[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
EFFECT OF PRESIDENT'S FY 2012 BUDGET AND LEGISLATIVE PROPOSALS FOR THE
BUREAU OF LAND MANAGEMENT AND THE U.S. FOREST SERVICE'S ENERGY AND
MINERALS PROGRAMS ON PRIVATE SECTOR JOB CREATION, DOMESTIC ENERGY AND
MINERALS PRODUCTION, AND DEFICIT REDUCTION
=======================================================================
OVERSIGHT HEARING
before the
SUBCOMMITTEE ON ENERGY AND
MINERAL RESOURCES
of the
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
Tuesday, April 5, 2011
__________
Serial No. 112-17
__________
Printed for the use of the Committee on Natural Resources
Available via the World Wide Web: http://www.fdsys.gov
or
Committee address: http://naturalresources.house.gov
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65-597 PDF WASHINGTON : 2011
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COMMITTEE ON NATURAL RESOURCES
DOC HASTINGS, WA, Chairman
EDWARD J. MARKEY, MA, Ranking Democrat Member
Don Young, AK Dale E. Kildee, MI
John J. Duncan, Jr., TN Peter A. DeFazio, OR
Louie Gohmert, TX Eni F.H. Faleomavaega, AS
Rob Bishop, UT Frank Pallone, Jr., NJ
Doug Lamborn, CO Grace F. Napolitano, CA
Robert J. Wittman, VA Rush D. Holt, NJ
Paul C. Broun, GA Raul M. Grijalva, AZ
John Fleming, LA Madeleine Z. Bordallo, GU
Mike Coffman, CO Jim Costa, CA
Tom McClintock, CA Dan Boren, OK
Glenn Thompson, PA Gregorio Kilili Camacho Sablan,
Jeff Denham, CA CNMI
Dan Benishek, MI Martin Heinrich, NM
David Rivera, FL Ben Ray Lujan, NM
Jeff Duncan, SC John P. Sarbanes, MD
Scott R. Tipton, CO Betty Sutton, OH
Paul A. Gosar, AZ Niki Tsongas, MA
Raul R. Labrador, ID Pedro R. Pierluisi, PR
Kristi L. Noem, SD John Garamendi, CA
Steve Southerland II, FL Colleen W. Hanabusa, HI
Bill Flores, TX Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
Charles J. ``Chuck'' Fleischmann,
TN
Jon Runyan, NJ
Bill Johnson, OH
Todd Young, Chief of Staff
Lisa Pittman, Chief Counsel
Jeffrey Duncan, Democrat Staff Director
David Watkins, Democrat Chief Counsel
------
SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES
DOUG LAMBORN, CO, Chairman
RUSH D. HOLT, NJ, Ranking Democrat Member
Louie Gohmert, TX Peter A. DeFazio, OR
Paul C. Broun, GA Madeleine Z. Bordallo, GU
John Fleming, LA Jim Costa, CA
Mike Coffman, CO Dan Boren, OK
Glenn Thompson, PA Gregorio Kilili Camacho Sablan,
Dan Benishek, MI CNMI
David Rivera, FL Martin Heinrich, NM
Jeff Duncan, SC John P. Sarbanes, MD
Paul A. Gosar, AZ Betty Sutton, OH
Bill Flores, TX Niki Tsongas, MA
Jeffrey M. Landry, LA Vacancy
Charles J. ``Chuck'' Fleischmann, Edward J. Markey, MA, ex officio
TN
Bill Johnson, OH
Doc Hastings, WA, ex officio
------
CONTENTS
----------
Page
Hearing held on Tuesday, April 5, 2011........................... 1
Statement of Members:
Holt, Hon. Rush D., a Representative in Congress from the
State of New Jersey........................................ 4
Prepared statement of.................................... 5
Lamborn, Hon. Doug, a Representative in Congress from the
State of Colorado.......................................... 1
Prepared statement of.................................... 3
Statement of Witnesses:
Abbey, Hon. Robert V., Director, Bureau of Land Management,
U.S. Department of the Interior............................ 6
Prepared statement of.................................... 8
Bolton, Shawn, Commissioner, Rio Blanco County, Colorado..... 44
Prepared statement of.................................... 45
Ferguson, Hon. Tony, Director, Minerals and Geology
Management, U.S. Forest Service, U.S. Department of
Agriculture................................................ 11
Prepared statement of.................................... 13
Fosburgh, Whit, President and CEO, Theodore Roosevelt
Conservation Partnership................................... 60
Prepared statement of.................................... 62
``FACTS for Fish and Wildlife--Revisited: Balanced
Management for Energy and Fish and Wildlife Can Be
Accomplished with the FACTS'' submitted for the record. 68
Schroeder, James, President and CEO, Mesa Energy Partners,
LLC, and President, Western Energy Alliance................ 46
Prepared statement of.................................... 48
Skaer, Laura, Executive Director, Northwest Mining
Association................................................ 50
Prepared statement of.................................... 52
Table 1 submitted for the record......................... 59
Additional materials supplied:
``Leasing of Onshore Federal Oil and Gas Resources'' from BLM
website.................................................... 43
OVERSIGHT HEARING ON THE ``EFFECT OF THE PRESIDENT'S FY 2012 BUDGET AND
LEGISLATIVE PROPOSALS FOR THE BUREAU OF LAND MANAGEMENT AND THE U.S.
FOREST SERVICE'S ENERGY AND MINERALS PROGRAMS ON PRIVATE SECTOR JOB
CREATION, DOMESTIC ENERGY AND MINERALS PRODUCTION, AND DEFICIT
REDUCTION.''
----------
Tuesday, April 5, 2011
U.S. House of Representatives
Subcommittee on Energy and Mineral Resources
Committee on Natural Resources
Washington, D.C.
----------
The Subcommittee met, pursuant to call, at 10:06 a.m. in
Room 1324, Rayburn House Office Building, Hon. Doug Lamborn
[Chairman of the Subcommittee] presiding.
Present: Representatives Lamborn, Coffman, Thompson, Gosar,
Fleischmann, Holt, DeFazio, Bordallo, Costa, Sablan, and
Sarbanes.
Mr. Lamborn. The Subcommittee will come to order. The
Chairman notes the presence of a quorum which, under Committee
Rule 3[e], is two Members.
The Subcommittee on Energy and Mineral Resources is meeting
today to hear testimony on the Effect of the President's Fiscal
Year 2012 Budget and Legislative Proposals for the Bureau of
Land Management and the U.S. Forest Service's Energy and
Minerals Programs.
Under Committee Rule 4[f], opening statements are limited
to the Chairman and Ranking Member of the Subcommittee, so that
we can hear from our witnesses more quickly. However, I ask
unanimous consent to include any other Members' opening
statements in the hearing record if submitted to the Clerk by
close of business today.
[No response.]
Mr. Lamborn. Hearing no objection, so ordered. I now
recognize myself for an opening statement.
STATEMENT OF THE HON. DOUG LAMBORN, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF COLORADO
Mr. Lamborn. During today's hearing we will hear from the
Administration their justification for the budget and
legislative proposals they have submitted for the Federal
Onshore Energy Minerals programs.
Traditionally, the Energy and Mineral programs, under the
jurisdiction of this Subcommittee, bring in the most revenue to
the Federal Treasury, behind the Internal Revenue Service.
According to the Department of the Interior's own economic
analysis, Federal lands contribute $370 billion in economic
activity annually, most of it from energy development. If the
Department had included locatable mineral activity, the number
would be even higher.
In addition, Federal lands are a key contributor to job
creation. The Administration's own jobs report said that more
than half the jobs created by the Department's activities are
related to energy and mineral production, more than 726,000.
When we talk about potential new job creation, the
opportunities are endless, whether from a new copper mine in
Arizona, a new solar field in Nevada, or a new oil and natural
gas resource in Utah.
Unfortunately, since the Administration took office, the
Department of the Interior has taken steps to reduce access to
domestic energy and mineral resources on Federal lands,
including renewable resources like wind and solar. The recently
announced so-called Wildlands program will further reduce
energy and mineral development on Federal lands, and exacerbate
the flight of investment capital from the public-land States to
those States with resources located on State and private lands;
or even overseas, to foreign nations.
This is devastating to the Federal land counties in the
West that still need to provide goods and services for the
residents of their counties, and the many visitors to the
public lands that come to use the national parks, wildlife
refuges, national monuments, or just come to camp or hunt,
fish, or hike on Forest Service and BLM lands.
It is important to recognize the extraction of energy and
mineral resources represents the introduction of brand-new
money into the nation's economic system, as well as providing
the commodities needed by people for the things they use every
day in their lives, the raw materials. This is an important
aspect of who we are as a nation.
Just last week there was an article highlighting that there
are more people working for government than working in
manufacturing. I am sure that in nearly all our States, the
same dynamic holds true for resource development. It is hard to
envision that a nation can become wealthy by simply selling
things made and produced elsewhere. At some point, that
financial engine will run out.
It is imperative to the economic security of our nation
that we develop our own domestic resources that we are
fortunate enough to have within our borders.
A recent CRS report that analyzed USGS energy resource
assessments determined that the U.S. has the largest barrel-of-
oil equivalent in the world: 1.3 trillion BOE. We don't have
the same kind of comprehensive assessments for locatable
minerals like copper, gold, or rare-earth minerals; however,
these mineral commodities the U.S. has in abundance, also.
Ensuring that we have robust energy and mineral programs
within the BLM and Forest Service will create jobs, increase
our domestic supply of energy and critical and strategic
mineral resources, and increase money coming to Federal, State,
and local Treasuries, is what I think our goal should be.
I am concerned, however, that the current Administration is
not moving in the direction to achieve private sector job
growth in these important sectors of our economy, and is too
willing to depend on OPEC to make up the nation's shortfall in
oil production. The Administration's policies instead have and
will contribute to job loss, further dependence on foreign
sources for the energy and mineral needs of the country, and
severely limit the revenue stream from the development of
Federal mineral resources.
I look forward to hearing from our other witnesses affected
by the policies that have been implemented since the
Administration took office, and their perspectives on the
proposed 2012 budget and legislative proposals.
I now recognize the Ranking Member for five minutes for any
statement that he might have. Representative Holt.
[The prepared statement of Chairman Lamborn follows:]
Statement of The Honorable Doug Lamborn, Chairman,
Subcommittee on Energy and Mineral Resources
During today's hearing we will hear from the Administration
justification for their budget and legislative proposals for the
federal onshore energy minerals programs. Traditionally the energy and
mineral programs under the jurisdiction of this subcommittee bring in
the most revenue to the federal treasury behind the IRS. According to
the Department of the Interior's own economic analysis, federal lands
contribute $370 billion in economic activity annually, most of it from
energy development. If the department had included locatable mineral
activity the number would be even higher.
In addition, federal lands are a key contributor to job creation.
The Administration's own jobs report said that more than half the jobs
created by the Department's activities are related to energy and
mineral production--more than 726, 000. When we talk about potential
new job creation the opportunities are endless, whether from a new
copper mine in Arizona, a new solar field in Nevada or a new oil and
natural gas resource in Utah.
Unfortunately, since the Administration took office the Department
of the Interior has taken steps to reduce access to domestic energy and
mineral resources on federal lands including renewable resources like
wind and solar. The recently announced ``wild lands'' program will
further reduce energy and mineral development on federal lands and
exacerbate the flight of investment capital from the public land states
to those states with resources located on state and private lands or
overseas to foreign nations. This is devastating to the federal land
counties in the West that still need to provide goods and services for
the residents of the county and the many visitors to the public lands
that come to use the National Parks, Wildlife Refuges, National
Monuments or just come to camp or hunt and fish on Forest Service and
BLM lands.
It's important to recognize the extraction of energy and mineral
resources represents the introduction of brand new money into the
nation's economic system as well as providing the raw materials needed
by people for the things they use every day in their lives. This is an
important aspect of who we are as a nation. Just last week there was an
article highlighting that there are more people working for government
than working in manufacturing. I am sure that in nearly all our states
that same dynamic holds true for resource development. It is hard to
envision that a nation can become wealthy by simply selling things made
and produced elsewhere. At some point that financial train will run
out. It is imperative to the economic security of our nation that we
develop our own domestic resources that we are lucky enough to have
within our borders.
A recent CRS report that analyzed USGS energy resource assessments
determined that the U.S. has the largest barrel of oil equivalent in
the world--1.3 trillion BOE. We don't have the same kind of
comprehensive assessments for locatable minerals like copper, gold, or
rare earth minerals--however these are mineral commodities the U.S. has
in abundance.
Ensuring that we have robust energy and mineral programs within the
BLM and Forest Service will create jobs, increase our domestic supply
of energy and critical and strategic mineral resources, and increase
revenue coming into federal, state and local treasuries.
I'm concerned, however, that the current Administration is not
moving in the direction to achieve private sector job growth in these
important sectors of the economy, and is too willing to depend on OPEC
to make up the nation's shortfall in oil production. The
Administration's policies instead have and will contribute to job loss,
further dependence on foreign sources for the energy and mineral needs
of the country and severely limit the revenue stream from the
development of federal mineral resources.
I look forward to hearing from our other witnesses affected by the
policies that have been implemented since the Administration took
office and their perspectives on the proposed 2012 budget and
legislative proposals.
______
STATEMENT OF THE HON. RUSH HOLT, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF NEW JERSEY
Mr. Holt. Thank you, Mr. Chairman. I appreciate your
holding the hearing today, and I thank the witnesses for
coming.
The BLM oversees all mineral and energy resource extraction
activities on Federal lands, including units of the Forest
Service. I would like to make the point that far from locking
up our energy resources, as some have alleged, the BLM has
actively promoted managing those resources, including
development of all forms of energy. And we will hear about that
in the testimony today.
The Obama Administration has continued to increase emphasis
on domestic oil and gas production on Federal lands. In 2010,
domestic natural gas production reached an all-time high.
Domestic oil production reached its highest level in nearly a
decade. Oil production increased more in the United States last
year than in any other country in the world.
This occurred, despite the fact that oil companies are
often letting leases that are issued to them languish. And the
drilling permits that are approved they allow to go unused.
In 2009, BLM approved 4,487 new permits onshore. The
industry started about three quarters of that number in new
wells. Last year, oil companies held back even more. BLM
approved 4,090 applications for permit to drill, the APDs;
however, the industry started 1,080, compared to 4,090, new
wells.
Meanwhile, according to a recent report released by the
Department of the Interior, oil companies are sitting on tens
of millions of acres of public land on which they are not doing
any exploration or production, whatsoever. So according to that
report, the oil companies are not conducting exploration or
production activities on 57 percent of the onshore acres under
lease.
And this current level of development is not an aberration.
The report concluded that over the last decade, oil companies
have produced oil on an average of only 30 percent of the
public land that they held under lease.
And yet the extraction companies and those advocating for
them in Congress say we have to help them--including oil
companies already making $20 billion, $30 billion, $40 billion
a year in profit.
Ranking Member Markey and I have introduced H.R. 927, the
Use It Act, to establish an escalating fee on oil and gas
leases over time, providing a strong incentive for oil
companies to either start drilling, or relinquish this land so
that another company could develop it. Our legislation also
would help us reduce the Federal deficit by increasing the
revenue to our Federal government. A similar proposal is
included in the Administration's budget request.
In addition, the Obama Administration is promoting the
development of renewable energy on public lands, which had been
almost completely ignored under the previous Administration.
The Department of the Interior has set a goal of permitting
10,000 million watts, so 10 gigawatts, of renewables on public
lands by the end of next year, 2012; and has already approved
5,683 megawatts of wind, solar, and geothermal, on its way to
that goal.
This stands in stark contrast to the de facto moratorium on
public lands for renewable energy that was in place during the
previous Administration. Indeed, the previous Administration
approved only four--that is a single digit--four wind projects
on public lands, and no--that is a goose egg--solar projects
over eight years.
The Obama Administration is restoring a balance to our
energy development on public lands that was sorely needed. And
I hope we just don't hear that repeated, sorry story that
failure to extract oil from public lands and offshore in the
United States is responsible for high prices at the gas pump.
We had a hearing last week where it was clearly established
that it is speculation, manipulation, profit-taking, call it
gouging, whatever; it is not failure to release permits.
Thank you.
[The prepared statement of Mr. Holt follows:]
Statement of The Honorable Rush D. Holt, Ranking Member,
Subcommittee on Energy and Mineral Resources
Thank you.
The Bureau of Land Management (BLM) oversees all mineral and energy
resource extraction activities on all Federal onshore lands, including
units of the National Forest System. Far from locking up our energy
resources, as some in the majority have alleged, the BLM is actively
promoting the development of all forms of energy.
The Obama Administration has continued to increase domestic oil and
gas production on federal land. In 2010, domestic natural gas
production reached an all-time high, and domestic oil production
reached its highest levels in nearly a decade. Oil production increased
more in the United States last year than in any other country in the
world.
This occurred despite the fact that oil companies are often letting
the leases they are issued languish and the drilling permits that are
approved go unused. In 2009, BLM approved 4,487 new permits onshore but
industry only started 3,267 new wells. Last year, oil companies held
back even more--BLM approved 4,090 Applications for Permit to Drill
(APDs), however, industry only started 1,480 new wells.
Meanwhile, according to a recent report released by the Department
of the Interior, oil companies are sitting on tens of millions of acres
of public lands on which they are not doing ANY exploration or
production whatsoever. According to that report, oil companies are not
conducting exploration or production activities on 57 percent of the
onshore acres under lease. And this current level of development is not
an aberration; the report concluded that over the last decade, oil
companies have produced oil on an average of only 30 percent of the
public land they held under lease.
Ranking Member Markey and I have introduced H.R. 927, the USE IT
Act to establish an escalating fee on oil and gas leases over time,
providing a strong incentive for oil companies to either start drilling
or relinquish this land so that another company can develop it. Our
legislation also would help us reduce the federal deficit by increasing
the revenue to the federal government. A similar proposal is included
in the Administration's budget request.
In addition, the Obama Administration is promoting the development
of renewable energy on public lands, which had been almost completely
ignored under the previous administration. The Department of the
Interior has set a goal of permitting 10,000 MW of renewables on public
lands by the end of 2012 and has already approved 5,683 MW of wind,
solar and geothermal on the way to that goal. This stands in stark
contrast to the ``De Facto Renewable Energy Moratorium'' on public
lands that was in place during the Bush Administration. Indeed the
previous Administration only approved 4 wind projects on public lands
and NO solar projects over 8 years.
The Obama Administration is restoring a balance to our energy
development on public lands that was sorely needed. I look forward to
the testimony of our witnesses.
______
Mr. Lamborn. I thank the Ranking Member. And we will now
hear from our witnesses. We have invited, and I appreciate the
attendance today of, the Hon. Bob Abbey, the Director of the
Bureau of Land Management, and the Hon. Tony Ferguson, Director
of Minerals and Geology Management of the USDA Forest Service.
Appreciate you both being here.
Like all of our witnesses, your written testimony will
appear in full in the hearing record, so I ask that you keep
your oral statements to five minutes, as outlined in our
invitation letter to you, and under Committee Rule 4[a].
Our microphones are not on automatic; you will have to
switch them on. And the timing lights, as you begin to speak,
the Clerk will start the timer, a green light will come on; and
after four minutes, a yellow light will come on; and after five
minutes, a red light.
Thank you for being here. And Mr. Abbey, you may begin.
STATEMENT OF ROBERT V. ABBEY, DIRECTOR, BUREAU OF LAND
MANAGEMENT, WASHINGTON, D.C.
Mr. Abbey. Thank you, Mr. Chairman and members of the
Subcommittee. We appreciate the opportunity to discuss the
President's Fiscal Year 2012 energy and minerals budget request
for the Bureau of Land Management.
The BLM administers more than 245 million acres, and
approximately 700 million acres of subsurface mineral estate
nationwide. America's public lands provide resources that are
critical to the nation's energy security. These resources have,
and will continue to play, a critical role in domestic energy
production for decades to come.
The BLM is a sound investment for America. Our management
of public lands contributes more than $100 billion annually to
the national economy, and supports more than 500,000 American
jobs.
Revenues generated from public lands make the BLM one of
the top revenue-generating Federal agencies, positively
affecting the U.S. Treasury, and directly benefitting the U.S.
taxpayers.
On March 30 the President announced his blueprint for a
secure energy future. The Bureau of Land Management is well-
positioned to contribute to this strategy. More than 114
million barrels of oil was produced from BLM-managed mineral
estate in Fiscal Year 2010, the most since Fiscal Year 1997.
And the almost 3 trillion cubic feet of natural gas produced
made 2010 the second most productive year of natural gas
production on record.
The coal produced from nearly a half-million acres of
Federal leases powers more than one fifth of all electricity
generated in the United States.
The BLM is also leading the Nation toward the new energy
frontier, with active solar, wind, and geothermal energy
programs. In 2010, the BLM approved nine large-scale solar
energy projects. These projects total more than 3600 megawatts
of electricity, enough to power more than a million homes; and
could create thousands of construction and operation jobs.
The Bureau of Land Management manages 20 million acres of
public lands, with wind potential. And there is currently 437
megawatts of installed wind power capacity on public lands.
Geothermal energy development on these public lands, with an
installed capacity of 1275 megawatts, accounts for nearly half
of the U.S. geothermal energy capacity.
The BLM's total Fiscal Year 2012 budget request is $1.1
billion, a decrease of $12 million from the 2010 enacted level.
The budget proposal reflects the Administration's efforts to
maximize public benefits, while recognizing the realities of
the current fiscal situation.
The proposed budget for the Bureau of Land Management makes
a strategic investment of $152.8 million in support of the new
energy frontier, an important Administration and Secretarial
initiative. This new initiative recognizes the value of
environmentally sound, scientifically grounded development of
both renewable and conventional energy resources on public
lands. Investment in this program today will reap benefits for
years to come.
President Obama and Secretary Ken Salazar have stressed the
critical importance of renewable energy to the future of the
United States. Developing renewable energy will create jobs and
promote innovation in our country, while reducing reliance on
fossil fuels.
In the conventional energy arena, the BLM expects its
onshore minerals leasing activities to contribute $4.3 billion
to the Treasury in Fiscal Year 2012. We will focus on
implementing oil and gas leasing reforms that place a continued
emphasis on oil and gas inspections, environmental enforcement,
and production monitoring. These reforms help ensure that
conventional energy development on public lands takes place in
a way that minimizes harm to the environment, as well as to the
public health and safety.
The budget proposes to shift a share of the cost of oil and
gas inspection activities from discretionary appropriations to
industry fees, for a savings of $38 million; a fee for non-
producing leases, and an increase in the onshore oil and gas
realty rate are also included in our budget proposal.
Finally, the BLM's budget for Fiscal Year 2012 assumes
legislative proposals to reform hard-rock mining on both public
and private lands.
Our budget request provides funding for the Agency's
highest-priority energy and minerals initiatives, and maximizes
public benefits.
Mr. Chairman, again, we appreciate the opportunity to
appear before your Subcommittee.
[The prepared statement of Mr. Abbey follows:]
Statement of Robert V. Abbey, Director, Bureau of Land Management,
U.S. Department of the Interior
Mr. Chairman and Members of the Subcommittee, thank you for the
opportunity to appear here today to discuss the President's Fiscal Year
(FY) 2012 energy and minerals budget request for the Bureau of Land
Management (BLM).
The BLM, an agency of the U.S. Department of the Interior (DOI), is
responsible for protecting the resources and managing the uses of our
nation's public lands, which are located primarily in 12 western
States, including Alaska. The BLM administers more land--over 245
million surface acres--than any other Federal agency. The BLM also
manages approximately 700 million acres of onshore subsurface mineral
estate throughout the Nation.
Meeting Our Nation's Needs
The BLM is a sound investment for America. Management of public
land resources and protection of public land values results in
extraordinary economic benefits to local communities and to the Nation.
The BLM's management of public lands contributes more than $100 billion
annually to the national economy and supports more than 500,000
American jobs. Energy and mineral resources generate the highest
revenue values of any uses of the public lands from royalties, rents,
bonuses, sales and fees. Revenues generated from the public lands make
the BLM one of the top revenue-generating Federal agencies, positively
affecting the U.S. Treasury, and directly benefiting the U.S. taxpayer.
A key component of these economic benefits is the BLM's
contribution to America's energy portfolio. The BLM expects its onshore
mineral leasing activities to contribute $4.3 billion to the U.S.
Treasury in Fiscal Year 2012. The BLM currently manages more than 38
million acres of oil and gas leases, although only 43 percent of that
acreage is currently in production. More than 114 million barrels of
oil were produced from BLM-managed mineral estate in Fiscal Year 2010
(the most since Fiscal Year 1997), and the almost 3 billion MCF
(thousand cubic feet) of natural gas produced made 2010 the second-most
productive year of natural gas production on record.
The coal produced from nearly a half million acres of federal
leases powers more than one-fifth of all electricity generated in the
United States. To underscore the Administration's commitment to the
goals of energy security and job creation, the BLM on March 22
announced four lease sales and four future records of decision for coal
tracts in Wyoming's Powder River Basin. The estimated total tonnage for
the eight coal tracts is 2.3 billion tons of coal, which is estimated
to generate $13.4 billion to $21.3 billion in revenue over the life of
the leases.
The BLM is also leading the nation toward the new energy frontier
with active solar, wind, and geothermal energy programs. The BLM has
proposed 24 Solar Energy Zones within 22 million acres of public lands
identified for solar development, and in 2010 approved nine large-scale
solar energy projects. These projects total more than 3,600 megawatts
of electricity, enough to power close to 1 million homes, and could
create thousands of construction and operations jobs. Development of
wind power is also a key part of our nation's energy strategy for the
future. The BLM manages 20 million acres of public lands with wind
potential and there is currently 437 MW of installed wind power
capacity on the public lands. Geothermal energy development on the
public lands, with an installed capacity of 1,275 MW, accounts for
nearly half of U.S. geothermal energy capacity.
FY 2012 Budget Overview
The BLM's FY 2012 energy and minerals budget proposal reflects the
Administration's effort to maximize public benefits while recognizing
the reality of funding constraints and the need to reduce the Nation's
budget deficit. The proposed budget for the BLM makes a strategic
investment in support of the New Energy Frontier, an important
Administration and Secretarial Initiative. Investment in this program
today will reap benefits for years to come.
The BLM's total FY 2012 budget request is $1.13 billion in current
authority, one percent and $12.0 million below the 2010 enacted/2011
continuing resolution level. The budget proposes $933.8 million for the
Management of Lands and Resources Appropriation and $112.0 million for
Oregon and California Grant Lands Appropriation, the BLM's two main
operating accounts. This represents a net decrease of $25.3 million for
these two accounts from the FY 2010 enacted/2011 CR level. While making
strategic program increases of $93.3 million for high-priority
initiatives, the budget offsets funding increases for these priorities
with $25.5 million in administrative and management savings, shifting
$42.4 million in energy and minerals inspection costs to industry, and
reducing funding for lower priority programs. The budget also includes
several important legislative proposals, including proposals to change
the management of hardrock mining, collect fees to be used to remediate
abandoned mines, charge a fee on new nonproducing oil and gas leases to
encourage diligent development, and extend the Federal Land Transaction
Facilitation Act and Service First authorities. This testimony focuses
on the BLM's energy and mineral resources program.
New Energy Frontier
The 2012 budget continues the Department's New Energy Frontier
initiative to create jobs, reduce the Nation's dependence on fossil
fuels and oil imports, and reduce carbon impacts. The New Energy
Frontier initiative recognizes the value of environmentally-sound,
scientifically-grounded development of both renewable and conventional
energy resources on the Nation's public lands. Facilitating renewable
energy development is a major component of this strategy along with
effective management of conventional energy programs. The proposed FY
2012 budget for the BLM follows this approach and includes priority
funding for both renewable and conventional energy development on the
public lands.
Renewable Energy--President Obama, Secretary Salazar, and the
Congress have stressed the critical importance of renewable energy to
the future of the United States. Developing renewable energy resources
is central to the Nation's efforts to reduce greenhouse gas emissions,
mitigate climate change, and protect the global environment. Renewable
energy is also vital to our economic development and energy security.
Developing renewable energy will create jobs and promote innovation in
the United States while reducing the country's reliance on fossil
fuels.
The BLM made significant strides in promoting responsible renewable
energy development on the public lands in 2010. The BLM has approved
projects that, when built, will generate approximately 4,000 megawatts
of energy, including the approval of nine large-scale solar energy
projects, and release of a draft Solar Programmatic EIS to provide for
landscape-scale siting of solar energy projects on the public lands.
BLM-managed lands also serve as important corridors for the
transmission infrastructure needed to deliver renewable energy to the
American people.
