[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
H.R. 2150, ``NATIONAL PETROLEUM
RESERVE ALASKA ACCESS ACT''
=======================================================================
LEGISLATIVE 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 16, 2011
__________
Serial No. 112-42
__________
Printed for the use of the Committee on Natural Resources
Available via the World Wide Web: http://www.fdsys.gov
or
Committee address: http://naturalresources.house.gov
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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 16, 2011.......................... 1
Statement of Members:
Hastings, Hon. Doc, a Representative in Congress from the
State of Washington........................................ 6
Holt, Hon. Rush D., a Representative in Congress from the
State of New Jersey........................................ 3
Prepared statement of.................................... 5
Lamborn, Hon. Doug, a Representative in Congress from the
State of Colorado.......................................... 1
Prepared statement of.................................... 2
Markey, Hon. Edward J., a Representative in Congress from the
State of Massachusetts..................................... 7
Statement of Witnesses:
Balash, Hon. Joe, Deputy Commissioner of the Alaska
Department of Natural Resources, Alaska Department of
Natural Resources.......................................... 12
Prepared statement of.................................... 13
Drevna, Charles T., President, National Petrochemical &
Refiners Association....................................... 19
Prepared statement of.................................... 21
Murkowski, Hon. Lisa, U.S. Senator, State of Alaska.......... 8
Prepared statement of.................................... 10
Myers, Eric F., Policy Director, Audubon Alaska.............. 30
Prepared statement of.................................... 32
Pool, Hon. Mike, Deputy Director, Bureau of Land Management,
U.S. Department of the Interior............................ 49
Prepared statement of.................................... 51
Sharp, Tim, Business Manager/Secretary Treasurer, Alaska
District Council of Laborers............................... 27
Prepared statement of.................................... 29
LEGISLATIVE HEARING ON H.R. 2150, THE ``NATIONAL PETROLEUM RESERVE
ALASKA ACCESS ACT.''
----------
Thursday, June 16, 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 10:04 a.m. in
Room 1324, Longworth House Office Building, Hon. Doug Lamborn
[Chairman of the Subcommittee] presiding.
Present: Representatives Lamborn, Gohmert, Fleming, Rivera,
Duncan of South Carolina, Gosar, Flores, Landry, Hastings (ex
officio), Holt, DeFazio, Costa, and Markey (ex officio).
STATEMENT OF HON. DOUG LAMBORN, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF COLORADO
Mr. Lamborn. The Subcommittee will come to order. The
Chairman notes the presence of a quorum, which under Committee
Rule 3[e] is two Members. I am told the Ranking Member will be
here any second.
The Subcommittee on Energy and Mineral Resources is meeting
today for a legislative hearing to hear testimony on H.R. 2150,
the National Petroleum Reserve Alaska Access Act.
Under Committee Rule 4[f], opening statements are limited
to the Chairman and Ranking Member of the Subcommittee.
However, I intend to recognize full Committee Chairman Hastings
and Ranking Member Markey for opening statements later in the
proceedings if they wish to make one.
In addition, 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 recognize myself now for five minutes for an opening
statement.
Today's hearing is on H.R. 2150, the National Petroleum
Reserve Alaska Access Act; but the real subject of today's
hearing is jobs and energy security.
Two weeks ago, this Subcommittee examined the tremendous
promise that Alaska holds in resources, infrastructure, and
people. 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 percent of the State's wealth.
Today we will hear directly from a representative of
thousands of those workers, who will join with us in the call
for more development in the National Petroleum Reserve, Alaska:
NPRA.
We will also hear from representatives of the State of
Alaska talking about the importance of development in NPRA for
the State and the security of the Trans-Alaska Pipeline. In
addition, we will hear from a representative from the Refinery
Association, discussing the important role Alaskan oil plays in
allowing Pacific Coast refiners to produce and provide
essential fuel that American consumers rely on every day.
We will also hear from the Administration. However, we will
likely not hear about how development in the NPRA has been
stymied by the inability of the Department of the Interior, the
Army Corps of Engineers, and the EPA to process permits for the
pipelines and roads necessary to transport the petroleum out of
the Petroleum Reserve.
There is no doubt that the development of NPRA has been
stopped because of problems within this Administration, and
these are problems that the President could fix.
We won't hear the Administration admit that in 2010 it
issued the fewest leases for oil and gas development since
1984. In issuing only 1308 leases last year, one-fifth of those
leases, which were issued in Nevada, this Administration has
shown that leasing for oil and gas is clearly not a priority.
In fact, the second year of the Obama Administration
resulted in only one-quarter the number of new leases in 1994,
the second year of the Clinton Administration, where they
issued 4,159 leases, and is about half the number of leases
issued during the second year of the Bush Administration in
2002, which issued 2,384.
This lack of leasing includes not issuing a single lease in
the State of Alaska in 2010. Last month, in his Saturday
Presidential Address, President Obama announced his intention
to hold annual lease sales in NPRA. I am glad that he has
appeared to reverse that policy of his Administration, and I
anxiously await his Administration following through with these
plans. The bill before us today will require the Department to
ensure annual lease sale offerings.
It has often been said in front of this Subcommittee that
our nation does not have a lack of resources to curb our
foreign dependence, we have a lack of clear policy. This
Administration has shown that through their actions, they do
indeed have a clear policy; it is a policy of limiting oil and
natural gas development, halting job creation, and weakening
our national security.
It can and should be the policy of this government to
develop the resources in our National Petroleum Reserve
quickly, efficiently, cleanly, and responsibly in order to
reduce our foreign dependence, create jobs, and keep our
revenue here at home. The legislation before this Committee
today will accomplish all these goals.
I would now like to recognize the Ranking Member for five
minutes for an opening statement. Mr. Holt.
[The prepared statement of Mr. Lamborn follows:]
Statement of The Honorable Doug Lamborn, Chairman,
Subcommittee on Energy and Mineral Resources
Today's hearing is on H.R. 2150, the ``National Petroleum Reserve
Alaska Access Act'' but the real subject of today's hearing is jobs and
energy security. Two weeks ago the Subcommittee examined the tremendous
promise that Alaska holds in resources, infrastructure and people.
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. Today we will
hear directly from a representative of thousands of those workers who
will join with us in the call for more development in NPR-A.
We will also hear from representatives of the State of Alaska
talking about the importance of development in NPR-A for the State and
the security of the Trans-Alaska Pipeline. In addition, we will hear
from a representative from the refinery association discussing the
important role Alaskan oil plays in allowing Pacific Coast refiners to
produce and provide essential fuel that American consumers rely on
every day.
We will also hear from the Administration. However, we will likely
not hear about how development in the NPR-A has been stymied by the
inability of the Department of the Interior, the Army Corps of
Engineers and the EPA to process permits for the pipelines and roads
necessary to transport the petroleum out of the petroleum reserve. The
is no doubt that the development of NPR-A has been stopped because of
problems within this Administration, and problems that the President
could fix.
We won't hear the Administration admit that in 2010 it issued the
fewest leases for oil and natural gas development since 1984. In
issuing only 1,308 leases last year, one-fifth of those leases were
issued in Nevada, this administration has shown that leasing for oil
and gas is clearly not their priority.
In fact, the second year of the Obama Administration resulted in
only one-quarter the number of new leases as 1994--the second year of
the Clinton Administration where they issued 4,159 leases, and about
half the number of leases of the Bush Administration in 2002 who issued
2,384 leases.
This lack of leasing includes NOT ISSUING A SINGLE LEASE IN THE
STATE OF ALASKA IN 2010. Last month in his Saturday Presidential
Address, President Obama announced his intention to hold annual lease
sales in NPR-A. I am glad that he has reversed that policy of his
Administration and I anxiously await his Administration following
through with these plans. The bill before us today will require the
Department to ensure annual lease sale offerings.
It has often been said before this subcommittee that our nation
doesn't have a lack of resources to curb our foreign dependence, we
have a lack of clear policy. This Administration has shown that through
their actions they do have a clear policy. It is a policy of limiting
oil and natural gas development, halting job creation, and weakening
our national security.
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. The legislation before this Committee
today will accomplish all those goals.
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. I thank my friend, the Chairman. Today this
Subcommittee is considering legislation dealing with oil
drilling in the National Petroleum Reserve, Alaska, NPRA, as
you have heard. And the Majority claims that we need this
legislation because the Administration is blocking, in their
words--stymied, actually, the Chairman used--oil and gas
drilling in the Reserve, and slow-walking permits in the NPRA.
The facts simply don't support that claim.
As with previous drilling legislation that the Majority has
been moving through this Committee, to set artificial and
unnecessary deadlines on the Interior Department and to limit
environmental review of oil and gas drilling, H.R. 2150 would
unnecessarily truncate review of permits by the BLM.
To quote the Chairman, what we are seeking to do here is to
behave responsibly. H.R. 2150 would direct the Secretary of the
Interior to ensure that any Federal permitting agency shall
issue permits for pipelines and roads within 60 days of
enactment of leases that have an approved permit to drill, and
within six months of the submission of an application for a
permit to drill for other leases.
This directive would appear to require the Interior
Department to compel other cabinet-level agencies to act,
something that is far beyond the scope of the Secretary of the
Interior's authority.
Furthermore, this directive is unnecessary because there
are no pending applications with the BLM to construct pipelines
or roads in the NPRA. This provision would also, it appears,
prohibit proper NEPA review of future oil and gas pipelines in
the Reserve.
H.R. 2150 would require the BLM to develop a plan to
``ensure that all leaseable tracts in the Reserve are within 25
miles of an approved road and pipeline right-of-way.''
Of course, requiring the BLM to invest time and money in
mapping out a spiderweb of roads and pipelines before we even
know where future oil and gas production may take place is
wasteful. Underscoring the difficulty of predicting where
future production may occur, and thus the infrastructure needed
to support it, oil companies have been relinquishing numerous
leases in the NPRA. In the last three years of the Bush
Administration, oil and gas companies relinquished more than
100 leases in the Reserve.
In Fiscal Year 2010, 64 leases were relinquished, and
already this year, 2011, companies have relinquished 60 leases.
H.R. 2150 would further require the Secretary to develop
regulations to require action on drilling permits within 60
days. However, existing regulations that are already in place
impose a timeframe on the Department of 90 days to consider
applications to drill in the NPRA.
Moreover, there are no pending applications at the BLM for
permits to drill in the NPRA. H.R. 2150 would require the
Geological Survey to complete an assessment of the technically
recoverable oil and gas in the Reserve.
The USGS just released a new assessment of the undiscovered
oil and gas reserves in the NPRA about eight months ago. That
assessment revised previous estimates downward by more than 90
percent.
The USGS also completed a study of the economically
recoverable oil and gas in the Reserve earlier this year. And
according to the USGS, the average cost of an oil and gas
assessment is $2.75 million.
We shouldn't be wasting nearly $3 million to require the
USGS to redo an assessment completed less than a year ago.
President Obama and the House Democrats have taken steps to
encourage drilling in the NPRA. The Chairman said we will not
hear today how the Administration has stymied oil production in
Alaska. No, we won't hear about it, unless you are making it
up, because that is not happening.
President Obama announced May 14, as the Chairman said,
that he would direct the Department of the Interior to conduct
annual lease sales. And I am pleased that it is not the
President who has reversed himself here; I am pleased that the
Majority has included similar language in this bill, and that
the Majority has reversed their position from three years ago,
when all but 15 Republican Members, so the large majority of
Republican Members, voted against a similar provision contained
in the comprehensive energy legislation passed by Democrats on
the House Floor.
So we should encourage oil and gas drilling in the NPRA in
a responsible manner, as President Obama and House Democrats
have done. I look forward to the testimony. I yield back.
[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.
Today, this subcommittee is considering legislation dealing with
oil drilling in the National Petroleum Reserve Alaska or NPR-A. The
majority claims that we need this legislation because the
Administration is somehow blocking oil and gas drilling in the Reserve
and slow-walking permits in the NPR-A. However, the facts do not
support the majority's claims.
As with previous drilling bills the majority has moved through this
Committee to set artificial and unnecessary deadlines on the Interior
Department and limit the environmental review of oil and gas drilling,
H.R. 2150 would unnecessarily truncate review of permits by the BLM.
H.R. 2150 would direct the Secretary of the Interior to ``ensure that
any Federal permitting agency shall issue permits'' for pipelines and
roads within 60 days of enactment for leases that have an approved
permit to drill and within 6 months of the submission of an application
for a permit to drill for other leases. This directive would appear to
require the Interior Department to compel other Cabinet-level agencies
to act, something far beyond the scope of the Secretary's authority.
Furthermore, this directive is unnecessary because there are no pending
applications with the BLM to construct pipelines or roads in the NPR-A.
This provision also could prohibit proper NEPA review of future major
oil and gas pipelines in the reserve.
H.R. 2150 would require the BLM to develop a plan to ``ensure that
all leasable tracts in the Reserve are within 25 miles of an approved
road and pipeline right-of-way.'' Of course, requiring the BLM to
invest time and money in mapping out a spider-web of roads and
pipelines, before we even know where future oil and gas production may
take place is wasteful and counterproductive.
Underscoring the difficulty of predicting where future production
may occur and thus the infrastructure needed to support it, oil
companies have been relinquishing numerous leases in the NPR-A. In the
last three years of the Bush Administration, oil and gas companies
relinquished more than 100 leases in the Reserve. In Fiscal Year 2010,
64 leases were relinquished, and already this year, companies have
relinquished 60 leases.
H.R. 2150 would further require the Secretary to develop
regulations to require action on drilling permits within 60 days.
However, existing regulations already place a timeframe on the
Department of 90 days to consider applications to drill in the NPR-A.
Moreover, there are currently no pending applications at the Bureau of
Land Management for permits to drill in the NPR-A.
And H.R. 2150 would require the U.S. Geological Survey to complete
an assessment of the technically recoverable oil and gas in the
Reserve. Well, the USGS just released a new assessment of the
undiscovered oil and gas reserves in the NPR-A in October of 2010. That
assessment revised previous estimates downward by more than 90 percent.
The USGS also completed a study of the economically recoverable oil and
gas in the Reserve earlier this year. According to the USGS, the
average cost of an oil and gas assessment is $2.75 million. We
shouldn't be wasting nearly $3 million to require the USGS to redo an
assessment completed less than 1 year ago.
President Obama and House Democrats have taken steps to encourage
drilling in the NPR-A. House Democrats introduced the Increase American
Energy Production Now Act of 2011 on May 12, which would require at
least one lease sale per year in the NPR-A. Building on that idea,
President Obama announced on May 14th in his weekly radio address that
he would direct the Department of the Interior to conduct annual lease
sales in the NPR-A. I am pleased that the Majority has included similar
language in this bill and that they have reversed their position from
2008, when all but 15 Republican Members voted against a similar
provision contained in comprehensive energy legislation passed by
Democrats on the House floor.
We should encourage oil and gas drilling in the NPR-A as President
Obama and House Democrats have done. But we should make sure that we
are drilling in challenging environments like the Arctic responsibly,
not truncating proper review as the majority proposes in this bill.
______
Mr. Lamborn. OK, thank you, Representative Holt. I now
recognize the full Committee Chairman for five minutes for his
opening statement.
STATEMENT OF HON. DOC HASTINGS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF WASHINGTON
Mr. Hastings. Thank you very much, Mr. Chairman, for
holding this hearing on this bill, the National Petroleum
Reserve Alaska Access Act.
Just last week I had the privilege of traveling to Alaska
with our colleagues, Don Young and Alaska Governor Sean
Parnell, up to the North Slope, and it was an extraordinary
trip from my point of view.
As we have heard in testimony at prior hearings, Alaskans
depend on a robust oil and natural gas industry to fuel their
economy and create jobs, and America depends on Alaska to
provide safe and reliable energy to sustain and create jobs
across the entire country.
Alaska is, without a doubt, a tremendous energy asset to
our nation.
The NPRA was specifically designated in 1923 as a petroleum
reserve. Its purpose was to help supply our country with
American energy. These oil and natural gas resources should be
developed to create jobs here, and make us less dependent on
Middle Eastern oil.
Development of the NPRA has enjoyed bipartisan support,
including from President Obama and House Democrat leaders, so I
am very hopeful that this will continue with this legislation.
H.R. 2150 expands energy production by requiring that
annual lease sales be held in the NPRA. This is a proposal
recently supported by President Obama.
However, lease sales alone are not enough. Producing oil
and natural gas in the NPRA is pointless if there is no way to
get it out of the NPRA. The real problem is the Federal
Government's blocking and delaying the permits for necessary
roads, bridges, and pipelines needed to transport the energy
out of this area.
While in Alaska, we visited the site where ConocoPhillips
has been waiting for three years to receive a permit to
construct a bridge and pipeline over the Colville River. They
have discovered oil that is ready to be produced--
ConocoPhillips--and delivered to the American people. It is
unacceptable that the Federal Government is the obstacle in
harnessing this energy, American energy.
To address this problem, the bill sets firm guidelines for
infrastructure permits to be approved. This will ensure that
bureaucratic delays will not prevent oil and natural gas
resources from being transported out of the NPRA.
Further, the development of the NPRA is imperative to keep
the Trans-Alaskan Pipeline System operating. TAPS is a conduit
for transporting oil from the far North across Alaska, for
shipments to Washington State--my state--and California, and
for refining and use in the Lower 48.
TAPS at one time conveyed over two million barrels of oil
per day, but reduced production has left the pipeline at less
than half that capacity, threatening a shutdown that would
impact thousands of good-paying jobs. This bill will help
ensure that TAPS stays full and operational.
TAPS is arguably the single most important piece of energy
infrastructure in our nation. Let me pause at this observation.
If it was targeted for destruction by a foreign threat, our
nation would aggressively defend and protect that pipeline. Yet
the Federal Government policies and inaction are threatening to
starve TAPS into destruction. We must not let that happen.
NPRA oil and natural gas is vital to the future of American
energy production. As gasoline prices hover at highs near $4
per gallon, it is imperative that Congress take action to
increase energy production, production that would lower prices,
create jobs, and lessen our dependence on unstable foreign
energy.
So with that, I yield back my time. I thank the gentleman
for having this hearing.
Mr. Lamborn. Thank you, Mr. Chairman. And we have one more
piece of official business to conduct before we hear from the
distinguished witness, who will consist of our first panel.
I now recognize the Ranking Member of the full Committee,
Representative Markey, for his opening statement.
STATEMENT OF HON. EDWARD MARKEY, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF MASSACHUSETTS
Mr. Markey. Thank you, Mr. Chairman. Mr. Chairman, I have a
unanimous-consent request that as we discuss Alaska, as we
discuss the National Petroleum Reserve Alaska today, I ask that
we accept a motion that we measure the oil in Alaska not in how
many barrels of oil could be filled with that oil, but rather
how many Stanley Cups of oil would be filled. Because in
Boston, in Boston we are very happy today.
[Laughter.]
Mr. Markey. And we know it is not a good day in Canada and
in the northland, all those rooting for----
Mr. Hastings. Reserving the right to object.
