[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]





                     DOMESTIC OIL AND NATURAL GAS:
                          ALASKAN RESOURCES,
                       ACCESS AND INFRASTRUCTURE

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

                           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

                               __________

                         Thursday, June 2, 2011

                               __________

                           Serial No. 112-38

                               __________

       Printed for the use of the Committee on Natural Resources






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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 Thursday, June 2, 2011...........................     1

Statement of Members:
    Hastings, Hon. Doc, a Representative in Congress from the 
      State of Washington........................................    32
        Prepared statement of....................................    33
    Holt, Hon. Rush D., a Representative in Congress from the 
      State of New Jersey........................................     3
        Prepared statement of....................................     4
    Lamborn, Hon. Doug, a Representative in Congress from the 
      State of Colorado..........................................     1
        Prepared statement of....................................     2

Statement of Witnesses:
    Glenn, Richard, Executive Vice President of Lands and Natural 
      Resources, Arctic Slope Regional Corporation...............    15
        Prepared statement of....................................    16
    Lawrence, David T., Executive Vice President, Exploration and 
      Commercial, Shell Energy Resources Company.................    18
        Prepared statement of....................................    19
    Quarterman, Cynthia L., Administrator, Pipeline and Hazardous 
      Materials Safety Administration, U.S. Department of 
      Transportation.............................................    28
        Prepared statement of....................................    29
    Sullivan, Dan, Commissioner, Alaska Department of Natural 
      Resources..................................................     6
        Prepared statement of....................................     7
                                     


 
OVERSIGHT HEARING ON ``DOMESTIC OIL AND NATURAL GAS: ALASKAN RESOURCES, 
                      ACCESS AND INFRASTRUCTURE.''

                              ----------                              


                         Thursday, June 2, 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 10:07 a.m. in 
Room 1334, Longworth House Office Building, Hon. Doug Lamborn, 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Lamborn, Fleming, Rivera, Duncan 
of South Carolina, Gosar, Flores, Landry, Johnson, Hastings, 
Holt, and Sarbanes.
    Also present: Representative Young.

 STATEMENT OF HON. DOUG LAMBORN, A REPRESENTATIVE IN CONGRESS 
                  FROM THE STATE OF COLORADO.

    Mr. Lamborn. 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 
for an oversight hearing to hear testimony on Domestic Oil and 
Natural Gas: Alaskan Resources, Access, and Infrastructure.
    Under Committee Rule 4[f], opening statements are limited 
to the Chair and Ranking Member of the Subcommittee. I have 
talked with staff for the Ranking Member and as soon as he gets 
here, which will be any moment, he will be able to make his 
opening statement, even if it is slightly out of order. So that 
will be momentarily.
    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. Hearing no objection, 
so ordered.
    I also ask unanimous consent that the gentleman from 
Alaska, Mr. Young, a member of the full Natural Resources 
Committee, be allowed to join us on the dais when he appears 
and to participate in the hearing. Without objection, so 
ordered.
    Now I recognize myself for five minutes for an opening 
statement. Today's hearing will focus on the tremendous 
resources that are on- and offshore of Alaska and the critical 
infrastructure that brings these resources to the U.S. market.
    Alaska has been, and will continue to be, an integral part 
of our nation's energy security. The opportunity and promise 
that has always made Alaska a special place is particularly 
true when it comes to energy. There is no doubt that Alaska 
holds tremendous resources. The offshore of Alaska is estimated 
to hold at least 27 billion barrels of oil and 132 trillion 
cubic feet of natural gas. But that is just the start. Onshore 
there are potentially an additional 14 billion barrels of oil 
just waiting for development.
    Currently, in Alaska alone, the oil and natural gas 
industries support over 43,000 American jobs and comprises 16 
percent of the State's wealth. Utilizing these resources will 
help decrease our foreign dependence, create jobs, and keep 
revenue here in the U.S., but accessing these resources is also 
the main source of frustration.
    One example has been development of the National Petroleum 
Reserve Alaska, an area designated both in name and in status 
as an area to provide oil and natural gas exploration, which 
stymied by the inability of the Army Corps of Engineers and the 
EPA to process a permit for the pipelines and roads necessary 
to transport the petroleum out of the petroleum reserve. This 
is a problem that the President should step in and untangle. 
There are few more egregious examples of bureaucratic red tape, 
stifling development of our domestic resources than the problem 
facing oil and gas developers in the NPRA today.
    But Alaska isn't just home to vast resources. It is also 
home to tremendous achievements of engineering. The 
Transatlantic Pipeline System, TAPS, is one of the great 
engineering achievements of our nation. This 800-mile pipeline 
system has resulted in 16 billion barrels of oil flowing from 
the northern reaches of North America into the cars of the 
western United States. At the same time, it has kept the money 
flowing from American consumers into the American Treasury.
    This is, in many ways, one of the most important reasons we 
need to focus on how to ensure the pipeline remains viable and 
continues to serve as one of the key components of Alaskan 
energy infrastructure that serves the American people. Each of 
those 16 billion barrels represents one small victory for 
domestic development over foreign dependence. But at the same 
time, every barrel of capacity in the TAPS that goes unused is 
one more missed opportunity to reduce our dependence on foreign 
sources of oil.
    Witnesses before this Subcommittee have often said that we 
don't have a lack of resources to curb our foreign dependence; 
we have a lack of a clear policy. It can and should be the 
policy of this government to develop the resources in our 
National Petroleum Reserve quickly, efficiently, and 
responsibly in order to reduce our foreign dependence, to 
create jobs, and to keep our revenue here at home.
    I want to thank all the witnesses again for being here 
today and I look forward to hearing your testimony. I now 
recognize the Ranking Member for five minutes for his opening 
statement.
    [The prepared statement of Mr. Lamborn follows:]

          Statement of The Honorable Doug Lamborn, Chairman, 
              Subcommittee on Energy and Mineral Resources

    Today's hearing will focus on the tremendous resources that are on 
and offshore of Alaska and the critical infrastructure that brings 
those resources to the U.S. market. Alaska has been and will continue 
to be an integral part of our nation's energy security. The opportunity 
and promise that has always made Alaska a special place, is 
particularly true when it comes to energy.
    There is no doubt that Alaska holds tremendous resources. The 
offshore of Alaska is estimated to hold at least 27 billion barrels of 
oil and 132 trillion cubic feet of natural gas. But that is just the 
start, onshore there are potentially an additional 14 billion barrels 
just waiting for development. Currently in Alaska alone, the oil and 
natural gas industry supports over 43,000 American jobs and comprises 
16% of the State's wealth. Utilizing these resources will help decrease 
our foreign dependence, create jobs and keep revenue here in the U.S. 
But accessing these resources is also the main source of frustration.
    One example has been development of the National Petroleum Reserve 
Alaska, an area designated both in name and in status as an area to 
provide oil and natural gas exploration, which sits stymied by the 
inability of the Army Corps of Engineers and the EPA to process a 
permit for the pipelines and roads necessary to transport the petroleum 
out of the petroleum reserve. This is a problem that the President 
should step in and untangle. There are few more egregious examples of 
bureaucratic red tape stifling development of our domestic resources 
than the problem facing oil and gas developers in the NPRA today.
    But Alaska isn't just home to vast resources; it is also home to 
tremendous achievements of engineering. The Trans Alaska Pipeline 
System, or TAPS, is one of the great engineering achievements of our 
nation. This 800 mile pipeline system has resulted in 16 billion 
barrels of oil flowing from the northern reaches of North America into 
the cars of the Western United States, at the same time it has kept the 
money flowing from American consumers into the American treasury. This 
in many ways is one of the most important reasons we need to focus on 
how to ensure the pipeline remains viable and continues to serve as one 
of the key components of Alaskan energy infrastructure that serves the 
American people.
    Each of those 16 billion barrels represents one small victory for 
domestic development over foreign dependence. But at the same time, 
every barrel of capacity in the TAPS that goes unused, is one more 
missed opportunity to reduce our dependence on foreign sources of oil.
    Before this subcommittee it has often been said that we don't have 
a lack of resources to curb our foreign dependence, we have a lack of 
clear policy. It can and should be the policy of this government to 
develop the resources in our National Petroleum Reserve, quickly, 
efficiently, and responsibly in order to reduce our foreign dependence, 
create jobs and keep our revenue here at home.
    I want to thank all the witnesses for being here today and look 
forward to hearing your testimony.
                                 ______
                                 

STATEMENT OF HON. RUSH HOLT, A REPRESENTATIVE IN CONGRESS FROM 
                    THE STATE OF NEW JERSEY

    Mr. Holt. Thank you, Mr. Chairman. I thank the witnesses 
for coming today for what is indeed an important hearing.
    There is no question that petroleum is important to 
Alaska's economy, to our national economy, not just for the 
economy of producing, refining, and distributing the petroleum, 
but for how dependent our economy is for the use of it. But we 
also must look at the bigger picture and it is worth holding 
this hearing about Alaska because Alaska really lays out in a 
stark way all of the various issues that are at play here.
    Alaska and the Arctic are on the front line, for example, 
of the effects of global climate change. Alaska has warmed at 
more than twice the rate of the rest of the United States in 
the last 50 years with winters that are now on average 6 
degrees Fahrenheit warmer. And as the Arctic regions warm one 
of the risks is melting permafrost, which can undermine the 
structural integrity of roads and pipelines and other 
infrastructure.
    As we examine oil and gas resources and development, we 
should also be examining the effects that that development has 
on our climate and the climate of the Arctic. We also should 
examine the other effects that oil and gas development have on 
the environment. This January crude oil was discovered leaking 
into the basement of a pump station in part of the TransAlaska 
pipeline and the source was a below-ground pipe encased in 
concrete leading to Pump Station No. 1 near Prudhoe Bay. The 
spill forced the shutdown of the pipeline and resulted in 
spilling more than 13,000 gallons of oil.
    This Committee has jurisdiction over the pipeline and we 
need to ensure that the pipeline's operator, Alyeska, is taking 
all the appropriate corrective actions to ensure that spills 
don't happen.
    But this recent spill is not the only one. We watched last 
year as BP was unable to stop an oil spill in the Gulf for 87 
days that ultimately spewed four million barrels of oil. And in 
the spring of 2006, on the North Slope, BP had two other spills 
from its pipelines, which together released more than 5,000 
barrels. And an investigation found that the cause was BP's 
complete and total failure to inspect properly and maintain its 
pipelines to prevent corrosion.
    Despite the challenges faced in maintaining an onshore 
pipeline in Alaska, some are advocating for drilling in the 
still relatively unknown waters of the Arctic Ocean. The 
independent commission on the BP spill recommended that we 
needed better scientific understanding of the Arctic 
environment before moving forward with drilling offshore in 
Alaska.
    As we saw last year in the Gulf, we need to make sure that 
the companies have the capability to actually contain and 
respond to a spill, particularly in harsh environments such as 
we are discussing here. Although big oil would like the public 
to think that Democrats are against oil production, it is worth 
noting that House Democrats have introduced legislation that 
would require lease sales in the National Petroleum Reserve, 
the NPR Alaska. At least once a year, these have been 
introduced.
    Building on that legislation, and even as U.S. oil 
production is at its highest level in a decade, President Obama 
recently announced in his weekly radio address that he would be 
directing the Department of the Interior to conduct annual sale 
leases at NPRA.
    Now the Chairman talked about reducing our dependence on 
foreign oil. It is a noble goal. We should work toward it, but 
we have to understand that this country peaked in oil 
production 40 years ago. You could drill from Asbury Park to 
the Bering Straits and this country will not for the 
foreseeable future ever again produce half as much oil as we 
did. In fact, as far into the future as this wonderful Rockwell 
painting is in the past, we will be using very little 
petroleum.
    So we have to bear that in mind as we find a way forward 
for our country. And just as shale gas has undermined the 
economics of North Slope natural gas, shale oil may do the same 
for oil production in Alaska and off the coasts. The New York 
Times reported oil companies have identified 20 new onshore oil 
fields in the Lower 48 that could collectively increase the 
nation's output by 25 percent for a while.
    So with oil use down and U.S. oil production up, for the 
moment, the prospect of additional fields to tap in areas once 
thought to be spent we need to carefully examine the risks and 
rewards in drilling in environmentally sensitive and rapidly 
warming areas of Alaska.
    I thank the Chair for calling this hearing.
    [The prepared statement of Mr. Holt follows:]

       Statement of The Honorable Rush D. Holt, Ranking Member, 
              Subcommittee on Energy and Mineral Resources

    Thank you Mr. Chairman.
    Alaska and the Arctic are on the front line for the effects of 
global climate change. Alaska has warmed more than twice the rate of 
the rest of the United States in the last 50 years, with winters that 
are now on average over 6+F warmer. As the arctic regions warm, one of 
the risks is melting permafrost, which can undermine the structural 
integrity of roads, pipelines and other infrastructure. As we examine 
oil and gas resources and development in Alaska, we also should be 
examining the effects of that development on our climate in the Arctic 
as well.
    We also should examine the other effects of oil and gas development 
on the Alaskan environment. This January, crude oil was discovered 
leaking into the basement of a pump station that is part of the Trans-
Alaska Pipeline System (TAPS). The source was a below-ground pipe, 
encased in concrete, leading into Pump Station number 1, near Prudhoe 
Bay. The spill forced the shutdown of the pipeline and resulted in the 
spillage of 13,314 gallons of oil. This Committee has jurisdiction over 
TAPS, and we need to ensure that the pipeline's operator, Alyeska, is 
taking all of the corrective actions needed to ensure that spills do 
not happen in the future.
    But that is not the only recent pipeline spill on the North Slope. 
We all watched last year as BP was unable to stop an oil spill in the 
Gulf for 87 days that ultimately spewed more than 4 million barrels of 
oil. But in the spring and summer of 2006, on the North Slope, BP had 2 
other spills from its pipelines, which together released more than 
5,000 barrels of oil. An investigation found that the cause was BP's 
complete and total failure to properly inspect and maintain its 
pipelines to prevent corrosion.
    Despite the challenges faced in maintaining an onshore pipeline in 
Alaska, some are advocating for drilling in the still relatively 
unknown waters of the Arctic Ocean. The independent Commission on the 
BP spill recommended that we needed a better scientific understanding 
of the Arctic environment as we move forward with drilling offshore in 
Alaska. As we saw last year in the Gulf, we need to make sure that oil 
companies have the capabilities to actually contain and respond to a 
spill, especially when it comes to the harsh environments of frontier 
regions like offshore in Alaska.
    Although Big Oil would like the public to think Democrats are 
against oil production, the House Democrats have introduced legislation 
that would require lease sales in the National Petroleum Reserve--
Alaska (NPR-A) at least once a year. Building on that legislation and 
even as U.S. oil production is at its highest level in nearly a decade, 
President Obama recently announced in his weekly radio address that he 
would be directing the Department of Interior to conduct annual lease 
sales in the NPR-A, while also respecting sensitive areas there.
    The NPR-A also has significant natural gas deposits--an estimated 
53 trillion cubic feet according to the latest USGS assessment. But 
there currently is no method of delivering that natural gas to market. 
Congress has been working to facilitate the development of a natural 
gas pipeline from the North Slope since 1976 and yet none has been 
constructed. In fact, just a few weeks ago, BP and Conoco Phillips 
announced that they were abandoning their proposal to build a 1,700 
mile natural gas pipeline from the North Slope to U.S. markets. 
Moreover, the Energy Information Administration has concluded that a 
natural gas pipeline would likely not be economic for the next 20 
years, especially given the recent discoveries of shale gas in the 
Lower 48 states.
    Just as shale gas has undermined the economics of North Slope 
natural gas, shale oil may do the same for oil production in Alaska and 
off her coasts. As reported last week in the New York Times, oil 
companies have identified 20 new onshore oil fields in the Lower 48 
states that could collectively increase the nation's oil output by 25 
percent within a decade. With U.S. oil use down, U.S. oil production 
up, and the prospect of additional fields to tap in areas once thought 
to be spent, we need to carefully examine the risks and rewards of 
drilling in environmentally sensitive and rapidly warming areas in 
Alaska.
    These are all important issues for this committee to examine and I 
look forward to the testimony of our witnesses today.
                                 ______
                                 
    Mr. Lamborn. All right. Thank you.
    We will now hear from our witnesses. And I want to invite 
The Honorable Dan Sullivan, Commissioner of the Alaska 
Department of Natural Resources, Richard Glenn, Executive Vice 
President of Lands and Natural Resources, the Arctic Slope 
Regional Corporation, David T. Lawrence, Executive Vice 
President, Exploration and Commercial of Shell Energy Resources 
Company, and The Honorable Cynthia Quarterman, Administrator, 
Pipeline and Hazardous Materials Safety Administration, U.S. 
Department of Transportation.
    Like all 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 automatic, so you need to push the 
button to make them work. I also want to explain how the timing 
lights work. When you begin to speak, the clerk will start the 
timer and a green light will appear. After four minutes, a 
yellow light comes on. And then at five minutes a red light 
comes on, and at that point I would ask that you finish the 
sentence that you are working on and conclude.
    Mr. Sullivan, you may begin.