The BLM continues work on developing a balanced portfolio of
renewable energy projects on public lands in 2011. We recently
announced our 2011 priority projects list, which includes 19 renewable
energy projects (nine solar, five wind, and five geothermal). The
projects are part of the Administration's efforts to diversify the
Nation's energy portfolio in an environmentally responsible manner. The
nine solar projects' potential output is about 2,600 megawatts, the
five wind projects total about 1,000 megawatts of potential output, and
the five geothermal projects total about 490 megawatts of potential
output. The BLM has already made progress on these projects, approving
a geothermal project in Nevada in early March.
To encourage and facilitate renewable energy development, the
President's FY 2012 budget for the BLM proposes $19.7 million, a $3.0
million increase over the FY 2010 enacted/2011 CR level. The increase
will be used to conduct site specific studies of potential solar energy
sites in Nevada, and regional studies of potential wind energy zones in
Nevada and Oregon. Additionally, the FY 2012 budget proposes
transferring $16.7 million from the Realty and Ownership Management
Activity to a new Renewable Energy Management subactivity in the Energy
and Minerals Management activity. This will allow the BLM to more
effectively track and monitor spending for these high-profile
activities, and also emphasize the importance of these efforts.
Conventional Energy--While we work to develop renewable energy
sources, domestic oil and gas production remain critical to our
nation's energy supply and to reducing our dependence on foreign oil.
Secretary Salazar has emphasized that conventional energy resources on
BLM-managed lands play a critical role in meeting the Nation's energy
needs. In 2010, conventional energy development from public lands
produced 43 percent of the Nation's coal, 14.1 percent of the natural
gas, and 5.7 percent of the domestically produced oil. The Department's
balanced approach to responsible conventional energy development
combines onshore oil and gas policy reforms with effective budgeting to
provide appropriate planning and support for conventional energy
development, which has been the target of increased appeals and
protests.
The BLM is committed to ensuring oil and gas production is carried
out in a responsible manner. To accomplish this, the BLM performs
various types of inspections, to ensure that lessees meet
environmental, safety, and production reporting requirements. The BLM
has begun a pilot program using a risk-based inspection protocol for
production inspections, inspecting first those leases with high levels
of oil or gas production. The BLM plans to expand this risk-based
strategy to the other types of inspections it performs. The risk-based
strategy will help the BLM maximize the efficient use of inspection
staff to better meet the inspection goals and requirements in the
future.
The Fiscal Year 2012 budget request essentially maintains the BLM
oil and gas program capacity at the FY 2010 enacted/2011 CR level. An
increase of $13.0 million is proposed to offset a projected decline in
the fees for processing applications for permits to drill (APD) oil and
gas on the public lands; and a reduction of $3.0 million is proposed to
reflect the completion of an energy study required by the Energy Policy
Conservation Act of 2000 (EPCA). The budget also includes an increase
of $2.0 million to improve air quality monitoring associated with
intensive oil and gas development. This funding will help the BLM
ensure that the energy development complies with NEPA and Clean Air Act
requirements and aids the BLM in minimizing or addressing potential
litigation issues.
The Administration believes that American taxpayers should get a
fair return on the development of energy resources on their public
lands. A 2008 Government Accountability Office (GAO) report suggests
that taxpayers could be getting a better return from Federal oil and
gas resources in some areas. Subsequent GAO reports have reiterated
this conclusion. The BLM and the Bureau of Ocean Energy Management,
Regulation, and Enforcement are cooperating to conduct an international
study of oil and gas revenues under different management regimes. The
study should be completed and published later this year. To this end,
the Administration proposes to implement the following reforms:
In 2012 the BLM will begin to charge a fee to recover
inspection costs for the oil and gas program, allowing a
savings of $38 million in requested funding. The fee would
defray Federal costs and ensure continued diligent oversight of
oil and gas production on Federal lands. Fee levels would be
based on the number of oil and gas wells per lease so that
costs are shared equitably across the industry.
To encourage diligent development of new oil and gas
leases, the Administration is proposing a per-acre fee on each
nonproducing lease issued after enactment of the proposal. The
$4 per acre fee on new non-producing Federal leases would
provide a financial incentive for oil and gas companies to
either put their leases into production or relinquish them so
that tracts can be re-leased and developed by new parties.
The BLM will propose a rulemaking in 2011 to increase
the onshore oil and gas royalty rate from its current 12.5
percent level. The BLM expects that the royalty rate increase
will increase oil and gas revenues by more than $900 million
over 10 years.
Abandoned Mines & Hardrock Mining Reform Proposals
The budget proposes legislation to address abandoned mine land
(AML) hazards on Federal, State, Tribal, and private lands and to
provide a fair return to the taxpayer from hardrock production on
Federal lands. The first component of this proposal addresses abandoned
hardrock mines across the country through a new AML fee on hardrock
production. Just as the coal industry is held responsible for abandoned
coal sites, the Administration proposes to hold the hardrock mining
industry responsible for abandoned hardrock mines. The proposal will
levy an AML fee on all uranium and metallic mines on both public and
private lands that will be charged on the volume of material displaced
after January 1, 2012. The fee will be collected by the Office of
Surface Mining, while the receipts will be distributed by BLM. Using an
advisory council comprised of representatives of Federal agencies,
States, Tribes, and non-government organizations, the BLM will create a
competitive grant program to restore the Nation's most hazardous
hardrock AML sites each year. The advisory council will recommend
objective criteria to rank AML projects to allocate funds for
remediation to the sites with the most urgent environmental and safety
hazards. The proposed hardrock AML fee and reclamation program would
operate in parallel to the coal AML reclamation program, as two parts
of a larger proposal to ensure that the Nation's most dangerous coal
and hardrock AML sites are addressed by the industries that created the
problems. The 2012 BLM budget request also includes an increase of $4.0
million in regular discretionary appropriations to address high
priority AML sites, such as the Red Devil mine in Alaska.
The second piece of the legislative proposal would institute a
leasing process under the Mineral Leasing Act of 1920 for certain
minerals (gold, silver, lead, zinc, copper, uranium, and molybdenum)
currently covered by the General Mining Law of 1872. After enactment,
new claims for mining these metals on Federal lands would be governed
by a leasing process and subject to annual rental payments and a
royalty of not less than five percent of gross proceeds. Half of the
receipts would be distributed to the States in which the leases are
located and the remaining half would be deposited in the U.S. Treasury.
Pre-existing mining claims would be exempt from the change to a leasing
system, but would be subject to increases in the annual maintenance
fees under the General Mining Law of 1872. However, holders of existing
mining claims for these minerals could voluntarily convert their claims
to leases. The Office of Natural Resources Revenue in the Department of
the Interior will collect, account for, and disburse the hardrock
royalty receipts.
Reductions & Efficiencies
The BLM's Fiscal Year 2012 budget proposal reflects many difficult
choices to produce a cost-conscious budget, while supporting priority
initiatives and maximizing public benefits. The budget request also
includes reductions that reflect the Accountable Government Initiative
to curb non-essential administrative spending in support of the
President's commitment to fiscal discipline and spending restraint.
Conclusion
The BLM's Fiscal Year 2012 budget request for energy and minerals
programs provides funding for the agency's highest priority energy and
minerals initiatives, while making difficult but responsible choices
for reductions to offset some of these funding priorities. This budget
request reflects the Administration's commitment to encourage
responsible energy development on the public lands, as well as ensure
the American people receive a fair return for the public's resources.
Mr. Chairman, thank you for the opportunity to testify on the BLM
budget request for Fiscal Year 2012. I will be pleased to answer any
questions you may have.
______
Mr. Lamborn. Thank you for your testimony. And Mr.
Ferguson, you may begin.
STATEMENT OF TONY FERGUSON, DIRECTOR, MINERALS
AND GEOLOGY MANAGEMENT, USDA FOREST SERVICE, WASHINGTON, D.C.
Mr. Ferguson. Thank you, Mr. Chairman and members of the
Subcommittee. I am honored to be here today to talk about the
Energy and Minerals program at the Forest Service.
America relies on forest and grasslands for jobs, energy,
and strategic minerals. This program provides significant
socioeconomic benefits to the American people, while at the
same time working to ensure that watersheds are protected and
threats to human safety are minimized.
Here are some examples of some activities on the Forest
Service. The value of mineral production from National Forest
System lands typically exceeds $5 billion per year. Over 5
million acres of National Forest System lands are currently
leased for oil, gas, coal, geothermal, and other minerals.
Approximately 58 percent of the U.S. coal production comes
from Federal minerals, and a third of that comes from National
Forest System lands. Last year, approximately 16.7 million
barrels of oil and 194 billion cubic feet of natural gas were
produced from National Forest System lands.
The Forest Service administers operations on approximately
90,000 mining claims, with many of those containing strategic
minerals. We manage approximately 4,000 mineral material
contracts for sand, gravel, and other industrial minerals,
amounting to over 10 million tons of materials that are
critical for road maintenance in rural communities.
Mineral revenues are managed and distributed by the Office
of Natural Resource Revenue at the Department of the Interior.
And between 25 and 50 percent of the revenues are returned to
the States and the counties where production occurs.
For Fiscal Year 2012, the priority for the Forest Service
Minerals program will be placed on processing the energy-
related mineral proposals, with the focus on the oil, gas, and
geothermal resources that are present on National Forest System
lands.
We will continue our inspection and monitoring of ongoing
mineral operations, we will continue to mitigate threats
associated with abandoned mine lands. We will identify and
manage geologic resources and hazards, and also restore sites
contaminated with hazardous materials.
At this time I would like to shift a little bit and focus
more on some renewable energy and some of the things we are
doing. We feel, the Forest Service feels that renewable energy
is a key to our future, and the expansion of the energy
portfolio to include renewable energy is critical. We have a
couple of examples I would like to share with you.
One of the areas we see a great amount of potential is
woody biomass utilization. In terms of renewable energy, it
represents about 7 percent of the overall U.S. energy
consumption. But of that 7 percent, more than a quarter of that
comes from wood, so we have some tremendous opportunities for
more jobs. It also has some great opportunities for us to meet
our forest restoration goals. We see opportunities to reduce
fire risks to communities, and at the same time provide jobs
and economic opportunities.
The next area is hydropower. We have a number of
significant small-scale projects that are available to us, that
we feel could very easily raise our existing megawatts up to 10
percent or more above what we are currently doing. There would
be no impact to fish passage, and at the same time we would be
helping rural communities. In Alaska alone there are 32 new
proposals for hydro-entitled projects.
The next area would be geothermal leasing and operation.
Working with the Bureau of Land Management, we currently have
137 leases that are covering 155,000 acres. There are also two
geothermal plants that are actually operating on National
Forest System lands, that are providing electricity
equivalents, the equivalent electricity demands for 60,000
homes. We also have 29 geothermal lease applications that we
are processing.
In the area of wind and solar energy development, at this
point in time we only have one wind project that is being
evaluated, and that is in Vermont. We have, we don't have the
same terrain and territory for some of the solar developments,
and that is pretty limited for us.
One thing I wanted to be sure to mention, though, is in
association with all of this activity regarding renewables, we
have a very, very active program dealing with transmission
lines, and making sure that we have adequate transmission for
existing production, as well as new production that comes on
line.
So in conclusion, the Forest Service Minerals and Energy
programs contribute to a sustainable energy situation, and
provide jobs for the American public, while promoting healthy
ecosystems.
Thanks for the opportunity to be here, and I will be happy
to answer any questions you may have.
[The prepared statement of Mr. Ferguson follows:]
Statement of Tony Ferguson, USDA Forest Service Director of Minerals
and Geology Management, U.S. Department of Agriculture
Mr. Chairman and members of the subcommittee, it is a privilege to
be here today to discuss the President's Budget request for the Forest
Service in fiscal year (FY) 2012 and specifically as it relates to the
energy and minerals programs administered by the Forest Service. I
appreciate the support this subcommittee has shown the Forest Service
in the past, and I look forward to working together in the future to
ensure that stewardship of our Nation's forests and grasslands continue
to meet the desires and expectations of the American people. I am
confident that this budget will allow the Forest Service to support
this goal, while also reflecting our commitment to fiscal restraint and
efficiency.
The Forest Service Minerals and Geology Management program is a
critical program in providing jobs, minerals and energy for the
American people, while working to ensure that watersheds are protected
and threats to human safety are minimized. In addition, the program
will work to restore sites contaminated with hazardous materials on NFS
lands, in particular, abandoned mine lands. Reliability of the nation's
electrical grid to sustain the economic growth of America and to
deliver new sources of renewable energy are prominent issues that our
country faces. The Forest Service will continue to support both of
these efforts.
Minerals and Geology Management Program
The FY 2012 President's Budget requests $78.8 million for the
Minerals and Geology Management Program, an $8.4 million decrease from
the annualized FY 2011 continuing resolution as shown in the published
FY 2012 Budget Justification. Priority will be placed on processing
energy-related mineral proposals with a focus on increasing
opportunities to develop and supply oil, gas, and geothermal resources
from Federal lands in support of the Energy Policy Act of 2005 (EPAct).
Other priorities include inspection and monitoring of ongoing mineral
operations, providing expertise to ensure watershed health and public
safety, and managing significant geologic resources. In addition to
leasable energy resources, we manage many small operations; e.g., over
four thousand mineral material permits providing for over ten million
tons of sand and gravel and other materials which are critical for
maintaining roads in rural communities. We are also involved in large
operations such as ensuring environmental and water quality impacts of
large gold and copper mines are minimized.
As calculated by USFS and the Department of the Interior's Office
of Natural Resources Revenue, the value of energy and mineral
production from NFS lands typically exceeds $5 billion per year. Over 5
million acres of NFS lands are currently leased for oil, gas, coal, and
phosphate mining operations. At any given time, the Forest Service
administers operations on approximately 90,000 mining claims and
manages approximately 4,000 mineral material sale contracts (Forest
Service Special Uses Data Base). Mineral receipts are derived from
annual lease rentals, royalties on production, bonus bids for
competitive leases, and mineral material sales. Of the total revenues
received, between 25 and 50 percent are returned to the State and
county where production occurred.
The Minerals and Geology Management program works to mitigate
potential threats to the environment and human safety associated with
thousands of abandoned mines and other contaminated sites located on
NFS lands. The program works to preserve valuable geologic resources
and minimize the impacts of pollution on NFS lands to protect and
enhance our Nation's water resources. NFS lands provide the largest
single source of municipal water supply in the U.S., serving over 66
million people in 33 states. Energy and mineral development can go hand
in hand with conserving resources and it is the Forest Service's aim to
do so.
The Bureau of Land Management and the Forest Service work closely
in managing and delivering the mineral and energy program in the United
States. The BLM issues leases for exploration and development of energy
minerals after receiving consent from the Forest Service for those
National Forest System lands. When an oil and gas drilling permit is
received by BLM on NFS lands, the Forest Service processes the surface
use authorization and the BLM processes the drilling portion of the
application and approves the drilling permit after consolidating the
surface and sub-surface portions. The Office of Natural Resources
Revenue at the Department of the Interior is responsible for the
efficient, timely, and accurate collection and disbursement of all
royalty payments and other revenues from the leasing and production of
natural resources from federal lands.
Mineral Applications Processing
The Budget requests $20.4 million to fund the processing of an
estimated 7,975 mineral applications in FY 2012, depending on market
demand for mineral resources from NFS lands. The energy component of
this activity will continue to focus on increasing opportunities to
develop and offer oil and gas, coal, and geothermal resources from
Federal lands. Pilot offices authorized under the Energy Policy Act of
2005 (EPAct) will continue to help the agency efficiently process
energy leasing and permit applications, particularly with respect to
processing of oil and gas lease nominations and surface use plan of
operations relative to applications for permits to drill. This program
provides for the review and approval of plans for proposed mineral
activities, including exploration and development of locatable minerals
under the authority of the Mining Law of 1872; coal, oil, gas, and
geothermal exploration and production under the various mineral and
geothermal leasing acts; and contracts for the extraction of mineral
materials such as sand and gravel by the public and local, State, and
Federal agencies under the Materials Act of 1947 and other statutory
authorities.
Mineral Operations Administration
The Budget requests $28.6 million to fund the administration of an
estimated 9,560 active mineral operations in FY 2012. The program will
emphasize meeting necessary administration levels to ensure compliance
with operating plan requirements and specific environmental standards
for protecting resources. This program provides for the inspection,
oversight, and monitoring of approved mineral operations on NFS lands.
Some of these active mineral operations are providing energy
producing minerals. This funding will allow the US Forest Service to
administer surface occupancy for a significant amount of oil, natural
gas, coal and geothermal operations. The current production on NFS
lands of oil (16.7 million barrels) and natural gas (194 million MCF of
natural gas) is estimated to generate $361 million in bonus and royalty
payments to the US Treasury in FY 2010, of which 25% (for Acquired
Lands) and 50% (for Public Domain Lands) will be returned to the states
and counties for schools and roads, in addition to the Secure Rural
Schools payments. Also, nineteen percent of all U.S. coal is produced
from NFS lands and the annual market value is in excess of $3 billion.
(DOI Office of Natural Resources Revenue)
Geologic Resources and Hazards Management
The Budget requests $5.8 million to fund the identification and
management of an estimated 355 geologic resources and hazards. Managing
geologic resources provides information on geologic and paleontologic
conditions that inform land management decisions and project design and
protects sites that have scientific or educational use. Identifying and
managing geologic hazards provides for the safety of the public by
protecting infrastructure, soil, and groundwater. This program provides
assessments of geologic settings and active geomorphic processes for
land management planning, environmental protection and restoration, and
cost effective management of roads, recreation sites and other
infrastructure.
Abandoned Mine Lands (AML) Safety Risk Features Mitigation
The Budget requests $7.3 million to fund the mitigation of an
estimated 560 abandoned mine sites. The AML program focuses on
mitigating safety risk features and associated activities for abandoned
mines in high-priority watersheds. This program provides for the
inventory, assessment, and mitigation of abandoned mine safety hazards
and environmental damage. This work includes closing underground mine
openings and vertical shafts; re-contouring open pits, trenches, and
associated roads; and removing or stabilizing abandoned buildings,
equipment, and hazardous materials. Wherever feasible, AML work
minimizes or mitigates adverse effects on AML-dependent wildlife and
AML-associated cultural and historic resources.
Environmental Compliance Management
The Budget requests $1.6 million to fund 22 environmental
compliance audits, assuring that employee and public health and safety
are protected. This program funds a national audit program which
assesses Forest Service compliance with environmental statutes and
trains field personnel on compliance and pollution prevention.
Environmental Restoration Management
The Budget requests $15 million to fund restoration activities on
50 known hazardous material sites on NFS lands. Cleanup of contaminated
sites is critical for the long-term protection of surface and
groundwater quality and contributes to overall ecological health. This
program provides for the inventory, assessment, and cleanup of sites
where there is a release, or threat of release, of a hazardous
substance, pollutant, or contaminant. Restoration mainly occurs at AML
sites, but also non-AML sites. Cleanup projects are typically initiated
under requirements of the Comprehensive Environmental Response
Compensation and Liability Act, Resource Conservation and Recovery Act,
or Clean Water Act. This restoration helps minimize or eliminate
threats to human health and the environment.
Special Use Authorizations for Alternative Energy Facilities
One of the priorities of the Forest Service's program in FY 2012
will be processing applications for land use authorizations that
contribute to the Nation's energy needs. Special use authorizations for
energy are managed by the Forest Service Lands and Realty Staff. The
Forest Service's authorization of wind, solar, and hydroelectric energy
producing facilities as well as transmission facilities will contribute
to our energy independence as well as mitigate the effects of climate
change.
The Agency's FY 2012 budget request includes $11.2 million for
processing land use proposals and applications under the National
Forest System's Landownership Management Program, which will fund the
issuance of approximately 3,700 new special use authorizations, with a
primary focus on those associated with statutory rights and energy-
related uses. Priority will continue to be placed on energy and
communications projects.
The FY 2012 budget includes an allocation of $7.2 million for the
Administration of Rights-of-Way and Other Land Uses, a non-
discretionary program that will continue to implement the cost recovery
pilot program to improve customer service to applicants and holders of
special land use authorizations and reduce the agency's backlog of
expired authorizations. In FY 2010, the backlog of expired
authorizations fell from 5,062 to 4,700. The agency will maintain and
look to improve this trajectory. Processing applications for
reauthorization of these uses, facilitates the development and
transmission of affordable, reliable energy; supports economic
development; and promotes public health and safety of populations in or
near national forests and grasslands.
A priority for the Forest Service is striving to improve the
Nation's ability to deliver electricity, as well as transport oil, gas,
and hydrogen. As directed by the Energy Policy Act of 2005 (EPAct), the
Forest Service, Bureau of Land Management and U.S. Department of Energy
(DOE) have identified 6,000 miles of energy corridors where
transmission is well suited, 1,000 miles of which are on NFS lands,
across 11 western states. The Forest Service will continue to work with
other federal agencies, tribal governments, and states to refine
corridor locations and enhance and facilitate energy production and
transmission.
The Forest Service is a participant in the 2009 inter-agency
memorandum of understanding (MOU) for expediting the evaluation and
authorization of high voltage and other significant electric
transmission projects that cross lands managed by more than one federal
agency. Expediting evaluation and authorization of these projects
improves reliability of the electrical grid and supports transmission
of renewable energy. The Forest Service is processing 26 applications
that meet the MOU's goals of improving the country's electric
transmission capabilities. The agency continues to enhance the process
for siting electric transmission infrastructure on NFS lands by working
closely with DOE and the Western Electricity Coordinating Council. As
directed by the Energy Policy Act of 2005 (EPAct), the Forest Service
is also working with DOE and the U.S. Department of the Interior on an
assessment of electric transmission in the eastern United States and
plans to submit a report to Congress on the assessment within the next
few months. Currently, 14,400 miles of electric transmission lines and
6,600 miles (Forest Service Special Uses Data Base) of pipelines are
under special use permit on NFS lands. The Forest Service is issuing
directives implementing the MOU to: 1) ensure better cooperation and
coordination with other federal agencies in evaluating and authorizing
electric transmission projects; 2) clarify private vs. public land
siting, 3) optimize siting of rights-of-way for energy transmission
corridors; and 4) expedite applications for electric transmission
projects on NFS lands.
Renewable Energy Development
Renewable energy resources are critical to satisfying the Nation's
energy demands and will create energy-related jobs in the future. The
Forest Service will continue to help increase the Nation's supply of
renewable energy through the Woody Biomass Utilization Strategy and
engaging in hydropower licensing, wind and solar energy development,
and geothermal operations on NFS lands.
Biomass and Bio-energy
Using forest biomass byproducts from ecological restoration
activities as a source of renewable energy can help enhance economic
opportunity and forest sustainability by providing raw material for the
renewable bio-energy and bio-based products sector. In FY 2012 the
Forest Service proposes $44 million for biomass and bio-energy
programs. This sector is a growing source of green jobs in the U.S. and
provides numerous benefits including improved forest health and
productivity, reduced fire risk to communities, and economic
opportunities. The Forest Service is working closely with other mission
areas in USDA to pursue additional wood to energy options. In addition
the Forest Service is working with DOE in converting Forest Service
facilities to utilize wood energy.
We aim to strengthen biomass utilization efforts through our work
with other agencies outside of USDA that encourage market development
for woody biomass. The Forest Service's woody biomass program is
ensuring a sustainable and reliable supply of raw materials and
fostering effective business models that assist growth in this emerging
sector. Stewardship contracts remain an important tool in meeting this
objective. This restoration tool ensures a more dependable wood supply
encouraging investment in private sector facilities.
Solar and Wind
In FY 2012, the Forest Service proposes $1.6 million as part of the
Lands and Realty Program for solar energy development that is expected
to fund authorization of several solar energy facilities. A future
solar energy programmatic environmental impact statement (PEIS) will
identify where solar energy facilities could be sited without
significant environmental impacts on 3 million acres of NFS land that
has been identified as potentially suitable for that purpose. Interest
in solar energy development on National Forest System lands has been
limited considering that large commercial solar energy production
generally requires large, flat landscapes that are more prevalent on
lands administered by BLM.
The Forest Service proposes $2 million as part of the Lands and
Realty Program to fund processing and administration of special use
authorizations for wind energy facilities on NFS lands. The Forest
Service will issue wind energy directives this year that will be used
to evaluate proposals and applications for wind energy facilities on
NFS lands. The directives will clarify the Forest Service's role and
policies in connection with wind energy development; promote consistent
evaluation and authorization of proposed wind energy facilities;
increase efficiency in processing proposals and applications for those
facilities; and foster early project collaboration among affected
governmental agencies and the public. NFS lands have significant
potential for wind energy generation though there are often public and
environmental concerns that need to be taken into consideration, such
as visual impacts from ridge top development and the potential impacts
on migratory birds and bats. The Forest Service is administering nearly
a dozen land use authorizations for wind energy site testing and
feasibility.
Hydropower
The agency proposes $5 million as part of the Lands and Realty
Program for hydropower in FY 2012, funding the processing and
administration of 220 special use authorizations. Because most of the
viable utility scale hydropower sites in the U.S. have already been
developed, new production will likely come from increased efficiency of
existing dams or smaller in-stream facilities that do not interfere
with fish passage. Proposals for small scale hydropower facilities are
anticipated to increase and could provide additional power generation
capacity of 10 percent above the existing 16,200 megawatts generated on
NFS lands. The agency is also active in hydropower licensing
proceedings administered by the Federal Energy Regulatory Commission
(FERC) by developing conditions to ensure adequate protection and use
of NFS lands. The Forest Service is currently reviewing ongoing
procedures seeking to reduce the time and resources needed to establish
appropriate terms and conditions for FERC hydropower licenses.
Geothermal
In 2008, the Forest Service and BLM completed a joint Programmatic
Environmental Impact Statement (PEIS) evaluating geothermal development
on Federal lands in the western U.S. to provide efficiencies in
processing geothermal lease applications on NFS lands. Currently, there
are 137 geothermal leases covering approximately 155,000 acres of NFS
lands. Leasing of NFS lands for geothermal development is similar to
leasing of NFS lands for oil and gas development in that the Secretary
of the Interior issues leases for NFS lands once there is agreement by
the Secretary of Agriculture. The Forest Service stipulates conditions
for disturbance of the surface for geothermal development on NFS lands.
There is significant potential for increased geothermal production from
National Forest System lands.
Conclusion
This President's Budget request for FY 2012 takes a comprehensive,
all-lands approach to conservation that addresses the challenges that
our forests and grassland currently face, while also taking into
consideration the need to reduce spending and to find the most
efficient way to do our work. Our vision in creating healthy landscapes
not only includes creating healthy ecosystems, but also creating
healthy, thriving communities around our Nation's forests and
grasslands and providing jobs in rural areas. Our minerals and energy
programs will contribute to supporting sustainable domestic energy
production and providing jobs and socioeconomic benefits to the
American people, while protecting healthy ecosystems.
Thank you for the opportunity to discuss the President's Budget
request as it relates to our agency's energy and minerals programs. I
look forward to sharing more with you about these programs and working
with you in shaping the proposals laid out in the FY 2012 budget. I
look forward to answering any questions you may have.
______
Mr. Lamborn. OK, thank you for your statement. We will now
begin questioning. Members are limited to five minutes for
their questions, but we may have an additional round. And I
appreciate the willingness on the part of our two witnesses to
stay for an additional round, so thank you so much.
I now recognize myself for five minutes. And Mr. Abbey, I
would like to ask you some questions based on your written
testimony.
Mr. Abbey. You bet.
Mr. Lamborn. And I am looking at initially pages 4 and 5 of
your testimony. And you talk about new fee increases on those
pages.
And you talked about, first of all, a fee to recover
inspection costs to the oil and gas program, allowing a savings
of $38 million. So I assume that that is a $38 million fee
increase.
Before I talk about the other fee increases, in general,
when you increase fees on industry, do they absorb that, or do
they pass that on?
Mr. Abbey. Well, if they, most of the time they would be
passing that cost on to the consumer.
Mr. Lamborn. So in effect, we can conclude that the economy
will increase its costs when costs to consumers go up, and that
could be a drag on the economy to that extent.
Mr. Abbey. Well, you certainly could make that assumption.
Again, what we are talking about is trying to, again, take
steps to reduce the costs to the American taxpayer, and then
place those costs on the industry that is benefitting from the
developing----
Mr. Lamborn. But the costs go to the American consumer.
Mr. Abbey. That would be, that would be a business decision
made by the industry.
Mr. Lamborn. OK. The next one there is, you are proposing a
per-acre fee on each non-producing lease of $4 per acre. How
many acres are we talking about there, so I have an idea of how
many dollars?