[Laughter.]
Mr. Markey. I am so sorry, Mr. Chairman, this is our day
for gloating.
Mr. Lamborn. If it doesn't lead to any rioting.
Mr. Markey. In Vancouver it does; in Boston, they are doing
cartwheels.
The bill we are considering today--and welcome, Senator--
the bill we are considering today would require at least one
sale annually in the NPRA.
Well, if this provision sounds familiar to some of my
colleagues, it should. In 2008, House Democrats passed
comprehensive drilling legislation on the Floor of the House,
which required at least one lease sale per year in the NPRA.
All but 15 of my Republican colleagues voted against that bill
on the House Floor.
And it might also sound familiar, from legislation which I
introduced with other House Democrats earlier this year, the
Increase American Energy Production Now Act of 2011, introduced
on May 12, that includes a provision requiring at least one
lease sale annually in the NPRA.
But it might also sound familiar, from what President Obama
has already announced in his weekly radio address. On May 14,
President Obama announced, ``I am directing the Department of
the Interior to conduct annual lease sales in Alaska's National
Petroleum Reserve, while respecting sensitive areas.''
So President Obama and the Interior Department are already
speeding up leasing in the NPRA, exactly as this legislation
would require.
In 2008, NPRA apparently stood for something that at that
point we could receive very little support, in terms of
increasing and celebrating the leasing in the Reserve. But
perhaps we should think about another meaning for NPRA. And
that is that we now have a consensus that is building around
this issue. I hope that everyone understands, however, that the
bill includes more than an unnecessary provision. The bill
would waive as well the requirements of the National
Environmental Policy Act, or NEPA, for the construction of
roads and pipelines in the NPRA. It would impose artificial and
arbitrary deadlines on the Department to approve permits for
the construction of infrastructure, even though there are no
such applications pending from oil and gas companies.
And as we are coming up on the debt ceiling, and the
Majority is attempting to cut key programs, such as Medicare,
this bill would require the U.S. Geological Survey to waste as
much as $3 million to conduct an assessment of the oil and gas
reserves in the NPRA, when the ink is barely dry on the last
USGS assessment.
This bill is more of the same drill, baby, drill, speed-
over-safety refrain that we have seen from the Majority during
this entire Congress. The bill would waive bedrock
environmental laws, and limit review of drilling permits. The
bill is not only unnecessary, it is imprudent. The President
and the Democrats support drilling in the NPRA. That is why we
passed the legislation in 2008. That is why the President
supports it.
What we do not support, though, is waiving the National
Environmental Policy Act in order to accomplish that goal. I
yield back the balance of my time.
Mr. Lamborn. OK, thank you. We will now hear from our first
panel of witnesses. We have before us the Hon. Lisa Murkowski,
the senior Senator from the State of Alaska.
Madame Senator, we are honored to have you here today. Your
written testimony will appear in full in the hearing record, so
I ask that you keep your oral statement to five minutes, as
outlined in our invitation letter to you, and under Committee
Rules.
Our microphones are not automatic, so you have to press the
button to get started. And I realize that you are on a hard
deadline and have to leave at 10:30.
Thank you so much for being here, and you may begin.
STATEMENT OF HON. LISA MURKOWSKI, A U.S. SENATOR FROM THE STATE
OF ALASKA
Senator Murkowski. Thank you, Mr. Chairman. I appreciate
the invitation to join with you and Ranking Member Holt, thank
you. Congressman Hastings, thank you for introducing the
legislation that you have in front of us.
And to my Congressman, it is good to see you here, as well.
[Pause.]
Senator Murkowski. I noticed, I am taking account of that.
But I am glad that you are here, and I thank you for the
opportunity to walk across from the Senate side to discuss the
National Petroleum Reserve Alaska. This is an important issue.
And as Representative Markey has indicated, this is an area
where we ought to be able to find agreement; that if we can't
be producing in the National Petroleum Reserve Alaska, where
can we produce? So I thank you for the opportunity to discuss
this today. Because as we talk about what we have in terms of
potential, this is not only about enhanced opportunities for
oil, but this is about jobs. This is about energy security.
This is about reducing the Federal deficit.
The NPRA is, by name and by law, a petroleum reserve. It is
not a wildlife refuge, it is not a national park, it is not a
monument or a wilderness area. Its primary statutory purpose is
to supply conventional energy resources to our nation.
The authorizing statute calls for the expeditious
development of these resources, so it is somewhat amazing that
we are even having this conversation. If we agreed that this is
where we should be doing it, why do we have to have legislation
to advance it?
Congressman Hastings referenced the ConocoPhillips CD-5
application up in the Colville River Delta. It was February 5
of last year that the Corps denied Conoco's Section 404 permit
for construction of a bridge across the Colville River.
The bridge is necessary to move personnel, equipment, and
of course a pipeline, across the delta to the leases that the
company has bought. This is not just for CD-5, but hopefully
for CD-6 and CD-7. The process of determining where and when
and how to construct this bridge really began back in 2004, and
was negotiated intensely in both an interagency process with
Federal and state entities, as well as with very, very strong
local participation, including the nearby village of Nuiqsut.
This would have been a great story of industry success
working with government and local residents, and it would be
the first oil produced from the NPRA. But all of this public
process, all of this support, didn't matter to the EPA. With no
public process, or even notice, the Agency designated the
Colville River as an aquatic resource of national importance,
and signaled a clear intention to elevate the project to a
veto, under Section 404 of the Clean Water Act.
We are still, we are still working through this process
with the Administration to advance this permit over the
Colville.
So the question needs to be asked: How did we get to this
point? We have to ask again. If we can't be producing from the
National Petroleum Reserve, where in the world can we get it
from?
I would suggest to you that we have a permitting problem;
we don't have a leasing problem. The leases are out there. We
can lease every acre there is. But without some assurance of
basic use and enjoyment of the property, purchasing a lease
would be a very risky business. And I am cautiously optimistic
that we will see a better result for CD-5 specifically, but I
think that there is a bigger problem here.
If every time a leaseholder wants to produce from the NPRA,
they have to come to Congress and essentially have a
Congressional hearing, we are not going to be in a much better
position next go-around. I think we recognize that we have a
vastly understated resource estimate within the NPRA, and you
take this with the highly speculative reassessment of previous
studies; these delays are going to shrink private investment in
bidding on NPRA. This will cost taxpayers billions in the
future, if the bids are low or nonexistent, let alone the lost
benefits of the royalties, the energy security, and of course,
most importantly, the jobs that are at stake.
I want to close with a very brief history lesson. This was
back in 1980, over 30 years ago. Congressman Young was here. I
wasn't around yet. But the President at the time, President
Carter, when he signed ANILCA into law, he stated 100 percent
of Alaska's offshore areas, and 95 percent of the potentially
productive onshore oil and mineral areas, will be available for
exploration or for drilling. That was a statement, that was a
commitment that our President made 30 years ago.
Mr. Chairman, this is among the biggest and the worst
broken promises between the Federal Government and any state.
And it is shameful, it is unacceptable, and we must change
this.
I appreciate your attention to this matter. I would ask
that my full statement be accepted for the record. Again, thank
you for your leadership on this issue.
[The prepared statement of Ms. Murkowski follows:]
Statement of The Honorable Lisa Murkowski, U.S. Senator, State of
Alaska
Chairman Lamborn, Ranking Member Holt, thank you for inviting me to
speak at this important hearing and thank you for considering
legislation to expedite the development of the National Petroleum
Reserve-Alaska, or the NPRA. As Alaska's Senior U.S. Senator and the
Ranking Member of both the Energy and Natural Resources Committee as
well as the Appropriations Subcommittee on Interior and the
Environment, I have a distinct interest in this subject. But it is
first and foremost as an Alaskan that I come to you in hopes of
advancing this discussion and our shared goals--those being jobs,
energy security, and reducing the federal deficit.
The NPRA is, by name and law, a petroleum reserve. It is not a
wildlife refuge, a national park, a monument, or a wilderness area. Its
primary statutory purpose is to supply conventional energy resources to
our Nation. The authorizing statute calls for the expeditious
development of these resources so it amazes me that we are having this
conversation today,
On February 5th of last year, the Corps of Engineers denied Conoco-
Phillips' Section 404 application for the construction of a simple
bridge across the Colville River Delta. A bridge was necessary for the
safe transport of personnel, equipment, and of course a pipeline across
the delta to leases the company had bought and explored in the area
known as CD-5, with the hopes of more production from CD-6 and CD-7.
The process of determining where, when, and how to construct this
bridge really began in 2004 and was negotiated intensely in both an
interagency process, with federal and state entities, as well as strong
local participation, including the nearby Native village of Nuiqsut.
This would have been a great success story of industry working with
government and local residents, and it would be the first oil
production ever from the NPRA.
But all of this public process, all of this support, didn't matter
to the EPA. With no public process or even notice, the agency
designated the Colville River Delta an ``aquatic resource of national
importance''--an ARNI--and thereby signaled a clear intention to
elevate the project to a veto under the Clean Water Act Section 404.
Several months later the Corps decision came back rejecting the
application. Conoco-Phillips appealed this and we have been working
extremely hard with the Administration to work through the issues
raised in the denial.
Members of the Subcommittee, how did we get to this point? We in
Congress have to ask ourselves, if we can't get petroleum from the
National Petroleum Reserve, where in the world can we get it? So I
commend Chairmen Hastings and Lamborn, together with Congressman Young,
for putting forth this bill to bring this issue to the forefront. And I
appreciate the recognition that we have a permitting problem, not just
a leasing problem. We can lease every acre there is, but without some
assurance of basic use and enjoyment of this property, purchasing a
lease would be a very risky venture. I am cautiously optimistic that we
will see a better result for CD-5 specifically, but there is a major
problem here. If every time a leaseholder wants to produce from the
NPRA, it requires Congressional hearings and years of involvement from
this many elected officials, we will not be in much better position
next time.
The danger is that, combined with what we in Alaska know to be a
vastly understated federal resource estimate of the NPRA, based on
highly speculative reassessments of previous studies, these delays will
shrink private interest in bidding on the NPRA. This stands to cost
taxpayers billions into the future if bids are low or nonexistent, let
alone the lost benefits of royalties, energy security, and most
importantly jobs.
I want to close with a very brief history lesson. Over 30 years ago
in 1980, while Congressman Young was already here but well before I
was, President Carter, right when he signed Alaska National Interest
Lands Conservation Act--or ANILCA--into law and after his re-election
was lost, stated that ``100 percent of [Alaska's] offshore areas and 95
percent of the potentially productive [onshore] oil and mineral areas
will be available for exploration or for drilling.'' Mr. Chairman, this
is among the biggest and worst broken promises between the federal
government and any state, and it is shameful and unacceptable. As the
Interior Department reported last spring when it published its report
on so-called ``non-producing'' lands, less than one percent of federal
lands in Alaska, and none of our federal offshore lands, are producing
any oil or natural gas. This is shameful and unacceptable because it
represents not only a failure of the federal government to allow U.S.
taxpayers to benefit from their federal resources, but also because it
is an outright broken promise to the people of the State of Alaska. I
doubt very much the statehood agreement, let alone ANILCA, would ever
have been agreed to if the signatories had any idea that this would be
the outcome.
For these reasons, I am glad to see the NPRA getting this attention
and I hope my colleagues will understand why so many members are
becoming reluctant to agree to any further land withdrawals anywhere.
The witnesses, particularly from the State of Alaska, are in good
position to speak to the merits of this bill and the need for the
NPRA's resources in preserving the viability of the Trans-Alaska
Pipeline. I am supportive of this bill and you may look to very similar
efforts from the Senate.
______
Mr. Lamborn. You are certainly welcome. Thank you for being
here today. Your full statement will appear in the record. We
appreciate your attendance. Thank you so much.
We will now have our second panel of witnesses. And I would
like to invite to come forward the Hon. Joe Balash, Deputy
Commissioner of the Alaska Department of Natural Resources,
within the Alaska Department of Natural Resources. Charles T.
Drevna, President of the National Petrochemical and Refiners
Association; Tim Sharp, Secretary-Treasurer of Laborers Local
No. 942; and Eric Myers, Policy Director, Audubon Alaska.
Like all witnesses, your written testimony will appear in
full in the hearing record, so I ask that you keep your oral
statement to five minutes, as outlined in our invitation letter
to you, and under Committee Rules.
Our microphones are not automatic, so you have to turn them
on when you are ready to begin. And when you have one minute
left, the yellow light will come on.
We do have to expedite things this morning. We have a long
series of votes that are going to begin about 11:30, and we
have to have not only your statements, but questions and
answers afterwards. And we have one more panel following.
So we will try to keep our questions as expedited as
possible, as well.
Mr. Balash, you may begin.
STATEMENT OF HON. JOE BALASH, DEPUTY COMMISSIONER, ALASKA
DEPARTMENT OF NATURAL RESOURCES
Mr. Balash. Thank you. Good morning, 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 our support
for the objectives of this legislation. 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 natural gas, for
the U.S. economy.
The National Petroleum Reserve Alaska Access Act is a good
first step toward realizing the potential that Federal lands in
Alaska have to provide domestic energy supplies. The provisions
of the Act are not unprecedented. Construction of TAPS required
an Act of Congress, and that was at a time when the U.S.
economy was in the doldrums, actions by OPEC were forcing
prices into the stratosphere, and Americans were left wondering
whether we still had what it takes to maintain our presence as
a world power.
We hope this legislation is but one piece of a larger body
of work by the Congress that will once again make clear that
energy production from America's most prolific hydrocarbon
province is a national priority.
Before commenting on the legislation specifically, I would
like to bring the Committee's attention to the massive energy
potential in Alaska. As a threshold matter, Alaska's North
Slope has huge reserves, and is still relatively underexplored.
According to the U.S. Geological Survey, America's Arctic ranks
as number one for undiscovered oil potential, and number three
for natural gas potential, in the world's conventional
petroleum resources north of the Arctic Circle. This represents
43 percent of the nation's total oil potential, and 25 percent
of its gas potential.
Thus, the issue of whether Alaska can continue to provide a
significant share of domestic production does not center on
whether we have enough hydrocarbons to entice investment. With
$100-a-barrel oil, the viability of Alaska production is
clearly not solely economic. Its realization will primarily be
determined by Federal politics and policies relative to Federal
lands in Alaska.
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.
Ironically, one place in Federal jurisdiction where there
should be less resistance to oil and gas development is the
NPRA. The objectives of the NPRA Access Act address many of the
challenges to development on Federal lands in Alaska.
Exploration and development in Alaska is a very long-term
proposition. A predictable leasing program is key to allowing
companies to make the investment of time, capital, and limited
human resources necessary to realize tremendous gains from this
relatively untapped resource.
The NPRA Access Act recognizes the critical linkage between
resource and transportation infrastructure, including roads and
pipelines. Without the means to reach reserves and move them to
market, these resources are effectively stranded.
Predictability in regulatory timelines is critical. In
Alaska, we pride ourselves on doing things right. One way we
achieve that is by restricting certain activities to very
specific windows of time throughout the year. Due to these
limited windows of opportunity to conduct exploration and
development activities, delays of critical permits for these
Alaska projects, even if only by 30 days, can push back
projects by an entire year.
This is particularly true for exploration conducted in the
NPRA, since there is little to no permanent year-round surface
transportation infrastructure, beyond the Spine Road at
Kuparuk, which is well east of the NPRA boundary.
Perhaps the most ambitious element of the proposed
legislation, the call for a plan for approved rights-of-way,
complements plans put into place by the state. In 2009,
Governor Parnell directed his Department of Transportation to
advance the permitting for a road and pipeline corridor from
Umiat in the southeast corner of NPRA to the Dalton Highway and
TAPS. More than 90 miles west of the Dalton, Umiat is known to
contain a discovery of oil at relatively shallow depths, just
inside the NPRA. The road and pipeline would provide benefits
not only for access and transportation of oil, but also for
future exploration and development of gas in the foothills.
Additionally, the road would benefit the U.S. Army Corps of
Engineers as it continues cleanup of the former military site
at Umiat. Whether this road is constructed depends on the
completion of an EIS by the Corps, and issuance of permits by
Federal agencies.
The State of Alaska welcomes Congress's involvement in
ensuring that access to Federal lands for responsible resource
development occurs in a timely and predictable manner. Thank
you.
[The prepared statement of Mr. Balash follows:]
Statement of Joe Balash, Deputy Commissioner,
Department of Natural Resources, State of Alaska
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 our support for the objectives of this legislation. 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.
At a time when the Congress faces difficult choices between raising
taxes and cutting spending development of our nation's natural
resources offers a means to put Americans to work, increase federal
revenue, and reduce the balance of trades deficit.
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 deputy commissioner of the Alaska Department of
Natural Resources (DNR), a state agency of over 1,100 personnel, since
December 2010. Under the Alaska Constitution, the primary
responsibility of the DNR 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 44,500 miles of coastline. I am responsible for the
management of the Divisions of Oil and Gas (DOG), Geologic Geophysical
Survey (DGGS), and Coastal and Ocean Management (DCOM), and the Offices
of the State Pipeline Coordinator (SPCO), the Alaska Gasline Inducement
Act Coordinator (ACO), and the Mental Health Land Trust (TLO).
General
This subcommittee has properly recognized that some of our
country's biggest challenges center on energy security, national
security, employment, and the national deficit. Pursuing smart policies
that promote responsible energy development in America can help the
country meet and overcome these challenges.
The National Petroleum Reserve Alaska Access Act is a good first
step towards realizing the potential federal lands in Alaska have to
provide domestic energy supplies. The provisions of the act are not
unprecedented. Construction of TAPS required an Act of Congress--at a
time when the U.S. economy was in the doldrums, actions by OPEC was
forcing prices into the stratosphere, and Americans were left wondering
whether we still had what it takes to maintain our presence as a
superpower. We hope this legislation is but one piece of a larger body
of work by the Congress that will once again make clear that energy
production from America's most prolific hydrocarbon province is a
priority.
Before commenting on the legislation specifically, I'd like to
bring the Committee's attention to the massive energy potential in
Alaska. Alaska is a leader in promoting all types of energy, including
our massive renewable energy base of hydro power, geothermal, wind, and
biomass. We are also a national leader in promoting energy efficiency
throughout the state. We cannot, however, talk about strategies to
ensure our country's energy security without discussing our critical
need to increase domestic production of oil and gas.
Alaska's Role in America's Energy Picture
Alaska is one of the nation's most critical and prolific oil-
producing states. For more than 30 years Alaska has supplied domestic
energy supplies to markets in the United States. When unscheduled
disruptions to this supply occur, such as in August 2006 and in January
of this year, prices move upward and refineries on the West Coast are
forced to seek supplies from foreign sources. While production is less
than 2/3 of its peak production, Alaska still supplies more than
600,000 barrels of oil every day.
The artery which gets that domestic energy to market is the Trans
Alaska Pipeline. Eight hundred miles of 48'' pipe, eleven pump
stations, several hundred miles of feeder pipelines, and the Valdez
Marine Terminal constitute the Trans-Alaska Pipeline System (TAPS). It
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.
