[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]
DRAFT LEGISLATION TO ESTABLISH IN THE DEPARTMENT OF THE INTERIOR AN
UNDER SECRETARY FOR ENERGY, LANDS, AND MINERALS AND A BUREAU OF OCEAN
ENERGY, AN OCEAN ENERGY SAFETY SERVICE, AND AN OFFICE OF NATURAL
RESOURCES REVENUE
=======================================================================
LEGISLATIVE HEARING
before the
SUBCOMMITTEE ON ENERGY AND
MINERAL RESOURCES
of the
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED TWELFTH CONGRESS
FIRST SESSION
__________
Thursday, September 15, 2011
__________
Serial No. 112-61
__________
Printed for the use of the Committee on Natural Resources
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_____
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COMMITTEE ON NATURAL RESOURCES
DOC HASTINGS, WA, Chairman
EDWARD J. MARKEY, MA, Ranking Democrat Member
Don Young, AK Dale E. Kildee, MI
John J. Duncan, Jr., TN Peter A. DeFazio, OR
Louie Gohmert, TX Eni F.H. Faleomavaega, AS
Rob Bishop, UT Frank Pallone, Jr., NJ
Doug Lamborn, CO Grace F. Napolitano, CA
Robert J. Wittman, VA Rush D. Holt, NJ
Paul C. Broun, GA Raul M. Grijalva, AZ
John Fleming, LA Madeleine Z. Bordallo, GU
Mike Coffman, CO Jim Costa, CA
Tom McClintock, CA Dan Boren, OK
Glenn Thompson, PA Gregorio Kilili Camacho Sablan,
Jeff Denham, CA CNMI
Dan Benishek, MI Martin Heinrich, NM
David Rivera, FL Ben Ray Lujan, NM
Jeff Duncan, SC John P. Sarbanes, MD
Scott R. Tipton, CO Betty Sutton, OH
Paul A. Gosar, AZ Niki Tsongas, MA
Raul R. Labrador, ID Pedro R. Pierluisi, PR
Kristi L. Noem, SD John Garamendi, CA
Steve Southerland II, FL Colleen W. Hanabusa, HI
Bill Flores, TX Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
Charles J. ``Chuck'' Fleischmann,
TN
Jon Runyan, NJ
Bill Johnson, OH
Todd Young, Chief of Staff
Lisa Pittman, Chief Counsel
Jeffrey Duncan, Democrat Staff Director
David Watkins, Democrat Chief Counsel
------
SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES
DOUG LAMBORN, CO, Chairman
RUSH D. HOLT, NJ, Ranking Democrat Member
Louie Gohmert, TX Peter A. DeFazio, OR
Paul C. Broun, GA Madeleine Z. Bordallo, GU
John Fleming, LA Jim Costa, CA
Mike Coffman, CO Dan Boren, OK
Glenn Thompson, PA Gregorio Kilili Camacho Sablan,
Dan Benishek, MI CNMI
David Rivera, FL Martin Heinrich, NM
Jeff Duncan, SC John P. Sarbanes, MD
Paul A. Gosar, AZ Betty Sutton, OH
Bill Flores, TX Niki Tsongas, MA
Jeffrey M. Landry, LA Vacancy
Charles J. ``Chuck'' Fleischmann, Edward J. Markey, MA, ex officio
TN
Bill Johnson, OH
Doc Hastings, WA, ex officio
------
CONTENTS
----------
Page
Hearing held on Thursday, September 15, 2011..................... 1
Statement of Members:
Hastings, Hon. Doc, a Representative in Congress from the
State of Washington........................................ 3
Prepared statement of.................................... 4
Holt, Hon. Rush D., a Representative in Congress from the
State of New Jersey........................................ 24
Prepared statement of.................................... 25
Lamborn, Hon. Doug, a Representative in Congress from the
State of Colorado.......................................... 2
Prepared statement of.................................... 2
Markey, Hon. Edward J., a Representative in Congress from the
State of Massachusetts..................................... 30
Prepared statement of.................................... 31
Statement of Witnesses:
Boesch, Dr. Donald F., President, University of Maryland
Center for Environmental Science, and Commissioner,
National Commission on the BP Deepwater Horizon Oil Spill
and the Future of Offshore Drilling........................ 49
Prepared statement of.................................... 51
Bromwich, Hon. Michael R., Director, Bureau of Ocean Energy
Management, Regulation and Enforcement (BOEMRE), U.S.
Department of the Interior................................. 5
Prepared statement of.................................... 7
Response to questions submitted for the record........... 14
Modiano, Albert, President, U.S. Oil & Gas Association....... 45
Prepared statement of.................................... 47
LEGISLATIVE HEARING ON DRAFT LEGISLATION TO ESTABLISH IN THE DEPARTMENT
OF THE INTERIOR AN UNDER SECRETARY FOR ENERGY, LANDS, AND MINERALS AND
A BUREAU OF OCEAN ENERGY, AN OCEAN ENERGY SAFETY SERVICE, AND AN OFFICE
OF NATURAL RESOURCES REVENUE, AND FOR OTHER PURPOSES.
----------
Thursday, September 15, 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 9:32 a.m. in
Room 1324, Longworth House Office Building, the Hon. Doug
Lamborn [Chairman of the Subcommittee] presiding.
Present: Representatives Lamborn, Broun, Fleming, Rivera,
Duncan, Flores, Landry, Fleischmann, Hastings [ex officio],
Holt, Costa, Sarbanes, Tsongas, and Markey [ex officio].
Mr. Lamborn. The Committee will come to order. We are going
to go ahead and start expeditiously here because we have votes
that are coming up fairly soon, and I want to make sure
everyone has their chance to give their testimony, if you are a
witness, or ask questions if you are a Member.
I believe that Ranking Member Holt should be here any
minute, and if necessary, we will just take him out of order
for his opening statement at a time that he prefers, if he is
not here upon my close.
The Chairman notes the presence of quorum, which under the
Committee Rule 3(e) is two Members. The Subcommittee on Energy
and Mineral Resources is meeting today to hear testimony on a
discussion draft of a bill, yet to be numbered, by
Representative Hastings of Washington, to establish in the
Department of the Interior an Under Secretary for Energy,
Lands, and Minerals and a Bureau of Ocean Energy, an Ocean
Energy Safety Service, and an Office of Natural Resources
Revenue, and for other purposes.
Under Committee Rule 4(f), opening statements are limited
to the Chairman and Ranking Member of the Subcommittee.
However, I want to ask unanimous consent to recognize the
author of the legislation and full Committee Chairman, Doc
Hastings, as well as Ranking Member Markey for opening
statements. Hearing no objection, so ordered.
I ask unanimous consent to include any other Members'
opening statements in the hearing record if submitted to the
clerk by close of business today. Hearing no objection, so
ordered.
I now recognize myself for five minutes.
STATEMENT OF HON. DOUG LAMBORN, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF COLORADO
Mr. Lamborn. Today we are considering a draft bill put
forward by our full Committee Chairman, Doc Hastings of
Washington, to reorganize the agencies currently tasked with
ensuring the safe and efficient development of our Nation's
offshore resources. The Chairman's bill separates the former
Minerals Management Service, MMS, into three distinct agencies
with clearly defined missions.
Additionally, the bill establishes a new Under Secretary of
Energy, Lands, and Minerals, a bold, new idea that not only
would increase oversight, but also would elevate the importance
of safe and efficient energy development on our Nation's public
lands and waters. The Bureau of Ocean Energy Management,
Regulation and Enforcement, BOEMRE, is finalizing their effort
to reorganize operations by this October, a subject that this
Subcommittee has already had an oversight hearing on in July.
However, Secretary Salazar has expressed the need for an
organic act to establish these changes in statute with clear
missions and duties. As we review this proposal today, I would
remind everyone that this legislation has not been formally
introduced. It is the intention of this Subcommittee to take
full account of whatever we learn from our witnesses today and
other experts as we craft a final bill.
We don't take this task lightly. The formation of organic
legislation for an agency must be conducted with careful
attention to the precedents of existing laws without bias, and
paired with an understanding of the successes and failures at
BOEMRE and the former MMS.
Drafting an organic act is part of Congress' solemn duty to
provide oversight of Federal operations, and must include an
expansive understanding of the agencies as they operate now,
and how we want to improve their operations and accountability
for future generations.
This hearing is not about the merits of offshore energy
development. Rather, it is on how we can work together to
ensure it is done efficiently and safely, with the best return
for the taxpayer.
On that note, I want to thank all of our witnesses for
appearing today. I hope you are full and fair analysis of the
inner workings of the BOEMRE will be of great help as we work
together to arrive at a final product.
[The prepared statement of Mr. Lamborn follows:]
Statement of The Honorable Doug Lamborn, Chairman,
Subcommittee on Energy and Mineral Resources
Today, we are considering a draft bill put forward by our Full
Committee Chairman, Doc Hastings, to reorganize the agencies currently
tasked with ensuring the safe and efficient development of our nation's
offshore resources.
The Chairman's bill separates the former Minerals Management
Service (MMS) into three distinct agencies with clearly defined
missions. Additionally, the bill establishes a new Under Secretary of
Energy, Lands and Minerals--a bold new idea that NOT ONLY would
increase oversight, but ALSO would elevate the importance of safe and
efficient energy development on our nation's public lands and waters.
The Bureau of Ocean Energy Management, Regulation, and Enforcement
(BOEMRE) is finalizing their effort to reorganize operations by this
October--a subject that this Subcommittee has already had an oversight
hearing on in July. However, Secretary Salazar has expressed the need
for an organic Act to establish these changes in statute, with clear
missions and duties.
As we review this proposal today, I would remind everyone that this
legislation has not been formally introduced. It is the intention of
this Subcommittee to take full account of what we learn from our
witnesses today and other experts as we craft a final bill.
We don't take this task lightly--the formation of organic
legislation for an agency must be conducted with careful attention to
the precedence of existing laws without bias, and paired with an
understanding of the successes and failures at BOEMRE and the former
MMS.
Drafting an organic Act is part of Congress's solemn duty to
provide oversight of federal operations, and must include an expansive
understanding of the agencies as they operate now--and how we want to
improve their operations and accountability for future generations.
This hearing is not about the merits of offshore energy development.
Rather, it is on how we can work together to ensure it is done
efficiently and safely with the best return for the taxpayer. On that
note I want to thank all of our witnesses for appearing today--I hope
your full and fair analysis of the inner workings of the BOEMRE will be
of great help as we work together to arrive at a final product.
______
Mr. Lamborn. And I am sure that Representative Holt will be
here momentarily. He will be able to offer an opening statement
at a time of his choosing, at any time after he arrives.