Mr. Abbey. Well, at this point in time we have a little
over 41 million acres under lease, with about 12 million acres
in production.
Mr. Lamborn. So how many acres again?
Mr. Abbey. We have 41 million acres under lease, with about
12 million acres under production.
Mr. Lamborn. So potentially 29 million times $4, which
would be over $100 million, if the full extent was assessed and
paid.
Mr. Abbey. If legislation was passed that allowed us to
assess that fee.
Mr. Lamborn. OK.
Mr. Abbey. And I should say, too, that I was just reminded
that that new $4-per-acre fee is really only going to be
assessed against new leases, not on existing leases.
Mr. Lamborn. OK. Because that would be unconstitutional.
OK. And third, the BLM is proposing a rulemaking in 2011 to
increase the onshore oil and gas royalty from its current 12.5
percent level, to what? I don't, what is the ending percentage,
if you have your way?
Mr. Abbey. Well, there has been no determination on what
the royalty rate might be. We are doing an analysis to
determine, based upon what is being charged throughout the
United States by states, as well as the international, or other
countries. We are going through that analysis.
I would say that the GAO has noted a couple of times in
reports that have been submitted to the Department of the
Interior that such an analysis is well overdue. We should
determine what is a fair return to the American taxpayer, and
then change our rules to reflect that fair return.
Mr. Lamborn. But you conclude that you are seeking to raise
$900 million over 10 years, so that would be 90, so whatever
the percent increase is that you have a target of $90 million
per year, or almost $1 billion over 10 years.
Mr. Abbey. That was a target that the Office of Management
and Budget came up with, and it was based upon, again, an
assumption that, at a minimum, the new royalty rate would be
similar to what is charged on offshore mineral development.
Which is around a little over 18 percent.
Mr. Lamborn. Well, in response I would say if they, they
either absorb it, which hurts the return to investors and
lowers investment, or they pass it on to the consumer, and that
hurts the economy.
Now, on the minerals side you are proposing an AML fee,
abandoned mine lands fee, on the volume of material displaced,
which doesn't take into account profitability or market prices;
and rental payments and a royalty of not less than 5 percent on
gross proceeds, once again ignoring market factors. If the
commodity market is taking a hit at that point in time, and you
are basing it on gross proceeds or on volume of materials
displaced, you could be driving people out of business.
Mr. Abbey. Well, the proposal that we have recommended, and
we are working on draft legislation that we would be presenting
to Congress, is really a very small royalty rate assessed
against that industry.
Again, our interest is bringing in a fair return to the
American taxpayer for the use of their public assets.
Mr. Lamborn. Last, you talk about lower-priority programs
on page 2. You want to reduce funding for lower priority--what
are the lower-priority programs that you have identified in
your current budget? It is in the middle of page 2.
Mr. Abbey. Well, the lower-priority programs, again, would
reflect some reductions in land conveyances in the State of
Alaska. We would also be looking at reducing funding in some of
our other renewable--I mean, not renewable, but resource
programs, like walleye, grazing, and those type of programs.
Mr. Lamborn. And do you have a dollar amount that these
lower-priority programs total up to?
Mr. Abbey. Well, I don't have it with me, but it is part of
our budget proposal that we have submitted.
Mr. Lamborn. OK, thank you so much. And at this point I
would like to recognize the gentleman from New Jersey.
Mr. Holt. Thank you, Mr. Chairman. Director Abbey, is it
correct that 2010 saw the highest level of oil production on
BLM land in more than a decade?
Mr. Abbey. Yes.
Mr. Holt. And the second highest on BLM land for natural
gas production ever?
Mr. Abbey. That is true.
Mr. Holt. OK. I just wanted to make sure that I was clear
on my facts here.
Now, there is interest in leases; that has not fallen off,
has it?
Mr. Abbey. Well, there was a slight decline in the interest
in leasing new areas. Again, there are 41 million acres that
have already been leased, with 12 million of those under
production.
But it does change with the market conditions. With the
market of gas going up, certainly there is a renewed interest
in leasing public lands for potential development, and we are
seeing that reflected in nominations of public lands for
possible leasing.
Mr. Holt. Let me understand the philosophy behind
administering fees. You believe that fees on oil and gas
industry are about right, too high, or too low right now?
Mr. Abbey. We believe that there should be an adjustment in
those fees to reflect the true costs of doing business, and,
again, a fair return to the American taxpayer.
Mr. Holt. If those fees are not collected, could you say
that it is actually at the taxpayer's expense, then; that it is
money that otherwise would have been returned to the taxpayer?
Because you return to the Treasury quite a bit of money each
year. Do you know what it would be in a typical year?
Mr. Abbey. Well, again, it is a good investment. We
estimated that we would be returning about $5, in Fiscal Year
2012, for every dollar that would be invested by Congress in
Bureau of Land Management activities. That is across the board,
and includes more programs than just Minerals.
Mr. Holt. And totally, what would the total amount be from
BLM activities?
Mr. Abbey. It would be over $5 billion.
Mr. Holt. Over $5 billion, with a B, OK. Now, is it true
that oil prices are determined on a world market, that you
know, if we drilled from Asbury Park to Yellowstone Park, we
would still be contributing a rather small amount of oil to the
world market? And the price is determined at an international
level, is that correct?
Mr. Abbey. That is true. You know, certainly public lands
have a role, but our role is very small compared to the
international market.
Mr. Holt. And so if a fee is raised, that can't be
reflected in a price to the, a change in price to the consumer,
can it? I mean, it is a world market price. The company will
then decide whether or not they are going to go for a lease,
whether they are going to develop that lease, based on the
world market price. But it is not passed on to the consumer, it
cannot be passed on to the consumer.
Mr. Abbey. Well, as we are looking, as far as our new fee
proposals again, we believe it is well past time to do an
analysis of determining what is a fair return from development
of these Federal leases.
Mr. Holt. I think most taxpayers would feel that these
things should be, that generally resources of any sort should
be paid for by those who use them, rather than the taxpayer
underwriting profitable activities of somebody else, of some
special or some individual corporation.
Now, I guess you still haven't quite answered the question,
because earlier I thought I heard you say that, agreeing with
the Chairman, that an increase in the fee would be passed on to
the consumer. But it is a world-determined price for the oil.
Mr. Abbey. It is a world-determined price for the oil.
Mr. Holt. How would that be passed on to the consumer,
then?
Mr. Abbey. It would be based on a business decision made by
the industry themselves, how they would absorb those additional
costs.
Mr. Holt. That is right. And it would not be passed on to
the consumer. I just wanted to clarify that point.
Well, we will come back with some other questions; I see my
time is exhausted. But I will be interested to hear more about
your plan for fees. Thank you.
Mr. Lamborn. OK, thank you, Mr. Ranking Member. And now we
will go to the Member from Pennsylvania, Representative
Thompson.
Mr. Thompson. Thank you, Chairman, Ranking Member, for this
hearing. Mr. Ferguson, Mr. Abbey, thank you for being here and
testifying.
I represent Pennsylvania's Fifth Congressional District; it
includes the Allegheny National Forest. And to my knowledge,
this forest has more privately owned mineral rights than any
other national forest in the country. In fact, 93 percent of
the mineral rights are privately owned.
A constant concern I have is over the unnecessary
litigation that the Forest Service faces. And I truly believe a
large part of the litigation is not for legitimate site-
specific concerns, but rather, an effort by some
environmentalists to slow the leasing and the permitting
processes.
What is the Forest Service and BLM doing to help ensure
that the permitting and leasing processes are completed in a
timely manner?
Mr. Ferguson. Well, in the situation with the Allegheny
National Forest, with so much of that being privately owned, 93
percent as you have stated, the BLM is not very involved,
because there is not a large percentage of Federal minerals
that need to be leased in that particular situation.
But each of the forest plans, or for the Allegheny there is
a forest plan that talks about the availability of public lands
for leasing. And then if there is interest by a company or an
individual, they would make a recommendation to the BLM to have
those parcels offered through their leasing program.
I am not sure if that is where you are going with the
Federal side, but that is the Federal process.
Mr. Thompson. OK. Well, I strongly believe that certainly
some in the environmental community are only filing lawsuits
against the Forest Service and BLM for no other reason to,
really, to further delay production. And actually also to fund
their organizations, since we have these funds that will pay
their fees to do that, to sue the Federal government.
Would you agree that the process of suing your agency needs
some reform?
Mr. Ferguson. If there was a way to limit litigation, I
think it would be fantastic. It takes a tremendous amount of
time for our employees to respond. It takes them away from some
of the other jobs they have. I am just not that familiar with
some of the possibilities as far as reform actions. But I do
know it takes a lot of resources in terms of responding to
litigation.
Mr. Thompson. Are you aware that the Forest Service entered
into a settlement agreement with the Sierra Club regarding oil
and gas drilling in the Allegheny National Forest in April of
2009, that severely restricted and indefinitely banned new oil
and gas drilling on private mineral property interests in the
national forests?
Mr. Ferguson. I was aware of that settlement, yes, sir.
Mr. Thompson. As a result of the settlement agreement, a
preliminary injunction was granted against the Forest Service
in the Federal Court in Erie, Pennsylvania, Judge McLaughlin,
on December 15, 2009. And in the litigation between Minard Run
Oil Company and the Pennsylvania Independent Oil and Gas
Association v. the U.S. Forest Service and the Sierra Club, the
preliminary injunction was issued in part because the Judge
found that many small oil and gas businesses in the Allegheny
National Forest would suffer irreparable harm, and potentially
go out of business, unless the Forest Service was prohibited
from requiring the application of the NEPA to these private
mineral estates in the Allegheny National Forest.
Are you aware of this preliminary injunction?
Mr. Ferguson. Yes, sir, I am.
Mr. Thompson. Does the Forest Service intend to abide by
that preliminary injunction?
Mr. Ferguson. Yes, sir, we do intend to abide by that. And
we are recognizing their rights for access.
Mr. Thompson. It is my understanding that the Forest
Service is in the process of drafting a regulation actually
relating to the ``management of National Forest System surface
resources with privately held mineral estates.''
Now, my concern is, although you are telling me your intent
to abide by the preliminary injunction, that this a back-door
way maybe to not do that, to violate it. Can you tell me what
the status is of that regulation?
Mr. Ferguson. Yes, sir. We are going through some of the
early stages of developing the regulations. It is not ready
for, it is not at the draft stage yet. We are pulling
information together.
There will be a point in time where we will have a draft
and a number of public opportunities will be available to get
feedback. I would be more than happy to come up and visit with
you and your staff and give you an update when we get to that
point.
Mr. Thompson. I look forward to that. And I do have one
question, and I will hold the rest for my second round. Can you
cite for me the legal authority that the Forest Service is
using to draft this regulation, when the Federal Courts have
thoroughly reviewed these facts and filed this injunction?
Mr. Ferguson. In 1992 the Energy Policy Conservation Act
had a specific statement that directed the Forest Service to
develop regulations for the Allegheny National Forest. That is
where the, where the effort was based, in the 1992 Energy
Policy Conservation Act.
Mr. Thompson. OK. We will come back and talk more next
round. Thank you, Chairman.
Mr. Lamborn. I thank the gentleman, and now I would like to
recognize Representative Bordallo for five minutes of
questions.
Ms. Bordallo. Thank you very much, Mr. Chairman. I have a
question for Director Abbey.
While I understand no decisions have been made at your
agency, if we look at what happened in 1995, it can give us
some idea of what might happen if the majority forces a
shutdown of the Federal government. Would a shutdown of the
government mean that no new permits to drill would be issued
onshore?
Mr. Ferguson. That is true.
Ms. Bordallo. It is true. So a shutdown could actually harm
domestic oil production.
Mr. Ferguson. It would harm domestic oil production during
the period of time that the government was shut down.
Ms. Bordallo. I see. Now, significant revenue is generated
to the Federal government from visitors to BLM lands. Would
that revenue stream also be lost if a shutdown occurs?
Mr. Ferguson. It would.
Ms. Bordallo. That sounds pretty serious.
Mr. Ferguson. Well, again, I am not sure, you are smarter
than me, no doubt. But I am not sure a shutdown would serve
anyone well.
Ms. Bordallo. Thank you. Thank you very much, Mr. Chairman.
Mr. Lamborn. I thank the gentlelady. Now for the next
Member who was here when the gavel came down, Representative
Fleischmann.
Mr. Fleischmann. Thank you, Mr. Chairman. My name is Chuck
Fleischmann; I represent the Third District in Tennessee. My
first question is for Director Ferguson.
Director Ferguson, you may recall that at one point the
Forest Service had 35 million acres of Federal oil and gas
leases. That figure is now 5.3 million acres. Can you please
explain to me what has caused this drastic drop in leasing
acreage, sir?
Mr. Ferguson. Probably a number of factors are at play
there. I am not familiar with the timeline, when we had 35
million acres, in terms of the historical time period.
We see cycles in the industry, and you know, there are
fluctuations in terms of where there are expressions of
interest. And it is totally market-driven. So we are trying to
respond to public inquiries that come in to the BLM originally
that come to us, and we look at those and see if they are
consistent with our land plans, our forest plans, and make
recommendations along that line.
So I can't give you a real specific answer, because I don't
know the timeframe. I would be happy to get some more
information and try to make that a little more clear.
Mr. Fleischmann. Thank you. Next question for Director
Abbey. Director Abbey, given the long list of processes and
regulations for leasing through environmental analysis and
permitting, sir, what could the government do to streamline
those processes and encourage domestic oil and gas development?
Also, what are the steps that the Bureau of Land Management are
taking to expedite oil and gas leasing process?
Mr. Abbey. Well, in the President's blueprint for a secure
energy future, he noted several possible provisions that might
provide incentives for quicker development of existing leases
and new leases. In that blueprint, there was a suggestion that
Congress entertain shorter lease terms, as part of the Minerals
Leasing Act. Also, there is the possibility of rewarding rapid
development with lease extensions once there is an indication
of progress being made in developing those leases.
And another suggestion was that we would reward rapid
development through graduated royalties. Again, that would
require a regulatory rule change for us. But there are
opportunities for us to work together with Members of Congress,
within the Administration, and with industry and all public
land stakeholders, to encourage responsible development of
these resources that this nation is very dependent upon.
We are willing and are moving forward in that direction. We
are hosting various forums over the course of the next month to
talk to the stakeholders regarding fracking, and the use of
fracturing technology in development of natural gas on public
lands. We are interested in hearing what the public has to say
regarding that particular technology and any concerns that they
may have, so that we can incorporate that as part of our
analysis.
The Bureau of Land Management again takes to heart the role
that we play in developing our national resources, both
renewable and conventional, to serve the public. And I think
the program that we have in place, and the ones that we are
implementing, not only provides greater opportunities to
develop these resources, both renewable and conventional, but
also to do so in a more responsible and environmentally sound
manner.
Mr. Fleischmann. Thank you. One follow-up question in the
time remaining. Director Abbey, the President's budget imposes
over $60 billion in tax and fee increases over 10 years on
American energy production. Can you please tell me what the
economic effect will be of these proposed taxes and fees on the
energy industry?
Mr. Abbey. I think you have some people that will be coming
up on the second panel that could probably provide a response
to that particular question.
I will say this. That again, as we look to the future, our
desire is to pass on to the industry the cost of doing business
on these public lands. We are looking at, again, assessing fees
to cover the full cost of inspections and enforcement actions
on all the applications for permits to drill that we are
approving. And as we look to the future, we are also looking at
what is a fair return to the American taxpayer.
Mr. Fleischmann. Thank you, sir. I yield back.
Mr. Lamborn. I thank the gentleman. Now the gentleman from
Colorado, Mr. Coffman.
Mr. Coffman. Thank you, Mr. Chairman. Mr. Abbey, I am
concerned with some of the proposed funding increases. In this
budget request there are $29.9 million for an increase for
recreational and cultural resources in the national landscape
conservation system. There is an increase of $20.4 million
requested for land acquisition. But the BLM has not requested
an increase for oil and gas processing.
Why do you rate land acquisition as more vital than energy
development?
Mr. Abbey. Well, in many cases acquisition of inholdings
actually reduce the cost of managing public lands. We have
worked very closely with public-land stakeholders, with
interest groups, to identify those lands that would complement
our management of key areas, sensitive environmental areas. We
have identified those as part of the 2012 budget proposal.
Our intention is that if these, if the monies were made
available, that we would acquire those lands from willing
landowners.
I would point out, you know, Congressman Coffman, that
managing public lands for multiple use is not just about
developing our energy, or every acre for oil and gas. It is
about bringing balance to public lands. Recognizing and
protecting significant historic and cultural resources,
sensitive watersheds and habitats, and wild and scenic rivers
is just as important as providing acres for oil and gas
leasing.
Mr. Coffman. In 2009, Americans utilized renewable energy
resources, such as wind, biofuels, hydroelectric, geothermal,
and solar, to meet around 8 percent of our nation's total
energy needs. Obviously it is unrealistic to assume that our
nation will be able to use renewable energy utilization of all
of our--let's see--will be able to use renewable energy
utilization for all our needs in the near future.
That being said, Mr. Abbey, I would like to know what your
plan to increase conventional, non-renewable energy sources is
in the future.
Mr. Abbey. Well, Congressman Coffman, again, as consistent
with our land-use plans, we are moving forward, making public
lands, appropriate public lands, available for leasing. Again,
we are implementing leasing reforms to try to bring greater
certainty to the industry and to our public land stakeholders
in those lands that we are evaluating for leasing, have the
greatest chance of being leased and development.
We are doing so to ensure that leasing is performed in the
proper places, and again, incorporating all the safe and
environmentally responsible, in a responsible manner. In other
words, adopting best-management practices for any development
on these public lands.
Mr. Coffman. Now, as I understand it, you have specific
goals for renewable energy on public lands, in terms of
increasing renewable energy on public lands relative to output.
Am I correct on that?
Mr. Abbey. We do. Congress actually established some of
those goals.
Mr. Coffman. OK. What are your goals in terms of oil and
gas, of actually oil and gas output on public lands? Would you
have specific goals on that, as well?
Mr. Abbey. We don't have specific targets. Again, our
desire is to make sure that we act responsibly, making
appropriate public lands available for such development, and to
ensure that best-management practices are adopted and
implemented on the ground.
Mr. Coffman. Well, I don't understand. It is odd that you
have specific targets on the renewables side, but you don't
have specific targets on the non-renewables side. Why is that?
Mr. Abbey. Well, again, it is part of the Congressional
desire to see this nation diversify our energy portfolio, to
release, or to decrease our reliance on foreign energy sources.
Again, Congress did establish goals for us relative to
renewable energy development. We are looking at, we are already
halfway to achieving those goals.
This year we will be reviewing 19 renewable projects, nine
solar projects, five geothermal leasing project proposals, and
five wind projects.
Mr. Coffman. Thank you. You know, I just want to make a
point. That it would seem to me that actually, that you ought
to have targets on the non-renewables side. And just as you are
trying to reduce our dependence on foreign oil, I have a
feeling that producing more oil inside the United States might
accomplish that.
Mr. Chairman, I yield back.
Mr. Lamborn. OK, thank you. I would now like to recognize
the gentleman from Oregon, Representative DeFazio.
Mr. DeFazio. Thank you, Mr. Chairman. Just in response to
my colleague, I think he was here for the hearing where we had
the head of the Energy Information Administration there. And he
and every other expert up there agreed that in fact, OPEC sets
targets, and they produce to meet those targets or restrict to
meet those targets. And incremental additions, particularly in
the short term, to U.S. oil supply would be offset by OPEC
because they want to maintain their price targets. And we have
a bipartisan problem there, because neither Clinton, Bush, nor
Obama wanted to take OPEC to the WTO, but that is not for this
hearing.
Mr. Abbey, you talked about greater certainty for
leaseholders, and I guess that was in part of a longer
response. And I just kind of want to get to what that means. I
don't know whether, is the former naval petroleum reserve, is
that under your jurisdiction in Alaska, the leasing there?
Mr. Abbey. The national reserve? Yes, it is.
Mr. DeFazio. OK. What about all the non-performing leases
in there, where there are known, very substantial reserves?
Mr. Abbey. The challenge in developing those resources in
the RA is infrastructure. Even though there has been areas that
have been leased, there has been some exploration performed on
those leases; the concern on the part of the industry, and I
think to all of us, is the lack of infrastructure. That if
those resources were developed, how do you deliver it to the
market.
Mr. DeFazio. Well, it seems to me it is a good deal closer
to the pipeline from Prudhoe Bay than is ANWR over here.
Mr. Abbey. Well, there is. And again, it would require some
additional pipelines and additional investments and costs by
the industry to deliver that resource.
Mr. DeFazio. Investments and costs? Is it just going to
spring up magically out of the ground, and go to the refinery
by itself? Doesn't all this involve very substantial investment
and costs?
I mean, I have been looking at this for a number of years.
I mean, it was the Clinton Administration that lifted the
moratorium on leasing in there, and let the leases; yet, we
have had no development. That is quite a few years. And yet on
that side of the aisle we hear that the government is holding
people back. Is the government preventing the development of
those leases?
Mr. Abbey. No.
Mr. DeFazio. OK. On the other hand, does the government
have stringent use-it-or-lose-it kind of performance
requirements? Can you just sit on top of a pool of oil and say
well, we will get to it some time?
Mr. Abbey. Well, the government, the Bureau of Land
Management issues 10-year leases. And if the industry does not
develop those leases within that 10 years, that lease does
expire.
Mr. DeFazio. Well, I would assume that quite a few of
those, if they were let in the Clinton Administration, must be
at or past that 10-year point. Have we taken any of them back?
Mr. Abbey. There has been some that have been relinquished,
yes.
Mr. DeFazio. OK, but others where there is more prospect of
there being substantial amounts of oil that haven't been
relinquished?
Mr. Abbey. Well, where there has been exploration and
another type of activity performed on those leases, they have
not been relinquished.
Mr. DeFazio. OK. So if they just perform some exploration,
then the 10-year limit doesn't apply. It isn't 10 years to
develop and extract the oil from the lease; it is 10 years to
do something.
Mr. Abbey. Exactly.
Mr. DeFazio. And then what happens after they do something?
Like explore and find out there is oil there? Does the 10-year
clock start over again to actually extract the oil?
Mr. Abbey. The lease can be extended.
Mr. DeFazio. Can be.
Mr. Abbey. Yes.
Mr. DeFazio. Can it not be?
Mr. Abbey. I am not aware that we have accepted leases back
where there has been activities--well, let me backtrack. We do
have areas where----
Mr. DeFazio. Accept them back. I am not talking about
accepting them back. I am talking about taking them back if
these people are sitting on pools of oil that are known, they
are refusing to develop it because it would cost money. And
might drive down the price a little bit if it is a large
supply, and it is longer-term, as opposed to the short-term
stuff.
Mr. Abbey. If there has not been any active exploration or
development in those leases within that 10-year period----
Mr. DeFazio. Yes, but you just used exploration. I could
explore, find out there is a pile of oil down there, huge pool
of oil; and then just say well, we will save that for later,
when the price is even higher.
Mr. Abbey. Well, within that 10-year period there has to be
some production. That is true.
Mr. DeFazio. There does have to be production. That seems
to contradict what you said earlier. I think this----
Mr. Abbey. Let me get some clarification real quick.
Mr. DeFazio. Yes.
Mr. Abbey. Well, I was just informed that Congress does
give companies more time in the NPRA, due to infrastructure
problems there. And so there is an exception there in Alaska
for the National Petroleum Reserve.
Mr. DeFazio. But my understanding is, with the decline in
Prudhoe Bay, we are not using the pipeline capacity, fully
utilizing it. And this is much closer than ANWR, where we don't
know if there is or isn't oil. We know there is oil in the
petroleum reserve; that is what it was kept for.
I guess then I would ask, on a bipartisan basis, maybe my
colleagues would like to join with me in forcing these people
to do something about accessing, investing, and extracting that
oil. Thank you. Thank you, Mr. Chairman.
Mr. Lamborn. OK, I thank the gentleman. Now we will hear
for up to five minutes, questions from Representative Rivera
from Florida.
Mr. Rivera. Thank you very much, Mr. Chairman. Gentlemen,
thank you for being here today.
Mr. Abbey, just to follow up on some of the line of
questioning we just heard, when did companies apply for permits
to build pipelines into the Naval Petroleum Reserve, Alaska?
Mr. Abbey. I don't have the specific dates. I do know that
there have been some proposals for pipelines within the
National Petroleum Reserve in Alaska.
I do know that at least one company is having problems
getting the necessary permit from the EPA and the Corp of
Engineers.
Mr. Rivera. Do you have any idea when those applications
may have started? Weeks, months, years?
Mr. Abbey. I don't. We would certainly be happy to provide
you that for the record.
Mr. Rivera. I would appreciate that. Because my
understanding is it has been several years. And I guess the
follow-up question then is what are you doing to move forward?
Mr. Abbey. Well, the Bureau of Land Management again takes
the applications that we receive, the proposals that we
receive. We go through the necessary NEPA analysis. We make a
determination of whether or not such an action is appropriate,
but it still is consistent upon the proponent acquiring and
obtaining all the necessary permits from other agencies who has
a role to play, as well.
Mr. Rivera. Well, let's talk about that a little bit, the
other agencies that have the role to play. I assume you are
alluding to the Army Corps, the EPA?
Mr. Abbey. I am, as well as State agencies.
Mr. Rivera. And in terms of the Army Corps and the EPA, why
are, what are they doing in terms of preventing going forward
and developing in the NPRA?
Mr. Abbey. Well, they have their own review processes, and
also they provide permits that are required in order for some
of those proposals to be developed.
Mr. Rivera. And anything that you, in your capacity, are
doing to expedite any of these efforts?
Mr. Abbey. We routinely coordinate our actions with the
EPA, as well as the Army Corps of Engineers. We share our
information, our analysis, with them. But they, in turn, have
their own processes, and they are the ones that make a decision
of whether or not they issue their permits.
Mr. Rivera. Let me move forward then and talk a little bit
about the question on the Energy Policy Act of 2005, where it
states that it is the Policy of the United States that, I am
quoting, ``oil shale, tar sands, and other unconventional fuels
are strategically important domestic resources that should be
developed to reduce the growing dependence of the United States
on politically and economically unstable sources of foreign oil
imports.''
My question is how do you square that policy direction from
Congress, which I think seems pretty clear, with the recent oil
shale settlement agreement with a number of environmental
groups that result in taking the oil shale resource off the
table, particularly at this time when it is so desperately
needed?
Mr. Abbey. Well, first, we have not taken the oil shale off
the table. We have a very aggressive research and demonstration
program that is in place. We have issued six oil shale leases,
five in Colorado, one in Utah, that are currently being
evaluated as far as the technology that is being planned to be
used by the companies that have those six RD&D leases.
In addition, we are reviewing three other nominations that
have come to us, and that, for additional RD&D leases. Two of
those three are located in the State of Colorado; one is also
located in Utah.
So we are aggressively looking at the technology to
determine what would be the true impacts of developing that
significant resource that does exist in Wyoming, in Colorado,
in Utah primarily, so that it could help offset our needs for
domestic oil and oil shale-type materials.
Mr. Rivera. So it is your position that any agreements with
these environmental groups are not essentially repealing the
National Policy Directive set by Congress.
Mr. Abbey. We do not see a repealing at all. In fact,
again, it does require us to go back and do some initial
analysis to determine just how much resource impacts could
occur, would occur under the development of these oil shale
materials. Again, we do not have a full understanding of the
quantity of water that would be required in order to produce
oil from oil shale. There are some other impacts that might be
experienced as a result of developing such a resource.
So we wanted to make sure that we have an aggressive RD&D
program that would give us the answers that we need in order to
move forward responsibly to develop such a resource.
Mr. Rivera. Thank you, Mr. Chairman.
Mr. Lamborn. OK, thank you. I now recognize for up to five
minutes the gentleman from Arizona, Representative Gosar.
Dr. Gosar. You know, Mr. Abbey, what I am noticing is a
total lack of coordination in efforts. And I am seeing this
over and over. And as a businessman, it is apparent that we
have some problems.
In fact, when my colleague on the other side of the aisle,
Mr. DeFazio, asked you some questions, you were careful in your
discussion about pinpointing about some of the problems in the
process, when the process is part of the problem.
I am from Arizona's First District, and NEPAs are now
taking over five years to accomplish. And all we have to take
is a letter with a stamp on it to hold it up. That is where we,
Mr. Ferguson, need to have some tort reform in regard to this
litigation.
But it is, the problem is, particularly when you see an
administration actually going and thwarting a process of
putting in infrastructure. So I want to pinpoint that the
problem is a lack of coordination.