           STATEMENT OF DAN SULLIVAN, COMMISSIONER, 
             ALASKA DEPARTMENT OF NATURAL RESOURCES

    Mr. Sullivan. Good morning Mr. Chairman and Representative 
Holt. My name is Dan Sullivan. I am the Commissioner of the 
Alaska Department of Natural Resources--DNR as we are known in 
Alaska. We manage one of the largest portfolios of oil, gas, 
minerals, renewables, land and water in the world.
    I am a former Attorney General of the State of Alaska and 
also a former Assistant Secretary of State that had 
responsibilities over global energy, economic and finance 
issues.
    Mr. Chairman, our country faces very serious energy 
security challenges and Alaska can and should be able to play a 
significant role in partnership with the Federal Government in 
helping our citizens address these challenges. Unfortunately, 
right now that is not happening, and I would like to explain 
that.
    As you mentioned, Mr. Chairman, Alaska is home to one of 
America's most vital components of energy infrastructure, TAPS, 
and Congress played the key role in the rapid construction and 
development of TAPS. Unfortunately, TAPS sits two-thirds empty 
from its massive peak of 2.1 million barrels a day to about 
620,000 barrels a day, and dropping. Working together, we are 
confident that we can fix this situation and further promote 
America's energy security.
    First, as you mentioned, Mr. Chairman, the North Slope of 
Alaska, both on- and offshore State and Federal lands, remains 
a world-class hydrocarbon basin by any measure with billions of 
conventional and unconventional oil and trillions of cubic feet 
of natural gas.
    Second, the State of Alaska is doing all it can to reverse 
the TAPS throughput decline with a comprehensive strategy that 
includes significant fiscal reform, permitting overall, new 
infrastructure projects and increased access to state lands, 
including state leases on the borders of ANWR.
    And third, Alaska is one of the most environmentally 
stringent places on earth to explore and produce hydrocarbons 
and is the world's leader in developing technologies that have 
dramatically reduced the footprint of exploration and 
development activities. We are very proud of this record, Mr. 
Chairman and my written testimony focuses on this extensively.
    But we are missing a critical partner in the development of 
Alaska's massive hydrocarbon resources and that partner is the 
Federal Government. The Federal Government's policies in Alaska 
have shifted from helping us protect the environment, which we 
certainly support because we care deeply about our environment, 
to proactively shutting down resource development. This is not 
just rhetoric. If you look at pages 9 through 11 of my 
testimony, I provide six specific examples in less than two 
years where the Federal Government has made decisions that will 
stall, kill, or delay resource development on state and Federal 
lands in Alaska.
    This anti-development posture is the cause of extreme 
frustration and anger with the vast majority of Alaskans. The 
state has done all it can, countless meetings, letters, public 
comments, and yes, even suing our own Federal Government to 
dissuade the Obama Administration from pursuing and continuing 
such a course. Why? Because locking up Alaska's resources not 
only hurts Alaskans, but it significantly undermines broader 
American interests.
    Rarely has there been a Federal policy that fails on so 
many fronts. Jobs and economic growth, energy security, trade 
and Federal budget deficits, national security are all 
undermined when Americans are prevented from producing energy 
from the largest resource basin in our country.
    Ironically, this policy also undermines global 
environmental protection because it drives resource development 
overseas to places like Brazil, Kazakhstan, Uzbekistan, Russia, 
Saudi Arabia. Mr. Chairman, I have been to all of those 
countries and I can guarantee this Committee they don't have 
nearly the stringent environmental standards or ability to 
protect the environment that the State of Alaska does.
    But my main purpose for traveling from Alaska today is not 
to complain, but to redouble our efforts to achieve the Federal 
partnership that we believe is so critical to Alaska and 
America's energy security success.
    In closing, I believe there are three important things 
Congress can do. One is support the Alaska Governor Sean 
Parnell's goal of a million barrels of oil a day through TAPS 
within ten years and make that a national priority of the 
Congress.
    Second, to continue to work on permitting reform to 
expedite and bring certainty to Federal permitting decisions. 
And third, Congress should continue its vigilant oversight of 
Federal agencies that make resource development decisions in 
Alaska. As a former attorney general, I believe that some of 
these decisions are made with little regard to national policy 
set by Congress and Federal law and I think it is important to 
keep close vigilance on that. Thank you very much.
    [The prepared statement of Mr. Sullivan follows:]

               Statement of Dan Sullivan, Commissioner, 
            Department of Natural Resources, State of Alaska

I. Introduction: America's Energy Challenge
    Chairman Lamborn, Ranking Member Holt, and members of the House 
Subcommittee on Energy and Mineral Resources, on behalf of Governor 
Sean Parnell, the State of Alaska welcomes this opportunity to testify 
to you about issues of such critical importance to Alaskans. I also 
wish to express our eagerness to work with the U.S. Congress and the 
Administration to see that Alaska can meet its potential to deliver to 
the nation billions of barrels of domestically produced oil and 
trillions of cubic feet of gas for the U.S. economy. More specifically, 
we want to demonstrate to this committee and the rest of your 
colleagues in the Congress the vital role Alaska can play in enhancing 
America's long-term energy security, expanding American employment, 
growing the economy, providing significant revenue to federal, state, 
and local governments, and delivering billions of barrels of 
domestically produced hydrocarbons to the U.S. marketplace.
Biographical Information
    Before getting into substantive matters, I would like to briefly 
mention my professional background as it pertains to this testimony. I 
have been serving as commissioner of the Alaska Department of Natural 
Resources (DNR), a state agency of over 1,100 personnel, since December 
2010. Under the Alaska Constitution, my primary responsibility as the 
DNR commissioner is to maximize the development of the state's 
resources in a manner that furthers the public interest. DNR manages 
one of the largest portfolios of oil, gas, minerals, land, and water 
resources in the world, including approximately 100 million acres of 
uplands, 60 million acres of tidelands, shore lands, and submerged 
lands, and 40,000 miles of coastline.
    Prior to my appointment as DNR commissioner, I served as the Alaska 
Attorney General and as the U.S. Assistant Secretary of State for 
Economic, Energy, and Business Affairs under Secretary of State 
Condoleezza Rice. I am also a United States Marine, having served on 
active duty and in the reserves as an infantry officer since 1993.
II. Alaska's North Slope Remains a World Class Hydrocarbon Basin
    Alaska is one of the nation's most critical and prolific oil-
producing states. Even though production is only about one third of 
what it was at its peak in 1989, Alaska's North Slope, both on and 
offshore, remains a world-class hydrocarbon basin with extraordinary 
potential. According to the U.S. Geological Survey (USGS), Alaska 
accounts for over 30% of the nation's technically recoverable oil and 
gas resources, with the North Slope estimated to hold approximately 40 
billion barrels of technically recoverable conventional oil and 236 
trillion cubic feet of natural gas.
    Alaska's Outer Continental Shelf (OCS) constitutes an important 
share of these totals, with an estimated potential for 27 billion 
barrels of conventional oil and 132 trillion cubic feet of natural gas. 
Studies have found that Alaska Beaufort and Chukchi Sea development 
could result in about 700,000 barrels of oil per day for 40 years. A 
February 2011 report by Northern Economics and the Institute of Social 
and Economic Research at the University of Alaska states that 
development of new oil and gas fields in the Beaufort and Chukchi seas 
could result in an estimated annual average of 54,700 new jobs for 50 
years. These direct and indirect jobs would be created both in Alaska 
and the Lower 48. With $120/barrel oil, total government oil and gas 
production from the OCS would be $312 billion.
    Considerable reserves also exist onshore. A United States 
Geological Survey (USGS) report in 1998 showed that the 1002 Area \1\ 
in the Arctic National Wildlife Refuge (ANWR) may have the highest 
potential for an enormous oil field of conventional any place onshore 
in the United States, with an estimated 10.4 billion barrels of crude 
reserves. In 2008, the Energy Information Administration concluded that 
in the mean ANWR oil resource case, oil production resulting from the 
opening of ANWR could average about 780,000 barrels per day which is 
roughly equal to the amount the United States imports from Venezuela 
(827,000 bpd).
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    \1\ ANWR covers approximately 19 million acres; the oil lies under 
a portion of the coastal plain (1002 Area), which is about 1.55 million 
acres. The 1002 Area has been designated by Congress as an ``area of 
study'' to determine its environmental value and oil potential. Under 
federal law, Congress' decision on whether to make the coastal plain a 
wilderness area or whether to make it available for oil and gas 
development was to be deferred until the Department of Interior 
provided Congress with a recommendation. Close to 75% of Alaskans 
support opening the 1002 Area for development.

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    In addition to conventional oil and gas reserves, Alaska's North 
Slope contains massive quantities of unconventional resources: shale 
oil and gas, heavy and viscous oil, and gas hydrates. The U.S. 
Department of Energy has estimated that there are 36 billion barrels of 
heavy oil on the North Slope. (No current estimates exist of Alaska's 
shale oil and gas reserves.) Most of these unconventional resources are 
located onshore near existing infrastructure. Energy companies are 
beginning to investigate developing some of these resources in Alaska.
    Despite the extraordinary production and massive hydrocarbon 
potential, Alaska remains relatively underexplored compared to any 
other prolific oil and gas region in North America. Only 500 
exploration wells have been drilled within a 150,000-square-mile area 
on the North Slope--an area that maintains the highest undiscovered 
conventional oil and gas potential in Alaska. That calculates to three 
wells per 1,000 square miles. As a comparison, 75,000 square miles 
within the state of Wyoming, endowed with high oil and gas potential, 
has more than 19,000 exploration wells, or about 250 wells per 1,000 
square miles.
    With this remarkable potential, Alaska can and should play a 
pivotal role in helping our country meet its significant energy and 
security challenges; reduce our reliance on foreign oil; provide 
thousands of high paying jobs; reduce the nation's trade deficit; and 
provide significant revenue to local, state, and federal governments.
III. Alaska Has a Strong Record of Responsibly Developing Resources 
        While Protecting Our Environment; We Are Also a Leader in 
        Environmental Research
    Alaska has some of the most stringent environmental policies and 
regulations in the world and we are a leader in research for sound, 
responsible resource development. We love our state, not only for its 
economic opportunities, but also for its natural beauty, and we are 
very focused on protecting our environment.
    The State of Alaska strongly believes that responsible resource 
development and protecting the environment go hand in hand and we have 
a strong record of upholding the Alaska Constitution's mandate that the 
state pursue responsible resource development in a manner that 
safeguards the environment.
Alaska's Robust Efforts to Protect the Environment and Wildlife
    To ensure responsible resource development while protecting the 
environment, the state has devised a comprehensive system that imposes 
rigorous environmental protections. Before leasing any area to 
developing, the state issues a comprehensive ``Best Interest Findings'' 
that explains in detail the potential impacts of oil and gas 
development. A central component of the Best Interest Finding are the 
mitigation measures. These measures protect wildlife, fish habitats and 
populations, and protect subsistence and sport harvest activities 
against undue interference through guidance for site selection and 
implementation of drilling and related development facilities. Fuel 
storage facilities and refueling are addressed with requirements for 
secondary containment and protection of floodplains. Waste reduction 
and proper waste disposal practices are required. Access to leased 
areas is constructed to minimize adverse impacts.
    What follows are just a few of the additional measures the state 
requires before oil and gas development can proceed.
          State agencies follow a rigorous scientific protocol 
        to ensure the right combination of snow depth and temperature 
        are met before allowing cross-tundra travel or construction of 
        ice roads. Such protections ensure that the tundra is not 
        degraded.
          Before drilling wells, operators must get approval 
        from the state and explain how they will comply with strict 
        mitigation measures imposed by regulatory agencies; they must 
        demonstrate that their blow-out prevention equipment (BOP) is 
        up to the state's high standards; and they must get approval 
        for their oil-spill contingency plan.
          The state encourages the unitization of leases that 
        overlie reservoirs to minimize the environmental impacts of 
        development.
          Alaska law for oil discharge prevention and 
        contingency planning requires the plan holder to be able to 
        contain or control and clean up the realistic maximum oil 
        discharge within 72 hours.
          Alaska is the only state or federal governmental 
        jurisdiction that regulates flow lines. Flow lines transport 
        three phase liquids from the well head to the processing 
        centers, which separate gas and water from crude oil. Flow 
        lines are viewed as having the greatest corrosion potential and 
        are therefore considered to be the highest risk.
          Alaska mandates that operators use the best available 
        technology for oil discharge containment, storage, transfer, 
        and cleanup.
          State agencies impose significant bonding 
        requirements.
          Wildlife are closely monitored and protected. For 
        example, in March, after a petroleum worker notified the U.S. 
        Fish and Wildlife Service (USFWS) that a polar bear had emerged 
        from a den near their drill site, the operation was shut down 
        and all 50 employees evacuated in less than 12 hours.
    Our efforts at protecting the environment and wildlife have been 
successful. For example, when debating the development of TAPS, many 
predicted that oil and gas development would decimate caribou herds. 
These predictions have not come true. In fact, caribou numbers have 
increased dramatically over the past thirty years. The Central Arctic 
caribou herd, which occupies summer ranges surrounding Prudhoe Bay, has 
grown from 5,000 in 1975 to over 66,000 today.
    Even with a robust regulatory regime, the state continues to look 
for ways to improve its regulatory oversight. To this end, the state is 
engaged in a comprehensive gap analysis to better understand the 
spectrum of state agency oversight; better understand the effectiveness 
of authorities and enforcement over oil and gas operations; and to 
identify gaps or redundancies in state oversight and determine if they 
need to be filled or eliminated as appropriate.
    Because of the efforts taken by federal, state, and local 
governments and the energy industry, oil and gas development in Alaska 
is conducted in a safe and responsible manner with standards that 
exceed most other jurisdictions in the world.
Alaskan Innovations Minimize Environmental Impacts: The Shrinking 
        Footprint of Alaska Resource Development
    In addition to the state's regulatory oversight, Alaska is a leader 
in innovations that protect the environment. For example, extended 
reach drilling, horizontal wells, multiple completions, and close-
surface well spacing were all invented and pioneered for use in Alaska. 
These advances in drilling technology have greatly reduced the 
footprint of modern exploration and development wells in Alaska, while 
expanding their ability to stretch vertically and horizontally 
underground.
    More specifically, the first drill sites in the Prudhoe Bay field 
were built in the 1970s and covered 65 acres of land to accommodate the 
footprint of the drilling rigs of the day. By the time the first 
production wells were drilled in the Kuparuk River field in the early 
1980s, improvements in rig design and drilling techniques and the 
materials used in the wells meant that the area of the drill sites 
could be reduced by more than one-half; a 16-well drill site was 
reduced to just 11 acres. In the 1990s, the Alpine field in the 
Colville River Delta represents the next stage in drilling advancement. 
From a drill site of only 13 acres, 54 wells have been drilled and the 
extended reach of these wells can intercept an area eight miles across 
and penetrate 50 square miles of the field.
    Put simply, in just 30 years, surface footprint requirements have 
been reduced from over 2 acres per well at Prudhoe Bay, to one quarter 
(0.24) acre per well at Alpine.
    Advances in technology have also allowed for minimal impact during 
the exploration phase of development. For instance, onshore exploration 
drilling occurs only in the winter. Heavy equipment is brought out to 
remote sites on ice roads and the drilling rigs are assembled on ice 
pads. Ice roads have been used on the North Slope for decades. When the 
ice melts, there is no trace left of the pad. The only visible sign of 
prior activity is an eight-by-eight foot well house that will remain on 
location only because this well is part of a field under development 
and will one day produce oil. In short, it is possible to explore for 
oil on the North Slope and leave no visible footprint.
Substantial Studies Have Been Conducted Regarding Alaska OCS 
        Development
    Despite the considerable energy security and economic benefits of 
Alaska OCS development, some have suggested that before leasing 
additional OCS acreage, more scientific studies need to be conducted. 
We disagree.
    As part of the North Slope Science Initiative (NSSI), there are 
over 50 organizations and initiatives currently doing scientific work 
in the Arctic. The NSSI is formally authorized by the Energy Policy Act 
of 2005; its mission is to improve scientific and regulatory 
understanding of terrestrial, aquatic, and marine ecosystems in 
Alaska's North Slope region for consideration in the context of 
resource development activities and climate change.
    Since 1973, federal agencies have performed more than 5,000 
environmental studies to better understand the Alaska OCS. Over the 
past 30 years, the Department of the Interior (DOI) has funded nearly 
$300 million for environmental studies in Alaska. And since 2000, it 
has conducted 30-40 environmental studies each year, spending over $45 
million.
    Additionally, the National Academy of Sciences has produced three 
Alaska OCS reports on environmental science which guide OCS activity. 
Industry has also spent millions to better understand the Arctic 
ecosystem; Shell alone spent over $40 million in the last several years 
on environmental studies.
    On this strong scientific basis, the Obama Administration's 
Department of the Interior released a ``Survey of Available Data on OCS 
Resources and Identification of Resource Gaps'' in 2009. In this 
report, the DOI concluded: ``Overall, an adequate baseline of 
information exists to address the environmental effects of the OCS oil 
and gas program. . .in support of leasing decisions.'' Thus, according 
to the current administration, sufficient studies have been conducted 
to support oil and gas leasing.
IV. Co-Located With Alaska's Massive Hydrocarbon Basin Is One of 
        America's Most Important Energy Infrastructure Assets: TAPS
    The Trans Alaska Pipeline, 11 pump stations, several hundred miles 
of feeder pipelines, and the Valdez Marine Terminal constitute the 
Trans-Alaska Pipeline System (TAPS). At 800 miles long, the Trans 
Alaska Pipeline is one of the longest pipelines in the world; it 
crosses more than 500 rivers and streams and three mountain ranges as 
it carries Alaska's oil from Prudhoe Bay to Valdez.
    The first oil entered the pipeline in June of 1977. Since that 
time, TAPS has transported over 16.3 billion barrels of oil and natural 
gas liquids for the U.S. domestic market. Oil and natural gas liquid 
production through TAPS peaked at 2.2 million barrels per day in the 
late 1980s, representing 25% of the U.S. domestic production. Since its 
peak, however TAPS throughput has steadily declined. By 2003, 
production was down to one million barrels a day. Today, TAPS 
throughput averages about 630,000 barrels per day.
Congress Was Instrumental in the Development of TAPS
    Spurred by global concern over the 1973 oil crisis (OPEC embargo) 
and spiking energy prices that resulted in a severe U.S. and global 
recession, the U.S. Congress was instrumental in the approval and rapid 
development of TAPS. Congress approved construction of the pipeline 
with the Trans Alaska Pipeline Authorization Act of 1973. The principle 
focus of this Act is as relevant today as it was in 1973: ``the early 
development and delivery of oil and gas from Alaska's North Slope to 
domestic markets is in the national interest because of growing 
domestic shortages and increasing dependence upon insecure foreign 
sources.''
    Underscoring the urgency of the country's precarious energy 
security position, the Trans Alaska Pipeline Authorization Act also 
halted all legal challenges to delay construction of the pipeline and 
ensured that additional government studies would not be used to delay 
construction.
TAPS Throughput Decline Raises a Host of Difficult Issues
    The reduced flow of oil through TAPS has reached a point where the 
pipeline is now approximately two-thirds empty. Continued throughput 
decline raises a host of technical challenges due to the slower 
velocity of oil in the pipeline, longer transit times, and the 
resulting dramatic lowering of the temperature of oil during the winter 
months. These challenges include wax buildup, frost heaves, and ice 
crystals and ice plugs. The likelihood of these problems occurring 
increases with lower throughput, and they can cause additional TAPS 
shutdowns and oil leaks that could harm the environment. This past 
January, TAPS was shut down for five days as the result of a leak at 
Pump Station 1 that was contained in a building.
    The State of Alaska is working with industry to ensure that we are 
prepared to address these additional challenges in the near term as 
TAPS throughput decline continues. But clearly, the most effective way 
to address these technical challenges and the environmental risks that 
they may entail is to increase TAPS throughput.
A Premature Shutdown of TAPS Would Significantly Undermine U.S. 
        National Security and Energy Security Interests and Would 
        Devastate the Alaskan Economy
    The January 2011 shutdown of TAPS, during the heart of a cold 
Alaskan winter, not only focused attention on the significant technical 
challenges of decreased TAPS throughput, but also raised the specter of 
a broader premature shutdown of TAPS. Such a shutdown would 
significantly undermine U.S. national security and energy security 
interests and would devastate the Alaskan economy.
    A premature shutdown of TAPS would result in the stranding of 
billions of barrels of domestic oil in America's largest hydrocarbon 
basin. Oil prices would continue to soar. Thousands of jobs would be 
lost. U.S. refineries would likely have to turn to foreign sources of 
oil, as they did when TAPS shutdown in January, thereby increasing the 
U.S. trade deficit and undermining American national and energy 
security.
    Even at today's throughput rates, TAPS supplies the US with more 
than $24 billion of oil per year. If this amount of money was to be 
spent importing oil, the US trade deficit would increase by nearly five 
percent. Furthermore, the flow of oil from TAPS amounts to 53 percent 
of the oil produced on the West Coast and supplies 28 percent of the 
West Coast demand for crude oil. Interruptions in flow Pump Station No. 
1 incident last winter had meaningful effects on the regional market. 
Prices for crude oil on the West Coast immediately responded to the 
shutdown as refineries scrambled for supplies of foreign oil.
    A premature TAPS shutdown would also have a crushing impact on 
Alaskans. It has been estimated that one third of the Alaska economy is 
connected to the oil industry. The loss of North Slope oil production 
would deprive state and local governments of billions of dollars in 
annual revenue. Government services including education, public safety, 
and health care would be slashed and infrastructure projects would be 
significantly curtailed. Rural communities, particularly those that 
have significantly benefitted from oil development such as the North 
Slope Borough, would face a significant decrease in their standard of 
living.
    But continued TAPS throughput decline does not need to be Alaska's 
or the country's destiny. The massive North Slope hydrocarbon resource 
base remains available for development. What is needed to ensure a 
reversal of this decline are state and federal policies that promote 
increased investment, responsible resource development, and increased 
job creation on the North Slope.
V. The State of Alaska Is Doing All It Can to Arrest the TAPS 
        Throughput Decline in Order to Achieve the Goal of One Million 
        Barrels of Oil per Day within 10 Years
    The State of Alaska is pursuing several major policy initiatives to 
arrest the TAPS throughput decline. The cornerstone of this effort is 
Governor Parnell's recent proposal to the Alaska Legislature to 
increase Alaska's global competitiveness by enacting significant tax 
reform. Under Governor Parnell's plan, production taxes will be lowered 
and the state will offer credits to incentivize additional drilling.
    The state is in the process of enacting other reforms that will 
attract more investment and, ultimately, increase oil production on the 
North Slope and employment for Alaskans. For example, the Governor's 
budget focuses on developing significant infrastructure projects to 
build more roads to our abundant resources. We are also seeking to 
reform our permitting system to enhance timeliness, predictability, and 
efficiencies. The state is also holding lease sales on state lands 
surrounding ANWR and in the OCS on state lands.
    In the face of steadily declining production, Governor Parnell 
recently announced an ambitious but critical goal for Alaska and the 
country to increase TAPS throughput to one million barrels of oil 
production per day within a decade. This ambitious goal will be 
supported by an overall state strategy that seeks to:
          Enhance Alaska's global competitiveness and 
        investment climate;
          Ensure the permitting process is structured and 
        efficient in order to accelerate resource development;
          Facilitate and incentivize the next phases of North 
        Slope development, including: outer continental shelf (OCS), 
        federal onshore lands, heavy and viscous oil, shale oil, 
        smaller pools of conventional oil, and gas;
          Unlock Alaska's full resource development potential 
        by promoting constructive partnerships between the state and 
        key stakeholders to facilitate increased investment, 
        exploration, and production while protecting the state's 
        interests and safeguarding the environment;
          Promote Alaska's resources and positive investment 
        climate to world markets.
    The policies described above will significantly benefit Alaska, but 
will also significantly benefit our fellow citizens in the Lower 48 as 
they struggle with spiking oil and gas prices that affect their 
livelihood and standard of living. Unfortunately, the executive branch 
of the federal government does not have a similar focus. Indeed, as 
detailed below, their focus has been to proactively shut down or delay 
resource development throughout Alaska.
VI. Federal Decisions and Policies Have Sought to Proactively Shut Down 
        Resource Development in Alaska
    The importance of federal land to the future of oil and gas 
development in Alaska's Arctic must not be underestimated. Although 98 
percent of all of the North Slope oil production to date has come from 
state lands, the lion's share of the resource potential belongs to the 
federal government--fully 88 percent of the undiscovered technically 
recoverable conventional oil and 79 percent of the gas will be explored 
for on land under federal jurisdiction. As discussed above, development 
of these lands, in particular from the OCS, Arctic National Wildlife 
Refuge, and National Petroleum Reserve--Alaska (NPR-A), could result in 
production of well over a million barrels of oil a day.
    Unfortunately, the federal government has consistently denied 
access to these lands, made decisions that have added significant 
delays to promising projects, and pursued policies that have chilled 
the investment climate. More specifically, the federal government has 
made a series of decisions that prevent or stall responsible 
development of domestic energy in Alaska. We believe that the following 
list will be of concern to members of this committee and your 
colleagues in Congress:
    NPR-A (A Region Specifically Set Aside for Oil Exploration and 
Production)/CD-5 Critical Permit Denial. In 2010, the U.S. Army Corps 
of Engineers (Corps) and the EPA and Fish and Wildlife Service derailed 
ConocoPhillips (CP) development of CD-5, which is a field on the 
eastern edge of the NPR-A. Once infrastructure is in place, CD-5 will 
open satellite fields in the eastern NPR-A to development. The state, 
CP, and Native communities worked with the Corps for years on the 
project to ensure that responsible safeguards are in place to open this 
field to development. In response to concerns raised by some 
stakeholders, the project was modified to minimize environmental 
impacts and the project garnered strong support from all stakeholders. 
After years of collaboration, the permits were considered a foregone 
conclusion. The first production from CD-5 was expected to start in 
2012. Nevertheless, in February 2010, the Corps reversed course and 
denied CP's permits to construct a drill pad, a pipeline/vehicle bridge 
across the Nigliq Channel in the Colville River Delta, and access 
roads. The Corps concluded that there are practicable alternatives to 
the bridge, drill pad, and roads that would have fewer environmental 
consequences but stakeholders, including the state, have provided 
substantial evidence to the contrary. We continue to work hard on this 
matter.
    DOI's Wild Lands Designation. Another decision chilling the 
investment climate in Alaska's NPR-A and beyond is the federal 
government's new ``Wild Lands'' policy. Secretary Salazar recently 
issued Secretarial Order 3310, which empowers the Bureau of Land 
Management (BLM) to convert vast areas of Alaska, including the NPR-A, 
into de-facto wilderness areas without Congressional oversight or 
approval. State officials have heard from many resources companies who 
have said if state lands receive Wild Lands designation they may not 
continue to invest in Alaska.
    OCS Permitting Delays Shutting Down Exploration Activities. The 
greatest potential for significant oil and gas production lies in the 
OCS. In recent years, Shell and other leading energy companies have 
spent billions of dollars to acquire leases and explore the OCS. Shell 
has also received approval for several exploration plans and has 
acquired over 34 federal permits to drill exploration wells. Yet its 
exploration plans have been repeatedly derailed; first by the 9th 
Circuit Court of Appeals in 2008 and more recently by the DOI and the 
Environmental Protection Agency (EPA).
    ANWR Wilderness Designation. The USGS has demonstrated that perhaps 
the greatest potential in America for an onshore elephant-size field is 
in the 1002 Area of ANWR. Despite this potential, the federal 
government has consistently refused to open the 1002 Area to 
exploration. More recently, the U.S. Fish & Wildlife Service (USFWS) is 
reviewing whether to designate the 1002 Area in ANWR as ``Wilderness,'' 
which would essentially lock-up ANWR from any oil and gas development. 
In the Federal Register notice, the USFWS expressly prohibited the 
public from filing comments related to oil and gas activity. The state 
believes that such action conflicts with federal laws--under the 
National Environmental Protection Act (NEPA) and the Alaska National 
Interest Lands Conservation Act (ANILCA), the USFWS must consider the 
benefits of oil and gas development before making a recommendation to 
Congress on a Wilderness designation. We have made this view known to 
the USFWS.
    200,000 Square Miles of Critical Habitat Designated for Polar 
Bears. The polar bear and its habitat are already well managed and 
conserved by Alaska, international agreements, conservation programs, 
and state and federal law. These laws and policies make the polar bear 
one of the most protected species in the world. Its population has more 
than doubled since oil production began on the North Slope. 
Nonetheless, the USFWS recently designated nearly 200,000 acres of the 
North Slope--which covers an area larger than the size of California--
as critical habitat for the polar bear. Never before has the USFWS 
interpreted its authority to designate such a vast expanse of critical 
habitat for a species. Worse, the USFWS acknowledges that the 
designation will not provide significant additional conservation 
measures for the polar bear and its habitat and that the primary 
claimed threat to the species (loss of sea ice due to climate change) 
will not be alleviated by this designation. Despite providing no 
benefits, the critical habitat designation imposes another layer of 
costly regulation on Alaska, its citizens, and its economy.
    Point Thomson EIS Delay. ExxonMobil has committed to a Point 
Thomson development plan to produce approximately 10,000 barrels of 
natural gas condensate starting in 2014. The EIS, however, has not been 
timely processed. As a result, the start-up date for the project has 
been delayed from 2014 to 2015.
The Cumulative Impact of These Federal Decisions: Broad Based Policy 
        Failure
    As this section demonstrates, in the past two years the federal 
government has consistently sought to delay, shut down, or prevent 
resource development in Alaska through its decisions and broad policy 
mandates. Rarely has there been a federal policy that fails on so many 
fronts:
          Economic and job security--these policies have killed 
        hundreds of jobs in Alaska.
          Trade deficit--shutting down resource development in 
        Alaska ensures that we import more oil from overseas.
          Federal budget deficit--by denying Americans access 
        to their own lands to produce oil, the federal government is 
        foregoing billions in federal revenues, and instead Americans 
        are forced to help fill the treasuries of countries such as 
        Venezuela, Russia, and Saudi Arabia.
          Energy security--foregoing and shutting down 
        development of Alaska's massive sources of domestic energy 
        undermines U.S. energy security.
    It is also important to underscore that the current federal 
administration's decisions and policies do not advance global 
environmental protection. To the contrary, they do the opposite. When 
oil and energy development in Alaska is shut down by our own 
government, development for such resources is driven overseas to places 
like Brazil, Russia, Iraq, Azerbaijan, and Saudi Arabia. Environmental 
standards in these places are not nearly as strong or strictly enforced 
as in Alaska, where stringent regulations are the hallmark of 
hydrocarbon production on the North Slope.
VII. The State of Alaska Wants to Partner with the Federal Government 
        to Increase TAPS Throughput to One Million Barrels Within a 
        Decade to Help Reduce the Country's Import of Foreign Oil
    The State of Alaska will continue to defend Alaska's interests by 
trying to persuade the federal government to abandon its anti-
development policy in Alaska. Where persuasion fails, we will continue 
to take other actions, including litigation when warranted. In so 
doing, we strongly believe that we are also defending and promoting 
broader American interests. All Americans should be concerned about 
federal government policies that undermine U.S. interests across such a 
broad spectrum of critical areas. In particular, the viability of TAPS 
as a continuing critical component of our nation's energy security 
infrastructure is an issue for all Americans. It is on this issue that 
the federal government can play a critical role.
    As noted above, the State of Alaska is doing all it can to make oil 
production on state lands as globally competitive as possible. However, 
the long-term viability of TAPS will primarily be determined by federal 
politics and policies. The federal government's antidevelopment 
policies throughout the North Slope chill the investment climate and 
discourage companies from exploring and producing in Alaska. When Shell 
cannot drill one exploratory well in the OCS after five years of 
spending billions of dollars for leases and permits, ConocoPhillips 
cannot get a permit, again after five years, to build a bridge across 
the Colville River to access CD-5 in the NPR-A, and oil companies are 
unable to conduct exploration drilling in ANWR, it is the federal 
government that is denying access to abundant hydrocarbon resources 
and, ultimately, jeopardizing the long-term viability of TAPS.
    These are just a few examples of many where federal policies have 
focused on discouraging--not encouraging--the billions of dollars of 
investment needed to increase North Slope oil production. If we had a 
federal government that welcomed exploration and development and 
permitted operations in a timely and predictable manner, the economics 
of filling TAPS would take care of itself.
The Federal Government Should Embrace the State of Alaska's Goal of 
        Increasing TAPS Throughput to 1 Million Barrels Per Day as a 
        National Policy
    Our preferred approach is to have a federal government that joins 
us in the mutually beneficial goal of responsible resource development 
in Alaska. For this reason, Governor Parnell has redoubled the state's 
efforts to gain federal cooperation on resource development issues.
    As noted above on page 8, Governor Parnell recently announced an 
ambitious but critical goal for Alaska and the country to increase the 
Trans Alaska Pipeline System (TAPS) throughput to one million barrels 
of oil production per day within a decade. On the same day, President 
Obama announced his goal of reducing oil imports by one third by 2025. 
The State of Alaska fully endorses President Obama's goal. Governor 
Parnell reached out to President Obama expressing Alaska's support for 
this important goal while at the same time asking the President to 
support the state's goal to increase TAPS throughput. More 
specifically, Governor Parnell respectfully requested that the 
President direct his Secretaries of Interior and Energy, as well as the 
EPA Administrator, to work with Alaska on refining a plan that will 
enable Alaska and the rest of the country to achieve the goal 
established by the President. More recently, Governor Parnell sent 
another letter to President Obama requesting his assistance in bring 
clarity, timeliness, and certainty to federal permitting. We recommend 
that Congress make these goals a national priority as well.
    In closing, the State of Alaska would welcome Congress's 
involvement in ensuring that the federal government supports Alaska's 
goal of one million barrels a day through TAPS within a decade. By 
working together to champion such a goal, as well as the President's 
goal of reducing oil imports by one third, we can demonstrate how state 
and federal governments can come together to curb our dependence on 
foreign oil and create a brighter, more secure future for Americans.
                                 ______
                                 