Next, I would like to recognize the bill author and full
Committee Chairman, Doc Hastings of Washington for five minutes
for his opening statement.
STATEMENT OF HON. DOC HASTINGS, A REPRESENTATIVE IN CONGRESS
FROM THE STATE OF WASHINGTON
Mr. Hastings. Thank you, Mr. Chairman, and thank you very
much for holding this hearing on my legislation to reorganize
the Interior Department's offshore energy agencies. The
Administration has already taken important steps in this
process. The Interior Department abolished the Minerals
Management Service and formed the Bureau of Ocean Energy
Management, Regulations and Enforcement, or BOEMRE. Next month,
it will be formally be separated into three distinct offices.
While the department is making progress, there has long
been bipartisan recognition, including from Secretary Salazar,
of the need for organic legislation to codify these changes
into law. The stakes are high, and we must ensure the reforms
are done right. Millions of jobs, our economy, and energy
security are all on the line. Reforms must increase
accountability, improve efficiency, promote safety, and ensure
the highest ethical standards of employees.
In July, I introduced draft legislation that builds on the
reforms already underway by the Administration. These reforms
will help expand American energy production in order to protect
and create American jobs, grow the economy, and lower energy
costs, while at the same time ensuring that all activity is
conducted with proper oversight.
Much like the Administration has done, my proposal would
officially abolish the MMS and create three separate agencies,
each with clearly defined missions. First, the Bureau of Ocean
Energy would be responsible for the planning, leasing, and
environmental work associated with offshore energy production.
Its primary focus will be ensuring a robust, responsible
process for harnessing offshore energy. This includes oil,
natural gas, and renewable energy.
Second, the Ocean Energy Safety Service would be
responsible for permitting, safety, and inspections. Both of
these agencies would be overseen by an Assistant Secretary of
Ocean Energy and Safety.
The third is the Office of Natural Resources Revenue, which
would be responsible for all royalty and revenue collections
for both onshore and offshore energy production. It would be
independent from the other two agencies, and overseen by the
existing Assistant Secretary.
In order to elevate the role of American energy production
within the Interior Department, my proposal will establish an
Under Secretary of Energy, Land, and Minerals. This new
position would be appointed by the President and oversee both
offshore and onshore energy production. Establishing this new
position would increase accountability to the American people,
and help ensure all separate agencies work together toward a
common goal of increased production on all types of American
energy on our Federal land and waters.
The proposal also makes a number of reforms to promote
safety and high ethical standards. So I am more interested in
working with the Administration on this proposal, which as the
Chairman noted is still in draft form, and I look forward to
hearing from Director Bromwich today. With that, I yield back,
Mr. Chairman, and thank you for the courtesy.
[The prepared statement of Mr. Hastings follows:]
Statement of The Honorable Doc Hastings, Chairman,
Committee on Natural Resources
Thank you Chairman Lamborn for holding this hearing today on my
draft legislation to reorganize the Interior Department's offshore
energy agencies.
The Administration has already taken important steps in this
process. The Interior Department abolished the Minerals Management
Service (MMS) and formed the Bureau of Ocean Energy Management,
Regulations and Enforcement (BOEMRE). Next month it will formally be
separated it into three distinct offices.
While the Department is making process, there has long been
bipartisan recognition, including from Secretary Salazar, of the need
for organic legislation to codify these changes into law.
The stakes are high and we must ensure that reforms are done right.
Millions of jobs, our economy, and energy security are all on the line.
Reforms must increase accountability, improve efficiency, promote
safety and ensure the highest ethical standards of employees.
In July, I introduced draft legislation that builds on the reforms
already underway by Administration. These reforms will help expand
American energy production in order to protect and create American
jobs, grow the economy and lower energy costs, while ensuring that all
activity is conducted with proper oversight.
Much like the Administration has done, my proposal would officially
abolish the MSS and create three separate agencies--each with very
clearly defined missions.
First, the Bureau of Ocean Energy would be responsible for the
planning, leasing and environmental work associated with offshore
energy production. Its primary focus will be ensuring a robust and
responsible process for harnessing offshore energy. This includes oil,
natural gas and renewable energy.
Second, the Ocean Energy Safety Service would be responsible for
permitting, safety and inspections.
Both of these agencies would be overseen by an Assistant Secretary
of Ocean Energy and Safety.
The third is the Office of Natural Resources Revenue, which would
be responsible for all royalty and revenue collection for both onshore
and offshore energy production. It would be independent from the other
two agencies and overseen by the existing Assistant Secretary.
In order to elevate the role of American energy production within
the Interior Department, my proposal would establish an Under Secretary
of Energy, Land and Minerals. This new position would be appointed by
the President and oversee both offshore and onshore energy production.
Establishing this new position would increase accountability to the
American people and help ensure all the separate agencies work together
towards the common goal of increased production of all types of
American energy on our federal lands and waters.
The proposal also includes a number of reforms to promote safety
and high ethical standards.
I'm interested in working with Administration on this proposal,
which is why it's still in draft form, and look forward to hearing from
Director Bromwich today.
______
Mr. Lamborn. OK, and thank you. And whenever Ranking Member
of the full Committee, Representative Ed Markey of
Massachusetts, arrives, then he will be able to make an opening
statement as well.
We will now hear from our witnesses, and I want to invite
forward The Honorable Michael Bromwich, Director of the Bureau
of Ocean Energy Management, Regulation and Enforcement. Like
all of our witnesses, your written testimony will appear in
full, so I ask you to confine your oral statement to five
minutes, as outlined in our invitation letter.
Our microphones are not automatic, so you have to press the
button to start. And I know you know how that works. So,
Director Bromwich, you may begin. Thank you for being here.
STATEMENT OF THE HON. MICHAEL BROMWICH, DIRECTOR, BUREAU OF
OCEAN ENERGY MANAGEMENT, REGULATION AND ENFORCEMENT
Mr. Bromwich. Thank you very much, Mr. Chairman, Chairman
Hastings. I apologize for being a couple of minutes late
because of the traffic. I appreciate very much the opportunity
to be here today to testify about our reorganization of the
former Minerals Management Service, and about the draft
discussion legislation that the Chairman issued on July 25th.
We believe that our offshore regulatory function should be
memorialized in organic legislation. And therefore, we are very
much encouraged by this Committee's interest in moving forward
with such legislation. In many significant respects, the draft
legislation is consistent with the organization that we have
designed and have already substantially implemented.
However, there are some significant differences that we
believe run counter to the fundamental objectives of the
reorganization and would present operational risks that would
interfere with the timely and efficient review of exploration
and development plans and drilling permits.
For the past 15 months, we have been working hard on a
number of fronts, as I think you know, to restore the public's
confidence in the regulation and oversight of offshore
drilling, to raise the standards for drilling and workplace
safety, and to reorganize the agency so as to allow for proper
focus on the three separate important missions of the former
MMS.
As I think you know, we completed the first step of the
reorganization on October 1 of last year, when the revenue
collection arm of the former MMS was moved to a different part
of the Interior Department. Effective October 1 of this year,
we will separate the former MMS' resource management and
leasing functions from its safety and environmental enforcement
responsibilities by establishing the Bureau of Ocean Energy
Management, or BOEM, and the Bureau of Safety and Environmental
Enforcement, or BSEE.
This change is designed to separate the promotion of
offshore energy development through leasing and plan approval
decisions, which will be in BOEM, and the responsibility for
ensuring that offshore operations are conducted safely and with
appropriate protection for the environment, which will be in
BSEE.
The structure and functions of BOEM and BSEE are the result
of a thorough and rigorous analysis undertaken with great care
since last summer. We have received advice from leading experts
in government transformations. We discussed the rationale and
design of the reorganization with employees throughout BOEMRE
and received their input.
The structure we have adopted and are in the final stages
of implementing was chosen from an array of alternatives and
options we considered, and it is in general alignment with the
recommendations of the National Commission on the BP oil spill
after its months of independent review of these issues.
By contrast, the draft discussion legislation would assign
the safety authority, which is generally similar to BSEE,
responsibility for, and I am quoting from the discussion draft,
`the processing of permits, exploration plan, and development
plans,' unquote.
This proposal represents essentially a division of
functions between BOEM and BSEE on the basis of whether the
activities are pre-lease or post-lease. This is an alternative
structure that we thoroughly analyzed in designing our
reorganization. We ultimately determined that a pre-lease/post-
lease organizational structure was not appropriate, and would
be counter-productive.
Among other things, it would create serious operational and
bureaucratic risks for the timely and efficient processing of
exploration and development plans. It would involve BSEE in
resource management issues, including environmental analyses
with respect to plans, which would establish overlapping and
potentially conflicting areas of responsibility and
environmental analysis.
In short, we are concerned it would create serious risks of
bureaucratic paralysis. Therefore, we believe the
organizational structure suggested in the draft discussion
legislation has the potential to slow down the timely and
efficient review of proposed offshore energy projects.
Our personnel and/or our external advisors reached broad
consensus that the structure we are implementing was preferable
to a pre-lease/post-lease division because it would enhance
efficiency and reduce duplication.
We have laid the groundwork for far-reaching organization
change. The success of our reforms now depends in large part on
providing the new agencies with the financial resources, the
tools, the training, and the culture to be effective. As we
have discussed previously, improving the safety of offshore
drilling and the effectiveness of government oversight of this
inherently risky activity will require a substantial infusion
of resources into the offshore regulator.
I thank you very much for your time and attention, and I am
happy to answer your questions.
[The prepared statement of Director Bromwich follows:]
Statement of Michael R. Bromwich, Director, Bureau of Ocean Energy
Management, Regulation and Enforcement, United States Department of the
Interior
Mr. Chairman and members of the Committee, I appreciate the
opportunity to be here today to testify about our progress in
reorganizing the former Minerals Management Service (MMS) and about the
draft discussion legislation that the Chairman issued on July 25, which
contains certain proposals regarding the organization of the Department
of the Interior (DOI) as well as of the new Bureaus that will replace
MMS.
Because the Secretary believes that our offshore regulatory
functions should be memorialized in organic legislation, we are
encouraged by this Committee's interest in moving forward with such
legislation. We have carefully reviewed the draft discussion
legislation. In many significant respects it is consistent with the
organization that we have designed, and have already substantially
implemented. However, there are some significant differences that, we
believe, run counter to the fundamental objectives of the
reorganization and would present operational risks that would impede
the timely and efficient review of offshore exploration and development
plans and drilling permits.