Now, Mr. Ferguson, how are stone quarry reclamation bonds
figured?
Mr. Ferguson. There is a process that we follow where they
look at projected reclamation costs for the type of activity,
equipment use, and things along that line. Our regulations
require us to update those periodically, and they look at a
couple different things. They can look at local, more localized
rates. They can also look at a more generalized regional rate
for the reclamation efforts that are required.
Dr. Gosar. Who has the authority to set those?
Mr. Ferguson. That would be actually managed at the
district or forest level, by the District Ranger, and
ultimately from an authority standpoint, the District Ranger
and Forest Supervisor.
There is usually a geologist or a minerals administrator
that gets involved in the process of gathering the information
from the local sources in pulling together the projection of
what the reclamation costs would be, and then calculating the
bond.
Dr. Gosar. That is interesting. Is there a means to review
that decision, with the checks and balances, in case somebody
didn't have their facts and figures right?
Mr. Ferguson. I would suggest having meetings with the
District Ranger and the Forest Supervisor to, you know, in
terms of a formal process. Once the bond is established, there
probably is an appeal process. But I would encourage just
having some face-to-face talking, you know, time with the local
supervisor, would probably be a good, effective way to try to
deal with that, as well.
Dr. Gosar. What if the regional supervisor basically says
my word is it, and that is it, and I don't care what Congress
or anybody else does? Is that a prudent use of oversight?
Mr. Ferguson. That is a good question.
Dr. Gosar. Well, let me just make it more specific. Let me
give you a nice story. I really have some concerns about the
reclamation bond requirements imposed on the stone quarry
industry.
As you know, the last three years have just plummeted. And
in fact, my district is one of the poorest. And so when you
talk about looking at rehabilitating a quarry, costs are
probably pretty low; not greater, probably pretty low.
So what happened is that we had some bonds set. And in the
end of 2010 the bond was set for $627,000. In 2011, that bond
went up to $940,800. And when they questioned it, the regional
geologist in Williams took that to a rate of $1,183,800. Wow.
I am astonished here. You know, over 200 families have jobs
there. And so it seems like we would have some workability with
people. And what began--I want to reiterate, I am from
Arizona's First District, where we seem to have a constant
problem here. And it was wonderful that the Chief came out to
work things out in the Schultz Pass fire.
But it seems to be that we have rogue bureaucrats at the
local level deciding fates of everybody, without a discernible
policy, without a checks and balances. I have a whole list of
questions in regards to this quarry industry, and I would like
to see them answered, if I may.
Mr. Ferguson. I would just offer that there are some
opportunities to look at that bond value calculation. There are
also opportunities to do some other, or look at other
approaches to how some of that reclamation can be done.
If the operators have equipment out there, and they are
actually able to do some of that reclamation themselves, you
know, make their footprint smaller, do some of that
rehabilitation, then that would be a way of decreasing that
bond calculation. So it is based on the footprint on the
ground.
So I think there are some possibilities that are out there
to negotiate, do some reclamation. It is going to be less
expensive for that operator if his equipment is already there,
if they meet the standards. So I think there are some
possibilities there.
Dr. Gosar. Mr. Chairman, just one follow-up then.
Mr. Lamborn. Quickly.
Dr. Gosar. So there are checks and balances that we can
mitigate this. And so who would people go to if they have
somebody sitting in a power of authority, just saying this is
the only way? I mean, actually the comment came back that
Congress can't do anything about it, it is my way or the
highway.
Mr. Ferguson. Well, I think that the decision maker, as I
said, is that district ranger or the forest supervisor. There
is a regional forester that also exists in the organization, so
I would knock it up to the next level, if that is where you
feel like you need to go.
Dr. Gosar. I would like to take it a step further. I would
like to see the checks and balances all the way through, so
that we can move this along for people in Main Street America.
Mr. Ferguson. I understand.
Mr. Lamborn. OK, let's have a second round. And you can
certainly do a follow-up in the second round. Once again, I
appreciate the two witnesses staying a little bit longer. I
appreciate that; I know your time is valuable. But there are a
lot of important questions that we would love to ask.
I will start the second round. And this question is for
both of you; it affects both of your agencies. And I have also
asked this question of Interior Secretary Salazar when he was
here. And it has to do with a situation, and I believe it is in
the Teton Forest of Wyoming. And apparently there is a forest
supervisor who has taken it upon herself to urge BLM to cancel
leases that, oil and gas leases, that were duly authorized by
BLM.
There is no way that this can happen, is there? And are you
familiar with the situation? This is for both of you.
Mr. Abbey. Well, certainly, I will begin the answer, and
then maybe Tony would like to augment my response. But the
Bureau of Land Management's position at this point in time is
awaiting the final outcome, so the Forest Service
administrative appeals process, before we determine how best to
address those leases.
The forest supervisor has made a determination, I believe
maybe based upon litigation, or certainly an appeal to go back,
reevaluate the analysis that provided such lands for leasing.
And that administrative appeal is still going on, as far as I
know.
Mr. Ferguson. I will just add to that. That is correct. The
administrative process is running through its course right now.
The decision that the forest supervisor made was to
withdraw the consent to leasing that had been previously
provided to the BLM. There was an appeal process of 45 days,
and then there is a final decision that will be made on that
appeal by the regional forester that we expect sometime on or
around the first week of May.
So we are still in the administrative process regarding the
consent that was provided for leasing to occur.
Mr. Lamborn. OK, thank you. Mr. Abbey, I want to thank you
for clarifying something earlier. There was some discussion
about the concept of use it or lose it. And you correctly
pointed out that people make payments upfront when they are
given a permit; they make annual permits thereafter. That is a
use-it-or-lose-it structure, already in place, for those who
understand how business and free enterprise operates.
Mr. Abbey. They pay rent on those leases, yes.
Mr. Lamborn. That is right. So they have every incentive
right now to make their investment pay off. And if they want to
watch that disappear because for some reason it is no longer
economically feasible, they pay a financial penalty currently.
Because they pay payments for nothing. To me, that is already
use it or lose it.
Mr. Abbey. Well, they are holding those parcels. They are
not being available to other companies who might have a desire
to develop those parcels.
Mr. Lamborn. You also talk about, Mr. Abbey, about making
people pay their own way. But don't we already have a system in
place where they pay for permits, they pay bonus bids at the
beginning, they pay annual lease payments? There are other
miscellaneous fees depending on the situation. So aren't there
already a lot of payments made by those being issued permits
today? Aren't there already payments in place?
Mr. Abbey. There are payments in place. There are fees that
are being collected for some of the actions that you just
described.
One of the concerns, and one of the greater concerns that
we have, though, is making sure that there is a fair return to
the American taxpayers. And that pretty much deals with the
royalty rates, the 12.5 percent royalty rate that has been in
place for a number of years.
As mentioned earlier, the Bureau of Ocean Energy Management
collects a royalty rate of 18.75 percent for offshore,
production of offshore leases. Onshore is 12.5 percent.
Mr. Lamborn. OK. There are so many things I would like to
ask you, but to shift gears quickly to one other subject. On
page 3 of your testimony you talked about transferring $16.7
million from the realty and ownership management activity to a
renewable energy project.
So my assumption from that is that the realty and owner
management activity as it is currently structured is a lower
priority for you, if you can just shift $16.7 million from it.
Is that correct?
Mr. Abbey. No, sir, it is not. The amount of monies that we
are proposing to shift is the amount of money that we have been
using in order to process rights-of-way applications for solar
and wind energy project proposals.
This would be an administrative action that requires
Congressional concurrence, because it would be done through the
appropriations process. But it would take the amount of money
that we are currently using to manage our Renewable Energy
Program, and put it in a specific sub-activity that is targeted
for renewable energy. So it is more than administrative action
than actually de-emphasizing any aspect of the Lands Program or
the Renewable Energy Program.
Mr. Lamborn. OK, thank you. At this point I would like to
recognize the Ranking Member for up to five minutes.
Mr. Holt. Thank you. I would like to pursue this renewable
energy matter for a bit longer. The goal is aggressive; I think
I said earlier it would be 10 billion watts of renewable energy
on public lands overall.
Can you tell us kind of what your schedule is? How you are
going to do that? And whether, how the permitting process
differs. I mean, are there more hurdles to jump through? Does
it take longer than for the other energy permits?
Mr. Abbey. Well, process-wise, it is very similar. In the
Renewable Energy Program, when we are talking about solar or
wind, the applications are filed through our rights-of-way
program. So the proponents are seeking a right-of-way in order
to develop commercials-scale projects on public lands.
Once we receive a perfected application, then we go through
the NEPA analysis to assess the impacts or the likely impacts
of approving that project, to determine whether or not the
project, as proposed, is in the right location; whether or not
the large footprints of solar projects or wind projects can be
successfully mitigated; and to determine what terms and
conditions that we would apply to a record of decision that
might be issued.
Again, the process is very similar to what we perform for
conventional energy, except it is different, different
authorities.
Mr. Holt. And what about the pace of this? When will we,
you know, are you on track for the 10,000 megawatts?
Mr. Abbey. Well, we are a little over halfway there. We
anticipate approving another 4,000 megawatts based upon
projects that are under review for this fiscal year. We have
already approved a little over 5,000 megawatts through 2010.
And if we successfully approve, or if we approve in the
neighborhood of 4,000 this year, we have another 4,000 to 5,000
megawatts that we would probably be reviewing in Fiscal Year
2012.
Mr. Holt. And how quickly will that actually be electrons
on the grid?
Mr. Abbey. Well, we hope as soon as possible, just like we
hope that----
Mr. Holt. Do we need a use-it-or-lose-it requirement there?
Mr. Abbey. No, we don't. Because we already have diligence
as part of our record of decision. So the terms and conditions
of the rights-of-way is that the proponent would be required to
move forward and demonstrate progress toward constructing their
project in a timely manner.
Mr. Holt. Just have a short answer, Mr. Ferguson. How much
of this renewable energy is targeted for Forest Service land?
Mr. Ferguson. The only target that we have specifically
identified at this point in time is in the hydropower area. And
we are looking at trying to increase our current capacity by at
least 10 percent. And we have a number of projects that are on
the board, on the table, that would allow that to be met
without any trouble at all.
Mr. Holt. Good. Well, thank you. Mr. Abbey, under the
Mining Act there is no real obligation for dealing with
abandoned mines and reclaiming them. What is the status of that
now? How many abandoned mines do you estimate are on lands
under your jurisdiction? And what level of public hazard do
they provide? Either in kind of physical hazard, or water
pollution, or whatever else might result.
Mr. Abbey. Well, many of these abandoned mines are
significant. We have identified 31,000 abandoned mine sites on
public lands, with almost 65,000 features. And those features,
you know, include such things as open entryways, mine tailings
and other environmental hazards.
Unfortunately, each year we see deaths as a result of some
of these abandoned mine sites, where people have fallen into
shafts or, through their own exploring of some of the abandoned
mines, they get trapped, and unfortunately die.
But there is a significant environmental cost to the
American taxpayer.
Mr. Holt. Has BLM written a proposal on what should be
done, under perhaps different law, to deal with this?
Mr. Abbey. We submit an appropriations request each year to
Congress, to provide funds to move forward and, to the best of
our abilities, mitigate hazards associated with those mine
sites that are closest to the population. The amount of money
that we have received through the Appropriations process has
not necessarily been sufficient in order to take the actions
that are required to mitigate the hazards associated with these
mines.
We believe that the fee that we are proposing as part of
our 2012 budget proposal would provide us with the funding that
are necessary for us to move forward as aggressively as
possible to mitigate the hazards associated with these
abandoned mines quicker, rather than later.
Mr. Holt. Thank you. And let me just say to the Chairman,
it is worth pointing out that I think as things exist now,
going forward, any hazards that result from these activities
are a cost borne by the taxpayer. Thank you.
Mr. Lamborn. OK, I thank the gentleman. Representative
Thompson.
Mr. Thompson. Thank you, Chairman. Mr. Ferguson, I promised
we would get back to just a couple questions yet on the
Allegheny National Forest.
Mr. Ferguson. OK.
Mr. Thompson. And it is a situation that relates to other
forests, obviously, our national forest public lands. You know,
specifically where this Administration implemented a moratorium
on the rights of individuals who own private, privately owned
subsurface rights.
And that was overturned, not once, but twice, by a Federal
Judge. And despite that, the Administration still continues to
trample, it looks like finding a back-door way to trample on
the rights of the taxpayers, I think, and certainly the private
owners, with this regulation relating the management of
national forest surface resources with privately held mineral
estates.
Is it true that this rulemaking was initiated in support of
the Sierra Club litigation in the Allegheny National Forest?
Mr. Ferguson. Not to my knowledge, sir.
Mr. Thompson. OK. That is my understanding, that that was
the event that triggered that. And again, I want to come back
to how you justify in the proposed rulemaking, now you had
referenced the Conservation Acts of 1990s?
Mr. Ferguson. 1992, there was very specific language
regarding the Allegheny National Forest in this regulation.
Mr. Thompson. OK. I was specifically going to look at that.
Within the Forest Service regulations, as a general rule--and I
am quoting from it--as a general rule, the Forest Service does
not have the authority to deny the exercise of a mineral
reservation or outstanding mineral right. Now, that is the
regulations that exist today. So I will take a look at that
1992 Act.
To what extent is the Forest Service going to consult about
this rulemaking with Native American tribes and States such as
Pennsylvania?
Mr. Ferguson. In terms of the tribal consultation, there is
a 120-day consultation period prior to anything going out in
draft that will be occurring with tribes. And then there will
be an opportunity for comments and interactions with the State
after the draft is published.
So consultation with the tribes occurs prior to publication
of any proposed regulations.
Mr. Thompson. OK, thank you. I want to come back to the
loss of leases that this new policy--and this is for both
gentlemen. Has the agencies done a cost-benefit analysis of
such a policy change, in terms of rescinding leases for, quote,
non-production?
Mr. Abbey. The oil and gas program?
Mr. Thompson. Yes. Well, I don't care what it is for,
minerals, it doesn't matter.
Mr. Abbey. Well, let me just point out, you know, the
Bureau of Land Management has issued 7,100 applications for
permit-to-drill authorizations to the companies themselves to
go out and drill on public lands. Those 7,100 permits are the
ones that are not being developed.
Mr. Thompson. Well, but my question is, has there been a
cost-effective analysis done of really the cost side? I think
the benefit side, too, because I think you may lose the revenue
of these leases. And once the Federal government takes this
move, that people aren't going to, other folks aren't going to
come in and bid on them, because who is going to want to deal
with this type of conditions?
Specifically, let me put out this. Have you considered the
liability costs when you rescind these leases for ``non-
production?'' Specifically, you know, when you cancel a lease,
we are talking about costs which I think we are going to be
liable for. Bonus bids, rents that have been paid by these
companies, prospective production. Have those been, there is a
cost--do we know what the costs of those, the exposure of that
liability will be for your agencies, for the Federal
government, and ultimately for the United States taxpayers?
Mr. Abbey. Sir, we are not proposing to rescind any
existing leases. The----
Mr. Thompson. I recognize it is future ones. But I am
talking about the liability costs for those future ones.
Mr. Abbey. Well, those future leases would be issued based
upon the terms and conditions of the decisions affecting those
leases. So there would be a diligence requirement to the
companies to move forward in a more aggressive manner to
develop their leases, or the leases would be lost.
Mr. Thompson. I understand that you are, the agency is
considering rescinding leases, current leases in Wyoming. So
that there are current leases on the table.
Mr. Abbey. There are leases that we have issued that we are
doing some additional environmental work, so that we can, so
that the companies can receive those leases, and move forward
and develop those leases.
Mr. Thompson. Let me finish up, because my time, I am down
to the last couple seconds. Can either of you gentlemen tell me
what percentage of the country that the United States owns,
through our public lands, our Bureau of Land Management, Forest
Service? Is it 10 percent, 20 percent, 30, 40, north of 40
percent? I am not exactly sure myself. I know I have heard it
is somewhere in that 40-to-60-percent range. That is a
significant amount of ground.
So the question I have for you, and this comes down to the
line of questioning that was with land acquisition, how much is
enough? And when we look at the consequences of taking land and
putting it into the public sector out of the private sector, it
comes at a cost of acquisition; you are budgeting for that. I
know the Allegheny National Forest is looking at taking more
land out of the private sector, and putting it into the forest.
It is a cost to the taxpayer, because it comes off the tax
rolls, so everybody else's property tax and tax rates go up. It
is a cost-economic activity. Because where homes were built and
property taxes would be paid, or businesses would be built and
jobs are created.
So my final question is, do you have an adequate budget
currently, or as proposed, to manage and maintain the current
public lands that the government owns? Or would you need more
money to do it adequately?
Mr. Abbey. Well, the acquisitions that we are proposing for
2012, again, would augment the management of our existing
programs. And by that, I mean in some respects it will bring
some efficiencies for managing some of these environmentally
sensitive areas.
Let me just point out, too, that the Bureau of Land
Management not only acquires lands subject to appropriations by
Congress, but we also dispose of public lands that have been
determined to be an excess, through our land-use planning
processes. So it is not just a one-way street.
The Bureau of Land Management does have the authority to
dispose of appropriate public lands that would be consistent
with decisions that are reached through land-use plans.
Mr. Thompson. I appreciate both the testimony from both of
you gentlemen. And you know, I understand it is a two-way
street. I would like it to be a hiking path for us acquiring,
taking any more land out of the private sector. And a four-lane
highway as returning land from the public sector to the private
sector.
And frankly, the Forest Service folks I deal with, they
tell me they don't have enough money to maintain what they have
now. So to acquire more land is, I don't understand that. Thank
you.
Mr. Lamborn. Thank you. I now recognize the gentlelady from
Guam, Mrs. Bordallo.
Ms. Bordallo. Thank you. Thank you very much, Mr. Chairman.
Just to clarify an earlier point. The Administration projects
that this non-producing lease fee would generate as much as
$874 million over 10 years. It will increase revenue overall
for American taxpayers. You agree with that.
Mr. Abbey. That is a projection based upon, you know, some
assumptions. But we do agree with those, that projection.
Ms. Bordallo. All right. Director Abbey, a recent GAO
report raised serious questions regarding BLM's management of
oil and gas wells that have not been producing for many years.
Now, these wells could pose a danger to the environment and
American taxpayers. What actions are you taking to mitigate the
risks posed by these idled and orphaned wells?
Mr. Abbey. Well, again, we take that report seriously, and
we are moving forward to encourage the companies who are in
possession of some of these idle wells who have not been
producing for a number of years, to move forward and plug those
wells. Unfortunately, we do have some orphan wells, as we refer
to them, where still there is no responsible party holding
those orphan wells.
And so, in order to mitigate the hazard associated with
those orphan wells, we are actually implementing our own plug-
in programs to lessen the impacts from such wells.
Ms. Bordallo. So you have something that is ongoing, is
that correct?
Mr. Abbey. We do. And again, it can be a serious problem if
we are not on top of these idle wells. And we are working very,
very closely with the industry to make sure that they are not
going to sit around for long periods of time before there is
some action to mitigate the hazards associated with it.
Ms. Bordallo. Meanwhile, the taxpayers would bear the costs
of these orphan----
Mr. Abbey. For the orphan wells.
Ms. Bordallo. I see. Director Abbey, according to the GAO,
the minimum bond amounts for oil and gas companies were set in
the fifties and the sixties, and have not been updated, and may
not be sufficiently high to serve as a proper incentive for
companies to plug wells and reclaim the land.
Would you agree that we should look at this issue of
whether bonding requirements for oil and gas companies are too
low?
Mr. Abbey. Congresswoman, we are doing that right now.
Again, we accepted the criticism that GAO noted in their
report; we have provided new directions to our offices on what
our expectations are, as well as what the American taxpayer's
expectations are of our performance. And so we are updating
those bonds to reflect today's costs.
Ms. Bordallo. What would be the time period with this
updating?
Mr. Abbey. It is ongoing, but it is a very high priority
for us. Because we want to make sure that the American
taxpayers are protected, and reclaiming some of these areas.
Ms. Bordallo. I have another question for you, Mr. Abbey,
just to clarify your answer to the questions posed earlier by
my colleague from Oregon.
Under current law, a company is issued a lease for 10
years. So a company can sit on these leases for five, six,
seven, eight, nine years without doing anything to develop
them, as long as they begin activity before 10 years. Is this
correct?
Mr. Abbey. That is true.
Ms. Bordallo. All right. And then, of course, they can go
on and get an extension.
Mr. Abbey. Once they have demonstrated progress toward
developing them.
Ms. Bordallo. Before the 10-year period is up.
Mr. Abbey. Yes.
Ms. Bordallo. What is the payment, annual payment, to hold
onto these wells?
Mr. Abbey. Let me ask real quick.
Ms. Bordallo. I understand it is very low.
Mr. Abbey. It is $2 per acre, per year. And the exception
is in Alaska, where there is a different fee.
Ms. Bordallo. Lower or higher?
Mr. Abbey. It would be higher in Alaska.
Ms. Bordallo. I see. Mr. Chairman, thank you, they have
answered my questions.
Mr. Lamborn. Thank you, and I thank the gentlelady. Now we
will go to Representative Fleischmann. He has departed, so next
on the line would be Representative Gosar.
Dr. Gosar. Well, I was glad to hear that certain fees
haven't gone up since the fifties, and yet we are dealing with
ones in my neighborhood that are going up concurrently into the
next millennium.
But Mr. Ferguson, I hope you understand that these bonds
are due on the 31st of March. And people have exhausted--and I
am trying to work with people at the local level, so we would
love to have your help in looking at this.
Mr. Ferguson. We will sure look into it.
Dr. Gosar. Thank you, Mr. Abbey. Or thank you, Mr.
Ferguson. Mr. Abbey.
Mr. Abbey. Yes.
Dr. Gosar. Prior to 1970 the old Atomic Energy Commission,
now the DOE, left behind a legacy of abandoned, unreclaimed
conventional uranium mines on a Navajo reservation, located
partially in my Congressional District, which has never been
cleaned up. No bonding was required, a situation which allowed
the government to mine on the reservation with reckless
abandon.
This same government imposes a reclamation bond requirement
for private businesses. The fact that the government has failed
to clean up these exposed tailings is a scandal that led to
confusion and misunderstanding regarding uranium extraction in
the 1950s and sixties, and a good record of commercial uranium
mining on the BLMs off the reservation were impugned.
There is a huge distinction which is lost in the public eye
here. The draft environmental impact statement on the million-
acre withdrawal in northern Arizona, proposed by the Secretary
of the Interior, withdrawal from mining validates this. Some
estimates that the full withdrawal of one million acres could
mean $29 billion in lost economic activity over 42 years, from
northern Arizona and southern Utah.
At a March 21, 2011 St. George coordination meeting with
Arizona and Utah county and city officials, BLM officials said
that they did not recommend the withdrawal of one million acres
of prime breccia-pipe uranium mines, one of the most
significant deposits of energy in the U.S. The USGS estimates
that 326 million pounds of uranium in the area equals to about
22.4 years' electricity equivalent for California, assuming no
other resources of energy, based on its findings.
Did BLM believe that anything it found in the draft EIS
make local officials believe they should recommend a
withdrawal?
President Obama has reiterated, in a variety of statements
recently, that his Fiscal Year 2012 budget reflects a goal of
increasing the use of nuclear power to provide a good portion
of this country's electricity needs. Yet, the Administration
seems to be working against itself with the Energy Secretary
Chu out promoting nuclear power, and the Interior Department
out trying to withdraw some of the nation's highest-grade
deposits of uranium in northern Arizona.
The Nuclear Energy Commission, or institute, calculated
that the proposed withdrawal, now the subject of a two-year
segregation order, would have major disruptive effects on
future domestic supplies, even after new mines are fully
operational in the State of Wyoming.
Today, the nation's utilities import over 90 percent of the
fuel they use in our 104 operating reactors. When 30 years ago,
America was entirely self-sufficient in providing uranium to
fuel our nuclear power plants.
We cannot substitute reliance on foreign countries for oil,
with a reliance on foreign countries for uranium. We have the
resources in our country. And I am troubled that the areas
withdrawn from the mining of 40 years are now being proposed
for this withdrawal.
First question. We have the funding. It seems that we are
lacking the prioritization about cleaning up our mess. Is that
true?
Mr. Abbey. Congressman, I am not familiar with the
reclamation requirements that you noted there on the Navajo
Indian reservation, but it certainly is something, now that you
raised it to my attention, that I am going to have to look into
and see what we can do to clean up the remnants of our past.
Dr. Gosar. Part of that was with the Bennett Freeze, in
which we arbitrarily put a line here and did nothing, did not
even allow people to replace a window. They can't even drink
the water, because we have unusually high radiation. So I would
hope that we would get an answer in regards to that.
And then looking at the priority schedule of cleaning up a
mess before we are starting to purchase something. As a
businessman, there are a lot of things I would like to do, but
I can't do, because I have some obligations.
Do you believe American utilities should purchase
domestically mined uranium?
Mr. Abbey. I do.
Dr. Gosar. Do you think this is the best way of going about
it? Or should we start looking at our domestic supply?
Mr. Abbey. I do believe that we should look at our domestic
supply before, you know, considering other alternatives.
I would say this. There are supplies of uranium that exist
outside the Arizona strip, so there are other alternative sites
and sources for uranium.
Dr. Gosar. Should we look at these on a case-by-case basis,
instead of just randomly taking out a whole segment?
Mr. Abbey. Well, again, it is a business decision. For
example, there in the area that has been in the proposed
segregated area, there are 3,000 mining claims that currently
exist within those areas. Any future withdrawal, if there is a
withdrawal in that particular area, it would be subject to
grandfather rights. So any of those mining claims with valid
existing rights could continue to produce.
Dr. Gosar. Well, I have a whole host of more questions, so
I would love to submit them, Mr. Abbey, for your comment.
Mr. Abbey. You bet.
Dr. Gosar. Thank you.
Mr. Lamborn. Thank you. Mr. Sarbanes.
Mr. Sarbanes. Thank you, Mr. Chairman. Thank you all.
Director Abbey, I just wanted to ask you, I kind of look at the
public lands, when it comes to production of various sources of
energy and resources, as like a giant outdoor laboratory, in a
sense. Where we have the opportunity, on behalf of our
taxpayers and the American public, to insist on a certain set
of standards as these new technologies are brought to bear and
so forth, and these public lands are made available to private
interests to develop.
And I wondered if you could just maybe speak to that
concept a little bit; and whether you could point to instances
where you think the activity on public lands, as a result of
the oversight that is brought to bear by your agency and
others, really does kind of push the best practices to a new
level and set higher standards. Particularly, I guess, when it
would come to requiring certain safety standards. Things where
exploration and production in another setting might not be as
attentive to those kinds of standards, but where, because it is
public lands, we kind of bring a higher expectation to bear.
I am sure there are examples you could cite, where maybe we
haven't been as good, the government hasn't been as good at
insisting on the highest standard. But I wonder if you could
speak to that, that concept, and maybe point to examples where
you think it is that dynamic between the private interests who
are pushing forward to explore and produce, and the public
oversight that has actually resulted in some pretty good best
practices that have set the standard for that particular
industry.
Mr. Abbey. Well, that is an excellent question. No doubt we
are living with the legacies of our past. And we would be
foolish if we didn't learn the lessons from those legacies.
And I am proud to report that in many respects, we are
taking those lessons and incorporating them into our decisions
that we are making today, based upon the latest technologies,
and based upon working with not only the industries who are
proposing actions on these public lands, but also with the
public land stakeholders, who care an awful lot about their
assets. They want to make sure that any development to these
lands or any uses that take place on these lands are done so in
a responsible manner.
That is a responsibility that we have, as the Bureau of
Land Management, for managing these 245 million acres of lands
that we manage on behalf of the American public.
So again, as we go forward, we are working very, very
closely to implement best management practices through any of
the authorizations that we are issued. Whether that is
reflected in the Renewable Energy Program that we are currently
managing, or whether it is in the conventional energy program
that we are also managing.
I am proud to report in many respects that the industries
themselves are the leaders in bringing forward this technology,
and sharing the lessons that they have learned elsewhere, and
working with us to try to limit the footprints from future
development on these lands.
There is still work to be done. There are still lessons to
be learned. But again, it is a lesson and actions that we
continue to move forward, so that we can be as responsible as
we can in managing these public assets.
Mr. Sarbanes. I would encourage you to try to position the
department, the Bureau, as well as you can to bring a really
high standard of expectation with respect to the hydraulic
fracturing practices. The reason being that that is going to be
getting a lot more attention, going forward. There are
obviously new discoveries, particularly in this area. The
Marcellus shale, which has set off a race to lay stakes in both
private and public venues.
