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




 
                       IMPACTS TO ONSHORE JOBS,
                         REVENUE, AND ENERGY:
                     REVIEW AND STATUS OF SEC. 390
                       CATEGORICAL EXCLUSIONS OF
                     THE ENERGY POLICY ACT OF 2005

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

                           OVERSIGHT HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                       Friday, September 9, 2011

                               __________

                           Serial No. 112-58

                               __________

       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 Friday, September 9, 2011........................     1

Statement of Members:
    Lamborn, Hon. Doug, a Representative in Congress from the 
      State of Colorado..........................................     1
        Prepared statement of....................................     2
    Holt, Hon. Rush D., a Representative in Congress from the 
      State of New Jersey........................................     7
        Prepared statement of....................................     8

Statement of Witnesses:
    Bolles, Randy, Manager, Regulatory Affairs Western Division, 
      Devon Energy Corporation...................................     9
        Prepared statement of....................................    11
        Response to questions submitted for the record...........    12
    Coleman, W. Jackson, Managing Partner and General Counsel, 
      EnergyNorthAmerica, LLC....................................    20
        Prepared statement of....................................    22
        Response to questions submitted for the record...........    24
    Gaffigan, Mark, Managing Director, Natural Resources and 
      Environment, U.S. Government Accountability Office.........    26
        Prepared statement of....................................    27
        GAO Highlights...........................................    34
        Response to questions submitted for the record...........    35
    Pool, Mike, Deputy Director, Bureau of Land Management, U.S. 
      Department of the Interior.................................     4
        Prepared statement of....................................     5
        Response to questions submitted for the record...........    51
    Sgamma, Kathleen M., Director of Government & Public Affairs, 
      Western Energy Alliance....................................    15
        Prepared statement of....................................    16
        Response to questions submitted for the record...........    18

                                     



 OVERSIGHT HEARING ON ``IMPACTS TO ONSHORE JOBS, REVENUE, AND ENERGY: 
  REVIEW AND STATUS OF SEC. 390 CATEGORICAL EXCLUSIONS OF THE ENERGY 
                         POLICY ACT OF 2005.''

                              ----------                              


                       Friday, September 9, 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 10:00 a.m., in 
Room 1324, Longworth House Office Building, Hon. Doug Lamborn 
[Chairman of the Subcommittee] presiding.
    Present: Representatives Lamborn, Duncan, Johnson, Flores, 
Costa, and Holt.

 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, and I note that the Ranking Member, 
Representative Holt of New Jersey, is detained because he is 
presenting an amendment on the Floor. He will be here as soon 
as he is able, and when he comes, he will be given discretion 
to give his opening statement whenever it fits his schedule the 
best.
    The Subcommittee on Energy and Mineral Resources is meeting 
today to hear testimony on an oversight hearing on the 
``Impacts to Onshore Jobs, Revenue, and Energy: The Review and 
Status of Section 390 Categorical Exclusions of the Energy 
Policy Act of 2005.''
    Under Committee Rule 4(f), opening statements are limited 
to the Chairman and Ranking Member of the Subcommittee. 
However, I ask unanimous consent to include any other Members' 
opening statements in the hearing record if submitted to the 
clerk by close of business today. Hearing no objection, so 
ordered.
    And I now recognize myself for 5 minutes. Today the 
Subcommittee is meeting to examine the use of categorical 
exclusions for onshore oil and natural gas development. In 2005 
the Energy Policy Act of 2005 was signed into law. In order to 
expedite the development of domestic energy production and the 
creation of American jobs, Section 390 of the Energy Policy Act 
directed the Bureau of Land Management to use categorical 
exclusions to expedite energy supplies by limiting redundant 
environmental analysis and red tape. Categorical exclusions are 
only used on land where the environmental impact is minor, the 
fields have already been developed, or where drilling was 
already analyzed under the National Environmental Policy Act. 
In order to lessen our dependence on foreign oil, create jobs 
for Americans, and secure our energy future, Congress should 
take steps to streamline the process and enable energy projects 
to move forward without being subject to unnecessary 
bureaucratic delays as well as costly litigation and a 
burdensome permitting process.
    Categorical exclusions are just one tool Congress has given 
the Bureau of Land Management in order to accomplish this goal. 
Western States, such as Wyoming, Utah, and New Mexico, have 
greatly benefited from the use of categorical exclusions. A 
2009 GAO report showed that Section 390 categorical exclusions 
were used to approve approximately 6,100 of 22,000 applications 
for drilling permits. In Wyoming alone, 87 percent of new gas 
wells drilled in the Upper Green River Basin from 2007 to 2010 
qualified for expedited development under categorical 
exclusions. Each of these wells brought increased domestic 
energy production and American jobs to the region.
    Categorical exclusions have been successful in expediting 
American energy production and are an essential part of 
streamlining an already overly burdensome bureaucratic energy 
permitting process. The Obama Administration took full 
advantage of categorical exclusions after passing the $787 
billion American Recovery and Reinvestment Act when the 
Administration used more than 179,000 categorical exclusions 
for projects funded by stimulus money. Oddly enough, while 
categorical exclusions were good enough to use to quickly make 
the Administration's taxpayer-funded stimulus projects shovel 
ready, the Obama Administration apparently does not find them 
acceptable for American oil and natural gas energy projects.
    In 2010, conceding to pressure from environmental groups, 
the Obama Administration adopted new rules to essentially halt 
the use of Section 390 categorical exclusions for energy 
projects, and they reinstated the burdensome and duplicative 
review process that has plagued the energy industry with 
delays, lengthy review processes, and onerous lawsuits. 
Fortunately, these rules were overturned by a U.S. district 
judge that rejected the Obama Administration's arguments and 
reinstated the categorical exclusion provisions.
    Today's hearing will focus on the use of categorical 
exclusions and their impacts on onshore jobs, revenue, and 
American energy production. I want to thank the witnesses for 
taking the time to appear before our Committee today, and I 
look forward to your testimony.
    [The prepared statement of Mr. Lamborn follows:]

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

    Today the Subcommittee is meeting to examine the use of categorical 
exclusions for onshore oil and natural gas development.
    In 2005, the Energy Policy Act of 2005, or EPAct, was signed into 
law. In order to expedite the development of domestic energy production 
and the creation of American jobs, section 390 of EPAct directed the 
Bureau of Land Management to use categorical exclusions to expedite 
energy supplies by limiting redundant environmental analysis and red 
tape. Categorical exclusions are only used on land where the 
environmental impact is minor, the fields have already been developed 
or where drilling was already analyzed under the National Environmental 
Policy Act.
    In order to lessen our dependence on foreign oil, create jobs for 
Americans, and secure our energy future, Congress should take steps to 
streamline the process and enable energy projects to move forward 
without being subject to bureaucratic delays, costly litigation, and a 
burdensome permitting process. Categorical exclusions are just one tool 
Congress has given the Bureau of Land Management in order to accomplish 
this goal.
    Western states such as Wyoming, Utah, and New Mexico have greatly 
benefitted from the use of categorical exclusions. A 2009 GAO report 
showed that Section 390 categorical exclusions were used to approve 
approximately 6,100 of 22,000 applications for drilling permits. In 
Wyoming alone, 87% of new gas wells drilled in the Upper Green River 
Basin from 2007 to 2010 qualified for expedited development under 
categorical exclusions. Each of these wells brought increased domestic 
energy production and American jobs to the region. Categorical 
exclusions have been successful in expediting American energy 
production and are an essential part of streamlining an already overly 
burdensome, bureaucratic, energy permitting process.
    The Obama Administration took full advantage of categorical 
exclusions after passing the $787 billion American Recovery and 
Reinvestment Act, when the Administration used more than 179,000 
categorical exclusions for projects funded by stimulus money.
    While categorical exclusions were good enough to use to quickly 
make the Administration's taxpayer funded stimulus projects ``shovel 
ready,'' the Obama Administration apparently did not find them 
acceptable for American oil and natural gas energy projects. In 2010, 
conceding to pressure from environmental groups, the Obama 
Administration adopted new rules to essentially halt the use of section 
390 categorical exclusions for energy projects and reinstated the 
burdensome and duplicative review process that has plagued the energy 
industry with delays, lengthy review processes, and onerous lawsuits.
    Fortunately, these rules were overturned by a US District judge 
that rejected that Obama Administration's arguments and reinstated the 
categorical exclusion provisions.
    Today's hearing will focus on the use of categorical exclusions and 
their impacts on onshore jobs, revenue, and American energy production. 
I want to thank the witnesses for taking the time to appear before our 
committee today and look forward to your testimony.
                                 ______
                                 
    Mr. Lamborn. We will now hear from our witnesses, and for 
the sake of consolidating the time because we are going to 
unfortunately have a series of votes from about 10:30 or 10:40, 
as late as possibly to noon, so I want to ask that we have all 
the witnesses come forward. There are a total of four. They 
will include Mr. Mike Pool, Deputy Director of the Bureau of 
Land Management; Mr. Randy Bolles, Manager, Regulatory Affairs 
of Devon Energy; Miss Kathleen Sgamma, Director of Governmental 
Affairs, Western Energy Alliance; Mr. W. Jackson Coleman, 
Managing Partner and General Counsel of EnergyNorthAmerica LLC; 
and Mr. Mark Gaffigan, Managing Director, Natural Resources and 
Environment Division of the U.S. Government Accountability 
Office. Excuse me, I guess that is five total.
    Like all our witnesses, your written testimony will appear 
in full in the hearing record, so I ask that you keep your oral 
statement to 5 minutes, as outlined in our invitation letter to 
you, and under Committee Rule 4(a).
    Our microphones are not automatic, so you have to press the 
button to turn them on. I will explain how the timing lights 
work. When you begin talking, we will start the timer and a 
green light will appear. After 4 minutes, a yellow light comes 
on, and after 5 minutes a red light comes on. You may complete 
your sentence, but at that time I ask that you stop.
    Mr. Pool, you may begin. Thank you for being here.

           STATEMENT OF MIKE POOL, DEPUTY DIRECTOR, 
                   BUREAU OF LAND MANAGEMENT

    Mr. Pool. Mr. Chairman and members of the Subcommittee, 
thank you for the opportunity to discuss the Bureau of Land 
Management's use of categorical exclusions established by 
Section 390 of the Energy Policy Act of 2005. The Mineral 
Leasing Act of 1920 establishes the statutory framework to 
promote the exploration and development of oil and natural gas 
from the Federal onshore mineral estate. Secretary of the 
Interior Ken Salazar has emphasized that as we move forward 
toward the new energy frontier, the development of conventional 
energy resources from BLM-managed public lands will continue to 
play a critical role in meeting the Nation's energy needs.
    Facilitating the safe, responsible, and efficient 
development of these domestic oil and gas resources is the 
BLM's responsibility, and part of the Administration's broad 
energy strategy to protect consumers and help reduce our 
dependence on foreign oil.
    The BLM is responsible for protecting the resources and 
managing the uses of our Nation's public lands. In Fiscal Year 
2010, onshore oil production from public lands increased by 5 
million barrels from the previous fiscal year as more than 114 
million barrels of oil were produced from BLM managed mineral 
estate, the most since 1997. At the same time, the nearly 3 
trillion cubic feet of natural gas produced from public lands 
made 2010 the second most productive year in natural gas 
production on record. In 2010 conventional energy development 
from public lands produced 14.1 percent of the Nation's natural 
gas and 5.7 percent of its domestically produced oil.
    The Energy Policy Act of 2005 was enacted in part to 
promote and expedite oil and gas development. Section 390 of 
the Energy Policy Act establishes statutory authority for the 
use of categorical exclusions for five types of oil and gas 
development activities. The purpose of Section 390 CXs is to 
streamline approval of exploration and development of oil and 
gas on public lands and U.S. Forest Service managed lands by 
allowing designated actions to proceed without the need for 
further environmental analysis.
    In 2009, the Government Accountability Office issued a 
report entitled ``Energy Policy Act of 2005: Greater Clarity 
Needed to Address Concerns with Categorical Exclusions for Oil 
and Gas Development under Section 390 of the Act.'' The report 
found that use of Section 390 CXs by BLM field offices was 
inconsistent and recommended that the BLM issue detailed and 
explicit guidance to address the gaps and shortcomings in its 
Section 390 guidance. The report also recommended that Congress 
consider amending the Act to clarify Section 390 of the Energy 
Policy Act. According to the GAO, whether or not the Energy 
Policy Act required the BLM to conduct an extraordinary 
circumstances review for applications for permit to drill 
remains an open question.
    On October 21st, 2010, the Western Energy Alliance filed 
suit against BLM, challenging its guidance on the application 
of Section 390 CXs. Without deciding the merits of WEA's 
challenge to BLM's interpretation of Section 390 of the Energy 
Policy Act, the U.S. District Court for Wyoming did decide on 
August 12, 2011, that the BLM had failed to give the public 
notice and an opportunity to comment on the proposed changes 
before making the May 2010 guidance effective.
    The court's order directed BLM to stop using the May 2010 
guidance when considering an applicant's request to undertake 
activities described in Section 390. This guidance had directed 
BLM field offices to determine whether further environmental 
reviews were required. The BLM informs its field offices of the 
court's direction on August 19, 2011, effectively reverted back 
to the 2008 policy.
    In the near term, BLM plans to initiate a rulemaking effort 
to establish guidelines for using the Section 390 CXs as part 
of the BLM's oil and gas regulations. The regulatory process 
includes public notice and opportunity for comment.
    Consistent with the framework presented by the President's 
blueprint for a secure energy future, the BLM is working to 
secure our energy future by ensuring that potential oil and gas 
development on our public lands is realized.
    Mr. Chairman, thank you for the opportunity to testify on 
BLM's use of the Energy Policy Act of 2005, Section 390 CX 
authorities. I will be pleased to answer any questions you may 
have.
    [The prepared statement of Mr. Pool follows:]

  Statement of Mike Pool, Deputy Director, Bureau of Land Management, 
                    U.S. Department of the Interior

    Mr. Chairman and Members of the Subcommittee, thank you for the 
opportunity to discuss the Bureau of Land Management's (BLM) use of 
Categorical Exclusions (CX) established by Section 390 of the Energy 
Policy Act of 2005 (EPAct). These CXs establish a rebuttable 
presumption that certain oil or gas exploration and development 
activities conducted under the Mineral Leasing Act are categorically 
excluded from additional National Environmental Policy Act (NEPA) 
review.
Background
    The Mineral Leasing Act of 1920 establishes the statutory framework 
to promote the exploration and development of oil and natural gas from 
the Federal onshore mineral estate. Secretary of the Interior Ken 
Salazar has emphasized that as we move toward the new energy frontier, 
the development of conventional energy resources from BLM-managed 
public lands will continue to play a critical role in meeting the 
Nation's energy needs. Facilitating the safe, responsible, and 
efficient development of these domestic oil and gas resources is the 
BLM's responsibility and part of the Administration's broad energy 
strategy--outlined in the President's Blueprint for a Secure Energy 
Future--that will protect consumers and help reduce our dependence on 
foreign oil. Well-paying jobs are often associated with oil and gas 
exploration and development, and provide needed revenues and economic 
activity in many communities. Royalties from onshore public land oil 
and gas development exceeded $2.5 billion in Fiscal Year 2010. 
Approximately half of that total was paid directly to the states in 
which the development occurred.
    The BLM is responsible for protecting the resources and managing 
the uses of our nation's public lands, which are located primarily in 
12 western states, including Alaska. The BLM administers over 245 
million surface acres and approximately 700 million acres of onshore 
subsurface mineral estate throughout the Nation. In fiscal year 2010, 
onshore oil production from public lands increased by 5 million barrels 
from the previous fiscal year as more than 114 million barrels of oil 
were produced from the BLM-managed mineral estate--the most since 1997. 
At the same time, the nearly 3 trillion cubic feet of natural gas 
produced from public lands made 2010 the second-most productive year of 
natural gas production on record. In 2010, conventional energy 
development from public lands produced 14.1 percent of the Nation's 
natural gas and 5.7 percent of its domestically-produced oil.
    As of August 1, 2011, the BLM processed more applications for 
permit to drill (APD) than had been received during the year, thereby 
continuing to reduce the number of pending applications. Approximately 
7,000 APDs on BLM and Indian lands have been approved by BLM, but have 
not yet been drilled by industry. We are achieving these permitting 
milestones by continuing to work to process APDs in a timely fashion.
    Fundamental to all of the BLM's management actions--including 
authorization of oil and gas exploration and development--is the 
agency's land use planning and NEPA processes. These open, public 
processes are ones in which proposals for managing particular resources 
are made known to the public in advance of taking action. The BLM is 
committed to providing the environmental review and public involvement 
opportunities required by NEPA for proposals for the use of BLM-managed 
lands. As required under the Federal Land Policy and Management Act, 
the BLM strives to achieve a balance between oil and gas production and 
development of other natural resources and protection of the 
environment; the land-use planning and NEPA processes are vital tools 
used to achieve this statutory mandate.
Energy Policy Act
    The Energy Policy Act of 2005 was enacted in part to promote and 
expedite oil and natural gas development. Section 390 of the Energy 
Policy Act establishes statutory authority for the use of ``categorical 
exclusions'' (CXs) from further analysis under NEPA for five types of 
oil and gas development activities. The purpose of Section 390 CXs is 
to streamline approval of exploration and development of oil and gas on 
BLM public lands and U.S. Forest Service lands, by allowing designated 
actions to proceed without further environmental analysis.
    On September 30, 2005, the BLM issued formal guidance (IM 2005-247) 
directing field offices that the use of these Section 390 CXs was 
mandatory. This guidance was issued without providing public notice and 
an opportunity to comment. The guidance specified that unlike 
categorical exclusions administratively established under NEPA, the new 
Section 390 CXs were established by statute and not subject to the 
Council on Environmental Quality's (CEQ's) NEPA implementing 
regulations. Additionally, the guidance stated that no review for 
``extraordinary circumstances'' was required--i.e., circumstances when 
further review under NEPA would still be warranted despite the activity 
falling into a category that is otherwise excluded from such review.
    In 2008, the policy was modified to clarify that use of the Section 
390 CXs under the EPAct is discretionary, rather than mandatory. This 
policy was incorporated into the BLM's 2008 NEPA Handbook. However, the 
2008 NEPA Handbook retained a provision that eliminates the requirement 
to conduct an ``extraordinary circumstances'' review when applying CXs 
to these statutorily-identified oil and gas development activities.
    In 2009, the Government Accountability Office (GAO) issued a report 
entitled ``Energy Policy Act of 2005: Greater Clarity Needed to Address 
Concerns with Categorical Exclusions for Oil and Gas Development under 
Section 390 of the Act'' (GAO-09-872). The report found that the use of 
Section 390 CXs by BLM field offices was somewhat inconsistent and 
recommended that Congress consider clarifying Section 390 of EPAct. The 
GAO also recommended that the BLM issue detailed and explicit guidance 
to address the gaps and shortcomings in its Section 390 guidance. 
Commenting specifically on the use of extraordinary circumstances 
reviews, the GAO report noted that, although EPAct does not state 
whether Section 390 CXs are subject to extraordinary circumstances 
review, the lack of direction in EPAct has led to ``differing 
interpretations, debate, and litigation, and more generally, led to 
serious concerns that BLM is using section 390 categorical exclusions 
in too many--or too few--instances.''
Court Actions
    In 2008, the Nine Mile Canyon Coalition, together with the Southern 
Utah Wilderness Alliance and the Wilderness Society, challenged the 
BLM's decision to issue 30 permits to drill gas wells in Utah without 
requiring further environmental review, consistent with agency's 2005 
Section 390 CX guidance. The BLM settled this litigation, agreeing, in 
part, to issue guidance directing its field offices to consider whether 
a particular proposal covered by a Section 390 CX presented 
``extraordinary circumstances'' that would require further 
environmental analysis.
    Further, the BLM agreed that the agency would not use a Section 390 
CX in Utah until it issued the guidance directing field offices to 
consider whether a proposal covered by a Section 390 CX presented 
``extraordinary circumstances.'' The BLM included these terms, as well 
as more specific provisions, in its May 17, 2010 guidance to its field 
offices (IM 2010-118). In response, the Western Energy Alliance (WEA) 
sued to prevent the BLM from implementing its May 2010 guidance.
    Without deciding the merits of WEA's challenge to BLM's 
interpretation of Section 390 of the Energy Policy Act, the U.S. 
District Court for Wyoming did decide on August 12, 2011, that the BLM 
had failed to give the public notice and an opportunity to comment on 
the proposed changes before making the May 17, 2010, changes effective. 
The Court's order directed the BLM to stop using the May 2010 guidance 
when considering an applicant's request to undertake activities 
described in Section 390--guidance that directed BLM field offices to 
determine whether further environmental reviews were required. The BLM 
issued the Court's direction to its field offices on August 19, 2011.
Current Status
    In the near term, the BLM plans to initiate a rulemaking effort to 
establish guidelines for using the Section 390 CXs as part of the BLM's 
oil and gas regulations. The regulatory process includes public notice 
and opportunity for comment, and we anticipate a high level of interest 
and participation. We look forward to a continued dialogue with many 
interested parties.
Conclusion
    The BLM remains committed to encouraging the safe, responsible, and 
efficient development of energy resources on public lands. Mr. 
Chairman, thank you for the opportunity to testify on the BLM's use of 
the Energy Policy Act of 2005 Section 390 CX authorities. I will be 
pleased to answer any questions you may have.
                                 ______
                                 
    Mr. Lamborn. Thank you for your testimony. I would now like 
to recognize the Ranking Member for his opening statement.