We look forward to continuing to work with the Committee on any
final legislation that may be introduced. In my testimony today, I will
describe in detail the reorganization that we have designed and nearly
completed, which will be effective on October 1. I will also discuss
the concerns that we have regarding certain aspects of the draft
discussion legislation. We appreciate the Committee's general support
for the significant structural changes we are implementing with respect
to the regulation and oversight of the nation's offshore energy
resources. The development of these resources is critical to the
country's economy and its energy and national security, and we believe
the reorganization of the former MMS is a fundamental reform necessary
to ensuring that this development continues and that it is done safely
and responsibly.
I. The Imperative of Reorganization
More than fifteen months ago, on May 19, 2010, Secretary of the
Interior Ken Salazar issued a Secretarial Order announcing his
intention to reorganize the former MMS and to divide its three
principal missions into three separate entities with clearly defined
missions. As Secretary Salazar said at the time, ``The employees of the
MMS deserve an organizational structure that fits the missions they are
asked to carry out. With this restructuring, we will bring greater
clarity to the roles and responsibilities of the Department while
strengthening oversight of the companies that develop energy in our
nation's waters.''
Secretary Salazar's decision reflected the fact that from its
creation in 1982 by secretarial order, MMS had been responsible for
three distinct missions--overseeing offshore resource development,
collecting royalties and revenues from onshore and offshore oil and gas
exploration and production, and enforcing safety and environmental
regulations. The problem with those important and complex missions
being undertaken by a single agency should have been apparent from the
outset, but a single agency continued to be responsible for those three
related but quite different--and sometimes conflicting--missions over
the course of 28 years.
A month after that announcement, I became the Director of the
Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE),
the agency that replaced MMS while the reorganization was being
implemented. Over the past fifteen months, we have been working hard on
a number of fronts--to restore the public's confidence in the
regulation and oversight of offshore drilling, to raise the standards
for drilling and workplace safety, and to reorganize the agency so as
to allow for proper focus on the three separate, important missions of
the former MMS.
The reorganization of the former MMS is designed to remove those
conflicts by separating missions across the three new agencies and
providing each of the new agencies with the clarity of mission and new
resources necessary to fulfill its regulatory responsibilities. We are
designing and implementing these organizational changes while
respecting the crucial need for information-sharing and the other links
among the functions of the former MMS. Recognizing and respecting these
operational issues is essential to ensuring that the regulatory
processes related to offshore leasing, plan approval, and permitting
continue to work smoothly and seamlessly.
The reorganization has been central to our thinking about reforming
the former MMS throughout my tenure. The logic of the reorganization--
and its broad outlines--have been subsequently validated by various
outside entities that have studied the agency, including the National
Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling
(the Commission). The Commission found that MMS--with its competing and
sometimes conflicting missions and due to a chronic lack of resources--
could not keep pace with the challenges of overseeing industry
operating in U.S. waters.
II. The New Agencies
The first step of the reorganization was completed on October 1 of
last year, when the revenue collection arm of the former MMS was moved
to a different part of the Interior Department with reporting
responsibilities and a chain of command completely separate and
distinct from the onshore and offshore regulators. The establishment of
this new agency--the Office of Natural Resource Revenue (ONRR)--was a
crucial first step that addressed one of the fundamental conflicts--
between revenue collection and the offshore regulator's resource
development and safety responsibilities--that plagued the former MMS.
The draft discussion legislation endorses the establishment of ONRR, as
did the Commission.
We have also announced that effective October 1 of this year, we
will separate the former MMS's resource management and leasing
functions from its safety and environmental enforcement
responsibilities by establishing the Bureau of Ocean Energy Management
(BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE).
This change is designed to separate the remaining distinct missions
that existed within the former MMS--the promotion of offshore energy
development through leasing and plan approval decisions, and the
responsibility for ensuring that offshore operations are conducted
safely and with appropriate protection for the environment. We believe
that the separation of these missions is essential to reforming the
government's oversight of energy development in our country's oceans.
During the interim period, these functions have been performed by
BOEMRE.
BOEM will be responsible for promoting and managing the development
of the nation's offshore resources, including oil, gas and renewable
resources. This mission involves ensuring that the nation's offshore
energy resources are made available for economically sound development
with appropriate protections for the environment. The structure that we
have developed and that we will complete implementing in approximately
two weeks ensures that effective reviews of the environmental impacts
of proposed projects in our oceans are closely analyzed and well-
understood; that these impacts are given appropriate weight during
decision-making related to resource management; and that the
appropriate balance is struck. These processes must be both rigorous
and efficient so that operations can go forward in a timely way and
with confidence that appropriate steps to mitigate potential
environmental effects are taken. Within BOEM, we have created the
senior position of Chief Environmental Officer, who will be responsible
for ensuring that environmental concerns are appropriately balanced in
leasing and planning decisions and for coordinating and promoting
scientific research relative to our oceans.
BSEE will be responsible for overseeing the safety and
environmental and regulatory compliance of offshore oil and gas and
renewable energy operations. The functions of BSEE include oil and gas
permitting, facility inspections, development of regulations and
standards, safety research, field operations, environmental compliance
and enforcement, review of operator oil spill response plans,
production and development conservation, and operating a national
training center.
By establishing BSEE as the offshore safety authority, we are
separating resource management from safety oversight. This will provide
the engineers who review permit applications and the inspectors who
ensure compliance with our workplace and drilling safety regulations
with greater independence, more budgetary autonomy, and clearer mission
focus. The mission of BSEE will be to independently and rigorously
enforce safety and environmental regulations. Our goal is to create a
tough-minded, but fair, regulator that can effectively keep pace with
the risks of offshore drilling and will promote the development of a
safety culture in offshore operators. We are establishing within BSEE a
new environmental compliance and enforcement function, which never
existed in the former MMS. Through BSEE, we also will establish the
review and enforcement of oil spill response plans as an area of
national-level focus and oversight in order to foster better
coordination with other federal agencies involved in oil spill
response, including the U.S. Coast Guard and the National Oceanic and
Atmospheric Administration.
The structure and functions of BOEM and BSEE are the result of a
thorough and rigorous analysis undertaken with great care since last
summer. We were determined to address the structural and mission
conflict issues that existed in the former MMS and to plan for the
orderly establishment of the new agencies. We have worked with and
received advice from leading experts in government transformations. We
have also examined closely the offshore regulatory regimes of other
nations, including those of the United Kingdom and Norway, which
underwent similar reforms following their own offshore accidents. A
central aspect of designing these new Bureaus--and of ensuring that we
can implement these changes while minimizing the disruptions to
BOEMRE's daily operations--has been the deep and continuing involvement
of BOEMRE career personnel. We discussed the rationale and design of
the reorganization with employees throughout BOEMRE and received their
input; we collected and analyzed data relating to the Bureau's
processes, systems and regulatory metrics; and we developed a number of
alternative models and options, which we discussed with BOEMRE career
leadership, for restructuring and reforming the Bureau.
We also considered the recommendations of the Commission, which
conducted its own thorough analysis of these issues and recommended a
structure that generally affirmed the structure of BOEM and BSEE we
have designed. In particular, the Commission recommended that BOEM
conduct reviews of offshore exploration and development plans,
including the environmental reviews associated with the evaluation of
those plans, while the safety authority, BSEE, be responsible for the
engineering and safety reviews involved in permitting specific well
operations, including drilling. This is the same functional design and
organizational structure that we have developed and are in the final
stages of implementing with respect to BOEM and BSEE.
By contrast, the draft discussion legislation would assign the
safety authority, which is generally similar to BSEE, but is called the
``Ocean Energy Safety Service,'' responsibility for ``the processing of
permits, exploration plan, [and] development plans.'' This proposal
represents essentially a division of functions between BOEM and BSEE on
the basis of whether the activities are pre-lease or post-lease. This
is an alternative structure that we thoroughly analyzed, in
consultation with organizational experts and our career leadership, in
designing our reorganization.
We ultimately determined that a ``pre-lease/post-lease''
organizational structure was not appropriate and would be counter-
productive because it would blur the mission focus of the new agencies,
defeating a fundamental goal of the reorganization, and create
operational and bureaucratic risks for the timely and efficient
processing of exploration and development plans. Specifically, we have
designed BOEM as the resource manager responsible for overseeing the
sensible development of offshore energy resources, including assessment
of the environmental effects of exploration and development plans. BSEE
is designed to be focused on the engineering and safety issues related
to specific well operations.
A pre-lease/post-lease structure would involve BSEE in resource
management issues, including environmental analyses with respect to
exploration and development plans, which would establish overlapping,
and potentially conflicting, areas of responsibility and environmental
analysis and create risks of bureaucratic paralysis. Therefore, we
believe the organizational structure suggested in the draft discussion
legislation has the potential to impair the timely and efficient review
of proposed offshore energy projects. During the course of our analysis
of the appropriate structure of the new agencies, our personnel reached
broad consensus that the structure we are implementing was preferable
to a pre-lease/post-lease division because it would enhance efficiency
and reduce duplication.
DOI also has major concerns about the Department-level
organizational changes proposed in the draft discussion legislation,
which would create two new Presidential appointees within the
Department of the Interior--a new Under Secretary for Energy, Lands,
and Minerals, and a new Assistant Secretary of Ocean Energy and
Safety--and reorganize the reporting structure of the Department. The
Assistant Secretary for Land and Minerals Management would no longer
report to the Secretary of the Interior through the Deputy Secretary,
but would instead report, along with the new Assistant Secretary of
Ocean Energy and Safety, to the new Under Secretary for Energy, Lands,
and Minerals. This represents a marked departure from the structure of
most other Executive Branch departments, nearly all of which have moved
to a structure in which the Deputy Secretary has statutory
responsibility as the Chief Operating Officer with responsibility for
all activities within the Department. The proposal would add a
duplicative layer of bureaucracy that would unnecessarily and
inappropriately narrow the responsibilities of the Deputy Secretary of
the Interior. The creation of the new Under Secretary position and
removal of such a large component of the Department's mission from the
supervision of the Deputy Secretary is unnecessary and would create
additional layers with higher administrative costs at a time when we
are looking to find efficiencies.
III. Related Reforms
New structures and clear missions are essential to establishing
agencies that will be effective in managing the environmentally-
responsible development of outer continental shelf (OCS) resources and
overseeing the safety of offshore operations. But true reform requires
a fundamental change in an organization's culture. Therefore, in
addition to making structural changes by establishing BOEM and BSEE, we
are working to change the way the former MMS does business. I'll
describe below several of the changes we already have made.