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. Under its Congressional declaration of purpose the Act
states: ``The purpose of this chapter is to insure that, because of the
extensive governmental studies already made of this project and the
national interest in early delivery of North Slope oil to domestic
markets, the trans-Alaska oil pipeline be constructed promptly without
further administrative or judicial delay or impediment. To accomplish
this purpose it is the intent of the Congress to exercise its
constitutional powers to the fullest extent in the authorizations and
directions herein made and in limiting judicial review of the actions
taken pursuant thereto.''
Alaska's Energy Potential
Alaska's North Slope, both on and offshore, remains a world-class
hydrocarbon basin with extraordinary potential. According to the U.S.
Geological Survey, America's Arctic ranks as number one for
undiscovered oil potential and number three for gas potential for the
world's conventional petroleum resources north of the Arctic Circle.
Nearly 50 billion barrels of conventional undiscovered, technically
recoverable oil resources and 223 trillion feet of conventional
undiscovered, technically recoverable gas resources may be found in the
North Slope and the Arctic OCS off Alaska's northern coast. This
represents 43 percent of the nation's total oil potential and 25
percent of its gas potential.
The development of these resources means jobs, domestic energy
supplies, and revenues for the federal treasury. A recent study
conducted by Northern Economics and the Institute for Social and
Economic Research at the University of Alaska Anchorage examined the
national benefits associated with commercialization of oil and gas
resources in the Arctic OCS. Their findings demonstrate that there are
significant, material gains available to the nation through development
of domestic natural resources.
Based on a reasonable set of price estimates for oil and gas ($65/
bbl and $6.40/mmBtu respectively), researchers estimated that $193
billion in revenues would accrue to federal, state, and local
governments over a 50-year period. If you assume a price for oil closer
to what the market is trading at today, that revenue estimate climbs to
nearly $263 billion. From a jobs perspective, this economic activity
would generate an annual average of 54,700 jobs nationwide, with an
estimated cumulative payroll amounting to $145 billion over the same
time period.
These extraordinary benefits are those that can be derived from a
single element of federal lands in the Arctic. In addition, the Arctic
National Wildlife Refuge (ANWR) and the National Petroleum Reserve-
Alaska contain large resource potential with further economic benefits
available to the nation. While these benefits are impressive, they are
based solely on conventional oil and gas resources.
Unconventional Resources
In addition to conventional oil and gas resources, Alaska's North
Slope contains massive quantities of unconventional resources: shale
oil and gas, coalbed methane, deep-basin gas, heavy and viscous oil,
and gas hydrates (USGS mean estimate is 85 trillion cubic feet). The
U.S. Department of Energy has estimated that there is 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, particularly shale oil.
The oil fields at Prudhoe Bay and Kuparuk are the two largest
discovered in North America. The oil and gas contained in those fields
was captured by geologic structures as the hydrocarbons migrated up
from the source rocks that produced them. Those source rocks are well-
known by geologists--and they are huge. While their potential is
unknown, key indicators (thermal maturity, organic chemistry,
petrophysics, and geomechanics) appear to be analogous to the Eagle
Ford play in southern Texas.
Three different source rocks are present, representing distinct
opportunities for development if a commercial means can be found to
produce them. Key to that commercial determination is the cost of
production and transportation. Their location runs from the base of the
Brooks Range just outside of ANWR and proceeds west in a wide swath
through the NPR-A all the way to the Chukchi coast.
The Future of Arctic Energy Production
The importance of federal land to the future of oil and gas
development in Alaska's Arctic must not be underestimated. Many of the
most promising oil and gas resources in Alaska are in federal lands.
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 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.
What concerns Alaskans and what should concern all Americans is the
continued viability of TAPS to operate under its current configuration.
Under the same law Congress enacted to ensure its construction, once
TAPS is no longer operating it must be dismantled and removed. Without
a pipeline to transport crude oil to the northernmost ice-free port in
the U.S., very little of the potential identified above can ever be
realized. 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.
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.
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.
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.
The Need for Investment
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 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.
The Need for Affirmative Federal Support
Although both economics and federal policies are in play, the
viability of TAPS is more of a political issue than an economic one. As
a threshold matter, Alaska's North Slope has huge reserves and it is
still relatively underexplored. Thus, the issue of TAPS' viability does
not center on whether we have enough hydrocarbons to entice investment.
With $100/barrel oil, predictions that oil prices will remain over $80-
$90 for much of the decade, and Alaska's existing infrastructure to
transport hydrocarbons, the viability of TAPS is clearly not solely
economic.
The State of Alaska is also doing as much as we can to make oil
production on state lands as globally competitive as possible. The
Governor's major tax reform legislation will do much to get us to such
a position. While it is true that 98 percent of all of the oil
production to date has come from state lands, the lion's share of the
resource potential belongs to the federal government. In the estimates
given above, fully 88 percent of the undiscovered technically
recoverable oil and 79 percent of the gas will be explored for on land
under federal jurisdiction.
For these reasons, the long-term viability of TAPS will primarily
be determined by federal politics and policies. 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, discouraging
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, and 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, 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.
Protecting Alaska's Environment
Among the reasons for these actions is concern for the environment.
This concern, however, is misguided. Failure to advance development of
Alaska's domestic energy supplies does not advance global environmental
protection. To the contrary, it does 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.
Alaska has some of the most stringent environmental policies and
regulations in the world and we are a leader in research for sound
natural 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.
To ensure responsible resource development occurs in Alaska, the
state has devised a comprehensive system that imposes rigorous
environmental protections that meet or exceed federal standards.
Wherever possible, we have assumed--or are in the process of assuming--
primacy for the issuance of permits.
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. Later this month, the
state will release a comprehensive gap analysis conducted 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.
NPR-A: a Logical First Step
Ironically, one place in federal jurisdiction where there should be
less resistance to oil and gas development is the National Petroleum
Reserve-Alaska (NPR-A). Early in the last century this land was
specifically set aside by Congress for oil and gas exploration and
production. As well, the State of Alaska has itself invested heavily in
this area--and may be the largest single investor in recent exploration
there. In just the last decade, the state of Alaska has awarded more
than $180 million in cash exploration incentive tax credits to several
oil companies to conduct seismic surveys and drill exploration wells in
the NPRA on land that it does not own. The objectives of the National
Petroleum Reserve-Alaska Access Act address many of the challenges
facing exploration and development on federal lands in Alaska.
Leasing
Access to Lands through predictable leasing programs allows those
companies interested in exploring, finding, and producing to assess the
opportunities and plan for participation. Exploration and development
of oil and gas in Alaska is a long term proposition. A predictable
leasing program is key to allowing companies to make the long-term
investment of time, capital, and limited human resources necessary to
realize tremendous gains from this relatively untapped resource.
Transportation Infrastructure
The NPR-A Access Act recognizes the critical linkage between
resource and transportation infrastructure--including roads and
pipelines. The first production from CD-5--the expansion of the
Colville River Unit operated by ConocoPhillips--was expected to start
in 2012. Unfortunately, in February 2010, the U.S. Army Corps of
Engineers (COE) reversed course and denied ConocoPhillips its permits
to construct a pipeline and vehicle bridge across the Nigliq Channel in
the Colville River Delta. Without the means to move it to market, this
reserve of oil is effectively stranded. Many Alaskans viewed this
decision as a shutdown of NPR-A development.
After five years of delays, the status of CD-5 remains uncertain,
thereby chilling the investment climate over the entire NPR-A. Alaskans
remain hopeful and we believe that the COE will recognize the efficacy
of a bridge over the Nigliq Channel and approve ConocoPhillips' permit.
Deadlines for Permits
Predictability in regulatory timelines is critical. In Alaska, we
pride ourselves on doing things right. One way we achieve that is by
restricting certain activities to very specific windows of time
throughout the year. If a critical permit is delayed by 30 days, the
consequences to the execution of the project could be enormous.
Tundra travel in the Arctic is restricted to those months when the
ground is frozen solid to a depth that ensures the surface will not be
scarred by exploration activities. Operators need sufficient time to
mobilize equipment to the site of the exploration activity, to conduct
the relevant activity, and to demobilize the equipment and return it to
permanent infrastructure.
Due to these limited windows of opportunity to conduct exploration
and development activities, when critical permits are delayed for
Alaska projects the consequence can be delay of the project for an
entire year. This is particularly true for exploration conducted in the
NPR-A since there is little to no permanent, year-round surface
transportation infrastructure beyond the spine road at Kuparuk.
Planned ROW
Perhaps the most ambitious element of the proposed legislation, the
call for a plan for approved rights-of-way for pipeline, road, and
other surface infrastructure to ensure all leases are within 25 miles
of an approved right-of-way complements plans by the State of Alaska.
In 2009, Governor Parnell directed the State of Alaska to advance the
permitting for a road and pipeline corridor from Umiat to the Dalton
Highway and TAPS.
More than 90 miles west of the Dalton, Umiat is known to contain a
discovery of oil at relatively shallow depths just inside the NPR-A.
The company holding the leases at Umiat estimates the size of the field
to be 250 million barrels, with peak production capable of reaching
50,000 barrels per day.
The road and pipeline would provide benefits not only for access
and transportation of oil, but also for future exploration and
development of gas in the Foothills. The road would also benefit to the
U.S. Army Corps of Engineers as it continues cleanup of the former
military site at Umiat. A total of $24 million in state funds have been
appropriated by the Alaska Legislature to complete the necessary EIS.
Accountability
Requiring a notification for applicants with specific information
regarding delays in the issuance of permits is a novel approach that
will inform operators of the likelihood they will succeed in obtaining
the necessary permits and authorizations required to proceed with
responsible development. Such notifications will allow operators to
make reasoned decisions regarding the timing and efficacy of their
exploration plans.
Resource Assessment
Activities currently underway by the USGS should make this
relatively easy to achieve. SOA had concerns with the last revision
made to assessments of the oil resources of the NPR-A. We remain
bullish on the prospects of conventional oil discoveries yet to be
found, and are certain that significant unconventional resources are in
place throughout the region.
Conclusion
The State of Alaska welcomes Congress's involvement in ensuring
that access to federal lands for responsible resource development
occurs in a timely, predictable manner. We believe the NPR-A Access Act
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.
The benefits of increased access to and production from federal
lands in the Arctic promote numerous interests of America and Alaska:
Economic and job security
Trade deficit--promoting resource development in
Alaska ensures that we import less oil from overseas
Federal budget deficit--by providing Americans access
to their own lands to produce oil, the federal government is
opening the opportunity to earn billions in direct revenues,
rather than forcing Americans to help fill the treasuries of
countries such as Venezuela, Russia, and, Saudi Arabia.
Energy security--promoting development of Alaska's
massive sources of domestic energy reinforces U.S. energy
security.
______
Mr. Lamborn. All right. Thank you for your testimony. Mr.
Drevna.
STATEMENT OF CHARLES T. DREVNA, PRESIDENT,
NATIONAL PETROCHEMICAL AND REFINERS ASSOCIATION
Mr. Drevna. Good morning, Subcommittee Chairman Lamborn,
Ranking Member Holt, Chairman Hastings, and members of the
Subcommittee. I am Charlie Drevna, and I serve as President of
NPRA, the National Petrochemical and Refiners Association. And
again, thank you for giving me the opportunity to testify in
support of the National Petroleum Reserve Alaska Access Act.
My association and the NPRA Reserve Alaska share the same
acronym, but we are a little different. National Petrochemical
and Refiners Association is a trade association. We represent
high-tech American manufacturers of virtually the entire supply
of U.S. gasoline, diesel, jet fuel, other fuels, home heating
oil, and the petrochemicals used as the building blocks for
virtually thousands of products.
My NPRA is headquartered in an office building in
Washington that sits atop a parking garage. The U.S. Geological
Survey estimates that the National Petroleum Reserve Alaska
sits on top of more than 2.7 billion barrels of oil, and more
than 114.3 trillion cubic feet of natural gas. And as Senator
Murkowski pointed out, these are probably very low estimates.
These are tremendous energy resources. Our nation needs to
use them to bring the tremendous benefits to the American
people.
For more than 30 years elected officials have been saying
we need to reduce our reliance on foreign oil. For far longer,
they have been telling us America needs to create more jobs. So
we can talk about this for another 30 years, or 40 years, or 50
years, or we can take action. And producing more oil and
natural gas in Alaska and elsewhere in the United States is the
most effective action I believe we can take.
Lurching from crisis to crisis, and wishing and hoping for
miraculous new energy sources to magically solve all of our
problems, isn't the foundation of U.S. energy policy. Instead,
we need a reality-based policy that looks years down the road,
and understands the need to develop easily accessible,
abundant, efficient, reliable, and proven sources of domestic
energy. This will be the foundation for a more secure future
for our children and grandchildren.
My association supports the National Petroleum Reserve
Alaska Act because it is realistic, practical, and benefits
America and the American people.
A report from 2008 said that oil and natural gas
development in Alaska would have the following impacts, and I
quote now: ``Reducing world oil prices, reducing the U.S.
dependence on imported foreign oil, improving the U.S. balance
of trade, extending the life of the Trans-Alaska Pipeline
System for oil, and increasing U.S. jobs.''
Now, some may assume this report was produced by the oil
industry; but in fact, it was produced by the United States
Energy Information Administration. Now, this is a non-partisan
and independent government organization that is respected for
its objective analyses.
The National Petroleum Reserve Alaska Act deserves to be
enacted into law on two levels. First, it will, because it will
provide a sure and steady supply of domestic oil to enable fuel
and petrochemical manufacturers to meet the needs of millions
of Americans throughout the country--living in Alaska,
Washington, Oregon, California, Nevada, Arizona, and Hawaii.
And second, because this important legislation, and I
believe it is just the first step of many actions that we urge
Congress and the Administration to take, to make more use of
America's valuable fossil-fuel resources available to serve all
Americans across the entire nation.
Let me dispel a myth that has been repeated so often that
millions of Americans understandably believe it is true.
Despite what you may have heard, America is not energy-poor. We
are energy-rich. We have more oil, natural gas, and other
energy resources under our feet and off our shores than just
about any country on earth, and we are finding new and
environmentally safe ways to bring these energy sources to the
American people all the time.
Keeping our energy resources locked up and out of reach
makes about as much sense as a millionaire keeping all his cash
stuffed in a mattress. We need to take advantage of our energy
wealth.
The members of NPRA want to ensure a continuing supply of
American oil to our refineries and petrochemical manufacturing
plants, because we want to preserve America's economic and
national security. Instead of shipping billions of more dollars
abroad to buy foreign crude, we want to keep more of our
nation's wealth right here, in our own nation, supporting
American families and communities.
Instead of creating millions of jobs abroad, we want to
produce more oil and natural gas, and more fuels and
petrochemicals, right here.
We urge the approval of the National Petroleum Reserve
Alaska Access Act. It is the first in a series of critical
measures to lay the foundation for a U.S. energy policy that
benefits our nation, economy, and all Americans.
Thank you very much.
[The prepared statement of Mr. Drevna follows:]
Statement of Charles T. Drevna, President,
National Petrochemical & Refiners Association
I. Introduction
Good morning Subcommittee Chairman Lamborn and Ranking Member Holt,
Chairman Hastings, Ranking Member Markey and members of the
Subcommittee. I'm Charlie Drevna, and I serve as president of NPRA, the
National Petrochemical & Refiners Association. Thank you for giving me
this opportunity to testify before the Subcommittee on Energy and
Mineral Resources of the House Natural Resources Committee in support
of The National Petroleum Reserve Alaska Access Act.
My association and the National Petroleum Reserve-Alaska share the
same acronym, but are in very different locations. The National
Petrochemical & Refiners Association is headquartered in an office
building here in Washington that sits on top of a parking garage. The
U.S. Geological Survey estimates that the National Petroleum Reserve-
Alaska sits on top of more than 2.7 billion barrels of oil and more
than 114.3 trillion cubic feet of natural gas. These are tremendous
energy resources, and our nation needs to use them to bring tremendous
benefits to the American people.
The National Petrochemical & Refiners Association is a trade
association representing high-tech American manufacturers of virtually
the entire U.S. supply of gasoline, diesel, jet fuel, other fuels and
home heating oil, as well as the petrochemicals used as building blocks
for thousands of vital products. NPRA members make modern life
possible, meet the needs of our nation and local communities,
strengthen economic and national security, and provide jobs directly
and indirectly for more than 2 million Americans.
I know that in the public mind, the oil industry is a collection of
giant companies that do everything--explore and drill for oil,
manufacture fuels and petrochemicals, and own gasoline stations where
you fill up your car or truck. But that's a myth, not reality. In fact,
the concept of ``Big Oil'' is a pejorative that inaccurately seeks to
homogenize, vilify and discount the tens of thousands of companies and
millions of American working men and women affiliated with our nation's
domestic oil industry.
NPRA member companies engage in what we call ``downstream''
manufacturing activities--we don't primarily focus on the ``upstream''
work of getting oil out of the ground or offshore, but rather on
turning oil into useful products. Or to paraphrase an old advertising
slogan: We don't produce the oil, we make the oil better. The oil that
comes directly out of the wellhead is useless until it's refined
through sophisticated manufacturing processes into a transportation
fuel or turned into a petrochemical--and that is the important work
carried out by our members.
The National Petroleum Reserve Alaska Access Act deserves to be
enacted into law on two levels. First, because it will provide a sure
and steady supply of domestic oil to enable refineries and
petrochemical manufacturing plants to make the fuel and other vital
products needed to serve the millions of Americans living in Alaska,
Washington, Oregon, California, Nevada, Arizona and Hawaii. And second,
because this important legislation it is just the first of many actions
we urge Congress and the administration to take to make more of
America's valuable fossil fuels resources available to serve the
American people.
II. America is Energy Rich
Before I get into the specifics of the merits of this bill, let me
dispel a myth that's been repeated so often that millions of Americans
understandably believe it's true. America is not energy poor--we're
energy rich. We have more oil, natural gas and other energy resources
under our feet and off our shores than just about any country on Earth.
And we're finding new--and environmentally safe--ways to bring these
energy sources to us all the time. Examples include technology for
extracting oil from shale and from oil sands, and technology for
bringing vast amounts of natural gas to the surface by using hydraulic
fracturing. The problem isn't that we lack energy resources. The
problem is that our government is making it extremely hard--if not
impossible in some instances--to use them, even with extensive
environmental safeguards.
From the Atlantic, to the Gulf of Mexico, to our nation's Pacific
Coast...from the Marcellus Shale in Pennsylvania and neighboring states
to the Eagle Ford Shale in Texas...from untapped oil and natural gas
fields in the Lower 48 states to Alaska...our nation is blessed with
immense and untold energy riches.
Keeping our energy riches locked up and out of reach makes about as
much sense as a millionaire keeping all his cash stuffed in a
mattress--and then begging for money because he won't give himself
access to his own fortune. We need to take advantage of our energy
wealth.