    Mr. Lamborn. Thank you for your testimony.
    Mr. Glenn, you may begin.

 STATEMENT OF RICHARD GLENN, EXECUTIVE VICE PRESIDENT OF LANDS 
    AND NATURAL RESOURCES, ARCTIC SLOPE REGIONAL CORPORATION

    Mr. Glenn. Thank you, Mr. Chairman. Honorable Chairman, 
Ranking Member Holt, thank you for the opportunity to appear 
before you today.
    I have more extensive written comments and I ask that they 
be accepted. I will just give a brief overview of some of those 
high points. And while I am speaking, I will be referring to a 
chart that you see displayed off to my left here and that is a 
chart that should become familiar to all of you by the end of 
the day.
    My name is Richard Glenn and I am the Executive Vice 
President of Lands and Natural Resources for Arctic Slope 
Regional Corporation.
    Arctic Slope Regional Corporation is a creation of 
Congress. It was created by the U.S. Government in an attempt 
to avoid the Indian Reservation System that exists in the Lower 
48 states. We are owned by the Inupiat Eskimo People of 
Alaska's North Slope. My mother is an Inupiat Eskimo. I am a 
hunter and a whaler from the community of Barrow and you cannot 
see Russia from our front door, but I can see the Arctic Ocean.
    Our communities, the eight communities of Alaska's North 
Slope, are on the front lines of many of the issues that you 
brought up this morning, Chairman and Ranking Member. We are 
witnesses to global climate change. We are witnesses to the 
development that is in our region, and yet our communities have 
come to the conclusion that our people, our villages, our 
subsistence culture depends on both a clean environment and the 
development that exists in our region.
    We formed our local government, the North Slope Borough to 
a vigilant watcher of the development in our region and many of 
the worries that existed about development in the Arctic were 
expressed by our people 40 years ago when the Prudhoe Bay oil 
fields were developed. And yet, because of our local 
involvement and changes in technology, we have seen that the 
animals that we were worried about and the environment that we 
were concerned about has fared well.
    There are more caribou now, more fish, more waterfowl than 
before development started, and yet Northern Alaska is 
America's energy province. The TransAlaska pipeline system is 
the single artery that connects the rest of the country to this 
province. Twenty-three million acres of petroleum reserve, the 
coastal plain of the Arctic National Wildlife Refuge, Alaska's 
bountiful OCS promise as well as dozens of oil fields are 
connected to the country by this important link. In many ways 
it defines access and infrastructure.
    After a peak of two million barrels a day and today at 
600,000 barrels a day, and dropping, as you see represented by 
this curve, we are headed for an uncertain future. When you 
look at that curve, what it says to you is a volume of oil 
produced over time. But what it says to me is the history of 
our people. The left side of the curve is the 1970s and just at 
the end of the age when were putting men on the moon our 
villages were in very hard scrabble conditions. And the peak of 
the curve represents the efforts that we made to improve the 
quality of life in our villages.
    I am talking about a flushing toilet where before we had a 
five-gallon bucket in the corner of the room. Reliable power 
where before they had to turn off the power generation systems 
at night. Construction of schools where before our parents had 
to go thousands of miles away just to go high school. Things 
like this were built in our communities by the presence of 
industry in our region. Largely, without the help of any 
Federal programs like you will find in tribal country elsewhere 
in the United States. So that curve means something a lot 
different to me than it means to the rest of you.
    But as the curve shows, we are headed for a low point and 
the low point beyond which the pipeline cannot safely transport 
oil and gas. Meanwhile, prospects on the North Slope in the 
neighborhood of the start of this pipeline lie fallow because 
of wrong-minded policies that seem to obviate, deter, and block 
efforts at reasonable production. The National Petroleum 
Reserve (NPRA) is a good example--regardless of your views on 
whether or not the coastal plain of ANWR should be explored and 
developed for oil and gas. I think it should because Native-
owned lands are there and we want the chance to better 
ourselves with that. We were told to use the NPRA as an 
alternative rather than ANWR. Now when we try to develop ANWR, 
we are told that national monument status, critical habitat 
status, and potential wildlife swathes of special designation 
block us for reasonable development of native-owned lands 
there.
    Mr. Chairman, our eyes are open. While the rest of the 
world's were fixed on the events of the Gulf of Mexico, we 
looked at the safety measures of the explorers in Alaska's OCS 
and we were favorably impressed. We have come to the 
conclusion, Mr. Chairman, that our communities will not survive 
without development. Let me repeat that. Without development in 
the Arctic, the Arctic Slope Native communities will not 
survive. Thank you.
    [The prepared statement of Mr. Glenn follows:]

   Statement of Richard Glenn, Executive Vice President of Lands and 
          Natural Resources, Arctic Slope Regional Corporation