In recent years there have been episodes of conflict of interest
involving MMS personnel. Last year, we issued a tough new recusal
policy. Employees in our district offices, where our inspections and
permitting functions reside, must notify their supervisors about any
potential conflict of interest and request to be recused from
performing any official duty in which such a potential conflict exists.
For example, our inspectors now are required to recuse themselves from
performing inspections of the facilities of former employers. Also, our
inspectors must report any attempt by industry or by other BOEMRE
personnel to inappropriately influence or interfere with their duties.
We will soon be issuing a broader version of the policy that applies
these ethical standards across the agency. This policy presents
operational challenges for some of our district offices in the Gulf
region, which are located in small communities where the primary
employers are offshore companies. However, the need for tough rules
defining the boundaries between regulators and the regulated is both
compelling and necessary. These rules are necessary to assure the
public that our inspections and enforcement programs are effective,
aggressive, and independent. Already we have evidence that these new
rules are being followed. In an internal review conducted by the
agency, we found more than 50 instances from September 2010 through
April 2011 in which our inspectors in the Gulf of Mexico appropriately
recused themselves from a specific assignment in compliance with the
policy. In short, the policy is working.
We also have established within BOEMRE a new Investigations and
Review Unit (IRU), which is comprised of a team of professionals with
investigative and law enforcement backgrounds. The mission of the IRU
is to promptly and credibly respond to allegations or evidence of
misconduct and unethical behavior by Bureau employees; pursue
allegations of misconduct by oil and gas companies involved in offshore
energy projects; and provide the Bureau with the ability to respond
swiftly to emerging issues and crises, including significant incidents
such as spills and accidents.
The draft discussion legislation would require the Secretary of the
Interior to personally certify on an annual basis that DOI employees
are in full compliance with all federal ethics laws and regulations. We
are unaware of any similar requirement for any other Cabinet officer.
DOI believes that imposition of this certification requirement on the
Secretary is both unrealistic and inappropriate. The best and most
effective approach to ensuring ethical conduct by public employees is
to establish clear rules and standards, train employees about the
rules, establish means to enforce compliance, and appropriately punish
violators. With respect to BOEMRE, for example, these are the very
reasons we have implemented the tough new recusal policy and
established the IRU--to set high standards for ethical conduct and
establish the capacity to investigate potential violations and impose
discipline if wrongdoing occurs.
As part of our broad and continuing reform efforts, and as an
integral part of the reorganization, we have created a number of
implementation teams that have been hard at work for many months and
are the central organizational focus for our efforts to analyze
critical aspects of BOEMRE's structures, functions, and processes.
These teams are necessary in their own right, but they are also a
central part of our reorganization efforts. These teams are considering
the various recommendations for improvement that we have received from
several sources, including the Commission, the National Academy of
Engineering, and the Offshore Safety Oversight Board commissioned by
Secretary Salazar. These teams are laying the foundations for lasting
change to the way the country's offshore regulator does business.
The key areas and issues that these teams are working on include:
Permitting. We have a team devoted to reviewing and improving
BOEMRE's drilling permit review and approval process. This process is
central to ensuring that proposed drilling operations will be conducted
safely. This review and evaluation process must be rigorous, but it
must also be efficient so that proposed operations are not unduly
delayed by the process. This team has been working on plans to address
the permitting workload in light of current resources. The team is also
developing a comprehensive handbook of policies and practices. This
handbook will be designed to assist permit reviewers in carrying out
their responsibilities and ensure greater consistency across our
offices and clarity for industry.
We have been in constant communication with industry
representatives and individual operators about our permitting process,
and we have already addressed specific issues with our plan approval
and permitting processes. These changes include issuing two guidance
documents to provide clarity regarding the steps in our permitting
process and the requirements that must be satisfied to meet our
standards; issuing a permitting checklist so that operators can confirm
their drilling permit applications are complete before they submit
them, thus minimizing the need to return applications because necessary
information is missing; and the development of information technology
solutions to improve the efficiency of our processes while providing
operators with greater transparency into the status of the permit
applications. We also are conducting outreach programs with industry to
discuss the reorganization, answer questions, and ensure that the
transition to BOEM and BSEE proceeds as smoothly as possible. In fact,
we held a well-attended, all-day workshop on permitting issues in New
Orleans two weeks ago.
Inspections. We have several teams that are focused on the various
discrete issues associated with developing effective, risk-based
approaches to our offshore inspections programs. Among other things,
these teams are focusing on:
Analysis of alternative organizational structures,
development of risk-based inspections programs that target
risks posed by specific types of operations, the appropriate
distribution of inspections personnel throughout the
organization, and internal management and oversight structures.
Defining near- and long-term strategies for
inspecting industry compliance with safety and environmental
regulatory requirements, including the enhanced safety
standards imposed by the Drilling Safety Rule that we issued
last fall. We are also developing the infrastructure, and will
be recruiting the expert personnel necessary, to conduct real-
time monitoring of the highest risk operations, such as
deepwater drilling operations. I have visited nearly a dozen
facilities in the Gulf of Mexico over the last several months
to learn about the new technologies being employed by the oil
and gas industry, and to evaluate how they might be used by the
Bureau.
Developing training programs and curricula for
inspectors, supervisory inspectors, and engineers involved in
BOEMRE's safety compliance and enforcement programs. BOEMRE
recently established the National Offshore Training Center and
we have developed the agency's first formal training
curriculum, which has been piloted with new BOEMRE inspectors.
An initial introductory course for new inspectors was recently
held for 13 new BOEMRE inspectors. In the coming months, 24
additional courses will be developed covering specific areas of
offshore inspections. We have hired an exceptionally highly-
qualified training director, who will have the responsibility
to further develop the Bureau's training policies, procedures,
and programs and improve the technical and professional
capabilities of offshore inspections and compliance personnel.
Examining how to provide our personnel with better
inspections and enforcement tools, including technological
solutions, for increasing inspections coverage and efficiency,
and for improving the Bureau's ability to conduct real-time
monitoring of offshore drilling activities. We are evaluating
the increased use of laptop computers and digital tablets by
inspectors and environmental enforcement personnel. We are also
analyzing the potential of satellite imagery, e-inspections
software, and live data feeds from offshore facilities to
enhance our inspections capacity and effectiveness.
Designing an oversight program for reviewing and
evaluating operators' compliance with new safety performance
requirements. We have introduced, for the first time in the
U.S. offshore regulatory system, performance-based standards
for the identification of safety and environmental risks and
the development of systems and personnel requirements to
address those risks. These performance standards are embodied
in our Workplace Safety Rule, otherwise known as the Safety and
Environmental Management Systems or SEMS rule, that we issued
last fall.
Regulatory Enforcement. We are evaluating the adequacy of the
enforcement tools available to us--including the system for documenting
and tracking incidents of non-compliance with prescriptive regulations,
the adequacy and use of civil penalties, the process for evaluating
operator qualifications, and the system for suspending or debarring
unsafe operators. We are reviewing potential gaps in our regulations,
including a thorough review of the regulatory standards used by other
countries. We are also looking for ways to enhance the civil penalties
available for violations of BOEMRE's safety and environmental
regulations, although our view is that legislation is required to make
those more meaningful. The current enforcement framework, which permits
maximum fines of only $40,000 per day, per incident, is patently
inadequate to deter violations in an environment where drilling
operations can cost more than a million dollars a day.
Environmental Compliance and Enforcement. We have a team that is
focused on designing new inspections and enforcement programs relating
to environmental compliance, which has not existed to this point in the
agency. This team is developing staffing plans, analyzing support
requirements, and designing systems for obtaining information necessary
to support environmental enforcement. We have selected a highly-
qualified person to head this program.
Incident Investigations. We have an Incident Investigations team
that is, among other things, evaluating and developing investigative
procedures relating to specific categories of accidents and incidents,
including industrial accidents on rigs and platforms, such as fires and
spills. We are identifying the types of expertise necessary to support
BOEMRE's investigations programs, and designing systems for tracking
the status of investigations, the imposition of sanctions based on
investigative findings, and the implementation of improvements to
safety and environmental regulations and practices recommended as a
result of investigations.
Oil Spill Response. We have a team that is conducting a
comprehensive review of spill response and the adequacy of operators'
oil spill response plans (OSRPs). This team is working closely with the
U.S. Coast Guard and other federal agencies on developing enhanced
spill response plans and more effective reviews of those plans in light
of lessons learned from the Deepwater Horizon oil spill response.
Finally, changing the culture of the former MMS and establishing
BOEM and BSEE as vigorous and effective regulators will require the
infusion of new blood into the organizations. Although BOEMRE has many
devoted and competent public servants, we recognize that the former MMS
lacked sufficient expertise and capacity in certain areas related to
safety oversight. Moreover, the sweeping reforms in culture and process
that we are pursuing necessitate, almost by definition, new energy,
fresh talent, and new ways of thinking. Therefore, we have conducted
nationwide searches to identify talented personnel to fill many of the
key senior positions in the new BOEM and BSEE and have selected people
from outside the agency to fill a number of key roles. We also are
engaged in an aggressive recruitment campaign to hire new engineers,
inspectors, scientists and other experts into the Bureau.
As you may know, I launched a recruitment campaign last fall to
expand the Bureau's field of inspectors and engineers--receiving more
than 500 applications in two weeks. As we increase our inspection
staff, we will begin to use multiple-person inspection teams for many
offshore oil and gas inspections, starting with the most complex
operations. This internal process improvement will improve oversight
and help ensure that offshore operations proceed safely and
responsibly. The new process will allow teams to inspect multiple
operations simultaneously and thoroughly, and enhance the quality of
inspections on larger facilities.
I also visited a dozen top universities across the country in April
2011 to expand the number of environmental scientists and other subject
matter experts in the agency. BOEMRE is hiring scientists to do work in
fields that include environmental studies, National Environmental
Policy Act (NEPA) review, and environmental compliance--all of which
are critical to the balanced development of offshore resources. We
received more than 2,000 applications during and since the six week
tour.
All of these measures will help us ensure the rigorous and
independent oversight of offshore drilling.
IV. 2012 Funding
As described above, we have laid the groundwork for far-reaching
organizational change. The success of our reforms now depends in large
part on providing the new agencies with the financial resources, tools,
training and culture to be effective. Improving the safety of offshore
drilling and the effectiveness of government oversight of this
inherently risky activity will require a substantial infusion of
resources into the offshore regulator.
As detailed in the Commission's Report, MMS lacked the resources
necessary to provide the rigorous and effective oversight of offshore
oil and gas activity that is necessary. This weakness became more
significant as industry continued its pursuit of higher-risk projects
in deepwater and other frontier areas such as the Arctic. We agree with
the Commission's strong recommendation for a substantial increase in
the resources devoted to government oversight of offshore activities
because an effective regulator is so clearly in the public's--and in
industry's--interests.