III. Utilize NPR-A
Let me focus now on the need for Alaskan crude oil and The National
Petroleum Reserve Alaska Access Act. In testimony May 13 this year
before the Subcommittee on Energy and Power of the House Committee on
Energy and Commerce (a copy of which is being submitted with this
testimony), Lynne D. Westfall, executive vice president of Turner Mason
& Company, pointed out:
The region comprised of Alaska, Washington, Oregon,
California, Nevada, Arizona and Hawaii was a major exporter of
crude oil to the rest of the country in the 1980s. But this
region has gradually seen oil production drop. Oil has not been
shipped out of the region since 2001.
These seven states are not connected by pipelines to
other parts of the United States and now rely on oil imported
from other nations for about 50 percent of their demand.
``Without continued production in Alaska, the West
Coast will grow more dependent on imports from OPEC.''
Declining oil production in Alaska ``will fall below
the minimum operating rate for the Trans Alaska pipeline in the
early 2030s. The economics of production, however, may cause
the cessation of supplies well before that time.''
In fact, we have already seen times in the past few years where the
low volume of oil being transported by the 800-mile long Trans Alaska
pipeline has threatened to halt pipeline operations, endangering the
oil supply to American refiners in the process. The low volume of oil
in the pipeline has already slowed the speed at which oil travels
through the vital artery, allowing the oil temperature to cool and
threatening pipeline malfunctions.
The loss of the Trans Alaska pipeline would cause many problems.
Had there been no crude coming from Alaska to the Western states in
2010 they would have imported more than 73 percent of their crude oil,
and 71 percent of these imports would have come from OPEC nations.
Mr. Westfall presents many additional compelling statistics in his
testimony to clearly establish that people of the West need more oil
from Alaska. Those who decry America's reliance on imported oil and at
the same time oppose efforts to bring us more oil from our northernmost
state are being logically inconsistent.
Looking in detail at the provisions of the National Petroleum
Reserve Alaska Access Act, my association believes this legislation has
a number of beneficial provisions that would avoid bureaucratic delays
that hold up the process for producing, transporting and delivering
American oil to American refiners.
The legislation provides for a streamlined and expedited permitting
process to accelerate the leasing, exploration and production
activities in the National Petroleum Reserve-Alaska. This permitting
process would also speed the building of critical infrastructure needed
to transport Alaskan oil to the West Coast market. In addition, the
bill calls on the Department of the Interior to develop a plan for
coordinating future leases and production activities with access to
necessary infrastructure.
Our nation needs to ensure that there are minimal constraints to
critical energy arteries--roads, bridges and pipelines--that move
reliable and secure American energy sources to manufacturers that
produce useful American products. Unfortunately, too often multiple
government agencies create years of bureaucratic delays in approving a
permit for a road, a bridge or other needed infrastructure.
For example, ConocoPhillips, a member of the National Petrochemical
& Refiners Association, has a ``shovel-ready'' project called CD5 in
the National Petroleum Reserve-Alaska area that could generate new jobs
and investment immediately. CD5 alone represents 400 new jobs per year
during at least two years of construction, plus hundreds more support
jobs. This project would also generate income for Alaska and the U.S.
economy. However, the project has faced permitting delays since 2005.
IV: Use Domestic Energy
Some may be wondering: if we just buy oil, why do the refiners and
petrochemical manufacturers that NPRA represents care so much about
where the oil comes from? The Gulf of Mexico, the Gulf of Alaska, the
Arabian Gulf or wherever--what's the difference? There are a number of
critically important reasons why we want--and why our nation needs--
robust domestic oil and natural gas production.
Above all, we want to ensure a continuing supply of domestic oil to
refineries and petrochemical manufacturing plants because we want to
preserve America's economic and national security. We share the concern
of Democrats, Republicans and independents that our nation has become
too reliant on oil from unstable areas of the world that are too often
hostile to American interests. We share the concern of all Americans
about our high national unemployment rate and the terrible suffering it
is causing families around our country. We share the concern of the
American people that our nation's debt and deficit are too high.
Producing more energy right here at home can have a big effect on
reducing all these problems.
We also--believe it or not--don't necessarily benefit from high oil
prices. Our members are the first customers for crude oil, and can't
manufacture fuels and petrochemicals without oil. In fact, about 70
percent of the cost of gasoline is determined by oil prices set on
world commodities markets. Just as a baker doesn't welcome a rise in
flour prices, or a coffee brewer doesn't welcome increases in the price
of coffee beans, we don't necessarily welcome increases in oil prices.
I never try to predict what will happen with fuel prices. But I've
never heard anyone say that shortages of domestic supply ever put
downward pressure on the price of any product.
We've seen President Obama and other administration officials meet
with officials from Brazil and OPEC nations to encourage oil production
abroad and to encourage sales of the foreign oil to the United States.
But why not produce more oil and natural gas right here at home to
create millions more American jobs beyond the 9.2 million already
supported by both the ``upstream'' and ``downstream'' petroleum
sectors?
Why not keep billions more American dollars right here in our own
country, supporting American families and communities, instead of
shipping this wealth abroad to buy foreign crude? Why not hold down
costs of crude oil by producing more in our own country and relying
less on oil shipped from foreign nations thousands of miles away?
Using our own energy resources to a much greater extent would be an
enormous economic stimulus to our country, at no cost to American
taxpayers. Besides reducing unemployment, it would flood the U.S.
Treasury with billions more dollars in taxes and royalty payments from
oil companies and the workers they employ. What is the alternative?
Growing energy imports that weaken our economy, wipe out American jobs,
increase our trade deficit and make us less secure in a dangerous
world.
V. Conclusion
The National Petrochemical & Refiners Association is not opposed to
non-fossil fuels forms of energy. We want all forms of energy to
compete on a level playing field in a free market, and we want to let
the best forms of energy win. We understand that no single energy
source will meet all of our nation's needs, and that we need an ``all
of the above'' solution to energy challenges.
NPRA is the association that says ``yes'' to a brighter energy
future. We say ``yes'' to the spirit of innovation and free market
competitiveness that led to countless inventions in the past 200 years,
transforming America from a frontier nation to the leading nation on
our planet. We say ``yes'' to problem-solving instead of throwing up
our hands in surrender. We say ``yes'' to building prosperity instead
of managing scarcity.
The death of the hydrocarbon molecule has been forecast for a very
long time, but it will continue providing the American people with
reliable, secure, abundant and efficient energy for many decades to
come. The members of NPRA and the hard-working men and women we employ
are proud to be able to harness this amazing molecule to serve the
American people every hour of every day.
The companies that are members of NPRA are often criticized and
demonized. But in fact, we're not part of America's energy problems--
we're part of the solution to those problems. We believe the path to
overcoming the energy challenges America faces begins with a national
commitment to using our own God-given resources to serve the interests
of our own citizens. Americans haven't achieved success by waiting
passively for things to happen to us. We've achieved success by taking
control of our destiny. Our parents and grandparents and earlier
generations did this, and we and our children and grandchildren can do
this as well.
I'm obviously here representing the best interests of the American
fuel and petrochemical manufacturers that are members of NPRA. We want
to stay in business, serving the American people, employing American
workers, paying American taxes, strengthening American communities,
being good American citizens. We don't want to see American fuel and
petrochemical manufacturing plants and their workers be replaced by
foreign competitors--as happened with much of the American textile,
appliance, auto and electronics manufacturing industries in the
lifetimes of many of us here today.
But if we get to the point where more and more of the oil we rely
on comes from abroad, there's no reason why more and more of the
gasoline, diesel, jet fuel, petrochemicals and other products we
manufacture couldn't be made abroad as well. Bad news for NPRA members?
Absolutely. But more importantly, bad news for American consumers,
American workers, and the American economy.
We urge approval of The National Petroleum Reserve Alaska Access
Act as the first of a series of measures to help bring an end to the
bad economic news that's hit our country in the last few years, to give
Americans faster and greater access to our nation's valuable natural
resources, to generate more revenue for government at all levels, and
to begin building a better and brighter future for our nation and the
American people.
______
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Mr. Lamborn. OK, thank you. Mr. Sharp.
STATEMENT OF TIM SHARP, BUSINESS MANAGER/
SECRETARY TREASURER, LABORERS LOCAL 942
Mr. Sharp. Good morning. My name is Tim Sharp, and I am the
Business Manager of the Alaska District Council of Laborers, an
organization representing approximately 5,000 union
construction workers. We are mainly construction, maintenance,
and manufacturing workers employed throughout the State of
Alaska. We work in the oilfields, on roads and bridges, within
the building and construction trades industry, as well as
maintain both public and private infrastructure facilities all
over the State.
I am here today and very excited to strongly support H.R.
2150, or the National Petroleum Reserve Alaska Access Act,
introduced by Congressmen Young, Hastings, and Lamborn. We are
in strong support for a number of different reasons, but they
boil down to two main issues that most impact my membership.
Most simply put, those are jobs and affordable fuel and energy.
There was never a question of if the NPRA should be opened,
only when. We would suggest that with the dwindling amount of
oil presently being pumped through the Trans-Alaska Pipeline,
the cost of gas and heating oil for the average American
increasing to business and commerce-stifling rates, the huge
number of unemployed construction workers, the extra cost
burden presently being exacted on our rural Alaskans in the
form of $6- to $10-dollar-per-gallon fuel, that there is no
better time than right now.
There will of course be the inevitable wailing and gnashing
of teeth from those who have never met a road, bridge, dam, or
pipeline that they liked, especially from certain organizations
outside our state run by people that have never even been
there, that wish to lock up our state out of a misguided
perception of what they think it should be.
From the perspective of the people I represent and most
Alaskans that I know, we need jobs, and we need affordable
energy and fuel. We see no wisdom in not taking action to begin
to address the obvious immediately. We feel that this
legislation is a straightforward approach toward doing so for
the nation.
Also to at least show that we are responsible stewards of
our own state, I would also support any development being tied
to the most stringent, ecologically friendly engineering
possible. It means more jobs, it protects the environment, and
results in cheaper and more abundant energy.
The other reason for moving this legislation now is that
the oilfields are not built or developed overnight. I think
that five years would be a very conservative guess toward a
minimum timeline in going from permitting to blueprints to
further exploration, to roads and pad construction, to
pipelines, and finally to market. However, the upside would be
that five years of good employment leading up to a time of
bringing a downward pressure to the price per gallon of
gasoline or heating fuel. We see no downside for Americans.
It has also been my observation, after 20 years in the
Alaskan oilfields, that the amount of spinoff jobs created in
support of this type of development are huge. There may also be
large amounts of natural gas to be discovered, tapped, and
developed as a result of newly concentrated commercial activity
in the NPRA.
Finally, and most important, is that Alaska has always had
the potential to be a huge breadbasket of natural resources for
America. Shy of permitting and politics, the only thing that
keeps this from becoming a reality is the extraordinarily high
cost of energy that it takes to develop them.
This legislation moves us toward changing that, and helping
to control our own destiny as a state and as a nation. The only
thing we can know for sure is that which is not working
already; and that any further inaction, for lack of political
will, will only put us farther behind the eight-ball of
increased dependence on foreign oil, jobs, and energy.
Please support this timely and much-needed legislation for
our country, and thank you for taking the time to listen.
[The prepared statement of Mr. Sharp follows:]
Statement of Tim Sharp, Business Manager/Secretary Treasurer,
Alaska District Council of Laborers, Anchorage, Alaska
Good Morning,
I appreciate the invitation from Chairman Lamborn to testify and
the sub committee for taking the time to listen. My oral testimony will
be the same as my written remarks.
My name is Tim Sharp and I am the Business Manager of the Alaska
District Council of Laborers, an organization representing
approximately five thousand union workers. We are mainly construction,
maintenance and manufacturing workers employed throughout the State of
Alaska. We work in the oilfields, on roads and bridges, within the
building and construction trades industry, as well as, maintain both
public and private infrastructure facilities all over the state.
I am here today and excited to strongly support H.R. 2150 or the
National Petroleum Reserve Alaska Access Act introduced by Congressmen
Young, Hastings and Lamborn. We are in strong support for a number of
different reasons, but they boil down to two main issues that most
impact my membership. Most simply put, those are jobs, and affordable
fuel and energy.
There was never a question of ``f''the NPRA should be opened, only
``hen'' We would suggest that with the dwindling amount of oil
presently being pumped through the Trans Alaska Pipeline, the cost of
gas and heating oil for the average American increasing to business and
commerce stifling rates, the huge numbers of unemployed construction
workers, the extra cost burden presently being exacted on our rural
Alaskans in the form of six to ten dollar per gallon fuel, that there
is no better time than now.
There will of course be the inevitable wailing and gnashing of
teeth from those who never met a road, bridge, dam or pipeline that
they liked; especially from certain organizations outside our state run
by people that have never been there, that wish to lock our state up
out of their own misguided perception of what they think it should be.
From the perspective of the people I represent and most Alaskans I
know, we need jobs and we need affordable energy and fuel. We see no
wisdom in not taking action to begin to address the obvious immediately
and feel this legislation is a straightforward approach towards doing
so for the nation.
Also, to at least show that we are responsible stewards of our own
state I would also support any development being tied to the most
stringent ecologically friendly engineering possible. It means more
jobs, protects the environment and will result in cheaper and more
abundant energy.
The other reason for moving this legislation now is that oilfields
are not built or developed overnight. I would think that five years
would be a very conservative guess toward a minimum time line in going
from permitting to blueprints, to further exploration, to roads and pad
construction, to pipelines, and finally to market. However, the upside
would be five years of good employment leading up to a time of bringing
a downward pressure to the price per gallon of gasoline or heating
fuel. We see no downside for Americans.
It also has been my observation, after twenty years in the Alaskan
oilfields, that the amount of spin off jobs created in support of this
type of development are huge. There may also be large amounts of
natural gas to be discovered, tapped and developed as a result of newly
concentrated commercial activity in the NPRA.
Finally, and possibly most important, is that Alaska has always had
the potential to be a huge breadbasket of natural resources for
America. Shy of permitting and politics, the only thing that keeps this
from becoming a reality is the extraordinarily high cost of energy here
that it takes to develop them. This legislation moves us towards
changing that and helping to control our own destiny as a state and a
nation.
The only thing we can know for sure is; that which is not working
already and that any further inaction for lack of political will, will
only put us further behind the eight ball of increased dependence on
foreign oil.
Jobs and energy... Please support this timely and much needed
legislation for our country.
Thank you again for taking the time to listen.
______
Mr. Lamborn. Thank you, Mr. Sharp, for your testimony on
behalf of working families.
Now I would like to hear from Mr. Myers.
STATEMENT OF ERIC MYERS, POLICY DIRECTOR,
AUDUBON ALASKA
Mr. Myers. Mr. Chairman, members of the Subcommittee, thank
you for the opportunity to provide this testimony on the topic
of today's hearing. My name is Eric Myers, and I serve as the
Policy Director for Audubon Alaska. Today I am representing the
National Audubon Society.
Both as a longtime resident of Alaska, as well as a citizen
of the United States, I believe this is a very important topic.
With more than 450 chapters across the country and more than a
million members, volunteers, and supporters, Audubon has a long
history of involvement with the National Petroleum Reserve
Alaska, and advocates for a responsible and balanced approach
to resource development in Alaska, which includes the only
Arctic ecosystem in the United States.
Audubon is not opposed to oil and gas development, and
recognizes that we are all consumers of energy. At the same
time, Audubon supports a careful and measured approach to
resource development in America's Arctic that should include a
continuing commitment to the conservation and protection of
special areas with exceptional biological values.
Alaska has benefitted greatly from oil development and the
associated revenues, but these fiscal benefits have not come
without cost. Since the discovery of oil at Prudhoe Bay in
1968, North Slope development has grown from a single
operational oilfield to a sprawling industrial complex,
extending across 100 miles of America's Central Arctic. More
than 30 major oilfields have been developed, with more than
5,500 exploration and production wells, and more than 390
gravel pads, connected by more than 500 miles of road and 600
miles of pipeline, and supported by some 20 airstrips, various
production plants, production facilities, refineries. This
infrastructure has used more than 50 million cubic yards of
gravel mined from North Slope rivers and tundra.
Impacts include oil spills, both large and small, too
numerous to count; displacement of wildlife; air pollution,
water pollution; elimination of wilderness values; and the loss
of significant subsistence harvest opportunities in the Central
Arctic across the Coastal Plain, between the Canning River to
the east and the Colville River to the west. This industrial
development has permanently transformed Alaska's North Slope,
and is projected to continue far into the future.
Incremental industrialization is now moving west, with the
proposal to develop permanent new infrastructure on the Federal
public lands inside the NPRA.
Audubon believes that the current law enacted by Congress
appropriately recognizes that there is room for both future oil
production, as well as protection, within the NPRA. The NPRA is
the largest single land-management unit in the United States.
Congress enacted the Naval Petroleum Reserves Production Act in
1976, and explicitly recognized that the NPRA contains far more
than just potential hydrocarbon resources.
Current law recognizes the need for balanced management of
our public lands and the NPRA, specifically calling for the
protection of special areas with important surface values and
exceptional biological resources. At more than 22 million
acres, the NPRA spans a large portion of the entire North
Slope. It is larger than 12 states. Were it a state, it would
fall somewhere between South Carolina and Maine in size.
Audubon believes that within such a vast landscape, it is
both reasonable and appropriate that there be a balance in
development and conservation. This is the position that
Congress itself has endorsed in the statutes that govern the
NPRA when it enacted the Naval Petroleum Reserves Production
Act in 1976, and transferred management from the Navy to the
Department of the Interior, expressly requiring protection of
exceptional surface values.
Congress itself recognized two areas in particular,
Teshekpuk Lake and the Utukok River Uplands, and deserving
maximum protection because of the exceptional biological values
found in these areas.
In keeping with the American land ethic of balanced land
management, Congress has recognized in the NPRA the value of
the nation's public lands includes far more than just the
wealth and economic gain that can be extracted.
Teshekpuk Lake has been a particular focus of Audubon's
work in the past 10 years. The Teshekpuk Lake special area
includes the most important goose-molting habitat in the
Arctic, and provides vital habitat for tens of thousands of
geese that gather annually in the area, including Brant,
greater wet-fronted geese, snow gees, and Canada geese. These
waterfowl rely on the wetlands in the area, and migrate back
south to their wintering grounds across the Lower 48.
It is important to recognize that both Democratic and
Republican administrations have recognized the importance of
this area, and Presidents with disparate philosophies, such as
Jimmy Carter and George W. Bush, have both taken actions to see
this area protected.
Consistent with the Congressional requirement to conduct an
expeditious program of competitive leasing, the BLM has
conducted numerous oil and gas leases, leasing more than 6.8
million acres to date. Half of those lease sales were in the
past decade, and the vast majority of the 13.4 million acres
have been leased in the Northwest and Northeast planning areas
multiple times. There have been four lease sales in the
Northeast planning area alone, in 1999, 2004, 2008, and 2010.
Most recently within the last year. And there will be another
lease sale held within the calendar year.