    Chairman Lamborn, Ranking Member Holt, and distinguished 
Subcommittee members, thank you for allowing me an opportunity to 
address this important issue.
    My name is Richard Glenn. I am the Executive Vice President for 
Lands and Natural Resources for Arctic Slope Regional Corporation 
(ASRC), based in Barrow, Alaska. Arctic Slope Regional Corporation is 
an Alaskan Native-owned regional corporation that was established 
pursuant to the Alaska Native Claims Settlement Act of 1971 (ANCSA). It 
is a private, for-profit corporation that is owned by the 11,000 
Inupiat Eskimos from the villages of Point Hope, Point Lay, Wainwright, 
Atqasuk, Barrow, Nuiqsut, Kaktovik, and Anaktuvuk Pass on Alaska's 
North Slope.
    Our villages are small and separated by great distance with no 
roads connecting them. Barrow, my hometown, is a coastal community 
located 340 miles north of the Arctic Circle. It is located in a region 
of tundra plains, devoid of trees, with an average annual temperature 
of around 10 degrees Fahrenheit. In Barrow, the ground is frozen to a 
depth of about a thousand feet and our ocean is ice-covered for much of 
the year. In our more remote villages, fuel can cost ten dollars or 
more per gallon; milk--eleven dollars per gallon. Despite these 
physical and current economic challenges, the Inupiat people have 
endured. We have done so for centuries. We have demonstrated a close 
relationship with both the land and sea in our region.
    Our communities realize that our survival depends on a healthy 
environment and upon resource development that exists in our region. 
Safe, responsible oil and gas development is the only industry that has 
remained in our region long enough to foster improvements to our remote 
communities. More than forty years ago, when the Prudhoe Bay oilfields 
were first being developed, our people were worried about the effects 
on the environment and its wildlife. We formed our regional government 
in part to exercise permitting control on the explorers and producers. 
Now we can look back and see that fish, caribou and waterfowl were not 
threatened by development-in fact they have increased in number. 
Regarding environmental effects of oil and gas development, on and 
offshore, no one has more at stake than the residents of the North 
Slope.
    Congress in 1971 passed the Alaska Native Claims Settlement Act in 
an attempt to extinguish claims of aboriginal title by Alaska's Native 
people. With ANCSA, Congress chose to create 12 land-based Alaska 
Native Regional Corporations and more than 200 Alaska Native Village 
Corporations, and gave each of them title to surface and/or subsurface 
ownership of some of the land they claimed, as well as a cash 
settlement for part of the remainder of lands each group claimed. With 
these lands and cash settlements, the corporations were poised to 
develop their resources and benefit their shareholders, the tribal 
members of their region or village. My regional corporation, ASRC, 
represents the Natives of Alaska's North Slope.
    With approximately five million acres of surface and subsurface 
estate conveyed to it under the terms of ANCSA, ASRC is the largest 
private landowner on the North Slope. ASRC's lands contain a high 
potential for oil, gas, coal and minerals, including lands that are 
already producing oil. As stewards of the land, ASRC continuously 
strives to balance management of Inupiat Eskimo cultural resources with 
management of natural resources.
    Alaska's North Slope is a national energy province. It covers 50 
million acres of the northern portion of our state and hosts many well 
known energy resource prospects and production areas including Prudhoe 
Bay and nearby oil fields, the National Petroleum Reserve in Alaska 
(NPR-A), the Coastal Plain of the Arctic National Wildlife Refuge and 
many others. It is adjacent to both the Beaufort and Chukchi Seas, 
which overlie the most prospective hydrocarbon basins of Alaska's Outer 
Continental Shelf (OCS).
    At its peak around 1990, northern Alaska produced up to a fifth of 
the country's oil, sending more than two million barrels per day from 
the prolific Prudhoe Bay, Kuparuk and nearby oilfields down the 800-
mile long Trans Alaska Pipeline System (TAPS) for marine shipment to 
the West Coast. Today, TAPS remains the single conduit for development 
of Alaska's resources; it defines access and infrastructure. And, the 
resources of the North Slope have been developed without negatively 
affecting the wildlife species such as fish, caribou or migrating 
waterfowl.
    Today, Alaska's production is at about a third of its peak (see 
chart). Continued reduction in volume, or throughput, as the large 
fields decline, threatens the integrity of the pipeline itself. At 
lower flow rates, paraffins and water are more prone to settle out and 
the oil cools more in transit due to its slow velocity. The result is 
an increased risk of accelerated corrosion and freezing. Despite the 
development of about a dozen other North Slope oil fields, none have 
yet been able to compensate for the decline of the much larger Prudhoe 
and Kuparuk fields. They have only lessened the steepness of the 
decline.
    Other nearby prospects for production or exploration lie fallow 
today because there is a near shutdown of new onshore development. This 
is due to a mixture of federal policy and land use decisions that have 
chilled new exploration and development. A good example is the National 
Petroleum Reserve in Alaska (NPR-A). The 23 million-acre NPR-A was 
designated in 1923 by President Harding specifically for its 
hydrocarbon potential due to the presence of naturally occurring oil 
and gas seeps throughout the area. Today, further exploration of the 
NPR-A is at risk by overlapping swaths of National Monument and 
Critical Habitat status--in a petroleum reserve. When North Slope 
leaders and others have advocated over the years for the exploration of 
the Native-owned lands on Coastal Plain of the Arctic National Wildlife 
Refuge, we have been told that the NPR-A exists for that kind of 
activity. Now, at a time when we need additional development, even the 
Native-owned lands in the NPR-A are being held off limits.
    According to the USGS, the most significant prospects for 
additional new production lie in Alaska's OCS region. It appears that 
this Administration agrees that it is in the nation's interest that 
Alaska's OCS should be explored and developed. With the production 
decline of the larger onshore fields and few marginal discoveries to 
replace them, the future of TAPS (and the economic future of both the 
North Slope and the State of Alaska itself) depends on the development 
of additional production from offshore prospects.
    We believe that offshore exploration can be conducted safely. While 
the rest of the world was fixed on the disaster in the Gulf of Mexico, 
we were reviewing the leading exploration safety measures that the 
Alaska OCS explorers have developed for the Arctic. We were favorably 
impressed. In addition, we have seen the extra measures that explorers 
have taken to avoid conflict with our subsistence hunters. They have 
gone a long way to ease our concerns.
    This hearing is timely. Our region, just last week, assembled our 
leadership to discuss this very topic. We find that our community 
survival depends on continued production from our region. Let me be 
clear, without development in our region our communities will not 
survive. Thank you again, Committee members, for allowing me to share 
the views of the people of the North Slope regarding development of 
Alaska's natural resources.
                                 ______
                                 
    Mr. Lamborn. Thank you very much for your compelling 
testimony. Mr. Lawrence.

   STATEMENT OF DAVID T. LAWRENCE, EXECUTIVE VICE PRESIDENT--
   EXPLORATION AND COMMERCIAL, SHELL ENERGY RESOURCES COMPANY

    Mr. Lawrence. Mr. Chairman, members of the Subcommittee, I 
appreciate the opportunity to speak to you today.
    I have been asked to talk about Alaska's extraordinary 
offshore oil and gas resource potential and how tapping these 
resources could benefit the country.
    The world needs oil and gas. It is widely recognized that 
global demand for energy will double by 2050, and to meet it we 
will need all forms of energy. Alaska's Outer Continental Shelf 
holds world-class resources. Government experts say Alaska's 
offshore holds at least 27 billion barrels of oil. It could be 
much more. We won't know until we can actually explore with the 
drill bit. We have been ready to do that since 2007. However, 
we have been blocked by regulatory barriers.
    Put simply, developing Alaska's OCS is imperative for U.S. 
energy supplies, our economy, and our national security. 
Credible studies project that peak production from Alaska's OCS 
could top 1.4 million barrels of oil per day, more than the 
2010 imports from Saudi Arabia. Reducing foreign imports has 
immediate economic benefits. The balance of trade improves and 
U.S. dollars stay here to fuel our own economy. Alaska's OCS 
development will create an average of nearly 55,000 jobs per 
year for generations. These are long-term, well-paying jobs, 
both in Alaska and in the Lower 48. It will generate 
conservatively, almost $200 billion in government revenue from 
royalty and taxes. Perhaps most importantly, our offshore oil 
will move through the TransAlaska Pipeline System or TAPS, 
which for the last 30 years has delivered more than 17 billion 
barrels of oil to terminals in Washington State and California.
    TAPS is a major energy supply line to the Lower 48, and it 
should continue to be so. It is now running at one-third of its 
peak capacity. Unless more crude is developed in Alaska, TAPS 
is at risk, meaning that a major energy supply artery to the 
Lower 48 is at risk.
    A generation of Americans worked to build TAPS and it 
remains not only an economic engine, but a symbol of American 
know-how and ingenuity. Without a reliable, new resource base, 
TAPS future is uncertain at best. The TransAlaska Pipeline is a 
national security asset we are counting on to deliver offshore 
to the U.S. well into the future, and for that to happen we are 
also counting on government to uphold its obligations to 
leaseholders. Regulatory barriers that undermine the nation's 
oil and gas leasing program should be of grave concern to 
policymakers.
    Consider the facts, at the government invitations Shell 
participated in offshore lease sales in Alaska. We paid the 
government more than $2 billion for those leases and invested 
more than 1.5 billion additional dollars to prepare for an 
exploratory program that meets and exceeds regulatory 
requirements. But despite our most intense efforts, we have yet 
to be able to drill a single well.
    This is highly unusual. When the Federal Government holds a 
sale, it is saying OCS exploration and development is desired. 
If a company presents a plan that meets all regulatory 
requirements that plan should be permitted. Unlike a 
development and production program, exploration is a temporary, 
short-term operation. Our initial Alaska wells will each take 
approximately 30 days to complete. Data will be gathered and 
the well will be permanently plugged and abandoned.
    These are not complex wells. The much lower pressures 
encountered in Alaska's shallow waters means the mechanical 
barriers and Shell's design will have even greater safety 
margins and much lower risk profiles than those in the deep 
water Gulf. Still, Shell has assembled an unprecedented oil 
spill response capability. There is no question the bar should 
be high in the Arctic. We support high standards and a robust 
permitting process. But the process must work and currently the 
government's permitting and regulatory process is not equipped 
to deliver.
    These delays are frustrating and disappointing and they are 
undermining our confidence in the American regulatory system. 
And it is more than just exploratory drilling delay. Production 
from the Chukchi Sea, for example, will be delivered to TAPS 
through a pipeline across the National Petroleum Reserve, so 
timely permitting for that is also crucial. Thousands of men 
and women are counting on the jobs that will follow success and 
local businesses are counting on the revenue and communities 
are counting on the tax boost.
    Certainly, this is an area that Congress needs to address. 
Decisive action must be taken to bring these resources to bear 
and ensure our country remains an attractive environment for 
investment. It comes down to this, if policymakers want to 
enable the development of our offshore resources, they must 
support the regulatory process, fund and staff the agencies to 
ensure the necessary permitting work in a competent and 
efficient manner, require the regulatory process be clear and 
streamlined and recognize that clear timelines are critical so 
that companies can plan investment decisions accordingly. Thank 
you and I look forward to your questions.
    [The prepared statement of Mr. Lawrence follows:]

        Statement of David Lawrence, Executive Vice President, 
                   Exploration and Commercial, Shell