With this in mind, I urge Congress to carefully consider the
Interior's FY 2012 appropriations bill, which was passed by the House
Appropriations Committee this summer. The bill's budget allocation
falls short of providing the full funding required to implement the
reorganization of the agency and inadequately funds the operational
capacity required to implement all of our necessary and far-reaching
reforms. The appropriations bill does not provide the requested
increase in offshore inspection fees of $55 million that could help to
fund the additional needs. Requiring that industry pay for inspections
is good government and consistent with the Commission's Report which
recommended increasing industry's contribution to regulatory oversight.
I am very concerned--and Secretary Salazar has said publicly--that the
level of funding provided in the bill will have a significant impact on
the Department's ability to facilitate the safe development of oil and
gas resources on the nation's OCS and greatly hinders the ongoing
reorganization and reform efforts.
Increased resources are essential to creating an efficient,
effective, transparent and stable development and regulatory
environment. Without them, we will be significantly limited in our
ability to adequately achieve the goals of the reorganization, follow
through on the many reforms we have launched over the past several
months, and implement many of the recommendations from the Commission's
Report and other reviews of this agency. In addition to these important
limitations, we would be unable to devote sufficient resources to
facilitating new exploration and resource development. This result is
unacceptable, and it is our collective responsibility to ensure that we
have the resources to carry out the major changes that are necessary to
improve and transform this agency.
Finally, we have announced the formation of the Ocean Energy Safety
Advisory Committee, comprised of representatives from federal
agencies--including BOEMRE, the Department of Energy, the National
Oceanic and Atmospheric Administration, the United States Geological
Survey, the Environmental Protection Agency, and the United States
Coast Guard--as well as the offshore oil and gas industry, academic
institutions, and other non-governmental organizations. Secretary
Salazar has selected Dr. Tom Hunter, the former head of the Sandia
National Laboratory who was central to the Macondo well control effort,
to chair this committee. The Advisory Committee will be a center of
excellence charged with driving research and development and technical
innovation across government and industry in the areas of drilling
safety, well control and subsea containment, and oil spill response. It
will be of invaluable assistance to BSEE as it works to strengthen the
safety of offshore energy operations. The draft discussion legislation
is generally supportive of the Advisory Committee (or ``Advisory
Board''), although there are some technical issues that need to be
addressed.
V. Promoting Safe Exploration and Development
Regulatory and industry reform in the wake of a significant
offshore disaster has happened before. The United Kingdom and Norway
substantially changed their oversight of offshore drilling and
production following the Piper Alpha and Alexander Kielland incidents,
respectively. Australia is currently facing many of the same issues we
are confronting following the Montara blowout, which occurred only
eight months before Deepwater Horizon.
The specific challenges facing us, however, are unique in many
significant respects. The scale of the offshore oil and gas operations
in U.S. waters, particularly in the Gulf of Mexico, is vastly greater
than those in the North Sea. The economies of many of the Gulf Coast
states, particularly Louisiana, are closely tied to offshore industry.
The Gulf accounts for more than 25 percent of domestic oil production
and approximately 12 percent of domestic gas production. One of the key
challenges that we are addressing--and that cannot be avoided--is this:
how will government and industry make the fundamental reforms necessary
to improve the safety and environmental protection in this massive
industry, while at the same time allowing operations to continue? The
major challenge facing the country is to dramatically improve the
safety of drilling in the Gulf of Mexico, particularly in deepwater,
while continuing with operations, keeping production flowing and
keeping people working.
VI. Conclusion: the Future of the New Agencies
The goal of the reorganization is not to restructure an agency and
divide it into multiple agencies for the sake of creating new agencies
bearing new names. Instead, the goal is to remove the structural
obstacles that stood in the way of the former MMS achieving its
substantive management goals. The structure of MMS--and its competing
and sometimes conflicting missions--needed to be changed because the
former structure hampered the pursuit of proper organizational goals.
There were too many competing goals for one agency to handle--and in
some instances those goals conflicted with one another.
The reorganization we have undertaken is designed to allow the new
agencies to achieve important goals without being burdened with a
structure that interferes with the attainment of those goals. We are
determined to succeed in creating a system that allows continued
offshore development while ensuring safety and environmental
protection. That is the goal we will continue to pursue with focus and
determination.
I thank you for your time and attention and am happy to answer your
questions.
______
Response to questions submitted for the record by Michael Bromwich
Questions for the record from the Majority
1. Director Bromwich, in your testimony you specifically mentioned the
efforts your agency is making to make the permitting process
more transparent. Naturally, transparency is an important
virtue of government operations and I would appreciate your
compliance in providing the Committee with the following
information.
a. Could you please provide for the Committee in writing some
detailed information about the last 10 approved exploration
plans and Applications for Permit to Drill for new wells?
Response: Attached to this response is information retrieved from
the BOEM and BSEE websites on November 8, 2011. Attachment 1 describes
the details of the last 10 drilling exploration plans (EP) approved by
BOEM, showing the log of the dates of initial submission and
resubmissions, and when the plan was deemed submitted. Attachment 2
describes the details of the last 10 Applications for Permits to Drill
(APD) approved by BSEE.
b. In this could you include a log of the timelines for major
milestones in the approval process for each of these plans and
APDs including: every email sent, received or any communication
unofficial or otherwise between BOEMRE staff and each
respective applicant? This must include the first instance an
applicant attempted to submit the plan or application for
approval, and the interactions BOEMRE had with the applicant if
the application was returned requesting further information
before being deemed submitted? The intention of the Committee
is to use existing information and data from APDs and
Exploratory Plans that have already been approved by your
agency--and to fully track their progress through the approval
process at BOEMRE, including data through emails that
determines how long each of these EPs and APDs took to be
deemed submitted.
Response: Dates of initial submissions and major milestones for
these plans and permits are reflected in Attachments 1 and 2.
Additional detail on the specific communications between BOEM or BSEE
and the operators is not readily available, may contain privileged or
proprietary information, and, because limited staff resources would
need to be diverted from pending matters to obtain such information,
cannot be provided without creating significant delays in the plan
review and approval process for other pending applications.
c. Could you also please clearly distinguish how many of the permits
and plans are for brand-new wells and how many are projects for
work on continuing/known projects?
Response: Per the inquiry in 1.a. above, all ten APDs are for new
wells. Four of the EPs are for new projects; the remaining six are
supplemental or revised EPs for existing projects.
d. In this can you include the relevant steps of the exploration and
development approval process? In this data, can you make sure
this information includes but is not limited to all relevant
dates regarding CZM reviews, APD dates, comment periods, and
days when drilling/production occurs?
Response: Attached to this response are flowcharts that show the
various steps during the exploration phase (Attachment 3) and the
development phase (Attachment 4) of a lease which require review and
approval by either BOEM or BSEE, as well as Coastal Zone Management
(CZM) review by the states. Each exploration and development plan or
APD is unique and the bureaus work with operators to address the
individual submissions. Additional details on the specific steps for
these plans and APDs are not readily available, may contain privileged
or proprietary information and, because limited staff resources would
need to be diverted from pending matters to obtain such information,
cannot be provided without creating significant delays in the plan
review and approval process for other pending applications.
e. Currently, the eWell system does not seem to provide any easily
accessible data on the average number of days it takes for an
EP or APD to be ``deemed submitted.'' Could you provide the
Committee with data that indicates the average number of days
it takes between an operator's first attempt to submit a plan
or permit and that same submission being considered to be
``deemed submitted''? It would be helpful if you are able to
compile and provide this information over the past year--from
September 2010 through September 2011.
Response: BOEM has used an outside consultant to analyze how much
time it takes, on average, for a plan to move from the first submission
to the ``deemed submitted'' stage. On October 14, we provided Committee
staff with a copy of preliminary results provided by the consultant,
showing that the average time to get a plan to be deemed submitted has
gone down considerably over the past year. Those preliminary results
are attached here as Attachment 5.
f. Is BOEMRE currently conducting any internal tracking of the
permitting process that has not been shared publically? If so,
could you please provide the resulting data to the Committee.
Response: BOEM and BSEE have committed to provide quarterly reports
to the House and Senate Appropriations Committees detailing the status
of EPs, Development and Operation Coordination Documents (DOCD), and
APDs in both shallow water and deepwater, with data on how many were
received, returned, withdrawn, deemed submitted (for EPs and DOCDs),
pending, and approved. The data will be broken down on a week-by-week
basis, and will also distinguish between those APDs requiring subsea
containment and those that do not. In order to ensure that the
Committee has the most up-to-date data available, and to minimize the
diversion of our permitting and planning staff resources, the bureaus
will provide the Committee with this data at the same time it is
provided to the Appropriations Committees.
Questions for the record from Ranking Member Edward J. Markey
1. The Department's oil and gas lease utilization report, issued in
March of this year, found that ``Approximately 70% of the
Undiscovered Technically Recoverable Resources currently under
lease in all areas of the Federal Gulf of Mexico are not
producing or not subject to approved or pending exploration or
development plans'' which contains an estimated 11.6 billion
barrels of oil and 59.2 trillion cubic fee of natural gas. How
does the Department define a lease that is idle and how did the
Department arrive at its estimate for the oil and gas resources
that are sitting under these idle oil company leases on public
lands?
Response: In the report you refer to in your question, ``Oil and
Gas Lease Utilization--Onshore and Offshore. Report to the President,''
the Department defines ``inactive leases'' as leased areas that are
neither currently producing oil and gas nor covered by an approved
exploration and development plan. The Department arrived at its
estimate for the oil and gas resources under inactive leases by
apportioning those estimated resources within the geologic plays
underlying the leased acreage. The Undiscovered Technically Recoverable
Resources (UTRR) calculated on leased lands take into account the
relative location, petrophysical properties and stacking of the
geologic plays underlying the leased acreage. The report assumed that
leased acreage percentages in the Gulf of Mexico had not changed
significantly since late 2008, the last time leased resources were
thoroughly analyzed.
2. Does the Department believe that civil penalties for oil companies
that violate federal regulations should be increased? If so, by
how much does the Department believe civil penalties should be
increased?
Response: The Department does believe that civil penalties for oil
and gas companies that violate federal regulations should be increased.
The existing civil penalties were established over two decades ago, and
have only been increased modestly to keep up with inflation since that
time. The current levels of $40,000 per violation per day ($35,000 per
violation per day at the time of the Deepwater Horizon incident) do not
act as an effective deterrent for an industry that spends upwards of a
half-million to a million dollars per day on rig fees. The Department
has not taken a position on what the appropriate level for the civil
penalties should be.