My point, sir, is simply to say that there is, there has
been leasing by the BLM, and the current law is important to
maintain. And that the proposals that are reflected in this
legislation would abandon the protections that have previously
been recognized by Congress. I will stop there. Thank you.
[The prepared statement of Mr. Myers follows:]
Statement of Eric F. Myers, Policy Director,
Audubon Alaska, Anchorage, Alaska
Thank you for the opportunity to provide testimony to the
Subcommittee on Energy and Mineral Resources on the topic of today's
hearing.
My name is Eric Myers and I serve as the Policy Director for
Audubon Alaska. Today I am representing the National Audubon Society.
With more than 450 chapters across the country and more than one
million members, volunteers and supporters, Audubon has a long history
of involvement with the National Petroleum Reserve Alaska (NPRA) and
advocates for responsible and balanced approach to resource development
in Alaska, which includes the only Arctic ecosystem in the United
States.
Audubon is not categorically opposed to oil and gas development and
recognizes that we are all consumers of energy. At the same time,
Audubon supports a careful and measured approach to resource
development in America's Arctic that should include a commitment to the
conservation and protection of special areas and exceptional biological
values.
Today's hearing is focused on the NPRA, the largest single land
management unit in the United States. Established by President Harding
in 1923, the NPRA was originally intended to help meet the Navy's needs
as it converted from coal to oil. In 1976, Congress enacted the Naval
Petroleum Reserves Production Act (NPRPA) and removed management of the
NPRA from the Navy and transferred it to the Department of the Interior
(DOI) while expressly requiring the protection of exceptional surface
values.
At more than 22 million acres, the NPRA spans a large portion of
the entire North Slope. The NPRA is larger than 12 states; were it a
state, it would fall somewhere between South Carolina and Maine in
size. Audubon believes that within such a vast landscape it is both
reasonable and appropriate that there be a balance of development and
conservation.
This is the position that Congress itself has endorsed in the
statutes that govern the NPRA. The mandate for balance has also enjoyed
bi-partisan support as reflected in the NPRA management actions taken
by both Democratic and Republican administrations.
The NPRPA requires the Secretary of the Interior to determine
whether and/or where to lease lands in the NPRA for oil and gas
development while also requiring ``maximum protection'' of areas
identified as having ``significant subsistence, recreational, fish and
wildlife, or historical or scenic value.'' In the 1976 legislation
Congress itself identified two areas in particular--the Teshekpuk Lake
and the Utukok River Uplands--as deserving of ``maximum protection''
because of the exceptional biological values in these areas.\1\
---------------------------------------------------------------------------
\1\ 42 USC Sec. 6504
---------------------------------------------------------------------------
Congress appropriately provided a mandate for balanced resource
management of the NPRA directing that the Secretary ``shall include or
provide for such conditions, restrictions, and prohibitions as the
Secretary deems necessary or appropriate to mitigate reasonably
foreseeable and significantly adverse effects on the surface resources
of the National Petroleum Reserve in Alaska.'' \2\ As recognized in the
first Integrated Activity Plan (IAP) prepared for the Northeast
Planning Area, the NPRPA ``encourages oil and gas development in NPRA
while requiring protection of important surface values.'' \3\
---------------------------------------------------------------------------
\2\ 42 USC Sec. 6506a
\3\ 1998 NE NPRA Final IAP/EIS, Vol 1: Introduction--Purpose and
Need, p. I-1
---------------------------------------------------------------------------
Congress has thus expressly provided that while energy development
is an important reason for the initial establishment of the NPRA it is
not a mandate to the exclusion and detriment of other important values
and public interest priorities such as protection of the natural
ecosystems that support subsistence.
In keeping with the American ethic of balanced land management
Congress has recognized that in the NPRA the value of the Nation's
public lands includes more than the just the wealth and economic gain
that can be extracted.
Special Areas and Exceptional Biological Resources in the NPRA
The NPRA has a remarkable diversity of ecosystems that remain
intact at the landscape scale that are also essential to supporting a
wide range of subsistence harvest activities for more than 40
communities spread across northern and western Alaska.
The NPRA and the immediately adjoining Arctic waters sustain
exceptional natural resources and values. These include: fish
resources, marine mammals (seals, whales, walrus, polar bears),
migratory birds, large mammals (caribou, moose, wolverine, wolf,
grizzly bear and other furbearers); threatened and endangered species;
rare Arctic ecosystem types (e.g., sand dunes); designated Important
Bird Areas; archeological, anthropological, and paleontological
resources; and wilderness/wild river values.
The NPRA includes four existing designated Special Areas recognized
by the BLM as having extraordinary biological values. These include:
Teshekpuk Lake, the Utukok River Uplands, Kasegaluk Lagoon and the
Colville River. As noted, Congress specifically recognized the
Teshekpuk Lake and Utukok Uplands areas as warranting ``maximum
protection'' when it enacted the NPRPA in 1976 and past presidential
administrations as philosophically disparate as those of former
President Jimmy Carter and former President George W. Bush have
embraced the need for protection of these areas.
Exceptional biological values in existing Special Areas include the
concentrated calving grounds of two of Alaska's largest caribou herds
(i.e., the Western Arctic Caribou Herd and the Teshekpuk Lake Caribou
Herd); vitally important nesting, molting and staging habitat for
migratory waterfowl, seabirds and shorebirds; essential habitat for
various marine mammal species including polar bear, walrus, spotted
seal, and beluga whale; internationally recognized raptor nesting
concentrations; and exceptional predator populations including grizzly
bears, wolves and wolverine.
A particular focus of Audubon's work in the past ten years has been
to assure the protection of the unique assemblage of biological
resources found in the vicinity of Teshekpuk Lake, the largest
freshwater lake on the North Slope and the third largest lake in
Alaska. The Teshekpuk Lake Special Area includes the most important
goose molting habitat in the Arctic and provides vital habitat for tens
of thousands of geese that gather annual in the area, including Brant,
Greater white-fronted geese, Snow geese, and Canada geese. In the fall,
the waterfowl that rely on the wetlands in this area migrate back south
to their wintering grounds across the Lower 48 states. Teshekpuk Lake
has been recognized and designated as an Important Bird Area of Global
Significance for the many breeding and migrating birds that rely upon
the area.
The area around Teshekpuk Lake also includes the concentrated
calving and insect relief areas for the Teshekpuk Lake Caribou Herd
which provides a critical subsistence harvest resource for North Slope
communities. The Western Arctic Caribou Herd Working Group, an
organization comprised of subsistence users from small communities
across northern and western Alaska, has identified and recommended that
the lands surrounding Teshekpuk Lake should not be leased or developed
for oil and gas.
Over time, the unique values of the Teshekpuk Lake area have been
acknowledged and set aside for protection by both Democratic and
Republican administrations.
Oil and Gas Leasing & Exploration in the NPRA
Consistent with the Congressional requirement to ``conduct an
expeditious program of competitive leasing of oil and gas in the
Reserve'' \4\ the BLM has conducted numerous oil and gas lease sales
within the NPRA. Management plans for the Northeast Planning Area (4.6
million acres) and Northwest Planning Area (8.8 million acres) have
been completed that govern approximately 13.4 million acres, including
the lands within the NPRA regarded as having the greatest oil
potential.\5\
---------------------------------------------------------------------------
\4\ 42 USC Sec. 6506a
\5\ An Integrated Management Plan for the South Planning Area was
initiated by BLM but subsequently suspended. Resource assessment
indicated that the South NPR-A planning area contains very limited oil
reserves or approximately 2 percent of the undiscovered oil in NPR-A.
See: http://www.blm.gov/ak/st/en/prog/planning/npra_general/
south_npra.html
---------------------------------------------------------------------------
There have been ten lease offerings in the NPRA since
1982 in which nearly 6.8 million acres have been leased.
Half of those lease sales were in the past decade and
the vast majority of the 13.4 million acres within the
Northeast and Northwest Planning areas have been offered for
lease multiple times.
There have been four lease sales in the Northeast
Planning Area alone (1999, 2004, 2008, and 2010).
The most recent NPRA lease sale offering was
conducted by the Obama Administration less than a year ago in
August 2010.
The Obama Administration has announced it will conduct annual lease
sales in the NPRA, with another sale anticipated before the end of this
calendar year.
Recent activities in the NPRA include extensive 3-D seismic survey
work and the completion of 30 exploration wells on federal and Native
land.
Hydrocarbon Potential in the NPRA
In October 2010, the United States Geological Survey (USGS) updated
its 2002 analysis of the hydrocarbon potential of the NPRA and
substantially revised downward the estimate of technically recoverable
oil in the NPRA. The USGS analysis of drilling and seismic data found
an unanticipated and abrupt transition from oil to gas approximately
15-20 miles west of the Alpine oil field along with poor reservoir
quality in key formations.
U.S. Geological Survey (USGS) geologists have interpreted
results of exploratory drilling to show that formations thought
to be oil prone are actually gas prone. The new data have also
indicated that actual reservoir quality is inferior to the
reservoir quality inferred in the 2002 assessment (Houseknecht
and others, 2010). The change in paradigm results in a decline
in the estimated mean value of undiscovered oil from 10.6
billion barrels of oil (BBO) to 895 million barrels of oil
(MMBO).\6\
---------------------------------------------------------------------------
\6\ United States Geological Survey, ``Economic Analysis of the
2010 U.S. Geological Survey Assessment of Undiscovered Oil and Gas in
the National Petroleum Reserve in Alaska'' (May 2010)
---------------------------------------------------------------------------
The updated USGS estimate of 895 MMBO of technically recoverable
oil (mean estimate) in the NPRA is less than ten percent of the prior
2002 estimated quantity of oil. The USGS also estimated undiscovered
technically recoverable natural gas resources of 52.8 TCF (mean
estimate). This estimate also resulted in a downward revision but
remains at roughly ninety percent of the natural gas estimated in the
prior 2002 assessment.
In May 2010, USGS published its estimate of undiscovered
hydrocarbon resources in the NPRA that can be economically recovered
(i.e., commercially developed at a range of market prices). This
analysis further reduced the prospect of significant oil development in
the NPRA.
At a price of $90 per barrel ($10 per MCF gas price) and an
estimated 895 MMBO of technically recoverable oil, USGS projects
economically recoverable reserves of 502 MMBO (mean estimate) under a
scenario with a 10-year delay for gas pipeline capacity and 358 MMBO
with a 20-year-delay assumption. (The USGS anticipates a 10-year to 20-
year delay between expenditures for discovery of gas accumulations and
production that would rely upon construction of a new gas pipeline.)\7\
---------------------------------------------------------------------------
\7\ Because of limited oil potential and high costs, the USGS has
concluded that future oil development in the NPRA will be a by-product
of gas exploration and exploration for gas will drive the discoveries
of oil. The USGS analysis concluded that at a market price in the
conterminous United States of $8 per thousand cubic feet (MCF) and with
the assumption of a 10-year pipeline delay, the economic non-associated
gas resources at the 95th-fractile, mean, and 5th-fractile estimates
are predicted to be 4.5 TCF, 17.5 TCF, and 39.4 TCF, respectively. In
the case of a 20-year pipeline delay, the economic gas resources at the
95th-fractile, mean, and 5th-fractile estimates are predicted to be 0.9
TCF, 7.3 TCF, and 24.5 TCF, respectively. With a superabundance of
relatively inexpensive natural gas in the Lower 48, however, prospects
for construction of a natural gas pipeline from the North Slope are
poor as reflected by the recent cancellation of BP and Conoco-Phillips
efforts to build the Denali Pipeline project. See: http://www.adn.com/
2011/05/17/v-printer/1867232/bp-conoco-drop-bid-for-alaska.html
---------------------------------------------------------------------------
NPRA Hydrocarbon Potential in the Context of National Energy Demand
Considerable attention has been given of late to the rising price
of gasoline. It has been argued in some quarters that more aggressive
development of NPRA will help ``lower energy costs'' but this claim
cannot be supported objectively.
The ``Drill Baby Drill'' rhetoric most famously associated with
Alaska's former Governor will not bring down the price of gasoline at
the pump. Any such representations do a great disservice to the
American public, misleading consumers and providing a false hope that
will not be realized.
The price of oil is driven by international market considerations
that are well beyond the ability of NPRA development to influence. Even
assuming the most robust USGS estimate of oil reserves as informed by
the most current data, there is simply not enough oil volume to move
prices downward to any significant degree.
Putting the oil potential of the NPRA into the larger national
context, the United States consumes 19.58 MMBO per day or approximately
587 MMBO per month.\8\ The total economically recoverable oil in the
NPRA identified by the USGS is insignificant: the entire projected
economically recoverable reserves of 502 MMBO \9\ (mean estimate)
accounts for less than one month of consumption for the United States.
---------------------------------------------------------------------------
\8\ Annual Energy Outlook 2011, Energy Information Administration
http://www.eia.gov/forecasts/aeo/excel/fig93.data.xls See: Figure 93
(figure data)
\9\ USGS mean estimate assuming only a 10-year delay in gas
pipeline access. United States Geological Survey, ``Economic Analysis
of the 2010 U.S. Geological Survey Assessment of Undiscovered Oil and
Gas in the National Petroleum Reserve in Alaska'' (May 2010).
---------------------------------------------------------------------------
To address the issue of excessively high oil prices attention
should be directed to curtailing rampant speculation in oil markets. As
reported recently by the head of the Commodity Futures Trading
Commission, nearly 9 of 10 traders in oil are financial speculators and
not actual end users of oil.\10\
---------------------------------------------------------------------------
\10\ K. Hall, ``Chief regulator says speculators swamping oil,
grain markets'', Anchorage Daily News (June 10, 2011) http://
www.mcclatchydc.com/2011/06/09/115551/key-regulator-speculators-
swamping.html
---------------------------------------------------------------------------
If reducing the price of gasoline at the pump is the goal,
attention should be concentrated on the Wall Street banks and hedge
funds that are driving up oil prices through excessive speculation
which may account for a significant fraction of the price.\11\
---------------------------------------------------------------------------
\11\ The impact of speculation on oil prices has also been noted by
the government of Saudi Arabia. Diplomatic cables between the Saudis
and the former Administration show speculation has been raised in
meetings between U.S. and Saudi officials, in one-on-one meetings with
American diplomats and at least once with former President George W.
Bush himself. Saudi officials have conjectured that speculation
represented approximately $40 of the overall oil price when oil was at
its height. http://www.mcclatchydc.com/2011/05/25/114759/wikileaks-
saudis-often-warned.html See also: http://www.mcclatchydc.com/2011/05/
13/114190/speculation-explains-more-about.html
---------------------------------------------------------------------------
Declining Industry Interest in the NPRA
The oil industry's ``on-the-ground'' actions reinforce the
conclusion that the NPRA has only limited oil potential. As a result of
the many past lease sales, nearly 6.8 million acres have been leased
across large portions of the NPRA, extensive 3-D surveys have been
conducted, and exploration wells have been drilled.
However, in the past several years, the industry has been
abandoning leases in the NPRA at a record pace, reinforcing the
conclusion that the NPRA is fundamentally a gas province; that key
formations hold more gas than oil; and there is poorer reservoir
quality than originally anticipated. Of the nearly 6.8 million acres
previously leased, approximately three-quarters of the tracts have been
given up by the industry.
Limited oil potential in the NPRA, combined with the glut of
natural gas in Lower 48 markets and the superabundance of natural gas
already available from developed fields on the North Slope, has
rendered the NPRA an area of limited appeal.
No exploration wells were drilled in the NPRA during the winter of
2010-2011 and there are no pending applications to drill additional
exploration wells.\12\ In the most recent NPRA lease sale (August
2010), 1.8 million acres were offered. Only a few individual tracts
were leased within the vicinity of already unitized areas.
---------------------------------------------------------------------------
\12\ Ted Murphy, BLM Alaska State Office (personal communication)
---------------------------------------------------------------------------
Notably, industry lease relinquishments have included tracts both
on federal lands within the NPRA as well as leased areas in State of
Alaska coastal waters immediately adjacent to the NPRA. Leases were
most recently relinquished in Smith Bay and Harrison Bay, state waters
along the north coast of the NPRA.
Future Development Within the NPRA and the Proposed CD-5 Road/Bridge
Project
While the NPRA has limited prospects as a major oil province, there
is interest on the part of Conoco-Phillips Alaska Inc. (Conoco) in
developing some ``satellite'' oil resources associated with the
existing Alpine oil field that is located within the Colville River
Delta immediately to the east of the NPRA.
This includes the so-called ``CD-5 project'', a proposal by Conoco
to build a permanent all-weather surface road from the Colville River
Delta with a bridge and suspended pipe over the Nigliq Channel to
access the CD-5 production drilling pad inside the NPRA. (The Nigliq is
a large channel in the Colville River Delta defining the westernmost
edge of the Delta and the eastern boundary of the NPRA.)
There is no question that oil and gas development on Alaska's North
Slope will continue far into the future and Audubon fully anticipates
development of the Cononco satellite prospects on the eastern edge of
the NPRA. The essential issue in the case of this development is not
whether oil and gas development will take place in the NPRA, but rather
where and how it will occur.
The proposed road and bridge project would be the first permanent
oil production road and infrastructure within the NPRA and the manner
in which this project proceeds has important implications for future
development of the NPRA. The CD-5 project proposal is not only relevant
in terms of ``opening'' NPRA, the project design has very significant
implications for the Colville River Delta, an area with unique
biological qualities found nowhere else on the North Slope.
The all-weather road and bridge proposal has a long history of
controversy because it is at odds with prominent representations made
by the oil industry regarding development of Alpine as a roadless
project in order to prevent damage to the exceptional ecological values
of the Colville River Delta. To this day, Conoco-Phillips touts
roadless Alpine oil field development on its website:
Alpine - The company continues to develop environmentally-
sensitive and technologically advanced approaches to oil
extraction, including the Alpine field on the Western North
Slope. The $1.3 billion initial construction cost resulted in a
roadless development that operates more like an offshore
development. In winter, an ice road is constructed from Kuparuk
to the main Alpine facility to transport supplies for the rest
of the operating year.\13\
---------------------------------------------------------------------------
\13\ http://alaska.conocophillips.com/EN/about/operations/Pages/
index.aspx (emphasis added)
---------------------------------------------------------------------------
Directional drilling, zero-waste discharge, roadless
development and other innovations minimize the Alpine
development's environmental footprint on the Arctic.\14\
---------------------------------------------------------------------------
\14\ http://www.conocophillips.com/EN/about/worldwide_ops/country/
north_america/pages/alaska.aspx (emphasis added)
---------------------------------------------------------------------------
The importance of maintaining the biological integrity of the
Colville River Delta was a key consideration during the original Alpine
oil field development process. This included a specific provision that
future development in the Delta adhere to a roadless design unless
either a more environmentally preferred alternative was developed or
roadless development was determined to be infeasible (Special Condition
10).\15\
---------------------------------------------------------------------------
\15\ Letter from M. Combes, Environmental Protection Agency to Col.