Introduction
    Mr. Chairman and members of the Subcommittee, I appreciate the 
opportunity to testify today. I would like to thank you for having this 
hearing to examine the resource potential in the Alaska Outer 
Continental Shelf (OCS) and why this is important to the future of the 
Trans Alaska Pipeline System (TAPS) and the Nation's energy supply.
    As Executive Vice President of Shell Exploration and Commercial, I 
lead a team of professionals who identify, invest in and explore for 
oil and gas resources around the world. The Arctic, including Alaska's 
offshore, holds world-class resource volumes. That is why Shell has 
invested in leases off the coast of Alaska.
    Alaska can continue to play a major role in meeting the energy 
needs of American consumers and American businesses, but achieving that 
result requires action and political will. Developing these resources 
will extend the life of TAPS, and also create thousands of jobs; 
hundreds of billions in revenue for local, state and federal coffers; 
reduce imports; and improve the balance of trade.
    Shell has been prepared to explore in Alaska's OCS since 2007, but 
regulatory and legal challenges have prevented us from drilling even a 
single well. In the five years since first seeking to explore in 
Alaska, Shell has drilled more than 400 exploration wells around the 
world. I remain hopeful that the barriers to exploring in Alaska's OCS 
will be addressed so that Shell can begin its exploration drilling in 
2012.
    Today I will discuss:
          Global energy demand forecasts, and the fact that oil 
        and gas will play a critical role in meeting future energy 
        needs and in fueling the economy.
          Alaska's OCS resource potential, and the benefits to 
        the nation of developing those resources.
          Shell's proposed exploration program in Alaska and 
        the challenges that have blocked the program.
          And finally, some recommendations for moving forward.
Global Energy Demand
    The world must grapple with the reality that global energy demand 
is projected to increase by roughly 50 percent over the next 20 years 
and could double by 2050. As the global recession fades and economies 
recover, demand will accelerate. A key driver will be strong economic 
growth and a vast, emerging middle-class in the developing nations.
    To address this demand, we will need all sources of energy--
hydrocarbons, alternatives, renewables and significant progress in 
efficiency. Oil and gas will be the dominant energy source for decades. 
Renewables and energy efficiency will play an ever-increasing role. 
Shell is actively pursuing research and development into next 
generation biofuels. We also have a wind business in North America and 
Europe, for which I am responsible.
    Future growth for alternative energy forms will be paced by the 
speed of technological development, public and private investment 
capacity, government policies, and the affordability of energy supply. 
Still, it takes several decades to replace even one percent of 
conventional energy with a renewable source. The effort to tip the 
scale towards more renewable sources of energy is worthwhile but even 
unprecedented growth in renewables would leave an enormous energy gap 
that must be filled with oil and gas.
    As we move to meet the world's energy needs, environmental 
challenges must be met and policies kept in place to ensure responsible 
energy development. We must recognize and provide the amount of energy 
that will be required to allow our economy to grow; and do so in an 
environmentally sustainable way.
    Governments have a role to play in defining the policies that will 
foster a viable, efficient and workable marketplace that allows 
technology and innovation to move forward. Industry--and most 
particularly the energy industry--has an important role to play as 
well.
U.S. Oil and Gas Resource Potential
    The President recently acknowledged that reducing dependence on 
imports was a national policy imperative. We agree. The U.S. is 
resource-rich in many ways, especially in oil and gas. Yet, the U.S. 
imports more than 60 percent of its petroleum.
    Consider the enormous costs created by importing oil. According to 
the EIA:
          Petroleum net imports will average 9.7 million 
        barrels per day 2011 and 10 million barrels per day in 2012, 
        comprising 50 percent and 52 percent of total consumption, 
        respectively.
          Imports cost the U.S. more than $350 billion last 
        year.
    I applaud the President for highlighting the need to reduce 
imports. Producing more oil and gas in our own country is a ``win-win'' 
proposition. It provides real economic and security benefits. With 
increased domestic production, less money is exported from the U.S., 
more money is invested here and federal revenues increase through 
royalties and taxes. This can be done in a way that provides 
appropriate environmental protections based on solid science and an 
understanding of ecosystems and the impact of oil and gas activities on 
them.
    I offer an example from the OCS:
    According to the U.S. government, 420 trillion cubic feet of 
natural gas and more than 86 billion barrels of oil are yet to be 
discovered on the OCS, including Alaska. To put that into perspective, 
that is enough natural gas to heat 100 million homes for 60 years and 
enough oil to fuel 85 million cars for 35 years.
    The greatest offshore resource potential lies in four key areas: 
the Gulf of Mexico, Alaska and the Atlantic and Pacific Coasts.
          Gulf of Mexico--This has been the heartland of U.S. 
        offshore activity. The industry has been in the Gulf for more 
        than 60 years, producing more than 10 billion barrels of oil 
        and more than 73 trillion cubic feet of natural gas. Estimates 
        state there are at least 45 billion barrels of oil and more 
        than 233 trillion cubic feet of gas remaining.
          Alaska OCS--World Class Potential--The Alaska 
        offshore likely holds some of the most prolific, undeveloped 
        conventional hydrocarbon basins in the world. Conservative 
        estimates from the Bureau of Ocean and Energy Management 
        Regulation and Enforcement (BOEMRE) place roughly 27 billion 
        barrels of oil and over 120 trillion cubic feet of gas in the 
        Alaska OCS.
          Atlantic and Pacific Coasts - Assessments of these 
        areas have not been updated in decades, but the estimate is 
        that the Atlantic Coast holds 4 billion barrels of oil and 37 
        trillion cubic feet of gas and the Pacific Coast holds 10 
        billion barrels of oil and 18 trillion cubic feet of gas.
History of Alaska OCS
    The world has long been aware of the Arctic's vast resources. In 
total, more than 500 exploratory, production, and disposal wells have 
been drilled in the Arctic waters of Alaska, Canada, Norway and Russia. 
As a result of federal OCS lease sales in the 1980s and 1990s, more 
than 35 wells have been safely drilled in the U.S. Beaufort and Chukchi 
Seas.
    Shell is proud of its offshore legacy in Alaska, having produced in 
the state waters of Cook Inlet in Alaska for more than 30 years 
beginning in 1964. In the late 1970s and mid 1980s, Shell drilled 
exploration wells offshore in the Gulf of Alaska, St. George Basin and 
the Bering Sea. In the late 1980s and early 1990s, Shell drilled 
several exploration wells in the Beaufort Sea and later drilled four of 
the five exploration wells ever drilled in the Chukchi Sea.
    Although oil and gas were found, Shell chose not to proceed to 
development. We plugged and abandoned those exploratory wells for 
economic reasons--including the fact that, at that time, TAPS was 
already running near capacity.
    Since 2005, the federal government has held several more OCS lease 
sales in Alaska. Shell participated in these lease sales and in fact, 
is now the majority leaseholder in the Alaska offshore. Shell has paid 
the federal treasury nearly $2.2 billion for ten-year leases in the 
Beaufort and Chukchi Seas. Additionally, Shell has invested more than 
$1.5 billion and six years preparing for an exploration drilling 
program with unparalleled mitigation and safety measures. Shell's work 
includes multiple years of 3D seismic data collection, first-of-its-
kind baseline science, shallow hazard surveys, geotechnical programs, 
numerous social investment initiatives and hundreds of meetings with 
North Slope residents.
The Benefits of Developing the Alaska Offshore
    The benefits of developing Alaska's offshore oil and gas resources 
are many--not only to Alaska, but also to the Lower 48. Development 
would be an economic engine for decades to come.
    The jobs growth and economic benefits of Alaska OCS exploration and 
development are well understood. A study conducted in 2010 by Northern 
Economics and the Institute for Social and Economic Research (ISER) at 
the University of Alaska details the potential national benefits of 
developing the oil and gas resources of the Alaska OCS:
          An annual average of 54,700 new jobs would be created 
        and sustained through the year 2057, with 68,600 jobs created 
        throughout decades of production and 91,500 at peak employment;
          A total of $145 billion in new payroll would be paid 
        to employees through the year 2057, including $63 billion to 
        employees in Alaska and $82 billion to employees in the rest of 
        the U.S.; and
          A total of $193 billion in government revenue would 
        be generated through the year 2057, with $167 billion to the 
        federal government, $15 billion to the state of Alaska, $4 
        billion to local Alaska governments, and $6.5 billion to other 
        state governments.
    Several important implications for national policy and domestic 
supply are raised in the study including:
          Alaska OCS development maximizes the value of 
        Alaska's and the nation's oil and gas resources by enhancing 
        both value and volume. Using TAPS' existing infrastructure, 
        which is currently operating far below capacity, would enhance 
        value by lowering transportation costs. Further, the new 
        expanded infrastructure needed to connect to TAPS would enable 
        development of satellite fields such as the National Petroleum 
        Reserve-Alaska (NPRA).
          Alaska OCS development would extend the operating 
        life of TAPS and increase the viability of an Alaska gas 
        pipeline, due to greater certainty of the available gas 
        resource base to fill it.
    To elaborate, Alaska's OCS likely has at least one-third more oil 
than has been produced in Prudhoe Bay, moved through TAPS and used to 
fuel the U.S. for the past 30 years. It is two-and-a-half times what 
has been produced in the Gulf of Mexico since 1990.
    An independent assessment of industry-wide development of Alaska's 
Beaufort and Chukchi Sea OCS concluded that an average of about 700,000 
barrels of oil per day would be produced for 40 years. This is 
equivalent to our 2010 oil imports from Iraq (506,000 bbl/day) and 
Russia (137,000 bbl/day) combined. This same study found that Alaska 
OCS production would peak at 1.45 million barrels of oil per day in 
2030 (and 2.1 billion cubic feet of gas per day in 2050). This is more 
than our 2010 oil imports from some of our major importing nations, 
e.g, Mexico (1.03 million bbl/day), Saudi Arabia (958,000 bbl/day), 
Nigeria (996,000 bbl/day), or Venezuela (827,000 bbl/day).
    Such production numbers, which could potentially eliminate the need 
for imports from one of our largest foreign suppliers, is significant, 
and even--more so in a world of increasing geopolitical instability.
    Domestic energy production is critical for the security and 
prosperity of the U.S. Money spent on domestic energy cycles in the 
U.S. economy, increases domestic economic activity and jobs. Alaska OCS 
activity will also help address our national debt, bringing in hundreds 
of billions in federal revenues in taxes and royalties from oil and gas 
production and the economic activity that is stimulated as a result.
    A major benefit from Beaufort and Chukchi development would be the 
long-term viability of TAPS. Since 1977, Alaska has supplied the U.S. 
and its refineries with vast quantities of domestic oil via TAPS, 
totaling roughly 17 billion barrels through 2010. The construction and 
operation of the pipeline has also provided hundreds of thousands of 
high paying jobs in Alaska and the nation, helping to lift America out 
of one of its worst economic downturns. A generation of Americans 
worked to build TAPS; and it remains not only an economic engine, but a 
symbol of American know-how and ingenuity. Unfortunately, without a 
reliable new resource base, TAPS' future is uncertain.
    Production in Prudhoe Bay has fallen significantly in recent 
decades. At its height, TAPS supplied the nation with 2.1 million 
barrels of oil per day or about one-third of the nation's oil 
production.
    Today TAPS supplies only 600,000 barrels per day; about 11 percent 
of our domestic supply. If the throughput in the pipeline continues to 
decline and no new supplies are developed, TAPS will eventually be shut 
down, cutting access to one of the largest sources of domestically 
produced oil in the country. Our already increasing dependence on 
imported oil will accelerate and the U.S. balance of payments and 
federal revenues will both get worse.
    A temporary shutdown of TAPS earlier in 2011 had an immediate 
impact on crude prices, jeopardized the continuity of the U.S. West 
Coast refinery infrastructure, and resulted in a spike in U.S. reliance 
on Russian crude supplies. This could be a harbinger of things to come 
unless we develop new resources in Alaska.
    Fortunately, the U.S. has an opportunity to prevent this scenario 
from reoccurring. According to Northern Economics and ISER at the 
University of Alaska, if OCS oil is transported through TAPS, the 
higher volume of throughput would reduce the TAPS tariff and would 
extend the life of TAPS for decades. Doing so would require new 
pipelines that connect offshore fields in Camden Bay and the Chukchi 
Sea to TAPS. These projects would certainly rank among the largest 
private sector construction projects in U.S. history.
    It is clear that resource development, such as OCS oil and gas 
production, is the first step in wealth creation. It has an enormous 
economic multiplier effect. Jobs and revenues created by oil and gas 
development reverberate throughout our economy, producing long-term 
high paying jobs. It creates a need for domestic manufacturing 
capabilities, steel production, transportation, infrastructure 
development, electronics and high-tech components. Alaska OCS 
development is a genuine long-term economic stimulus plan.
    Finally, by exploring and developing our Alaska OCS resources, the 
U.S. has an opportunity to reaffirm its global role as an Arctic 
nation. It is no secret that the Arctic is becoming a critical location 
from a geopolitical and strategic perspective. Arctic nations are 
increasingly interested in international boundaries and opportunities 
for resources and economic development.
    Recently, Norway and Russia signed a maritime border delimitation 
agreement that settled a long-standing seaward boundary dispute in the 
Barents Sea. The stimulus for the agreement was mutual cooperation that 
would allow the development of offshore Arctic oil and gas resources. 
Elsewhere, Arctic nations are asserting their claims to continental 
shelf borders in accordance with the United Nations Convention on the 
Law of the Sea. For instance, we've recently seen reports that Denmark 
will lay claim to the North Pole itself, as an extension of Greenland 
territorial waters. Even nations outside the Arctic are positioning 
themselves for Arctic resource development.
    With continuing U.S. inactivity, our country risks falling even 
further behind the rest of the world in developing its Arctic 
resources. In Norway, Russia, Greenland and Canada, Arctic resources 
are highly valued and new exploration is already underway. We have an 
opportunity to develop our own Arctic resources and the infrastructure 
appropriate to facilitate our presence in this valuable region.
Offshore Safety Standards
    Before moving to a discussion of Shell's Alaska OCS exploration 
program, it remains appropriate to acknowledge the Deepwater Horizon 
incident in the Gulf of Mexico. The incident forced a re-examination of 
offshore operations and led to new regulatory requirements that have 
raised the bar on safety and led to substantial changes in the way the 
industry operates. There is no question that the industry must be held 
to the highest standards both for protecting the environment and 
protecting the health and well-being of our workers and communities in 
which we operate.
    Let me highlight a few of the new regulatory requirements systems 
adopted by the federal government and industry:
          The Interim Final Drilling Safety Rule is focused on 
        minimizing the likelihood of an incident and addresses barriers 
        that should be in place to prevent a hazard. Preventing an 
        incident is a top priority.
          Responding to an incident is now substantially 
        enhanced with new requirements for containment capability. The 
        Marine Well Containment Company (MWCC), which Shell initially 
        formed in partnership with three other oil and gas companies, 
        is designed to do just that. The MWCC is a stand-alone 
        organization committed to improving capability for containing a 
        potential underwater well control incident in the Gulf of 
        Mexico.
          The industry announced that a new Center for Offshore 
        Safety will be created to promote the safety of offshore 
        operations and enhance the government's regulatory role. The 
        Center will provide an effective means for sharing best 
        practices. Members will be subject to independent, third-party 
        auditing and verification to ensure integrity. The Center will 
        operate around an existing safety framework known as RP75, or 
        ``Recommended Practice for Development of a Safety and 
        Environmental Management Program for Offshore Operations and 
        Facilities.''
          Industry has also significantly increased its 
        resources to respond to a major oil spill by adding vessels, 
        equipment and personnel. Significant research and development 
        is ongoing for oil spills in ice.
          Shell recently announced it has taken the lead as 
        operator of the Subsea Well Response Project (SWRP) to be based 
        in Stavanger, Norway. Nine major oil and gas companies will 
        work pro-actively and collaboratively progressing development 
        of subsea well intervention and oil spill response equipment 
        that can be deployed swiftly to different regions in the world.
    In addition to regulatory requirements, a company must foster and 
promote safety relentlessly each day. At Shell we call this Goal Zero. 
Everyone who works for us--both employee and contractor--is expected to 
comply with the rules; intervene when anything looks unsafe; and 
respect people, the environment and our neighbors. Compliance is not 
optional.
    We have personal safety systems and procedures with clear, firm 
rules; simple ``do's and don'ts'' covering activities with the highest 
potential safety risk, such as getting proper authorization before 
disabling safety-critical equipment and protecting against falls when 
working at heights.
    We have process safety systems to ensure the safety and integrity 
of our operations and assets. Process safety is also managed through a 
variety of tools, such as well and facility design standards; 
established ``operating envelopes'' not to be exceeded; maintenance and 
inspection intervals for safety critical equipment; and an effective 
Management of Change process.
    Our approach also requires that all our drilling contractors 
develop a Safety Case to demonstrate major risks are properly managed. 
A Safety Case shows how we identify and assess the hazards on the rig; 
how we establish barriers to prevent and control the hazards; and how 
we assign the critical activities needed to maintain the integrity of 
these barriers. Further, it guides the rig and crews in risk 
management; and ensures staff competency, especially for those new to 
the rig.
Shell's Alaska Exploration Program
    Shell is planning an offshore oil and gas exploration program in 
Alaska's OCS in 2012 during the three-month open water season. This 
program could include drilling multiple wells in both the Beaufort and 
Chukchi Seas, site clearance surveys and baseline science studies. It 
is important to note that an exploration program, unlike a development 
and production program, is a temporary, short-term operation. In the 
Alaska OCS, an exploration well is anticipated to take approximately 30 
days to complete, at which time the well will be permanently plugged 
and abandoned and the site cleared. Shell's exploration program will 
meet or exceed all applicable regulatory requirements for the 
protection of health, safety and the environment.
    Shell is committed to employing world-class technology and 
experience to ensure a safe, environmentally responsible Arctic 
exploration program--one that has the smallest possible footprint and 
no negative impact on North Slope stakeholders or traditional 
subsistence hunting activities. Aspects of the 2012 program have been 
under evaluation by federal agencies since 2006. At every step, Shell 
has worked with federal agencies, the State of Alaska, and local 
communities to develop a program that achieves the highest technical, 
operational and environmental standards.
    My discussion here focuses on the following points:
        1.  The currently available science regarding the Arctic is 
        extensive and more than adequate for an exploration program;
        2.  The shallow water, low pressure Alaska OCS wells differ 
        significantly from Gulf of Mexico deepwater exploratory wells; 
        and
        3.  The oil spill prevention, containment, mitigation and 
        response plans included in Shell's 2012 Arctic exploration plan 
        are robust and comprehensive.
Arctic Baseline Science
    Some argue that there is insufficient scientific data regarding the 
Arctic and, therefore, exploration in the Chukchi and Beaufort Seas 
should not go forward. This is not accurate. In fact, the available 
scientific data is more than adequate to identify and evaluate the 
impacts of an exploration program that is, by definition, a short-term, 
temporary operation.
    Several thousand environmental, ecological, and socio-economic 
studies applicable to oil and gas activities in the Arctic OCS have 
been completed over the last 30 years. The categories of scientific 
data available include: tides and ocean currents, weather (e.g., wind 
and its effect on currents, precipitation), ice conditions, baseline 
environmental data related to species found in the arctic (e.g., 
benthic, fish, birds, marine mammals, etc.), assessments regarding the 
impacts of oil and gas exploration activities on those species, and, 
specifically, information assessing the impacts of an oil spill on 
those resources, in the highly unlikely event of an incident during 
exploration drilling.
    Since 1973, federal agencies have performed more than 5,000 
environmental studies to better understand the Alaska OCS and coastal 
environment, and document or predict the effects of offshore oil and 
gas activities. The former Minerals Management Service Environmental 
Studies Program spent more than $600 million (more than $1 billion in 
inflation adjusted dollars) for studies under the guidance of the OCS 
Scientific Committee, which advises the Secretary of Interior. About 
half of these funds have been directed to Alaska.
    The advancement of scientific knowledge will continue. This 
expanded knowledge is critical because it informs government regulators 
who must issue permits, it informs policymakers who must develop sound 
energy and environmental policy and it informs our operational 
decisions. In fact, Shell is contributing to advancing Arctic science 
in several ways. Since returning to Alaska in 2005, Shell has spent $60 
million engaging in an aggressive environmental studies program in the 
Arctic offshore. Shell has worked in a collaborative manner with a wide 
range of stakeholders, including industry partners, local, state, and 
federal governments, universities, and non-government organizations to 
share resources and facilitate the further development of our 
understanding of the Arctic marine ecosystem.
    Shell has also taken the lead in the development and implementation 
of new technologies, including unmanned aerial systems, acoustic 
recorders, and integrated ecosystem studies to advance capacities to 
work in this challenging offshore environment. Shell fosters and funds 
such diverse research as computer assisted identification of marine 
mammal calls, greatly enhancing the capacity to utilize acoustic 
sampling technologies, satellite tagging of whales and seals, ice and 
weather forecasting and physical oceanography.
    Recently, the North Slope Borough (NSB) and Shell entered into a 
multi-year collaborative science agreement that will enable impacted 
North Slope communities to build capacity for scientific research and 
independent review of studies, exploration and development plans and 
regulatory documents. The research program established under this 
agreement will be guided by an Advisory Committee of representatives 
from each of the coastal communities (Point Hope, Point Lay, 
Wainwright, Barrow, Nuiqsut and Kaktovik), scientists from the NSB and 
Shell, and independent scientists. This committee will be responsible 
for identifying critical issues, setting investigative priorities, and 
integrating traditional knowledge with science. The current agreement 
is between the NSB and Shell, but it anticipates expansion of the 
studies program through additional funds from third parties, which may 
include either private or public sources.
    If exploration leads to a commercial discovery, even more science 
will be needed. Consistent with the Outer Continental Shelf Lands Act's 
(OCSLA) multi-stage process, development and production activities will 
build on the information gathered through the exploration stage. The 
first development in the Arctic OCS will require the preparation of an 
additional environmental impact statement. The issues to be addressed 
in that document will be determined during a public scoping process. 
Since 2006, Shell has spent almost $90 million pre-investing in data 
acquisition, studies, and research and development that will support 
environmentally sound offshore development. Information gathered during 
these earlier OCSLA stages (including exploration) will form the basis 
for that scoping process, as well as the identification of any issues 
that may require additional research or study before informed decision 
making.
    This approach was recently validated in the final version of the 
President's Oil Spill Commission report where it states, ``The need for 
additional research should not be used as a de facto moratorium on 
activity in the Arctic, but instead should be carried out with specific 
timeframes in mind in order to inform the decision making process.''
Exploration in Alaska's OCS vs. Exploration in Deepwater Gulf of Mexico
    The drilling conditions for Shell's proposed 2012 Alaska OCS 
exploration program are typical of wells that have been safely drilled 
for decades in shallow water around the world. The Alaska OCS wells are 
in shallow waters and have much lower downhole pressure, which is 
vastly different from the conditions found in the deep waters of the 
Gulf of Mexico. This increases the safety margin.
    The Deepwater Horizon was drilling the Macondo well in 5,000 feet 
of water and down to a depth of 18,000 feet. The pressure encountered 
in the Macondo well was about 15,000 psi based on mud weight at total 
depth. The water depth, well depth and pressure make the Macondo well 
and other deepwater Gulf of Mexico wells far more technically complex 
than the shallow wells that will be drilled off the coast of Alaska.
    In Alaska's Beaufort Sea, the wells will be in 150 feet of water or 
less. The wells will be between 7,000 to 10,000 feet deep. We have 
extensive reservoir pressure models based on previously drilled wells 
in the Chukchi and Beaufort Seas that show the pressure at total depth 
in our initial exploration wells will be no more than 6,000 psi, less 
than one-third the pressure of Macondo.
    With lower anticipated bottomhole pressure in the Alaska wells, all 
of the mechanical barriers in Shell's well design have higher overall 
safety margins between operating pressure and mechanical barrier design 
pressures. Even if the riser from the drill rig to the blow-out 
preventer on the seafloor was breeched, as it was in Macondo, the 
weight of the drill mud in the downhole pipe would maintain well 
control and prevent a blowout from happening. To reiterate, Shell's 
2012 Arctic well program is exploratory. The well will not be converted 
to a production well. It will be permanently plugged and abandoned per 
federal regulations.
Oil Spill Prevention and Response
    Oil spill prevention and response planning is a top priority. 
Shell's Oil Discharge Prevention and Contingency Plan is robust. We 
have invested in an unprecedented oil spill response capability to 
support our drilling plans in the Beaufort and Chukchi Seas. Our spill 
recovery equipment is state-of-the-art, widely acknowledged by experts 
as proven and effective under cold-climate conditions and designed to 
remove the worst-case discharge.
    Specifically, Shell has developed a three-tier or layer system for 
use in the Alaska OCS.
        1.  The first tier is located on site, always less than an hour 
        from the drilling rig. It is a dedicated fleet of purpose-built 
        vessels and specialized oil containment equipment, which will 
        be on-site 24/7 before a drill bit ever touches the sea floor.
        2.  The second tier is located to capture oil that might move 
        away from the drill rig.
        3.  The third layer involves pre-staged shoreline protection. 
        This, along with the first two tiers involves extensive use of 
        both local residents and traditional knowledge.
    Shell's oil spill response personnel routinely practice and conduct 
spill response drills. The response system consists of dedicated oil 
spill response assets including:
          Offshore recovery vessels with skimmers and boom,
          Near-shore barges with skimmer and boom,
          Shallow water vessels with skimmers and boom,
          Pre-identified protection strategies and equipment 
        for environmentally and culturally sensitive sites, and
          Onshore oil spill response teams to deploy and 
        support the above.
    These assets are staffed during operation around the clock with 
trained crews provided by Alaska Clean Seas, Arctic Slope Regional 
Corporation, and Ukpeagvik Inupiat Corporation.
Design Prevention, Containment and Spill Response
    Shell has design standards and practices that have enabled us to 
safely drill many deepwater and shallow water wells worldwide in a 
variety of conditions, including the Arctic. Shell will rigorously 
apply these standards in all well operations on the Alaska OCS. As 
described above, the conditions of the well mean that prevention 
through the mechanical barriers built into the design have a high 
margin of safety.
    The blow out preventers (BOP) that Shell will use have been 
extensively maintained, inspected and tested by third party 
specialists. The BOPs have been validated to comply with the original 
equipment manufacturer specifications, in accordance with API Recommend 
Practice No. 53. Shell's BOPs will have two sets of shear rams and 
comply with all regulatory requirements.
    We will also retain the ability to mechanically cap the well in the 
unlikely event of a BOP breach. In fact, all existing Shell wells, in 
deep water, around the globe, can be capped. The design and 
construction of these wells allows them to withstand the pressure 
build-up that results when the well is capped. If the blow-out 
maintains mechanical integrity in the borehole and wellhead, a 
``capping and containment'' operation would be employed. Mechanically 
capping the well, for example with an additional pre-engineered BOP, 
has the ability to reduce or even stop the flow, but still requires a 
surface collection system. The benefit of this response methodology is 
that it reduces or completely halts the flow of oil entering the water 
column. This capping method was eventually proven successful in 
terminating the well bore flow even at Macondo, and has been an 
integral part of well control descriptions in industry's recently 
approved permits in the deepwater Gulf of Mexico return to drilling.
    In the extremely unlikely event that the wellhead integrity is 
compromised and an uncontrolled flow occurs, we would employ a pre-
fabricated ``subsea collection'' system. This would consist of a 
capping stack that would be located on top of the blowout preventor, 
collecting fluids to a surface barge where gas, oil and water can be 
separated prior to storage and disposal. Separated gas would be flared; 
separated oil and water would be stored in tanks for subsequent 
disposal offsite or flared.
    Collecting the flowing fluids close to their source of origin 
prevents or limits the flow of oil into ocean waters, and optimizes the 
suite of surface oil spill response capabilities by engaging the 
problem at its source. Surface oil spill response equipment would 
remain on station in the immediate area. Given we will have two 
functional drilling vessels in our 2012 exploration operations, each 
drilling rig will act as the relief backup well drilling unit for the 
other. Each can immediately stop operations and respond to drill any 
ultimate relief well.
Oil in Ice
    A significant amount of oil-in-ice research has been completed over 
the last 30 years and more is underway. A four-year program known as 
the Joint Industry Project (JIP), under the management of SINTEF 
Norwegian Research Institute, was sponsored by six international oil 
companies, including Shell, and involved a host of international 
scientists including those from the Department of the Interior.
    The purpose was to advance knowledge, tools and technologies for 
oil spill response in ice-covered waters. The program looked at:
          The fate and behavior of oil spilled in Arctic 
        conditions;
          In-situ burning of oil in Arctic and ice-covered 
        waters;
          Mechanical recovery of oil in Arctic and ice-covered 
        waters;
          Use of chemical dispersants in Arctic and ice-covered 
        waters;
          Monitoring and remote sensing of oil in and under 
        ice;
          Preparation of a generic oil spill contingency plan; 
        and
          Field experiments at Svalbard, Norway, in offshore 
        ice-covered waters.
    In May 2009, the group spent two weeks in the pack ice in the 
Norwegian Barents Sea to study the behavior of oil spills in Arctic 
waters and to test various response options in realistic oil-in-ice 
conditions. The tests proved that ice acts as a natural boom or 
protective barrier to confine and reduce the spread of an oil spill and 
to provide a longer window of opportunity in which clean-up 
technologies can be used effectively. These tests are the most wide-
ranging research and development programs ever undertaken to evaluate 
Arctic oil spills.
    These real-world offshore tests marked the final stage in the 
largest and most wide-ranging international research and development 
program ever undertaken to enhance detailed understanding, to further 
improve and develop spill-response technologies and to increase the 
ability to react rapidly in the event of an accidental oil spill in 
ice-covered conditions. The summary of that research showed that by 
using a suite of available tools (all of which are part of Shell's 
Alaska tool kit), including Arctic-tested booms and skimmers, and in-
situ burning and dispersants, the majority of oil could be cleaned up 
in a variety of Arctic conditions; including broken ice and slush.
    Shell is now leading industry efforts to perform another JIP to 
continue advancing the technology and research for oil spill response 
in ice.
Regulatory Challenges
    Shell participated in several Alaska OCS lease sales at the 
invitation of the federal government. Although the leases were issued 
to Shell, the government's permitting and regulatory process has not 
been equipped to deliver. As a result, Shell has been blocked from 
drilling even a single exploration well.
    Let me stress that this is highly unusual. The federal government's 
decision to hold a sale is, in effect, a decision that OCS exploration 
and development is desired. The federal government does years of in-
depth analyses before holding an OCS lease sale. Therefore, an 
exploration or development plan that meets regulatory requirements is 
permitted. In the case of Shell in Alaska, we have met and exceeded the 
regulatory requirements and still have not been able to drill a well.
    Each of our 414 leases in the Beaufort Sea and the Chukchi Sea has 
a ten-year term. A lease will expire and return to the federal 
government at the end of its term, if substantial steps to develop it 
are not taken.
    So, Shell is in a ``Catch-22.'' We have invested more than $3.5 
billion in leases and in supporting infrastructure--equipment, support 
vessels, baseline studies, and workforce training--in order to take the 
first step to explore for oil and natural gas. We have assembled what 
is arguably the most environmentally sensitive and thoroughly 
responsible exploration plan in history. Yet, for reasons largely 
beyond our control, permits have not been issued. Since our leases are 
only valid for a limited time, we are keen to move forward.
A Robust Regulatory Process Is Critical
    Let me be clear, Shell fully supports a robust permitting process. 
Shell does not seek lower environmental standards for OCS activities or 
a less exhaustive public permitting process. Such a process protects 
people and the environment and ensures safe and responsible operations. 
The bar is high in the Arctic, and it should be. Shell fully 
understands and supports this. We are ready to proceed with an 
exploration program that does precisely that.
    But we need a regulatory framework that is clear; and a regulatory 
process that is properly funded, efficient and robust. The process 
should lead to timely decisions. Regardless of one's views on oil and 
gas development, we can all agree that endless delays by our government 
are wasteful to the taxpayer and should not be tolerated. Permitting 
for oil and gas activity must be done thoroughly and to the letter of 
the law. Without that, legal challenges are likely and can also act to 
block a program.
    In the absence of a sound regulatory system, confidence in the U.S. 
offshore program is undermined. Where OCS leasing has occurred, the 
government has done literally years of environmental analysis in 
advance of the lease sale. It has invited companies to buy leases, and 
it has accepted bonus bids from companies. In return, the government 
bears responsibility to follow through. There is an expectation that 
the government is prepared to do the regulatory work that allows for 
exploration and development. If this is not the case; if the regulatory 
system fails to work in support of the leasing program; policymakers 
should be concerned.
Recommendations: How Do We Move Forward?
    Now I would like to look forward--to where we go from here and what 
policymakers should do.
    There is no question that the federal government has a critical 
role to play as a steward of our oceans. It also has a role to play in 
supporting the OCS leasing program and the sustainable development of 
our natural resources. What does this mean?
          It means that federal permitting agencies must have 
        enough staff with appropriate expertise to execute the program, 
        or have the authority to contract with outside experts to do 
        the work. Lack of staff should be no excuse for delaying 
        permitting work.
          It means that the government needs funds to do the 
        environmental studies, ecological characterization and baseline 
        science, that underpins the permitting of any oil and gas work 
        in OCS areas. Lack of funds should be no excuse.
          It means that federal permitting agencies must 
        coordinate and streamline the permitting work. Multiple federal 
        agencies are now involved in issuing multiple federal permits 
        for a single offshore project. Duplication and inefficiency 
        means delay and waste. It should be identified and eliminated.
          It means the regulatory process does not have open-
        ended timeframes that leave permit applicants with no clear 
        understanding of the permit timeline. Rather, the regulatory 
        process should have a firm timeline for delivering permits and 
        clear milestones marking the path to their delivery.
          It means that the statutes, the regulations and the 
        rules must be clear. It is unreasonable to expect anything 
        less. Only when the rules are clear can a permit applicant meet 
        them.
    Fundamentally, it means that the government must respond in a 
timely and competent manner. Where the government, as the landlord, 
hands over a federal lease, it must also hand over the ``key'' to a 
lessee proposing a responsible program.
    The President and Members of Congress have called for a government-
wide review of burdensome regulations that hinder economic development. 
I am hopeful that this will result in true reform. With this, we can 
move forward with responsible development of our rich natural resources 
such as those in Alaska.
Conclusion
    Oil and gas will remain critical sources of energy for decades to 
come. This is fact. Further, there are broad and sustained benefits in 
developing our own domestic resources. By tapping our resources here, 
we will create jobs, power the economy, put billions into dwindling 
government coffers, provide energy security, reduce imports and reduce 
our trade deficit. Keeping this economic value here at home, we can at 
the same time move forward with the investments in the next generation 
of technologies and energy solutions that will power the future.
    Thank you. I am happy to answer any questions.
                                 ______
                                 