3. It is my understanding that there is a survivable black box
device--similar to what is on aircraft and marine vessels and
used by NTSB for their accident investigations--that could be
used on offshore oil rigs. These data recorders could provide
additional forensic information for evaluation in accident
investigations. Is your agency evaluating the technology or
whether it can lead to improved oil drilling safety?
Response: BSEE is aware of ``black box''-type recorder systems that
are being designed to capture all of the information generated by blow
out preventer (BOP) control systems; however, BSEE is not aware of any
studies at this point on the use of or effectiveness of these systems.
The major problem with the ``black box'' technology is likely to be
retrieval of the information after an accident. The ``black box'' would
most likely be left on the seafloor as part of the subsea BOP once a
floating rig (semisubmersible or drillship) disconnects and leaves
location.
An alternative that is currently being reviewed by the Ocean Energy
Safety Advisory Committee (OESC) is the remote monitoring of BOP
performance and other drilling-related data. This type of technology
transmits information from the subsea BOP and/or well via electro-
hydraulic control systems to the rig. This information may be
transmitted from the rig via satellite through a secure data network to
an onshore rig monitoring center. One problem with this method is that
a disruption of the electro-hydraulic control system results in the
interruption of data retrieval. This type of system was a topic of
discussion at the OESC meeting on November 8, 2011.
4. The BP Commission recommended that BOEMRE have a salary scale for
its engineers, technical staff, and inspectors that is similar
to the Nuclear Regulatory Commission, which is allowed to set
their salaries at a higher scale than would normally apply for
similar positions in the civil service. Does BOEMRE believe
that having the ability to set a higher salary for its
engineers, technical staff, or inspectors would enable it to
accomplish its missions more effectively?
Response: In the Consolidated Appropriations Act for FY 2012,
Congress provided language authorizing the BOEM and BSEE to use funds
in fiscal years 2012 and 2013 to establish higher minimum rates of
basic pay for employees of the Department of the Interior in the Gulf
of Mexico Region in the Geophysicist (GS-1313), Geologist (GS-1350),
and Petroleum Engineer (GS-0881) job series at grades 5 through 15 at
rates no greater than 25 percent above the minimum rates of basic pay
normally scheduled. The Department will examine how to implement this
authority in collaboration with the Office of Personnel Management
(OPM.)
5. Does BOEMRE believe that it had the ability to increase its salary
scales through its inherent administrative/regulatory authority
to increase the salaries above the level normally permitted in
the civil service for engineers, technical staff, or
inspectors?
Response: Please see response to question #4.
6. If BOEMRE does not have the authority to raise the salaries above
the normal salary scale for the civil service, does it believe
that legislation allowing it to do so would enable it to
accomplish its missions more effectively?
Response: Please see response to question #4.
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
Mr. Lamborn. All right. And we will get to those
momentarily. I will now recognize Ranking Member Rush Holt of
New Jersey for an opening statement for five minutes.
STATEMENT OF HON. RUSH HOLT, A REPRESENTATIVE IN CONGRESS FROM
THE STATE OF NEW JERSEY
Mr. Holt. Thank you, Mr. Chairman, and I was mistaken about
the starting time of this hearing. It had been scheduled for 10
o'clock, and I apologize to Mr. Bromwich.
Mr. Bromwich. I was late, too, Congressman, so no apologies
necessary.
Mr. Holt. And to my colleagues on the Committee. And I
thank the Chairman for holding this hearing because indeed we
all believe that some reorganization is needed. The question is
what in particular.
The Oil Spill Commission issued a lengthy report, hundreds
of pages, that was a pretty strong indictment of the offshore
drilling industry and regulation. Yesterday, the Interior
Department and the Coast Guard joint investigative team issued
a report which further confirmed the failings of the companies
in the disaster. Interior announced that it would issue seven
violations of Federal regulations against some companies.
There were recommended sweeping reforms to improve the
safety of offshore drilling, as the Director has talked about.
And now, well over a year after these recommendations, not a
single legislative reform has been enacted. However, the
department has moved ahead on its own, codifying the
reorganization of the former Minerals Management Service as the
majority's discussion draft attempts to do. It is an important
step, as one of I think many reforms that are needed to ensure
that we don't have disasters like this, that the safety of the
workers is preserved, and that the economic needs of the
country are met.
Thus far, I must say, the majority has refused to take
action on the broader legislation that Ranking Member Markey
and I have introduced to implement the Commission's
recommendations. Some months ago, Interior began dividing MMS
into three separate agencies. I am reviewing what I think we
all know here, but it is important to get this on the record, I
think. And the department will, as the Director has pointed
out, soon complete this division.
Now, the discussion draft in front of us has some critical
differences from this department's reorganization that could, I
think, not only require some backtracking, some loss of time,
but could undermine some of the principles in the separation in
safety and leasing and revenue functions that the department
has put forward. The discussion draft could obscure the safety
and resource management between the new agencies.
I welcome the Chairman's proposal of reorganization. But it
is a little late, and it will be very disruptive of the good
steps that are already taking place. And I don't know how to
make the best of that. The Commission recommended that the
director of the new safety agency be appointed to a five- or
six-year term to insulate the director from political
influence, called for Senate confirmation, and so forth.
The discussion draft wouldn't implement either of these
important recommendations. The Commission recommended that
Congress provide a stable funding stream to the regulatory
agencies through increased fees. And, you know, with regard to
funding, the majority's discussion draft doesn't provide any
dedicated funding stream for the Bureau of Ocean Energy, as, by
the way, we do in our Democratic legislation.
And we know that the majority has underfunded the Bureau in
the Fiscal Year 2012 Interior appropriations bill and rejected
solutions as simple as making oil companies pay for their rigs
to be inspected. I should say to my colleagues, you know, our
committee, as sometimes is the case, is populated mostly on one
side of the dais here.
Those of my colleagues who want to see increased drilling
should take this as bad news, this proposal, because the
discussion draft differs from the reorganization of the
department, the reorganization that will be completed very
soon. This discussion draft, this move, will only delay
permitting of drilling and issuing new leases. I wonder if my
colleagues would welcome that.
So rather than legislatively repeating the mistakes that
led to the BP Deepwater Horizon disaster, we should pass broad
reforms called for by the BP Commission so that offshore
drilling industry can be the safest in the world. Thank you,
Mr. Chairman.
[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 Independent BP Spill Commission issued a 350 page report that
was an indictment of the entire offshore drilling industry. Yesterday,
the Interior Department and Coast Guard Joint Investigative Team issued
its report, which further confirmed the failings of the companies
involved in this disaster. The Interior Department even announced that
it would issue seven violations of federal regulations against these
companies.
The BP Commission recommended sweeping reforms to improve the
safety of offshore drilling. Yet well over a year since the spill
began, the Congress has still not enacted a single legislative reform.
Codifying the reorganization of the former Minerals Management
Service, as the Majority's discussion draft attempts to do, is an
important step. However, it is only one of many reforms that are needed
to ensure that we never have another similar disaster again.
Unfortunately, thus far the Majority has refused to take action on
broader legislation that Ranking Member Markey and I have introduced,
H.R. 501, to implement the Commission's recommendations.
The Interior Department began the process of dividing the MMS into
three separate agencies to oversee leasing, revenue and safety in June
2010. On October 1st, the Department will complete this division.
However, the Majority's discussion draft has some critical differences
with the Department's reorganization that could undermine the
separation of the safety, leasing and revenue functions.
The discussion draft could obscure safety and resource management
between the new agencies, which would potentially undermine the purpose
of the reorganization. The discussion draft also makes little mention
of environmental protection in outlining the duties and
responsibilities of the new leasing agency.
In addition, the Commission recommended that the director of the
new safety agency be appointed to a five or six year term to insulate
them from political influence and that they should be confirmed by the
Senate. The discussion draft would not implement either of these
important recommendations, as we do in our Democratic legislation.
The Commission also recommended that Congress provide a stable
funding stream to the regulatory agencies through increased fees on the
industry. This agency has historically been woefully underfunded and we
need to ensure that they can hire the experienced engineers,
inspectors, scientists and first responders they need to properly
perform their duties.
The Majority's discussion draft would not provide any dedicate
funding for BOEMRE as we do in our Democratic legislation. In fact, the
Majority even underfunded BOEMRE in the FY2012 Interior Appropriations
bill and rejected solutions as simple as making oil companies pay for
their rigs to be inspected.
And for my colleagues on both sides of the aisle who care about new
drilling, I have some bad news. Because the discussion draft differs
from the reorganization that the Department will complete in a few
weeks, the Majority's proposed legislation would actually lead to
significant delays in future permitting for offshore drilling and
issuing new leases if it were enacted in its present form.
Rather than legislatively repeating the mistakes that led to the BP
Deepwater Horizon disaster we should pass the broad reforms called for
by the BP Commission so that our offshore drilling industry can be the
safest in the world.
I yield back.
______
Mr. Lamborn. OK. Thank you. And as I stated earlier,
whenever full Committee Ranking Member Markey appears, he is
welcome to make an opening statement also.
We will now begin our questioning. Members are limited to
five minutes for questions, and I now recognize myself.
Director Bromwich, you and I are both lawyers, and we
understand the importance of our Nation's laws. This sentence
comes directly from OCSLA, 43 USC 1332, quote, `The Outer
Continental Shelf is a vital national resource reserve held by
the Federal Government for the public, which should be made
available for expeditious and orderly development, subject to
environmental safeguards in a manner which is consistent with
the maintenance of competition and other national needs,'
unquote.
Since you are the Director of BOEMRE, you are directly
responsible for making the Outer Continental Shelf available
for expeditious and orderly development, subject to
environmental safeguards. Now, we have all seen the recent FBR
report that states if the pace of permitting does not improve,
8 to 20 more rigs will leave the Gulf of Mexico, in addition to
the 12 that have already left or are committed to leave.
Now, I know clearly what you are doing on environmental
safeguards, and that is extremely important. But what are you
doing about expeditious development?
Mr. Bromwich. Thank you very much, Mr. Chairman. I very
much appreciate the question. We take our obligations under
OCSLA in terms of the expeditious and orderly development of
offshore resources extremely seriously. We are, contrary to the
doubts of many people, going forward with a lease sale in the
western Gulf in December. We are on schedule for a large
consolidated lease sale in the central Gulf of New Mexico next
spring.
So we are moving ahead with that. I don't know, Mr.