K. Wilson, United States Army Corps of Engineers, dated June 9, 2009.
---------------------------------------------------------------------------
The project, as proposed by Conoco, with a permanent all-weather
road, bridge and suspended pipeline over the Nigliq channel stands in
sharp contrast to the commitment to roadless development at Alpine. The
high-quality habitats in the Colville River Delta have long been
recognized for their unique value. The Colville River drains nearly
one-third of the North Slope and the United States Fish and Wildlife
Service (USFWS) has identified the Delta as the largest and most
productive river delta in northern Alaska. The EPA has identified the
Colville delta as an Aquatic Resource of National Importance.
After careful review, the Alaska District of the Army Corps of
Engineers (Corps) concluded that the Conoco project proposal was not
the ``least environmentally damaging alternative'' (or LEDPA) as
required by the Clean Water Act. The Corps found that there are other,
less damaging project design alternatives that would accomplish the
purpose of accessing the CD-5 site to produce oil. These alternatives
include a roadless alternative with a pipeline under the Nigliq channel
using horizontal directional drilling (HDD) which the Corps has
identified as feasible and practicable.
The administrative record before the Corps reflects a long history
of opposition to Conoco's proposed project design by both the EPA and
the U.S. Fish and Wildlife Service (USFWS).
It should also be noted, as recently reported by the Wall Street
Journal, that the CD-5 permit denial was ``a rare step by the Alaska
district engineer, who has denied just two of nearly 3,000 permit
applications, including the Conoco proposal, since he took command in
June 2009.'' \16\
---------------------------------------------------------------------------
\16\ http://online.wsj.com/article/
SB10001424052702304563104576357800795837470.html ``Bureaucratic Rift
Stalls Alaska Well'', Wall Street Journal (June 2, 2011)
---------------------------------------------------------------------------
The Colville River Delta provides habitat for nearly 80 species of
birds and is within the range of three species listed as threatened
under the Endangered Species Act (Spectacled eider, Steller's eider,
and polar bear), is an area used by another Endangered Species Act
candidate species (Yellow-billed loon), and the Delta provides
important habitat for hundreds of thousands of migratory shorebirds. In
addition, the Colville River Delta has been designated an Important
Bird Area (IBA) of Continental Significance and the area contains
approximately 70 percent of the fish overwintering habitat on the North
Slope. Spotted seal and beluga whale are known to seasonally occur in
the Nigliq channel
Of particular note are concerns about the impact a permanent road
would have on the Colville River Delta surface flow hydrology that is
essential to the long-term health and productivity of the Colville
River Delta. Construction of a road would disrupt this surface flow
which is vital to the long-term maintenance and health of the Delta's
habitat.
The proposed bridge and suspended pipeline also present the risk of
a catastrophic spill. The Nigliq channel can carry significant
discharge volumes (most of the flow) when an ice jam occurs in the main
channel during breakup. If even a relatively minor leak in the pipeline
should occur concomitant with a seasonal flood event the potential for
a major spill exists. While an HDD alternative is not without risk,
proper design, maintenance and monitoring can limit the risk of leaks.
An under-channel pipe would not be vulnerable to a complete
catastrophic failure.
Another concern about the Conoco proposal is that the road would
allow the Colville River Delta to become the main staging area for
future development in the NPRA. Industrialization of the Delta is a
long-anticipated concern of itself--further wetlands fill, additional
laydown pad, facility construction, loss of habitat, disruptive
operations, traffic, etc.--and the fundamental reason for inclusion of
the roadless development stipulation. As the CD-5 project is proposed,
Conoco would create an operations center for future development of the
eastern NPRA in the center of the most hydrologically active and
resource rich river delta in Alaska's arctic.
Consistent with the Clean Water Act, the Corps determined that
there are other practicable alternatives that meet the need of the
project--to transport hydrocarbons from CD-5 back to the Alpine for
processing--that would have less adverse impact on the aquatic
ecosystem.\17\
---------------------------------------------------------------------------
\17\ ``U.S. Army Corps of Engineers denies permit application for
CD-5 drill pad'', U.S. Army Corps of Engineers, Alaska District Public
Affairs Office, Press Release No. 10-02 (February 5, 2010)
---------------------------------------------------------------------------
When the Alpine project was first developed there were many
representations, as reflected to this day on Conoco-Philips' website,
about roadless development. The CD-5 proposal now being advanced
contradicts that commitment. As articulated in comments by the EPA in
correspondence to the Corps dated June 9, 2009 regarding the Conoco's
proposal:
As you are aware, EPA is not opposed to continued exploration
and development of oil and gas resources in the NPR-A. EPA is
firm in our understanding that this can occur in a reasonable
manner through the construction of alternatives that are the
least environmentally damaging. During EPA's evaluation of the
applicant's previous proposal EPA found a road-less alternative
to be the least environmentally damaging practicable
alternative (LEDPA).. . .EPA believes there are practicable
alternatives that do not involve a bridge and road crossing of
the Nigliq Channel and CRD [Colville River Delta] that have
less adverse effect on the aquatic environment.. . .[A]n
alternative that includes use of the existing airstrip in
Nuiqsut, development of a ``Nuiqsut hub'' for logistical
operations with road access to CD-5 drill site via the proposed
Kuukpik spur road, and HDD of the pipeline under the Nigliq
Channel warrants a detailed analysis.\18\
---------------------------------------------------------------------------
\18\ Letter from M. Combes, Environmental Protection Agency to Col.
K. Wilson, United States Army Corps of Engineers, dated June 9, 2009.
---------------------------------------------------------------------------
Many of the foreseeable impacts that would follow from approval of
a permanent road, bridge and elevated pipeline would be avoided with an
alternative road configuration using and developing infrastructure at
and around Nuiqsut. A more complete analysis of the Nuiqsut Operations
Center (NOC) alternative is needed. This alternative has never been
given detailed analysis by the BLM. In the 2004 Alpine FEIS process,
the NOC alternative was regarded as not ``economically viable'' and
eliminated from detailed consideration.\19\
---------------------------------------------------------------------------
\19\ Alpine Satellite Development Plan Final EIS http://
www.blm.gov/eis/AK/alpine/eisdoc/final/07sec02.pdf Section 2.6.8
(September 2004)
---------------------------------------------------------------------------
Since the time the Alpine Final EIS was completed, the price of oil
has more than doubled and oil company profits have soared. Substantive
consideration of the NOC alternative is especially relevant because of
the Memorandum of Agreement between Conoco and Kuukpik Corporation that
calls for the construction of a new road that will connect Nuiqsut and
the CD-5 platform.
Written comments jointly prepared by the Kuukpik Corporation, the
Native Village of Nuiqsut and the City of Nuiqsut express clear support
for expansion of oil field support services in the Nuiqsut area so that
the community can develop ``as the main hub supporting future oil and
gas activities in NPR-A'' \20\ providing a competitive advantage to
Nuiqsut-based businesses and generating local employment opportunities.
These comments note that expanded use of the existing Nuiqsut airport
and ``[s]hifting air traffic out of the far more sensitive wildlife
habitat of the Delta to the already developed area around Nuiqsut would
be very beneficial.'' \21\
---------------------------------------------------------------------------
\20\ Kuukpik Corp., Native Village of Nuiqsut and City of Nuiqsut
to U.S. Army Corps of Engineers, letter dated July 21, 2009.
\21\ Ibid.
---------------------------------------------------------------------------
The history of oil development on the North Slope has been one of
incremental industrial sprawl. The Clean Water Act appropriately
requires that the least environmentally damaging practicable
alternative be identified.
The ultimate decision on how the CD-5 project proceeds will provide
an important measure of whether the promise for responsible development
is kept.
``The National Petroleum Reserve Alaska Access Act''
There are several elements to the draft legislative proposal under
review by the Subcommittee (H.R. ___ ``The National Petroleum Reserve
Alaska Access Act''). These include provisions that would:
enact a fundamental change to existing policy and law
in the NPRPA that would undermine the requirement for balance
that Congress has appropriately established in law for
management of the NPRA, the nation's single largest land
management unit;
compel oil and gas leasing in areas irrespective of
their exceptional biological value or sensitivity;
establish arbitrary fixed timelines for permit
decisions and other authorizations regardless of their
complexity;
require the Department of the Interior to engage in
extensive and wasteful planning about speculative rights of way
in the NPRA; and
require the Department of the Interior to undertake a
redundant study of hydrocarbon resources within the NPRA after
having just recently completed such an analysis.
For all of the reasons discussed above, Audubon does not believe
the provisions of this draft legislative proposal are either necessary
or beneficial and would urge the Subcommittee to defer further action
on the proposal.
Conclusion
1. Balance: Under current law, the Congress has appropriately
recognized that the NPRA contains more than just potential
hydrocarbons, including extraordinary surface values of
national significance. Congress has properly required that oil
and gas development in the NPRA should proceed in a manner that
balances energy development with other public interests in the
protection and conservation of the NPRA's special areas and
exceptional biological resources.
2. Leasing & Oil Potential: The BLM has diligently undertaken
a leasing and exploration program, as directed by Congress,
having held numerous oil and gas sales, leased more than 6.8
million acres (an area the size of Massachusetts) and overseen
seismic survey work and exploration as intended by Congress.
The NPRA will undoubtedly make a future contribution to the
Nation's oil supply but only in modest quantity. Seismic and
drilling results have shown that the NPRA is largely a gas
province with relatively little oil development potential.
3. Protection of Special Areas: With enactment of the NPRPA,
Congress explicitly called for the protection of special areas
in the NPRA, specifically identified the Teshekpuk Lake and the
Utukok River Upland areas as well as recognized that other
areas with important surface values should also be identified
and protected. Over time, recognition of the need to conserve
the exceptional biological areas in the NPRA has been embraced
by both Democratic and Republican administrations.
Finally, it should again be noted that Audubon recognizes that
there will be future oil development in the NPRA. As future development
proceeds there are important issues of national interest regarding
where and how that development is undertaken.
In the NPRA, the nation's largest land management unit, Audubon
believes there is both room as well as need to balance future
development with strong protection of special areas and extraordinary
biological values.
______
Mr. Lamborn. OK, thank you. And I want to thank all of you
for your testimony. You have come great distances to be here,
and we appreciate that.
I would like to ask my first question to Mr. Sharp. In your
testimony you mentioned that you observed a large amount of
spinoff jobs that are created by expanding energy development.
Can you elaborate on what exactly these kinds of spinoff jobs
are? That is the first part of my question.
And second, will expanding energy development indirectly
help the rest of the country, as well? Mr. Sharp.
Mr. Sharp. Thank you. I guess it would be the same answer
of both. In other words, those jobs that would be created would
impact immediately the Lower 48, in terms of supply, in terms
of foundries, the potential for steel, manufacturing of all
oilfield supplies. It would be, it would be huge in the Lower
48, much like we have seen in the past. If you look at these
suppliers for Prudhoe Bay right now, they are, more often than
not, American-made products, and you would just be seeing more
and more of those things--whether from Texas, whether from the
foundries of Ohio, or throughout the United States.
Mr. Lamborn. Thank you. Mr. Balash--I hope I have
pronounced that correctly--like other oil-producing regions, in
some Alaskan communities, the oil and gas industry is the
lifeblood. These jobs are high-paying, and according to the
American Petroleum Institute, there are over 43,000 jobs in
Alaska supported by the oil and gas industry.
Can you tell me about the different opportunities for
people between having a robust oil and gas industry, or the
other kinds of employment opportunities that are available
apart from the energy sector?
Mr. Balash. Thank you, Mr. Chairman. As you noted, the
number of jobs supported by the energy industry in Alaska are
particularly high-paying. They are able to support very solid
elements and pillars within the community, both in terms of
gainful employment, but also in terms of social contributions
by those employees that can afford to participate in the larger
community activities.
Aside from energy, we have primarily seasonal and service-
based opportunities. The commercial fishing processing type of
employment is periodic and intermittent. Construction also
varies with the seasons, and the types of other employment
opportunities in Alaska are few and far between. Mining is one
bright spot in addition to energy.
And so these opportunities for projects to occur are
incredibly important to the State as a whole, but especially,
and in particular, to the communities in question on the North
Slope, as you move farther west and east, and become closer to
proximity of the local villages.
Mr. Lamborn. All right, thank you, Commissioner. Mr. Myers,
there are two wildlife refuges in the Lower 48, the Rainey
Wildlife Refuge in Louisiana and the Bakers Sanctuary in
Michigan. These are not petroleum reserves; these are wildlife
refuges that are owned by your organization. And they allow oil
and gas development, or have in the past.
If oil and gas development is good enough for these two
areas, why isn't it good enough in Alaska, which is what we are
talking about--a petroleum reserve?
Mr. Myers. Mr. Chairman, as I said earlier, Audubon is not
opposed to oil and gas development; it is a question of where,
and under what circumstances. And in the case of the, I am not
familiar with the second property you mentioned, but in the
case of Rainey Sanctuary, there was divided, the state
interest, and Audubon inherited a surface state interest. And
there was some production; there is no production now. And I
don't believe there is any further intention of production on
that property.
But the question fundamentally is not whether there should
be oil and gas development; it is a question of where and how.
In the case of the National Petroleum Reserve, the NPRA, under
the Federal law that was enacted in 1976, Congress itself took
great care to acknowledge that the NPRA included far more than
just petroleum resources.
And so the position that I have tried to identify today is
not that there is categorical opposition to oil and gas
development, but it is a question of how you go about it. And
if there is enough room in such a large landscape to ensure
that there is protection, as well as production.
Mr. Lamborn. OK, thank you. Now I will recognize Ranking
Member Holt.
Mr. Holt. Thank you, Mr. Chairman. A question for Mr.
Balash and Mr. Drevna. What is the pronunciation of your name?
I am sorry, Balash?
Mr. Balash. Balash, thank you.
Mr. Holt. Balash, I beg your pardon. About three quarters
of the leased acres in NPRA have been either relinquished or
allowed to expire over the last few decades. And in fact, they
are being relinquished at a greater and greater rate, so that
this year 60 leases have been relinquished. Why do you think
that is? I would like to ask each of you for a short answer,
please.
Mr. Balash. Ranking Member Holt, I am aware of one company
in particular who is going through the process of plugging and
abandoning a known discovery. That is FEX Alaska. They have a
known discovery in the western part of NPRA, the closest
discovery to Barrow that has been found to date.
As their company has changed leadership, they have
redirected their corporate approach. They put that property up
for sale prior to engaging in these P and A activities, and
found no buyers. The distance and the regulatory gauntlet that
has to be run to transport that discovered oil resource from
the western central part of NPRA to the east, and tying into
the existing infrastructure at Prudhoe Bay, is daunting.
Mr. Holt. Given the amount of oil they would expect to get
there. Is that right, Mr. Drevna?
Mr. Drevna. Sorry, I can't comment on the exact amount of
oil. What I can comment on is, it is very difficult to have a
short answer to a very complex question.
The process of obtaining a lease--getting the permits,
developing the lease, and trying to really determine if there
are economically recoverable quantities of oil and natural
gas--is not an overnight proposition. It is not like leasing an
apartment.
So there are leases that are gained and returned all the
time. The point we are trying to make is that, if we don't get
a process that has----
Mr. Holt. But Mr. Drevna, 76 percent of the leases have
been relinquished or abandoned. Companies make hard-headed
decisions and we in policy circles shouldn't live in a world of
wishful thinking any more than a hard-headed business does.
The fact is that the recoverable oil there hasn't become
real, and companies are deciding that it is just not worth it.
That seems pretty apparent.
Mr. Drevna. Would you like me to respond to that, sir?
Mr. Holt. Well, in just a moment. We have here the gas
pipeline project. Mr. Sharp, I am always looking forward to
good jobs for hard-working people. This would have been the
largest private construction project in history. But it is
abandoned for hard-headed decisions, when you look at what will
be available.
So you know, no companies are asking the BLM for permits to
build pipelines or roads. There are none pending with the
Department. So let me ask Mr. Myers, isn't this really just
about economics?
Mr. Myers. The industry's on-the-ground action certainly
reinforces the conclusions that are reflected in the USGS
analysis, that the NPRA is not likely to provide the bonanza of
oil that it once was thought to.
In the past several years, the industry has relinquished or
allowed to expire about three quarters of the tract. I think an
important point is that the BLM has engaged in an aggressive
leasing program consistent with its mandates under the Naval
Petroleum Reserves Production Act. There has been exploration
wells drilled, but that basically what they have found is that
it is a gas province, rather than oil province, and there is no
market for gas.
Mr. Holt. Well, my time has expired. But of course, what
this bill does, then, is ask the BLM, or the USGS rather, to do
another survey because they didn't like the answer of the last
one, which is just not there in the numbers that some might
wish it would be. Thank you.
Mr. Lamborn. Thank you, Mr. Holt. Thank you. I would like
to now recognize the Chairman, Representative Hastings.
Mr. Hastings. Mr. Lamborn. Mr. Drevna, you attempted to
respond to an observation that was just made. Would you go
ahead and respond?
Mr. Drevna. Thank you, sir, Mr. Chairman. Again, the
leasing process is one that is very complicated. If you look at
the history of leasing throughout, whether it is oil, coal,
gas, it is a process of prospecting. You have to make those
hard-headed decisions you mentioned, Ranking Member Holt, about
where to go, where to drill, how to drill.
And then when you throw on top of that the delays, the
interminable delays that companies see in getting the necessary
permits. It reminds me of the old Yogi Berraism: No one goes to
that restaurant anymore; it is too crowded. It is just that it
is not worth the time and effort for these companies.
Our members have told us that until we get a process up
there that really streamlines things and allows us to go in and
develop and process, these leases are not going to be
forthcoming. That is the bottom line.
Mr. Hastings. Let me follow up on that, because in my
opening statement I made reference to the pipeline, and made
reference to the fact that it is at about half its capacity.
The intent of this legislation is to have some certainty in
connecting to that pipeline, and I think that is a very, very
important part of how you are going to develop these resources
up here.
So I would like to ask Mr. Balash, Mr. Drevna, and Mr.
Sharp, an open-ended question. If we don't start producing up
there, whether we are talking about the Reserve or whether we
are talking about Beaufort or Chukchi, or even ANWR, to the
west, and that pipeline does not have the capacity to continue
on, what are the consequences, with the economy and jobs in
Alaska? And Mr. Balash, I will start with you.
Mr. Balash. Well, from a state perspective, being a little
bit parochial, Alaska quite simply would be devastated
economically. Oil provides 85 percent of the revenue that funds
our state government. We are a top-heavy state; most of the
revenue is collected at the state level, and redistributed to
our communities for education, K-12, university, and health
programs.
Without TAPS, without oil revenue coming into our state
Treasuries, it would be a total collapse.
Mr. Hastings. Mr. Drevna.
Mr. Drevna. Expanding, going farther south, and starting in
Washington and going down the coast all the way to Arizona,
they are very, very dependent on the Alaska reserves. What we
have seen over the past years now is we have seen, I think, as
you mentioned, Mr. Chairman, at a peak, about 2.1 million
barrels a day heading south to fuel the refineries along the
West Coast. Now it is about 655,000 barrels a day.