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

    Mr. Holt. I thank the Chair for his courtesy, and by way of 
explanation I should point out that I had an amendment on the 
Floor of the House at exactly the time this Committee convened. 
It just happened that way. So I thank the witnesses for 
appearing today, and I just wanted to set the hearing in some 
context.
    The National Environmental Policy Act allows all interested 
Americans to have their voices heard on how their public lands 
are managed and allows for agencies like the Bureau of Land 
Management to make informed decisions about potential 
environmental impacts of their actions. When Congress takes 
steps to limit NEPA review, what often results is environmental 
harm, less public participation, and more litigation, which 
everyone should want to avoid.
    Section 390 of the Energy Policy Act of 2005 is an example 
of this kind of policy. The categorical exclusions established 
in Section 390 to expedite the approval of oil and gas drilling 
permits were unnecessary and unwise. They are unnecessary 
because the industry is producing oil and gas on really a small 
fraction, less than 30 percent, of the public lands that are 
under lease on shore. In 2010, for example, BLM approved 
approximately 4,100 new permits to drill, but the oil and gas 
industry only drilled 1,500 wells. There is no shortage of 
places where the oil and gas industry could be drilling or 
could start drilling right away.
    Section 390 was also unwise because oil and gas exploration 
has real environmental impacts. There is no question that the 
industry has made great strides in safety and environmental 
sensitivity. Under NEPA the BLM has the authority to establish 
categorical exclusions for activities that don't, quote, 
individually or cumulatively have a significant effect on the 
human environment.
    However, in Section 390 of the bill, of the Act, Congress 
established a set of legislative categorical exclusions for 
activities that have been documented by the Government 
Accountability Office to have environmental impacts, such as 
ozone levels that have reached or exceeded allowable levels, 
habitat fragmentation that have clearly harmed wildlife.
    The GAO has documented that BLM's implementation of Section 
390 was inconsistent from one office to another, often resulted 
in violations of NEPA. The previous Administration also 
actually prohibited the BLM from considering extraordinary 
circumstances, which they are supposed to consider when 
deciding whether a categorical exclusion applies.
    So as a result of the deficiencies found by the GAO and 
others, the current Administration in 2010 issued a new policy 
on Section 390 that vastly improved the BLM's implementation of 
that provision of the law. The 2010 policy required the BLM to 
make sure that no extraordinary circumstances are present like 
threats to public health--we would all hope they would consider 
such things--or threats to endangered species prior to granting 
a categorical exclusion under NEPA for a drilling permit.
    Now, where extraordinary circumstances exist, the BLM is 
required to conduct a more rigorous review, as we should want. 
As a result of the Obama Administration's policy and better 
planning from the start, protests of leases have declined. Only 
12.5 percent of tracts have been contested in 2011 as opposed 
to 47 percent in 2009 and 40 percent in 2010. So this is what I 
was saying before. If we do it right and by the book, we will 
have less litigation.
    However, earlier this year the Obama Administration's 
policy was struck down by a Federal Court for procedural 
reasons, and I am pleased that the BLM is announcing today that 
it will conduct a formal rulemaking process for using Section 
390 categorical exclusions.
    I am concerned that the BLM must now revert to using the 
previous policy which the GAO had concluded was inadequate in 
ensuring that BLM meets its obligations under NEPA. As a 
result, today Ranking Member Markey and I are sending a letter 
to the Department of Justice urging an appeal of this decision. 
An appeal and a stay of the court's ruling would remove any 
uncertainty while the BLM completes its rulemaking which will 
ensure that BLM can conduct oil and gas drilling in an 
environmentally responsible way.
    I thank the Chair. I hope that puts this hearing in some 
perspective.
    [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.
    The National Environmental Policy Act (NEPA) allows Americans from 
all across the Nation to have their voices heard on how their public 
lands are managed and allows for agencies like the Bureau of Land 
Management to make informed decisions about potential environmental 
impacts of their actions. When the Congress takes steps to limit NEPA 
review, what often results is unanticipated environmental harm, less 
public participation in land management decisions, and more litigation 
challenging agency decisions.
    Section 390 of the Energy Policy Act of 2005 is an example of this 
kind of bad policy. The categorical exclusions established in Section 
390 to expedite the approval of oil and gas drilling permits were 
unnecessary and unwise. They are unnecessary because industry is 
producing oil and gas on less than 30 percent of the public lands under 
lease onshore. For example, in 2010, the BLM approved approximately 
4,100 new permits to drill, but the oil and gas industry only drilled 
1,500 wells. There is no shortage of places where the oil and gas 
industry could start drilling right now.
    Section 390 was also unwise because oil and gas exploration has 
real environmental impacts. Under NEPA, the BLM has the authority to 
establish categorical exclusions for activities that do not 
``individually or cumulatively have a significant effect on the human 
environment.'' However, in section 390 of EPACT, Congress established a 
set of legislative categorical exclusions for activities that have been 
documented by the Government Accountability Office (GAO) to cause 
environmental impacts, such as ozone levels that have reached or 
exceeded allowable levels and habitat fragmentation that has harmed 
elk, antelope and other wildlife in the West.
    The GAO has documented that BLM's implementation of Section 390 was 
inconsistent from one office to another and resulted in violations of 
NEPA. The Bush Administration also actually prohibited the BLM from 
considering ``extraordinary circumstances'' when deciding whether a 
categorical exclusion applies.
    As a result of the deficiencies found by the GAO, the Obama 
administration in 2010 issued a new policy on Section 390 that vastly 
improved the BLM's implementation of that provision of the law. The 
2010 policy required the BLM to make sure that no extraordinary 
circumstances are present, like threats to public health or threats to 
endangered species, prior to granting a categorical exclusion under 
NEPA for a drilling permit. Where extraordinary circumstances exist, 
the BLM is required to conduct a more rigorous environmental review.
    As a result of the Obama Administration's policy, and better 
planning from the start, protests of leases have declined. Only 12.5 
percent of tracts have been contested in 2011 as compared with 47 
percent in 2009 and 40 percent in 2010.
    However, earlier this year Obama Administration's policy was struck 
down by a Federal Court for procedural reasons. I am pleased that the 
BLM is announcing today that it will conduct a formal rulemaking 
process for using the Section 390 categorical exclusions. However, I am 
concerned that the BLM must now revert to using the Bush 
administration's policy, which the GAO had concluded was grossly 
inadequate in ensuring that the BLM meets its obligations under NEPA, 
while that rulemaking is ongoing.
    As a result, today Ranking Member Markey and I are sending a letter 
to the Department of Justice urging an appeal of this decision. An 
appeal and stay of the court's ruling would remove any uncertainty 
while the BLM completes its rulemaking, which will ensure that the BLM 
can conduct oil and gas drilling in an environmentally responsible 
manner.
    I look forward to hearing from our witnesses.
                                 ______
                                 
    Mr. Lamborn. OK, thank you, Mr. Holt. We will now go to the 
next witness, Mr. Randy Bolles, Manager of Regulatory Affairs, 
Devon Energy.

              STATEMENT OF RANDY BOLLES, MANAGER, 
                REGULATORY AFFAIRS, DEVON ENERGY

    Mr. Bolles. Thank you, Mr. Chairman, Ranking Member Holt, 
members of the Subcommittee. My name is Randy Bolles, I am an 
employee of Devon Energy Corporation, headquartered in Oklahoma 
City, Oklahoma. I am pleased to be here today to share my 
perspective on how Section 390 categorical exclusions can help 
preserve the environment while also benefiting local, State, 
and Federal economies. More specifically, I will discuss how 
Devon has used categorical exclusions in the Washakie Basin in 
Wyoming and how Devon's drilling efforts there have been 
affected by the Bureau of Land Management's May 2010 guidance.
    As this Subcommittee knows, the 2005 Energy Policy Act 
provided five specific exclusions from review under the 
Environmental Policy Act. In 2010, BLM provided guidance that 
virtually eliminated categorical exclusions Devon used to drill 
over 260 wells in Wyoming. When categorical exclusions are 
utilized, each well is still subject to public notice and 
comment procedures and site specific reviews that are conducted 
by BLM resource staff. In addition, categorical exclusions 
encourage multi-pad well drilling which reduces surface 
disturbance, and as you can see, Mr. Chairman, categorical 
exclusions provide BLM with the ability to offer a practical 
environmental review while avoiding a lengthy and often 
duplicative NEPA effort that had previously been completed. 
Simply put, it is a common sense approach.
    Let me give you an example of our activity as it relates to 
categorical exclusions. In 2009, before BLM restricted 
categorical exclusions, the Rawlins field office authorized 75 
applications for permit to drill submitted by Devon based on 
Section 390 categorical exclusions. Devon was able to obtain 
timely BLM approval of those applications because of 
categorical exclusions. If they had not existed, the BLM would 
have been required to conduct a NEPA analysis on all 75 
applications, and those applications would have taken much more 
time and might have led Devon to consider dedicating its 
resources to more timely projects in other areas of the 
country.
    Even within Devon there is major competition to deploy 
capital, and we are going to deploy that capital in areas where 
we have the least likelihood or burdensome environment to work 
in. That result ends up in less Federal royalties and less 
taxes being paid to the local, State, and Federal economies.
    When considering not only the 75 wells that we drilled in 
2009 but the more than 260 wells that Devon drilled since EPAct 
was approved in 2005, the economic impact is significant. A 
report released by a consulting firm called SWCA extrapolated 
the 260 wells that we drilled translates into about 6,838 jobs, 
about $598 million in employment earnings, and over the life of 
the well about $35 million in annual government revenue. While 
these numbers are significant, so is the toll that is taken 
when drilling comes to a standstill.
    Following the BLM guidance that restricted Devon's ability 
to use congressionally approved categorical exclusions, Devon 
reassigned one of its two rigs drilling in the Washakie Basin 
to other areas where we are drilling on fee and State lands.
    This is just one of the BLM restrictions that make it 
difficult, extremely difficult for Devon to drill, produce, and 
maintain its wells. Burdensome wildlife stipulations and timing 
restrictions, when coupled with the prohibition on the use of 
categorical exclusions, make it almost impossible to develop 
the resources in an economic fashion.
    Devon believes in environmental stewardship, and believe me 
I live it every day, and it is a core value of our company, and 
has been recognized for its efforts to protect and preserve 
habitat and wildlife. However, BLM should give consideration to 
practical aspects of developing Federal resources.
    In conclusion, Mr. Chairman, Devon Energy Corporation works 
to do its part to preserve and protect the areas in which we 
operate, and we truly wish to see them grow. As I mentioned 
earlier, the jobs and revenue that occur with new well 
development can leave a significant hole in local economies if 
they are not considered in the regulatory process.
    Devon is dedicated to production on Federal lands and will 
continue to produce on Federal lands. However, the level of 
regulatory burden will determine not only our activity but also 
the economic benefit received by Federal, State, and local 
economies.
    Again, thank you very much for allowing me to testify 
today. It is truly an honor, and I stand for any questions.
    [The prepared statement of Mr. Bolles follows:]

    Statement of Randy Bolles, Manager, Regulatory Affairs--Western 
                   Division, Devon Energy Corporation

    Chairman Lamborn, Ranking Member Holt, and members of the 
Subcommittee, my name is Randy Bolles, and I am employed by Devon 
Energy Corporation. I am pleased to share my perspective on how Section 
390 categorical exclusions can help preserve the environment while 
benefiting local, state and federal economies. More specifically, I 
will discuss how Devon has used categorical exclusions in the Washakie 
Basin of Wyoming and how Devon's drilling efforts there have been 
affected by the Bureau of Land Management's May 2010 guidance.
    Devon Energy Corporation is an Oklahoma City-based independent 
energy company engaged in oil and natural gas exploration and 
production. Devon is a leading U.S.-based independent oil and gas 
producer and is included in the S&P 500 Index. I am responsible for 
regulatory affairs in Montana, Wyoming, Colorado, New Mexico, Utah and 
West Texas. My staff and I spend our time working with local, state and 
federal agencies to resolve issues related to regulation so that Devon 
may gain access to minerals on fee, state and federal lands. To the 
point of today's topic, I am part of the management team responsible 
for all aspects of the permitting process in the Washakie Basin.
    Mr. Chairman, Devon works hard to be a good neighbor and maintain a 
strong relationship with all landowners. Because about 26 percent of 
Devon's leased minerals in the Western Division are on federal lands, 
Devon's relationship with the federal government is particularly 
important to us. As a result, Devon strives to comply with or exceed 
all environmental regulations and seek all necessary approvals to 
drill. To Devon, it is not just about complying with regulations. It's 
about taking meaningful environmental steps and assuring the 
communities where we work that Devon wants to partner in their growth.
    As this Subcommittee knows, the 2005 Energy Policy Act (EPAct) 
provided five specific exclusions from review under the National 
Environmental Policy Act. In 2010, the BLM provided guidance that 
virtually eliminated categorical exclusions Devon had used over 260 
times prior to the regulatory action by BLM.
    When categorical exclusions are utilized, each well is still 
subject to public notice and comment procedures and site-specific 
reviews to ensure other resources are adequately protected. The 
exclusions allow Devon to drill multiple wells from an existing pad, or 
to drill directionally in a field previously approved for vertical 
wells. This practice reduces surface disturbance. The categorical 
exclusion provides BLM with the ability to offer a practical 
environmental review while avoiding a lengthy, often duplicative NEPA 
effort that was previously completed. Simply put, it is a common-sense 
approach.
    Let me provide an example of our activity and applications using 
categorical exclusions: In 2009--before BLM restricted categorical 
exclusions--the BLM field office in Rawlins, Wyoming, authorized 75 
applications for permits to drill submitted by Devon based on the 
section 390 categorical exclusions. Devon was able to obtain timely BLM 
approval of those applications because of the categorical exclusions.
    If the exclusions had not existed in 2009, and BLM was required to 
prepare NEPA analyses on those 75 applications, the applications would 
have taken much more time. As a result, it would have taken Devon more 
than an additional year to develop the leases. Many of the applications 
simply involved drilling additional wellbores from existing well pads. 
In these cases, the delay would have been unreasonable and might have 
led Devon to consider dedicating its resources to more timely projects 
in other areas of the country.
    When considering not only the 75 wells drilled in 2009, but the 
more than 260 wells Devon drilled since EPAct was approved in 2005, the 
economic impact is significant. A report released by SWCA Environmental 
Consultants this past March, when extrapolated to the more than 260 
wells Devon drilled under section 390, translated to 6,838 jobs, $598 
million in employment earnings and, over the life of the well, $35 
million in annual government revenue. A copy of this study is attached 
to my prefiled written testimony.
    While these numbers are significant, so is the toll that is taken 
when drilling comes to a standstill. Following the BLM guidance that 
restricted Devon's ability to use the Congressionally-approved 
categorical exclusions, Devon reassigned one of its two drilling rigs 
in the Washakie field to other areas where that rig could be used.
    This is just one of the BLM restrictions that make it extremely 
difficult for Devon to drill, produce and maintain its wells. 
Burdensome wildlife stipulations and timing restrictions, when coupled 
with a prohibition on the use of categorical exclusions, make it almost 
impossible to develop the resources in an economic fashion. Devon 
believes in environmental stewardship and has been recognized for its 
efforts to protect and preserve habitat and wildlife. However, BLM 
should give consideration to the practical aspects of developing 
federal resources.
    In conclusion, Mr. Chairman, Devon Energy Corporation works to do 
its part to preserve and protect the areas we operate. Moreover, Devon 
is an active part of the communities in which we operate, and we truly 
wish to see them grow. As I mentioned earlier, the jobs and revenue 
that occur with new well development can leave a significant hole in 
local economies if they are not considered in the regulatory process. 
Devon is dedicated to production on federal lands and will continue to 
produce on federal lands. However, the level of regulatory burden will 
determine not only our activity, but also the economic benefit received 
by federal, state and local governments.
    Thank you very much for your time.
    [NOTE: The study has been retained in the Committee's official 
files. It can be found at http://westernenergyalliance.org/wp-content/
uploads/2011/10/SWCA-Report-Wyoming-NEPA-delay-impacts.pdf]
                                 ______
                                 

Devon Energy Corporation
20 North Broadway
Oklahoma City, OK 73102-8260
Phone 405 228 8588
www.devonenergy.com

August 17, 2012

Honorable Doug Lamborn, Chairman
Subcommittee on Energy and Mineral Resources
Attn: Tim Charters, Staff Director
1324 Longworth House Office Building
Washington, DC 20515

Dear Chairman Lamborn:

Per your request, included are the supplemental answers to the 
testimony I offered on September 9, 2011 at the oversight hearing on 
``Impacts to Onshore Jobs, Revenue, and Energy: Review and Status of 
Sec. 390 Categorical Exclusions of the Energy Policy Act of 2005.''

Sincerely,

Randy Bolles
Regulatory Affairs Manager
Devon Energy Corporation

cc: Sophia Varnasidis via email: [email protected]
                                 ______
                                 

    Response to questions submitted for the record by Randy Bolles, 
          Regulatory Affairs Manager, Devon Energy Corporation

1.  Mr. Bolles, in your testimony you say that in 2009 75 applications 
        for permits to drill have been approved using categorical 
        exclusions. Can you explain the difference in the approval 
        timeline when categorical exclusions are used versus when you 
        have to go through the usual approval process? Can you discuss 
        the job creation and energy production that accompany the 
        expedited approval process?
    It is important to reiterate that oil and gas operators must submit 
the same type, quality and quantity of information to the BLM when 
preparing an Application for Permit to Drill (APD) package. The use of 
statutory categorical exclusions to streamline this permitting process 
is an internal decision made by the BLM.
    Ultimately, execution of the categorical exclusions process is an 
internal BLM process. The BLM determines whether valid, existing 
environmental analyses are appropriate, in which case, Thus, Devon 
cannot state with specificity or quantify exactly how use of the 
categorical exclusions expedited the approval timeframe for certain oil 
and gas operations that qualified for one of the statutory exclusions. 
By way of example, in Wyoming, if an APD is submitted and the BLM 
conducts a standard, non-categorical exclusion review, that process 
could take from 60 to 360 days. If, however, a statutory categorical 
exclusion can be utilized, the APD review process can be reduced to 45 
to 90 days. Time efficiencies are gained because the BLM is able to 
utilize valid, existing environmental, archeological and wildlife 
analyses instead of requiring duplicative and overlapping documentation 
of certain areas, much of which is often unnecessary. These statutory 
categorical exclusions helped Devon continue our drilling program. 
Without these approvals, Devon would have been forced to release 
drilling rigs and terminate the jobs that follow the drilling and 
completion process. In fact, as was mentioned in testimony Devon 
reassigned a rig in Wyoming at least in part due to BLM guidance that 
restricted Devon's ability to use the Congressionally-approved 
categorical exclusions. That particular rig has since been release and 
is no longer drilling for Devon.
    It is difficult to quantify energy production that accompanies the 
expedited approval process but it does assist in obtaining approved 
APDs and retaining rigs and preparing a continuous drilling program. 
This in turn creates jobs related to drilling, completion, development 
and production operations. For example, in Wyoming, each oil or gas rig 
creates about 125 jobs on average. These jobs include--in addition to 
the drilling, completion, and oilfield service contractors--jobs such 
as welders, waste management companies, roustabouts, electricians, food 
service contractors, and truck drivers, just to name a few. Each well 
in the Washakie area of Wyoming costs about $3 million to drill, 
complete and hook up to the sales pipeline. However, this cost is not 
the norm; Washakie is an established field and drilling efficiencies 
have been maximized. Newer, developing areas can see drilling and 
completion costs that are closer to $5-8 million per well.
2.  Mr. Bolles, in your testimony you say that the categorical 
        exclusion are just one of the BLM restrictions that make it 
        difficult to drill and produce. Can you elaborate on some of 
        the other restrictions that make it difficult for you to 
        conduct your business and what impact these restrictions have 
        on job creation and energy production?
    BLM has many policies and regulations in place that affect 
companies' ability to access, develop and produce federal minerals. \1\ 
For example, BLM created a new leasing policy in 2010 that requires 
additional and redundant NEPA analyses to determine if leasing should 
occur. [BLM Instruction Memorandum 2010-117 (May 17, 2010).] Currently, 
BLM has Resource Management Plans (RMP) in place that went through a 
rigorous Environmental Impact Statement (EIS) analysis. This analysis 
determines areas within the field office's jurisdiction that are 
available for leasing, and if the area is available for leasing, which 
stipulations or other restrictions should be included within the lease. 
In addition to the EIS analysis, BLM Instruction Memorandum 2010-117 
also requires the BLM develop repetitive and duplicative second NEPA 
analyses prior to each lease sale, regardless of whether new or 
additional information is available or whether a secondary analysis 
will facilitate the BLM's leasing process. This additional 
Environmental Assessment (EA) \2\ or even an EIS \3\ for a Master 
Leasing Plan could take several years to prepare.
---------------------------------------------------------------------------
    \1\ To illustrate the complex regulatory requirements mandated by 
BLM, see attachment entitled ``Federal Onshore Oil and Gas Leasing and 
Permitting Process,'' prepared by the American Petroleum Institute.
    \2\ An Environmental Analysis, or EA, is required by the National 
Environmental Policy Act (NEPA) 40 C.F.R. Part 1501. An agency conducts 
an EA to determine whether the action will cause a significant impact. 
If the finding of the EA shows that there will not be a significant 
impact, then the EA is sufficient, and the agency issues a Finding of 
No Significant Impact (FONSI). 40 C.F.R. Sec. Part 1501. If the EA 
determines that the action will cause a significant impact, then a full 
EIS is required. For an oil and gas project, an EA typically takes 
anywhere from 60 days to five years to conduct.
    \3\ An Environmental Impact Statement, or EIS, is also required by 
NEPA 42 U.S.C. 4332. An EIS is mandated if the EA determines that the 
action will cause a significant impact. An EIS is a more detailed and 
time consuming process. An EIS typically has four sections: 
Introduction, which includes a statement of the Purpose and Need of the 
Proposed Action, a description of the Affected Environment, a Range of 
Alternatives to the proposed action, including a ``No Action'' 
alternative, and a robust analysis of the environmental impacts of each 
of the possible alternatives, including impacts to threatened or 
endangered species, air and water quality, historic and cultural sites, 
and a cost analysis for each alternative, including costs to mitigate 
expected impacts. A contractor is secured to complete the EIS, which 
typically takes several years to complete.
---------------------------------------------------------------------------
    While requiring this duplicative analysis may not seem overly 
burdensome, in reality, the BLM removes lease parcels within these 
areas from inclusion on the lease sale while the NEPA analysis is being 
conducted. Thus, new areas may be prohibited from being leased 
permanently, or at a minimum, delayed considerably, which hurts 
companies' ability to lease and access those areas for development.
    Since the implementation of the new leasing process in 2010, the 
BLM's leasing has dramatically slowed across most of the United States. 
According to recently released information, Federal onshore oil and 
natural gas leasing was down significantly in the Rocky Mountain region 
in Fiscal Year 2011, which ended on September 30th. According to the 
Western Energy Alliance, the number of lease parcels offered has 
declined by 70% the total amount of acreage leased has decreased by 
81%, and revenue generated by Federal onshore oil and gas lease sales 
has declined by 44% since 2008. Because almost half of the revenue 
generated from Federal onshore oil and gas lease sales is returned to 
state in which the lands are located, the Federal government and state 
and local governments are all suffering as a result of these declines.
    In addition, the cumulative impacts of overlapping stipulations for 
the protection of wildlife makes it extremely difficult to manage a 
comprehensive and year-round drilling plan. For example, in Wyoming, 
many overlapping wildlife stipulations can occur on a lease from 
November 15 through August 1 if an area has Big Game Winter Range 
Stipulations (November 1--April 30) or Sage Grouse and Raptor 
Stipulations (February 1--August 1). These restrictions leave companies 
only a three month drilling or completion window--August 1--November 
15--to conduct operations. These policies and stipulations make it 
increasingly difficult to conduct energy operations on federal lands. 
Additionally, special interest groups further delay lease development 
by protesting and appealing the BLM's decisions, generally with the 
sole purpose of delaying or preventing oil and gas development on 
public lands.
    The timeframes necessary for the BLM to approve oil and gas 
development projects and field-wide NEPA analysis for oil and gas 
projects is also a significant concern. Currently, there are six oil 
and gas projects proposed on lands managed by five Wyoming BLM field 
offices. EISs are being prepared for each of the six projects. The NEPA 
planning processes (and Record of Decision (ROD) that follows the 
completion of the EIS) for each of the projects are currently 
experiencing delays. On average the planning process for each EIS was 
originally estimated to take two to three years. However, due to a 
range of issues that have arisen with each project, the RODs have been 
delayed one to five years. The Table below highlights the six EISs 
currently under development with the Wyoming BLM. These delays are 
significant, prevent operators from committing the resources necessary 
to begin operations, and delay the development of new high-paying jobs.