Chairman, whether you saw, but there is an article in the Wall
Street Journal today suggesting that the level of activity in
the Gulf is approaching pre-Macondo levels. So I think the
situation is not nearly as dire as many of the groups and
entities have suggested in their studies. I commented publicly
on some of those studies. They are in many respects flawed,
distorted, based on erroneous data. They almost never seek
information from us, and so I am very concerned that they are
getting misleading and inaccurate information into the public
domain, and I think that serves no one's interests, and I
regret that very much.
We are moving ahead not only the lease sale side, but also
with the orderly and expeditious processing and approval of
plans, including in deep water, and the orderly and expeditious
approval of permits in both deep water and shallow water.
When I was here last time, we reviewed some of those
numbers. Those numbers have gone up fairly significantly. Since
I was here last, for example, we have approved well over 100
permits in deep water for 40 unique wells since industry
demonstrated its ability to deploy subsea containment
capabilities, which didn't happen until February.
And so we are moving ahead. We are getting better at
processing permit applications that attempt to satisfy all of
the new requirements, and I think things are moving ahead. We
are very receptive and interested in working with industry to
make sure that their understanding and ability to implement the
requirements that we have is improved. So, for example, Mr.
Chairman, just two weeks ago, at industry's request, we held a
permitting workshop all day, multiple presentations, both by
staff members of the agency as well as by members of industry,
who explained to their colleagues how to submit a compliant
application.
That seems to have eluded a lot of operators to an extent
that is surprising to me, and that is surprising to many of our
staff members.
So I want to assure you, Mr. Chairman, that we again take
our charge under OCSLA extremely seriously. We are moving ahead
as promptly as we can. We are limited at times by the quality
of the applications that we get from operators, and I am sure
neither you nor Chairman Hastings nor anybody on this Committee
wants us to cut corners in order to expedite the processing of
permits.
Mr. Lamborn. OK. Thank you for that answer. And I would
like to get those latest numbers that you referred to. That
would be very helpful.
Mr. Bromwich. I can give those to you orally or in writing
later, whatever you choose.
Mr. Lamborn. How about in writing?
Mr. Bromwich. That is fine.
Mr. Lamborn. That would be wonderful. And last, do you
believe the current reorganization will delay your release of
the next five-year plan?
Mr. Bromwich. I don't think the reorganization will delay
the release of the five-year plan. Because of a variety of
events, including Macondo and a lot of the work that was going
on in the agency, we are a little behind the schedule that we
have historically followed. But the reorganization has nothing
to do with that. It is just the buildup of work that occurred
even before we began the reorganization.
But I can assure you and other Members of the Committee, we
are working extremely hard to come as close to meeting that
deadline as we possibly can.
Mr. Lamborn. OK. Thank you. And I recognize Ranking Member
Holt for five minutes for questions.
Mr. Holt. Thank you. Director Bromwich, you have given I
think a clear statement of some of your concerns and
reservations. Let me ask you, does the discussion draft for
reorganization in your opinion properly elevate environmental
review and safety in the new agencies charged with offshore
drilling?
Mr. Bromwich. I think the Chairman's blueprint does not
really affect our plans for safety whatsoever. With respect to
environment, I have concerns. The concerns are principally
because the pre-lease/post-lease, which is what the discussion
draft proposes, would require full-bodied analyses,
environmental analyses, NEPA analyses, analysis under the
National Environmental Policy Act, in both the resource
management agency, BOEM, and the safety and environmental
agency, which we are calling BSEE.
We think that carries grave risks of conflicting NEPA
judgments by the two agencies, which would need to be resolved
if they can be resolved. Now, as I said in my opening
statement, we carefully considered exactly the architecture
that the Chairman's discussion draft includes, and we concluded
that that risk of conflict and bureaucratic paralysis was a
true risk, and therefore that we ought to put the bulk of the
environmental function in the resource management agency, which
we are calling BOEM, so that you have the bulk of that work
done in one place, and you substantially reduce the chance of
conflicts through competing environmental analysis.
Mr. Holt. And you think the reorganization being proposed
here on the Committee would interfere with that.
Mr. Bromwich. Yes, I do.
Mr. Holt. In my statement a few moments ago, I raised some
questions about funding. I would like your quick comments about
whether you think this--if we turned now to this new proposed
reorganization, whether there would be additional costs for
taxpayers. I would also like you to comment whether you think
it is serious, the point that I raised, that there is no
dedicated funding stream in the proposed authorization. And I
would like you to comment on the aspect of the legislation that
Representative Markey and I have introduced, that would allow
for increased inspection fees to be paid by oil companies
operating offshore as the BP Commission recommended.
Mr. Bromwich. Let me start with your second and third
points. We do need a guaranteed funding stream. We think that
is vital to plan and execute our functions appropriately. And I
agree that an increased level of inspections fees and having
the oil and gas industry pay for it rather than the taxpayers
is the right way to go.
I will say, though, that for me, from my somewhat parochial
perspective as head of the agency, that matters less than we
get the money from someplace. We really need it.
With respect to your first point, would really a further
reorganization, a reorganization from what we will be
completing--and we are on schedule to complete it on October
1--would that cost the taxpayers additional money? Without a
doubt. I think a significant amount of additional money, not to
mention the turmoil that it would create for some terrific
employees who have worked extraordinarily hard to make this
reorganization happen at the same time as they do their daily
jobs.
Mr. Holt. Let me ask another question that isn't directly
related to the cost, but it is very much a topic of discussion
here, and that has to do with the department's authority to
regulate contractors. The various review panels have cited not
only BP, but contractors such as Halliburton, TransOcean, and
so forth.
Do you have, and will you defend, your authority--if you
have this authority, will you defend it to regulate
contractors?
Mr. Bromwich. We have it, and we will defend it. I spoke
last time I was here, back in July, on this issue. And I know
there is concern among some Members and among some members of
the industry. We will not move from the principle, a principle
that we will hold operators accountable and fully accountable.
But that does not mean that we shouldn't also hold contractors
in specific cases where the conduct is sufficiently egregious
also accountable. And so we intend to do that.
We have the authority. We have no doubt about that.
Mr. Holt. Thank you.
Mr. Lamborn. All right. Thank you. I now recognize the
Chairman of the full Committee, Representative Hastings, for
five minutes for questions.
Mr. Hastings. Thank you, Mr. Chairman. Prior to my
introducing or releasing this draft, I had a conversation with
Secretary Salazar, and he pointed out, of course, the steps
that you were going through in your reorganization. Certainly
from my point of view, I didn't think that my draft or what
you're going through with reorganization was an either/or
situation. In fact, I thought they complemented each other, and
I think you, Director Bromwich, said the same thing in your
opening statements.
So I never considered that. I considered the activity that
is going to go on in the offshore is going to go on far beyond
a couple of months. At least I hope it does. And so we need to
get it right.
But I do want just to ask a couple of questions. In your
written testimony, it appears that the only real concern that
you have with the creation of a new Under Secretary of Energy
is the chain of command aspects in that he or she would be
reporting directly to the Secretary instead of the Deputy
Secretary.
Now, I am sure that the Deputy Secretary has plenty of
responsibilities already managing the five that are under his
responsibility. But if we were to change this legislation to
report to the Deputy Secretary, what would your response be to
that?
Mr. Bromwich. I still don't think it is necessary, Mr.
Chairman. I think that it adds extra layers of bureaucracy into
an agency that doesn't need additional layers of bureaucracy. I
think the structure that we are executing with the agencies,
the resource management agency and the safety and environmental
enforcement agency reporting up through the Assistant Secretary
for Land and Minerals Management is adequate. And my philosophy
is if it is not broke, don't fix it.
So I don't think that needs to be fixed. I think the Deputy
Secretary has shown great interest in and knowledge about
energy issues. I will obviously only have exposure to this one
Deputy Secretary, but he has been extremely involved in issues
in a completely appropriate way. And so my view of creating a
separate structure with new high level appointees is shaped by
that. I simply don't think it is necessary, and again I know
you are concerned about operational efficiency and operational
continuity. I think that risks slowing that down and impeding
it.
Mr. Hastings. OK. When I hear responses like that from
somebody that is very qualified, I say that is good if you are
there into perpetuity. But they generally say they want to
retire sometime.
Mr. Bromwich. And I am no different.
Mr. Hastings. Yes, I know. I have read stories on that.
Under your reorganization, you have one Assistant Secretary of
Land and Minerals Management in charge of all four agencies,
BLM, OSM, and the two offshore energy agencies. Should it not
be of some concern that the safety of offshore oil development
would be on the desk of one person who is also in charge of
onshore leasing and production and the Office of Surface
Mining, Reclamation, and Enforcement?
Mr. Bromwich. I don't think it is troublesome. We have
obviously thought a lot about that. We think that is the
appropriate level for those issues to be balanced. They have to
be balanced by someone in the first instance. We think that is
an appropriate level for it to be balanced initially. It then
is obviously subject to review by, under the current structure,
the Deputy Secretary, and ultimately the Secretary.
So I think it will work. We have looked at this, as I said,
very closely. And I am not troubled by that at all.
Mr. Hastings. OK. Well, I appreciate your testimony, and I
appreciate your willingness and understanding that this needs
to be somehow an organic law. The Secretary certainly passed
that along to me when I talked to him, and I look forward to
working with you. As Chairman Lamborn said, this is draft
legislation, and rarely does draft legislation become perfect,
even though sometimes the author would like it to be that way.
It just simply doesn't happen, so I know it is work in
progress, and we look forward to working with you. And I
apologize. I am going to have to leave because like so many of
us, we have conflicting engagements. But I thank you very much,
Director, for being here, and I yield back my time.
Mr. Bromwich. Thank you, Mr. Chairman. I very much
appreciate it.
Mr. Lamborn. OK. And thank you, Mr. Chairman. I would now,
as I stated earlier, accommodate Ranking Member Markey of the
full Committee for an opening statement.
STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MASSACHUSETTS
Mr. Markey. Thank you, Mr. Chairman, very much. Next Monday
will mark the one-year anniversary of the silencing of BP's
blown-out Macondo oil well. But the lessons of the Deepwater
Horizon tragedy still ring loud and clear. The Minerals
Management Service, as the agency regulating offshore was
known, had become dysfunctional. Relationships with industry
had become too cozy. Safety inspectors and regulators had
become too complacent.
And during the eight years of the Bush Administration, the
agency was woefully underfunded and left to deteriorate because
the oil and gas interests were happy to have fewer cops on the
regulatory beat.
Today, the MMS is no more. At the beginning of next month,
the Interior Department will complete the task of splitting the
agency into three parts, finally separating the safety,
revenue, and permit functions that had grown too incestuous.