    Mr. Lamborn. Thank you for your testimony. Ms. Quarterman.

 STATEMENT OF HON. CYNTHIA QUARTERMAN, ADMINISTRATOR, PIPELINE 
AND HAZARDOUS MATERIALS SAFETY ADMINISTRATION, U.S. DEPARTMENT 
                       OF TRANSPORTATION

    Ms. Quarterman. Good morning, Chairman Lamborn, Ranking 
Member Holt, members of the Subcommittee. Thank you for the 
opportunity to appear today to discuss the Pipeline and 
Hazardous Materials Safety Administration's oversight of the 
approximately 5,000-plus miles of energy pipeline in Alaska 
under our jurisdiction.
    Safety is the number one priority of Secretary LaHood, 
myself and the employees of PHMSA and we are all strongly 
committed to reducing the transportation risks to the public 
and the environment.
    PHMSA is responsible for establishing and enforcing safety 
standards for the design, construction, operation, and 
maintenance of the nation's pipeline transportation system. In 
Alaska, PHMSA's authority includes oversight of the TransAlaska 
Pipeline System, other North Slope and Cook Inlet pipelines, as 
well as other energy-related facilities.
    As critical as Alaska's oil and gas resources are to 
supporting the nation's energy needs, PHMSA recognizes that its 
role in ensuring these energy resources are transported safety 
and efficiently is even more important. For this reason, PHMSA 
has invested heavily in working with the State of Alaska and 
operators to ensure the safety of both existing and proposed 
interstate and intrastate pipelines.
    Alaska is only one of two states that have not accepted 
jurisdiction over its intrastate pipelines. Therefore, PHMSA is 
responsible for enforcing its pipeline safety regulations on 
the state's interstate and intrastate oil and natural gas 
pipelines. While production facilities, including pipeline 
upstream of the processing centers on the North Slope are 
regulated by the State of Alaska and the Environmental 
Protection Agency, PHMSA regulates the North Slope oil transit 
lines downstream of the processing centers.
    In addition, PHMSA also regulates the TransAlaska Pipeline 
System, the Cook Inlet Pipelines, and local distribution 
pipelines. PHMSA has six-person staff in Anchorage that 
conducts comprehensive inspection and enforcement activities to 
ensure that pipeline operators are complying with its pipeline 
safety regulations.
    PHMSA routinely coordinates with the Joint Pipeline Office, 
the Alaska Department of Natural Resources, the Office of the 
Federal Coordinator, and the Alaska Gas Development Corporation 
to provide oversight and technical support that helps protect 
the public and the environment and ensures operating 
reliability. Additionally, PHMSA is fully engaged with the 
Department of Natural Resources and other state agencies 
responsible under the Alaska Gas Inducement Act to advance the 
Alaska Gas Pipeline Project.
    Mr. Chairman, ensuring the safety and reliability of the 
nation's hazardous liquid and natural gas pipeline network is 
an enormous responsibility. PHMSA looks forward to working with 
Congress to address any issues you may have concerning the 
pipelines, the agency's pipeline safety program, and the 
regulation of gas and hazardous liquid pipelines in Alaska. 
PHMSA very much appreciates the opportunity to report on our 
oversight role on those pipelines. I look forward to any 
questions the Committee may have. Thank you.
    [The prepared statement of Ms. Quarterman follows:]

          Statement of Cynthia L. Quarterman, Administrator, 
         Pipeline and Hazardous Materials Safety Administration

I. Introduction
    Chairman Lamborn, Ranking Member Holt, members of the Subcommittee, 
thank you for the opportunity to appear today to discuss the Pipeline 
and Hazardous Materials Safety Administration's (PHMSA) oversight of 
America's 2.5-million-mile energy pipeline system. Safety is the number 
one priority of Secretary Ray LaHood, myself, and the employees of 
PHMSA and we are all strongly committed to reducing transportation 
risks to the public and environment. Our Nation's reliance on the safe 
and environmentally sound transportation of energy fuels and hazardous 
materials is increasing. PHMSA's safety oversight of the pipeline 
network that delivers these products is providing critical protections 
for the American people.
    PHMSA is responsible for establishing and enforcing safety 
standards for the design, construction, operation, and maintenance of 
the nation's pipeline transportation system. PHMSA's authority to 
regulate pipelines includes oversight of the Trans Alaska Pipeline 
System (TAPS), North Slope pipelines, certain pipelines in the Cook 
Inlet area, Liquefied Natural Gas (or LNG) facilities, and the 
distribution systems that deliver natural gas to homes, businesses, and 
power plants. Alaska oil and gas resources are critical to the nation's 
energy needs, and PHMSA recognizes its role in ensuring that this 
energy is transported safely and efficiently. For this reason, PHMSA 
has invested significant time and resources working with the State of 
Alaska and operators to ensure the safety of both existing and proposed 
interstate and intrastate pipelines, including the Trans Alaska 
Pipeline System and Alaska natural gas pipeline projects. The support 
of Congress is critical for the continued safe operation of oil and 
natural gas pipelines in Alaska. PHMSA seeks to increase the safety of 
Alaska's pipelines by providing the agency with additional staffing, 
enhancing our ability to collect information and data from pipeline 
operators, eliminating certain statutory limitations applicable to the 
regulation of gathering lines, and providing for reimbursement of 
expenses related to reviewing new pipeline projects.
II. PHMSA Coordination with the State of Alaska
    PHMSA is an active member in the pipeline regulatory community in 
Alaska. Alaska is only one of two states that have not accepted 
jurisdiction over its intrastate pipelines, therefore PHMSA is 
responsible for enforcing its Pipeline Safety Regulations on both 
interstate and intrastate oil and natural gas pipelines in Alaska. The 
State of Alaska and the Environmental Protection Agency (EPA) regulate 
the production facilities, including pipelines, upstream of the 
processing centers on the North Slope. PHMSA regulates the North Slope 
oil transit lines downstream of the processing centers, as well as the 
Trans Alaska Pipeline System, the Cook Inlet pipelines, and local 
distribution pipelines. PHMSA has a six-person staff in Anchorage that 
conducts comprehensive inspection and enforcement activities to ensure 
that pipeline operators are complying with its Pipeline Safety 
Regulations. PHMSA routinely coordinates with:
          The Joint Pipeline Office, a consortium of 12 Federal 
        and State Agencies;
          The Petroleum Systems Integrity Office, which is part 
        of the Alaska Department of Natural Resources;
          The Office of the Federal Coordinator for Alaska 
        Natural Gas Transportation Projects; and
          The Alaska Gasline Development Corporation, which is 
        working to develop a plan for an in-state natural gas pipeline 
        project.
    PHMSA also regularly provides Alaska state agencies with technical 
support. For example, we recently collaborated with the Department of 
Natural Resources on a special permit for a pipeline facility that 
connects a new natural gas field on the Kenai Peninsula to a 
transmission line that serves the Cook Inlet. The special permit allows 
the pipeline operator to use advanced pipeline materials, but also 
requires the operator to take additional safety measures beyond our 
regulations to safeguard the pipeline's operation. In addition, a 
senior PHMSA leadership and technical team, including myself, will be 
traveling to Anchorage in the next few months to meet with State 
officials on pipeline matters including the proposed interstate and 
intrastate gas pipelines.
    PHMSA is committed to achieving coordinated and effective oversight 
of Alaska pipeline systems. We would like to achieve more coordinated 
inter-agency inspections; the development of state-of-the art programs 
designed to better manage the integrity risks associated with operating 
pipeline systems in the unique conditions of Alaska; the development of 
enhanced inspection protocols and training programs; and the execution 
of cooperative agreements with other Federal and State agencies for the 
purpose of achieving effective oversight.
III. PHMSA Oversight of the Trans Alaska Pipeline System and the North 
        Slope
    PHMSA recognizes the importance of TAPS and the pipelines on the 
North Slope, and is vigilant in overseeing those that are within our 
jurisdiction. PHMSA works with the Joint Pipeline Office to ensure 
oversight that helps protect the public and the environment, and 
ensures operating reliability. Federal oversight is limited, however, 
and PHMSA can only provide oversight and protections for 
transportation-related pipelines under our jurisdiction.
    Historically, gathering and low-stress lines in rural areas, such 
as the BP Exploration Alaska (BPXA) pipelines that leaked in 2006, were 
exempt from the Pipeline Safety Statutes and regulations. In the 
absence of Federal oversight, Alaska had been regulating these 
gathering lines and flow lines on the North Slope under State law. In 
March 2006, approximately 5,000 barrels of crude oil were released from 
BPXA's Western Operating Area pipeline. A smaller spill on the Eastern 
Operating Area pipeline occurred in August 2006. Since the affected 
BPXA pipeline was considered to be a transportation pipeline, PHMSA 
issued a Corrective Action Order (CAO) in response to the spills 
requiring BPXA to perform certain corrective measures. Ultimately, 
PHMSA identified seven different violations of the CAO, each violation 
involving BPXA's failure to timely complete either maintenance pigging 
or in-line inspection of one of the pipelines. At the joint request of 
DOT and EPA, the Department of Justice filed a complaint in the US 
District Court for the District of Alaska in March 2009. We recently 
reached a consent agreement that, once it is approved by the court, 
will provide for heightened Federal oversight of BPXA's production 
related pipelines in Prudhoe Bay and require BPXA to pay $25 million. 
This accident highlighted the importance of PHMSA's enforcement program 
and jurisdiction over the nation's pipelines.
    PHMSA has made significant progress in regulating these lines. In 
June 2008, PHMSA issued a final rule that established new safety 
requirements for regulated rural hazardous liquid gathering lines. This 
rule brought BPXA's and other low-stress pipelines that had been exempt 
from PHMSA regulations under our jurisdiction. However, PHMSA still 
does not have complete authority to regulate certain gathering lines in 
rural areas. Removing the statutory exemption for gathering lines would 
clarify the extent of PHMSA's jurisdiction and provide additional 
safety for the nation's pipelines in rural areas. Even those lines that 
we do have jurisdiction to regulate pose a challenge that requires 
focused and dedicated resources. The integrity of TAPS is challenged by 
the unique conditions in Alaska, the reduction in the volume of oil 
transported, and the age of the pipeline. The continued safe operation 
of TAPS will require technical ingenuity as well as ongoing monitoring 
and attention.
    A leak that occurred at Pump Station 1 in January highlights this 
challenge. The leak appears to have been the result of internal 
corrosion and occurred in a piece of pipe that could not be assessed 
using in-line inspection tools. Following the discovery of that leak, 
PHMSA and other federal and state agencies worked together to address 
it and to prevent adverse environmental impact. PHMSA issued a Notice 
of Proposed Safety Order to Alyeska in response to this accident that 
proposed corrective measures that will help assure the future safe 
operation of TAPS. One proposed requirement is for Alyeska to remove 
all sections of pipe that cannot be assessed using in-line inspection 
tools. We have been working with Alyeska to reach an agreement for the 
resolution of this notice and other alleged violations of the pipeline 
safety laws.
IV. PHMSA's Oversight of Alaska Natural Gas Pipeline Projects
    The proposed Alaska interstate and intrastate natural gas pipeline 
projects will tap into gas reserves on North Slope fields next to the 
Beaufort Sea for transportation to markets in Alaska and the Lower 48 
states. Both the State and Federal authorities will regulate these 
proposed projects. PHMSA is fully engaged with the Department of 
Natural Resources and other state agencies responsible under the Alaska 
Gas Inducement Act (AGIA) to advance the Alaska Gas Pipeline Project. 
We are also in regular contact with the Office of the Federal 
Coordinator, the lead federal agency charged with facilitating the 
federal review of the gas pipeline project, and our federal partners at 
the Federal Energy Regulatory Commission and the Bureau of Land 
Management. PHMSA conducts periodic meetings with TransCanada/Exxon 
Mobil, the AGIA sanctioned operator of the proposed Alaska Gas Pipeline 
Project, to review the technical requirements of the pipeline that will 
incorporate unique design scenarios.
    We are also aware of and fully engaged in the Alaska Stand Alone 
Gas Pipeline Project pursued by the Alaska Gasline Development 
Corporation to bring North Slope gas to the Fairbanks and Anchorage 
areas. PHMSA has been coordinating with state authorities overseeing 
the project and the U.S. Army Corps of Engineers and other federal 
agencies to support the project.
    For these proposed pipelines, PHMSA will need to conduct reviews of 
design, material, construction, commissioning, and operation and 
maintenance plans. These pipeline projects will incorporate novel 
design concepts needed for the unique Arctic operating environment, 
which will likely require special permits. These projects will be of 
unprecedented size, and will require significant involvement from PHMSA 
for oversight and planning. The costs associated with these activities 
should be allocated to the beneficiary pipeline operators through 
reimbursement and permit fees.
V. Conclusion
    In closing, we look forward to working with Congress to address any 
issues you may have concerning PHMSA's pipeline safety program and the 
regulation of gas and hazardous liquid pipelines in Alaska. PHMSA very 
much appreciates the opportunity to report on our oversight role of 
these pipelines and the opportunities that exist to strengthen 
oversight.
                                 ______
                                 
    Mr. Lamborn. All right. Thank you for your testimony.
    At this point, before we begin our questioning, I would 
like to recognize the Chairman of the Full Committee, 
Representative Doc Hastings of Washington State for a five-
minute opening statement.