From what the engineers tell us, that is unsustainable.
What we are seeing now--besides the potential devastation to
the pipeline, which is a very, very dire situation, as was just
mentioned--we are getting colder oil now, and in order to
process that oil, we have to heat it because it is not being
heated because the pipeline is not being used to capacity.
Now, if you will allow me to go on a little farther.
Mr. Hastings. Well, real quickly, because I want Mr. Sharp
to respond to that.
Mr. Drevna. OK. That is the impact on the pipeline. The
impact on the domestic refineries and jobs is going to be, if
we are not going to get it from Alaska--and we are not going
to--and California is not going to allow Canadian oil sands
soon, where are we going to get it from?
We are either going to get it continually from foreign
nations, Russia and other OPEC countries, or we are going to
ship Canadian crude to China and the Pacific Rim, have it
refined there, and sent back to the United States.
Mr. Hastings. Right. Mr. Sharp.
Mr. Sharp. Yes. It is not a matter of what would, it is
happening right now.
In Fairbanks, the energy prices are so cost-prohibitive,
people are literally leaving the state, leaving Fairbanks in
particular. It is interesting to me, Mr. Holt's talk of all
this gas. We are coming out of the ground with a training and
apprenticeship school right now. I can't get gas to heat and
fuel my training school. I live in Alaska; it doesn't make any
sense.
But yes, it would be devastating to the economy. It would,
it would change the face of Alaska as we know it, and not in a
good way.
Mr. Hastings. I just want to make an observation before my
time runs out. It appears to me, after my trip up there and
listening to a number of people testify on this issue, I quite
frankly see a back-door effort to starve the pipeline. Once you
starve the pipeline, you take away all that potential up there.
I just think the focus needs to be, and I think all of you
up there, especially that are impacted, need to focus on how
important it is to keep that pipeline full. Because without
that pipeline, all of what we are talking about in the future,
even from a national security standpoint, which you alluded to,
Mr. Drevna, is at risk.
So thank you very much, Mr. Chairman.
Mr. Lamborn. All right, thank you. Mr. Fleming.
Mr. Fleming. Thank you, Mr. Chairman. Gentlemen, I am from
Louisiana. And you know, of course, it is legendary now, the
problems we have had with the oil spill and so forth. And as
you know, we started out with a moratorium; then we had a de
facto moratorium, then a permitorium, and now we have a
slowatorium.
It is obvious that the Administration is doing everything
it can to throw a monkey wrench into the gears, to slow things
down, do whatever it can to be sure that we reduce our energy
production in this country.
Now, why, I don't quite understand, but that is obvious. I
am hearing the same sort of testimony here today that this is
going on in Alaska as well.
Now, to address a point here before I get to a question.
The statement is made by the other side time and time again
that there are less oil reserves in the United States, and that
production is going up. That is exactly opposite to the truth.
For instance, offshore drilling in the United States,
production has dropped from 1.7 million barrels a day to 1.59
million barrels a day, and going down. Their permit process is
way off of what it has traditionally been. So we don't know
where the bottom is going to be in this fall-off of production.
Having said that, the USGS says that the United States now
has more oil reserves than any country in the world: 1.3
trillion barrels equivalent, when you get to coal, natural gas,
and oil; and, of course, in my district alone, there is the
Hainesville Shale, which has the largest natural gas deposit in
North America, the fourth largest in the world. We didn't know
it existed five years ago.
So the elephant in the room here, gentlemen and members of
the Committee, is that the Administration flatly wants to
reduce oil production, to the benefit of so-called alternative
forms of energy, which do not make sense in the marketplace.
They still are not technologically where they need to be, and
this creates a conundrum that we are talking about today.
So I will quickly get to my question. Mr. Drevna, in your
testimony you discussed the importance that Alaskan crude plays
for West Coast refiners. You also point out that these
refineries import about 50 percent of their crude product from
overseas.
However, if the Trans-Alaska Pipeline were to shut down in
2010, they would have imported over 73 percent of their crude
product, over 70 percent of this from OPEC nations.
Do you have an estimate of how many Americans are employed
at these refineries?
Mr. Drevna. Yes, sir. I believe that currently we have
about 16 to 17,000 direct, on-the-payroll employees in
refineries up and down the Coast. But when you take into
consideration the jobs that those jobs generate, as Tim had
mentioned earlier, you are talking anywhere up to the 200- to
240,000 jobs. Which I would suggest is significant. Good high-
paying jobs.
Mr. Fleming. Yes, that was going to be my followup point.
The petroleum sector jobs are wonderful; I mean, even the
entry-level jobs are much better than the average job out
there. So we are talking about excellent jobs, and benefits
that would go with them.
Can you explain to the Committee what the result would be
if Alaskan crude supply continues to diminish?
Mr. Drevna. Well, as I mentioned before to the Chairman, if
it continues to diminish and as the pipeline goes away, then
what are we going to feed those West Coast refineries with?
In California right now you have a low-carbon fuel standard
that says you can't use the Canadian crudes. Well, those
Canadian crudes are going to be used. If they are not used in
the United States, they are going to be used elsewhere. The
rest of it is going to have to come from foreign sources.
And that is if the situation were to continue where we
would get the crude from the foreign sources, but after a while
the logical, or illogical conclusion, as one might suggest,
would be that it would be much more efficient and less
expensive to actually refine the product overseas, and bring it
to the United States. Thus putting those 240,000 jobs at severe
risk.
Mr. Fleming. So what we are looking at is continued loss of
jobs in a terrible job market today we have in this country,
higher and higher energy prices, more and more dependency on
foreign sources of oil. At our peak, we were at 60 percent
self-dependent, now we are 30 percent self-dependent, or 60
percent dependent on other sources; and it looks like it is
going to continue to go down.
Yet we have more conventional forms of energy than any
country in the world. It makes absolutely no sense to me, Mr.
Chairman. I thank you, and I yield back.
Mr. Lamborn. All right, thank you. Mr. Duncan. Excuse me,
Mr. Young. I am sorry.
Mr. Young. Thank you. This is an interesting hearing. I
have reviewed this bill, and I highly support it. But I hope,
Mr. Chairman, we add to it.
You heard the Senator say something about permits. I am
just curious about, they talk about having lease sales in Pet
4. We had two of them in 2010. There have been 100 of them in
inactive leases that have been relinquished, and there have
been 11 of them expired. That is because of the 10-year rule.
Now, Mr. Holt keeps saying well, there is no oil there.
They have done no 3-D work, is that correct? Does anybody know,
Mr. Balash? Did they do any 3-D work?
Mr. Balash. Mr. Congressman, limited 3-D seismic work has
been done.
Mr. Young. But was the State involved in this?
Mr. Balash. We have been supporting exploration through
credits on the production taxes.
Mr. Young. My point is, the DOI report went from 10 billion
to 2 billion.
Mr. Balash. Mr. Congressman, I believe that is a self-
fulfilling prophecy that has occurred; that the most
prospective areas of NPRA were deferred from leasing and
drilling activities.
Mr. Young. That is what I----
Mr. Balash. The 2010 assessment was based on the wells that
had been drilled in the last decade, which were in the least
prospective areas of NPRA for oil.
Mr. Young. That is what I asked the question for. Because
this has not been explored. The leases that were given were
relinquished because they couldn't drill, and it is expensive
oil. It is a long way away from the pipeline. Until we have a
big pool, you can't afford to put the infrastructure in to do
it. That is our biggest challenge.
We can go all to the pipeline, I think the gentleman, Mr.
Hastings, mentioned the fact, Mr. Audubon Society and Sierra
Club and Defenders of the Earth, you are all trying to take and
strangle the pipeline. What the members of this Committee don't
realize, if the pipeline shuts down, it has to be pulled up.
That is what they are trying to do. They are trying to starve
the pipeline, and there is no doubt about that in my mind.
This is to be drilled. I hope this Committee will take and
pass out ANWR; if you don't want to drill in PET-4, we will
drill in ANWR. This isn't the last pristine area in Alaska; we
have those priorities set aside, and now to say this is the
habitat--and, by the way, I was up there last week. There were
many, many, many geese right around the wells. Landing. Laying
their eggs. The goslings were going to be out in about six
weeks or less. So don't tell me it affects the birds; in fact,
the birds are in better shape than they were before. They are
not, in fact, being endangered and threatened. Those that don't
believe me, go down to the golf courses around here.
Voice. Mr. Young----
Mr. Young. I didn't ask you a question.
Voice. Could I----
Mr. Young. I did not ask you a question. OK. Second, this
area, you know, we have this idea of the bridge being set aside
by the EPA, primarily. The EPA is what is the real snot on the
handkerchief. This is really what it is.
Because they stopped the building of that bridge, and it is
on Native land, Mr. Chairman. This is not Federal land. And if
I get my way, I will make sure the EPA can't do anything to
Native lands. We gave those lands to the Natives for their
economic and social well-being. They have drilled wells on
their land. And yet they can't build a bridge across Colville
to expand their finds and their drilling. The cost of the
state, too.
Mr. Sharp, you have a training school. How many people are
you training for pipeline work?
Mr. Sharp. Congressman, we are training as many as the
market allows us to put to work. Right now, that is not as many
as we would like to see. We have 100 active apprentices in
Local 942, probably the same in Local 341 in Anchorage. But it
is very sporadic in terms of the ability to get them into the
oilfield under the pipeline.
Mr. Young. Is most of that work being done on maintenance?
Or is it, are you training them to build pipelines, too?
Mr. Sharp. We are training both, Congressman.
Mr. Young. Both of them. This has been one of the knocks on
the industry, because there has been an awful lot of outside
oil workers coming from, all due respect, Louisiana and other
areas to Alaska, and then return.
How many jobs do you think the pipeline, and if we get PET-
4 open, would be created?
Mr. Sharp. Congressman, I would not want to take a guess,
except to say that right now just the legacy jobs alone in
Prudhoe, the regular maintenance jobs are between 9 and 12,000.
When I worked on the Trans-Alaska Pipeline, my local union
alone had 11,000 people, and that is from one of the four
pipeline unions that are involved--not to mention all the
building trades unions or the spinoff work. And the other work
then would have to still be done, the regular construction
projects. Congressman, it would be huge. I would like to, I
would like to stay away from that question, because I know
whatever answer I give it will be wrong. But it will be
thousands and thousands and thousands of jobs.
Mr. Young. I thank you. And I am running out of time, Mr.
Chairman. Thank you.
Mr. Lamborn. All right, thank you. And I hope we have kept
everything in the correct order, those who were here at the
opening gavel, in the order of seniority, and then everyone in
order as they arrived afterwards. So Mr. Duncan.
Mr. Duncan of SC. Thank you, Mr. Chairman. And I want to
thank you for holding this hearing; it has been very
informative. I appreciate the Chairman of the Committee issuing
this piece of legislation.
I just wanted to say that the testimony today just proved
what we already have heard over and over in this Committee, and
that is that Alaskans want this. That Alaskans want more oil
and natural gas leasing and sales in their state.
In fact, when I sat down with the former Speaker of the
House from Alaska, she told me that a vote in the Alaska House
of Representatives was 51 to one in favor of allowing leasing
permits and drilling within the State of Alaska. I think
Senator Murkowski confirmed that this morning. I have never
heard it been used, the snot on the handkerchief, Mr. Young,
but I like that. I am going to borrow that from you at some
point in time.
But not only does Alaska want this, and Alaskans want this,
but America needs this. We know this is the, the National
Petroleum Reserve. I think the question isn't there whether the
area has oil and natural gas.
And it is a time for this Administration to quit talking
about meeting America's energy security needs, and actually
start doing something about it.
And we are learning this morning about this area. But it
strikes me as odd that no one from the other side of the aisle
is taking the opportunity to listen to you guys, and understand
what is going on in Alaska, and understanding that we do have
the reserves there. We can tap those, we can access those with
bridges and pipelines that are necessary.
And so again, I will say that it is time for the
Administration to quit talking, and to start walking the walk,
lessening our dependence on Middle Eastern sources of energy
controlled by a cartel, and start tapping American resources to
meet our energy needs.
I don't have a question for you guys, because I have
listened to the testimony today, and you are answering all the
questions that I had. So I want to thank you for being here,
and I want to commend you for pursuing this very vital time in
American history for tapping American resources. So Mr.
Chairman, I will yield back my time, because I know there are
others that want questions.
Mr. Lamborn. All right, thank you. And we are trying to
finish before votes being called very, very soon. Mr. Landry.
Mr. Landry. Thank you, Mr. Chairman. I just want to thank
Mr. Duncan, as well as you all, for expressing that. That is
exactly, what he said is exactly the same point that I will
have. And I won't try to repeat it, and I will try to be brief.
But I think what others on the other side of the aisle
don't understand is that we don't know what is under the ground
there until we have an opportunity to do proper 3-D
seismograph, then do exploration wells.
I mean, look, they thought we were running out of natural
gas. Well, it has gone, I mean, we have so much natural gas
now, we are starting to export it. You know?
I wanted to tell you something, Mr. Sharp. I am with you. I
want you and your people to go to work, and the only way we can
go to work, the only way that we can feed this economy is
through affordable energy.
The reason they are not over here is because they are
embarrassed; because they know that you-all guys are right.
And Mr. Myers, I respect the Audubon Society, but you all
are wrong. OK. I hunt on property next to the Audubon Society's
pieces of property. That oil and gas production doesn't affect
those birds one lick.
In fact, I am getting ready to have to leave here and go to
a meeting with the head of an oil and gas company, who showed
me pictures of his oil and gas rig that President Obama is
going to require him to remove off the floor of the Gulf of
Mexico, where he is going to be in violation of multiple laws
for destroying some of the most exotic endangered coral in the
world. OK?
Not only that, it is one of my favorite fishing spots. That
is the kinds of things that you all have to realize you all are
doing. Oil and gas exploration and conservation, and the
protection of animals, go hand in hand.
Last weekend in the Gulf of Mexico I fished a tournament
where they broke a record for the number of blue marlin caught,
and they shattered the big-eye tuna Mississippi State record,
and you all are going to tell me that the BP oil spill has
destroyed the Gulf of Mexico. Please, please, please understand
that we cannot move this economy and this country unless we
provide Americans with affordable energy, and it starts with
drilling out there in Alaska. Help these guys help you and your
organization.
Thank you. Mr. Chairman, I yield back.
Mr. Lamborn. All right, thank you. Mr. Flores.
Mr. Flores. Thank you, Mr. Chairman. I was struck by the
testimony of Mr. Balash. I wasn't here to hear it, but I did
read it, and it is deja vu all over again. In 1973, what were
we faced with? As you said, it was high oil prices. We were
faced with a moribund economy.
But we did something different back then. We approved the
Trans-Alaska Pipeline. And here we are, in 2011, and we are
facing the same situation. High oil prices, high gasoline
prices, and a moribund economy. And we have people that would
rather get our oil from the Middle East, and rather get our oil
from Brazil, than grow the American economy with American oil,
and create American jobs for Mr. Sharp.
I don't get it. We are going in the wrong direction in this
country; but with this Act, we hopefully will turn this
silliness around.
I do have a question for you, Mr. Balash. And then Mr.
Sharp, I am going to try to get to you in just a second, if we
can be brief.
Mr. Balash, could you tell me a little bit--and if this is
a repeat question, I apologize for it, because I wasn't here
before. What could we do in addition to this bill to better
facilitate a more efficient and transparent permit processing
structure with the Corps? Is there anything we need to do
there?
Mr. Balash. Thank you, Mr. Congressman. I think that the
Corps is one of a handful of agencies involved in these
permitting decisions. The legislation specifically calls out
the Department of the Interior for action, but as we have come
to understand the regulatory process in Alaska, there is an
alphabet soup of agencies out there that we have to deal with.
With different----
Mr. Flores. Could I interrupt you? I mean, what would you
recommend we do for this Act in order to help you with that
alphabet soup? That is basically shutting down the entire U.S.
economy every day.
Mr. Balash. I would be happy to provide the Committee with
a written summary of the specific agencies involved in most of
these decisions. The Corps is a leading actor because of the
wetlands issues, and the Fish and Wildlife Service as well.
Those would be the two primary agencies to deal with.
Mr. Flores. If you would send that to us as quickly as
possible, I would appreciate it.
Mr. Sharp, I think you were passed over on a question a
minute ago that Mr. Holt asked, and I think you might have an
answer for this. Can you tell us how the pace of permitting is
impacting jobs and your constituents?
Mr. Sharp. Yes, sir. It is, it is impossible for oil
companies, it is a closed-for-business message. Because the oil
companies not only have to get over the initial permitting--the
lease, then the permitting. At the end of the day, Shell Oil
right now is held up on a project that they invested in years
ago. Millions of dollars a month are being spent, and they are
held up on the permits.
It generates downstream very quickly to nobody going to
work. We have a membership of about 13- to 1400 in Fairbanks; I
have 500 people working. Everybody needs their job. So it is, I
understand why the oil companies aren't going after the leases,
because of all the hurdles that they have to do to get it from
lease to market, in a reasonable time on their investment.
Mr. Flores. Thank you. Mr. Myers, I just want to let you
know I have been to the North Slope. I have driven the Haul
Road, and the allegations that are being made about these types
of activities by your organizations and your affiliates are
absolutely incorrect.
Mr. Chairman, thank you. I yield back.
Mr. Hastings. Could I respond to that?
Mr. Flores. I will yield to Mr. Hastings.
Mr. Hastings. I appreciate your yielding, and I am going to
make an announcement. The Department of the Interior just put
out a news release that is embargoed until 11:30; I am about
three minutes early on this. I hope the Department of the
Interior will forgive me for that.
But I just want to mention that they have announced that
they are going to expedite lease sales in the National
Petroleum Reserve Alaska. Now, I want to make two observations
in that regard.
Perhaps these hearings and exposing what is going on is
accelerating the Administration to move. In that case, I am
very pleased with that.
But second, what I think it probably does more than
anything else is it talks about the importance of moving this
piece of legislation. Because if you are going to accelerate
leases, you are going to have to have infrastructure if, in
fact, there are product there to move. So those two things I
just want to make, and I hope the Department forgives me for
being two or three minutes early on this.
So I thank the gentleman for yielding. I yield back.
Mr. Lamborn. All right, thank you all. That concludes the
questions for this panel of witnesses. Thank you all for being
here.
Like all witnesses, your written testimony will appear in
full in the hearing record. I would ask that if anyone has any
further questions to you, that they submit to you in writing,
that you would respond to those. And they will need to get
those questions to you by the end of business today? Is that
correct? Within 10 days.
So thank you for the thousands and thousands of miles you
have traveled to be here, and for your testimony.
We will now have our next panel come up. I would like to
invite forward the Hon. Mike Pool, Deputy Director of the
Bureau of Land Management within the U.S. Department of the
Interior.
Like all of our witnesses, your written testimony will
appear in full in the hearing record, so I ask that you keep
your oral comments to five minutes, as outlined in our
invitation letter and under Committee Rules.