[GRAPHIC] [TIFF OMITTED] T8267.002

    Additionally, Devon is concerned that BLM budgets have been or 
will be significantly reduced in the near future, while at the same 
time, the agency is required to respond to an ever-increasing workload 
and other ``national priorities.'' Staff shortages and an inability to 
hire or retain quality employees is a constant problem in multiple BLM 
offices. Employees are often prevented from working on oil and gas 
related projects to comply with other priorities set by the national 
office, including preparing additional and often duplicative 
documentation and reports for the national office.
3.  Mr. Bolles, can you provide any examples where CXs enabled your 
        company to continue development and create jobs that it would 
        not otherwise created?
    In an area of development for our company, statutory categorical 
exclusions enabled Devon to continue drilling operations where while a 
project-level NEPA analyses were delayed. This area that had already 
heavily developed and the appropriate level of NEPA analysis had 
occurred in order to meet the criteria of the statutory categorical 
exclusion. The categorical exclusion permitted Devon to continue a 
modest drilling program while additional project level NEPA was 
underway.
                                 ______
                                 
    Mr. Lamborn. OK, thank you for your testimony. The next 
witness is Ms. Kathleen Sgamma, Director of Government and 
Public Affairs for Western Energy Alliance.

   STATEMENT OF KATHLEEN M. SGAMMA, DIRECTOR OF GOVERNMENT & 
            PUBLIC AFFAIRS, WESTERN ENERGY ALLIANCE

    Ms. Sgamma. Good morning, Mr. Chairman, Ranking Member 
Holt, and members of the Committee. Thank you for the 
opportunity to appear before you.
    Section 390 categorical exclusions, cat exes, are important 
tools for encouraging domestic energy production, thereby 
creating jobs, growing Federal revenue, and spurring American 
economic activity. Western Energy Alliance represents more than 
400 small businesses and independent producers that operate on 
public lands in the West.
    Our members are proud to provide 27 percent of the Nation's 
natural gas and 14 percent of the Nation's oil production while 
disturbing only 0.07 percent of public lands. Our Blueprint for 
Western Energy Prosperity finds that by 2020 we could produce 
as much oil and natural gas in the West as the U.S. currently 
imports from Russia, Iraq, Kuwait, Saudi Arabia, Venezuela, 
Algeria, Nigeria, and Colombia combined, while creating an 
additional 70,000 jobs and $3.5 billion in government revenues, 
just in six producing States in the West alone. We hope to 
achieve that potential if government red tape doesn't stand in 
the way.
    Oil and gas has a small and temporary impact on the land, 
and operators comply with thousands of very detailed 
regulations under the Clean Air Act, Clean Water Act, Safe 
Drinking Water Act, Endangered Species Act, and National 
Historic Preservation Act, to name just a few, as well as State 
and local regulations and numerous BLM regulations.
    With EPAct 2005, Congress intended to ensure jobs for our 
future with secure, affordable, and reliable energy. Cat exes 
are an important part of achieving those goals by encouraging 
domestic oil and gas development in very limited ways. By 
eliminating the requirement for redundant environmental 
analysis in five specific circumstances in which the 
environmental impact is minimal and/or where development was 
previously analyzed in an environmental document, Congress 
hoped to create jobs and encourage domestic energy. Companies 
must still comply with all other regulations when using a CX.
    Almost all the criticism of categorical exclusions has been 
about missing a layer of environmental analysis, no matter how 
redundant, as if oil and gas development is not highly and 
aggressively constrained and regulated. Despite the limited 
scope of cat exes and their success in reducing environmental 
impact, cat exes have been under attack from day one. That 
criticism would be highly appropriate if cat exes absolved 
companies from all environmental regulations, but they do not. 
They merely remove a redundant layer of NEPA analysis.
    A 2009 GAO report found that BLM regularly did not use cat 
exes in many situations even to the point that five BLM offices 
refused to use them. However, GAO didn't highlight that breach 
of the law or the impact on jobs, the economy, and government 
revenue. Rather, GAO highlighted a very few examples where BLM 
incorrectly uses cat ex. There was no systematic look at the 
energy development and job creation prevented from the 
government's refusal to use categorical exclusions.
    While there is coordinated outrage from the environmental 
lobby about the fact that one layer of redundant analysis has 
been removed, where is the loud response about the fact that 
government reluctance to utilize a legal tool has prevented 
economic activity and jobs? History has shown again and again 
that wealthy societies are best able to protect the environment 
and poor countries are the ones with the most devastating 
environmental conditions. The best way to ensure we continue to 
improve our environment is to grow the economy and create high-
paying jobs. American development of oil and natural gas is a 
proven path to that prosperity.
    It is important to note that the use of cat exes doesn't 
mean less protection for the environment. It just means less 
redundant analysis and bureaucratic process. In fact, effective 
use of cat exes can enable BLM staff to spend less time behind 
a desk and more time in the field monitoring and inspecting. 
According to a study from the Western Organization of Resource 
Councils, an environmental advocacy group, BLM doubled the 
number of environmental inspections after the implementation of 
cat exes in 2006. A recent analysis by SWCA, a respected 
environmental consulting firm, finds that delays from just six 
oil and gas projects in Wyoming are preventing the creation of 
over 30,600 jobs, $2.6 billion in labor earnings, and $157 
million in annual royalty and tax revenue. Those numbers are 
stark evidence of how redundant red tape can prevent jobs and 
revenue. Cat exes are one solution to that problem.
    Thank you very much.
    [The prepared statement of Ms. Sgamma follows:]

Statement of Kathleen Sgamma, Director of Government & Public Affairs, 
                Western Energy Alliance (formerly IPAMS)

    Mr. Chairman and Members of the Committee--thank you for the 
opportunity to appear before you today. Section 390 Categorical 
Exclusions (CX) are important tools for encouraging domestic energy 
production, thereby creating jobs, growing federal revenue and spurring 
American economic activity.
    Western Energy Alliance (formerly the Independent Petroleum 
Association of Mountain States IPAMS) represents 400 companies engaged 
in all aspects of environmentally responsible exploration and 
production of oil and natural gas across the West. Alliance members are 
small businesses and independent producers that operate on public lands 
in the West.
    Our members are proud to produce 27% of America's natural gas and 
14% of its oil production while disturbing only 0.07% of public lands. 
Our Blueprint for Western Energy Prosperity finds that by 2020 we could 
produce as much oil and natural gas in the West as the U.S. currently 
imports from Russia, Iraq, Kuwait, Saudi Arabia, Venezuela, Algeria, 
Nigeria, and Colombia combined, while creating an additional 70,000 
jobs and $3.5 billion in government revenue. We hope to achieve that 
potential if government red tape doesn't stand in the way.
    Oil and natural gas development has a small and temporary impact on 
the land, and operators comply with thousands of very detailed 
regulatory requirements under the Clean Air Act, Clean Water Act, Safe 
Drinking Water Act, Endangered Species Act, National Historic 
Preservation Act, Occupational Safety & Health Act, Emergency Planning 
and Community Right to Know Act, Environmental Response, Compensation & 
Liability Act, and Toxic Substances Control Act, to name a few, as well 
as state and local regulations and numerous Bureau of Land Management 
(BLM) policies and procedures.
    With the Energy Policy Act of 2005, Congress intended ``to ensure 
jobs for our future with secure, affordable, and reliable energy.'' 
Section 390 CXs are an important part of achieving those goals by 
encouraging domestic oil and natural gas development in very limited 
ways. By eliminating the requirement for redundant environmental 
analysis in five specific circumstances in which the environmental 
impact is minimal, and/or in which oil and gas development was analyzed 
previously in a NEPA document, Congress hoped to create jobs and 
increase government revenue while encouraging domestic production. 
Companies must still comply with all other regulations when a CX is 
used.
    Almost all the criticism directed at CXs has been about missing a 
layer of environmental analysis, no matter how redundant, as if oil and 
gas development is not highly and aggressively constrained and 
regulated. Despite the limited scope of Section 390 CXs and their 
success in reducing environmental impact, CXs have been under attack 
from day one. That criticism would be highly appropriate if CXs 
absolved companies from all environmental compliance, but they do not--
they merely remove a redundant layer of National Environmental Policy 
Act (NEPA) analysis in specific situations where the impact is minimal 
or where environmental analysis has already been done.
    A 2009 Government Accountability Office report (Energy Policy Act 
of 2005: Greater Clarity Needed to Address Concerns with Categorical 
Exclusions for Oil and Gas Development Under Section 390 of the Act, 
GAO-09-872, September 2009) found that BLM regularly did not use CXs in 
many situations, even to the point that five BLM field offices simply 
refused to use them at all. However, GAO didn't highlight that breach 
of the law, or the impact on jobs, the economy and government revenue. 
Rather, GAO highlighted a very few examples where BLM incorrectly used 
a CX. While GAO recognized they were unintentional errors from 
implementing a new program that are easily corrected administratively, 
there was no systematic look at all the energy development and job 
creation prevented from the government's refusal to use CXs.
    Where's the criticism of the government's failure to use CXs which 
discourages energy development? While there's coordinated outrage from 
the environmental lobby about the fact that one layer of redundant 
analysis has been removed, where's the loud response about the fact 
that government reluctance to utilize a legal tool has prevented 
economic activity and job creation? History has shown again and again 
that wealthy societies are best able to protect the environment, and 
poor countries are the ones with the most devastating environmental 
conditions. The best way to ensure we continue to improve our 
environment is to grow the economy and create high-paying jobs. 
American development of oil and natural gas is a proven path to that 
prosperity.
    Developing oil and natural gas from federal lands is a very time 
consuming and expensive process compared to development on state and 
private lands. The normal regulatory requirements mentioned above are 
augmented with a lengthy federal bureaucratic process and requirements 
under the NEPA. NEPA requires detailed analysis of environmental 
impacts at several stages of the process--the land use planning 
process, leasing, seismic exploration, project planning, and 
permitting. NEPA analysis for large projects can take seven years, and 
even small projects of a few wells can be held up for a few years by 
analysis.
    Furthermore, permitting times are extremely long for drilling 
federal wells. While states take about a month on average to process 
and approve a drilling permit, the federal government routinely takes 
six months to two years, depending on the field office. Timely 
permitting enables rigs to keep running, thus enabling companies to 
execute efficient development programs and create jobs. And each rig 
running creates about 125 jobs. When companies cannot get federal 
permits in a timely manner, they must move onto state and private lands 
or lay down rigs and send jobs elsewhere. Either way, the federal 
government has denied itself considerable royalty revenue.
    CXs are a means to eliminate redundant analysis in certain 
circumstances. By using CXs, BLM can approve permits in a more timely 
manner, putting more people to work and creating government revenue. A 
recent analysis by SWCA, a respected environmental consulting firm that 
regularly conducts NEPA and other analysis for the federal government, 
finds that delays from just six oil and natural gas projects are 
preventing the creation of over 30,600 jobs, $2.6 billion in labor 
earnings and $157 in annual royalty and tax revenue in Wyoming alone.
    However, this Interior Department has slowed development of oil and 
natural gas, and last year issued BLM Instruction Memorandum 2010-118 
that rewrote the criteria for Section 390 CXs, rendering them virtually 
ineffective. Fortunately, Judge Nancy Freudenthal in Wyoming Federal 
District Court overturned the policy in our successful lawsuit. Western 
Energy Alliance is hopeful that as a result of her imposition of a 
nationwide injunction of IM 2010-118, BLM will again use CXs more 
effectively, thereby creating more jobs and economic growth.
    The use of CXs doesn't mean less protection for the environment--it 
just means less redundant analysis and bureaucratic process. In fact, 
effective use of CXs can enable BLM and Forest Service staff to spend 
less time behind a desk pushing paper and more time in the field 
monitoring and inspecting. According to a study from the Western 
Organization of Resource Councils (WORC), an environmental advocacy 
group, the number of environmental inspections performed by BLM 
generally increased over the last decade until 2006 to 2008, when 
inspections more than doubled. It's no coincidence that the dramatic 
increase in BLM inspections corresponded with full implementation of 
CXs in 2006. Furthermore, CXs only remove the need for a redundant 
layer of NEPA analysis. They do not remove any other regulatory 
requirements or tools like BMPs and voluntary measures to protect 
natural resource values.
    In conclusion, we can use limited, balanced tools like CXs to 
develop American oil and natural gas on public lands, or we can 
continue to make it more difficult for producers to operate on federal 
lands and forego economic activity and job creation. Thank you for the 
opportunity to testify today.
                                 ______
                                 

  Response to questions submitted for the record by Kathleen Sgamma, 
                        Western Energy Alliance

Questions from Subcommittee Chairman Lamborn
Can you elaborate on the usual NEPA process and how exactly categorical 
        exclusions streamline this process?
    Attached is a flowchart from API showing the Standard Onshore Oil & 
Gas Leasing Process. This concisely shows all the points in the process 
that NEPA is conducted at.
    Leasing Process (shown in Blue)
        1)  Actually, the first NEPA analysis is done during the 
        Resources Management Planning before the leasing process can 
        even be started, although it's shown in the flowchart under the 
        blue leasing section. The Environmental Impact Statements (EIS) 
        that are done along with RMPs can take several years, at least 
        five years usually.
        2)  The second is a Master Leasing Plan (MLP) that is a new 
        requirement as of May 17, 2010. BLM may determine that some 
        areas should have an MLP, which will result in an amendment to 
        an RMP. Although an MLP has not been completed yet, I estimate 
        at least three years will be added to the process, since 
        amendments to RMPs can also take several years.
        3)  If an MLP is not required, BLM conducts a leasing NEPA 
        analysis, usually an EA. I believe this is largely redundant 
        with the EIS done as part of the RMP. At the leasing stage it 
        is not known what type of project might be proposed, the number 
        of wells, infrastructure required and many other details, or 
        even whether the lease parcel contains economic quantities of 
        oil or gas. Therefore, the leasing EA is not site specific and 
        largely just duplicates the work done for the RMP EIS.
    APD Process (shown in Peach, the section under ``BLM/FS Initiates 
NEPA Review'').
        4)  In the flowchart, the project NEPA is included in the 
        overall Application for Permit to Drill (APD) process, but it 
        could be thought of as another full section of NEPA Project 
        Approvals. Companies propose projects of a few wells to 
        hundreds of thousands of wells. Smaller projects usually 
        require an Environmental Assessment, and larger projects 
        require an EIS document, both prepared according to NEPA. EAs 
        are supposed to take about six months, but there are many cases 
        where they can take three to five years. EISs are supposed to 
        take about three years, but many outstanding EISs are taking 
        the government over seven years. Sometimes, even if a project 
        EIS is in place, BLM may require further NEPA analysis that may 
        result in an EA.
        5)  If an APD is submitted for a well within a Master 
        Development Plan EA or project EIS, BLM makes a determination 
        of NEPA adequacy and approves the APD. If not but there's NEPA 
        from a land use plan or the well is from an existing pad, for 
        example, a categorical exclusions (CX) should be issued.
        6)  If 4) or 5) are not applicable, BLM determines whether an 
        EA or EIS is necessary, and begins to conduct that NEPA 
        analysis. Often, BLM will require an EA even if the APD meets 
        the criteria for a CX.
    As you can see from the flowchart and the steps outlined above, 
there are up to six points at which NEPA analysis is conducted in the 
process. CXs are designed to eliminate NEPA analysis at simply one or 
two of those six points. In addition to NEPA, the flowchart shows many 
other steps that must be complied with such as cultural surveys under 
the National Historic Preservation Act, and consultation under the 
Endangered Species Act. Despite all the intricacies of the process 
illustrated by the flowchart, it simplifies other regulatory processes. 
Various actions required to comply with federal, state and local 
regulations, such as air and water permits are all grouped together in 
just one box.
    Out of the entire multi-step process for operating on federal 
lands, CXs eliminate just one or two levels of NEPA, but not all the 
other regulatory requirements. The only instance where they may 
eliminate two levels of NEPA is very limited--in cases where an EIS 
completed as part of an RMP is less than five years old. That CX was 
crafted to take advantage of the years of effort that go into RMP EISs, 
which include analysis of what lands are appropriate for oil and gas 
development, but only for a limited time. In that case, a CX will 
eliminate site-specific NEPA
Do you have an approximation of the time saved in the permitting 
        process?
    Unfortunately the actual time saved is often opaque to industry 
because of generally long permitting times. BLM is not complying with 
notification requirements specified in Section 366 of the Energy Policy 
Act of 2005, so operators often don't know why their permits are taking 
so long. Often operators don't even know whether an APD was approved 
with a CX or if BLM conducted a single well EA even if the well met one 
of the criteria for a CX. We do know that even small EAs can take years 
and open companies to legal challenge under NEPA, so the time savings 
could be potentially significant. Many single well EAs are fairly 
perfunctory and do not take BLM lots of time, but even a small savings 
of time and paperwork should be welcome by an agency that struggles to 
meet all its obligations, especially at a time of tight budgets. CXs 
can help reduce the time spent pushing paper, and free up time for in-
the-field monitoring.
Questions from Committee Ranking Member Markey
In 2005, the Bush administration published Instruction Memorandum No. 
        2005-247. This memorandum went through the exact same process 
        within BLM as the 2010 Instruction memorandum. Under Judge 
        Freudenthal's reasoning, would the 2005 instruction memorandum 
        also be illegal since the BLM failed to undertake a formal 
        rulemaking process with notice and comment pursuant to the 
        Administrative Procedures Act (APA)?
    Judge Freudenthal issued a very balanced judgement which was not 
meant to be so sweeping and expansive that it would require all 
instruction memoranda (IM) to undergo public notice and comment. If so, 
not just the original Bush Administration IM 2005-247 but all IMs 
issued by the Obama administration Interior Department would have to 
undergo public notice and comment.
    One of the main points ruled on by the judge when she overruled the 
Obama administration's CX policy IM 2010-118 was whether it constitutes 
a ``legislative'' rule or an ``interpretive'' rule which can be adopted 
without public notice and comment. I quote directly from the judge's 
ruling
        ``If a challenged agency action creates a `legislative rule,' 
        then full compliance with the APA's notice and comment 
        processes is required. . .For the reasons that follow, the 
        court agrees with WEA and concludes the issuance of the 2010 
        Instructions violated 5 U.S.C. Sec. 553 (requiring that 
        legislative rules be issued only after public notice and an 
        opportunity for comment).''
    The reason the judge found IM 2010-118 to be legislative and not a 
standard interpretive rule was because it was an obvious rewrite of the 
plain language of Section 390 of EPAct. In her words:
        ``. . .there is no path from Section 390 to the 2010 
        Instructions and in some instances there is no obvious 
        consistency between Section 390 and the 2010 Instructions. As 
        legislative rules, the Federal Respondents had no authority to 
        issue the 2010 Instructions without public notice and an 
        opportunity for comment.''
    Whereas there was a direct ``path'' from the statute to the 
guidance issued in IM 2005-247, there was no direct path in IM 2010-118 
because the federal government simply rewrote the plain language of 
Section 390 which Congress had carefully crafted to be precise and 
limited in scope. This is the key difference and why IM 2005-247 does 
not need public notice and comment, nor do the majority of IMs issued 
under this and other administrations that conform to the laws passed by 
Congress.
Do you believe that the 2005 Instruction Memorandum was procedurally 
        deficient and should also be repealed?
    The 2005 IM was not procedurally deficient for the same reasons 
presented in the answer to the question immediately above--because it 
follows the plain language of the law. 2005-247 and the majority of IMs 
issued under this and other administrations that conform to the laws 
passed by Congress are not procedurally deficient and should not be 
repealed.
                                 ______
                                 
    Mr. Lamborn. Thank you for your testimony, and I think we 
have time for one more of the remaining two witness statements. 
No matter how we structured this, it was not possible to get 
either of the original panels done before the break, and we 
can't do the combined panel before the voting break, either. So 
we will come back. This is an important topic. Thank you for 
your indulgence while we go over there for 60 to 90 minutes. 
There is a lengthy series of votes, so it is probably closer to 
at least 60-plus minutes. So thank you for your patience while 
we do that.
    We will hear one more witness, but when I hear the GAO 
witness at the end when we come back, I will want to hear the 
response to what Ms. Sgamma said about the report that was 
issued earlier.
    So the next witness will be Mr. Coleman.