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

    Mr. Hastings. Thank you very much, Mr. Chairman, and thank 
you for your consideration. I apologize for coming in late, but 
we have another hearing in our other hearing room on the 
manmade drought in California and that has taken a lot of 
interest and work in this Committee. Thank you for holding this 
important hearing today on the vast energy resources continued 
in our northern most state and the unique access and 
infrastructure issues facing energy production in Alaska.
    America might not have a single state with more abundant 
energy resources than the offshore and onshore lands of Alaska. 
The utilization of these resources is vital to moving America 
forward to a future less dependent on foreign sources of 
energy, at the same time creating hundreds of thousands of 
American jobs.
    Certainly, in any form of energy production there are 
challenges that must be overcome. However, some of the greatest 
challenges in Alaska seem to originate from our own government, 
not the physical characteristics of the Arctic. In the 1970s, 
the TransAlaska Pipeline System was build to transport up to 
two million barrels of oil a day from Prudhoe to Valdez. TAPS 
is now operating less than half that capacity, due to the 
Federal Government's refusal to explore for more oil resources 
to fill the pipeline in places like the National Petroleum 
Reserve or the Beaufort or Chukchi Seas. Critical 
infrastructure is needed to ensure TAPS remains open. Yet, 
after years and years, the Administration isn't issuing the 
necessary permits for the infrastructure to be installed.
    If capacity isn't increased, the pipeline could shut down, 
putting thousands of hard-working American workers out of work 
and eliminating the valuable irreplaceable American asset. The 
Obama Administration's effective moratorium on new offshore 
drilling took the Chukchi and Beaufort Seas out of 
consideration for the 2012/2017 lease plan. Together these 
offshore areas contain potentially over 20 billion barrels of 
oil and over a 100 trillion cubic feet of natural gas.
    Now fortunately, this Committee has responded by passing 
H.R. 1231, not only out of this Committee, but out of the 
House, and it would require them to move forward with these 
lease sales.
    As gasoline prices continue to put a strain on the 
pocketbooks of American families across the country, it would 
be irresponsible for Congress to sit idly by and not act to 
harness the resources in Alaska, and for that matter elsewhere 
in America, to make us more energy secure. Alaska's energy 
resources will play a vital role in America's ability to fuel 
our economy, create American jobs, and lessen our dependence on 
unstable foreign energy.
    So thank you once again, Mr. Chairman, for the courtesy of 
allowing me to testify at this very important hearing regarding 
the vast resources that we have in Alaska. And with that, I 
yield back my time.
    [The prepared statement of Chairman Hastings follows:]

          Statement of The Honorable Doc Hastings, Chairman, 
                  House Committee on Natural Resources

    I would like to thank Chairman Lamborn for holding this important 
hearing today on the vast energy resources contained in our northern 
most state and the unique access and infrastructure issues facing 
energy production in Alaska. America might not have a single state that 
richer in energy resources than the offshore and onshore lands of 
Alaska. The utilization of those resources is vital to moving America 
to a more energy independent future while creating hundreds of 
thousands of American jobs.
    Certainly, there are challenges in energy production that must be 
overcome; however, some of the greatest challenges in producing energy 
in Alaska seem to originate from our own government, not the physical 
characteristics of the Arctic.
    The Obama Administration's effective moratorium on new offshore 
drilling took the Chukchi Beaufort Seas out of consideration for the 
2012-2017 offshore lease plan. Together those offshore areas contain 
over 20 billion barrels of oil and over 100 trillion cubic feet of 
natural gas. Fortunately, H.R. 1231, passed out of this Committee and 
the Full House of Representatives would require the Administration to 
move forward with lease sales on those areas in the next five year 
lease plan.
    In the 1970's the Trans Alaska Pipeline System was built to 
transport up to 2 million barrels per day from Prudhoe Bay to Valdez. 
TAPS is now operating at less than half capacity due to the federal 
government's refusal to explore for more oil resources in places like 
the National Petroleum Reserve-Alaska, or the Beaufort or Chukchi Seas. 
Critical infrastructure is needed to increase ensure TAPS remain open; 
however the Administration isn't issuing the necessary permits for the 
infrastructure to be installed. If capacity isn't increased, the 
pipelines will eventually shutdown putting thousands of hardworking 
American's out of work.
    As gasoline prices continue to put a strain on the pocketbooks of 
American families across the country, it would be irresponsible for 
Congress to sit idly by and not address the resources we have to make 
America more energy secure. Alaska's energy resources will play a vital 
role in America's ability to fuel our economy, create American jobs and 
lessen our dependence on unstable foreign energy.
    I'm looking forward hearing testimony from today's witnesses and 
asking them questions about the best way to access Alaska's untapped 
energy resources.
                                 ______
                                 