It would be great if BLM could end up being a resource as
that industry further develops, as to what the best practices
are. And you know, going forward, I will be interested to hear
sort of the results of studies and investigation that you can
do of how that is working on public land, so we can bring that
kind of expertise to bear with respect to our, our interest in
these new, these new possibilities in this area.
And with that, I yield back my time.
Mr. Lamborn. OK, thank you. Representative Duncan.
Mr. Duncan. Thank you, Mr. Chairman. And Director Ferguson,
Director Abbey, thank you guys for coming to the Committee
today, and talking about the budget and about concerns.
You know, world events have really magnified the fact that
America is very, very dependent on foreign sources of energy.
We have had numerous hearings about opening up Federally owned
lands to energy exploration and production.
And we had one hearing where we talked about the Wildlands
Act, and the fact that Secretary Salazar issued a Secretarial
Order in December to expedite the designation of wilderness
areas from wilderness study areas. And a lot of questioning him
on the reason behind taking those. And I believe you, Director
Abbey, were here, talking about taking those lands off the
table for energy production.
We have the resources in this country. And I will tell you,
folks in my State of South Carolina are hurting because of
rising gas prices. It is affecting commodity prices all the way
down to the bread on the grocer's shelves. And I remember when,
in August of 2008, we saw rising fuel prices; I remember the
impact the tremendous diesel prices had on my business.
And so when we are trying to have an economic recovery from
this recession, this is going to slow it, if not stall it. And
so as we address those rising gas prices and our ever-
increasing dependence on foreign sources of oil because of
things like Deepwater Horizon and the de facto moratorium in
the Gulf, and the fact that we are not harvesting American
resources, it comes to light that we need to expand what we do
in this country.
And so I understand that the second-largest revenue source
for this country, second only to taxation, is what we receive
in royalties and revenues from oil and natural gas leases, both
offshore and onshore. In fact, in your written remarks you
referenced that.
You also referenced that the BLM currently manages more
than 38 million acres of oil and natural gas leases, but only
43 percent of that acreage is currently in production. I think
at a time when we are trying to lessen our dependence on
foreign oil, and we definitely have needs in this country, that
that should increase from 43 percent. I think that is way low.
The Wall Street Journal had an article this past Friday I
thought was kind of interesting, and it talked about the secret
to Brazil's energy success. And Steven Hayward goes on to say
in that article, he mentions the blueprint for a secure energy
future by the Administration that was announced last week.
And he talks about the expansion of wind, solar, hydrogen,
and other things, which I think are part of it. But what about
expanded domestic oil production?
And the article goes on to talk about the President
applauding Brazil for expanding their offshore drilling. And in
fact, he expressed enthusiasm for aggressive offshore drilling
in Brazil.
Brazil increased their domestic oil production over the
last 20 years by 876 percent--876 percent. Most of that
production has come from offshore, I understand that; but they
achieved energy independence, independence from foreign sources
of oil, the old-fashioned way. They drilled for it.
I think that is what Americans are wanting us to do. They
are wanting us to tap the American resources that we have, oil
and natural gas resources, both offshore, but also, sir,
onshore. And on Federal lands that we have.
And it seems to me that the Administration continues to set
aside this land, through efforts such as Secretary Salazar's
effort with the Wildlands Act and the Wildland Secretarial
Order that designate that property as wilderness areas. When,
Mr. Chairman, I think that Congress has the only statutory
authority to designate wilderness areas.
And so as we continue to address American energy
independence and the budget deficits, I think we need to
address the fact that we receive a large amount of our income
as a nation from oil and natural gas leases, the royalties
coming from production, and the fact that we do have the
resources here. And I can spout a lot of different percentages
and projections on what we should have under the nation's land.
But we need to tap America's resources for American energy
issues. Mr. Chairman, I thank you for having this hearing so we
can bring these issues out. Thank you, and I yield back.
Mr. Lamborn. OK, and I thank the gentleman. And unless
anyone else wants to ask questions who hasn't asked questions--
--
Mr. Costa. Mr. Chairman, just a quick question. And I don't
know, maybe it was covered in the opening statement.
Mr. Lamborn. The gentleman is recognized.
Mr. Costa. Thank you. Maybe it was covered in the opening
statement by the Director of Minerals and Geology Management
with USDA.
But the amount of revenues that we have received as part of
the royalty program to the Federal government is traditionally
about the second-largest source of revenues besides our tax
payments to the Federal government by American citizens.
And I wonder if you offered in your testimony--if you
haven't, if you could--the breakdown between those amount of
revenues from royalties on public lands that are on Forest
Service land, versus those that are broken down in other
Federal land holdings in which we derive income from oil and
gas leases.
And of course, I assume here that with mineral extractions,
it possibly is also minerals, as well as other, as a part of
those revenues--precious metals, gold, et cetera.
Mr. Abbey. Well, Congressman Costa, unless Tony has the
information, I don't think either one of us has that breakdown
today. But we would be happy to provide that information to you
as part of the record.
Mr. Costa. No, I think it would be important to get a
better understanding on those. Because obviously, as we try to
reduce our dependency on foreign sources of energy and use all
the energy tools in our energy toolbox, when it comes to the
USDA's management of Forest Service lands that are a part of
that contribution of energy, I would like to, one, and I think
the Subcommittee would probably like a breakdown of the
revenues we derive from those leases on U.S. Forest Service
land.
Mr. Abbey. OK. We can sure work on that. Thanks.
Mr. Costa. Thank you.
Mr. Lamborn. OK. I want to thank you all for being here,
for giving us of your valuable time. Members of the Committee
may have additional questions for the record, and I ask you to
respond to those in writing.
One last matter of business, I ask unanimous consent to put
into the record a page from the BLM official web site, titled,
``Leasing of Onshore Federal Oil and Gas Resources,'' which
does point out that of the 279 million acres of Federal land
that have oil and gas potential, 145 million are closed, and 20
million more acres are inaccessible because of surface
occupancy or ground disturbance being prohibited. If there is
no objection, that is put into the record.
[The page from the BLM website follows:]
Leasing of Onshore Federal Oil and Gas Resources
The BLM administers the leasing of minerals found beneath the 258
million surface acres managed by the Bureau, 57 million surface acres
where the minerals are Federally owned but the surface is in non-
Federal (mostly private) ownership, as well as another 385 million
acres whose surface is managed by other Federal agencies. About half of
these 700 million subsurface acres are believed to contain oil and/or
natural gas.
Development of onshore Federal oil and natural gas resources
happens in five phases:
Land Use Planning
Parcel Nominations and Lease Sales
Well Permitting and Development
Operations and Production
Plugging and Reclamation
Numerous opportunities for public involvement during land use
planning and then during environmental review of specific projects help
ensure that development is both efficient and environmentally
responsible.
Oil and gas resources found on U.S. Forest Service lands are leased
under Land and Resource Management Plans (LRMPs) developed by the
Forest Service.
______
Mr. Lamborn. Thank you for being here. And we will call up
the next and final panel. That will consist of Shawn Bolton, a
County Commissioner from Rio Blanco County in Colorado; James
Schroeder, President and CEO of Mesa Energy Partners, LLC, and
President of the Western Energy Alliance; Laura Skaer,
Executive Director of the Northwest Mining Association; and
Whit Fosburgh, President and CEO of the Theodore Roosevelt
Conservation Partnership.
So if you could all come to the table, that would be great.
And as I pointed out earlier, you will have five minutes to
present each of your testimony. You have to push the button in
front of you to activate the microphone. The light will turn
yellow when there is one minute left, and red when the five
minutes are up.
And we appreciate your being here. You will have, as I am
currently contemplating it, one round of questions; maybe two,
if there are burning questions that we still have, and if your
time allows for that.
But thank you all for being here today, and we will just
jump right into the testimony. Mr. Bolton, thank you for coming
all the way from Colorado. It is good to see you here. You may
begin.
STATEMENT OF SHAWN BOLTON,
COMMISSIONER, RIO BLANCO COUNTY
Mr. Bolton. Mr. Chairman, thank you for the opportunity to
appear before you today.
Rio Blanco County is a rural county in northwest Colorado,
with a population of about 6,000 people--75 percent of the
county consists of Federally managed lands, with about two-
thirds BLM lands and one-third national forest.
In addition to serving as the Commissioner, I am the CEO of
Bolton Fencing and Construction, LLC, a small business that
provides full-service construction to the oil and gas industry;
from well pad and road construction, to pipelines and
reclamations. We employ 50 to 80 people in the high season.
My small business is like many that support the oil and gas
industry in that we provide good, high-paying jobs in rural
counties across Colorado and the West; and are the economic
engines for our communities.
Rio Blanco County gets about 90 percent of our tax
assessment from the oil and gas industry, and 75 percent of
property taxes are from oil and gas. Over one-third of all jobs
in the county are directly related to the oil and gas industry.
Given the large amount of Federal land and high proportion of
our tax base from oil and gas, the energy programs of the BLM
and the Forest Service have a huge impact on job creation and
government revenue in my county.
When Federal policies constrain leasing, permitting, and
project approvals, it directly impacts my small business and my
county. I have noticed, in my county over the last several
years, that more and more decision making is being done in
Washington, rather than the practical, on-ground approach by
land managers who understand the lands and their natural
resource values, as well as the local economic and social
factors in Rio Blanco County.
Distant Federal agencies in Washington are imposing a one-
size-fits-all approach. Instead of listening to local
communities and the businesses like mine who support them,
Washington seems to have, Washington seems driven by an
environmental lobby that gives exclusive preference to removing
more lands from environmentally responsible, multiple
productive uses, and locking them away for passive recreational
purposes only.
I am particularly concerned about the new Wildlands policy.
We have already seen a situation where an 800-acre parcel was
removed from a lease-sale because it supposedly met Wildlands
criteria. Just because an environmental group proposes an area
as wilderness does not mean it meets the criteria.
I urge Congress to defund the implementation of the
Wildlands policy, and pass legislation that prevents the
Interior Department from unilaterally taking lands away from
multiple use, and manage them as de facto wilderness, without a
Congressional Wilderness designation.
There is already a process in place, through Federal Land
Policy Management Act, to identify wilderness-characteristic
lands. There is a critical environmental concern, special
recreation management areas and other designations to protect
resource values on BLM lands, through the Resource Management
Plan process.
In fact, the White River field office, which includes most
of Rio Blanco County, is currently updating its RMP. And the
county is participating as a cooperating agency.
Wilderness-characteristic areas can be identified as part
of that process, but be subject to the scrutiny of local
representatives, such as myself. I would urge the BLM to weigh
the input of cooperators and the public in Rio Blanco County
more heavily than the form letters organized by environmental
groups from people across the country who are not directly
impacted by these decisions made in these planning documents,
and whose livelihoods and communities are not affected.
Increased State and Federal regulation and the
corresponding uncertainty has caused activity in Rio Blanco
County and throughout the Piceance Creek Basin, western
Colorado, to plummet. While low natural gas prices affect the
entire country, activity in the Piceance Basin has been slower
to rebound because of the added cost of regulation.
When the Federal government adds in further regulation that
slows leasing, environmental analysis required by oil and gas
project approvals, and permitting, the costs become too great
in our county and region, and the break-even price means that
the producers will go elsewhere, to lower-cost regions of the
country that don't have the additional regulatory burden of
Federal lands.
Ultimately, this affects the budget of the BLM. Less
activity on public lands means less revenue to the Federal
government. I urge this Committee to consider the negative
impact of BLM budget, which imposes more costs through new fees
and new regulations, which will ultimately result in less
economic activity and jobs in my county.
I look forward to addressing any questions, and thank you.
[The prepared statement of Mr. Bolton follows:]
Statement of Shawn Bolton, Commissioner, Rio Blanco County, Colorado
Mr. Chairman, thank you for the opportunity to appear before you
today. Rio Blanco County is a rural county in northwestern Colorado
with a population of about 6,000 people. Seventy-five percent of the
county consists of federally managed lands, with about two-thirds BLM
lands and one-third National Forests, including parts of the White
River and Routt National Forests.
In addition to serving as commissioner, I am the CEO of Bolton
Fencing & Construction LLC, a small business that provides full service
construction services to the oil and natural gas industry, from well
pad and road construction to pipelines and reclamation. I employ 50
people to 80 in the high season. My small business is like many that
support the oil and gas industry, in that we provide good, high paying
jobs in rural counties across Colorado and the West and are the
economic engines for our communities.
Rio Blanco County gets about 90% of our tax assessment from the oil
and gas industry and 75% of property taxes are from oil and gas. Over
one-third of all jobs in the county are directly related to the oil and
gas industry. Given the large amount of federal land and the high
proportion of our tax base from oil and gas, the energy programs of the
BLM and the Forest Service have a huge impact on job creation and
government revenue in my county. When federal policies constrain
leasing, permitting, and project approvals, it directly impacts my
small business and my county.
I have noticed in my county over the last several years that more
and more decision making is being done in Washington. Rather than the
practical, on-the-ground approach by land managers who understand the
lands and their natural resource values as well as the local economic
and social factors in Rio Blanco County, distant federal agencies in
Washington are imposing a one-size-fits-all approach. Instead of
listening to local communities and the businesses like mine who support
them, Washington seems driven by an environmental lobby that gives
exclusive preference to removing more lands from environmentally
responsible multiple, productive uses, and locking them away for
passive recreation purposes only.
I am particularly concerned about the new wild lands policy. We
have already seen a situation where an 800 acre parcel was removed from
a lease sale because it supposedly met wild lands criteria. Just
because an environmental group proposes an area as wilderness doesn't
mean it meets the criteria. I urge Congress to defund implementation of
the wild lands policy and pass legislation that prevents the Interior
Department from unilaterally taking lands away from multiple use and
managing them as de facto wilderness without a Congressional wilderness
designation. There is already a process in place through the Federal
Land Policy Management Act (FLPMA) to identify wilderness
characteristics lands, areas of critical environmental concern (ACEC),
special recreation management areas, and other special designations to
protect resource values on BLM lands through the Resource Management
Planning (RMP) process. In fact, the White River Field Office which
includes most of Rio Blanco County is currently updating its RMP, and
the county is participating as a cooperating agency. Wilderness
characteristics areas can be identified as part of that process, but
then subject to the scrutiny of local representatives such as myself. I
would urge BLM to weigh the input of cooperators and the public in Rio
Blanco County more heavily than the form letters organized by
environmental groups from people across the country who are not
directly impacted by the decisions made in these planning documents,
and whose livelihoods and communities are not affected.
Increased state and federal regulation and the corresponding
uncertainty has caused activity in Rio Blanco County and throughout the
Piceance Basin in western Colorado to plummet. While low natural prices
affect the entire country, activity in the Piceance Basin has been
slower to rebound because of the added costs of regulation. When the
federal government adds in further regulation that slows leasing,
environmental analyses required for oil and gas project approvals and
permitting, the costs become too great in our county and region, and
the break even price means that producers will go elsewhere to lower
cost regions of the country that don't have the additional regulatory
burden of federal lands.
Ultimately, this affects the budget of BLM, as less activity on
public lands means less revenue to the federal government. I urge this
committee to consider the negative impact of BLM's budget, which
imposes more costs through new fees and new regulations which will
ultimately result in less economic activity and jobs in my county and
less revenue to the federal government as oil and gas activity is
driven to other areas of the country without federal public lands.
I look forward to addressing any questions or comments the
Committee may have. Thank you Mr. Chairman for your time today.
______
Mr. Lamborn. Commissioner Bolton, thank you for coming all
this way to be here, and thank you for your testimony.
Mr. Schroeder.
STATEMENT OF JAMES SCHROEDER, PRESIDENT AND CEO, MESA ENERGY
PARTNERS, LLC; PRESIDENT, WESTERN ENERGY ALLIANCE
Mr. Schroeder. Mr. Chairman and the members of the
Committee, thank you for allowing me to appear today.
The BLM and Forest Service budgets set the tone for how
Federal land managers implement their multiple-use mandates,
and whether they enable the productive use of Federal lands or
whether they discourage production of energy that all American
citizens own.
The fees proposed in the budget on the oil and gas industry
would have a significantly negative impact on energy
development, production, jobs, and economic development in
communities across the West.
Mesa Energy Partners is a privately held oil and natural
gas development production partnership. We employ seven folks.
Mesa is currently developing a six-well project on a 74,000-
acre government unit on BLM land in the Piceance Basin of
Colorado.
Independent producers such as Mesa are small businesses,
averaging 20 employees. Yet this community of companies drill
90 percent of the wells, produce 82 percent of America's
natural gas.
I have been operating on Federal lands, both BLM and
National Forest, for 20-plus years, and have conscientiously
worked closely with BLM field offices, local Forest District
offices, regional foresters, State BLM offices, and the
Washington office of both agencies.
The ever-increasing and often over-reaching bureaucratic
procedures on public lands have resulted in expensive and
inefficient operations when compared to operations on State and
private lands. These prolonged procedures ultimately mean that
Federal lands cannot be developed in a timely manner; and as
such, not as productive as they may be.
These inefficiencies have negatively affected the budget
deficit, and result in less energy for the American people.
Fewer jobs, less economic energy, or economic activity in the
western community.
Producers provide an extraordinary return on investment to
the American taxpayer. In year 2010, oil and gas companies
returned in excess of $40 per every $1 spent by the government.
Over the last two years, policy changes in Interior have
added additional layers of analysis and rework of prior
decisions that are causing public land energy development to be
less efficient and return less revenue to the Federal
government.
Just two years ago, BLM's onshore program returned in
excess of $46 for every dollar spent by the Administration. The
balance has tipped too far toward constraining oil and gas
development at the expense of government revenue, jobs, and the
economy. The justification for increased fees rings hollow when
the government is already reaping a more-than-healthy return of
40 to one on investment.
In order to effectively evaluate budget requirements, it is
necessary for any business to perform a look-back and determine
what and where expenditures and budget allocations have been
made, in order to effectively allocate capital in the future.
With that in mind, I would like to reflect on the fact that the
BLM has been put in a position to spend an inordinate amount of
time in dealing with avoiding litigation. We have heard that
the BLM may spend nearly half of its resources on litigation
and legal reviews.
BLM is constantly harassed by lawsuits from special
interest groups with an agenda of preventing any oil and gas
development on public lands. DOI's approach to alleviate the
situation has been a further delay of the oil and gas
development in order to remove the controversy. But the source
of the problem still remains: the ease with which financially
unaccountable groups can sue.
Litigation threatens to reduce the productive use of
Federal lands, the development of critically needed resources,
and impacts creating jobs and economic growth.
Last year alone, new regulation and bureaucratic delays
prevented nearly $4 billion in investment by oil and gas
companies, and a corresponding 16,000 jobs in the West. That is
according to the Western Energy Alliance.
In Mesa County, western Colorado, a county that is
dependent on resource development, and in which there is a
disproportionate percentage of Federal acreage, the
unemployment rate is currently in excess of 11 percent. Not
healthy, nor satisfactory.
In stark contrast, development on non-Federal lands in
North Dakota, the unemployment rate is below 3 percent. The
allocation of funds for litigation needs to be brought under
control, and managed in a fashion that allows BLM to make
decisions in the best interests of the American people.
Congress needs to pass legislation that prevents the
Federal government from using taxpayer dollars to reimburse
special interest groups who abuse the Equal Access to Justice
Act to fund their litigation programs, and to hold these groups
financially responsible for frivolous lawsuits that prevent
this country from delivering economic growth.
I look forward to questions that you may have. Thank you.
[The prepared statement of Mr. Schroeder follows:]
Statement of James Schroeder, President and CEO, Mesa Energy Partners,
and President, Western Energy Alliance (formerly IPAMS)
Mr. Chairman and Members of the Committee--thank you for the
opportunity to appear before you. The BLM and Forest Service budgets
set the tone for how federal land managers implement their multiple-use
mandates and whether they enable the productive use of federal lands,
or whether they discourage production of energy that all American
citizens own. The fees proposed in the budget on the oil and gas
industry would have significant, negative impacts on energy production,
jobs and economic development in communities across the West.
Mesa Energy Partners, LLC is a privately held oil and natural gas
development and production partnership of seven employees. Mesa is
currently developing a six well project on a 74,000 acre government
unit on BLM land in the Piceance Basin of Colorado. Independent
producers such as Mesa are small businesses, averaging twenty
employees, yet this community of companies drills 90% of the wells and
produce 82% of America's natural gas.
I have been operating on federal lands, both BLM and National
Forests, for 20 plus years, and have conscientiously worked closely
with BLM field offices, local forest district offices, regional
foresters, state BLM offices and the Washington offices of both
agencies. The ever increasing and often over-reaching bureaucratic
procedures on public lands have resulted in expensive and inefficient
operations when compared to operations on state or private lands. These
prolonged procedures ultimately mean that federal lands cannot be
developed in a timely manner and as such are not as productive as they
might be. These inefficiencies have a negative effect on the federal
budget deficit and result in less energy for the American people, fewer
jobs, and less economic activity in communities across the West.
Producers provide an extraordinary return on investment to the
American taxpayer; in FY 2010, oil and gas companies returned $40.12
for every dollar spent by the government. Over the last two years,
policy changes at Interior have added additional layers of analysis and
rework of prior decisions that are causing public land energy
development to be less efficient and return less revenue to the federal
government. Just two years ago, BLM's onshore program returned $46.07
for every dollar spent administering the program. The balance has been
tipped too far towards constraining oil and gas development, at the
expense of government revenue, jobs and the economy. The justification
we often hear that new fees are necessary because industry needs to pay
it's fair share rings hollow, when we are already doing so 40 times
over.
In order to effectively evaluate budget requirements, it is
necessary for any business to perform a ``look back'' and determine
where expenditures and budget allocations have been made in order to
effectively allocate capital in the future. I would like to reflect on
the fact that the BLM has been put in a position to spend an inordinate
amount of its budget dealing with or trying to avoid litigation. We
have heard that the BLM may spend nearly half of its resources on
litigation and legal reviews.
BLM is constantly harassed by lawsuits from special interest groups
with an agenda of preventing any oil and gas development on public
lands. DOI's approach to alleviate the situation has been to further
slow oil and gas development in order to remove the controversy, but
the source of the problem remains--the ease with which financially
unaccountable groups can sue. Litigation threatens to reduce the
productive use of federal lands and the corresponding jobs and economic
growth. Last year alone new regulations and bureaucratic delays
prevented $3.9 billion in investment by oil and gas companies and a
corresponding 16,200 jobs in the West, according to Western Energy
Alliance.
The allocation of funds for litigation needs to be brought under
control and managed in a fashion that allows the BLM to make decisions
in the best interests of the American people. Congress should pass
legislation that prevents the federal government from using tax payer
dollars to reimburse special interest groups who abuse the Equal Access
to Justice Act to fund their litigation programs, and to hold these
groups financially responsible for frivolous lawsuits that prevent this
country from delivering economic growth.
Budget Details
Royalty Rate Increase
The budget contains the line ``The Administration believes that
American taxpayers should get a fair return on the development of
energy resources on their public lands'' and states that Interior will
undertake rulemaking to adjust onshore royalty rates. Yet industry
already returns $40.12 for every dollar spent administering the onshore
oil and gas program. Interior Secretary Salazar has indicated publicly
that Interior is considering applying the 18.75% offshore rate.
Currently set at 12.5%, the onshore rate provides an excellent return
to taxpayers. Paradoxically, although the offshore rate is higher, it
returned just $30.08 for each dollar spent by the government in 2010.
Comparison of the onshore rate to the offshore royalty rate is
misleading. The reserves found on onshore federal lands are
significantly different from the conventional reserves offshore, such
as in the Gulf of Mexico. Unconventional reserves on public lands in
the West are less productive and more expensive to develop, and the
12.5% onshore royalty rate reflects that difference. Producers assume
100% of the risk and expense for developing these unconventional
resources with no guarantee of any return on investment whatsoever,
while providing a huge rate of return to the taxpayer.
Administration officials often compare the federal onshore rate to
states such as Texas which have a higher royalty rate in some
instances. The comparison does not take into account the fact that
these states have a regulatory and permitting environment that
encourages production. For example, permitting is done within an
average of nineteen days in Texas, versus over a year for federal
permits. Environmental analyses that take several years and cost
hundreds of thousands if not millions of dollars on federal lands are
not required by these states. Increasing the royalty rate for federal
lands, which are already extremely expensive to develop, could become
prohibitively expensive with a higher royalty rate.
Fees
All fees are unnecessary, as industry returns over $40 for each
dollar spent administering the entire onshore program, including all
permitting, inspection, enforcement, leasing, and environmental costs.
Inspection Fees: The inspection fees seem to be another way for the
government to decrease efficiency while removing more capital from the
actual production of domestic energy. The inspection fees proposed in
BLM's budget would create a huge administrative burden for BLM, which
would have to determine which leases meet one of four categories
depending on surface disturbance and number of wells, track the data,
and invoice operators accordingly. Despite the additional
administrative burden, BLM's budget projects a return of $38 million to
the federal government. BLM is already trying to do too much with too
few people, and coupled with all the other new requirements this
Administration has placed on them, would further constrain the onshore
oil and gas program. In the end, it is feasible to suggest that the fee
would return a lot less than anticipated, even before taking into
account the production and economic activity that would be lost capital
is shifted away from production and into increased fees.
Non-producing Acreage Fee: The budget proposes a $4 annual non-
producing acreage fee. The fee does not take into account all the
preparatory work done on a lease before it goes into production, such
as geophysical exploration, environmental analyses, permitting,
wildlife and cultural resource surveying, and numerous other regulatory
activities necessary before a well is drilled. Besides being
inequitable to charge companies a non-producing fee when, in many
cases, the government is the entity holding up production on federal
leases, the fee would significantly increase the cost of developing on
federal lands, making less capital available for producing American
energy and creating jobs. A DOI IG report, Oil and Gas Production on
Federal Leases: No Simple Answer already addressed how punitive fees on
non-producing acreage would de-incentivize industry (Oil and Gas
Production on Federal Leases: No Simple Answer, U.S. Department of the
Interior, Office of Inspector General, Royalty Initiatives Group,
February 27, 2009). That same report found that Interior's systems were
so bad, that they could not tell with any certainty whether leases are
producing. The IG recommended that those data problems be fixed before
the Department could adequately determine ways to encourage diligent
development.
APD Fee: The Application for Permit to Drill (APD) fee continues to
create problems for my company. We are required to pay a fee for each
APD submitted, whether that APD is approved or not. Besides the fact
that this is akin to charging taxpayers to file their income taxes, the
fee has been particularly inefficient since its enactment in 2008 at
$4,000, now at $6,500 and proposed to become permanent in the FY 2012
budget. Since the fee was first enacted, BLM has consistently delivered
less service and permitting times have increased significantly, from a
few hundred days to over 500 days in many cases. In addition, the
permitting process has become more ad hoc, resulting in more Conditions
of Approval, surveys and other requirements, many of which are not
supported by law and regulations.
______
Mr. Lamborn. OK, thank you, Mr. Schroeder. Ms. Skaer.
STATEMENT OF LAURA SKAER, EXECUTIVE DIRECTOR, NORTHWEST MINING
ASSOCIATION
Ms. Skaer. Thank you very much for the opportunity to
testify here today on behalf of our more than 2,000 members
located in more than 40 States.
Since 1973, we have been painfully aware of the need to
lessen our dependence on foreign oil. But until recently, our
growing dependence on foreign sources of minerals always took a
back seat to energy with the public and our policymakers. There
is evidence this is changing, and the fact this Committee is
holding this hearing indicates you understand the seriousness
of our mineral vulnerability.
But unfortunately, the Obama Administration's budget
priorities not only fail to address this issue, they actually
compound the problem, resulting in serious national defense and
economic consequences, while impeding private sector job
creation.
The Administration talks the talk, but its 2012 budget
doesn't walk the walk. And agency testimony today ignores the
reality that all energy production, including renewables,
requires minerals, minerals we have in America.
Instead of advancing policies to increase access to mineral
deposits, reduce unconscionable permit delays, and encourage
domestic mineral exploration and development, the
Administration prioritizes protection and wilderness over
multiple-use and resource production, and proposes fees and
taxes resulting in fewer private sector jobs, less mineral
production, and an increased reliance on foreign sources of
minerals.
Specifically, the President's budget and regulatory
legislative proposals will increase the costs to explore and
produce hardrock minerals critical to infrastructure
development, manufacturing, national defense, energy
production, in every aspect of our lives by imposing a gross
royalty and increased fees on top of what is now the highest
corporate tax rate in the world. Demonstrate a lack of
understanding of the differences, both in terms of geology and
capital investment, between finding and producing hardrock
minerals and oil, gas, and coal, by imposing a leasing system.