 STATEMENT OF W. JACKSON COLEMAN, MANAGING PARTNER AND GENERAL 
                COUNSEL, ENERGYNORTHAMERICA, LLC

    Mr. Coleman. Thank you, Mr. Chairman, Ranking Member Holt, 
and members of the Subcommittee. My name is Jack Coleman, I am 
Managing Partner and General Counsel of EnergyNorthAmerica, an 
energy consulting firm in Washington, D.C., and Denver, 
Colorado. About 2 years ago I retired from the Federal 
Government after 27 years, the last 6 years of which was spent 
working for this Committee, and my last 2 years I was 
Republican General Counsel of the Committee. However, in 2005 
with the passage of the Energy Policy Act, I was the Energy and 
Minerals Counsel for the Committee, and I was directly involved 
in the deliberations and the negotiations and drafting of 
Section 390, which became Section 390.
    My work in the House followed 14 years as a Senior Attorney 
at the Interior Department, first as the Senior Attorney for 
Environmental Protection for the Department for about 3-1/2 
years, and then Senior Attorney for Offshore Minerals.
    In my written testimony I detailed the history of this 
provision. It started as a provision in H.R. 6, which passed 
the House on April 21st, 2005. It originated as a Member 
amendment in the markup of the Resources Committee. Congressman 
Peterson from Pennsylvania put this forward as an amendment, 
and the staff and the Members of the Committee thought it was a 
very outstanding amendment, and we supported and worked toward 
its passage from that point.
    There have been many, many, I think, misunderstandings 
unfortunately or maybe intentional misunderstandings or stated 
misunderstandings of this provision. The House passed it with 
seven categories. I think it is best to go through the history 
of how this was dealt with in the conference report. Staff in 
the House and Senate worked together to try to resolve 
differences between the House and Senate bills. If they were 
not able to resolve these differences at the staff level, then 
these differences were kicked up to what is called the Big 
Four, Gang of Four, whatever you want to call them, and that 
was the Chairman and Ranking Member of the Energy and Commerce 
Committee in the House and the Chairman and Ranking Member of 
the Senate Energy Committee. And so they were not able to get 
staff agreement on this provision that was in the House bill, 
and so it was moved to the four leaders of the conference.
    This is where a tremendous amount of review took place. I 
was designated to be the staff person to represent the 
Committee on Resources in these discussions, and an attorney 
for Senator Bingaman represented the Democrat staff. We had 
basically a moot court frankly, several hours of discussion of 
the law back and forth in front of all of these two Congressmen 
and two Senators and with other staff present. This was, as I 
said, hours of discussion. Finally, the decision was made by 
these four leaders that a provision based on the House 
provision should be included in the conference report, and the 
Senate staffer and I were sent out of the room, told to try to 
come up with a negotiated agreement that we both could 
recommend back to the leaders, and that is what we did.
    So we eliminated two of the provisions, two of the 
categories, cut back from seven to five, and there were some 
other changes that were made. As I stated in my written 
testimony, we went over every word, every word. If a word is in 
there, it is meant to be in there. If it is not in there, it is 
meant not to be there.
    So that is what has been irritating to me, frankly, by the 
BLM's recent reinterpretation of this language and also the 
GAO's report. Both of them have done a disservice to the work 
of the Congress. Frankly, they seem to be thinking they can 
write what should have been. This was closely analyzed, and 
these words were determined to be, and one of the things I will 
point out, this is mandatory, the whole question of rebuttable 
presumption, it is a question as to whether or not the activity 
that you are proposing fits within the category. That is what 
can be rebutted. The whole idea, and I know there has been this 
discussion about extraordinary circumstances review. Let me 
point out, I have been a NEPA law practitioner since 1978 when 
I became a lawyer in the Army JAG Corps. I was the 
environmental law officer for Fort Meade, Maryland. This is not 
something I am new to. Categorical exclusions that are 
administrative have an extraordinary circumstances review. That 
is the way it is under the NEPA regulations. That is not 
necessary for a statutory categorical exclusion that Congress 
decides to set up, and no extraordinary circumstance review was 
included in this statute. So people should not read into this 
statute what is not there.
    Thank you for the opportunity to testify.
    [The prepared statement of Mr. Coleman follows:]

Statement of W. Jackson Coleman, Managing Partner and General Counsel, 
                        EnergyNorthAmerica, LLC

I. Introduction
    Chairman Lamborn, Ranking Member Holt, and Members of the 
Subcommittee, my name is Jack Coleman and I am Managing Partner and 
General Counsel of EnergyNorthAmerica, LLC, a energy consulting firm 
with offices in Washington, DC, and Denver, CO. I appreciate the 
invitation to present my views at this hearing on ``Impacts to Onshore 
Jobs, Revenue, and Energy: Review and Status of Sec. 390 Categorical 
Exclusions of the Energy Policy Act of 2005.'' Early in 2009 I retired 
after a career of almost 27 years in the federal government--the last 
six of which were spent working in the House of Representatives. From 
February 2007 until March 2009, I was the Republican General Counsel of 
the House Committee on Natural Resources, and prior to that I served 
from May 2003 until late 2006 as the Energy and Minerals Counsel for 
the House Committee on Resources. While working in the House, I drafted 
many bills, including the Deep Ocean Energy Resources Act passed by the 
House in 2006, and significant parts of the Energy Policy Act of 2005. 
Relevant to today's hearing, I was the House staff member most directly 
involved in the conference deliberations, negotiations, and other 
activities related to the decision to include Section 390 in the Energy 
Policy Act of 2005. I will explain that in significant detail later in 
this testimony.
    My work in the House followed my previous fourteen years as a 
senior attorney at the Department of the Interior. From September 1992 
until May 2003, I served as a senior attorney in the Office of the 
Solicitor with the Minerals Management Service (MMS) as my primary 
client, and prior to that, from January 1989 until September 1992, I 
served as Senior Attorney for Environmental Protection and legal 
advisor to the Department's Office of Environmental Affairs. My first 
work on offshore oil and gas issues began during the period from March 
1982 until August 1985 when I was Special Assistant to the Associate 
Administrator of the National Oceanic and Atmospheric Administration.
    Prior to my service at NOAA, I served on active military duty as an 
Army Judge Advocate General's Corps Captain from June 1978 until March 
1982. My post-secondary education was completely at the University of 
Mississippi, except for graduate work in legislative affairs at the 
George Washington University. I received a Juris Doctor degree from the 
University of Mississippi School of Law in 1978 and a Bachelor of 
Business Administration in Accountancy degree from the University of 
Mississippi in 1975. I am a member of the Mississippi Bar.
II. History of Section 390 Provisions.
    The focus of this hearing is on Section 390 of the Energy Policy 
Act of 2005. The House of Representatives passed HR6, its version of 
the Energy Policy Act of 2005, on April 21, 2005. Included within HR6 
was a provision from the House Committee on Resources, Section 2055, 
which was the precursor of Section 390 which was enacted into law. The 
Senate bill did not contain a corresponding provision. Section 2055 
follows directly below and may be found on page 975 of the enrolled HR6 
as passed by the House:
    ``SEC. 2055. LIMITATION ON REQUIRED REVIEW UNDER NEPA.
        (a)  LIMITATION ON REVIEW.--Action by the Secretary of the 
        Interior in managing the public lands with respect to any of 
        the activities described in subsection(b)shall not be subject 
        to review under section 102(2)(C) the National Environmental 
        Policy Act of 1969 (42 U.S.C.4332(2)(C)), if the activity is 
        conducted for the purpose of exploration or development of a 
        domestic Federal energy source.
        (b)  ACTIVITIES DESCRIBED.--The activities referred to in 
        subsection (a) are the following:
                (1)  Geophysical exploration that does not require road 
                building.
                (2)  Individual surface disturbances of less than 5 
                acres.
                (3)  Drilling an oil or gas well at a location or well 
                pad site at which drilling has occurred previously.
                (4)  Drilling an oil or gas well within a developed 
                field for which an approved land use plan or any 
                environmental document prepared pursuant to the 
                National Environmental Policy Act of 1969 analyzed such 
                drilling as a reasonably foreseeable activity.
                (5)  Disposal of water produced from an oil or gas 
                well, if the disposal is in compliance with a permit 
                issued under the Federal Water Pollution Control Act.
                (6)  Placement of a pipeline in an approved right-of-
                way corridor.
                (7)  Maintenance of a minor activity, other than any 
                construction or major renovation of a building or 
                facility.''
    A comparison of House Section 2055 (hereinafter Section 2055) and 
the language enacted as EPACT Section 390 (hereinafter Section 390) 
reveals a number of differences. First, in Subsection (a) of Section 
390:
        1.  The Conference Committee expanded the section to apply to 
        the Secretary of Agriculture in managing the National Forest 
        System Lands. As passed by the House, Section 2055 had only 
        applied to the Secretary of the Interior in managing the public 
        lands.
        2.  The Conference Committee added the qualifier that 
        application of the statutory categorical exclusions under (b) 
        would ``be subject to a rebuttable presumption that the use of 
        a categorical exclusion under the National Environmental Policy 
        Act of 1969 (NEPA) would apply.'' Section 2055 had merely said 
        that the activity would not be subject to any type of review 
        under NEPA.
        3.  The Conference Committee added the limitation that the 
        activity on public lands subject to the categorical exclusion 
        must be conducted under the Mineral Leasing Act. This change 
        eliminated activities taking place under the authority of other 
        laws authorizing energy production activities on public lands. 
        For example, this change excluded the use of the section 390 
        categorical exclusions from the National Petroleum Reserve-
        Alaska.
        4.  The Conference Committee added the limitation that the 
        activity on public lands subject to the categorical exclusion 
        must be for ``the purpose of exploration or development of oil 
        and gas.'' Section 2055 had been broader and would have applied 
        to ``exploration or development of a Federal energy resource.'' 
        This would have applied to other energy resources, including 
        alternative energy.
    Second, in Subsection (b) of Section 390 the Conference Committee 
made a number of changes, including reducing from seven (7) to five (5) 
the number of categories of activities which would be subject to the 
statutory categorical exclusions:
        1.  The Conference Committee deleted Section 2055 categories 
        (b)(1) (geophysical exploration) and (b)(5) (disposal of 
        produced water).
        2.  Section 2055 category (b)(2) became Section 390 category 
        (b)(1), but a limitation was added--``so long as the total 
        surface disturbance on the lease is not greater than 150 acres 
        and site-specific analysis in a document prepared pursuant to 
        NEPA has been previously completed.''
        3.  Section 2055 category (b)(3) became Section 390 category 
        (b)(2), but the Conference Committee added a limitation--
        ``within 5 years prior to the date of spudding the well.''
        4.  Section 2055 category (b)(4) became Section 390 category 
        (b)(3), but the Conference Committee added a limitation--``so 
        long as such plan or document was approved within 5 years prior 
        to the date of spudding the well.''
        5.  Section 2055 category (b)(6) became Section 390 category 
        (b)(4), but the Conference Committee added a limitation--``so 
        long as the corridor was approved within 5 years prior to the 
        date of placement of the pipeline.''
        6.  Section 2055 category (b)(7) became Section 390 category 
        (b)(5) without change.

III. Discussion.
    As I stated earlier, at the time of the passage of the Energy 
Policy Act of 2005, I was the Energy & Minerals Counsel for the House 
Committee on Resources. I was directly involved in the action on 
Section 2055 at the committee level prior to consideration by the 
House. This provision was offered as an amendment by a member at mark-
up. The Committee adopted it. Then the Committee defended this 
provision during passage by the House. The reason--it is a commonsense 
provision which has the effect of focusing the attention of limited 
staff on matters that really matter. We also believed that this 
provision would prevent trivializing of NEPA and would likely encourage 
drilling from an already used drill site, reducing environmental 
impacts. The intent of NEPA is to review actions that may have a 
``significant'' impact on the environment. It is clear to me, and was 
apparently clear to the Conference Committee, that these 5 categories 
included in Section 390 are highly unlikely to ever cause a 
``significant'' impact on the environment.
    The EPACT Conference Committee worked like this--the staff would 
consider provisions in the House and Senate bills which were not 
identical. If the staff could not come to a resolution of the 
differences, the matter was reserved for the ``Gang of Four''--the 
Chairman and Ranking Member of the House Energy and Commerce Committee 
and the Chairman and Ranking Member of the Senate Energy Committee. The 
staff could not agree on House Section 2055, so the matter of NEPA 
categorical exclusions was kicked-up to the Gang of Four. During 
consideration of this matter by the Gang of Four, I was the only 
Majority staff member present for the discussions/deliberations. In 
addition, no Member of the Resources Committee was present or 
participated in these discussions--not even the Chairman. I and a 
Democrat Senate staff counsel were asked to discuss/debate, in front of 
the Gang of Four, the legal issues related to House Section 2055. These 
discussions/debate between myself, the Senate staff counsel, and the 
members of the Gang of Four took several hours over several sessions. 
The Gang of Four finally decided to include Section 2055 in the 
Conference Report, but with changes to the language. The Senate staff 
counsel and I were directed to negotiate changes that we could agree to 
and bring them back to the Gang of Four for approval. We did this and 
those negotiations resulted in the changes that I outlined above.
    Other than removing the two categories related to geophysical 
surveys and disposal of produced water, most of the other changes 
involved limitations on House-passed language, such as 5-year 
limitations on some, and an acreage limitation on another. Each one of 
these five categories was extensively debated and discussed by staff 
and the members of the Gang of Four. Every word was considered. When 
words were left out of some categories but included in others, this was 
intentional. As someone who was the House staff most involved in the 
derivation of these provisions, I have been very disappointed by the 
GAO report and by recent actions by the current Administration to, in 
essence, legislate words into or out of these provisions through 
implication and/or settlement of litigation.
    This section is mandatory as written, not optional. After 
enactment, this right to the use of these categorical exclusions became 
part of the bundle of rights that lessees acquire upon obtaining a 
lease from the government. Discussion of why that is so is beyond the 
scope of this hearing.
    There has been much discussion about the meaning of the term 
``rebuttable presumption'' as used in Section 390. Let me make clear, 
my understanding of this term when it was added in negotiations with my 
Senate counterpart was the same interpretation that BLM adopted in its 
first implementing instructions. That is, it is presumed that an 
activity that fits the description of the activity listed within the 
category is the activity that is subject to the categorical exemption. 
However, whether or not the subject activity fits the description is 
subject to be rebutted. The rebuttal would only address whether or not 
the subject activity fit the categorical exemption, not whether or not 
the activity would cause significant impacts. If it had meant the 
latter, then a NEPA document would need to be developed which would 
defeat the purpose of the section.
    In addition, there has been much discussion about whether these 
Section 390 categorical exclusions should be subject to an 
extraordinary circumstances review. First, there is no mention of the 
need for an extraordinary circumstances review in Section 390. Second, 
what would be the purpose of Congress legislating a categorical 
exclusion which was really still just a regulatory categorical 
exclusion? I have practiced NEPA law since 1978. Other staff and 
counsel involved in negotiating this provision were very aware of NEPA 
law. The intent of Congress in negotiating these statutory categorical 
exclusions was to fast-track approvals for this very limited number of 
categories. Congress has long been concerned about extensive 
unwarranted delays because of NEPA litigation. Certainly we knew that 
extraordinary circumstances reviews lead to litigation. This is why the 
Congress legislated these exclusions rather than leaving them to the 
agency to promulgate through regulations.
    Thank you for the opportunity to testify and I would be pleased to 
answer any questions.
                                 ______
                                 

 Response to questions submitted for the record by W. Jackson Coleman, 
     Managing Partner and General Counsel, EnergyNorthAmerica, LLC

Questions from Chairman Doug Lamborn

1.  Mr. Coleman, can you explain for the Committee the permitting, 
economic, and domestic energy production scenario the Committee was 
facing in 2005 that led to the Committee putting the categorical 
exclusions in EPAct and if you believe these provisions have improved 
the situation?
    Answer: The Committee has long known that lands owned by the 
Federal Government, both onshore and offshore, are endowed with vast 
quantities of oil and natural gas. I reference the Committee to a long 
line of resource assessments and reports by the United States 
Geological Survey and the former Minerals Management Service which 
document these resources. These assessments and reports document 
resource numbers which are limited, however, by the lack of sufficient 
seismic data upon which to provide higher resource assessment volumes. 
Given the great energy needs of the Nation and the large contribution 
that these Federal lands can provide to help meet these energy needs, 
the Congress has acted a number of times to expedite energy production 
on these lands, while taking care to guard against unwarranted impacts 
on the environment.
    In 2005, the Committee was cognizant of a number of things which 
caused the Committee to initiate enactment of statutory NEPA 
categorical exclusions. First, for a number of years prior to 2005 the 
relationship of the Nation's supply of natural gas and the demand for 
it had become very tight. This caused swings in prices with a 
significant upward trend. Second, environmental groups had become very 
aggressive in challenging leasing and permits to drill for oil and gas 
exploration and production on public lands, even though expansive 
environmental reviews had been conducted for leasing and permitting, 
and much greater environmental protections had been placed on such 
exploration and production. This was having an adverse effect on the 
potential for energy production from public lands, particularly for 
natural gas, thereby unnecessarily exacerbating the natural gas price 
upward trend. Environmental groups almost always included a challenge 
to NEPA review in their challenges. Third, the frustration level among 
Members of Congress and Committee staff had continued to rise for 
several years prior to 2005. More and more the desire to effect 
rational policy changes that would increase energy production from 
public lands, while providing for essential environmental protections, 
had grown.
    So, in 2005 the Committee included a number of reform provisions in 
the House precursor to the Energy Policy Act of 2005 having the 
objective of expediting leasing and permitting of all types of public 
lands energy resources. One of them was Section 390--NEPA statutory 
categorical exclusions related to oil and gas production. As stated in 
my testimony at the hearing, the purpose of these categorical 
exclusions was to describe categories of activities for which 
significant impacts would not reasonably be foreseeable, and therefore 
no further environmental analysis would be necessary. This action would 
expedite production in a number of ways--shortening the time required 
for issuing a permit and eliminating litigation about the adequacy of 
environmental reviews.
    Prior to the decision of the current Administration not to 
implement Section 390 as written by the Congress, it had significantly 
achieved the objectives that the Committee had for it. However, the 
Administration's implementation of the provision had in essence 
repealed it.
                                 ______
                                 
    Mr. Lamborn. OK, thank you for your testimony. I stated 
earlier we will be in recess for 60 to 90 minutes. Thank you 
for your patience, and we will see you soon. This is such an 
important subject, we will have multiple rounds of questioning. 
We will be in recess.
    [Recess.]
    Mr. Lamborn. The Subcommittee will please come back to 
order. I want to thank the witnesses and everyone else in 
attendance for your patience while we did that series of votes. 
It was lengthy, like I thought it was. But we should be done 
with any interruptions. So we will finish with our testimony 
and then have time for a lot of questions. I hope a lot of 
Members can rejoin us. I apologize for the delay and how some 
had to now start their travel plans, going back to their 
families and their districts. But those of us who are here are 
going to have a lot of questions because this is such an 
important topic.
    So now we will hear from the gentleman from the GAO and you 
may continue.

    STATEMENT OF MARK GAFFIGAN, MANAGING DIRECTOR, NATURAL 
     RESOURCES AND ENVIRONMENTAL DIVISION, U.S. GOVERNMENT 
 ACCOUNTABILITY OFFICE; ACCOMPANIED BY JEFF MALCOLM, ASSISTANT 
 DIRECTOR, NATURAL RESOURCES AND ENVIRONMENT, U.S. GOVERNMENT 
                     ACCOUNTABILITY OFFICE

    Mr. Gaffigan. Chairman Lamborn, thank you. And with 10 
minutes to spare, let me say good morning. I won't think of 
myself so much as being the last batter but maybe delude myself 
with, you have saved the best for last. Thank you.
    I am pleased to be here to discuss Section 390, categorical 
exclusions, or cat exes, for oil and gas development. My 
testimony today is based on our 2009 report on this issue and 
some notable events since then; namely, BLM's subsequent 
response to our report's recommendations and some recent court 
decisions.
    In 2009, as you pointed out at the beginning, we have 
reported that BLM had used the Section 390 cat exes to approve 
about 6,100 of the 22,000 applications that had come through 
between Fiscal Year 2006 and Fiscal Year 2008. That is about 28 
percent of the whole total. BLM reported benefits of increased 
efficiency that varied across offices depending on a number of 
different factors, but those benefits were not easy for us to 
quantify. But we did find that not unexpectedly for a new law 
there were some instances of noncompliance with either the law 
or agency guidance. Now our findings reflect what appear to be 
honest mistakes with a new law. And while many were technical 
in nature, they may thwart NEPA's twinnings of ensuring that 
BLM and the public are fully informed of the potential 
environmental impact of oil and gas development.
    We noted that a lack of clarity in the law and lack of BLM 
guidance and oversight contributed in large part to the 
inconsistencies that we found and raised cautions amongst all 
the stakeholders, including industry, environmental groups and 
BLM. Regarding the law, four key questions were raised about 
Section 390 CXs: Are they subject to extraordinary 
circumstances? Two, are they mandatory? And Ms. Sgamma was 
talking about whether GAO noted violations of the use of these 
as not being mandatory. The reason we did not do that is it 
wasn't clear to us that the law said this was mandatory.
    The third question was, what does rebuttable presumption 
mean? And fourth, what level of public disclosure is required?
    Regarding the BLM guidance and oversight, the concerns 
included three things: One, the need to issue more detailed and 
explicit guidance for some of the terminology that is undefined 
in the law; two, the need for some standardized guidance, 
including some documentation required to justify the 
categorical exclusion use; and, three, the need for BLM to 
implement an oversight plan for ensuring compliance with the 
law and guidance in a consistent manner.
    Accordingly, our report suggested that Congress might want 
to clarify the law and resolve the questions raised. In 
addition, we recommend that BLM issue more detailed guidance, 
provide some standard templates or checklists for each of the 
categorical exclusions that at a minimum specifies what kind of 
justification is required to be documented, and last that BLM 
develop an oversight plan.
    Since our report 2 years ago, despite efforts to address 
the need for clarity in the law and BLM attempts to provide 
additional guidance, the bottom line is that today the 
situation is unchanged. The law, with its questions, remains 
unaltered. And BLM's attempt to provide further guidance in a 
May 2010 instruction memorandum has been recently blocked by a 
court decision that held that this guidance constituted a 
regulation that was adopted without using proper procedures. In 
short, today we are right back where we were 2 years ago when 
we issued our report.
    In conclusion, no matter where it occurs, oil and gas 
development can be a high risk, high reward endeavor with 
numerous potential benefits and costs for the economy and 
ecosystems. For years oil and gas development under Federal 
jurisdiction has faced challenges in its efforts to strike the 
balance between development and environmental protection. While 
the challenges that may be brought are largely out of its 
control, the Federal Government can control the quality and 
integrity of its permitting environmental analysis process. 
Uncertainty and questions about this process only increases the 
vulnerability to challenges from all sides. Anything that can 
be done to reduce this uncertainty and resolve questions 
decreases this vulnerability and enhances the government's 
credibility among all stakeholders, as it strives to achieve 
the balance between oil and gas development and environmental 
protection.
    Mr. Chairman, thank you for your time. This concludes my 
opening statement. I am happy to answer any questions you might 
have.
    [The prepared statement of Mr. Gaffigan follows:]

 Statement of Mark Gaffigan, Managing Director, Natural Resources and 
   Environment, United States Government Accountability Office (GAO)