    Mr. Lamborn. All right. Thank you.
    We will now begin questioning. Members are limited to five 
minutes, but we may have additional rounds, although the time 
may not permit that. So we will have a dialogue about that 
later. I will now recognize myself for five minutes.
    First of all, Mr. Glenn you live in the region that this 
hearing focuses on. As you know, one of the primary concerns 
surrounding oil and natural gas production in this area is that 
it be done in an environmentally responsible manner. In your 
testimony you briefly discussed the impact energy development 
will have on wildlife.
    Can you tell me, from your own experience, have the fish, 
caribou and waterfowl been negatively impacted by energy 
development on these lands?
    Mr. Glenn. Not at all. The caribou, the freshwater fish and 
the waterfowl teem across the entire Arctic Slope and it is 
almost irrelevant whether there is industry presence there or 
not because the impact on the animals is so benign. This is for 
onshore development.
    Regarding offshore development, we are home to many 
populations of migrating sea mammals and what we have seen is 
the voluntary efforts by industry to minimize their impacts to 
that exploration, for example, is timed not to conflict with 
migrating period for animals like the bowhead whale. And 
importantly also, the explorers like Shell have offered to pull 
back away from their exploration areas during the times of the 
subsistence hunt because we are interested in these animals 
welfare, not just for their own sake because our people and our 
culture depend on them as well. And so we have not seen any 
harmful effects on wildlife.
    Mr. Lamborn. All right. Thank you.
    Mr. Lawrence, in your testimony you discussed the leases 
that your company holds in the Beaufort and Chukchi Seas for 
which you have completed the exploration plan, invested 
billions of dollars and are essentially ready to begin drilling 
exploration wells, is this correct?
    Mr. Lawrence. Yes, that is correct. We started a leasing 
program and have picked up more than 415 leases. We have 
invested $2.2 billion in that leasehold through time. And to 
properly evaluate that leasehold, including environmental 
studies, including what would be necessary for going forward 
for development, and including all this response that we need 
to safely do this program in Alaska we have invested an 
additional $1.5 billion. So at this point, prior to drilling a 
single well, we have invested almost $3.7 billion.
    Mr. Lamborn. That is amazing. You go on to say that permits 
have not been issued for these wells despite your having 
completed all the required steps to obtain them. Has any reason 
been given to your company as to why you have not been issued 
permits for these leases?
    Mr. Lawrence. We work closely with all the different 
permitting agencies, and just to be clear, there are almost 35 
different permits from different agencies that are required to 
be able to drill in Alaska. The permits have been denied to be 
given to us for a wide variety of reasons. Some of those 
reasons include that the studies, that were done by the various 
permitting agencies themselves, had not been deemed to be 
complete.
    Some of those things have been, for example, on the air 
permits that there have been questions around such things as 
where was the air to be measured. At what point did something 
become a stationary source and so forth. In combination, what 
you have is a number of different regulatory requirements that 
each on its own we are very happy to comply with, and as I 
stated in my testimony we happily would adhere to and often 
exceed regulatory requirements. But in combination, makes an 
almost impossible maze to work through to be able to obtain 
these permits.
    Mr. Lamborn. Thank you.
    And Mr. Sullivan, can you make any recommendations for 
streamlining this Federal permitting process for oil and gas 
exploration and development without undermining environmental 
protections?
    Mr. Sullivan. Yes, sir, Mr. Chairman.
    One of the things that we are working on from the state 
perspective is doing exactly what you just mentioned, which is 
streamlining, looking at efficiencies in our own state 
permitting system. And we are doing that with a continued focus 
of environmental protection, which as I mentioned, and mention 
in my written testimony is a hallmark of the way resources are 
developed on the North Slope of Alaska.
    The President recently mentioned having a high-level 
Federal coordination group with regard to expediting permitting 
in Alaska with regard to oil and gas. We think that is a good 
first step. What Mr. Lawrence mentioned about the overlapping 
different jurisdictions is a problem. Governor Parnell 
requested in a letter to President Obama that if there is a 
high-level permitting coordination group at the Federal level, 
that the State of Alaska be part of it because it is very 
important with regard to the overlapping jurisdictions.
    So whatever can be done to accelerate and bring certainty 
to a system that is slow and has no certainty is what we think 
is important.
    Mr. Lamborn. Thank you all for your answers. I would now 
like to recognize the Ranking Member of the Subcommittee, 
Representative Holt of New Jersey.
    Mr. Holt. Yes, thanks for those answers.
    Mr. Sullivan, the Oil Spill Commission concluded in its 
final report, and let me quote, ``Scientific understanding of 
environmental conditions in sensitive environments such as the 
Arctic is inadequate,'' and they go on to talk about the 
effects, the impacts of oil spills.
    The Commission continued, ``Good information exists only 
for a few species in the Arctic, and even for those just for 
certain times of the year or in certain areas. As a result, the 
Commission recommends an immediate comprehensive Federal 
research effort to provide a foundation of scientific 
information on the Arctic with periodic review by the National 
Academy of Sciences.'' Do you agree or disagree with that 
recommendation?
    Mr. Sullivan. Representative Holt, one of the things that 
is mentioned in my testimony is the studies. If you look on 
page 6.
    Mr. Holt. Yes.
    Mr. Sullivan. And there has been hundreds of millions of 
dollars worth of studies. As a matter of fact, the Obama 
Administration in 2009 mentioned----
    Mr. Holt. So to my question, Mr. Sullivan, you are saying 
you do not agree that there is poor scientific understanding.
    Mr. Sullivan. As a matter of fact, Representative Holt, I 
think that the USGS right now is undertaking an analysis of 
what the studies are in the Arctic.
    Mr. Holt. So you do not----
    Mr. Sullivan. And my understanding of that----
    Mr. Holt. I am not trying to badger you. I just want an 
answer. Is the Commission way off? They are wrong. There is 
adequate scientific understanding in your opinion?
    Mr. Sullivan. We think there is adequate scientific 
understanding to undertake exploration drilling.
    Mr. Holt. OK. Mr. Lawrence, do you agree? Let me turn to--I 
am sorry. I just have limited time. Mr. Lawrence, do you agree 
with the recommendation made by the Spill Commission?
    Mr. Lawrence. I have looked at the Presidential Commission 
and actually had many discussions with the Commission as they 
looked at that. And one of the things that they have stated is 
that in many cases there is a baseline of studies that have 
been done that would support that work and that continuing 
exploration would add to that scientific base. So to build on 
that, 5,000 studies to date, $500 million spent on that 
research to date, $50 million spent on research to date by 
Shell.
    Mr. Holt. So do you or do you not agree with the 
recommendation that an immediate, comprehensive Federal 
research effort to provide a foundation, not supplemental, but 
a foundation of scientific information on the Arctic should be 
undertaken?
    Mr. Lawrence. I believe that we have more than adequate 
foundation to go forward with that.
    Mr. Holt. OK. So you disagree. OK.
    Mr. Sullivan, the Commission also really issued what would 
have to be called a scathing indictment of the entire offshore 
oil and gas industry when the Commission said that from 2004 to 
2009, this is a quote. I hear some muttering from the other 
side of the dais here. I am just quoting the Commission and I 
am asking whether or not you agree with that.
    ``From 2004 to 2009, fatalities in the offshore oil and gas 
industry were more than four times higher per person hours 
worked in U.S. waters than in European waters, even though many 
of the same companies operate in the same venues.'' Are there 
recommendations made by the BP Commission that could improve 
the safety of offshore drilling that should be undertaken 
before we expand offshore drilling in Alaska?
    Mr. Sullivan. Representative Holt, one of the things I 
wanted to mention, we are always looking to increase safety and 
analyze our regulatory----
    Mr. Holt. But the question is, is this before or after the 
deaths occur? I am asking should these be undertaken before we 
do further drilling. Are you saying no?
    Mr. Sullivan. I what I am saying is the record in Alaska is 
quite strong. We have had 84 wells drilled in Federal waters 
over the last three decades.
    Mr. Holt. Yes, 84 is not so many, but OK.
    Mr. Sullivan. But we have had dozens drilled in state 
waters and we have a very, very strong safety and environmental 
record in the State of Alaska. Are we always looking to 
increase safety----
    Mr. Holt. So these reforms, if undertaken, should be 
undertaken after we expand the drilling in the offshore waters?
    Mr. Sullivan. I am saying, sir, that we shouldn't further 
delay development in Alaska.
    Mr. Holt. OK. So it should not be done before we expand the 
drilling? OK.
    Mr. Sullivan. But as the same time, as I mentioned, it is 
in my testimony, we are always looking for increase----
    Mr. Holt. In the few seconds that I have remaining, let me 
turn to Ms. Quarterman.
    Did the lower throughput of oil in the TAPS have anything 
to do with the January spill?
    Ms. Quarterman. No, it did not.
    Mr. Holt. Are there things that we should be doing that 
would be as effective as increasing the flow in the pipeline to 
prevent spills?
    Ms. Quarterman. There are a number of challenges that are 
being raised by the fact that the flow has decreased on the 
pipeline. Some of the things we should be considering is how to 
keep the pipeline sufficiently warm to continue it to operate. 
As the pipeline cools down, water falls out which can cause ice 
plugs.
    Mr. Holt. Or in pipeline inspections, pigs and so forth. So 
you are saying those could be done. They would be as effective 
as increasing the throughput?
    Ms. Quarterman. I think they are alternatives. Absolutely.
    Mr. Holt. Thank you.
    Mr. Lamborn. Thank you.
    Now I would like to recognize the gentleman from Alaska, 
Mr. Young, who is also Chairman of the Subcommittee on Indian 
and Alaska Native Affairs.
    Mr. Young. Thank you, Mr. Chairman. And it is hard for a 
person to sit by and listen to someone talk about something 
they don't know about. And I want to thank the witnesses.
    The gentleman, Mr. Holt, refers to a commission and Bill 
Riley, a known environmental extremist on fossil fuel, who said 
there should be no offshore drilling, period. Former Senator 
Bob Graham from Florida agrees with that and, of course, 
Frances Beinecke, Natural Resources Defense Council. I would 
say it was not really a fair commission. I mean they were 
prejudiced when they started and you know it.
    Their report, and I have attacked it time and again is 
false. I just want to make that record clear.
    Mr. Sullivan, can you give me some specifics how they have 
interfered in delaying development of oil in Alaska?
    Mr. Sullivan. Yes, sir, Congressman Young. And I just want 
to, just to clarify, I did want to make the point that in 2009 
the Obama Administration itself stated quote, ``There is an 
adequate baseline of information that exist to address the 
environmental effects of OCS oil and gas programs.'' So that 
was from this Administration.
    I also want to just clarify----
    Mr. Holt. Would you give us the date again, please?
    Mr. Young. It is not your time.
    Mr. Holt. I beg your pardon.
    Mr. Young. Just remember that.
    Mr. Sullivan. The spill in January did not spill one ounce 
of oil on--there was a misstatement, 13,000 gallons. There was 
not a drop of oil spilled on the land in January. It was all 
contained in a small building. But to answer your question 
further Congressman Young, on pages 9 through 11 of my 
testimony we give specific examples of exactly specific 
projects and then broader policy determinations by this 
Administration that we think have had a chilling affect on the 
significant amount of investment needed to increase production 
to increase TAPS throughput. So I can give a few examples.
    Mr. Young. If it is in your testimony, I don't need it. But 
you have specifics in your testimony?
    Mr. Sullivan. Absolutely. And that is not even going 
through all of them, as a matter of fact.
    Mr. Young. Mr. Glenn, thank you for your testimony too. 
When you say your people will not be able to survive the way 
they have been able to survive recently because of development, 
what will happen? I mean what do you think is going to occur up 
there?
    Mr. Glenn. Sometimes I think the term ``village,'' 
``Alaskan native village'' does us an injustice. Today's 
villages are modern, small cities. We have power plants, water 
sewer plants, runways, roads. Things that need continued 
maintenance. In the absence if this municipal infrastructure 
that we built, we run the risk of responding to a fire, for 
example, in a building like we used to by running home and 
grabbing small fire extinguishers.
    In the absence of snow removal, we run the risk of no more 
ambulance visits to someone during a time of medical emergency. 
And these are real world possibilities in the absence of 
continued development in our region.
    Mr. Young. So what they are doing is by non-acting and then 
the government is really trying to extinguish a culture.
    Mr. Glenn. A lot of people will fight Arctic development in 
the name of saving----
    Mr. Young. The culture.
    Mr. Glenn. The culture of the native people there. If they 
really want to help us, they should come try and live where we 
live.
    Mr. Young. I would like to see them move a honey bucket out 
and dump it in a lagoon for a while. I think you might learn a 
little bit, Mr. Holt.
    Mr. Lawrence, can I ask you a question? When you weren't 
issued a permit last year, who really stopped the permit. EPA 
issued a permit, did they not?
    Mr. Lawrence. We have had air permits that have been 
remanded to the EPA and we are waiting on those air permits.
    Mr. Young. But was it the appeal board that turned down the 
decision of EPA?
    Mr. Lawrence. Again, continue to study and not provide the 
requisite decision.
    Mr. Young. This is my concern. You know 30 agencies to get 
permits from?
    Mr. Lawrence. Thirty-five different permits. Yes.
    Mr. Young. Gentlemen, that is our problem. We have agencies 
doing this one. They don't want any oil development. And by the 
way, if we don't do something about oil development in this 
country, every man, woman, and child pays about $1100 a year in 
taxes to the foreigners. We do have fossil fuels and it is what 
makes our commerce run. It moves our trains, our planes, our 
automobiles, and our trucks and our ships and nothing else 
moves those things. And to have Obama sitting down and saying 
we are going to go use windmills. We are going to stop nuclear 
power when that is what runs our commerce and we have the oil 
in Alaska. We have the oil offshore. China knows it. They are 
going to drill. Russia knows it. They are going to drill. 
Iceland knows it. They are going to drill. Greenland knows it. 
They are going to drill. And we are sitting around in this 
Congress doing nothing about developing our fossil fuels.
    Mr. Chairman, it is time we started acting in this Congress 
on an energy policy and fossil fuels. I am through.
    Mr. Lamborn. Thank you.
    Now I would like to recognize the gentleman from Maryland, 
Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Mr. Chairman. Thank you all for 
your testimony.
    Obviously, I don't have the years of experience of 
Congressman Young. I have only been here four years. But in the 
four years of sitting in hearings like this one, looking at the 
issue of oil and gas development I haven't seen any evidence 
that the agencies that are charged with oversight of the 
industry are against oil and gas development.
    I think what they are for is oil and gas development that 
is done in a safe way. That is done in a way that preserves the 
environment. And frankly, is done in a way that means that that 
resource over time is sustainable. Because if you don't do 
these things safely and you have accidents with significant 
consequences, it can then result in the industry being pushed 
back. So it is in the industry's interest to make sure this is 
done well on the front end.
    Now Mr. Lawrence, I was actually encouraged by your 
testimony because you said a number of times that you don't 
resist the regulatory requirements that are being asked of the 
industry and your corporation. Your concern is about whether 
the permitting process happens in a timely way, whether there 
is adequate coordination of the expectations of these different 
agencies and so forth. That is a fair case to make because 
sometimes the bureaucracy can be an impediment, but that 
doesn't speak to the I think good intentions of the agencies in 
terms of what they are trying to accomplish.
    What it actually speaks to is we have to make sure that 
there are sufficient resources available to these agencies to 
be able to do these reviews in a way that is efficient, in a 
way that is timely, and that is a concern I have, particularly 
as these agencies try to regroup in the wake of what happened 
last year, and in the wake of other information that has come 
forward.
    So I would hope, and I don't really have a question. But I 
would hope that going forward you would be an advocate with 
others in the industry for making sure that there are really 
sufficient resources available there for these agencies to do 
their job. I don't really have a question. But I thank you all 
for your testimony and I yield back.
    Mr. Lamborn. Thank you.
    Mr. Fleming of Louisiana.
    Mr. Fleming. Thank you, Mr. Chairman.
    I would like to extend, first, on the remarks from Mr. 
Young. It was mentioned here today that somehow we are at some 
peak of oil production, energy production and nothing further 
could be from the truth. If you look at the overall trend line, 
oil production peaked in this country in 1972 at nine million 
barrels of oil per day. We are down to six million barrels of 
oil per day and dropping rapidly.
    Off-shore we peaked in 2010 at 1.7 million barrels a day. 
We are down to 1.59 million barrels a day and we will drop 
another 200 to 250,000 barrels per day over the next year. And 
then we see a graph there showing that the TransAlaska Pipeline 
System peaked in the eighties at 2.2 million per day, which 
represented at the time 25 percent of U.S. domestic production. 
It is down to 630,000 barrels per day.
    Now conventional wisdom has it that the reason why oil 
production or really fossil fuel production is declining in 
this country is because we are using it up. That it is gone. 
That we have very little left. But the reality is that the USGS 
has found in recent years that we have far more of these 
entities, these God-given minerals than we ever thought we had 
and new technologies are showing that we can find them and get 
to them in ways that we never thought we could.
    My own district, District 4 of Louisiana, we discovered the 
Haynesville shale only five years ago and we now know that we 
have more natural gas just in the Haynesville shale, in fact, 
than the largest deposit in North America, the third largest 
deposit in the entire world--and more then any other shale 
developments that we are seeing. So the reality is we know 
today that the United States has more coal, natural gas, and 
oil than any country in the world, more than any country in the 
world. The second to it is Russia and they are not even close, 
far more than Saudi Arabia.
    So the issue here today, ladies and gentlemen, is not that 
we are using up these vital resources. We face a number of 
issues, including the permitting process, hyperregulation, 
extreme environmentalist positions, a whole cascade of 
Administration members who say that they are quite happy to see 
gasoline prices go up to $10 a gallon--like they have in 
Europe--in order to advance a so-called green agenda, and in 
order to make alternative fuels more competitive in the 
marketplace. That is really impossible to do.
    So it really seems to me that the problem is that we are 
artificially constricting the production of fossil fuels 
hydrocarbons and that is, in fact, what is causing our price 
increases at the gasoline pump. Americans think that we are up 
here working to get that down when, in fact, we are doing just 
the opposite. We are slowing it down and we are hearing 
wonderful witness testimonies here today that tell us exactly 
why that is happening.
    In fact, I will follow up with a question here. Mr. 
Lawrence, in light of the recent deep water incident, could you 
please elaborate on how your regulatory hurdles have grown just 
since April 2010?
    Mr. Lawrence. Yes. Thank you very much and appreciate the 
opportunity to discuss. Following the deepwater Macondo 
incident, we have taken on board the numerous recommendations 
from the Commission to be able to operate safely. And in fact, 
we had already implemented most of those and helped provide 
insights into what those might look at.
    We have had a significant challenge with our permitting 
process. Just to give you an example, we have deferred almost 
$700 million of investment as a result of the delays in 
permitting that have come from that. That cost us almost 10,000 
barrels a day. Last year almost 50,000 barrels a day going into 
2011. We currently have five deepwater rigs. You know what the 
rates of these things are, up to an all inclusive million 
dollar a day type rate. We have only three of those deepwater 
rigs working at this point in time and we have received three 
permits with numerous others out for request.
    So we are working off of five discoveries in the Gulf of 
Mexico, ready to get those on, appraise them, develop them, 
bring them onto production, and it is having a significant 
impact on us in terms of not only our activity, the jobs that 
we have, but also directly for the country in terms of 
production and then revenue loss and lost investment.
    Mr. Fleming. So I would submit then to you today that we 
have plenty to go after. We have plenty of opportunities out 
there in terms of our equipment, the personnel and so forth, 
but it is the Administration's agenda that is really 
constricting the production, not other issues that perhaps may 
be discussed here today. Thank you.
    Mr. Lamborn. Mr. Landry of Louisiana.
    Mr. Landry. Thank you, Mr. Chairman.
    You know Mr. Glenn I want you to know that I always believe 
the other side of the aisle lived in a Utopian world and I was 
proven that yesterday when I sat in an Natural Resources 
Committee and heard the wind farm industry tell us how they 
can't put up windmills because the environmentalists are 
blocking their windmills. So I don't know how they are going to 
power their homes.
    They don't like it when you are able to afford to put your 
own toilet in your home. That is not enough for them. They want 
to be able to pay for you to put your toilet. Then they want to 
tell you what kind of toilet to put in your home. So understand 
what you are dealing with. These people have driven gas prices 
to almost record highs. They are fixing to wreck this economy 
because they won't allow us to produce affordable energy, which 
stems this economy just like Congressman Young says. They want 
us to be more like Europe.
    Every time I read the Wall Street Journal I don't want 
anything to do with Europe's economy. I want you to be able to 
drill over there. Wouldn't you say that you know how to protect 
your home. This is actually both for Mr. Sullivan and Mr. 
Glenn. You are both native Alaskans, I would guess. Wouldn't 
you say that you know how to protect your home better than me?
    Mr. Glenn. Yes. I have a real world example that helps to 
illustrate the answer to that question. In the town where I 
live is 340 miles north of the Arctic Circle. No roads go 
there. We are only visited by aircraft and ships like barge 
traffic. We have developed natural gas for our home local use. 
It is a 12-mile pipeline that goes from the gas fields from my 
town that keeps the lights on and the houses warm. I helped 
drill those wells, Congressman. And I was part of the 
exploration effort. I had to listen to the state and the 
Federal regulations that protect our environment. So the short 
answer is yes. We do protect our environment. We care about it.
    Mr. Landry. And you know how to protect your home better 
than I would, wouldn't you agree with that?
    Mr. Glenn. I would hope so. Yes.
    Mr. Sullivan. Congress Landry, I would agree that we live 
in the state and most people live in Alaska because they love 
the environment. Its pristine nature. We all get out there, use 
it, so we are very focused, and that is way a big part of my 
written testimony is focused exactly on what we do to protect 
the environment. I recently signed what they call a best 
interest finding for increased development on state land. It is 
very, very detailed. Pages and pages of what you have to do if 
an explorer runs into a den of bears or things like this and we 
are very focused on it.
    I think the key issue is that we think you can do both. You 
can responsibly develop resources and protect the environment, 
and we have a good record in Alaska doing that and it is not an 
either or proposition.
    Mr. Landry. I am for letting you protect your home. I want 
you to know that. I want to ask two quick questions. One to Mr. 
Lawrence.
    Last year when the TAPS pipeline was shutdown because of a 
slowed flow, coupled with the cold weather, where did the 
refineries in California get their oil?
    Mr. Lawrence. Thank you. So for that period of time, oil 
came from Asia.
    Mr. Landry. From Asia?
    Mr. Lawrence. It did not come from Alaska as it normally 
comes. Again, that throughput that went to the refineries was 
shutdown and they needed to seek other sources.
    Mr. Landry. So we have the ability to fuel our refineries 
with our oil.
    Mr. Lawrence. That is correct. The shutdown, again, 
requires those--you don't want to shut those refineries down so 
that oil then needs to come from elsewhere.
    Mr. Landry. So that means that people who refused to let us 
drill in Alaska, who refuse to let us put oil in the pipeline 
basically promote us purchasing foreign oil, that is a correct 
statement, is it not?
    Mr. Lawrence. What I would say is that the Alaska pipeline 
is absolutely essential to supplying our West Coast refineries 
with American oil.
    Mr. Landry. Mr. Lawrence, I hate to put you on the spot 
because I love Shell. I think they do a great job in the Gulf 
of Mexico. Thumbs up to you all and your safety record there, 
but honestly, if that pipeline is not there that means that we 
have to buy foreign oil for our West Coast refineries.
    Mr. Lawrence. If the pipeline does supply oil from Alaska, 
that oil will come from elsewhere and much of it will come from 
foreign suppliers.
    Mr. Landry. So that means that people who refuse to let us 
fill that pipeline support us purchasing foreign oil? That is a 
yes or no question.
    Mr. Lawrence. Yes.
    Mr. Landry. Thank you.
    Dr. Fleming. [Presiding] The gentleman's time is up. Next 
is Mr. Johnson.
    Mr. Johnson. First of all, I want to thank the Chairman for 
holding this hearing.
    I have heard a lot of banter from the other side this 
morning about how it must take congressional experience to see 
that $4 a gallon for gas is hurting Americans and how America's 
dependence on foreign sources of oil is a national security 
issue. I think Americans get it and it doesn't take an American 
that is sitting in the halls of Congress to get it. My 
constituents in eastern and southeastern Ohio get it.
    I don't see why my colleagues on the other side of the 
aisle and the Obama Administration don't see the need for an 
immediate national energy policy that is going to ensure 
America's energy security. I am new. I am freshman, but I am a 
loss for words on this Administration's security policy. Back 
in my district in eastern and southeastern Ohio my constituents 
are fed up with high gas prices. They have told me time and 
time again that we need to produce more of America's energy 
from our own natural resources. From the testimony that we have 
heard from you folks today, we have heard how the Federal 
Government is not only slowing down the production of an area 
of land that is set aside specifically as a national strategic 
reserve, but is also holding up permits to allow drilling in 
the shallow water OCS off the Alaska coast.
    As we have heard from Mr. Lawrence, Shell's proposed 
drilling in Alaska's Beaufort and Chukchi Seas OCS is estimated 
to produce an on average 700,000 barrels of oil a day for 40 
years, 700,000 barrels a day is more than America imports from 
Russia and Iraq per day combined. It is mind boggling to me and 
my constituents that the Federal Government won't let the Shell 
project go forward and reduce America's dependence on foreign 
oil.
    Because of the lack of oil and gas production in Alaska, 
the TransAlaska Pipeline, as you know, or TAPS, as we have 
heard this morning is in danger of shutting down to a lack of 
volume. Without an increase in production, TAPS will shutdown 
and America will become more dependent on foreign oil. We just 
heard that in the question period from Mr. Landry. And folks I 
submit to you that this simply cannot happen.
    Finally, I would like to point out that Shell's story of 
investing over a billion dollars into trying to drill in Alaska 
is a poster child for why the other side's so-called Use it or 
Lose It legislation is so misguided. Here we have a company 
that is trying to use their lease, but because of the Federal 
Government's broken permitting process they haven't been able 
to start drilling. Instead, the other side's proposal would 
place a tax on the company for the Federal Government's 
incompetency. And this idea just defies logic. I do have some 
questions.
    Mr. Lawrence, do you think that the Federal Government in 
the past have purposely slowed down Shell's drilling permits 
because of a fundamental disagreement over whether drilling 
should take place in Alaska's Beaufort or Chukchi Sea OCS or 
because of a lack of competency by the agencies involved to 
handle such a request for a permit.
    Mr. Lawrence. Thank you. I think there are two things that 
have fundamentally caused that delay. The first is the 
coordination between the different agencies so that the right 
hand knows what the left hand is doing and assures that we are 
able to actually get timely delivery of those permits.
    Mr. Johnson. That is the competency issue.
    Mr. Lawrence. The second thing, and that is the 
coordination issue. The second thing brought up, and I do think 
it is quite important, is that these agencies are properly 
resourced to ensure they can operate and go through these 
permits in a timely manner. And I think that deserves support 
to get that proper resource in addition to the coordination.
    Mr. Johnson. I am glad you brought that up because I will 
submit to you that they are more than adequately resourced. If 
we look at the permitting process from just a few short years 
ago, 300-and-some permits per year. The next year--after the 
Obama Administration came in--100-and-something. We are down 
into the double digits in terms of numbers of permits. They are 
asking for an increase in budget authorization and 21,000 
additional people to put in a robust permitting process to do 
less than what they used to do three years ago, four years ago. 
I don't understand that. So I appreciate your answer, Mr. 
Lawrence, but I submit to you that they are resourced. They 
simply are not doing what the American people are doing.
    I apologize. I am out of my time. I yield back.
    Dr. Fleming. The gentleman yields back. Next for five 
minutes Mr. Duncan from South Carolina.
    Mr. Duncan. Thank you Mr. Chairman and thank the panelists 
for being here today.
    If I get passionate about this issue it is because I am 
passionate about American energy production. I may not be as 
passionate as the gentleman from Alaska and the gentleman to my 
left from Louisiana, but it is an issue that I have been 
following for a long time, having served on the MMS, Outer 
Continental Shelf Five-Year Planning Subcommittee and 
understanding that areas that we were talking about back then 
when I served on that committee were very, very limited, a 
couple of grid squares in the western GOM and a little area off 
the coast of Alaska is the only thing we could talk about for 
future lease sales on the next five year plan, which I thought 
back then was ludicrous but I know with the Administration is 
not doing now with future lease sales. They don't have a five-
year plan for the future.
    I am concerned about what we are going to do without future 
lease sales in this country to open up these areas that 
American people know the resources are there. They know that we 
have them in this country. We are very, very blessed, yet the 
Administration's policies are continuing to hamper our ability 
to get out there and harvest the resources, whether it is any 
hydrocarbon, whether it is oil or natural gas.
    The folks watching back home need to realize that this 
Administration has been very clear. Dr. Chu, the Secretary of 
the Department of Energy said before he was ever elected that 
he wanted to see America have European-styled gas prices. As 
Mr. Landry mentioned a minute ago, folks that eight, nine, $10 
a gallon gasoline. That is unsustainable. I look at this mural 
here and we see planes and trains and automobiles and ships and 
a city in the background and everything in that picture is run 
on hydrocarbons. It is run on oil and natural gas, primarily in 
that picture diesel fuel, which comes out of the ground and is 
produced in the refining capacity process.
    Anyway, America needs to know that this Administration is 
standing in the way of us harvesting our own resources and 
moving forward with American energy independence. But I know 
how the folks in Alaska feel about drilling there. I met with 
the former speaker of the house recently in my office from 
Alaska and she said that a drilling bill passed in Alaska 51 to 
1, 51 to 1. That tells me how Alaska feels about it. Your 
testimony is very, very clear that the gentlemen that are from 
Alaska.
    We went to the White House this week and we met with 
President Obama. And he looked at us and he said that he didn't 
necessarily think we had a spending problem in this country. We 
had a revenue problem and he talked about possibly raising 
taxes on the higher income producers in this country. But you 
know what, the second largest income producer for this nation, 
second only to taxation, if you take borrowing, Mr. Chairman, 
out of the equation, when we are borrowing 43 cents of every 
dollar we spend.
    If you take borrowing out, the second largest income 
producer for this country is the revenues we get from oil and 
natural gas royalties and lease sales, the second largest 
revenue producer. If we want to increase revenue, Mr. 
President, we need to increase American domestic energy 
production and increase the revenue we get from the royalties 
there.
    And I looked at the graph that you provided and ANWR is the 
size of my home state of South Carolina. The whole thing is a 
national wildlife refuge. I can't imagine South Carolina, the 
whole state being a national wildlife refuge. And then I 
investigate where the oil and natural gas areas that we 
possibly could drill and produce from, if ANWR is the size of 
that wall right there and I put a postage stamp up there that 
is what we are talking about, the negligible impact on the area 
is something that we have to talk about.
    So I will get off my soapbox and ask a question because Mr. 
Lawrence you made a comment that I have been thinking about EPA 
not issuing Shell Oil an air quality permit. And having gone to 
an offshore production and drilling platform in the Gulf of 
Mexico, both of them had flare gas. And I am assuming that the 
air quality permit is dealing with that flare gas because I 
don't remember seeing any other emissions that may have been 
under an air quality permit the EPA would be involved in.
    But in your comments you talk about that BOEMRE had 
normally been the only agency that issue air quality permits, 
if I read this correctly. Why is the EPA the agency involved 
here?
    Mr. Lawrence. Yes, you are correct. BOEMRE has 
responsibility for those air quality permits in the central and 
western Gulf of Mexico and has for years. They would look at 
any emissions, for example, from drill ships in those areas. In 
the Alaska jurisdiction, the EPA has been designated as having 
that responsibility.
    Mr. Duncan. For how long?
    Mr. Lawrence. Since at least I have been going for a 
permit. And what I would say is that the experience level with 
working with those permits and the kind of issues that you face 
with those permits is far less with the EPA than it is 
elsewhere.
    Having said that, what I look forward to is just to be able 
to receive the permit, having met all those requirements and 
having been able to deliver what we have said we would deliver 
to be able to get those permits.
    Mr. Duncan. Mr. Lawrence, I know you are going through a 
permitting process with EPA and you are treading very lightly 
because you don't want to impact that. I appreciate those 
comments, but I am going to question this committee why the EPA 
is involved in the Alaskan Sea, Beaufort and Chukchi and the 
rest of them when BOEMRE does it everywhere else there is 
offshore drilling. Thank you very much, Mr. Chairman.
    Mr. Lamborn. Thank you. Now Mr. Rivera of Florida.
    Mr. Rivera. Thank you, Mr. Chairman.
    Just one question regarding the pipeline and what the 
effect would be or the actual effect would be on the pipelines 
should the flows continues to slow down because my staff has 
told me that if it gets to a certain point it will have to be 
dismantled, according to Federal law. How much would 
dismantling the pipeline costs, how long would it take to 
rebuild, how much would it cost to rebuild? Any reflections on 
that?
    Mr. Sullivan. Yes, sir. Congressman, just to address that 
issue more broadly, we believe that the best way to ensure that 
the pipeline doesn't shut down is to increase the TAPS 
throughput. The best way to deal with the technical problems, 
the best way to deal with potential spills is to actually 
increase. As you go lower in through-put, we may see an 
increase in these kinds of problems, regardless of technical 
fixes. But there is a requirement, if it is shutdown, for the 
actual pipeline to be dismantled and it would cost probably in 
the billions of dollars and it would in some ways be, from our 
perspective, an enormous wasted investment because we still 
have the massive resource base to fill it and that is where we 
believe the investment dollars should be focused on is the 
responsible production to actually fill it.
    Mr. Rivera. Anyone else? Any other comments?
    I yield the rest of my time, Mr. Chairman.
    Mr. Lamborn. All right. Thank you.
    At this point, I want to thank the witnesses for coming 
today. You provided some illuminating and educational responses 
and testimony to help us do our jobs better, hopefully. So 
thank you for being here. And I would like to urge the 
witnesses to answer any questions that Members may submit to 
them in writing immediately afterwards.
    And if there is no further business, the Subcommittee 
stands adjourned.
    [Whereupon, at 11:25 a.m., the Subcommittee was adjourned.]

                                 
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