Proposals do not address the most significant risk to
mining projects in the U.S.--permitting delays that have caused
our country to rank dead last among 25 mineral-producing
countries, and attract only 8 percent of worldwide exploration
spending. If this isn't a call to action, I don't know what is.
They further exasperate permit delays by requiring three
procedural Federal notices to unnecessarily go through a four-
month Washington office review and approval process per notice.
No permits, no jobs.
They threaten to lock up access to rare and hard-to-find
mineral deposits through regulatory initiatives like
Secretarial Order 3310, the Wildlands Order, and propose
mineral withdrawals like northern Arizona. Again, no access, no
jobs.
They do not address critical work-force retirement and
training issues in the BLM and Forest Service locatable mineral
programs, where more than 60 percent of those professionals
will be retiring within the next five years. And the proposals
do not include Good Samaritan legislation to encourage AML
cleanup.
Mr. Chairman, members of the Committee, we are entering an
era of resource nationalism, where many countries, led by
China, are using country over resources to attract long-term
manufacturing jobs. In a nutshell, they are saying you want the
minerals you need for manufacturing? Locate your plant where we
control the minerals. And in today's highly competitive global-
minerals industry, geologic, economic, and political risk
factors determine where a company invests, and where high-
paying jobs are created; not only mining jobs, but the
manufacturing jobs, as well as many indirect jobs.
If we are going to attract new wealth-creating, job-
creating mining investments that pay an average wage of
$75,000, with an indirect job multiplier twice the national
average, our country must adopt policies that will encourage
investment and production of America's vast mineral resources
to supply the metals and materials necessary to create and
sustain U.S. manufacturing jobs, a robust economy, and our
standard of living.
Unfortunately, the President's budget and legislative
proposals do not move us in that direction.
We urge this Committee and Congress to reject the
President's budget proposals, and instead access, enact
policies that will guarantee access to mineral-potential lands;
guarantee the certainty and security of tenure required to
invest hundreds of millions to more than $1 billion to find and
develop a mine, all before any return on investment; most
importantly, to guarantee timely permits, and to address the
work force retirement issues.
Mr. Chairman, we look forward to working with the Committee
to find solutions to these issues, and we will be happy to
answer any questions you might have. Thank you.
[The prepared statement of Ms. Skaer follows:]
Statement of Laura Skaer, Executive Director,
Northwest Mining Association
Executive Summary
Chairman Lamborn, Ranking Member Holt and Members of the Committee,
the Northwest Mining Association (NWMA) appreciates this opportunity to
provide testimony on the Effect of the President's FY-2012 Budget and
Legislative Proposals for the Bureau of Land Management and the U.S.
Forest Service's Energy and Minerals Programs on Private Sector Job
Creation, Domestic Energy and Minerals Production and Deficit
Reduction.
At a time when Members of Congress, the Administration, the media
and the public are acknowledging that the United States has become
increasingly vulnerable and dependant on foreign sources of strategic
and critical minerals, the Administration's budget and legislative
priorities not only fail to address this serious issue, they actually
compound the problem. As you know, this vulnerability has serious
national defense and economic consequences. This increased
vulnerability and reliance on foreign sources of minerals is not new to
NWMA or the mining industry, as we have been delivering that message
for the past ten years.
While Members on both sides of the aisle are beginning to introduce
legislation to address these mineral vulnerability issues, the
Administration's budget ignores this reality by proposing increased
fees and royalties; advocating policies that make access to mineral
lands and permits more and more difficult; fails to address serious
workforce issues in both the Bureau of Land Management (BLM) and the
U.S. Forest Service (USFS); and basically ignores Congressional
mandates to manage public and National Forest Lands for multiple-use,
sustained yield and the production of fiber, food, minerals and energy
the Nation requires.
The Federal Land Policy and Management Act of 1966 (FLPMA) 43
U.S.C. 17.01 et seq lists twelve policies with respect to the public
lands of the United States. Section 102(a)(12) states that it is the
policy of the United States that:
the public lands be managed in a manner which recognizes the
Nation's need for domestic sources of minerals, food, timber
and fiber from the public lands including implementation of the
Mining and Minerals Policy Act of 1970 (30 U.S.C. 21a) as it
pertains to the public lands;
The Mining and Minerals Policy Act of 1970 declares, in part:
[t]hat it is the continuing policy of the Federal Government in
the national interest to foster and encourage private
enterprise in (1) the development of economically sound and
stable domestic mining, minerals, metal and mineral reclamation
industries,. . ..
The Multiple-Use and Sustained Yield Act of 1960 (16 U.S.C. 528)
and the National Forest Management Act of 1976 contain similar policy
declarations for the USFS.
It is within the context of these statutes and congressional
declaration of policy that NWMA finds the Administration's budget
proposals relating to private sector job creation, domestic minerals
and energy production, and deficit reduction woefully lacking. Instead
of allocating budgetary resources to wealth and job creating mineral
and energy resource programs, and providing incentives and required
certainty to attract mineral investment, the Administration's budget
and legislative proposals focus on protection, removing lands from
productive use, increasing royalties, fees, and taxes, increasing
uncertainty and regulatory burdens and implementing controversial and
job killing policies revolving around climate change. While the
Administration talks the job creation talk, their proposals clearly do
not walk the job creation walk.
The Administration's job killing budget and legislative proposals
include increased fees and a gross royalty/leasing system for seven
hardrock minerals that will discourage exploration, development and
production of those metals on public lands and increase our Nation's
dangerous reliance on foreign sources of minerals as well as energy.
The President's FY-2012 budget also fails to address project delays
caused by bureaucratic red tape, a broken NEPA process and a failure to
address workforce issues.
Finally, if the Administration was truly interested in reducing the
environmental impact of abandoned hardrock mines, it would have
included Good Samaritan legislation similar to H.R. 3203 introduced by
Chairman Lamborn in the 111th Congress.
Northwest Mining Association: Who We Are
NWMA is a 116 year old, 2,000 member, non-profit, non-partisan
trade association based in Spokane, Washington. NWMA members reside in
42 states and are actively involved in exploration and mining
operations on public and private lands, especially in the West. Our
diverse membership includes every facet of the mining industry
including geology, exploration, mining, engineering, equipment
manufacturing, technical services, and sales of equipment and supplies.
NWMA's broad membership represents a true cross-section of the American
mining community from small miners and exploration geologists to both
junior and large mining companies. More than 90% of our members are
small businesses or work for small businesses. Most of our members are
individual citizens.
Bureau of Land Management Budget and Legislative Proposals
Our testimony will focus on the budget and legislative proposals
impacting the hardrock mining industry, namely the proposed gross
royalty and leasing system for seven locatable minerals, the abandoned
mine land fee for hardrock minerals, regulatory proposals, such as
Secretarial Order 3310 and the proposed Northern Arizona withdrawal,
the failure to address delays in the NEPA/permitting process and
replacing and training new professionals to replace an aging workforce.
Instead of focusing on enhancing the programs that create jobs, lessen
America's reliance on foreign sources of minerals and promote the
production of the minerals, food, timber and fiber Americans require,
the Department has elevated protection as its budgetary and legislative
priority.
A. Proposed Leasing/Gross Royalty System for Seven Hardrock Minerals
The President's FY-2012 budget includes a legislative proposal to
institute a leasing process under the Minerals Leasing Act of 1920 for
seven hardrock minerals--gold, silver, lead, zinc, copper, uranium and
molybdenum. These seven minerals currently are subject to location
under the General Mining Laws of the United States. The President's
proposal would include a new leasing process and subject these seven
minerals to annual rental payments and a royalty of not less than 5% of
gross proceeds. One half of the royalty proceeds would be distributed
to the states and the other half would be deposited in the General
Treasury. Existing mining claims would be exempt from the leasing
system but would be subject to increases in annual claim maintenance
fees.
This proposal would have the effect of killing private sector job
creation and discouraging private investment in the exploration,
development and production of domestic mineral resources. It would
increase our nation's reliance on foreign sources of minerals and lower
the United States' standing among the twenty-five largest mineral
producing countries in the world.
The leasing proposal will increase uncertainty by failing to
recognize that unlike coal and oil and natural gas, which are typically
located in vast sedimentary basins, economically viable deposits of the
seven minerals mentioned in the President's proposal are rare and hard
to find. Discovery, delineation and development of metallic ore bodies
require years of fact-finding, including ground, aerial and satellite
reconnaissance, exploration drilling, environmental baseline gathering,
workforce hiring and training, mine and mill planning, design and
construction and closure and reclamation.
In a 1999 report, the National Research Council of the National
Academy of Sciences recognized just how rare economically viable
mineral deposits are: ``Only a very small portion of Earth's
continental crust (less than 0.01%) contains economically viable
mineral deposits. Thus, mines can only be located in those few places
where economically viable deposits were formed and discovered.''
Hardrock Mining on Federal Lands, National Research Council, National
Academy Press, 1999,
p. 2-3.
On page 24 of the same report, the National Research Council
Committee included a sidebar on ``How Hard is it to Find a Mineral
Deposit?'' This is what the NRC Committee had to say:
The art and science of finding new mineral deposits is much
better than pure luck, but it is still far from perfect.
Moreover, the search for new mineral deposits is costly, time
consuming, and without guarantee of success. For example,
Roscoe (1971) showed that the number of mineral indications in
Canada that had to be investigated to discover a significant
mineral deposit was about 100 in 1951 and rose to about 1,000
in 1969. There is no reason to expect that this trend has
changed. Similarly, in a probabilistic analysis of exploration
experience in the United States by Homestake Mining Company,
Anderson (1982) concluded that from an initial sample of 1,000
reconnaissance examinations (more or less equivalent to casual
use activities), 100 drillable exploration targets (roughly
equivalent to notice-level activities) would emerge in which
there would be a 75% chance of finding one deposit with 3
million ounces of gold. The statistics may not be quite as grim
as they first appear, because there are many cases of someone
with a better concept, more persistence, or luck finding an
economic deposit in a prospect or worked-out mine that several
companies have deemed worthless. Successful projects can be
spectacularly profitable, but overall, mining has one of the
lowest returns on investment of major industries (Dobra, 1977).
It is not uncommon for mining companies to spend millions of
dollars just to identify 100 drillable exploration targets. Sometimes
more than $100 million can be expended before a decision is made to
build a mine. At a recent mining conference in Denver, the chief
financial officer of a large gold company told the audience that his
company was initially surprised when it spent $2 billion dollars to
explore for, develop and build a mine but they now consider that to be
a common figure. Bear in mind that all of this investment occurs up
front before production and the beginning of cash flow. Furthermore,
the combination of cyclical price volatility and the variations in the
concentration and geologic characteristics of these seven metals within
a single ore body can turn ore with economic value into waste rock at a
sudden downturn in the market.
These are among many reasons that these metals were not removed
from the operation of the Mining Law when the Mineral Leasing Act was
passed in 1920. Congress recognized then, as it should today, that in
order to encourage private enterprise in the development of hardrock
minerals, there must be an incentive for those who take substantial
risk to explore for, find and develop a mineral deposit. The Mining Law
has served this Nation well for 139 years by providing a self-executing
process to enter upon federal lands open to mineral entry to explore
for, find, use and occupy those lands for all uses reasonably incident
to prospecting, exploration, processing and mining. The Mining Law has
provided the necessary framework and security of tenure or certainty
required to attract mineral investment and take the risk to find that
true needle-in-a-haystack, one-in-ten thousand economically viable
mineral deposit.
Removing these seven minerals from the operation of the Mining Law
and placing them in a leasing system will result in less mineral
investment in the U.S. and exacerbate our dangerous reliance on foreign
sources of critical and necessary minerals.
The President's proposal came as a surprise because it is
inconsistent with Secretary Salazar's testimony before the Senate
Energy and Natural Resources Committee on July 14, 2009. While
supporting a need to amend the Mining Law of 1872, including patent
reform and providing a fair return to the taxpayers for the extraction
of valuable resources and the creation of an AML Fund that included a
Good Samaritan provision, the Secretary never suggested a leasing
program. In fact, neither Congressman Rahall's Mining Law Reform bill
introduced in the 110th (H.R. 2262) and 111th (H.R. 699) Congress nor
Senator Bingaman's bill (S. 796) introduced in the 111th Congress
contained a leasing system for hardrock minerals. Both Representative
Rahall and Senator Bingaman's legislation recognized the importance of
the self-initiation rights under the Mining Law to encourage the search
for and production of hardrock minerals.
B. A Gross Royalty Not Less Than 5% Will Adversely Impact Investment in
Domestic Mining.
A royalty assessed on gross proceeds increases the economic risk of
a given mining project investment and acts as a disincentive to
investment. This disincentive becomes pronounced when one considers the
cyclical nature of commodity prices. In other words, as commodity
prices decrease, the rate of return required to justify a mining
investment increases. A gross royalty becomes a fixed cost that, in
times of low commodity prices, can mean the difference between a mine
closing prematurely, resulting in lost jobs, and a mine continuing to
operate because it can cover its fixed costs thereby keeping people
employed during times of low prices. In other words, a gross royalty
raises the ``cut off grade'' between recoverable ore and waste rock.
The life of a mine is shortened by causing what otherwise would be
valuable minerals below the cut off point to be lost. A gross royalty
prevents conservation of the resource and is not an environmentally
sustainable policy. Early mine closures waste public minerals by
leaving minerals in the ground. Premature closures of mines means more
mineral deposits have to be discovered, more mines built, impacting
more land.
Unlike oil, natural gas and coal which are generally marketable as
found in place in the ground, hardrock minerals require extensive and
costly processing and beneficiation to produce a marketable product. A
gross royalty does not consider these costs. A gross royalty is
punitive in periods of low commodity prices. During periods of low
commodity prices, a mining company would continue to have to pay the
gross royalty even if it meant operating at a loss. Since no mine can
be operated at a loss for any significant amount of time, the result is
that some mines will shut down prematurely creating loss of jobs; loss
of federal, state and local taxes; and indirectly adversely impacting
suppliers of goods and services to the mine and the mine employees. The
economic devastation from a gross royalty would be significant,
especially in the rural West where most hardrock mines are located and
mining provides some of the best jobs available, jobs that average more
than $75,000 per year.
On the other hand, a net royalty does not cause a mining company to
operate at a loss. With a net royalty, operators pay higher royalties
when their net is high during periods of robust mineral prices and/or
operating costs are lower. When mineral prices are depressed, and/or
operating costs are higher, operators pay lower royalties, so the
royalty does not cause premature mine closures resulting in job losses.
Because mineral prices are cyclical in nature, there have been and
always will be periods of lower commodity prices. A net royalty
provides the best incentive to explore for minerals on federal lands,
regardless of the economic cycle. A net royalty promotes conservation
of the resource, ensures a longer royalty stream from operating mines,
and promotes job retention.
The Metals Economics Group produces an annual report ``World
Exploration Trends'' which tracks global exploration and industry
trends. The 2011 report estimates that nonferrous exploration budgets
for 2010 will total $12.1 billion. Despite significant mineral
resources, the United States attracts only 8% of total world-wide
exploration dollars, while Latin America attracts 27%, Canada 19%,
Africa 13%, and Australia 12%. The following report provides insight
into why the U.S. lags in attracting job creating exploration dollars.
An internationally respected minerals industry advisory firm, Behre
Dolbear,prepares an annual report ranking the twenty-five largest
mineral producing countries in the world. The latest report is entitled
2011 Ranking of Countries for Mining Investment--Where ``Not to
Invest'' and is attached and incorporated by reference. Behre Dolbear
considers seven criteria in ranking countries:
The country's economic system
The country's political system
The degree of social issues affecting mining in the
country
Delays in receiving permits due to bureaucratic and
other delays
The degree of corruption prevalent in the country
The stability of the country's currency
The country's tax regime
While the United States ranks high (eight or above on a one to ten
scale) for its economic and political system, the United States
received a ranking of three with respect to social issues affecting
mining; ranked last in delays and receiving permits (the only country
to receive a one on the one to ten scale); and a rating of three with
respect to its tax regime. Behre Dolbear considers the total taxes
applicable to a mining project, including income taxes, severance and
excise taxes, duties and imposts, and royalties. The reason the United
States received a three is that its ``corporate tax rate is 35% plus,
which, when combined with state levies effectively makes it the highest
corporate tax rate in the world.'' This high corporate tax rate
provides a significant disincentive for mineral investment in the
United States. A gross royalty would only exacerbate this disincentive,
and any net royalty must take into consideration the overall government
take.'' According to the study, when the ``government take'' from
combined taxes and royalty reaches 50%, a mining project's economic
viability is threatened.
In addition, the Administration doesn't seem to understand that our
lifestyle and standard of living is made possible by mining.
Furthermore, it doesn't understand that the production of solar, wind
and geothermal electricity capacity requires minerals. The
Administration proposes key funding increases for renewable energy
development while proposing new fees and taxes on mineral production,
proposing a new leasing system and enacting policies that will
adversely impact the security of tenure necessary to attract mineral
investment, and failing to address significant workforce issues in the
Mining Law program. The bottom line is that all energy production,
including renewable energy requires minerals, and lots of them. And
they need American minerals--unless, of course, we are willing to trade
our unhealthy dependence on foreign oil for a dangerous dependence on
foreign sources of critical minerals. In 1995, the United States
Geological Survey reported that the United States was import reliant on
43 nonfuel minerals with a $51 billion value. In 2010, the U.S. had
become import reliant on 63 minerals and 100% reliant on 19 minerals
with a value of $90.4 billion. Unfortunately, the President's budget
and legislative proposals will discourage mineral production in the
United States and further increase our Nation's reliance on foreign
sources of minerals.
C. Abandoned Mine Land Fee
The President's FY-2012 budget proposes to levy an undetermined fee
on the production of hardrock minerals beginning January 1, 2012 with
the receipts distributed through a competitive grant program. The
President's AML proposal of a fee based on the volume of material
displaced is significantly different than any AML fee proposed in the
past either through Mining Law Reform bills introduced in the last two
Congresses or the Secretary's testimony in July, 2009. What is
noticeably absent from the President's proposal is a Good Samaritan
provision.
A Good Samaritan law, similar to the one introduced by Chairman
Lamborn in the last Congress (H.R. 3203), will do more to bring about
the cleanup and reclamation of abandoned hardrock mines than any fee
imposed on production or material moved.
It appears the President's proposal is based on the coal AML
program administered by the Office of Surface Mining (OSM). As was
discussed in more detail earlier in this testimony, increasing fees on
hardrock production is counterproductive to private sector job
creation, domestic energy and minerals production and deficit
reduction. Because most currently producing mines are located in the
same mining districts as most abandoned hardrock mines, a Good
Samaritan provision would enable mining companies to utilize current
permitted processing and tailings facilities, equipment and mine
personnel to reclaim nearby abandoned mines without the legal risk of
incurring cradle to grave liability under the Clean Water Act (CWA) and
the Comprehensive Environmental Response, Compensation and Liability
Act (CERCLA).
On October 2, 2007 at a legislative hearing on H.R. 2262 entitled
Royalties and Abandoned Mine Reclamation, I provided testimony on
hardrock AML issues including the need for Good Samaritan legislation.
As I stated at that time, the mining industry supports the creation of
a new federal AML fund to be financed from royalties owing under any
Mining Law legislation enacted by the Congress to augment the monies
available to state AML Funds to address safety and, where needed,
environmental hazards at AML sites. Our industry also strongly supports
the enactment of comprehensive Good Samaritan legislation like H.R.
3203, which would allow mining companies with no previous involvement
at an AML site to voluntarily remediate and reclaim that site in whole
or in part without the threat of potential enormous liability under the
CWA, CERCLA and other federal and state environmental laws. I have
attached a copy of that testimony for the record of this hearing and
incorporate it by reference.
Rather than imposing a new AML fee on the production of hardrock
minerals for reclaiming abandoned mine sites, Congress should first
pass Good Samaritan legislation and use, in addition to state AML
funds, monies collected from existing claims maintenance and location
fees that are not used to administer the General Mining Laws or provide
for mineral program workforce hiring and training as discussed below.
Over the past five years, the amount of claim maintenance and location
fees collected has exceeded the amount allocated by the Secretary of
the Interior for administration of the General Mining Laws by more than
$20 million per year. We submit that this would be a much better use of
those excess funds than depositing them into the General Treasury.
Addressing Permit Delays and Workforce Training
The hardrock mining location and claim fees have brought in between
$51.5 and $67.3 million over the last five years. These monies are
earmarked for administering the Mining Law Program, yet, over the same
time period, only $32.7 to $36.7 million have been appropriated to run
the program. The balance has gone to the Treasury.
During this same time period, Mining Law/Minerals Program managers
and BLM/USFS field personnel responsible for the locatable minerals
programs have been retiring at an unprecedented rate. Within the next
five years, more than 60% of BLM and USFS employees responsible for the
respective locatable minerals programs will retire or be eligible for
retirement. Yet, there appears to be no effort at the departmental
level to address this issue. The President's FY-2012 budget certainly
doesn't address it.
The 2011 Behre Dolbear report ranking countries for mining
investment ranked the United States dead last in delays and receiving
permits due to bureaucratic and other delays, and near the bottom with
a rating of three out of ten on the degree of social issues affecting
mining in the country. Here is what Behre Dolbear had to say about
social issues in the United States:
The United States' rating remained at three. Mining projects in
the United States (especially those proposed on public lands)
continue to be fiercely opposed. The 2010 mid-term
Congressional elections refuted the Democratic Party's singular
control of the government, which may give the mining industry
breathing room from the onslaught of unchecked regulatory
initiatives that have reduced its cost competitiveness. Unable
to achieve its goals through legislation, the Obama
Administration has turned to regulation through the
Environmental Protection Agency (EPA) and other agencies.
With respect to permitting delays, Behre Dolbear ranked the United
States worst among the twenty-five countries rated stating:
Permitting delays in the United States are the most significant
risks to mining projects. A few mining friendly states (Nevada,
Utah, Kentucky, West Virginia, and Arizona) are an exception to
this rule but are negatively impacted by federal rules that
they are bound to enforce. The United States is ranked lowest
at a one due to the average 7-to 10-year period required before
mine development can begin.
The delays are not due to environmental regulations being stronger
in the United States than in other countries because most countries
have environmental regulations equal, at a minimum, to the standards
established by the World Bank Group. Rather, it is abuse of the NEPA
process, unnecessary bureaucratic red tape and the fact that virtually
every mining project is litigated.
Attached as Table 1 is a list of hardrock mining projects in Nevada
that have been through the NEPA process to obtain plan of operation
approval from the BLM. I have highlighted the length of time it has
taken to complete the process and obtain a plan of operation. This
chart is evidence supporting the United States' current ranking of last
among 25 mineral producing countries in the world with respect to the
time it takes to process plans of operations and obtain necessary
permits (Behre Dolbear Group Inc., 2011 Ranking of Countries for Mining
Investment--Where ``Not to Invest'') These delays represent jobs that
are not being created, jobs by an industry that pays an average wage of
$75,000 and has an indirect job multiplier equal to twice the national
average.
Most of these projects do not reflect the substantial delays
resulting from a BLM Instruction Memorandum issued on December 23, 2009
(IM 2010-043) requiring all Federal Register Notices be sent to the BLM
Washington Office for review and approval prior to publication in the
Federal Register. This Instruction Memorandum also implemented a 12 to
14 step review and approval process that is taking approximately four
months per Notice, prior to publication. Included are three procedural
notices required by NEPA: (1) Notice of Intent to prepare an EIS which
starts the public scoping process; (2) Notice of Intent to publish the
Draft Environmental Impact Statement; and (3) Notice of Intent to
publish the Final Environmental Impact Statement and Record of
Decision. Note that all three Notices are purely procedural--nothing
substantive.
Contrast the BLM policy with the USFS policy which allows these
purely procedural Federal Register Notices to be sent directly to the
Federal Register by the local forest supervisor. This is not to say
that the USFS NEPA process does not have its own problems, rather,
merely to contrast the USFS' policy with the BLM's policy that is
inhibiting job creation by unnecessarily adding up to a year to what is
already a very broken, anti-job NEPA process. We can think of no
rational reason for the BLM to require these three procedural Notices
to each undergo a four month review and approval process in the
Washington, D.C. office prior to publication in the Federal Register.
It is no wonder the United States ranks last in terms of permitting
delays.
As mentioned previously, claim maintenance and location fees are
bringing in $20 million a year more than is being appropriated to
administer the BLM's locatable minerals program. This is not taxpayer
money. This is money from the mining industry, and we believe some of
this more than $20 million per year could and should be used to hire
and train the necessary professionals to help break the backlog of
permit delays and replace an aging workforce. We believe this should be
BLM's and the USFS's number one budgetary priority for locatable
minerals.
Among all of the programs administered by the BLM and USFS,
hardrock mining is the most technically complex, legally complex and
capital intensive. Hardrock mineral deposits result from complex
geological forces, and, as discussed earlier, are rare and hard to
find. The variation in geology among the different metals as well as
variations within a metal require specific geologic and engineering
knowledge and training.
In addition, BLM and USFS professionals responsible for managing
the locatable mineral programs require an understanding of the General
Mining Laws of the U.S. and their relationship with other laws and
regulations, including environmental laws and regulations. The
technical and legal issues are far more complex than other mineral
resources like coal, oil and gas. Additionally, hardrock mine
development is the most capital intensive activity taking place on
federal lands. Hundreds of millions to several billions of dollars of
investment is required, up front, before there is any cash flow or
return on investment.
These factors demand professionals with specialized education and
training in geology and mining engineering, so they understand the
complex technical, legal and capital investment issues associated with
hardrock mining.
The U.S. Forest Service
While we have focused our testimony on the BLM's budget proposals,
the U.S. Forest Service budget contains many of the same misguided
priorities as the BLM, with a focus on protection and climate change
rather than production. Based on information compiled by the USFS
Minerals and Geology Management staff, the nine largest locatable
mineral mines producing on National Forest Lands produce metals worth
$1.03 billion, more than all other USFS programs combined. This
represents wealth creation, high paying jobs and significant state and
local tax revenues. It also supports U.S. manufacturing jobs by helping
to ensure a domestic supply of minerals.
As mentioned above, the USFS faces similar workforce issues as the
BLM. As of January 25, three-quarters of the USFS's certified mineral
examiners were eligible for retirement. A December 20, 2010 workforce
analysis by the USFS shows 61% of USFS employees eligible for or will
be eligible for retirement by 2015. Thus, it is likely that within the
next three or four years, the USFS will lose over 60% of its mineral
management expertise, yet, little is being done to replace this
workforce, and the Administration's proposed budget actually reduces
the amount of monies budgeted to manage the mineral wealth of our
National Forest System Lands. The budget shows reductions in monies to
administer mineral operations, process mineral applications and manage
the abandoned mine land program.
In these times of robust mineral prices, we believe the Forest
Service should be increasing its budget request for mineral application
processing, so it can hire and train the professionals needed to
administer the program and process plans of operation.
Conclusion
The U.S. minerals industry operates in a highly competitive global
environment. The search for new mineral deposits occurs around the
globe. Major mining companies operate internationally and weigh many
factors in determining whether the potential return on mineral
investment is worth the geologic, economic and political risk.
There can be no question that mining creates new wealth and
provides high paying jobs with an indirect job multiplier more than
twice the national average. As mining companies weigh the geology/
mineral potential, economic and political risk, they will invest in
mineral development where they can obtain access to the land; access to
regulatory approvals; access to capital; and access to the resources
necessary to build and operate the mine such as people, water and
energy. While the United States scores high in terms of its economic
and political systems, lack of government corruption and currency
stability, it ranks last or near the bottom in terms of permitting
delays, social issues and tax policy. Thus, in the Behre Dolbear 2011
Ranking of Countries, the United States is sixth behind Australia,
Canada, Chile, Brazil and Mexico.
We also are entering a period of resource nationalism where many
countries, led by China, are asserting control over natural resources
located within their country. Unlike the Arab oil embargo of the early
70's, countries like China are using resource nationalism not to
control the market or the market price for a given commodity, but to
attract long term manufacturing jobs. Manufacturing require minerals.
Manufacturing concerns require a stable and affordable supply of metals
and minerals. In a nut shell, resource nationalism says ``if you want
our minerals, locate your manufacturing facility in our country.''
This is most evident and transparent in China with rare earth
minerals. China currently controls 97% of global rare earth production.
China has announced that it is cutting back on rare earth exports in
favor of internal consumption. Rare earths are required not only in
wind turbines and hybrid vehicles, but also in dozens of consumer
products like flat screen TV's, computer monitors, and energy saving
CFL light bulbs. China is telling these manufacturing concerns that
they have a choice. They can hope to obtain the rare earths they need
in the global market place at the global commodity price, or they can
relocate their manufacturing facility in China and be guaranteed a
supply of rare earths at a discount. China has been very transparent in
this policy because first and foremost they want to create
manufacturing jobs.