    Chairman Lamborn, Ranking Member Holt, and Members of the 
Subcommittee:
    I am pleased to be here today to participate in your hearing on the 
categorical exclusions established by section 390 of the Energy Policy 
Act of 2005. As you know, oil and natural gas production from federal 
lands is critical to meeting our nation's energy needs. From fiscal 
year 2006 through fiscal year 2010, the Department of the Interior's 
Bureau of Land Management (BLM) approved more than 30,600 new oil and 
gas drilling permits across 24 states, largely in the mountain West. 
Like many projects on federal land with possible environmental impacts, 
oil and gas development activities are typically subject to 
environmental review under the National Environmental Policy Act of 
1969 (NEPA). \1\
---------------------------------------------------------------------------
    \1\ Pub. L. No. 91-190, 83 Stat. 852 (1970). NEPA has two principal 
purposes: (1) to ensure that the agency carefully considers detailed 
information concerning significant environmental impacts and (2) to 
ensure that this information will be made available to the public. See, 
for example, Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 
349 (1989). It does not, however, require any particular substantive 
result. See, for example, Department of Transportation v. Public 
Citizen, 541 U.S. 752, 756 (2004).
---------------------------------------------------------------------------
    Under NEPA, federal agencies evaluate the likely environmental 
effects of projects they are proposing by preparing either an 
environmental assessment or, if projects are likely to significantly 
affect the environment, a more detailed environmental impact statement. 
If, however, the agency determines that activities of a proposed 
project fall within a category of activities the agency has already 
determined has no significant environmental impact--called a 
categorical exclusion--then the agency generally need not prepare an 
environmental assessment or environmental impact statement. \2\ The 
agency may instead approve projects that fit within the relevant 
category by using one of the predetermined administrative categorical 
exclusions, rather than carrying out a project-specific environmental 
assessment or environmental impact statement.
---------------------------------------------------------------------------
    \2\ Throughout this testimony, we refer to categorical exclusions 
developed under the NEPA regulations as administrative categorical 
exclusions.
---------------------------------------------------------------------------
    To address long-term energy challenges, Congress enacted the Energy 
Policy Act of 2005, in part to expedite oil and gas development within 
the United States. \3\ This law authorizes BLM, for certain oil and gas 
activities, to approve projects without preparing the new environmental 
analyses that would normally be required by NEPA. Section 390 of the 
Energy Policy Act of 2005 established five categorical exclusions 
specifically for oil and gas development. \4\ These categorical 
exclusions--referred to in this testimony as section 390 categorical 
exclusions--define specific conditions under which BLM need not prepare 
any new NEPA analysis, such as an environmental assessment or 
environmental impact statement, which would ordinarily be required for 
oil and gas projects. For a project to be approved using an 
administrative categorical exclusion, the agency must determine whether 
any extraordinary circumstances exist under which a normally excluded 
action or project may have a significant effect. As originally 
implemented, projects approved with section 390 categorical exclusions 
were not subject to any screening for extraordinary circumstances, 
according to BLM officials. \5\
---------------------------------------------------------------------------
    \3\ Pub. L. No. 109-58, 119 Stat. 594 (2005).
    \4\ Pub. L. No. 109-58, Sec.  390, 119 Stat. 747 (2005), codified 
at 42 U.S.C. Sec.  15942.
    \5\ Bureau of Land Management, "Instruction Memorandum No. 2005 -
247: National Environmental Policy Act (NEPA) Compliance for Oil, Gas, 
and Geothermal Development," attachment 2 (Sept. 30, 2005), and BLM, 
National Environmental Policy Act Handbook H-1790-1 (Washington, D.C.: 
2008).
---------------------------------------------------------------------------
    In September 2009, we reported on BLM's first 3 years of 
experience--fiscal years 2006 through 2008--using section 390 
categorical exclusions. \6\ My testimony today will summarize the 
finding of our September 2009 report, along with some recent updates. 
Specifically, I will discuss (1) the extent to which BLM used section 
390 categorical exclusions each fiscal year from 2006 through 2008 and 
the benefits, if any, associated with their use; (2) the extent to 
which BLM used section 390 categorical exclusions in compliance with 
the Energy Policy Act of 2005 and internal BLM guidance; (3) key 
concerns, if any, associated with section 390 categorical exclusions; 
and (4) how BLM has responded to the recommendations in our September 
2009 report and other recent developments.
---------------------------------------------------------------------------
    \6\ GAO, Energy Policy Act of 2005: Greater Clarity Needed to 
Address Concerns with Categorical Exclusions for Oil and Gas 
Development under Section 390 of the Act, GAO-09-872 (Washington, D.C.: 
Sept. 16, 2009).
---------------------------------------------------------------------------
    For our report, we reviewed relevant laws, regulations, and 
Interior and BLM guidance. We also reviewed BLM headquarters and field 
office documents and data for each fiscal year from 2006 through 2008. 
We interviewed officials in BLM headquarters and in the 11 BLM field 
offices (and their associated state offices) that processed the most 
applications for permit to drill (APD) from fiscal year 2006 through 
fiscal year 2008. We also interviewed representatives from industry, 
historic preservation groups, and environmental groups about benefits 
and concerns--both actual and potential--associated with section 390 
categorical exclusions. Other recent developments are based on our 
review of court decisions that have been decided since we issued our 
September 2009 report. The report was a performance audit conducted in 
accordance with generally accepted government auditing standards. A 
detailed description of our scope and methodology in presented in 
appendix I of the September 2009 report.
Background
    Under the Federal Land Policy and Management Act of 1976, as 
amended (FLPMA), \7\ BLM manages about 250 million acres of federal 
land for multiple uses, including recreation; range; timber; minerals; 
watershed; wildlife and fish; and natural scenic, scientific, and 
historical values, as well as for the sustained yield of renewable 
resources. In addition, the Mineral Leasing Act of 1920 charges 
Interior with responsibility for oil and gas leasing on federal and 
private lands where the federal government has retained mineral rights. 
BLM is responsible for managing approximately 700 million mineral 
onshore acres, which include the acreage leased for oil and gas 
development. To manage its responsibilities, BLM administers its 
programs through its headquarters office in Washington, D.C.; 12 state 
offices; 45 district offices; and 128 field offices. BLM headquarters 
develops guidance and regulations for the agency, while the state, 
district, and field offices manage and implement the agency's programs. 
Thirty BLM field offices, located primarily in the mountain West, were 
involved in oil and gas development.
---------------------------------------------------------------------------
    \7\ Pub. L. No. 94-579, 90 Stat. 2743 (1976), codified as amended 
at 43 U.S.C. Sec.  1701 et seq.
---------------------------------------------------------------------------
    To drill for oil or natural gas on leased lands, a company must 
submit an APD to BLM. \8\ APDs are used to approve drilling and all 
related activities on land leased by a company, including road 
building; digging pits to store drilling effluent; placing pipelines to 
carry oil and gas to market; and building roads to transport equipment, 
personnel, and other production-related materials. \9\ After an APD is 
approved, operators can submit proposals to BLM, in the form of a 
sundry notice, for modifications to their approved APD. Sundry notices 
may involve activities like changing the location of a well, adding an 
additional pipeline, or adding remote communications equipment.
---------------------------------------------------------------------------
    \8\ 43 C.F.R. Sec.  3162.3-1(c).
    \9\ Companies may also be required to submit a right-of-way 
application for related activities, such as adding pipelines, that take 
place on land for which they do not own a lease. See 43 C.F.R. Sec.  
2881.7.
---------------------------------------------------------------------------
    Interior and BLM have administrative categorical exclusions in 
place for numerous types of activities, such as constructing nesting 
platforms for wild birds and constructing snow fences for safety. To 
use such an administrative categorical exclusion in approving a project 
on BLM land, the agency screens each proposed project for extraordinary 
circumstances, such as significant impacts to threatened and endangered 
species, historic or cultural resources, or human health and safety or 
potentially significant cumulative environmental effects when coupled 
with other actions. When one or more extraordinary circumstances exist, 
BLM guidance precludes staff from using an administrative categorical 
exclusion for the project.
    Section 390 of the Energy Policy Act of 2005 authorizes BLM to 
forgo environmental assessments and environmental impact statements for 
oil and gas projects under certain circumstances. Specifically, 
subsection (a) states:
    ``NEPA Review.--Action by the Secretary of the Interior in managing 
the public lands or the Secretary of the Agriculture in managing 
National Forest System Lands, with respect to any of the activities 
described in subsection (b) shall be subject to a rebuttable 
presumption that the use of a categorical exclusion under the National 
Environmental Policy Act of 1969 (NEPA) would apply if the activity is 
conducted pursuant to the Mineral Leasing Act for the purpose of 
exploration or development of oil and gas.'' \10\ [emphasis added]
---------------------------------------------------------------------------
    \10\ Pub. L. No. 109-58, Sec.  390(a), 119 Stat. 747 (2005), 
codified at 42 U.S.C. Sec.  15942(a). Although the Energy Policy Act of 
2005 authorizes both BLM and the Department of Agriculture's U.S. 
Forest Service to use section 390 categorical exclusions, our September 
2009 report examined only BLM's use of section 390 categorical 
exclusions.
---------------------------------------------------------------------------
    Subsection (b) outlines five new categories of activities to be 
considered categorical exclusions. These section 390 categorical 
exclusions (referred to in this testimony as section 390 CX1, CX2, CX3, 
CX4, and CX5) include:
    ``(1) Individual surface disturbances of less than 5 acres so long 
as the total surface disturbance on the lease is not greater than 150 
acres and site-specific analysis in a document prepared pursuant to 
NEPA has been previously completed.
    (2) Drilling an oil or gas well at a location or well pad site at 
which drilling has occurred previously within 5 years prior to the date 
of spudding the well.
    (3) Drilling an oil or gas well within a developed field for which 
an approved land use plan or any environmental document prepared 
pursuant to NEPA analyzed such drilling as a reasonably foreseeable 
activity, so long as such plan or document was approved within 5 years 
prior to the date of spudding the well.
    (4) Placement of a pipeline in an approved right-of-way corridor, 
so long as the corridor was approved within 5 years prior to the date 
of placement of the pipeline.
    (5) Maintenance of a minor activity, other than any construction or 
major renovation or [sic] a building or facility.''
    In its process for approving oil or gas projects, BLM's original 
guidance provided that the agency can use a section 390 categorical 
exclusion when a project meets the conditions set forth for any of the 
five types of section 390 categorical exclusions. BLM guidance still 
directs staff to document their decision and rationale for using a 
specific section 390 categorical exclusion. Furthermore, BLM guidance 
directed its staff when using section 390 categorical exclusions to 
comply with the Endangered Species Act and the National Historic 
Preservation Act; to conduct on-site reviews for all APDs; and to add 
site-specific restrictions or conditions of approval if deemed 
necessary to protect the environment or cultural resources.
BLM Field Offices Used Section 390 Categorical Exclusions for More Than 
        One-Quarter of Their APDs, Although Benefits of Use Varied 
        Widely across Field Offices
    In September 2009, we reported that 26 of the 30 field offices with 
oil and gas activities used almost 6,900 section 390 categorical 
exclusions to approve oil-and-gas-related activities from fiscal year 
2006 through fiscal year 2008. Of these, BLM field offices used section 
390 categorical exclusions to approve nearly 6,100 APDs (about 28 
percent of approximately 22,000 federal wells approved by BLM) during 
this period. Three BLM field offices (Pinedale, Wyoming; Farmington, 
New Mexico; and Vernal, Utah) accounted for almost two-thirds of 
section 390 categorical exclusions used to approve APDs. Section 390 
CX3 accounted for more than 60 percent of the section 390 categorical 
exclusions used to approve APDs. BLM also used section 390 categorical 
exclusions to approve more than 800 nondrilling projects from fiscal 
year 2006 through fiscal year 2008. These approvals were for a wide 
range of activities, such as changing a well location, adding new 
pipelines, and doing road maintenance. The Buffalo, Wyoming, field 
office was the most prominent user of section 390 categorical 
exclusions for these purposes, approving more than 250 nondrilling 
projects with section 390 categorical exclusions.
    The vast majority of BLM officials we spoke with told us that using 
section 390 categorical exclusions expedited the application review and 
approval process, but the amount of time saved by field offices 
depended on a variety of factors and circumstances influencing the 
extent to which field offices used the exclusions. A frequently cited 
factor contributing to these efficiency gains was the extent to which 
proposed projects fit the specific conditions set forth in each section 
390 categorical exclusion. BLM officials also identified other factors 
that contributed to their ability to use section 390 categorical 
exclusions, including the field office resource specialists' 
familiarity with the area of the proposed action, the area's 
environmental sensitivity, the extent of the area's cultural resources, 
and the proposed action's extent of surface disturbance. Specifically, 
BLM officials told us that section 390 categorical exclusions were 
regularly used to approve projects in areas where sensitive 
environmental or cultural concerns were few (e.g., no threatened or 
endangered species, or limited cultural resources in the area), where 
the resource specialists were familiar with the location of the 
proposed action, or where the proposed project was not unusual or was 
likely to have minimal impact on the local environment. Additionally, 
field office policies could contribute to how often section 390 
categorical exclusions were used. The differences in office policies 
result from field office managers' comfort with the use of section 390 
categorical exclusions and their interpretations of appropriate use.
    Because it is not always clear how oil and gas development would 
have proceeded in the absence of section 390 categorical exclusions, 
BLM officials told us that estimating the amount of time saved by using 
the exclusions was difficult. In field offices where section 390 
categorical exclusions were seldom used to approve APDs or nondrilling 
actions, officials told us that a typical section 390 categorical 
exclusion approval document saved a few hours of total staff time. In 
contrast, in field offices where section 390 categorical exclusions 
were used more often, the time savings were cumulatively more 
significant, although officials could not quantify them. Officials in 
these field offices told us that while the savings for a single APD did 
not by itself mean that the APD was approved in fewer calendar days, 
the total number of APDs processed in the office in a given period was 
probably larger because of the cumulative time saved by using section 
390 categorical exclusions.
    Industry officials with whom we spoke also agreed that BLM's use of 
section 390 categorical exclusions had generally decreased APD-
processing times and that this increased efficiency was more pronounced 
in some field offices than in others. Acknowledging that the type of 
development and the availability of NEPA documents were both critical 
factors, they also stressed that differences in field office policies, 
field office operations, and field management personalities generally 
influenced how readily a given BLM field office used section 390 
categorical exclusions. For example, according to industry officials, 
some field offices were conservative and cautious and therefore 
reluctant to use section 390 categorical exclusions if even minimal 
environmental or cultural resource concerns existed. This tendency ran 
counter to what some industry officials told us was their 
interpretation of the law--namely, that they believed that section 390 
categorical exclusions should be used whenever a project meets the 
required conditions. Industry officials told us that in some cases BLM 
was overly cautious in applying section 390 categorical exclusions, in 
part because BLM feared litigation from environmental groups. Industry 
officials commented on the lack of consistency among BLM field offices 
in how section 390 categorical exclusions were used but overall told us 
that section 390 categorical exclusions were a useful tool and have 
contributed to expedited application processing. They applauded the 
exclusions for reducing redundant and time-consuming NEPA documentation 
and making APD application processing more predictable and flexible.
BLM's Use of Section 390 Categorical Exclusions from Fiscal Year 2006 
        through Fiscal Year 2008 Often Did Not Comply with Either the 
        Implementing Statute or Agency Guidance
    In September 2009, we reported that BLM's field offices used 
section 390 categorical exclusions to approve oil and gas activities in 
violation of the law and also failed to follow agency guidance. 
Specifically, we found six types of violations of the Energy Policy Act 
of 2005 and fives types of noncompliance with BLM guidance (see table 
1).
[GRAPHIC] [TIFF OMITTED] T8267.001


    Overall, we found many more examples of noncompliance with 
guidance than violations of the law. We did not find intentional 
actions on the part of BLM staff to circumvent the law; rather, our 
findings reflected what appear to be honest mistakes stemming from 
confusion in implementing a new law with evolving guidance. 
Nevertheless, even though some of the violations of law--such as 
approving multiple wells with one decision document--were technical in 
nature, they must be taken seriously. In some instances, violations we 
found may have thwarted NEPA's twin aims of ensuring that both BLM and 
the public were fully informed of the environmental consequences of 
BLM's actions. For example, approval of multiple wells on one or more 
well pads could have required an environmental assessment or 
environmental impact statement, which would likely have provided 
additional information on the environmental impacts of approving 
multiple wells. According to BLM officials, the outcome of the NEPA 
process likely would have yielded the same result. Nevertheless, the 
purpose of NEPA is to provide better information for decision making, 
not necessarily to alter the decisions ultimately made. The projects 
would likely have been approved, but the specific location and 
conditions of approval might have differed, and BLM and the public 
might have had more detailed information on the environmental impacts 
of the approvals.
    A lack of definitive and clear guidance from BLM, as well as lack 
of oversight of field offices' actions, contributed to the violations 
of law and noncompliance with BLM's existing guidance. At the time of 
our report, BLM had provided several key guidance documents; we found, 
however, that this guidance did not contain the specificity and 
examples needed to clearly direct staff in the appropriate use and 
limits of section 390 categorical exclusions. Specifically, BLM's 
guidance at the time said little, if anything, about (1) the 
documentation needed to support a decision to use a section 390 
categorical exclusion or (2) the proper circumstances for using section 
390 categorical exclusions to approve modifications to existing APDs 
through ``sundry notices.'' Furthermore, BLM headquarters and state 
offices we spoke with had generally not provided any oversight or 
review of the field offices' actions in using section 390 categorical 
exclusions that could have ensured compliance with the law or BLM 
guidance.
Lack of Clarity in the Law and in BLM Guidance Raised Serious Concerns 
        about Section 390 Categorical Exclusions
    We reported in September 2009 that the lack of clarity in section 
390 of the Energy Policy Act of 2005 and in BLM's implementing guidance 
led to serious concerns on the part of industry, environmental groups, 
BLM officials, and others about when and how section 390 categorical 
exclusions should be used to approve oil and gas development. 
Specifically, these concerns included the following:
          Key elements of section 390 of the Energy Policy Act 
        of 2005 were undefined, leading to fundamental questions about 
        what section 390 categorical exclusions were and how they 
        should be used. This lack of direction left these elements open 
        to differing interpretations, debate, and litigation, leading 
        to serious concerns that BLM was using section 390 categorical 
        exclusions in too many--or too few--instances. BLM officials, 
        environmental groups, industry groups, and others raised 
        serious concerns with the law as a whole. These concerns 
        related to four key elements: (1) the definition of 
        ``categorical exclusion'' and whether the screening for 
        extraordinary circumstances was required, (2) whether the use 
        of section 390 categorical exclusions was mandatory or 
        discretionary, (3) the meaning of the phrase ``rebuttable 
        presumption,'' and (4) the level of public disclosure required 
        for section 390 categorical exclusions.
          The law's descriptions of the five types of section 
        390 categorical exclusions prompted more specific concerns 
        about how to appropriately use one or more of the five types of 
        section 390 categorical exclusions. These concerns related to 
        (1) the adequacy of NEPA documents supporting the use of a 
        particular section 390 categorical exclusion, (2) consistency 
        with existing NEPA documents, (3) the rationale for the 5-year 
        time frame used in some but not all types of section 390 
        categorical exclusions, and (4) the piecemeal approach to 
        development fostered by using section 390 categorical 
        exclusions.
          Concerns about how to interpret and apply key terms 
        that describe the conditions that must be met when using a 
        section 390 categorical exclusion. In particular, each of the 
        five types of section 390 categorical exclusions contain 
        terminology that is undefined in the law and for which BLM had 
        not provided clear or complete guidance. Specifically, the 
        ambiguous terms included (1) ``individual surface 
        disturbances'' under section 390 CX1, (2) ``maintenance of a 
        minor activity'' under section 390 CX5, (3) ``construction or 
        major renovation or [sic] a building or facility'' under 
        section 390 CX5, (4) ``location'' under section 390 CX2, and 
        (5) ``right-of-way corridor'' under section 390 CX4. Vague or 
        nonexistent definitions of key terms in the law and BLM 
        guidance led to varied interpretations among field offices and 
        concerns about misuse and a lack of transparency.
    In September 2009, we reported that the failure of both the law and 
BLM guidance to clearly define key conditions that projects must meet 
to be eligible for approval with a section 390 categorical exclusion 
caused confusion among BLM officials, industry, and the public over 
what activities qualified for section 390 categorical exclusions. As a 
result, we suggested that Congress consider amending section 390 to 
clarify and resolve some of the key issues that we identified, 
including but not limited to (1) clearly specifying whether section 390 
categorical exclusions apply even in the presence of extraordinary 
circumstances and (2) clarifying what the phrase ``rebuttable 
presumption'' means and how BLM must implement it in the context of 
section 390. In addition, to improve BLM field offices' implementation 
of section 390 categorical exclusions, we recommended that BLM take the 
following three actions:
          issue detailed and explicit guidance addressing the 
        gaps and shortcomings in its guidance;
          provide standardized templates or checklists for each 
        of the five types of section 390 categorical exclusions, which 
        would specify, at minimum, what documentation is required to 
        justify their use; and
          develop and implement a plan for overseeing the use 
        of section 390 categorical exclusions to ensure compliance with 
        both law and guidance.
BLM Took Actions in Response to Litigation and Our Report, but These 
        Actions Have Been Affected by a Recent Court Decision
    While we were working on our September 2009 report, the exact 
meaning of the phrase ``shall be subject to a rebuttable presumption 
that the use of a categorical exclusion under the National 
Environmental Policy Act of 1969 (NEPA) would apply'' was in dispute in 
a lawsuit in federal court. \11\ In Nine Mile Coalition v. Stiewig, 
environmental groups sued BLM, alleging that the phrase meant that BLM 
was required to avoid using a section 390 categorical exclusion in 
approving a project where extraordinary circumstances were present. BLM 
settled the case in March 2010, agreeing, among other things, to issue 
a new instruction memorandum stating that the agency would not use 
section 390 categorical exclusions where extraordinary circumstances 
were present.
---------------------------------------------------------------------------
    \11\ Nine Mile Canyon Coalition v. Stiewig, Civ. No. 08-586, D. 
Utah (filed August 6,2008).
---------------------------------------------------------------------------
    In May 2010, BLM issued ``Instruction Memorandum No. 2010-118,'' 
\12\ which was the first in a series of guidance documents BLM planned 
to issue to address the recommendations in our September 2009 report. 
BLM's May 2010 instruction memorandum announced several key reforms to 
the way BLM staff can use section 390 categorical exclusions. These 
reforms substantially addressed the gaps and shortcomings in BLM's 
guidance that we identified in our report, directing that, for example, 
section 390 CX2 or CX3 no longer be used to approve drilling wells 
after the law's allowed 5-year time frame or that section 390 CX3 not 
be used to approve drilling a well without sufficient supporting NEPA 
documentation. The memorandum explicitly identified the types of NEPA 
documents needed to adequately support the use of section 390 
categorical exclusions to approve new wells and directed that any 
supporting NEPA analysis must be specific to the proposed drilling 
site. The memorandum also directs BLM field offices to ensure that all 
oil and gas development approved with a section 390 categorical 
exclusion conform to the analysis conducted in the supporting land use 
plan and come within the range of environmental effects analyzed in the 
plan and associated NEPA documents. In addition, the May 2010 
instruction memorandum implemented the settlement in Nine Mile 
Coalition v. Stiewig by requiring BLM field offices to screen for the 
presence of extraordinary circumstances--such as for cumulative impacts 
on air quality or critical habitat--whenever considering the use of a 
section 390 categorical exclusion.
---------------------------------------------------------------------------
    \12\ Bureau of Land Management, "Instruction Memorandum No. 2010-
118: Energy Policy Act Section 390 Categorical Exclusion Policy 
Revision" (May 17, 2010).
---------------------------------------------------------------------------
    According to BLM officials, the agency developed a second 
instruction memorandum in 2011 to address our recommendation that it 
standardize templates and checklists its field offices use in approving 
each of the five types of section 390 categorical exclusions to 
specify, at a minimum, the documentation required to justify their use. 
This draft second instruction memorandum was undergoing review by the 
department when, on August 12, 2011, a decision was reached in Western 
Energy Alliance v. Salazar. \13\ In this case, an oil and gas trade 
association sued BLM, alleging, among others, that the agency issued 
its May 2010 instruction memorandum without following proper rule-
making procedures and that the instruction memorandum's provision 
concerning extraordinary circumstances violated section 390. The court 
held that the instruction memorandum constituted a regulation that BLM 
adopted without following proper rule-making procedures, and the court 
issued a nationwide injunction blocking implementation of the 
memorandum. The court did not address whether the instruction 
memorandum was consistent with section 390; neither did it address the 
meaning of the phrase ``rebuttable presumption'' in section 390. 
According to a BLM official, the ruling has prevented BLM from 
implementing the parts of the May 2010 instruction memorandum directly 
related to extraordinary circumstances and the use of section 390 CX2 
and CX3 and also called into question the issuance of the second 
instruction memorandum aimed at further addressing our recommendations.
---------------------------------------------------------------------------
    \13\ Civ. No. 10-237F (D. Wyo. 2011).
---------------------------------------------------------------------------
    In conclusion, it is now uncertain what actions BLM may take in 
response to the most recent court decision. These actions could 
include, but are not limited to, moving forward and issuing the May 
2010 instruction memorandum as a regulation or possibly appealing the 
decision.
    Chairman Lamborn, Ranking Member Holt, and Members of the 
Subcommittee, this completes my prepared statement. I would be pleased 
to answer any questions that you may have at this time.
GAO Contacts and Staff Acknowledgments
    For further information about this testimony, please contact Mark 
Gaffigan or Anu K. Mittal at (202) 512-3841 or [email protected] and 
[email protected], respectively. Contact points for our Offices of 
Congressional Relations and Public Affairs may be found on the last 
page of this testimony. In addition to the contact named above, Jeffery 
D. Malcolm (Assistant Director), Mark A. Braza, Ellen W. Chu, Heather 
E. Dowey, Richard P. Johnson, Michael L. Krafve, and Tama R. Weinberg 
made key contributions to this testimony.
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                                 ______
                                 