Our microphones are not automatic, so you have to press the
button to be able to talk and be heard. And at four minutes a
yellow light will come on, and a red light will come on at five
minutes.
Thank you for being here, and we appreciate your testimony.
STATEMENT OF HON. MIKE POOL, DEPUTY DIRECTOR, BUREAU OF LAND
MANAGEMENT, U.S. DEPARTMENT OF THE INTERIOR
Mr. Pool. Thank you, Mr. Chairman. And thank you for the
opportunity to discuss H.R. 2150, the National Petroleum
Reserve Alaska Access Act. The bill directs the Department of
the Interior to continue a program of competitive oil and gas
leasing in the NPRA, and to update the NPRA Fossil Fuel
Resource Assessment.
With me today is Douglas Duncan. He is the Associate
Coordinator for the Energy Resources Program at U.S. Geological
Survey. Mr. Duncan is available to respond to any questions on
the resource assessment portion of the bill.
On May 14, 2011, as part of an effort to increase safe and
responsible domestic oil production, President Obama directed
the Secretary of the Interior to conduct annual oil and gas
lease sales in the NPRA, and Secretary Salazar has affirmed
this commitment.
The Department supports the goal of facilitating the
development of oil and gas resources in the NPRA in an
environmentally responsible manner.
In 1923, President Harding signed an Executive Order
establishing the Naval Petroleum Reserve on the North Slope of
Alaska. The U.S. Navy conducted the first modern oil
exploration program of the area from 1944 to 1953. The Naval
Petroleum Reserve's Production Act of 1976 transferred
responsibility to the Department of the Interior.
In 1980 Congress directed the Department to conduct an
expeditious program of competitive oil and gas leasing in the
Reserve. Since 1999, BLM has offered six lease sales in NPRA,
and over 1.6 million acres are currently under lease in the
area. BLM plans to conduct a lease sale in December of 2011,
and in 2012, and each year thereafter.
The BLM is required to balance the exploration and
development of oil and gas resources with other values,
including the protection of wildlife habitat and the
subsistence values of rural residents and Alaska natives.
We accomplish this on the nearly 23-million-acre NPRA
through a careful planning process, which includes public
input.
The U.S. Geological Survey has also studied the area. USGS
resources assessment report was updated in October 2010; and in
2011, the USGS released its assessment of the economic
recoverability of undiscovered conventional oil and gas
resources within the NPRA.
Facilitating responsible development in the NPRA poses
unique challenges. The potential environmental and public
health impacts of production, exploration, and development can
be more difficult to ascertain, given the often harsh
conditions of the area. As a result, planning and exploration
activities can take longer than other areas of the United
States.
The Administration remains firmly committed, however, to
facilitate development in the region.
The Department has concerns with the leasing and
authorization provisions of H.R. 2150. The bill's provisions
requiring leasing in areas of NPRA most likely to produce
commercial quantities of oil and gas may conflict with
decisions reached through the BLM's carefully conducted public
land planning process.
The Department has additional concerns, including the
requirement that the Secretary consult with the Department of
Transportation on all surface disturbance, rather than only
major roads and pipelines; the requirement that the Secretary
must ensure that other Federal permitting agencies comply with
the deadlines set forth in the bill; and the implication that
all requested permits must be issued--regardless of the
availability of alternatives or the actions of potential
impacts.
In addition, the Department is concerned that the timelines
required by the bill may not be compatible with the public
involvement comments and review requirements of other laws,
including the Environmental Policy Act. Also of concern is the
suggestion that the Department must preapprove rights-of-way on
millions of acres of lands that industry may never seek to
develop. If enacted, these requirements would likely divert BLM
resources, and result in delay of further development of NPRA
resources in an environmentally responsible manner.
Finally, the BLM's existing regulations already establish
timelines for appropriate authorizations and require prompt
notification of any delays.
The BLM's leasing program in the NPRA ensures that safe and
responsible exploration and development of domestic oil and
natural gas resources can be done in a manner that protects
wildlife and habitat, and honors the subsistence values of
rural residents and Alaska natives.
We welcome the opportunity to work with the Committee, the
oil and gas industry, the Alaska Native community, and the
public to continue to develop NPRA in an environmentally
responsible manner.
Thank you for the opportunity to present the views of the
Department on H.R. 2150. I would be glad to answer any
questions.
[The prepared statement of Mr. Pool follows:]
Statement of Mike Pool, Deputy Director, Bureau of Land Management,
U.S. Department of the Interior
Thank you for the opportunity to discuss H.R. 2150, the National
Petroleum Reserve Alaska Access Act. The bill directs the Department of
the Interior to continue a program of competitive oil and gas leasing
in the National Petroleum Reserve in Alaska (NPR-A). The Department
supports the goal of facilitating the development of oil and gas
resources in the NPR-A in an environmentally responsible manner. On May
14, 2011, as part of an effort to increase safe and responsible
domestic oil production, President Obama directed the Secretary of the
Interior to conduct annual oil and gas lease sales in the NPR-A, and
Secretary Salazar has affirmed this commitment.
Many of the activities called for in H.R. 2150 are within the scope
of existing Department authorities and consistent with our priorities
and activities already underway. Under these authorities, 191 tracts
are currently leased by the Bureau of Land Management (BLM) in the NPR-
A with a leased acreage of over 1.6 million acres. We would like to
work with the Committee to move toward our shared goal of improving the
efficiency of the oil and gas leasing and development process while
maintaining safety and environmental standards in the NPR-A.
Background
In 1923, President Harding signed an executive order establishing
the Naval Petroleum Reserve Number 4, on the North Slope of Alaska. The
Order reserved to the Navy all oil and gas resources within the
Reserve, and prohibited private production from all areas not then
covered by a valid entry, lease or application. The U.S. Navy conducted
the first modern oil exploration program of the area from 1944 to 1953.
The Naval Petroleum Reserves Production Act of 1976 renamed the area
the National Petroleum Reserve in Alaska, and transferred authority and
administrative responsibility to the Department of the Interior. The
Act directed the Department to commence further exploration of the
Reserve, but prohibited petroleum production, and all developments
leading to production of petroleum, from the Reserve. In 1980, an
appropriations enactment superseded the prohibition on the production,
and directed the Department to conduct an expeditious program of
competitive oil and gas leasing in the Reserve. Under subsequent
amendments to the Naval Petroleum Reserves Production Act of 1976, and
implementing regulations, the BLM is required to balance the
exploration and development of oil and gas resources with, among other
values, the protection of wildlife, habitat, and the subsistence values
of rural residents and Alaska Natives.
The BLM manages nearly 23 million acres in the NPR-A. In 2004, the
BLM completed planning for 8.8 million acres in the Northwest NPR-A
Integrated Activity Plan/Environmental Impact Statement (IAP/EIS). The
BLM completed the 4.6 million acre Northeast NPR-A Supplemental IAP/EIS
in 2008 with the assistance of the North Slope Borough as a cooperating
agency. In 2010, the BLM moved to establish consistent management
direction for the entire NPR-A, including the unplanned southern
portion of the Reserve, through an Integrated Activity Plan/
Environmental Impact Statement. A Draft IAP/EIS is planned for May of
2012.
Through a careful planning process which includes public input, the
BLM has in place an active leasing program in the NPR-A, under which
lease sales have been offered in 1999, 2002, 2004, 2006, 2008, and
2010. Over 1.6 million acres are currently under lease in the NPR-A. In
December, 2011, the BLM plans to conduct a lease sale of tracts. The
BLM also plans to hold a lease sale in 2012 and each year thereafter.
The U.S. Geological Survey (USGS) also has studied the area. A USGS
report from October 2010 entitled ``Petroleum Resource Assessment of
the National Petroleum Reserve in Alaska,'' found an estimated 896
million barrels of conventional, technically recoverable oil and 53
trillion cubic feet of conventional, undiscovered gas within NPR-A and
adjacent state waters. In 2011, the USGS released its assessment of the
economic recoverability of undiscovered, conventional oil and gas
resources within the NPR-A and adjacent state waters. This new analysis
estimates that approximately 350 to 500 million barrels of undiscovered
oil are economically recoverable at $90 per barrel. Additional studies
are ongoing.
It should be noted that facilitating responsible development in
Alaska, including in the NPR-A, poses unique challenges. The potential
environmental and public health impacts of production, and exploration
and development can be more difficult to ascertain given the often-
harsh conditions of the area. As a result, planning and exploration
activities can take longer than in other areas of the U.S. The
Administration remains firmly committed, however, to facilitating
environmentally responsible development in this region.
H.R. 2150/Leasing & Authorizations
H.R. 2150 directs the Department (BLM) to continue a program of
competitive oil and gas leasing in the NPR-A, and to facilitate
permitting of drilling and surface development activities in an
environmentally responsible manner. The bill specifically requires the
Department to conduct at least one lease sale annually from 2011
through 2021 in those areas of the reserve most likely to produce
commercial quantities of oil and natural gas (Sec. 3). As noted above,
the Administration supports annual lease sales in the NPR-A and has
committed to holding them, while respecting environmentally sensitive
areas. Efforts to begin this annual lease sale are already underway
with existing authorities.
The bill requires the Secretary of the Interior to consult with the
Department of Transportation (DOT) for all surface development
activities; to ensure that other federal agencies meet specific
timelines for issuing appropriate authorizations; and to submit a plan
for approval of potential rights-of-way on an area covering nearly 23
million acres (Sec. 4). Also, the bill requires the Secretary to
promulgate regulations which establish deadlines and sets forth
specific actions the Department must take if deadlines are not met
(Sec. 5).
The Department has concerns with the leasing and authorization
provisions in H.R. 2150. For example, the bill's provisions requiring
leasing in areas of NPR-A most likely to produce commercial quantities
of oil and natural gas may conflict with decisions reached through the
BLM's careful public land-use planning process. These decisions balance
protection of wildlife, habitat, and subsistence values with oil and
gas exploration and development.
The Department has additional concerns with the bill, including:
the requirement that the Secretary consult with the
DOT on all surface disturbance, rather than only on major roads
and pipelines [Sec. 4(a)];
the requirement that the Secretary must ensure that
other federal permitting agencies comply with the deadlines set
forth in the bill [Sec. 4(b)];
the implication that all requested permits must be
issued, regardless of a proposed action's potential impacts or
the availability of alternatives [Sec. 4(b)];
the timelines required by the bill that may not be
compatible with the public involvement, comment, and review
requirements of other laws, including the National
Environmental Policy Act [Sec. 4(b)].;
the suggestion that the Department must pre-approve
rights-of-way on millions of acres of lands that industry may
never seek to develop [Sec. 4(c)].
If enacted, these requirements would likely divert BLM resources
and result in delay of further development of NPR-A resources in an
environmentally responsible manner. Further, the BLM's existing
regulations already establish deadlines for appropriate authorizations
and require prompt notification of any delays.
H.R. 2150/Resource Assessment
The bill requires the Department (U.S. Geological Survey) to
complete an updated comprehensive assessment of technically recoverable
conventional and unconventional fossil fuel resources in the NPR-A
(Sec. 6). As noted, the USGS recently completed an updated assessment
of the conventional oil and gas resources of NPR-A. The Department has
concerns with this requirement. Because the USGS used all available
information in its 2010 assessment and no new data or information has
become available since that time, the USGS believes there is no need to
reassess these resources now.
The USGS has started evaluating the unconventional petroleum
resources in NPR-A, with the plan to assess these resources in the
future. A coalbed methane assessment for the North Slope including NPR-
A was completed in 2006; the mean estimate of undiscovered, technically
recoverable resources indicated a potential for about 18 trillion cubic
feet (TCF) of coalbed gas. The results for other unconventional
resources on the North Slope, including shale gas and tight gas, are
expected to be available in 2-3 years.
It is not clear from the language in the bill whether a coal
assessment would be required. The North Slope of Alaska contains coal
resources [which are the source of the coalbed methane], but the cost
of mining and transporting the coal would be substantial. Earlier this
year, the USGS, in cooperation with the Department of Energy, National
Energy Technology Laboratory, published a database compilation of
published and nonconfidential unpublished coal data from the Cook Inlet
and North Slope areas of Alaska. Despite the database, there are
relatively few data with which to conduct a robust coal assessment.
Conclusion
The BLM's leasing program in the NPR-A ensures that safe and
responsible exploration and development of domestic oil and natural gas
resources can be done in a manner that also protects wildlife and
habitat, and honors the subsistence values of rural residents and
Alaska Natives. We welcome the opportunity to work with the Committee,
the oil and gas industry, the Alaska Native community, and the public
to continue to develop the NPR-A in an environmentally responsible
manner. Thank you for the opportunity to present the views of the
Department on H.R. 2150. I will be glad to answer any questions.
______
Mr. Lamborn. All right, thank you. They have just called
votes. It is down to 13 minutes of the first 15-minute vote.
Thank you very much for being here. I will ask that in our
round of questions, everyone try to keep it to two minutes, and
that way we can be out of here with about eight or so minutes
to go.
So I will ask just one question, and then the Ranking
Member will have a question or two.
Director Pool, in 2010 this Administration issued the
fewest leases for oil and gas development since 1984, in
issuing only 1308 leases last year. This is the second year of
the Obama Administration, and only one-quarter of the number of
leases in 1994, which was the second year of the Clinton
Administration, which was at the time 4,159 leases, and about
half the number of the second year of the Bush Administration
in 2002, where they issued 2,384 leases.
Now, as you know, oil and gas development takes time. It is
like a pig in a python. The increases that we have seen in
domestic production today are the result of much of the leasing
that took place at the end of the Clinton Administration and
the beginning of the Bush Administration five to 10 years ago.
Can we expect that the slowdown in leases that we have seen
last year and previously by this Administration, to result in
declining production in the future?
Mr. Pool. Thank you, Mr. Chairman. I can respond to what we
have been doing with the NPRA, and this is since 1999. And that
was since 1999, we were offering the lease sales every two
years. And since that time, we have offered 250 tracts of about
two and a half million acres, all of which have been
relinquished by industry.
In 2010 we offered 190 tracts for leasing in the NPRA, and
we only received five lease offers by industry, which is about
30,000 acres. So systematically over time, we have been
responsive to conduct and make available and facilitate oil and
gas leasing in the NPRA.
We have no pending backlog of applications for permit to
drill. We have no pending backlog of rights-of-way to
facilitate pipelines and roads. We have issued four APDs, and
they have not been pursued by industry as of yet. So there is
no delay in permitting or processing as it relates to the
Bureau of Land Management responsibilities in the NPRA.
Mr. Lamborn. Representative Holt.
Mr. Holt. Thank you. Just to move along briefly, I thank
you for coming. I would like to ask for some short answers,
then, if you could.
The assessment by the USGS was completed less than a year
ago, is that correct?
Mr. Pool. That is correct.
Mr. Holt. Do you see any reason why that would be a,
methodologically, a poor assessment? Or any reason why it would
be out of date?
Mr. Pool. I think I will allow my colleague to answer that
question.
Mr. Holt. Identify yourself, please.
Mr. Duncan (USGS). I am Douglas Duncan; I am the Associate
Coordinator of the Energy Resources Program for the U.S.
Geological Survey.
Mr. Holt. And I would like to give you a lot of time to
reply, but unfortunately there isn't a lot.
Mr. Duncan (USGS). I will be very brief. Our assessment is
very current. And without additional information from
additional drilling or seismic profiling, including 3-D
seismic, there would be no reason for us to reassess or update
that assessment.
Mr. Holt. And this assessment was based on wells that had
been drilled.
Mr. Duncan (USGS). That is correct.
Mr. Holt. Which presumably were not the least promising. I
mean, the witness earlier said well, the assessment was done on
the basis of the least promising wells. I presume the wells
that had been drilled were what the knowledgeable people
thought were the most promising.
Mr. Duncan (USGS). That is correct.
Mr. Holt. OK, thank you. And Mr. Pool, the bill would
require that all leaseable tracts be within 25 miles of an
improved road or pipeline. Do you agree with that? Would you
like to see that done? Does the BLM agree with that
requirement?
Mr. Pool. Congressman, I think that from our perspective,
that it depends on which leases have been issued and industry's
pursuit to develop those particular leases, their proximity to
existing roads, and the need for new roads or pipelines,
through BLM's authorization process.
Mr. Holt. OK. Could the required consultation with the
Department of Transportation improve matters? Would that speed
things up, or slow things down?
Mr. Pool. In my view, it is unnecessary. I think we clearly
have, with our own regulations, we are very accustomed to
processing permits, the application for permit to drill,
including those right-of-way authorizations for pipelines and
roads. We already have the infrastructure in place to do that.
Mr. Holt. And the announcement today from Interior suggests
that things are moving along at the rate that the requests for
permits would warrant. Is that a correct interpretation?
Mr. Pool. Yes. What we are planning, and we hoped to
announce this early next week, it will go through the
Federation Notice, is an open solicitation for expressions of
interest. And this affords the industry to express the BLM for
certain parcels or tracts that we would like to see offered for
the lease sale come December.
And just to complement that, it doesn't preclude the Bureau
of Land Management, which oftentimes we do, we will look at our
planning system. And by Bureau motion, we will also offer these
various tracts up for lease sale.
Mr. Holt. So putting aside some of the provisions of the
bill that might actually be damaging, such as waiving
environmental reviews and so forth, is there a need for this
legislation?
Mr. Pool. I think we have everything in place. And we have
demonstrated that over time. This Administration is clearly
committed to facilitating oil and gas development. I think that
we currently have all the regulations and authorities we need
to continue to advance oil and gas development in NPRA.
Mr. Holt. OK. I wish there was more time for discussion. I
thank the Chairman, I thank the witnesses, and I yield back.
Mr. Lamborn. Thank you. I am going to take the final two
minutes of my time.
Mr. Pool, if everything is in place, why is no oil being
produced in the NPRA?
Mr. Pool. Mr. Chairman, we have been, I think, very
proactive for a number of years in terms of lease
administration. I pointed out earlier the statistics associated
with the number of relinquishments. We have only issued four
applications for permits to drill.
We have currently no wells in production. The fact is that
we have, on a biannual basis--and now we are going to move to
an annual basis--making parcels available for lease. We are
fully prepared, if they want to pursue those leases, develop
those leases, to provide the needed ancillary authorizations
for both rights-of-way to accommodate pipelines and roads.
To the extent that market conditions, oil and gas prices,
other outside influences impact or----
Mr. Lamborn. Or other agencies. EPA, Corps of Engineers.
Mr. Pool. Well, I will let them speak for themselves. But I
can just let you know within the NPRA, that is our
jurisdiction, and we have been very responsive--not only on
lease sales, but we are fully prepared to process whatever
permits may come our way.
Mr. Lamborn. But there is no production today.
Mr. Pool. Not today.
Mr. Lamborn. Thank you. That will conclude this hearing.
Thank you for your testimony. I would ask you to respond to any
questions that are submitted to you in writing by members of
the Committee within the next 10 days.
Thank you for being here. And if there is no further
business, this Subcommittee is adjourned.
[Whereupon, at 11:43 a.m., the Subcommittee was adjourned.]