blowout Prevention Equipment Systems for Drilling Wells;
Require testing of all ROV intervention functions on subsea
BOP stack during stump test and testing at least one set of
rams in initial seafloor test;
Require function testing auto shear and deadman systems on
the subsea BOP stack during the stump test and testing the
deadman system during the initial test on the seafloor; and
Require pressure testing if any shear rams are used in an
emergency.
Responses of Michael R. Bromwich to Questions From Senator Murkowski
Question 1. Mr. Bromwich, your written testimony states ``The Outer
Continental Shelf currently provides 30 percent of the Nation's
domestic oil production and almost 11 percent of its domestic natural
gas production. The Nation relies on this Bureau and its employees to
continue to make available the energy resources that we and our economy
need.''
Of course, if deepwater exploration is frustrated due to either
loss of investment under the current moratorium or due to a new
regulatory regime that proves too heavy handed, the nation could strand
80% of its offshore production--or about 25% of our total production.
Concurrent with your priorities in reforming the minerals agency, how
are you as actively guarding against the risk of all this production
falling off?
Answer. The suspension had a termination date from the beginning.
Originally to be effective until no later than November 30, 2010, it
allowed the Department time for investigation and implementation of
needed new safety, containment and oil spill response capability
measures. The suspension never included shallow water drilling, nor did
it affect production in either deep or shallow waters.
Following the review of the October 1, 2010 BOEMRE report to the
Secretary on safety measures put in place since the Deepwater Horizon
spill, Secretary Salazar determined it was appropriate that deepwater
oil and gas drilling resume, provided that operators certify compliance
with all existing rules and requirements, including those that recently
went into effect, and demonstrate the availability of adequate blowout
containment resources. The suspension was lifted on October 12.
Question 2. Mr. Bromwich, it is clear that if there are bad actors
or bad behavior still pervading MMS, you will correct that. But we have
heard testimony in the Energy and Natural Resources Committee that the
vast and overwhelming majority of MMS employees are perfectly ethical
people with excellent records in terms of enforcement and integrity.
Can you describe how your work to root out problems will avoid a
chilling effect on good people doing their jobs so that the new agency
moves efficiently ahead with permitting and seeing through major energy
projects?
Answer. Secretary Salazar has put into place many reforms over the
past 17 months that have provided changes to the management and
oversight of the nation's OCS energy and mineral revenue programs,
including permitting and major energy projects. I will continue to
build on those reforms and look forward to working with the men and
women of BOEMRE to establish this Bureau as a preeminent manager and
regulator of a safe and environmentally responsible offshore oil and
gas and renewable energy program.
We have attempted to send a consistent message: ethical employees
doing their jobs with dedication and integrity will be supported, and
indeed will be recognized for their service. We will further emphasize
that message both in our communications and in our actions.
Question 3. Mr. Bromwich, in hearings you have categorized your
internal investigative teams, which you'll use to clean up the Interior
Department's new bureaus, as a ``SWAT team.'' Within the criminal
justice world you've been dealing with that may be an appropriate
metaphor, but in your experience as a crisis counselor do you have any
concern with inserting the image of a SWAT team into a civilian
government agency that is a currently perhaps a bit de-stabilized?
Answer. While my knowledge of the Bureau and its employees is
increasing with each day, I have learned that the programs BOEMRE
manages are complex and involve a highly specialized workforce. I agree
with your concern that every effort needs to be made to ensure
communication with the employees is open and clear as we implement the
reorganization that lies before us. On June 29, 2010, the Secretary
issued Secretarial Order No. 3304 to establish the Investigations and
Review Unit (IRU) within the BOEMRE.
A key component to reforming the Bureau is establishing the ability
to promptly and credibly respond to allegations or evidence of
misconduct or unethical conduct by Bureau employees as well as by
members of regulated industry, consistent with BOEMRE's authority. This
capacity is intended, and will be designed, as a complement to the work
of the Department's Office of Inspector General (OIG) and the
Departmental Ethics Office.
I believe the work of the IRU, which will report directly to me,
will serve the Bureau and all employees well through their efforts to
ensure that we are conducting the work of the Bureau ethically,
efficiently, and with appropriate planning and oversight.
Appendix II
Additional Material Submitted for the Record
----------
Article From The Wall Street Journal, June 17, 2010
Crude Politics
the drilling experts speak out on the obama deepwater moratorium
Before the Obama Administration sweeps under the carpet the
controversy over the drilling experts it falsely used to justify its
moratorium, the incident bears another look. Not least because it
underlines the purely political nature of a drilling ban that now
threatens the Gulf Coast economy and drilling safety.