GAO Highlights
September 9, 2011
ENERGY POLICY ACT OF 2005
BLM's Use of Section 390 Categorical Exclusions for Oil and Gas 
        Development
Why GAO Did This Study
    The Energy Policy Act of 2005 was enacted in part to expedite 
domestic oil and gas development. Section 390 of the act authorized the 
Department of the Interior's Bureau of Land Management (BLM) to use 
categorical exclusions to streamline the environmental analysis 
required under the National Environmental Policy Act of 1969 (NEPA) 
when approving certain oil and gas activities. Numerous questions have 
been raised about how and when BLM should use these section 390 
categorical exclusions. In September 2009, GAO reported on BLM's first 
3 years of experience--fiscal years 2006 through 2008--using section 
390 categorical exclusions.
    This testimony is based on GAO's September 2009 report (GAO-09-872) 
and updated with information on court decisions that have been reached 
since the report was issued. The testimony focuses on (1) the extent to 
which BLM used section 390 categorical exclusions and the benefits, if 
any, associated with their use; (2) the extent to which BLM complied 
with the Energy Policy Act of 2005 and agency guidance; (3) key 
concerns, if any, associated with section 390 categorical exclusions; 
and (4) how BLM has responded to GAO's recommendations and other recent 
developments. For its September 2009 report, GAO analyzed a 
nongeneralizable random sample of 215 section 390 categorical exclusion 
decision documents from all BLM field offices that used section 390 
categorical exclusions and interviewed agency officials and others.
    GAO is making no new recommendations at this time.
What GAO Found
    GAO's analysis of BLM field office data showed that section 390 
categorical exclusions were used to approve almost 6,900 oil-and-gas-
related activities from fiscal year 2006 through fiscal year 2008. 
Nearly 6,100 of these categorical exclusions were used for drilling 
permits and the rest for other nondrilling activities. Most BLM 
officials GAO spoke with said that section 390 categorical exclusions 
increased the efficiency of certain field office operations, but it was 
not possible to quantify these benefits.
    GAO reported that BLM's use of section 390 categorical exclusions 
through fiscal year 2008 often did not comply with either the law or 
BLM's guidance. First, GAO found several types of violations of the 
law, including approving projects inconsistent with the law's criteria 
and drilling a new well after mandated time frames had lapsed. Second, 
GAO found numerous examples where officials did not correctly follow 
agency guidance, most often by failing to adequately justify the use of 
a categorical exclusion. A lack of clear guidance and oversight 
contributed to the violations and noncompliance. Many instances of 
noncompliance were technical in nature, whereas others were more 
significant and may have thwarted NEPA's twin aims of ensuring that BLM 
and the public are fully informed of the environmental consequences of 
BLM's actions.
    In September 2009, GAO reported that a lack of clarity in section 
390 and BLM's guidance had caused industry, environmental groups, BLM 
officials, and others to raise serious concerns about the use of 
section 390 categorical exclusions. First, fundamental questions about 
what section 390 categorical exclusions were and how they should be 
used led to concerns that BLM might have been using these categorical 
exclusions in too many--or too few--instances. Second, specific 
concerns were raised about key concepts underlying the law's 
description of certain section 390 categorical exclusions. Third, vague 
or nonexistent definitions of key terms in the law and BLM guidance 
that describe the conditions to be met when using a section 390 
categorical exclusion led to varied interpretations among field offices 
and concerns about misuse and a lack of transparency. As a result, GAO 
suggested that Congress may want to consider amending the act to 
clarify section 390, and GAO recommended that BLM clarify its guidance, 
standardize decision documents, and ensure compliance through more 
oversight. The Department of the Interior concurred with GAO's 
recommendations.
    In May 2010, in response to a court settlement and GAO's 
recommendations, BLM issued a new instruction memorandum substantially 
addressing the gaps and shortcomings in BLM's guidance that GAO had 
identified. In addition, BLM was developing a second instruction 
memorandum to address GAO's recommendation that it standardize decision 
documents when, on August 12, 2011, a decision was reached in Western 
Energy Alliance v. Salazar. The court held that the May 2010 
instruction memorandum constituted a regulation that BLM adopted 
without using proper rule-making procedures and issued a nationwide 
injunction blocking the memorandum's implementation. According to a BLM 
official, the ruling has prevented BLM from implementing key parts of 
the memorandum and called into question the issuance of the second 
memorandum aimed at further addressing GAO's recommendations.
                                 ______
                                 

   Response to questions submitted for the record by Mark Gaffigan, 
       Managing Director, Natural Resources and Environment, GAO

Questions for the Record Submitted by Ranking Member Edward J. Markey
Question 1: During the period between now and when the rulemaking is 
        complete, BLM must now revert to the Bush Administration's 2005 
        policy on categorical exclusions. What might be the 
        implications of returning to the Bush Administration's policy? 
        Will it lead to uncertainty and inconsistency among BLM field 
        offices regarding the implementation of Section 390?
GAO Response:
    In the absence of the clarifying guidance and templates that we 
recommended in our September 2009 report,\1\ and in the absence of 
clarifying amendments to section 390 of the Energy Policy Act of 2005, 
the implementation of section 390 categorical exclusions will likely 
continue to raise the same questions and concerns that we identified in 
our report. We reported that BLM field offices had frequently 
implemented section 390 categorical exclusions in a manner inconsistent 
with the law and BLM's 2005 guidance. We recommended that BLM issue 
additional guidance and conduct vigilant oversight to ensure that 
section 390 categorical exclusions are used appropriately--neither 
over- nor under-used.
---------------------------------------------------------------------------
    \1\ GAO, Energy Policy Act of 2005: Greater Clarity Needed to 
Address Concerns with Categorical Exclusions for Oil and Gas 
Development under Section 390 of the Act, GAO-09-872 (Washington, D.C.: 
Sept. 16, 2009).
---------------------------------------------------------------------------
Question 2: Will going back to the Bush Administration's policy in the 
        interim lead to the possibility of additional habitat 
        fragmentation or harm to wildlife?
GAO Response:
    The environmental effects of oil and gas development can vary based 
on a number of site-specific factors. For example, adding a new well to 
an existing well-pad is unlikely to cause additional habitat 
fragmentation or harm to wildlife. In contrast, drilling a well in a 
new location could possibly lead to additional habitat fragmentation or 
harm to wildlife. Going back to BLM's 2005 guidance on the use of 
section 390 categorical exclusions, however, may not have a substantive 
affect on habitat fragmentation or wildlife because as we reported in 
September 2009, according to BLM officials the applications for permit 
to drill (APD) not approved using a section 390 categorical exclusion 
would likely have been approved under BLM's regular approval process 
following the National Environmental Policy Act (NEPA).
Question 3: Could returning to the Bush Administration's Section 390 
        policy make it more likely that there could be additional 
        damage to Native American cultural sites throughout the West?
GAO Response:
    As stated above, the environmental effects of oil and gas 
development can vary based on a number of site-specific factors. An 
important factor in this case would be the level of official status or 
recognition that a particular Native American cultural site may have, 
if any. We reported in September 2009 that BLM guidance directs its 
staff when using section 390 categorical exclusions to comply with the 
Endangered Species Act and the National Historic Preservation Act; to 
conduct on-site reviews for all APDs; and to add site-specific 
restrictions or conditions of approval if deemed necessary to protect 
the environment or cultural resources. BLM's overturned May 2010 
instruction memorandum directed BLM field office staff to screen for 
the presence of extraordinary circumstances--such as significant 
impacts on (1) such natural resources and unique geographic 
characteristics as historic or cultural resources and (2) properties 
listed, or eligible for listing, on the National Register of Historic 
Places--whenever considering the use of a section 390 categorical 
exclusion.\2\ The overturned guidance sought to prevent the use of a 
section 390 categorical exclusion when an extraordinary circumstance 
was present.
---------------------------------------------------------------------------
    \2\ Bureau of Land Management, ``Instruction Memorandum No. 2010-
118: Energy Policy Act Section 390 Categorical Exclusion Policy 
Revision'' (May 17, 2010). On August 12, 2011, in a decision in the 
Western Energy Alliance v. Salazar case, the court held that the 
instruction memorandum constituted a regulation that BLM adopted 
without following proper rule-making procedures, and the court issued a 
nationwide injunction blocking implementation of the memorandum. Civ. 
No. 10-237F (D. Wyo. 2011).
---------------------------------------------------------------------------
Question 4: The GAO found that three field offices--the Pinedale, 
        Wyoming office, the Farmington, New Mexico office, and the 
        Vernal, Utah office--accounted for almost two-thirds of section 
        390 categorical exclusions used to approve APDs. In these three 
        areas, the Environmental Protection Agency found that ground 
        level ozone levels exceeded EPA air quality standards in these 
        three areas. Could returning to the Bush Administration's 2005 
        Section 390 policy lead to adverse air quality impacts where 
        cumulative impacts are not analyzed?
GAO Response:
    Yes. We reported in September 2009 that of the various 
extraordinary circumstances, concerns about the cumulative impacts of 
additional oil or gas development--especially adverse effects of such 
development on air quality--have been among the most widespread and 
potentially serious. We reported that environmental groups and 
government agencies alike had raised concerns that section 390 
categorical exclusions exacerbate air quality problems and threats by 
not subjecting projects to screening for extraordinary circumstances 
such as cumulative impacts. To the extent that new decisions by BLM to 
approve APDs with section 390 categorical exclusions do not consider 
cumulative impacts such as air quality, the concerns we cited in our 
report would persist. Moreover, as we noted in our report, certain 
projects erroneously approved as section 390 categorical exclusions may 
have required more rigorous environmental analyses--such as 
environmental assessments or environmental impact statements--which 
could have assessed the need to mitigate potentially adverse effects on 
natural resources like wildlife and air quality. Without the additional 
guidance we recommended, the potential for similar errors would 
persist.
Question 5: Given the ambiguities in Section 390's statutory language, 
        would it be important for BLM to develop a consistent policy 
        that allows for the consideration of extraordinary 
        circumstances such as the cumulative impacts of drilling?
GAO Response:
    We have not taken position on whether the use of section 390 
categorical exclusions should be subject to a screening for the 
presence of extraordinary circumstances. However, this issue is subject 
to interpretation and, as our September 2009 report noted, there are 
conflicting interpretations of section 390 of the Energy Policy Act of 
2005 with respect to this issue. Furthermore, in our report we 
suggested that Congress should consider amending section 390 to clarify 
and resolve some of the key issues that we identified in the report, 
including, but not limited to, clearly specifying whether section 390 
categorical exclusions apply even in the presence of extraordinary 
circumstances.
Question 6: Another concern identified by GAO regarding Section 390 was 
        the large amount of variation among BLM field offices in how 
        they each implemented this section. Do you think it's important 
        to standardize the application of Section 390 as part of BLM's 
        new rule?
GAO Response:
    Yes. BLM field offices should be consistently implementing section 
390 of the Energy Policy Act of 2005 in accordance with the law and 
BLM's internal agency guidance. Specifically, in our September 2009 
report, we recommended that BLM
          issue detailed and explicit guidance that addresses 
        the gaps and shortcomings in its guidance;
          provide standardized templates or checklists for each 
        of the five types of section 390 categorical exclusions, which 
        would specify, at minimum, what documentation is required to 
        justify their use; and
          develop and implement a plan for overseeing the use 
        of section 390 categorical exclusions to ensure compliance with 
        both law and guidance.
Question 7: Please explain the problems BLM has had in interpreting 
        each of the five categorical exclusions contained in Section 
        390 due to ambiguities in the statutory language of the Act.
GAO Response:
    Section 390 of the Energy Policy Act of 2005 authorizes BLM to 
forgo environmental assessments and environmental impact statements for 
oil and gas projects under certain circumstances. Specifically, 
subsection (b) outlines five new categories of activities to be 
considered categorical exclusions. These section 390 categorical 
exclusions (which we refer to as section 390 CX1, CX2, CX3, CX4, and 
CX5) include:
        ``(1) Individual surface disturbances of less than 5 acres so 
        long as the total surface disturbance on the lease is not 
        greater than 150 acres and site-specific analysis in a document 
        prepared pursuant to NEPA has been previously completed.
        (2)  Drilling an oil or gas well at a location or well pad site 
        at which drilling has occurred previously within 5 years prior 
        to the date of spudding the well.
        (3)  Drilling an oil or gas well within a developed field for 
        which an approved land use plan or any environmental document 
        prepared pursuant to NEPA analyzed such drilling as a 
        reasonably foreseeable activity, so long as such plan or 
        document was approved within 5 years prior to the date of 
        spudding the well.
        (4)  Placement of a pipeline in an approved right-of-way 
        corridor, so long as the corridor was approved within 5 years 
        prior to the date of placement of the pipeline.
        (5)  Maintenance of a minor activity, other than any 
        construction or major renovation or [sic] a building or 
        facility.''
    We reported in September 2009 that the lack of clarity in section 
390 of the Energy Policy Act of 2005 and in BLM's implementing guidance 
led to serious concerns on the part of industry, environmental groups, 
BLM officials, and others about when and how section 390 categorical 
exclusions should be used to approve oil and gas development. 
Specifically, some of those concerns included the following:
          The law's descriptions of the five types of section 
        390 categorical exclusions prompted concerns about how to 
        appropriately use one or more of the five types of section 390 
        categorical exclusions. These concerns related to (1) the 
        adequacy of NEPA documents supporting the use of a particular 
        section 390 categorical exclusion, (2) consistency with 
        existing NEPA documents, (3) the rationale for the 5-year time 
        frame used in some but not all types of section 390 categorical 
        exclusions, and (4) the piecemeal approach to development 
        fostered by using section 390 categorical exclusions.
          Concerns about how to interpret and apply key terms 
        that describe the conditions that must be met when using a 
        section 390 categorical exclusion. In particular, each of the 
        five types of section 390 categorical exclusions contain 
        terminology that is undefined in the law and for which BLM had 
        not provided clear or complete guidance. Specifically, the 
        ambiguous terms included (1) ``individual surface 
        disturbances'' under section 390 CX1, (2) ``maintenance of a 
        minor activity'' under section 390 CX5, (3) ``construction or 
        major renovation or [sic] a building or facility'' under 
        section 390 CX5, (4) ``location'' under section 390 CX2, and 
        (5) ``right-of-way corridor'' under section 390 CX4. Vague or 
        nonexistent definitions of key terms in the law and BLM 
        guidance led to varied interpretations among field offices and 
        concerns about misuse and a lack of transparency.
Question 8: Please explain the difficulties in enacting Section 390 of 
        the Energy Policy Act with respect to the phrase ``subject to 
        rebuttable presumption''? How should a BLM field office decide 
        whether a rebuttable presumption exists if that office cannot 
        consider extraordinary circumstances?
GAO Response:
    The exact meaning of the phrase ``shall be subject to a rebuttable 
presumption that the use of a categorical exclusion under the National 
Environmental Policy Act of 1969 (NEPA) would apply'' was in dispute in 
a lawsuit in federal court during the preparation of our report.\3\ The 
court in the Nine Mile case did not reach a decision on this issue, but 
the government still could appeal the ruling. Accordingly we are not in 
a position to interpret this language.
---------------------------------------------------------------------------
    \3\ Nine Mile Canyon Coalition v. Stiewig, Civ. No. 08-586, D. Utah 
(filed August 6, 2008).
---------------------------------------------------------------------------
    However, in terms of the ``rebuttable presumption'' language, we 
reported in September 2009 that it was unclear what presumption was 
rebuttable and how that presumption was to be rebutted. Consequently, 
we stated that Congress should consider amending section 390 to clarify 
and resolve some of the key issues identified in our report, including, 
but not limited to clarifying what the phrase ``rebuttable 
presumption'' means and how BLM must implement it in the context of 
section 390.
    Moreover, in our September 2009 report we noted that the language 
in a House version of the bill would have specifically exempted from 
additional NEPA analysis activities similar to those meeting the 
conditions for a section 390 categorical exclusion--meaning that use of 
the new provisions would have been mandatory. The law as enacted, 
however, contained no such specific exclusion, and instead included the 
rebuttable presumption language.\4\ Whatever this language means, it 
certainly differs from the mandatory exemption language that existed in 
the House bill.
---------------------------------------------------------------------------
    \4\ During Senate floor debates on the conference version of the 
bill, which ultimately became law, one of the bill's supporters stated 
that the bill ``does not include categorical waivers for NEPA for oil 
and gas developments.'' 151 Cong. Rec. S9340 (daily ed. July 29, 2005) 
(statement of Senator Akaka).
---------------------------------------------------------------------------
Question 9: During its investigation, GAO discovered that BLM had 
        actually used Section 390 categorical exclusion over 6,100 
        times, while BLM believed that it had only used these 
        exclusions about 5,000 times. Has BLM implemented a system yet 
        to fully track the uses of these categorical exclusions?
GAO Response:
    We are not aware that BLM has implemented such a system.
Question 10: Please explain the benefits of a standardized checklist 
        for all BLM offices to follow with respect to these categorical 
        exclusions? Do you believe that BLM could still develop a 
        standardized checklist on how to use Section 390 exclusions?
GAO Response:
    As we stated above in our response for Question 6, we believe BLM 
field offices should be consistently implementing section 390 of the 
Energy Policy Act of 2005 in accordance with the law and BLM's internal 
agency guidance. In our September 2009 report, we recommended that BLM
          issue detailed and explicit guidance that addresses 
        the gaps and shortcomings in its guidance;
          provide standardized templates or checklists for each 
        of the five types of section 390 categorical exclusions, which 
        would specify, at minimum, what documentation is required to 
        justify their use; and
          develop and implement a plan for overseeing the use 
        of section 390 categorical exclusions to ensure compliance with 
        both law and guidance.
    We still believe that it is important that BLM continue to pursue 
implementing these recommendations.
Question 11: The 2006 BLM guidance did not address the documentation 
        needed to support the use of a section 390 categorical 
        exclusion or even whether BLM field offices had to disclose how 
        often these categorical exclusions were used. What did GAO 
        recommend with respect to documenting the use of these 
        categorical exclusions?
GAO Response:
    With regard to documenting the use of section 390 categorical 
exclusions, we recommended in our September 2009 report that BLM 
provide standardized templates or checklists for each of the five types 
of section 390 categorical exclusions, which would specify, at a 
minimum, what documentation is required to justify their use.
Question 12: GAO also recommended the development of a BLM oversight 
        plan to ensure compliance with EPACT, NEPA, and agency guidance 
        documents. Has BLM done this yet?
GAO Response:
    As far as we know, BLM has not yet developed an oversight plan as 
we recommended in our September 2009 report. As we noted in our 
testimony,\5\ BLM was in the process of developing a second instruction 
memorandum in 2011 when the court overturned their May 2010 instruction 
memorandum. BLM has had to adjust their plans as a result of the August 
12, 2011 court decision.
---------------------------------------------------------------------------
    \5\ GAO, Energy Policy Act of 2005: BLM's Use of Section 390 
Categorical Exclusions for Oil and Gas Development, GAO-11-941T 
(Washington, D.C.: Sept. 9, 2011).
---------------------------------------------------------------------------
                                 ______
                                 