If the United States is going to compete in this global mineral
environment fueled by resource nationalism, it must adopt policies that
guarantee access to lands with mineral deposits, must provide a
competitive tax regime, and must reduce permitting delays. We should be
embarrassed that we rank last among the twenty-five largest mineral
producing countries in terms of permitting delays. The fact that a
country with a mineral resource base as rich as the United States
attracts only 8% of world-wide exploration spending should be a call to
action.
Unfortunately, the President's FY-2012 budget and legislative
proposals for the BLM's and USFS's energy and mineral programs do not
answer this call to action. Instead of advancing policies that will
encourage mineral production, job creation and deficit reduction, the
Administration's proposals will result in less domestic energy and
minerals production, adversely impact private sector job creation, and
increase the United States' dangerous reliance on foreign sources of
strategic and critical minerals. This will have a negative impact on
our balance of payments and will not contribute to deficit reduction,
as we watch other countries reap the benefits of mineral investment and
the resulting private sector jobs, both in mineral exploration and
development as well as manufacturing.
We urge this Committee and Congress to reject the President's
budget and legislative proposals and, instead, enact incentives that
will encourage investment and production of America's vast mineral
resources to supply the strategic and base metals and materials
necessary to create and sustain U.S. manufacturing jobs, a robust
economy, and our standard of living.
Thank you for the opportunity to provide testimony on these
important issues. I will be happy to answer any questions.
______
Mr. Lamborn. OK, and thank you for your testimony. Next
we will have Mr. Fosburgh.
STATEMENT OF WHIT FOSBURGH, PRESIDENT AND CEO, THEODORE
ROOSEVELT CONSERVATION PARTNERSHIP
Mr. Fosburgh. Thank you. My name is Whit Fosburgh; I am the
President and CEO of the Theodore Roosevelt Conservation
Partnership, a national nonprofit that is dedicated to
guaranteeing every American quality places to hunt and fish.
My testimony is going to stand in fairly stark contrast to
the other folks on this panel. But in summary, one, over the
last decades sportsmen have seen a massive push to open Federal
lands to unbridled oil and gas development, often with
devastating impacts to fish and wildlife.
Two, industry is only using a relatively small percentage
of its lands that are already available to it to produce
energy.
Three, the reforms recently announced by the Obama
Administration, including leasing reforms, massive release
planning, and the Wildlands Policy, are steps to restore some
balance to the system--not to block oil and gas development,
but to ensure that it happens in a responsible manner, and that
special places for fish, wildlife, and recreation can be
conserved through an open public process.
First, let me state upfront that the TRCP and our partners
in the conservation business support energy development on
public lands. Increasing domestic energy production is an
important national goal, and energy production is a legitimate
component of public lands multiple-use mandates. As are mining,
fish and wildlife conservation, and wilderness.
But there are ways to do energy development right, and to
do it in the proper places. And too often this has been
avoided, forgotten, or ignored.
In the last six years, as Mr. Holt pointed out, more than
40 million acres of public lands have been opened up to oil and
gas development. Laws were changed to make sure that oil and
gas development took precedence over other uses, including fish
and wildlife conservation.
The meager BLM Wildlife staff has literally been
overwhelmed by the onslaught of drilling proposals, often
forcing agency biologists to expedite applications, rather than
to monitor and manage fish and wildlife habitat. This problem
promises to get even worse if proposed budget cuts actually
happen.
The rush in applications and permits has even outpaced
industry's ability to produce. Of the 40-plus million acres of
public lands already leased by industry, development is
occurring in only about 12.2 million acres.
In 2010, BLM approved 4,090 wells; only 1,480 were spudded.
According to recent press reports, 7,200 approved APDs were
available to industry as of early 2011.
While there is clearly not a lack of land available for
energy production, where it is occurring, the impacts to fish
and wildlife should give everyone reason to pause before
rushing headlong into further streamlining the process, or
opening up more lands for leasing. And I will use mule deer as
an example here.
Mule deer, unlike their brethren white-tails in the East,
are easily disturbed by human activities, especially when they
are in their critical winter ranges. A recent report on mule
deer and how mule deer have been addressed in energy projects
in the Greater Green River Basin of Wyoming, Colorado, and Utah
showed that of the 10.2 million acres of mule deer critical
winter range on BLM and Forest Service lands, 2.4 million acres
have already been leased for development. Many of these leases
came with stipulations limiting or preventing winter drilling
activity, which is appropriate. But such stipulations are
routinely waived or modified at the request of industry
For example, in Wyoming 83 percent of the waiver requests
were approved in the 18-month period between 2007 and 2008. Not
surprisingly, according to a scientific study commissioned by
BLM and the industry, and released last November, the mule deer
herd in the Upper Green River Basin has declined by about 60
percent since development began in Pinedale in 2000. And
industry touts the Pinedale Anticline project as a model for
responsible development on public lands.
The leasing reforms proposed by the Administration will
help ensure that fish and wildlife needs are better considered
in future energy leasing on public lands. But these reforms
really do nothing to conserve fish and wildlife and hunting and
fishing on the 40-plus million acres that have already been
leased. Frankly, the greatest threat to energy production on
public lands is not restricted policies from this or any other
administration; it is a failure on the ground to achieve real
balance and real multiple use, thereby inviting controversy,
protests, or lawsuits.
When mule deer, sagegrass, cutthroat trout, and other
iconic western species continue to decline, and hunting and
fishing opportunities are lost, we will have squandered a
national legacy that was left to us by Theodore Roosevelt and
held in trust for future generations. We will have traded
short-term profits for a sustainable natural resource that
provides jobs forever.
2010 saw more than 58 million visitors at BLM lands, with
the resulting benefit of $7.4 billion to the economy. In
Wyoming, Colorado, and Utah, the three States I noted in my
mule deer example, hunters and anglers, more than 2.2 million
hunters and anglers bought fishing and hunting licenses,
providing license revenues of more than $1.2 billion back to
those States.
You can have energy projects and healthy fish and wildlife
on public lands, but that means that the agencies need the will
and the budgets to do their jobs. It means that game and
species of fish and wildlife, not just endangered species,
should be considered before projects begin, not just after
declines are seen. And it means that there should be a way to
protect special places, either for biological reasons or the
fact they are simply too important for outdoor recreation to
millions of people who enjoy them.
Thank you very much for the opportunity to be here, and I
would be happy to answer any questions.
[The prepared statement of Mr. Fosburgh follows:]
Statement of Whit Fosburgh, President and CEO,
Theodore Roosevelt Conservation Partnership
Mr. Chairman:
Thank you the opportunity to testify before the House Natural
Resources Committee, Subcommittee on Energy and Mineral Resources. My
name is Whit Fosburgh, and I am the president and CEO of the Theodore
Roosevelt Conservation Partnership, a national nonprofit conservation
organization (501-3c) that is dedicated to guaranteeing every American
places to hunt or fish. As a lifetime hunter and angler and a long-time
professional in the conservation field with experience at numerous
levels of government and non-governmental organizations, I am honored
to provide comments on the important issue of energy development and
its potential impacts on fish, wildlife and sportsmen. The quality of
life in this nation, one enjoyed by sportsmen and non-sportsmen alike,
depends on a sound economy fueled in part by responsible energy
production that is balanced with the needs of fish, wildlife, habitat
and water.
First and foremost, the TRCP and the sportsmen's community in
general support responsible energy development. We understand and
appreciate the need for exploration and production of our domestic
energy resources but maintain it must be done responsibly and in a way
that conserves and sustains other values with those of energy
production. We advocate true multiple use and sustained yield of
public-lands resources, including energy production, while maintaining
a fish and wildlife conservation legacy for this and future
generations.
Policy changes during the last two years are positively affecting
the management of public-lands energy resources and beginning to return
balance to a dynamic that previously held energy as the primary value
of millions of acres of our Western landscapes. Energy leasing reform
announced by Secretary Salazar is a very positive step toward resolving
this bias. Federal budgets for fish and wildlife programs, however,
have been neglected and are inadequate. Further budget cuts would cause
irreparable harm. The model for public-lands energy development is
broken, and we wish to provide recommendations for fixing it based on
our extensive experience working on Western energy and fish and
wildlife issues.
Our energy policy must acknowledge that two-thirds of the nation's
land is privately owned land and that significant access and permitting
on Western public lands for energy development already has occurred
there. We do not support energy policies that eliminate protections for
fish and wildlife resources, reduce or eliminate public involvement in
public-lands energy development, or prioritize energy development over
valuable fish and wildlife uses and values. We believe that evaluation
to potential impacts from energy development should be done before
leasing occurs and that the public, the owners of federal mineral
interests, should have more opportunity to provide needed input on how
their public lands are affected by energy development. The leasing
reforms implemented by Secretary Salazar are a needed step in the right
direction and will allow for a better application of multiple-use on
public lands. This also applies to the Master Lease Planning part of
the lease reforms which will map out where and how energy will be
developed in those areas that have not already been significantly
affected. We also believe that clear air, clean water, and a healthy
environment are essential to our well being as a country and no
shortcuts, loopholes, or other actions should diminish proper
environmental reviews or limit the federal government from protecting
these essential resources. Administrative actions that addressed these
problems have our support as well. Overall, we believe more can be done
at the planning or leasing stages for protection of fish, wildlife,
water and recreation that will allow for less conflict, better
multiple-use, and more certainty for the development of our public land
energy resources. Finally we believe that fish and wildlife agencies
need an adequate budget to manage fish and wildlife resources and that
draconian cuts are not acceptable, nor is diverting funding intended
for fish and wildlife programs to other uses. Having given an overview
of our position l will discuss some of these issues in detail.
The TRCP is addressing problems with development of oil and gas
resources on public lands in the Rocky Mountains and elsewhere. Since
1995, the conservation and sporting community has been working with
officials from USDI, USDA and CEQ to address inadequate energy policies
and practices. In 2001, we began discussions with former DOI Secretary
Gale Norton and other officials to fix the problems in places like
Wyoming and New Mexico, where development was accelerating. The rapid
pace and narrow approach of development was preventing the BLM from
sustainably managing wildlife and fish resources. We were especially
concerned with the severe impacts on mule deer, pronghorn, elk, sage
grouse, trout and other desirable fish species and the recreational
opportunities they provide for tens of thousands of sportsmen every
year on public lands.
During the energy boom that began in the late 1990s, energy
development practices and policies on public lands drastically changed.
In the face of pressure to gain access and permitting to meet industry
demands, fish and wildlife were determined by federal officials to be
an impediment to development rather than a valuable resource to be
managed in tandem with development. This approach is borne out by
congressional testimony by industry, policies guiding BLM management of
lands with energy potential, public statements by industry associations
and the previous administration, and the authorization and development
of major energy projects, such as Wyoming's Pinedale Anticline,
Atlantic Rim and Jonah natural gas fields and coal-bed natural gas
fields in New Mexico and Wyoming.
The 2005 Energy Policy Act further prioritized energy development
over other resources and concerns through actions like the Halliburton
loopholes for the Clean Water Act and Safe Drinking Water Act, the
establishment of pilot offices in seven BLM offices for the purpose of
expediting permits for drilling, and the establishment of ``statement
of adverse impacts to energy development'' for actions that were
perceived to delay or deny immediate approval. All led to BLM policies
that fostered a ``minerals trump everything else'' direction given by
BLM directors to employees. This paradigm shift within the BLM led to
practices that detracted from the agency's ability to manage other
resources like fish and wildlife, including redirecting appropriated
funding intended for fish and wildlife management to energy planning
and permitting, instructing biologists and other specialists to
prioritize energy above their fundamental tasks of managing fish and
wildlife habitats, and reinterpreting or rewriting long-standing
policies of the multiple-use, sustained-yield mandate from FLMPA and
MUSYA. In a very short time, the culture of the BLM changed. Minerals
development, sportsmen, the public, and fish and wildlife played second
fiddle to energy development.
As previously mentioned, the TRCP and sportsmen support responsible
energy development but will not sit idly by while public resources are
ignored to meet the financial needs of energy companies. Public lands
are held in trust for the American people and must be managed to meet
the multiple needs of the citizenry--today and in the future. This
includes the mineral wealth located on public lands and held in split-
estate situations. Public polling consistently finds that Americans,
particularly sportsmen, want development and fish and wildlife on
public lands. In fact, polls show that public-lands users want the
federal government to do more to protect fish and wildlife during
energy development. Polling results have been consistent regardless of
energy prices and the fiscal recession our country has experienced.
In 2007, the TRCP commissioned a poll of public-lands users.
Results of the poll included the following:
85 percent wanted more protection for fish and
wildlife during energy development;
79 percent opposed unlimited energy development;
90 percent wanted energy development to be adjusted
to protect fish and wildlife;
89 percent wanted energy planning to encompass
sustaining fish and wildlife resources;
94 percent wanted plans to be clearer for lay people
and allow for better public participation;
91 percent supported revenues derived from energy
development to be used to benefit or mitigate fish and
wildlife.
Polls executed after the recession and high gasoline prices in 2008
showed similar results. A poll commissioned by Trout Unlimited and
Sportsmen for Responsible Energy Development showed that 75 percent of
respondents wanted more protections for fish and wildlife on public
lands during energy development and 85 percent opposed limiting or
eliminating the ability for the public to be involved during energy
development planning and permitting. A poll done this year done by
Public Opinion Strategies and FM3 (a Republican and a Democratic
polling company) showed that 77 percent of respondents wanted stronger
laws and enforcement for fish and wildlife protection rather than
lessening restrictions (this is up from 74 percent in 2009). Clearly
the American public and public-lands users and sportsmen want more to
be done for fish and wildlife, even after experiencing some serious
pain at the gas pump and through the hardest financial times since the
Great Depression.
Because of this and the fact that policies and process used to
lease and develop public energy resources did not adequately take into
account fish and wildlife resources, the TRCP and sportsmen began to
take action. Unlike other activities on public lands, public minerals
leasing historically included little opportunity for public
involvement. Lease parcels were secretly nominated by industry six to
nine months ahead of a sale, and 45 days before sale they were made
available for public review. Interested or affected citizens then had
30 days to find the information on a BLM website, print sale notice,
review, interpret, and decide whether to express concerns about these
irretrievable commitments being made on our public lands. If concerns
were great enough, the public was forced to formally protest to the BLM
15 days before the sale date. Some of these sales included hundreds of
thousands of acres across numerous states.
Problems plague the management of our federal mineral estate, as
evidenced by the disaster in the Gulf of Mexico last summer and facts
brought to light by the investigation into the former MMS. Onshore, the
BLM has experienced similar problems. In 2005, the Government
Accountability Office released a report, ``Oil and Gas Development:
Increased Permitting Activity Has Lessened BLM's Ability to Meet Its
Environmental Protection Responsibilities.'' The report highlighted the
fact that the dramatic increase (255 percent) in permitting and
approvals for oil and gas activities from 1999-2004 in six BLM field
offices had caused the agency to ignore or neglect its responsibility
to inspect and enforce environmental protections or ensure
environmental impacts were properly mitigated. This shift in priorities
basically created single-use focus for energy development at the
expense of multiple use, including fish and wildlife management. This
exclusionary approach created unmanageable workloads, fostered industry
expectations that their interests were above all others, and gave BLM
the excuse to move monies intended for fish and wildlife management to
energy programs. It created bureaucrats whose only job was to process
and approve permits in timeframes that made adequate review impossible.
BLM biologists and other resource specialists who were supposed to be
managing habitats, range resources and other valuable natural resources
became office fixtures dealing with mountains of paperwork related to
drilling permits. Because of promises made at higher levels and a focus
on maximizing access and permitting at industry's request, the BLM had
its ability to manage public lands outstripped by the demand for more
permits. This led to programs like fish and wildlife management being
ignored or neglected even where world-class wildlife resources were at
stake. This cultural shift still is evident, although recent market
downturns and recession along with new policies from the current DOI
have allowed for some catching up. Thousands of permits are still
approved by BLM each year, however. In FY2010, the BLM approved 4,090
wells, while only 1,480 were spudded. (Greenwire recently reported
7,200 approved APDs were available to industry as of early 2011.)
Additionally, of the over 41 million acres of public lands leased by
industry, development is occurring only on 12.2 million acres. A GAO
report from 2008 showed that in a 20-year period from 1987 to 2007,
only 6 percent of onshore leases had any development activity, and only
5 percent of the leases ever produced oil and gas. This same report
reported that DOI was not doing enough to encourage diligent
development, and companies allow many leases to expire (after 10 years)
without attempting to develop oil or gas resources. The report
concluded that changes were needed to ensure development proceeded in a
timely fashion and that the American public's resources were being
developed as promised.
Industry already has significant access to public lands with high
and moderate potential to produce oil and gas. In fact there are less
than half of all the leases in effect producing oil and gas with 22,676
leases producing oil or gas out of50,544 leases in effect, meaning only
45% of the valid leases producing energy. Public lands are a big
contributor to our nation's energy demand with 114,367,122 barrels oil
and 2,825,507,717 MCF gas produced in FY 2010. This is even with the
practice of companies shutting in wells that could be producing oil and
gas while waiting for prices to rise to make a better profit. These
numbers prove that public lands are a big contributor to our domestic
energy supply even though industry has not developed 55% of the leases
they currently hold. The energy lease reforms implemented by DOI will
have no affect on these existing leases and should provide more
certainty for industry and fish and wildlife for new leases.
The business strategy used by industry is competitive in nature and
based on market forces that do not accurately reflect the access and
availability that industry has to public lands. In fact, more acres are
leased on high-potential producing areas than can be drilled in near
future, and a limiting factor has been rig availability and investment
strategies by the companies. The fact is the policies used to develop
our energy resources on public lands were developed in different times
and did not account for some of the concerns of today. The last
significant revision of the Mineral Leasing Act was in 1987 (FOOGLRA),
and much has changed since then. Also, the model used by business
worked when energy resources were relatively easy to access and
produce, but it does not work where significant conflict exists with
other values, such as fish and wildlife resources.
Probably one of the best examples of the need for better policy and
coordination concerns mule deer management. Mule deer are a Western
deer species related to white-tailed deer but with very different
requirements. They respond to human-caused disturbance much
differently. Where white-tailed deer are generalists and highly
adaptable, mule deer mostly inhabit larger Western landscapes and often
rely in different seasonal habitats that allow for annual migrations
from summer to winter range. Mule deer experts agree that one of the
limiting factors for mule deer is available winter habitat. These
winter habitats often are deemed ``crucial'' for survival by state game
and fish agencies and have been afforded protection from disturbance
for more than 40 years in many states. Energy leases that are within
winter range often restrict development seasonally, restrictions not
specific to energy development, as most winter ranges are closed to
vehicle traffic and human activity to protect deer from unnecessary
stress.
A recent evaluation and report of how mule deer have been addressed
in federal land use planning and major energy projects of the greater
Green River Basin of southwestern Wyoming, northwestern Colorado and
northeastern Utah showed that of the 10.2 million acres of mule deer
crucial winter range on BLM and FS lands, 2.4 million acres already
have been leased for development. More than 15,000 wells have been
drilled in this winter habitat, mostly outside of the critical winter
season. But how long these protective measures will continue to be
applied to mule deer crucial winter range is unknown. Recent statements
from industry indicate that these measures intended to protect deer and
other wildlife are perceived as unnecessary and impediments to
development. Requests for relief from these stipulations have increased
in recent years. In Wyoming, where the bulk of requests for an
exception, modification or waiver to wildlife protective restrictions
were processed, 83 percent of requests were approved in an 18-month
period in 2007-2008. Fewer requests were made in Colorado and Utah, but
they were approved at a rate of 95-100 percent in the same time period.
These protective stipulations were not intended to be enforced and
granted as standard practice. State game and fish agencies and BLM
offices indicate that requests for relief are becoming harder to reject
and pressure is mounting for major modifications or elimination of
winter protection policy for big game and sage grouse.
At the Pinedale Anticline in western Wyoming, the BLM has granted
thousands of wells to be drilled during the winter season, and the
results on the deer herd have been staggering. As of the latest
monitoring report in 2010, the wintering population of the segment of
the deer herd that winters within the project area has dropped by 60
percent from levels that were documented before development began
(approximately 6,000 deer used to winter on the mesa before
development, now approximately 2,000 deer do so). This reduction is
well documented and has occurred with less that 3 percent of the
surface (habitat) being disturbed and under 1,000 wells. Additionally,
most of this development occurred with only limited winter drilling,
but the BLM ignored the science and data available and authorized, in
2008, unlimited winter drilling and more than 4,000 additional wells.
This pressure, along with proposed development on important migratory
and fawning habitats, could further reduce this renowned mule deer
herd. The BLM promised to use adaptive management on this project, but
recent official responses by BLM managers indicated they are opting not
to adjust development operations, even though evidence of unacceptable
impacts is well documented. This is probably the most egregious example
of how wildlife has been pushed aside for the sake of energy
development and a result of past policies and existing culture within
the BLM. Furthermore, the ``Pinedale model'' is showing up in proposals
in other important habitat such as Colorado's Piceance Basin.
One should not discuss problems with past public-lands energy
development policy and management without mentioning sage grouse. Sage
grouse are sagebrush obligates that require large tracts of quality
sagebrush habitats to persist. Science and experience have shown that
sage grouse do not do well in areas developed for energy. In Wyoming's
Powder River Basin, research has shown that more than 80 percent of
leks (breeding grounds) were significantly impacted by development. In
addition, the standard practice of quarter-mile buffers has been proven
to be ineffective at maintaining local leks.
States like Wyoming recognized the need to do something different,
and through the leadership of former Governor Dave Freudenthal, Wyoming
instituted a strategy to preserve sage grouse ``core'' areas to balance
development with wildlife. This effort has received much attention and
has the potential to protect important sage grouse habitats and
populations. It is being replicated by other states. Even though the
BLM was part of Wyoming's core strategy, it was slow to agree to
coordinate on federal public lands (the Wyoming strategy and executive
order signed by the governor only applied to state lands), and to date
no similar policy is in place for conservation of core habitats on BLM
lands. Also with significant amounts of core sage grouse habitats
already leased for development, how effective these efforts will be for
sage grouse conservation if they apply only to future leasing is
unclear. In Wyoming, where more than 50 percent of the remaining sage
grouse populations reside and the best habitat remains, 14 million
acres of sage grouse habitat (47 percent) and 6.2 million acres of
designated core sage grouse habitat (40 percent) already were leased as
of 2008. In fact, the Wyoming BLM continued to lease areas within core
habitats while the core conservation strategy was being developed--
while they served on the sage grouse implementation team. In one area
of southern Wyoming called the Atlantic Rim, the BLM authorized
development of a coal-bed methane project of more than 300,000 acres
that included some of the region's best sage grouse habitat and more
than 80 active sage grouse leks with the acknowledgement that sage
grouse would be significantly impacted or eliminated. (This took place
during the FWS review of Endangered Species Act listing petitions,
which I will mention next).
In 2010, the FWS determined that sage grouse were ``warranted but
precluded'' for listing under the ESA as a threatened species. This
means that enough evidence exists to list the species, but because of
federal resources or higher-priority species, the service will not move
forward with listing at this time. Now a candidate species, sage grouse
are one step closer to listing (and thereby complicating energy
development activities) and will be evaluated annually to determine
whether their status will be changed. In its review, the FWS identified
energy development as a real threat to habitat and noted that the BLM
did not have ``adequate regulatory mechanisms'' to prevent a listing.
The FWS has basically identified what the BLM must do to prevent a
listing, and adjusting how it manages energy development is at the top
of the list. Worth noting is that the TRCP and sportsmen do not want an
ESA listing and have initiated many actions to prevent a listing from
occurring, as it would undoubtedly affect hunters first because most
states would immediately stop hunting these game birds. In 2008, TRCP
along with some our conservation partners asked the DOI to undertake an
evaluation of the current management actions being done by BLM during
energy development and make adjustments for the benefit of the sage
grouse. This was done outside of the ESA process and through a rule
making request, which would have given DOI great flexibility to
accommodate the needed changes based on the science while coordinating
with the energy industry and other affected stakeholders.
Unfortunately, DOI ignored our request and now sage grouse futures lie
in the more restrictive ESA process.
The problems with mule deer and sage grouse are important to this
testimony because they offer examples of how BLM policy for energy
development has affected fish and wildlife resources and therefore
sportsmen. Significant new information and science are available
regarding these two species to better balance wildlife with energy
development during project planning, but unfortunately this science has
not been embraced by the BLM and often is ignored or discounted because
energy development is prioritized. Instances exist of adjacent BLM
offices not treating the same science the same way and, more than once,
not even recognizing that new information was available during its
analysis. Ironically, much of the recent research on mule deer and sage
grouse has been funded in part by the BLM, and the BLM participates in
numerous technical working groups for these two species. In the most
extreme case, long-term research projects on the Pinedale Anticline
that began in the late 1990s were abandoned in 2008 for less-rigorous
``monitoring,'' and BLM stated that there ``is not enough information''
to do things differently. Having been extensively involved in this
project, the TRCP was only able to conclude that the BLM and industry
did not like the results of the research; therefore, they ensured it
did not continue. Even more perplexing is that BLM managers now state
that this information cannot be used in future attempts to address the
impacts to grouse and deer. This is not how science should be used in
management or how we should be managing public lands and resources.
The development of National Environmental Policy Act documents to
deal with proposals from industry has become a primary function of many
BLM offices that manage energy development. Much time and effort are
spent over many years to accommodate industry's desire to develop their
leases, detracting from other functions of BLM employees. Given the
``energy first'' culture that exists in many offices, the goal is to
build a defendable NEPA document and subsequent decision, after which
the BLM moves on to the next document. The BLM also has allowed
commitments made in the decision documents to go unmonitored and are
all too eager to modify decisions or complete new NEPA documents at
industry's request. Land use plans are altered, ignored or
reinterpreted to meet the demands of lease holders, and employees find
themselves constantly attending planning meetings, processing permits
or writing NEPA documents. All of this activity benefits energy
development and takes away from other important duties like managing
fish and wildlife habitats.
BLM policies also significantly affect state wildlife agencies'
workloads and duties. These agencies have the legal authority for
management of fish and wildlife within their borders, with the
exception of species listed under ESA and migratory birds. Western
states have very little property of their own and have to rely on
public lands, FS or BLM, to provide habitat to meet state-set
population objectives. Coordination between state and federal agencies
is essential for proper management, and often states serve as
cooperating agencies during federal energy development activities and
planning. The recent boom in development activities has overwhelmed
state agencies, and they are struggling to keep up with the workload.
State employees are tied up in endless meetings, embroiled in
controversial decisions regarding development in sensitive wildlife
habitats and neglect duties enable proper management of species for the
public's benefit. States also are being pressured to support
development in winter range and other important habitats. Because of
the non-regulatory relationship the states have with federal agencies,
recommendations for addressing impacts to fish and wildlife do not have
to be followed, and therefore increased impacts are experienced during
development. State agencies feel the impact of political or economic
pressures from their governors and can be made to feel helpless when
deals are struck at high levels within states. Additional resources to
deal with the increased workload have been slow in coming, and recent
budgets in many states leave even less resources for the future.
Federal agencies are not immune to resource shortages. The BLM has
increased its energy program budgets as it increased the priority for
energy development without commensurate increases in fish and wildlife
program budgets. A slight increase was implemented in order to process
more permits more quickly, mainly through the pilot energy offices, but
no increase was requested to deal with mitigation of impacts from
energy development or maintain functional fish and wildlife programs
within offices where energy development boomed. The result has been
neglect of long-standing fish and wildlife programs, high turnover of
employees because of the nature of the energy workload, and a loss of
important habitat management plan implementation at local levels.
Future requests will be much harder to achieve, and any cuts to
existing fish and wildlife programs will be much more pronounced. Add
on the fact that renewable energy development will increase energy
workloads further and many experienced fish and wildlife biologists are
retiring rather than change jobs to administrative roles, the future is
not bright.