When President Obama last month announced his six-month deepwater
moratorium, he pointed to an Interior Department report of new
``safety'' recommendations. That report prominently noted that the
recommendations it contained-including the six-month drilling ban-had
been ``peer-reviewed'' by ``experts identified by the National Academy
of Engineering.'' It also boasted that Interior ``consulted with a wide
range'' of other experts. The clear implication was that the nation's
drilling brain trust agreed a moratorium was necessary.
As these columns reported last week, the opposite is true. In a
scathing document, eight of the ``experts'' the Administration listed
in its report said their names had been ``used'' to ``justify'' a
``political decision.'' The draft they reviewed had not included a six-
month drilling moratorium. The Administration added that provision only
after it had secured sign-off. In their document, the eight forcefully
rejected a moratorium, which they argued could prove more economically
devastating than the oil spill itself and ``counterproductive'' to
``safety.''
The Administration insisted this was much ado about nothing. An
Interior spokesman claimed the experts clearly had been called to
review the report on a ``technical basis,'' whereas the moratorium was
a ``comprehensive'' question. Obama environment czar Carol Browner
declared: ``No one's been deceived or misrepresented.'' Really? We can
only imagine the uproar if a group of climate scientists had claimed
the Bush Administration misappropriated their views.
We decided to call some of these experts ourselves. Their
information, and concerns, are revealing.
The experts were certainly under the impression they were reviewing
a comprehensive document, as some of the recommendations would take six
months or even a year to implement. And the report they agreed to did
address moratoria: It recommended a six-month ban on new deepwater
permits. Yet Benton Baugh, president of Radoil, said that in at least
two separate hour-and-a-half phone calls among Interior and the
experts, there was no discussion of a moratorium on existing drilling.
``Because if anybody had [made that suggestion], we'd have said `that's
craziness.'''
Ken Arnold, an engineer and consultant, said the changes went
beyond just the drilling moratorium. The Interior draft he looked at
included timelines for each safety recommendation. The ``bulk'' of
those recommendations, he explained, were all ones that could be done
within 30 days. And most of the longer-term provisions would result in
only ``marginal increases in safety.''
Yet when the final report came out, the timelines he saw had been
removed, no doubt because they argued against the necessity of a six-
month moratorium. Mr. Arnold adds that the Administration's decision to
allow industry to continue drilling ``gas injection wells''--which, he
says, are no more risky than production wells--only shows the
moratorium makes ``no sense.''
``This was a political call; this was not a technical call,'' says
Mr. Arnold. Interior Secretary Ken Salazar has since testified that the
call was his. But Robert Bea, from the University of California at
Berkeley, who also reviewed the report, told us Interior had sent him a
letter that ``stated clearly that [the moratorium] had been inserted at
the request of the White House.'' Mr. Bea pointed out that the
Department of Interior is more than equipped to target and shut down
specific Gulf operations that might offer safety concerns. There was no
call for a moratorium ``for industry as a whole.''
Ford Brett, managing director of Petroskills and also a reviewer,
notes that the experts first went to the Interior Department with their
concerns. ``All they had to do was put out another press release-one
sentence long-clarifying that we hadn't reviewed the drilling
moratorium . . . That didn't happen.'' Only then did the experts go
public.
As for Ms. Browner's claim that no one was ``misrepresented,'' Mr.
Brett disputes that. Several reviewers said they had, in fact, received
``apology'' notes from the Interior Department acknowledging the
misrepresentation. ``We did not mean to imply that you also agreed with
the decision to impose a moratorium on all new deepwater drilling,''
read one.
All of this matters because it offers proof the moratorium was
driven by politics, not safety. The drilling ban was not reviewed by
experts, and was not necessary to satisfy most of the safety
recommendations in Mr. Salazar's report. It was authored by political
actors so Mr. Obama could look tough. A cynic might argue the ban was
only added after review precisely because the Administration knew
experts would refuse to endorse it.
A big reason why those experts would have balked is because they
recognize that the moratorium is indeed a threat to safety. Mr. Arnold
offers at least four reasons why.
The ban requires oil companies to abandon uncompleted wells. The
process of discontinuing a well, and then later re-entering it,
introduces unnecessary risk. He notes BP was in the process of
abandoning its well when the blowout happened.