    Mr. Lamborn. Thank you for your testimony. We will now go 
to our rounds of questions. And because yet another one of the 
Members of the Committee is on a tighter time schedule for 
traveling back to the district, I am going to defer to Mr. 
Flores and let him go first. So I recognize the gentleman from 
Texas.
    Mr. Flores. Thank you, Mr. Chairman. I will try to get 
through as many questions as I can as quickly as I can.
    Mr. Coleman, you were I think fairly adamant that the law 
was very clear, that the legislative intent and legislative 
history of EPAct '05 was very clear. But your friend to the 
right of you is saying that it wasn't. Can you guys reconcile 
this for me? Mr. Gaffigan, I am going to ask you for your 
comments. Why don't you give me your comments first? Mr. 
Gaffigan.
    Mr. Gaffigan. I think in general when we talked to a lot of 
people when we did this study, and we tried to look through the 
legislative history, and we are GAO auditors. We are trying to 
understand what went behind some of the words that are in 
there. A lot of folks are not sure what some of the key terms 
in the law referred to. And in searching the legislative 
history we couldn't find much evidence of that. I know Mr. 
Coleman is pretty clear that he felt it was clear as to what 
was intended. And I think that if you talk to some others who 
were involved--because he did have some other friends who were 
helping him with the legislation, you will probably hear a 
different version of what might have been clear.
    All we are pointing out is that a lot of folks have raised 
this question. It has already been subject to litigation, and 
we suspect that it probably will be in the future, no matter 
what the outcome of further guidance is.
    Mr. Flores. Mr. Coleman.
    Mr. Coleman. I appreciate you asking that question. As we 
talked, Mr. Gaffigan and I have and others, these issues that 
were raised in the GAO report, some of them about lack of 
clarity I didn't think were really appropriate. Congress does 
not define every term that is in a bill. These have to be 
interpreted based on their common usage or experience. The 
whole question is--and I go back to the testimony that I gave 
earlier, what has been attempted is to read some words into 
this bill which were not in there, like extraordinary 
circumstances; and read some words out of there that are 
clearly in there, like having a categorical exclusion for NEPA 
based on a land use plan. That is clearly in there. We have 
went over that in great detail.
    Frankly, there was only one other person that really 
negotiated this. Now I am not sure if she would agree with me 
on everything. But that one she would have to agree that we 
went over every one of those words. So I know we can't have a 
disagreement on that. Every one of these words is what we 
intended to be in there. As a lawyer, we have certain rules of 
statutory construction that we use to interpret statutes. We do 
not have to write all that out. And as I mentioned to others, 
at one time the Congress used to have a habit of writing 
detailed report language. This is not what we were doing in 
EPAct 2005. So we tried to write in terms that were going to be 
clearly understood. And I think the people who were against 
this law, mostly environmental groups, wanted to raise these 
issues to create a problem which didn't really exist.
    Mr. Flores. OK. More questions for Mr. Gaffigan. Were there 
any substantive problems? It sounds like we had paperwork 
problems, inconsistencies. Were there substantive problems?
    Mr. Gaffigan. I would say no. Most of them were sort of 
technical in nature, but we felt they were serious enough to 
point out. As you know, lawsuits can be lost or criminal cases 
when they are brought can be lost in terms of a technicality. 
So we wanted to make clear that to put us in the best position 
of not being vulnerable to challenges that all these things 
were important to address.
    Mr. Flores. Was NEPA violated at any time?
    Mr. Gaffigan. Not in anything that we have found, no.
    Mr. Flores. So as far as we know, none of these mistakes or 
inconsistencies caused a pollution incident or a loss of life 
or damage to property or anything of that nature?
    Mr. Gaffigan. Well, there was a challenge and there were 
some in the Nine Mile Canyon case that were challenged that 
there was a categorical exclusion brought there. Some 
environmentalists brought a lawsuit challenging that. And that 
is what sort of led to a settlement where BLM came out with 
more further detailed guidance.
    Mr. Flores. That doesn't answer my questions. Was there any 
pollution incident or loss of life or damage or injury or 
anything because of the inconsistencies in the way the 
paperwork was processed?
    Mr. Gaffigan. Not in the paperwork.
    Mr. Flores. OK. Ms. Sgamma, your testimony was pretty 
compelling to me. And Mr. Chairman, may I have a couple more 
minutes?
    Mr. Lamborn. Yes. I will recognize myself now, but I will 
yield to you.
    Mr. Flores. Thank you, Mr. Chairman. Ms. Sgamma, you went 
through some metrics pretty quickly. You talked about this SWCA 
analysis or study. You gave us some numbers, jobs, payrolls, 
government revenues, things like that. Can you repeat those 
quickly for me?
    Ms. Sgamma. Sure. In Wyoming, because of delays to six NEPA 
documents, six environmental impact statements, 30,600 jobs 
have been prevented, $2.6 billion in labor earnings, and $157 
million in annual royalty and tax revenue. And that is just in 
Wyoming. If you would like, I can leave that study.
    Mr. Flores. OK. And this is just because the 
environmentalists felt like there was a missing layer of NEPA 
analysis which the law provides that that could be subject to a 
categorical exclusion, is that right?
    Ms. Sgamma. Well, I was actually bringing up merely to make 
the point that NEPA can take a long time. In the case of these 
six EISs, they are over 6 years. They are at about the 6-year 
mark with no draft in sight. So when we look at categorical 
exclusions once that EIS is done, they are a way to enable one 
additional layer of redundant NEPA to be avoided. So my point 
was that NEPA does, indeed, cost and delays to doing NEPA can 
cost time, money, and more importantly, jobs and government 
revenue.
    Mr. Flores. And to continue on the jobs and government 
revenue for a minute. You talked about small businesses and 
producers. If they were allowed to continue I guess under the 
older rules, the original interpretation of the CXs, that we 
could be producing what percentage of our domestic oil and gas 
and using what percentage of public lands?
    Ms. Sgamma. Well, currently we provide in the West--and by 
the West, I mean basically the Rocky Mountain States, not 
including California. But just in the Rocky Mountain States, we 
are producing 27 percent of the Nation's natural gas, 14 
percent of the oil production, and we are disturbing less than 
0.1 percentage of public lands. So of the 700 million acres of 
Federal mineral estate, there is about, as best we know--
because the last time BLM put out a number was 2007--as best we 
know there are about 500,000 acres of actual surface 
disturbance and that equates to less than a tenth of a 
percentage.
    Mr. Flores. OK. And 70,000 jobs is part of that. And what 
was the government revenue as well?
    Ms. Sgamma. Well, we did our blueprint study which finds 
that by 2020, we could produce as much in the West--and I can 
leave a copy of that as well--as we import from several nations 
such as Saudi Arabia, the Middle East, and Venezuela. And if 
government policies don't get in the way, we are able to 
produce that by 2020 and create about 70,000 jobs and $58 
billion worth of additional investment in the West.
    Mr. Flores. And I think the answer to my next question is 
obvious, we can do that without any government stimulus, is 
that correct?
    Ms. Sgamma. That is correct. That is pretty much a 
projection that doesn't look at high, medium and low levels of 
additional regulations. That is kind of the status quo now. Or 
if we can use things like categorical exclusions.
    Mr. Flores. Essentially we get government out of the way 
and then Main Street America can do its job and create revenues 
and grow payrolls and produce more revenues to the Federal 
Government?
    Ms. Sgamma. Absolutely.
    Mr. Flores. As well as State and local governments. Thank 
you. That is the end of my question. I yield back to you, Mr. 
Lamborn.
    Mr. Lamborn. Thank you. We will now start our second round 
of questions. And thank you for allowing us to do multiple 
rounds of questions. And whoever is here will have that 
opportunity. This is such an important topic.
    Deputy Director Pool, I would like to go straight to you 
because you hold a very important position in the 
Administration. And first of all, just a simple, hopefully a 
yes or no answer--and I think I know what you are going to say. 
The purpose of categorical exclusions are to streamline the 
permitting process and expedite American energy production and 
job creation. And do you believe that we accomplish this goal 
with categorical exclusions?
    Mr. Pool. I think generally speaking we do.
    Mr. Lamborn. Thank you. Now more specifically, this is a 
technical question, and I know you will be able to follow it. I 
don't know if everyone will be able to follow it but 
nevertheless your answer is critical to this question.
    In light of the court's recent ruling that was discussed 
earlier and the statement that we heard this morning that BLM 
plans to issue a rulemaking process for categorical exclusions, 
can you tell us if you intend on putting IM 2010 118--that is 
BLM's 2010 policy that includes the extraordinary circumstances 
provision and a rewrite of two of the five categorical 
exclusion categories and that would reinstate duplicative 
regulatory reviews for energy projects, which as we know, the 
President said that is one of the things we should guard 
against in his speech last night, burdensome regulations. Do 
you intend to put this out for notice and comment? Or do you 
plan on putting out a policy that complies with Section 390 as 
it was originally passed into law in 2005?
    Mr. Pool. Chairman, in reference to the two CXs that we had 
readdressed in the IM that was rescinded by the courts in 
addition to the application of extraordinary circumstances, 
those three items will be taken into consideration in terms of 
a rulemaking process, and that rulemaking process will involve 
public notification and comment.
    Mr. Lamborn. So it will be put out for public notice and 
comment?
    Mr. Pool. That is correct.
    Mr. Lamborn. OK. Let me shift to Mr. Bolles. Can you 
provide any examples where categorical exclusions enabled your 
company to continue development and create jobs that would not 
otherwise have been created?
    Mr. Bolles. Thank you, Mr. Chairman. Yes, as I mentioned in 
my testimony, Devon Energy is involved in a field in Wyoming 
called Washakie Basin where we have an active drilling program 
as well as a production going on there. We have used in the 
past categorical exclusions to gain applications for permit to 
drill in that field. We had a situation--I think as I mentioned 
where we had two what we call fit for purpose rigs, drilling 
wells in this basin, and those two rigs were drilling basically 
the same amount of footage or wells as seven rigs prior to 
these new generation rigs. And so we kind of created an 
efficient machine, if you will, of infield drilling within this 
particular field. And in order to keep those rigs busy, in 
order to keep them--because we are paying $25,000 to $30,000 a 
day to keep these rigs busy, whether they are working or 
whether they are not, that alone equates to a number of jobs. 
Not just Devon employees but jobs, the local welder, the road 
grader, the local restaurants that are all helping to provide 
services to all of these people. We had to at one point--at 
least part of the reason for us to eliminate the use of one of 
those rigs on these particular lands in Carbon County, Wyoming 
was related to the BLM's decision to not grant APDs using 
categorical exclusions. Obviously part of the reason was also 
the price of natural gas declined. But that rig has moved on, 
and it is currently working on fee lands in another part of 
Wyoming and soon will be not employed by Devon any longer.
    Mr. Lamborn. OK. Thank you.
    Mr. Gaffigan, in your written testimony you say that in 
some cases, ``BLM was overly cautious in applying Section 390 
categorical exclusions in part because BLM feared litigation 
from environmental groups.'' Could you elaborate on that, 
please?
    Mr. Gaffigan. Well, I think, again, because of some of the 
uncertainty in the language of both the law and their guidance, 
if they could see a situation where they could approve an APD 
without using a categorical exclusion they would go that route 
rather than jeopardize potential challenge under the 
uncertainty associated with categorical exclusions. I think 
that is the basic mindset that they were going through.
    Mr. Lamborn. OK. Thank you. I would now recognize the 
gentleman from California, Mr. Costa, the former Chairman of 
this Subcommittee in the previous Congress, for 5 minutes.
    Mr. Costa. Thank you very much, Mr. Chairman. Thank you for 
holding today's hearing, as we try to deal with the host of 
challenges on increasing our opportunities for energy 
development of all kinds, as we use all the energy tools in our 
energy toolbox. It is our proposal to discuss the impacts of 
the regulatory framework that is involved in our energy policy 
in total because there is a very important hand-in-glove, I 
think, relationship there.
    Let me first ask Mark Gaffigan, in yesterday's Natural 
Resources Committee hearing on jobs and offshore energy 
development, I learned of Scott Mitchell's comments from Wood 
McKenzie, who mentioned that slowing activities in drilling 
comes at great cost. Now we know if we look at the last 11-year 
cycle from drilling domestically to a decrease in the mid part 
of the last decade to what has been a very rapid increase in 
the last 2 years that these changes--and from those changes, 
you could draw examples. But he talked about the Gulf of Mexico 
that showed that if permitting paces were restored to the 
prelevel Macondo levels, the estimation is it would create an 
additional 200,000-plus jobs in 2012, or $8.4 million. And I am 
not sure that number is correct. When we look at the royalty 
structure, it must be billion, I would think and roughly 
additional significant revenues to States. What is your 
assessment, Mr. Gaffigan, of jobs that might be recovered if 
the Administration were to again use categorical exclusions?
    Mr. Gaffigan. You know it is very difficult to quantify 
that. But there is no doubt there has always been a boom and 
bust cycle in oil and gas development. And there have always 
been a lot of reasons for why development--as far as 
categorical exclusions go, in our work, we did see some 
benefit. We focused on the permitting process in the offices. I 
think what is hard to quantify is what would have happened if 
the categorical exclusion were----
    Mr. Costa. Let me ask the question this way then, because I 
think you ought to provide the Committee with a detailed 
response, notwithstanding the various circumstances. We would 
like to have that. I think I would like to have that. With the 
President's desire, both last night and in previous statements 
that have been made by both he and the Secretary, are you going 
to focus on removing various regulatory burdens? And do they 
include categorical exemptions as a part of that consideration?
    Mr. Gaffigan. At GAO, I don't think we are going to be 
making any decisions.
    Mr. Costa. No, I know that. I would like the Administration 
to--Mr. Pool, you are representing the Administration?
    Mr. Pool. Yes, sir, I am.
    Mr. Costa. And that question was noted more appropriately 
placed toward you.
    Mr. Pool. Sure. Thank you. Well, let me just add that BLM 
has used categorical exclusions for many, many years. We use 
about 80 administrative CXs that cover, you know, nine BLM 
program areas which also includes other aspects of oil and gas 
and geothermal development. We think the CXs are a valuable 
tool in terms of managing land surface activities.
    Mr. Costa. You are saying in contrary that you think the 
use of categorical exclusions has added significant delays to 
leasing lands in intermountain West?
    Mr. Pool. I don't think it has added significant delays. I 
think that--some of the challenges we have in various provinces 
of the West depends on the environmental considerations that 
are being addressed through NEPA. Many of these planned well 
developments on a much larger scale does require more extensive 
NEPA evaluation.
    Mr. Costa. My time is running out. I want to ask this same 
question to the other witnesses here. So you are going to do it 
on a case-by-case basis? How are you going to approach 
regulatory reform in this instance?
    Mr. Pool. I think that the leasing reforms that have been 
initiated by this Administration, as previously mentioned in 
the early part of this hearing, that prior to the leasing 
reforms, many of our oil and gas leases were being protested, 
appealed, or litigated, as high as 50 percent. It wasn't 
serving the public interest. It wasn't serving industry's 
interest. So as a result of leasing reforms, we are up front, 
the BLM, in cooperation with industry and the conservation 
community and State and local governments, were spending more 
time in evaluating landscapes such that when we offer them for 
lease that we receive fewer protests. And prior to the leasing 
reform, our protests were as high as 50 percent bureau-wide.
    Mr. Costa. And so how much have they been reduced?
    Mr. Pool. We think they have been reduced down to 12 to 14 
percent, and that is because of the quality up front work.
    Mr. Costa. Could you provide the Subcommittee with that 
information, please?
    Mr. Pool. Yes. I would be a glad to.
    Mr. Costa. My time has expired. Mr. Chairman, I don't know 
if you think it is warranted but whether or not the private 
sector participation here would want to respond to----
    Mr. Lamborn. We will have a second round of questions, 
another round of questions.
    I would like to ask either Ms. Sgamma or Mr. Coleman, if 
BLM issues IM 2010 118 that we discussed earlier for public 
comment, do you feel that that would be in compliance with the 
recent court ruling? Either one of you.
    Ms. Sgamma. Well, I believe that Mr. Pool said just now 
that they would not just simply turn around and issue 118 for 
comments but actually consider the judge's ruling as far and 
that rewrite of the two CXs. So it didn't sound, if I was 
understanding Mr. Pool correctly, that they are just going to 
turn around and issue that 118 for public comment. Well, we 
would have a problem with that. If you looked at the judge's 
ruling--and although she didn't rule on the merits 
specifically, she did say that there was not a direct path from 
the statute to the regulation that was put out--that 2010 118. 
So I thought Mr. Pool's answer was encouraging, that they are 
not just going to turn around and issue that.
    Mr. Lamborn. Mr. Pool, was that a correct understanding?
    Mr. Pool. That is a correct understanding. And in fact that 
directive has been vacated and currently we have gone back to 
the standards in our NEPA handbook of 2008. And based on the 
judge's decision, we will reconsider some of the areas that we 
readdressed in that directive, including two of the CX 
modifications in addition to the review of extraordinary 
circumstances in a rulemaking, and that will be designed for 
public notice and comment.
    Mr. Lamborn. OK. Thank you. And Mr. Coleman.
    Mr. Coleman. I think that is what it calls for. Hopefully 
BLM will have an open mind on these now, particularly in view 
of the legal issues of changing their interpretation of the 
statute. They had had a pretty clear interpretation early on of 
what this statute said and then they did an about-face that has 
real legal problems with doing that. So I hope they will go 
back to the previous version and work from there.
    Mr. Lamborn. Thank you. And Ms. Sgamma, I have another 
question for you. As you have heard discussed to date, BLM 
offices are sometimes hesitant to use categorical exclusions--
this is what we heard from the GAO--due to a fear of litigation 
by environmental groups. Is this fear of environmental 
litigation something that your members are often faced with 
when developing energy projects?
    Ms. Sgamma. Absolutely. There are several points at which 
an energy project can be litigated. And we face litigation at 
almost any one of those points, at the R&D stage, at the 
leasing stage. There are protests at the project stage, 
project-level NEPA and even sometimes at the APD level, the 
permit level. So that certainly is a valid concern.
    However, I sometimes think that the interpretation of 
Interior on the validity of some of these suits is unwarranted. 
A lot of times we see environmental lawsuits that are cut-and-
paste from one to the next, cut-and-paste language that doesn't 
apply or that case law clearly supports the BLM's decision. So 
often we would wish that BLM would stand up for their decisions 
that they make rather than continuing to delay making those 
decisions in the hopes of bulletproofing every decision that 
they make.
    For example, what we are seeing now with all those jobs 
being delayed in Wyoming, for example, because of delays to 
NEPA, we are seeing BLM take a long time because they are 
trying to--they are almost practicing preventive medicine. They 
are trying to bulletproof their decisions so that they don't 
get sued.
    Well, they are going to get sued because there is a group 
out there that is going to sue them no matter how frivolous the 
lawsuit or how specious the grounds or how shaky the grounds.
    So case law does support responsible oil and gas 
development on public lands. For example, the categorical 
exclusions. So we would just hope that we could get on, move 
on, and not let that litigation bog down the entire process.
    Mr. Lamborn. Thank you. Mr. Coleman?
    Mr. Coleman. Mr. Chairman, I just wanted to add that one of 
the reasons that the committee was interested in doing the 
statutory categorical exclusions was, with the administrative 
categorical exclusions, which BLM has talked about how they 
have used for such a long time for various things, you still 
get to litigate that. What you do is, you litigate whether or 
not that extraordinary circumstances document. You do an 
extraordinary circumstances review. And the environmentalists 
litigate whether that has done an adequate look of whether 
there were extraordinary circumstances. That is one of the 
reasons the Congress wanted to pass a statutory categorical 
exclusion, so we did not have these extraordinary circumstances 
review lawsuits.
    Mr. Lamborn. All right. Thank you. I would like to 
recognize the gentleman from California for up to 5 minutes.
    Mr. Costa. I don't think I will take that long, but maybe 
the witnesses might in their response. The question that I 
asked earlier to the private sector participants, I would like 
the three of you to give me your take on whether or not you 
think the exclusion of the use of categorical exclusions adds 
significant delays to interleasing mountains and I guess, 
Kathleen, you just spoke of that in your last response as an 
example. Obviously you have a lot of real hands-on experience 
on this kind of stuff.
    And I concur with your comment. There is a group out there 
in many instances that will sue as a pro forma because it is 
part of the agenda that they have and their philosophy. And I 
think we should do due diligence to make all of our permitting 
process as bulletproof as possible and obey the law and protect 
the environment in that process. But clearly that is not going 
to prevent folks who just don't believe we ought to be using 
public lands in this fashion from suing.
    So would you please, the three of you, respond on the 
categorical exclusions. How much do they add in delays, if they 
do?
    Ms. Sgamma. Do you mean how much is not using them adding 
to delays?
    Mr. Costa. Right.
    Ms. Sgamma. Well, I mean we have put together several 
instances where companies clearly met the criteria in one or 
more of the criteria in Section 390. And rather than using it, 
a CX, the BLM, the field office said, no, go ahead and do an 
EA, an environmental assessment. And sometimes that can take a 
couple of years. I mean usually an EA for a couple of wells 
doesn't take that long or shouldn't take that long, but there 
are cases where it can take years. And so time is money. And 
what happens also is you might have to lay down a rig. You 
might not be able to go and create jobs, about 125 per rig 
running, if you have to lay down that rig because you can't get 
a permit.
    But I guess Randy has probably some better examples.
    Mr. Bolles. Yes, sir. I think I mentioned before that in 
this particular--I am just using it as an example--this 
particular field in Wyoming in Washakie Basin, where we had a 
situation where we utilized--or BLM approved applications for 
permit to drill utilizing categorical exclusions. That 
particular area called the Washakie Basin is under an extensive 
EIS review right now, environmental impact statement, that 
began in 2004 for Devon. And to date--what are we, September of 
2011--we still don't have a draft document.
    Mr. Costa. Are there some distinctions here--and this is 
way out of my realm here--but between natural gas fields and 
oil fields in some of the areas? I know in Colorado we rely 
heavily on California on a lot of our natural gas because of 
our air quality issues. It is the energy de jure. Is it more 
problematic in some instances versus others?
    Mr. Bolles. I am not sure I understand your question, sir.
    Mr. Costa. With pursuing these efforts in natural gas 
fields versus oil, are the delays--are they the same, I guess, 
is what I am trying to get to.
    Mr. Bolles. I think there are different instances or 
different issues in developing oil versus developing gas. And 
in the particular situation I am talking about, it is actually 
a development of both. It is oil and gas coming from the same 
stream. So I don't know that it makes any difference whether it 
is oil or gas. The NEPA work is done on Federal lands, whether 
they are oil fields or gas fields.
    Mr. Costa. So the delays--the bottom line--relate to months 
and years?
    Mr. Bolles. Yes, sir. I was going to give the example of 
this particular environmental impact statement. We don't have a 
draft document. It is almost 8 years. It worked well for a 
company like Devon who used categorical exclusions to be able 
to continue to develop that field and drill--it is an infield 
drilling project where we are drilling--maybe we had six wells 
in a particular section and we needed to drill three or four 
more wells in order to--our reservoir engineers had determined 
that would fully drain that particular reservoir in that 
particular area. In order for us to do that, we were able to 
use categorical exclusions to get permits to drill those 
additional three wells inside of this field. And that allowed 
us to have--and we had less surface disturbance because 
technology allowed us to drill off of one pad instead of three 
or four different pads. So those delays--I guess that is an 
example of----
    Mr. Costa. Yeah. It doesn't make any sense.
    Mr. Bolles. Right.
    Mr. Coleman. And I would just add, Congressman, that just 
as a fundamental matter of how the litigation takes place, 
frankly, we normally don't get--we should not get a litigation 
on the statutory--and we do have some. But we did not have a 
lot of litigation on these statutory categorical exclusions, 
yet we do on these regulatory ones because, as I said earlier, 
that delays things--the regulatory ones do--because you get to 
litigate whether or not that extraordinary circumstance review 
has been done properly. And certainly if you do an EA, if you 
are forced to do an EA, then that takes a whole lot longer from 
an administrative processing point of view before you get your 
permits.
    Mr. Costa. Thank you. Thank you, Mr. Chairman.
    Mr. Lamborn. OK. I will now recognize myself.
    Mr. Pool, earlier this year Director Bob Abbey and 
Secretary Ken Salazar announced that BLM would be increasing 
oil and gas permits by 44 percent this year to 7,200 from 5,000 
in 2010. Is BLM on track to meet that goal for Fiscal Year 
2011?
    Mr. Pool. Are we talking about applications for permit to 
drill?
    Mr. Lamborn. Yes.
    Mr. Pool. Yeah. Currently we have issued APDs approved from 
7/10 to 6/30 of 2011 is around 4,156. So we are a little bit 
shy of that goal. But I also might add that we have issued 
7,000 APDs that have yet to be drilled, and we have been able 
to really address some of our backlog situation. We only have 
680 plus APDs from backlog status, and most of those reside in 
Utah. They are a planned development scale involving maybe 
several hundred wells. The same may hold true in Colorado. But 
I just want to point out that there have been 7,000 APDs that 
have yet to be drilled.
    Mr. Lamborn. Thank you. Mr. Gaffigan, the GAO's categorical 
exclusion report discussed concerns with CXs from an 
environmental standpoint only. Why didn't GAO address the lack 
of utilization of CXs and the impact on jobs and the economy?
    Mr. Gaffigan. In terms of our objectives as far as benefits 
go, we try to address the benefits of actually using those for 
BLM's use of the categorical exclusions. And we did talk about 
the benefits of reduced time and efficiency that the BLM 
offices were achieving through their use of categorical 
exclusions.
    Mr. Lamborn. OK. Mr. Coleman, do you have any theories why 
BLM would not make greater use of categorical exclusions and 
thereby stand in the way of more job and revenue creation?
    Mr. Coleman. Mr. Chairman, I don't know what would go 
through individual BLM office directors' minds on this. I find 
it very curious that you had various offices that made 
extensive use of these statutory categorical exclusions and 
others who didn't do anything with them. It points out a 
problem that I have had with BLM of not really having good 
strong central management sometimes to make sure that you have 
proper implementation across BLM of policies. I will say again, 
as I said in my testimony, the use of these categorical 
exclusions is not optional. And yet it should have been made 
mandatory by oversight from BLM management to make sure that 
the agency was implementing this across the board as it should 
have been.
    Mr. Lamborn. OK. And Ms. Sgamma, in your testimony, you 
discussed the redundant and overlapping environmental analysis 
that categorical exclusions are supposed to eliminate.
    Can you elaborate on the usual NEPA process and how CXs 
streamline the process and do you have an approximation of time 
saved in the permitting process when they are used versus when 
they are not used?
    Ms. Sgamma. It is hard to give specific statistics on time 
saved because often a company doesn't even know whether an APD 
was approved under a categorical exclusion or not. We have 
members telling us about instances where they know they have 
met the criteria and didn't get a CX because they were asked to 
do an EA. So I mean I have some anecdotal evidence but it is 
hard to get at the specific time saved. I actually haven't seen 
categorical exclusion numbers in a couple of years now. So I 
don't even know how many have been issued in the last couple of 
years, and I am hoping that BLM will issue those numbers soon. 
But I am sorry, Chairman, I don't have a specific date on that.
    Mr. Lamborn. OK. Thank you. And Ms. Sgamma, you I believe 
live in Colorado, and so you are familiar with along the Front 
Range where there is more development, private residential 
development, when there is oil and gas exploration or 
development, there can be friction between the surface owner 
and the mineral rights owner. And the more densely populated an 
area, that is more of an issue, especially when we are talking 
about private lands versus public lands.
    Is it a fair statement to say that the less that public 
lands are able to be used for oil and gas development, that 
puts more pressure on the need to find private land places for 
development, hence increasing the friction between the surface 
owners and the mineral rights owners?
    Ms. Sgamma. What happens with companies when they can't get 
permits from the BLM but they can get a State permit in about 
30 days versus up to years in some cases from the BLM. Often 
companies will go to adjacent private or State lands. So often 
adjacent private and State lands see more development than 
public lands because the process is just more burdensome on 
Federal lands. If you look at areas--you mentioned the Front 
Range, Congressman. You look at, for example, the Niobrara in 
Colorado and Wyoming. I don't think we would be seeing the 
production and the job creation there in eastern Colorado as 
much if that had been primarily public lands. I think we are 
seeing more development today because most of that is private 
lands. So it does enable us to develop oil in this case much 
faster than if it were on public lands, just like the Bakken in 
North Dakota. That is primarily private lands. We weren't able 
to develop that area, nor the Niobrara even just 5 years ago. 
And we are able to explore and develop and produce that and 
increase American oil production in such a quick and timely 
fashion because that has been primarily on private lands.
    Mr. Lamborn. All right. Thank you. And then as we wrap up 
here, do any of you have any comments that you want to make as 
we conclude here based on what anyone else has said or you 
think is needed to complete the record for our hearing today? 
And I will open this up to any one of the five of you.
    Ms. Sgamma. I would just like to make one correction from 
something that was said earlier by a Member. And that is that 
incorrectly stated that we are developing on less than 30 
percent of the leases. That is incorrect information. In March 
of this year, Interior did a leasing utilization report and 
they found that in fact companies are producing on 43 percent 
of the Federal leases, not less than 30 percent, as was said 
earlier. And that equates to about--of the 38 million acres 
currently under lease about 16 million are in production. And 
we continue to hear the old numbers on that which are just 
false. So I am just hoping that those corrections can be made.
    Mr. Lamborn. OK. Thank you. Anyone else before we conclude? 
Mr. Coleman.
    Mr. Coleman. Thank you, Mr. Chairman. And I want to say, I 
congratulate you on having this hearing. I want to reiterate, 
if NEPA is trivialized by continuing to have to have 
environmental assessments over very minor activities and minor 
impacts, then you will just bog everything down. And that is 
not what NEPA was intended to do. It is supposed to focus on 
the potential for significant impacts. And we felt very 
strongly when we were working on this legislation that these 
were categories that did not have that kind of risk of having 
significant impacts and something that the Congress could do on 
its own, not wait on an Administration, any Administration. You 
could clarify these things because we knew that these things 
would not have significant impacts. So otherwise you risk 
trivializing NEPA and bogging everything down in litigation.
    Mr. Lamborn. OK. Thank you. Any final comments? Mr. Pool, 
Mr. Bolles, or Mr. Gaffigan? If not, thank you all for being 
here. This has been a very important subject. I appreciate your 
travel and your time here.
    I would note that it is about 12:35. Had we not had our 80-
minute delay for voting--we started at 10:00. We would have 
been done by, I think, 11:15. So it is spread out longer than 
we had to, but we were only here apparently about 80 minutes or 
so. Thank you very much for your testimony. And if there is no 
other business to come before the Subcommittee, seeing none, we 
will be adjourned.
    [Whereupon, at 12:38 p.m., the Subcommittee was adjourned.]