Until now I have discussed problems with previous policies and
budgets, but now I want to focus on some of the benefits of responsible
fish and wildlife management of our public lands. The American system
of public lands is unique, found nowhere else in the world. A
fundamental American value, it was left to us by our predecessors and
held in trust for future generations. FY 2010 saw more than 58 million
visitors to BLM lands with a resulting benefit of $7.4 billion dollars
to the economy. Most of these visits were to enjoy scenery, hunt, fish,
camp, watch wildlife or have other great outdoor experiences. Americans
and people from all over the world come year after year to experience
our public lands, and they bring the economic benefits with them. This
sustainable economic engine is dependent on healthy environments, clean
air, clean water and abundant fish and wildlife. In 2010 in Wyoming,
Colorado and Utah, more than 2.2 million hunters and anglers bought
licenses, providing license revenues of more than $1.2 billion dollars
back to those states. This figure does not include the federal match
generated through the Pittman-Robertson and Dingell-Johnson acts or
revenue from expenditures on food, hotels, equipment, or other
purchases made by these hunters and anglers. Nationwide it is estimated
that 1.2 million jobs are provided annually by the outdoor industry,
many hunting and fishing related. These jobs and economic benefits are
sustainable, provide growth in hard times, and allow people to
reconnect with nature. Federal policies and budgets significantly
affect our ability to continue these benefits.
Some places in this country are valuable or special and should not
be developed. These ``special places'' have values that could not be
replaced or mitigated if development took place. Places like the Rocky
Mountain Front in Montana, Valle Vidal in New Mexico and Wyoming Range
in Wyoming provide unique experiences for hunters and anglers and
critical habitats for fish and wildlife. In the past decade, these
areas have been threatened through lease nominations and sales and
other development proposals. Previous policy prevented the BLM from
identifying all but congressionally designated lands or previous
administrative withdrawn areas during land use planning development.
Local campaigns or legislation have been required to deal with threats
to these areas, many of which have very little energy development
potential or would be very difficult to develop because of their
landscapes. We promote the identification and protection of these
places to balance fish and wildlife values with areas that have been
and will be developed for energy development. Not all lands are
suitable for development; nor is development compatible with other uses
in all areas.
We also promote responsible development when energy development
takes place. Acknowledging that some places will be developed more than
others and some may become industrial zones, most lands can be
developed while concerns about fish, wildlife and recreation are
addressed. As stated previously, sportsmen want to see energy
development balanced with fish and wildlife resources. The TRCP and our
conservation-sportsmen partner organizations have developed a set of
recommendations, revised in 2011, that can help achieve balance during
energy development. The ``FACTS for Fish and Wildlife'' comprise 25
specific recommendations in five targeted areas--Funding,
Accountability, Coordination, Transparency and Science. The FACTS
recommendations accompany this testimony. If the FACTS are employed,
conflicts with sportsmen-conservation groups can be reduced, and we can
expand development of our domestic energy resources.
Finally, I delivery this testimony to ensure a bright future for
fish and wildlife, voice concerns about past policies and budget
allocations, and express interest in working with Congress to address
these important issues as we determine future energy policy. Sportsmen
want some certainty that Western fish and wildlife resources can be
sustained at levels that provide quality hunting and fishing
opportunities--ones of which we can be proud. We want a system of
public lands that provides energy AND fish and wildlife, not one that
provides energy OR fish and wildlife. We believe recent policy changes
by the Obama administration take a positive step toward that goal, but
we still have concerns about successful implementation and benefits on
the ground. We also are concerned that future cuts to fish and wildlife
budgets in our federal natural resources agencies could have drastic
consequences for hunting and fishing, along with other important uses
of our public lands.
______
FACTS for Fish and Wildlife--Revisited
Balanced Management for Energy and Fish and Wildlife Can Be
Accomplished with the FACTS
Energy and our ability to access affordable, reliable fuel and
electricity are fundamental to the American way of life. Oil, natural
gas, coal and biomass, as well as wind, solar, geo-thermal and nuclear
energy, must be transported via pipelines or transmission lines. These
realities pose challenges for both energy development activities and
natural resources management in our nation.
Energy production and transmission have been controversial for a
long time in America, and in 2011 we still have no comprehensive policy
that drives energy production and transmission. As a result, both have
followed a scattershot approach throughout the country, often based
around variables such as markets, investment, permitting and access
instead of an agreed-upon national strategy. One consequence of this
approach is neglect of how energy production and transmission affects
fish, wildlife and outdoor recreation, often to the detriment or
exclusion of these values and resources.
Sixty-seven percent of U.S. lands are privately owned. In the West,
the division of private and public lands is about 50/50 with some
states like Nevada (81 percent) and Utah (63 percent) being mostly
publicly owned. Because wildlife do not understand or respect
artificial boundaries like state lines or property lines, it is
imperative that lands be managed across boundaries.
Traditionally, conservation and sportsmen organizations with a
stake in energy issues have focused on public lands, and rightfully so,
as those lands are held in trust for all Americans and are mandated to
provide multiple-use, sustained yield for many values, including fish
and wildlife. But as our needs for expanded energy resources
(particularly renewable energy) and transmission capacity increases,
the impetus for managing fish and wildlife throughout all lands--
regardless of ownership--is increasing as well. Good stewardship and
conservation benefit both public and private lands, and management
recommendations for fish and wildlife on public lands can easily be
adopted on private lands.
In 2006, the TRCP released the ``FACTS for Fish and Wildlife,''
specific recommendations for balancing fish and wildlife needs with the
development of energy resources. This revision, developed in 2011,
updates those recommendations, expands their applicability to broader
geographic regions and private lands, and addresses forms of energy
development beyond traditional oil and gas. The ``FACTS Revisited''
will allow for better fish and wildlife stewardship through better
policy and management during energy development.
The FACTS recommendations are applicable, with a few exceptions, to
land and water, traditional or renewable energy, public or private
lands, and infrastructure associated with development. They can
increase our ability to responsibly manage fish and wildlife during
energy development, balance competing values, become conservation
stewards and ensure a future for our fish and wildlife populations.
These practices--driven by the FACTS--will sustain and uphold our
nation's shared natural resources and unique outdoor legacy.
Funding Accountability Coordination Transparency Science
The TRCP's recommendations and priorities regarding management of
fish and wildlife during energy development are organized under the
five fundamental areas of Funding, Accountability, Coordination,
Transparency and Science.
Funding
Successful fish and wildlife management requires adequate funding.
Traditionally, fish and wildfire programs are underfunded or rely on
funding sources other than federal monies. While funding alone will not
solve the problem, it plays a critical role in our ability to balance
energy development with the needs of fish and wildlife. Funding must be
secure, substantial and properly allocated to make a difference.
Determine adequate funding for sustainable fish and
wildlife management, including monitoring, in areas proposed
for energy development.
Prior to development, identify and secure appropriate
funds for fish and wildlife monitoring and mitigation,
including compensation if necessary or required.
Establish a long-term, dedicated ``mitigation trust''
to benefit fish and wildlife that is funded by royalties,
rents, fines or voluntary payments.
Ensure that funds designated and intended for fish
and wildlife management are not redirected to other causes.
Work cooperatively with various funding sources to
leverage additional federal or state grants.
Accountability
Doing what you said or promised defines accountability. It also
entails accepting responsibility for actions that you may or may not
have taken. On public lands, promises are made through various decision
strategies and should be considered ``contracts with the people'' that
mandate proper stewardship of the nation's lands and minerals. On
private lands, accountability increases trust, enabling projects to
transcend conflicts that can delay or stop development.
Proactively address fish and wildlife management and
needs with a specific ``conservation strategy'' for each energy
field or project. Finalize conservation strategies before
development starts and specify recommendations and actions to
minimize impacts and establish plans for mitigation, detailed
monitoring and adaptive management.
Establish and update regularly a system of tracking
commitments, in plans or agreements, along with any actions
contrary to those commitments.
Ensure that laws, regulations and policies intended
to conserve and protect fish and wildlife during energy
development are not abdicated or abridged.
Utilize lease development plans or master lease
planning to evaluate and address potential impacts to fish and
wildlife prior to development.
Notify the public and allow public comment on energy
development projects involving public lands or resources.
Provide the public with information regarding modifications to
current development plans.
Coordination
Energy development and natural resource management do not occur in
a vacuum. Coordination is essential in ensuring that fish and wildlife
are properly managed between boundaries. All stakeholders must be
involved, and experts that manage fish and wildlife at the local, state
or national levels must be included in energy project planning and
implementation. Coordination enables us to address unanticipated or
unforeseen actions that arise during development. A key stakeholder in
the administration of public lands and fish and wildlife resources, the
public must be included to build trust and brainstorm management
tactics.
Foster broad-based coordination between fish and
wildlife managers, landowners and affected stakeholders to
ensure fish and wildlife sustainability.
Establish expanded coordination across geo-political
boundaries between property owners (public and private). Ensure
that managers consider the movement corridors of fish and
wildlife.
Coordinate among all affected stakeholders during
planning and implementation of public-lands energy projects.
Include state fish and wildlife agencies in energy
development planning and monitoring fish and wildlife during
and after development.
Establish a process for annual review and adjustments
of actions that affect fish and wildlife. An adaptive
management strategy is appropriate if based on established
adaptive management guidelines and science.
Transparency
``There is no disinfectant like sunshine.'' That statement was used
to describe how transparency can avert undesirable activities,
particularly in the public interest. Transparency is essential to
building trust among stakeholders. Transparency can prevent unnecessary
delays, stoppages or bad press. Openness during energy development
enables fish and wildlife management that benefits all stakeholders,
not just project proponents.
Identify ``special places'' with exceptional resource
concerns or values where energy development should not be
allowed. Map these places and incorporate these values into
management plans.
Provide up-to-date information through a range of
media and informational outlets to the public and fish and
wildlife managers for energy development projects.
Guide leasing and development by complete and up-to-
date baseline information on fish and wildlife resources and by
coordinated plans for energy development and fish and wildlife
management.
Provide the public with information about all
proposed public-lands energy leases and development; allow
sufficient time for public comment.
Make all meetings related to public-lands use and
energy development part of the public record.
Science
Science is the foundation of good land and resource management. It
is essential to understanding how fish and wildlife react to energy
development and maintaining sustainable populations during and after
development. Utilizing known science enables a balanced approach that
sustains both energy AND fish and wildlife instead of either energy OR
fish and wildlife.
Utilize science in all fish and wildlife decisions,
particularly when specific research has been conducted on the
impacts of energy development. Assure that mitigation and
monitoring based on new scientific information is implemented
in the energy development process.
Incorporate science-based mitigation, using tested
and proven methods of adaptive management, when making
decisions about fish and wildlife management and energy
development. Identify and address ``gaps'' in science prior to
development and implement coordinated research to address these
gaps.
If necessary, utilize a third-party review of
development and mitigation proposals.
Establish a credible and qualified ``science review
team'' and engage science-based organizations for fish and
wildlife management and development decisions.
Establish a process to incorporate new information
and science into planning and implementation of existing and
new energy projects.
The TRCP supports and promotes responsible energy development that
balances land and resource values that sustain fish and wildlife
populations and maintain opportunities for hunting and fishing. Our
work is guided by the HTRCPHH HHFishHH, HHWildlifeHH HHandHH HHEnergyHH
HHWorkingHH HHGroup, a team comprised of representatives of our
conservation partner organizations, and a staff of experienced wildlife
and policy experts. By combining the science-based expertise of the
FWEWG with an active network of sportsmen, the TRCP Center for
Responsible Energy Development is working with hunters and anglers
throughout the country to conserve our outdoor traditions by supporting
a balanced approach to energy development and the management of fish
and wildlife resources.
A 501c3 nonprofit corporation, the TRCP is a coalition of hunting,
fishing and conservation organizations, labor unions and individuals
who represent the wide spectrum of America's outdoor community. In
order to guarantee all Americans quality places to hunt and fish, the
TRCP strengthens laws, policies and practices affecting fish and
wildlife conservation by leading partnerships that influence decision
makers.
For more information: Steve Belinda, Director of Energy Programs,
[email protected], 307-231-3128
Theodore Roosevelt Conservation Partnership
Washington, D.C.
202-639-8727
www.trcp.org
______
Mr. Lamborn. Thank you, and I enjoyed your comment there,
particularly toward the end, that these uses are not
incompatible.
We are going to have a round of questions. And then since
it is just the two diehards here, we will have a second round
of followup questions, assuming your time allows for that.
First of all, I will start for my five minutes with Mr.
Schroeder. According to the Interior Department, industry has
over 38 million acres of leases, yet is producing from only 16
million acres. Why isn't industry producing on the acreage it
already has? We have heard something about that during our
hearing today.
Mr. Schroeder. From an independent perspective, which I
represent, the independent is burdened by process. First and
foremost, the costs associated with bureaucratic delays, and
uncertainty of receiving a permit.
I was speaking to a party outside, and they were indicating
that with the budget of the government coming to a close on
Friday, that the efficiencies of the government are not there
by virtue of not being able to plan ahead. That is exactly what
happens with the environment of the bureaucratic process that
we are caught in, in the Federal land bank, if you would. You
can't reach out, you are delayed. APDs, drilling permits are
normally a year in abeyance. Other issues, such as species
evaluations and what-have-you, take an inordinate amount of
time.
I don't deny that we don't have compatibility, that we are
all striving for the same. But when the inefficiencies of the
bureaucracy cause delays, there is no way that you can get to
the properties and develop them in a timely sense.
Second, the activity that has been suggested that has not
taken place on public lands, there are a number of pre-drill
explorations, such as seismic and what-have-you, that aren't in
those numbers. There is a lot of geologic and geophysical
acquisition, if you would, before you can make the final
decision of whether to drill or not to drill.
Last, some of the acreage is not defined as being
productive once you go through the initial evaluation phase. So
there is a multiple of issues that affect these numbers. And
until you really drill down and understand what activity is
being generated on those lands, I am not sure that you can just
arbitrarily say we have X number of acres leased, and only Y
number of acres that really are receiving any type of
development.
Mr. Lamborn. So the bottom line is you can have a lease,
but that doesn't mean you have a permit.
Mr. Schroeder. Absolutely. And that is one of the biggest
problems, is that you can get a lease, followed by litigation
to that lease, after you have paid for it. And then second, it
takes probably a year to a year and a half to get a drilling
permit to allow you to develop that lease.
So your property rights, if you would, are being imposed
upon by virtue of you paying for that property.
Mr. Lamborn. OK, thank you. Now, speaking of litigation,
Commissioner Bolton, I would like to ask you a question. How
are environmental lawsuits affecting your county? Do you
believe they inhibit economic growth?
Mr. Bolton. Very much so, in the same aspect as Mr.
Schroeder was talking about. When you go out and you lease
something, when they can't come in and drill it in a county
such as ours with so much public lands, then we don't get the
jobs. We don't get the tax base in our county that, you know,
is derived from those activities.
That is about how simple it is. No jobs, no money. And in
rural communities in particular in Colorado, we can be hurting
for jobs, most definitely. We have probably dropped about 600
people in our county, I think, over the last couple of years,
with this decrease in activity.
I think we had, the numbers might not be exact, but we
probably had 20 to 30 rigs running in our county. And now, by
April here, I think we are going to be down to maybe four. So
with those rigs, you lose all the jobs, you lose all the
service companies that work with them companies.
Mr. Lamborn. Thank you. One last question. Ms. Skaer, you
stated--well, let's see. I will save it for the next round,
because we are almost to the end of our five minutes.
Mr. Holt. Go ahead. You are on a roll.
Mr. Lamborn. OK. OK, thank you, thank you. Ms. Skaer, you
have stated that the NEPA process is partially to blame for the
difficulty mineral resource companies have in getting
exploration and mining permits in a timely fashion; and that
the cost of delays caused by this process prevents some
projects from being realized.
Please comment further on the degree to which this is a
problem. And what do you recommend as to possible changes to
the NEPA process to help eliminate this problem?
Ms. Skaer. Right now, the average to obtain a permit in the
United States is between seven and 10 years for a mineral
project. There is significant capital investment that goes on
upfront. And after that seven to 10 years, which is assuming
there is no litigation, but you can't assume that any more.
Because in my 14 years at Northwest Mining, I have begun to see
that every mineral project, every mining project gets sued, at
every step of the, of the process.
You compare that to provinces in Canada, which have
essentially the same environmental requirements that we have,
yet large-scale metal mines are receiving permits in two to
three years. And it is, their process doesn't have this need of
agency need to try to get a bulletproof, litigation-proof
proposal, which is just impossible.
A few years ago, Representative Cathy McMorris-Rodgers
chaired a NEPA task force that looked at ways to reform the
NEPA process. You know, I would like to see the Committee kind
of dust that off and take a look at it. It has some very good
recommendations in it, including putting some sidebars on the
time to process permits.
We would also like to see proposals that would require an
organization that would oppose a mine, if they want to appeal,
they should have to post bonds. Alaska and Montana are two
States I know of that have that requirement, where you have to
post a bond if you are going to appeal, to pay the costs of
delay if you lose that appeal.
The same should be true on the litigation side. If an
organization that goes through the administrative appeal
process, and the project is approved, turns to the Courts, they
should have to pay the costs if they lose in Court of the
delay, and the opportunity costs, and the lost jobs that are
caused by preventing that project from coming into production.
Mr. Lamborn. And there is precedent for that in other parts
of our legal system, our Judiciary.
Ms. Skaer. Yes, there are.
Mr. Lamborn. And one last thing. If you have to take seven
to 10 years, I would imagine that that would have a chilling
effect on investors, because you also have to factor in where
will the market for that mineral be in seven to 10 years. And
if it is marginal, they may just pull the plug.
Ms. Skaer. That is certainly true, you know. Metals,
minerals, commodities have cyclical markets. And while we are
in a time of unprecedented high metal prices right now, it was
just 10 years ago that we had unprecedented low mineral prices,
and we will have low mineral prices again.
So in making those business decisions, as companies weigh
the political risk involved in how long does it take to get a
permit versus, you know, trying to look in your crystal ball
and determine where metal prices will be down the road, you
begin to understand why companies will take the political risk
of investing in countries where they might risk nationalization
of their investment down the road; but because they can get
their permits quicker, you know, they believe that they might
be able to get that return on investment before, you know, some
change of a dictatorship occurs in some of these countries.
Mr. Lamborn. OK, thank you. Representative Holt.
Mr. Holt. Thank you, Mr. Chairman. Ms. Skaer, I would like
to ask you to elaborate briefly on your suggestion of a Good
Samaritan cleanup procedure. What sorts of projects would be
covered by that?
Ms. Skaer. They would be covered, what we would look at is
what we call the orphaned or abandoned mines, mines that were
built in this country prior to a regulatory system in place,
prior to our first environmental law, which was NEPA, in 1969.
Projects which, you know, lack a current responsible party.
Mr. Holt. And the idea, of course, would be to do away with
an impediment for cleaning them up. But what would provide the
incentive?
Ms. Skaer. Well, there are a couple of incentives. One is
that most of these abandoned mines happen to occur in the same
mining district where existing mines are. Mr. Holt, the fact is
that these historic abandoned mines are an albatross around the
industry today. When you go to permit hearings, scoping
hearings on new projects, mining opponents will go into the
past and use----
Mr. Holt. My question is, what would provide the incentive
for a company, for a miner, for a person, to clean it up? If we
remove the impediments, some of the liability that results,
that may be to the good. But what would provide the incentive?
Ms. Skaer. Well, part of the incentive----
Mr. Holt. Is it just to look after the welfare of the
industry, because it looks bad for the industry?
Ms. Skaer. No. It is cleaning up, you know, one, it is the
right thing to do to clean up these abandoned mines.
Mr. Holt. But do companies make decisions out there just
out of straight altruism? You know, invest money to clean it up
just because, you know, it is the right thing to do?
Ms. Skaer. In part, that is true. There is also a
business----
Mr. Holt. If you could give us, you know, draft legislation
on that, I would be interested to see it.
Mr. Schroeder, do you really believe that all fees to the
oil and gas industry are unnecessary?
Mr. Schroeder. No. I hope I didn't give that impression.
Mr. Holt. Did I misunderstand you? Could you clarify that,
please?
Mr. Schroeder. No, I hope I didn't give that impression. I
was talking strictly to new fees. Currently we have fees
associated with lease bonus, which gives us the opportunity at
some point to develop those leases. And they have an annual
lease rental, as we discussed earlier.
In addition there are application fees with respect to
drilling permits.
Mr. Holt. And so they are plenty high already, I guess you
are saying. And we don't need any----
Mr. Schroeder. I believe they are, yes. You know, they have
been raised over the last few years, and in addition of
covering, quote-unquote, the expenses by the BLM, a good
portion of the BLM activities are done through third-party
consultants. And we pay for those.
Mr. Holt. And if they were raised, they would cut into
profits, I guess?
Mr. Schroeder. Excuse me?
Mr. Holt. If they were raised, they would cut into profits.
Mr. Schroeder. Absolutely.
Mr. Holt. That is your reasoning.
Mr. Schroeder. Yes.
Mr. Holt. I see. All right. Now, what does it mean to you
about the size of the fees? The fees don't seem to be any
impediment here. There are applications made, and thousands of
permits issued. There doesn't seem to be a lack of demand;
companies seem to think that they are getting a bargain here.
Mr. Schroeder. I can't respond to what other companies feel
they are receiving or not. You would have to take a look at
where that fee structure is with respect to who is making the
applications. And again, I am representing the independent
producer, and by virtue of we run on a different scale, if you
would, than, quote-unquote, all the references to big oil. We
can't afford to have non-performing dollars out of our capital
budget, put forward into receiving a permit on acreage that we
have successfully purchased, and have property rights to, to
sit there for a year or two waiting for a response, to be able
to develop that acreage.
Mr. Holt. And to whom do we owe the greater responsibility
for return on this use? Is it the developer, the extractor, or
is it the public?
Mr. Schroeder. I think it is a shared rate of return. And I
think that is demonstrated by virtue of the royalties, the
bonuses, the permits that have been received by the American
citizen relative to development on public lands.
Mr. Holt. With your permission, Mr. Chairman, may I go? Mr.
Fosburgh, do you think that BLM actions, such as implementation
of the Wildlands Order, would adversely affect oil and gas
production? Or to turn it more to your area of expertise, do
you think that they, that particularly the Wildlands Order,
would benefit the constituency that you are speaking of here?
Mr. Fosburgh. Well, I have no doubt, Mr. Holt, that the
Wildlands Order will benefit hunters and anglers. Because it
becomes, it creates a process whereby the public, including the
folks that we represent, can get engaged to say what areas
matter to them. And that they get them set aside so they not
get trashed. I mean, that is the bottom line.
Now, clearly that is probably going to mean that some areas
are going to be off limits to oil and gas development. But
there are probably some areas that ought to be off limits to
oil and gas development. It is not appropriate every place.
There are special places that ought to be protected, and this
is finally a mechanism, you know, which we lost when that
Norton-Leavitt settlement back in the 2000s happened, to set
these areas aside. Because it would really mean a lot to the
general recreationalists and hunters and fishermen.
Mr. Holt. And would you have any comments on the effects on
revenue, of these actions?
Mr. Fosburgh. Well, I think that people understate
routinely the value of the recreation economy, including
hunting and fishing. I threw out some statistics in my remarks,
but every time somebody goes to Grand Junction or Pinedale or
anyplace like that to hunt and fish, they do a lot more than
just buy a license. You know, they go there, they stay in a
motel, they stay at restaurants. They buy ammo, they buy
fishing rods.
You know, the trickle-down economy is pretty well
documented by the Outdoor Industry Association and lots of
others. The Fish and Wildlife Service makes some documentation
of this every 10 years. And it is significant.
And the good thing about it is these are jobs that give
forever. You are not going to play out, you know, a mule deer
herd if you manage them properly. You are always going to play
out a non-renewable resource eventually.
Mr. Holt. And do you have any comment on Mr. Schroeder's
assertion that any new fees would be unnecessary?
Mr. Fosburgh. Well, you know, frankly, I don't know that
the issue is fees as much. I mean, obviously we have a budget
deficit and we need to deal with it. You know, I am not the
National Taxpayers Union. You know, I don't really, it is not
my job to say that they are paying too much or they are paying
too little.
What I want to make sure of is that the special places out
there in the fish and wildlife are getting protected. And if
that is, a way to do that is to have a little bit higher fees,
I think the polling all shows that the general public supports
making industry pay a little bit more if that means better
protection over fish and wildlife.
If it is simply an issue of putting more money into the
coffers of the Federal government, I am a lot less passionate
about that. I would much rather see, you know, if there are new
fees, that translate into better management on the ground.
Mr. Holt. Well, I thank you for your articulate comments,
because it is often the case in a hearing such as this that
ordinary citizens who are not engaged in development activities
are not as heard, not as well heard. And I thank you for your
testimony.
Mr. Lamborn. And I have a couple of follow-up questions,
and then----
Mr. Holt. Yes, I have completed mine.
Mr. Lamborn. OK. But if one gets sparked, feel free to jump
in.
Mr. Schroeder, I have two final questions. If costs are
increased on oil and gas--and I realize that my colleague,
Representative Holt, correctly pointed out that sometimes they
cannot be passed on, because there is an inelastic price
ceiling set by a global market. Like in oil, for instance.
So if prices cannot be passed on and have to be absorbed,
what does that do to profitability; and hence, investment? By
either shareholders, if it is a public company, or other
investors if it is a privately held company.
Mr. Schroeder. Generally, it marginalizes profitability.
And you are right that a lot of those costs cannot be passed
on. Even with natural gas, which is a domestic resource, it is
governed by marketplace and competition within the United
States.
And with respect to investment for smaller companies, as
Laura indicated, that if you can't invest in a timely manner,
that investment opportunity usually diminishes, and they can go
elsewhere to invest in a given project.
Mr. Lamborn. So if we look at the raw numbers from one of
the Federal agencies saying that so many permits have been
issued, that doesn't address the marginal ones that fell away
and were never done in the first place.
Mr. Schroeder. That is correct. And again, we have to
understand, too, without getting in too much detail, not
knowing where these permits are and what areas are located in,
you can have multiple permits off of a given well pad, after
the initial well is drilled.
So therefore, it doesn't, it doesn't evaluate, let's say
perhaps maybe on an acre-by-acre basis, the numbers that are
being proposed that we have X number of tens of millions of
acres undefined.
Mr. Lamborn. OK, thank you.
Mr. Schroeder. You really need to drill down into those
numbers to see what they represent. But the bottom line is for
small independents, your equity capital goes away, and your
profitability diminishes. And with the imposed numbers that are
coming from Washington, it gets pretty marginal, relative to
can a small independent stay in business.
Mr. Lamborn. OK. Thank you. And finally, Ms. Skaer
addressed litigation and its impact on minerals. What is the
impact of litigation in the environment we have, where almost
everything that moves gets sued, in oil and gas? And then do
you have any--what is that doing, and do you have any
recommendations how to keep that under control?
Mr. Schroeder. Is that directed to her?
Mr. Lamborn. No, to you. Yes, she addressed mineral, and if
you could address oil and gas.
Mr. Schroeder. Excuse me, excuse me. As far as litigation?
Litigation is just a nasty process, it really is. There is no
way that with anyone being able to sue for any occasion, that
allows you, from an efficiency standpoint, either by the
agencies themselves or by operators themselves, that they can
logically and efficiently process and develop. There is no way
that you can do that.
And I feel sorry for the BLM, to be honest with you, from
the standpoint that over 50 percent of their time is wrapped up
in litigation.
Now, we are talking about raising fees to offset their
permitting inspections and what-have-you. That is not where the
money is going. The money is going into litigation. It is not,
it is not helping them at all to raise money whereby you think
that there are going to be more efficient inspections, or a
better process.
The litigation is chewing up their budget, and it is
chewing up their resources.
Mr. Lamborn. Any recommendations on keeping that under
control?
Mr. Schroeder. There has to be, like Laura indicated, there
has to be some ramifications of a party suing for the purpose
of suing. That if it isn't legitimate, that they pay for their
own costs associated with that.
Right now the American public is paying for all of those
costs. Again, a net back against the revenue that is generated
from energy per se, a good portion of that is going back in to
offset that litigation. And I don't think that is where the
American people----
Mr. Lamborn. And is the leaseholder having to pay lease
payments while these lawsuits wend their way through the
Courts?
Mr. Schroeder. Oh, absolutely, absolutely.
Mr. Lamborn. So the lease isn't shortened, the lease isn't
extended, and the annual payments aren't forgiven.
Mr. Schroeder. And many times over, there is no opportunity
to develop that lease while that litigation is going on. So we
talk about well, we have all these permits out there, we have
leased all of this acreage. But how much of it is being
challenged through litigation, whereby the operator who
purchased that lease has no rights to develop it until the
litigation is finalized?
Mr. Lamborn. OK, thank you. Anything from----
Mr. Holt. No, thank you, Mr. Chairman.
Mr. Lamborn. OK. I want to thank you all for being here. Be
aware that Members of the Committee may submit questions to you
in writing. We would ask for a prompt response on those for the
record.
Thank you for being here, and this hearing is adjourned.
[Whereupon, at 12:44 p.m., the Subcommittee was adjourned.]