The ban is going to push drilling rigs to take jobs in other
countries. ``The ones that go first will be the newest, biggest, safest
rigs, because they are most in demand. The ones that go last and come
back first are the ones that aren't as modern,'' says Mr. Arnold.
The indeterminate nature of this ban will encourage experienced
crew members to seek other lines of work-perhaps permanently.
Restarting after a ban will bring with it a ``greater mix of new people
who will need to be trained.'' The BP event is already pointing, in
part, to human error, and the risk of that will increase with a less
experienced crew base. Finally, a ban will result in more oil being
imported on tankers, which are ``more likely'' to spill oil than local
production.
All this is even before raising ban's economic consequences, which
already threaten tens of thousands of jobs. This is why Louisiana
politicians are now pleading with the Administration to back off a ban
that is sending the Gulf's biggest industry to its grave.
``Mr. President, you were looking for someone's butt to kick,''
said Lafourche Parish President Charlotte Randolph, recently. ``You're
kicking ours.'' The sooner the Administration climbs down from this
pointless exercise, the better for a Gulf that needs real help.
______
Article From The Wall Street Journal, June 22, 2010
The Antidrilling Commission
the white house choices seem to have made up their minds
Under my Administration, the days of science taking a back
seat to ideology are over . . . To undermine scientific
integrity is to undermine our democracy . . . I want to be
sure that facts are driving scientific decisions, and not the
other way around.
--President Obama, April 27, 2009
The President has appointed a seven-person commission to take what
he says will be an objective look at what caused the Gulf spill and the
steps to make offshore drilling safe. But judging from the pedigree of
his commissioners, we're beginning to wonder if his real goal is to
turn drilling into a partisan election issue.
Mr. Obama filled out his commission last week, and the news is that
there's neither an oil nor drilling expert in the bunch. Instead, he's
loaded up on politicians and environmental activists.
One co-chair is former Democratic Senator Bob Graham, who fought
drilling off Florida throughout his career. The other is William
Reilly, who ran the Environmental Protection Agency under President
George H.W. Bush but is best known as a former president and former
chairman of the World Wildlife Fund, one of the big environmental
lobbies. The others:
Donald Boesch, a University of Maryland ``biological
oceanographer,'' who has opposed drilling off the Virginia
coast and who argued that ``the impacts of the oil and gas
extraction industry . . . on Gulf Coast wetlands represent an
environmental catastrophe of massive and underappreciated
proportions.''
Terry Garcia, an executive vice president at the National
Geographic Society, who directed coastal programs in the
Clinton Administration, in particular ``recovery of endangered
species, habitat conservation planning,'' and ``Clean Water Act
implementation,'' according to the White House press release.
Fran Ulmer, Chancellor of the University of Alaska
Anchorage, who is a member of the Aspen Institute's Commission
on Arctic Climate Change. She's also on the board of the Union
of Concerned Scientists, which opposes nuclear power and more
offshore drilling and wants government policies ``that reduce
vehicle miles traveled'' (i.e., driving in cars).
Frances Beinecke, president of the Natural Resources Defense
Council, who prior to her appointment blogged about the spill
this way: ``We can blame BP for the disaster and we should. We
can blame lack of adequate government oversight for the
disaster and we should. But in the end, we also must place
blame where it originated: America's addiction to oil.''
On at least five occasions since the accident, Ms. Beinecke has
called for bans on offshore and Arctic drilling.
Rounding out the panel is its lone member with an
engineering background, Harvard's Cherry A. Murray, though her
specialties are physics and optics.
Whatever their other expertise, none of these worthies knows much
if anything about petroleum engineering. Where is the expert on modern
drilling techniques, or rig safety, or even blowout preventers?
The choice of men and women who are long opposed to more drilling
suggests not a fair technical inquiry but an antidrilling political
agenda. With the elections approaching and Democrats down in the polls,
the White House is looking to change the subject from health care, the
lack of jobs and runaway deficits. Could the plan be to try to wrap
drilling around the necks of Republicans, arguing that it was years of
GOP coziness with Big Oil that led to the spill?
White House Chief of Staff Rahm Emanuel took this theme for a test
drive on Sunday when he said that Republicans think ``the aggrieved
party here is BP, not the fisherman.'' He added that this ought to
remind Americans ``what Republican governance is like.'' The
antidrilling commission could feed into this campaign narrative with a
mid-September, pre-election report that blames the disaster on the
industry and Bush-era regulators and recommends a ban on most offshore
exploration. The media would duly salute, while Democrats could then
take the handoff and force antidrilling votes on Capitol Hill.