    [Additional material submitted for the record follows:]

            Response to questions submitted for the record 
                    by BLM Deputy Director Mike Pool

Questions submitted by Chairman Doug Lamborn (CO)
1.  Deputy Director Pool, BLM has, in the past, made significant 
        modifications to administrative requirements to which oil and 
        natural gas operators on public lands are subject, without 
        recourse to formal rulemaking processes with provision for 
        notice and comment. This was the case with IM 2010-117, 
        describing revisions to BLM land use planning and lease parcel 
        reviews, and with IM 2010-118, describing revisions to BLM 
        policy regarding use of EPAct05 Section 390 Categorical 
        Exclusions. Please explain the agency's rationale for pursuing 
        this course of action. How does the agency make a distinction 
        between subject matter that merits an administrative rulemaking 
        process, and subject matter that may be addressed by internal 
        guidance to agency staff in the form of an instructional 
        memorandum.
Response to 1:
    The BLM engages in rulemaking when it is imposing a requirement or 
revising a requirement previously imposed, that confers a new privilege 
or duty upon a member of the public. In general, an instruction 
memorandum is used to direct BLM employees how to perform their program 
work, as in this case NEPA analysis, or to provide clarification and 
interpretation of existing regulations.
2.  Deputy Director Pool, the purpose of categorical exclusions are to 
        streamline the permitting process and expedite American energy 
        production and job creation. Do you believe that categorical 
        exclusions accomplish this goal?
Response to 2:
    Certain actions are categorically excluded from NEPA review because 
the class of actions has been determined to typically not raise the 
potential for significant environmental impacts. Categorical exclusions 
can, when appropriately applied to a specific proposed action, provide 
an efficient tool to reduce paperwork and potential delay by 
eliminating the BLM's need to conduct and prepare further, more 
detailed, environmental analysis and documentation--EA/FONSIs or EISs--
to support the authorization of specific Federal activities. This tool 
is used by the local office where appropriate and where it makes sense. 
BLM line managers have the best information to make decisions that 
match the appropriate level of NEPA review for a proposed activity to 
the conditions on the ground.
    Some BLM field offices have made use of Section 390 CXs more than 
others. The differences stem from a variety of factors and 
circumstances, such as whether an office has recently completed any 
site-specific NEPA documentation, the level of confidence the 
authorized officer has in using a Section 390 CX, and the level of 
understanding the resource specialist has about the environmental 
sensitivity in the area where the project would take place. While a 
particular use of a Section 390 CX does not, in most cases, save 
substantial time, the cumulative time savings from processing multiple 
actions with Section 390 CXs can be significant.
3.  Deputy Director Pool, despite the fact that the GAO report on 
        categorical exclusions did not recommend their elimination, but 
        instead recommended simply that clarification be provided on 
        how they would be used. Why did BLM then choose to essentially 
        eliminate of the use of categorical exclusions?
Response to 3:
    The BLM's Section 390 CX reform policy did not eliminate the 
agency's ability to use the Section 390 CXs. The policy made the 
process for using Section 390 CXs consistent with the agency's existing 
environmental review process for using administrative CXs, including 
the need to conduct a review for extraordinary circumstances. If 
extraordinary circumstances associated with an action are identified, 
there is an indication that this particular proposed action could raise 
significant environmental impacts and therefore it is not appropriate 
to use an administrative categorical exclusion and further NEPA review, 
either an Environmental Assessment or and Environmental Impact 
Statement, is required. The BLM's policy to review the potential for 
significant impacts based on the site and project specific 
circumstances before proceeding with the Section 390 CX, aligned the 
use of Section 390 CX with all other BLM CXs, was supported by the 
Council on Environmental Quality and was responsive to a legal 
challenge, concerns raised by members of Congress, and information 
identified in the GAO's report which recommended that the BLM issue 
detailed and explicit guidance that addresses the gaps and shortcomings 
in its Section 390 guidance.
    As part of BLM's multiple-use mission, the BLM seeks to protect all 
resource values as it administers the development of domestic energy 
resources such as oil and gas on public lands. This is achieved, in 
part, by ensuring that adequate reviews are conducted before 
authorizing oil and gas development activities, including the 
identification of appropriate mitigation measures. Environmental 
analysis documents associated with land use plans do not generally 
include an analysis that adequately evaluates the effects of specific 
oil and gas development proposals.
    For these reasons, the BLM issued a policy in 2010 that required a 
review of extraordinary circumstances to help ensure impacts that may 
be significant were adequately evaluated before authorizing the 
development of federal oil and gas resources.
4.  Deputy Director Pool, as I'm sure you know, the Administration used 
        categorical exclusions over 179,000 times to advance the 
        progress of taxpayer funded stimulus projects. Can you please 
        explain to the Committee why the Administration found 
        categorical exclusions acceptable to use for stimulus projects, 
        but categorical exclusions were not acceptable for oil and gas 
        projects that have previously gone through extensive 
        environmental reviews?
Response to 4:
    The Department of the Interior and the BLM are able to 
categorically exclude some types of activities (most of which are 
unrelated to federal oil and gas development) from the preparation of 
an environmental analysis document. Stimulus projects covered a wide 
array of activities that fit into one or more of the categories that 
could qualify for an administrative categorical exclusion. All 
categorical exclusions used for an American Recovery and Reinvestment 
Act (ARRA) project were reviewed for extraordinary circumstances, and 
in the absence of extraordinary circumstances the project proceeded 
based on the CX. The range of categorical exclusions used for ARRA 
projects was much broader than the five types of narrowly defined oil 
and gas activities that may be categorically excluded by a Section 390 
CX. Also, criteria used to identify projects appropriate for stimulus 
funding included the need for proposed projects to be ``shovel ready.'' 
Essentially these projects were prescreened to determine if they raised 
potentially significant environmental concerns and would therefore 
merit additional, more extensive environmental analysis, before they 
could be undertaken. Most projects that had a potential for significant 
environmental issues were not selected for stimulus funding in the 
first place.
5.  Deputy Director Pool, can you explain whether the agency's 
        experience with implementation of the Energy Leasing Reforms 
        indicates staffing and budget are adequate at Field, District 
        and State Offices to execute the new Reform plan and to fulfill 
        other agency mandates.
Response to 5:
    The Secretary's oil and gas reforms, announced in 2010, establish a 
more orderly, open, consistent, and environmentally sound process for 
developing oil and gas resources on public lands. The BLM continues to 
implement these key policy changes that include an upfront investment 
in site visits, environmental documentation, and public participation. 
This has strengthened the BLM's ability to document its decision-making 
process. Initial indications are that protests for oil and gas leasing 
are decreasing but not eliminated. We continue to create these and 
other efficiencies.
    In these times of increasing fiscal constraint, the BLM is 
initiating its reforms within current budgets to the extent practical 
by adjusting program funding and priorities. The BLM is committed to 
doing its part to implement these policy changes within appropriated 
funding levels for 2012.
a.  Are backlogs developing in BLM Offices with respect to required 
        pre-lease or leasing actions, with respect to issuance of 
        permits, or with respect to other agency actions?
Response to 5a:
    No. The BLM issued 2,188 leases during fiscal year (FY) 2011. This 
is 116 more than were issued in FY 2009 and 880 more than were issued 
in FY 2010. Using the Leasing Reform Policy, the BLM continues to 
process expressions of interest and issue leases in areas where oil and 
gas development is appropriate. At the end of FY 2011, there were more 
than 7,000 APDs approved for operations on BLM and tribal lands, but 
not yet drilled by industry. At the end of FY 2011, there were 730 APDs 
pending longer than 30 days for a BLM decision to approve or deny the 
application.
b.  What are the potential impacts of these backlogs to the public 
        lands and resources, and how and when will these backlogs be 
        eliminated?
Response to 5b:
    With over 7,000 APDs approved, but not yet drilled, opportunities 
remain to develop resources on the public lands. Nonetheless, the BLM 
continued to process more applications for permit to drill than had 
been received during the year, thereby continuing to reduce the number 
of pending applications, including those that are in ``backlog'' 
status.
c.  Do you believe that using categorical exclusions would be a 
        sufficient way to eliminate some of these backlogs?
Response to 5c:
    There are a variety of options the BLM utilizes to fulfill its NEPA 
requirements. The Section 390 CXs are one of those options that are 
beneficial in circumstances where they are applicable. However, in 
order to use a Section 390 CX, activities must meet the particular 
criteria of a given category, such as proposing to drill a new well on 
an existing well pad or proposing surface disturbance that is no 
greater than 5 acres.
    The design features of projects to develop federal oil and gas 
resources are not driven by the criteria associated with the Section 
390 CXs. Therefore, not all proposals to develop federal oil and gas 
resources fall within the criteria of the Section 390 CXs. For example, 
many proposals do not entail drilling a new well on an existing well 
pad or disturbing less than 5 surface acres and, therefore, do not 
qualify for a Section 390 CX. Compliance with NEPA would need to be 
accomplished through other means, such as the preparation of an 
Environmental Assessment and Finding of No Significant Impact (EA/
FONSI) or an EIS as appropriate.
6.  Deputy Director Pool, can you please provide the Committee with a 
        full set of numbers of categorical exclusions (CX) issued by 
        field office and state beginning with 2006 when the statutory 
        CXs were first implemented through the end of fiscal year 2011? 
        This includes, for each field office, total CXs used by type 
        (#1, #2, #3, #4, and #5), total APDs approved, the percentage 
        of total CXs used, and total APD's approved.
Response to 6:
    The data presented in the table below is from periodic data 
requests that did not always coincide with a fiscal year, is not 
maintained in a database that can be queried or manipulated, and is 
complete through June 30, 2011. The table summarizes the number of 
categorical exclusions (CXs) issued by each field office and state 
beginning with FY 2006 through June 30, 2011 to approve APDs. The 
percentage of total Section 390 CXs used to approve APDs is calculated 
using the sum of approvals that relied on CX#1 (individual surface 
disturbance less than five acres), CX#2 (drilling at a location at 
which drilling has previously occurred within the last five years), and 
CX#3 (drilling in a developed field for which an environmental 
document, approved within the last five years, analyzed drilling as a 
reasonably foreseeable activity). This is because these three CXs are 
the only CXs that may be used to support the BLM's APD approval. 
Section 390 CX#4 (placement of a pipeline within a right of way 
corridor approved within the last five years) and CX#5 (maintenance of 
a minor activity) may be used to support the approval of other 
authorizations provided for under the Mineral Leasing Act (MLA), such 
as MLA Rights-of-Way (ROW) and Sundry Notices (SN).

[GRAPHIC] [TIFF OMITTED] T8267.003


Questions submitted by Ranking Member Edward J. Markey
1.  Can you please explain how the 2010 policy guidance issued by the 
        Obama Administration addressed some of the problems with the 
        Bush Administration's policy for implementing the categorical 
        exclusions for some oil and gas permits under Section 390?
Response to 1:
    As part of BLM's multiple-use mission, the BLM seeks to protect all 
resource values as it administers the development of oil and gas 
resources on public lands. This is achieved, in part, by ensuring that 
adequate NEPA reviews are conducted prior to authorizing oil and gas 
development activities, and appropriate mitigation measures are 
identified. Environmental analysis documents associated with land use 
plans cover broad areas and do not generally include an analysis that 
adequately evaluates the effects of site-specific oil and gas 
development proposals.
    The BLM's policy to review the potential for significant impacts 
based on the site and project specific circumstances before proceeding 
with the Section 390 CX, aligned the use of Section 390 CX with all 
other BLM CXs, was supported by the Council on Environmental Quality 
and was responsive to a legal challenge, concerns raised by members of 
Congress, and information identified in the GAO's report which 
recommended that the BLM issue detailed and explicit guidance that 
addresses the gaps and shortcomings in its former Section 390 guidance. 
For these reasons, the BLM issued a new policy that requires a review 
of extraordinary circumstances to help ensure impacts that may be 
significant are adequately evaluated before authorizing the development 
of federal oil and gas resources.
2.  The BLM announced on September 9th that it would be moving forward 
        with a formal rulemaking. However, given the August 12 court 
        decision, it is my understanding that the BLM will be operating 
        under the Bush administration's policy for Section 390 
        categorical exclusions, while the rulemaking is ongoing. How 
        will BLM operations in its field offices during the period 
        between now and when the rulemaking is completed?
Response to 2:
    On August 19, the BLM complied with the Court's Order to stop using 
the Section 390 CX guidance in Instruction Memorandum (IM) 2010-118 to 
the extent it limited the application of Section 390 CXs in specific 
ways. The BLM directed its field offices to resume following the 
guidance outlined in the 2008 BLM NEPA Handbook when considering the 
application of Section 390 CXs. This includes:
          Documenting, and incorporating into the well file or 
        case file, the decision-maker's rationale as to why one or more 
        Energy Policy Act CXs apply;
          Not conducting a review for extraordinary 
        circumstances when considering the use of a Section 390 CX; and
          Clarifying that other procedural requirements still 
        apply, such as consultation under the Endangered Species Act 
        and National Historic Preservation Act.
    It is still the BLM's policy to maintain a structured, multi- or 
interdisciplinary permit review and approval process, conduct onsite 
exams for 100 percent of proposed well and road locations, comply with 
other procedural requirements required by other environmental statutes, 
such as the National Historic Preservation Act and the Endangered 
Species Act, and apply appropriate mitigation and BMPs to all permitted 
actions even when using a Section 390 CX.
3.  Your testimony states that BLM plans to initiate rulemaking in 
        ``the near term.'' How quickly do you anticipate BLM being able 
        to begin the rulemaking process and how quickly do you 
        anticipate finalizing the rulemaking?
Response to 3:
    When the BLM determines how best to address the Court's order and 
implement Section 390 of the Energy Policy Act of 2005 (EPAct), it will 
initiate a rulemaking effort. The BLM expects the rulemaking process to 
take approximately 18 months.
4.  The GAO has found that the implementation of the Bush 
        Administration's policy was inconsistent amongst BLM offices 
        and documented harm to air quality and wildlife habitat as a 
        result of over-use of these exclusions. Will returning to the 
        Bush Administration's policy while the rulemaking process is 
        ongoing lead to the same problems?
Response to 4:
    The BLM's policy is still to maintain a structured, multi- or 
interdisciplinary permit review and approval process, conduct onsite 
exams for 100 percent of proposed well and road locations, comply with 
other procedural requirements required by other statutes, such as the 
Federal Land Policy and Management Act, Clean Air Act, Clean Water Act, 
and Endangered Species Act, and apply appropriate mitigation and BMPs 
to all permitted actions even when using a Section 390 CX.
    The BLM's interim direction is to follow the guidance outlined in 
the 2008 BLM NEPA Handbook when considering the application of Section 
390 CXs. .
5.  The Bush Administration policy prevented BLM from even considering 
        whether there were extraordinary circumstances, such as threats 
        to public health and safety, impacts to endangered species or 
        cumulative impacts that would warrant additional environmental 
        review when a Section 390 exclusion was utilized. Do you think 
        it's important for BLM's rule to allow for a review of 
        extraordinary circumstances? If so, why?
Response to 5:
    The review of extraordinary circumstances helps to identify those 
circumstances where other substantive environmental requirements, such 
as the Clean Air Act and the Endangered Species Act, must be satisfied 
before the proposed action can proceed. As previously mentioned during 
the Deputy Director Mike Pool's testimony, one of the options the BLM 
will be considering as part of the agency's rulemaking effort would be 
those elements of its 2010 guidance the Court vacated, which include a 
review of extraordinary circumstances. The BLM will provide notice and 
an opportunity for the public to comment, consistent with the 
Administrative Procedure Act (APA), as part of its rulemaking effort.
6.  Another concern raised by the GAO regarding Section 390 was the 
        large amount of variation among the BLM field offices in how 
        they each implemented Section 390. This led to a great deal of 
        uncertainty, and a large number of protests challenging BLM's 
        actions. Do you think it's important to standardize the permit 
        application process of Section 390 as part of the new rule?
Response to 6:
    The Section 390 CXs are used to support decisions to authorize 
specific oil and gas permits issued by the BLM. An example of such a 
permit includes an Application for Permit to Drill (APD). Unlike 
decisions to issue a federal oil and gas lease, which may be protested 
administratively, decisions to issue a specific permit to develop 
federal or Indian oil and gas resources are subject to legal appeal 
under procedures outlined in 43 CFR Part 4.
    The application for a permit to drill is a standardized process. 
The BLM Authorized Officer has the final decision-making authority with 
respect to the appropriate form of analysis needed before a decision 
can be made on a drilling application. BLM application review policies 
provide a framework for management. These policies are not site-
specific prescriptions but guide responsible energy and mineral 
development. The policies enable local review to account for site 
specific resources, resource uses, industry interests, and community 
needs. This flexibility is needed to be responsive to different 
combinations of these factors. Nonetheless, the APD outcomes may vary 
somewhat when compared regionally because of accounting for specific 
local conditions. The outcomes, however, comply with laws, regulations, 
and policy.
7.  The GAO's 2009 report noted that significant impacts to air quality 
        and wildlife habitat had occurred in areas where Section 390 
        categorical exclusions were heavily utilized, especially in 
        Wyoming, Utah, and New Mexico. How does the BLM plan on 
        reviewing drilling permits where these environmental impacts 
        have occurred in light of the current court ruling?
Response to 7:
    On August 19, the BLM complied with the Court's Order by directing 
its field offices to stop using the Section 390 CX guidance in IM 2010-
118 and resume using the guidance outlined in the 2008 BLM NEPA 
Handbook when considering the application of Section 390 CXs.
    It is still the BLM's policy to maintain a structured, multi- or 
interdisciplinary permit review and approval process, conduct onsite 
exams for 100 percent of proposed well and road locations, comply with 
other procedural requirements required by other environmental statutes, 
such as the Clean Air Act and the Endangered Species Act, and apply 
appropriate mitigation and BMPs to all permitted actions even when 
using a Section 390 CX.
8.  Does BLM still plan on developing a standardized checklist for the 
        review and use of Section 390 categorical exclusions, as the 
        GAO recommended? Or will this be part of a new rulemaking 
        process?
Response to 8:
    The BLM is considering long-term options for regulations to address 
the Court's order, which range from reverting to the previous policy 
outlined in the 2008 BLM NEPA Handbook to proposing those elements of 
IM 2010-118 the Court vacated and enjoined the agency's ability to 
implement. The BLM's rulemaking effort will address the Court's concern 
that BLM provide notice and an opportunity for the public to comment 
before BLM adopts procedures that would bind the agency and impose or 
affect individual rights and duties.

                                 
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