Even as this commission moves forward, engineering experts across
the country have agreed that there is no scientific reason for a
blanket drilling ban. The Interior Department invited experts to
consult on drilling practices, but as we wrote last week eight of them
have since said their advice was distorted to justify the
Administration's six-month drilling moratorium.
Judging from that decision and now from Mr. Obama's drilling
commission, the days of ``science taking a back seat to ideology'' are
very much with us.
______
Project On Government Oversight,
Washington, DC, June 22, 2010.
Hon. Jeff Bingaman,
Ranking, Senate Committee on Energy and Natural Resources, 304 Dirksen
Senate Building, Washington DC.
Hon. Lisa Murkowski,
Ranking, Senate Committee on Energy and Natural Resources, 304 Dirksen
Senate Building, Washington DC.
Re: Stop Cozy Relatinships with Big Oil Act of 2010, S. 3431
Dear Chairman Bingaman and Ranking Member Murkowski: The Project On
Government Oversight (POGO) strongly supports every effort to promote
ethical conduct and accountability in the management of the taxpayers'
natural resources, which is why we wish to express our strong support
for the Stop Cozy Relationships with Big Oil Act of 2010, (S. 3431). We
applaud Senators Menendez, Nelson, and Klobuchar for their leadership
in co-sponsoring this legislation that provides important and necessary
steps towards creating a more ethical culture at the agencies that
oversee offshore drilling.
Investigations conducted by the Department of the Interior's
Inspector General and POGO revealed gross misconduct at multiple
Minerals Management Service (MMS) offices. Instances of misconduct
included reports of MMS personnel receiving inappropriate gifts from
industry, performing outside work that clearly conflicted with the
ethical performance of their duties, and in at least one instance,
negotiating for a job with a company that they were inspecting.\1\
These findings are all indicative of an agency that is inappropriately
close to industry.
---------------------------------------------------------------------------
\1\ Department of the Interior Inspector General, ``Investigative
Report--Island Operating Company, et. al.,'' May 24, 2010, p. 1.
---------------------------------------------------------------------------
POGO is pleased that S. 3431 addresses these longstanding problems
by extending existing ethics provisions by prohibiting regulators from
simultaneously working for the government and for the oil and gas
industry, requiring financial disclosure for senior oil and gas
regulators, prohibiting government regulators from accepting gifts, and
slowing the revolving door between MMS and the industry it regulates.
One of the most fundamental issues fueling the inappropriate
closeness between MMS and industry is the frequency with which
individuals go through the revolving door. Several individuals have
been sentenced to prison for violations of conflict-of-interest laws or
obstruction of justice. An egregious example of this problem is the
last Director of MMS under the previous administration, Randall Luthi.
Luthi now serves as the president of an offshore drillers trade
association, the National Oceans Industries Association. When the
Director of MMS goes to direct a trade association whose explicit
mission was to secure a ``favorable regulatory and economic environment
for the companies that develop the nation's valuable offshore energy
resources,''\2\ taxpayers have to question whose interests were
actually being served when he was at MMS. S. 3431 addresses this
problem by placing a two-year ban on regulators going to work for the
industries they oversaw.
---------------------------------------------------------------------------
\2\ Project On Government Oversight, ``Oil Drilling Trade Group
Slips the F-Word into Its Mission Statement,'' June 11, 2010. http://
pogoblog.typepad.com/pogo/2010/06/oil-drilling-trade-group-slips-the-
fword-into-its-mission-statement.html
---------------------------------------------------------------------------
The Deepwater Horizon disaster dramatically illustrates that the
government needs stronger tools and enforcement mechanisms to protect
the public's interest. By making violations of the gifts provision and
the revolving door provision a felony, this bill will clearly establish
consequences for the kinds of ethical violations found by POGO and the
Inspector General.
POGO urges the members of the Senate Committee on Energy and
Natural Resources to enact S. 3431 to restore accountability and ethics
to natural resource development, and the members of the House Committee
on Natural Resources to adopt a similar measure. In addition, the
Committees should apply these common-sense ethics reforms not just to
MMS, but to all of the Department of Interior. Indeed, similar reforms
are needed throughout the federal government.
Thank you again for your leadership on this issue. If you have any
questions, please contact me at (202) 347-1122.
Sincerely,
Danielle Brian,
Executive Director.