Now we are at a crossroads. We have a choice to make.
When the reorganization is complete, will those three parts
resemble the three wise men or the three stooges? The
reorganization that the Interior Department has nearly
completed would elevate safety, as the independent BP
Commission recommended. In contrast, the discussion draft
circulated by the Republican majority would disrupt the reforms
occurring at our new drilling agency and legislatively repeat
the mistake of elevating energy production while shortchanging
safety.
You don't have to be Dick Tracey to see the speed-over-
safety pattern running through the offshore drilling bills the
majority has pushed in this Congress. The majority has
introduced bills that would put a shot clock on the review of
new drilling permits, legislation that would open our East and
West Coasts to drilling without putting new safety standards in
place, and legislation that would deem the same flawed
environmental reviews conducted by the inadequate MMS as
sufficient for new drilling.
Even the simple and commonsense requirement that oil
companies pay for the inspections of their own rigs has been
rejected by the Republican majority. Yesterday, the
government's joint investigative team, considered to be the
final authoritative study on the matter, released its report.
Republican leaders told us that they would reserve judgment
until after all the facts are in.
Well, that day has come. I am pleased the Chairman has
announced a hearing with Members of the joint investigative
team. But this Committee needs to also hear from the companies
involved in the spill: BP, Halliburton, TransOcean, and
Cameron. And this Committee needs to do more to respond to the
spill than simply codify the division of the MMS. This
Committee should enact all the safety reforms recommended by
the independent Blue Ribbon commission.
I have introduced legislation with Ranking Member Holt and
other Members of the Committee that would implement the
Commission's recommendations, but the majority has not held
hearings or advanced in any way on discussion of that subject.
We have heard from the independent BP Commission. We have
heard from the government's joint investigative team. There is
no longer any excuse for this Committee and this Congress to
delay action on the broad reforms that are needed to take the
lessons and turn them into laws so that we will never have a
disaster like this again.
I yield back the balance of my time, Mr. Chairman.
[The prepared statement of Mr. Markey follows:]
Statement of The Honorable Edward J. Markey, Ranking Member,
Committee on Natural Resources
Next Monday will mark the one year anniversary of the silencing of
BP's blown-out Macondo oil well. But the lessons of the Deepwater
Horizon tragedy still ring loud and clear.
The Minerals Management Service, as the agency regulating offshore
drilling was known, had become dysfunctional. Relationships with
industry had become too cozy. Safety inspectors and regulators had
become too complacent. And during the eight years of the Bush
administration, the agency was woefully underfunded and left to
deteriorate, because the oil and gas interests were happy to have fewer
cops on the regulatory beat.
Today, the MMS is no more. At the beginning of next month, the
Interior Department will complete the task of splitting the agency into
three parts--finally separating the safety, revenue, and permit
functions that had grown too incestuous.
Now we are at a crossroads. We have a choice to make--when the
reorganization is complete, will those three parts resemble the three
wise men or the three stooges.
The reorganization that the Interior Department has nearly
completed would elevate safety, as the independent BP commission
recommended. In contrast, the Discussion Draft circulated by the
Republican majority would disrupt the reforms occurring at our new
drilling agency and legislatively repeat the mistake of elevating
energy production while shortchanging safety.
You don't have to be Dick Tracy to see the speed over safety
pattern running through the offshore drilling bills the Majority has
pushed in this Congress.
The Majority has introduced bills that would put a shot clock on
the review of new drilling permits; Legislation that would open up our
East and West Coasts to drilling without putting new safety standards
in place; and legislation that would deem the same flawed environmental
reviews conducted by the inadequate MMS as sufficient for new drilling.
Even the simple and common-sense requirement that oil companies pay
for the inspections of their own rigs has been rejected by the
Republican Majority.
Yesterday, the Government's Joint Investigative Team, considered to
be the final authoritative study on the matter, released its report.
Republican leaders told us that they would reserve judgment until
after all the facts are in. Well that day has come.
I am pleased that the Chairman has announced a hearing with members
of the Joint Investigative Team. But this Committee needs to also hear
from the companies involved in the spill--BP, Haliburton, Transocean
and Cameron.
And this Committee needs to do more to respond to the spill than
simply codify the division of the MMS. This Committee should enact all
the safety reforms recommended by the independent blue-ribbon
commission. I have introduced legislation with Ranking Member Holt that
would implement the Commission's recommendations but the Majority has
not held hearings or advanced that legislation.
We have heard from the independent BP Commission. We have heard
from the government's Joint Investigative Team. There is no longer any
excuse for this Committee and this Congress to delay action on the
broad reforms that are needed to take the lessons and turn them into
laws so that we never have a disaster like this again.
I yield back.
______
Mr. Lamborn. OK. Thank you. And now I recognize
Representative Fleming of Louisiana for questions for five
minutes.
Mr. Fleming. Thank you, Mr. Chairman, and thank you, Mr.
Director. Of course, I and others on the dais here today are
from States that are still affected by the amount of activity.
And you know we have had discussions and debates on that. I
just glanced at the article in the Wall Street Journal where it
says activity is returning to pre-moratorium levels. Where did
they get that information?
Mr. Bromwich. I don't know.
Mr. Fleming. It wasn't clear, but it suggests that they got
it from your department, so obviously, you know, your
information is maybe in conflict with others. So I thought I
would kind of bring that out.
I have a report here from IHS dated July 21st. And they
show that pending volume has jumped from 59 plans to 112, and
that the duration of approval has gone from 36 median days to
131. And now the impact of this they also talk about, is
something on the order of 230,000 jobs, billions of dollars of
cost. And, of course, we know about the affect on gas prices.
So what is your comment on IHS. It is IHS Global Insight
and IHS CERA report. Do you feel that they are in error?
Mr. Bromwich. Yes, I feel they are very much in error. And
in fact, I sent them a five-page letter that was released
publicly criticizing them for many of the assertions they made
I their report, and raising questions about where they derived
their numbers because we frankly couldn't figure out where they
got their numbers.
We subsequently met with the authors of the report from IHS
CERA, and had what I would call a spirited discussion with
them. And they acknowledged that there were shortcomings in the
way that they had presented their report, not least of which
was they made no effort to contact us and find out the specific
issues in the processes that may have been slowing things down.
But more importantly, they were not able to explain to us where
they got their numbers.
So their numbers were deeply flawed. They projected, for
example--they took a six-month period after the Deepwater
drilling moratorium was ended. But, of course, you know that we
couldn't permit deep water wells under containment capabilities
had been demonstrated, which didn't happen until the middle of
February.
So they took what they said was a six-month period, which
actually was only about a month and a half, and they
extrapolated what the number of deep water permits would be for
a year based on that data. And it turns out we have already
vastly exceeded their projections because they took a
ridiculously slender piece of time that was unrepresentative.
Mr. Fleming. OK. I apologize for interrupting you. We have
limited time. But obviously there is dispute there between
that. But you do rely on their data oftentimes for other
things, I would assume.
Mr. Bromwich. I have never relied on their data for
anything that I do.
Mr. Fleming. So you feel IHS is basically not a reliable
source of information?
Mr. Bromwich. I didn't say that. My sample size is one. I
reviewed this report very carefully, took detailed notes, and
was able to raise questions with them. So based on that sample
size of one, I do have substantial concerns with the quality of
their work, yes.
Mr. Fleming. Right. Well, you know, the industry itself--
for instance, there is an article here from the Heritage
Foundation, September 8th, where in addition to the 12 rigs
that have left--that was as of last June, June a year ago--
there are 20 rigs that are now contemplating having to leave
because they are unable to get the permits and the processing.
So at least from an industry standpoint, the people that
pay the bills to have those rigs out there--and, of course, the
12 that we lost, we lost for good. They are not coming back. In
some cases, as you know, we sent money to Brazil so that they
would use our rigs to pump oil off their shore that we could
then buy back from them. The President's quote was, we become
good customers of theirs.
Aren't we in danger of actually doing that even worse? I
mean, we have let 12 go, and now we have another 20 that says
that they are about to have to pick up and leave and go
elsewhere?
Mr. Bromwich. Two points. I take issue with your suggestion
that they are not coming back because I have been told by
operators that they are going to be coming back. But more
important than that, as I think you know, I meet with operators
and groups of operators all the time. And they tell me that
they are quite optimistic and bullish about continued
development in the Gulf of Mexico, and that they are planning
accordingly.
I have not heard a cross word or a critical word from those
executives any time in the last few months because they
understand the efforts that we are making. They appreciate the
efforts we are making to expedite the permitting process,
making it more transparent, making it more efficient.
So I think I have good and reliable sources, namely, the
operators themselves who are not painting a doom and gloom
scenario to me.
Mr. Fleming. Well, we must be talking to different
operators. Industry LOGA, which is a Louisiana representative
of all of these, they are telling us that they are seeing no
relief in the moratorium. Thank you. I yield back.
Mr. Lamborn. OK. Thank you. I now recognize Representative
Tsongas of Massachusetts for five minutes.
Ms. Tsongas. Thank you, Mr. Chairman, and thank you,
Director Bromwich, for being here with us today.
In Mr. Boesch's written testimony that he will be appearing
in the next panel, and he served on the commission that studied
the BP Deepwater Horizon oil spill, his report, he comments
that the report stresses the importance of congressional
engagement to ensure responsible offshore drilling. So I am so
pleased that the Subcommittee is having this hearing to
consider draft legislation, which is a step forward toward
codifying important commission recommendations regarding the
reorganization of the former Minerals Management Service.
And I am also glad to see that this draft legislation by
Chairman Hastings codifies into law the executive actions to
separate the revenue collection from safety and environmental
enforcement functions.
But I do have concerns that this draft legislation does not
go far enough toward ensuring environmental protections in
outlining the duties and responsibilities of the Ocean Energy
Safety Service, which appear to match some of the ultimate
responsibilities of the Bureau of Safety and Environmental
Enforcement, BSEE, as you call it.
This Congress, I introduced a Safer Drilling Act, which
would require oil companies to have worst-case scenario
response plans and the financial and technical means to clean
up any spill before they drill or are allowed to drill for oil
off our coast. We have seen the consequences of not having such
a plan in place. I know that the Commission recommends better
worst-case scenario planning. But I see no mention of worst-
case scenario planning in the Chairman's draft.
My question, Director Bromwich, is in the absence of
legislation codifying worst-case scenario spill plan
guidelines, what processes will BSEE or the Ocean Energy Safety
Service put in place to enforce and review worst-case scenario
response plans and ensuring that they are fully comprehensive?
Mr. Bromwich. Well, thank you very much for your question.
We are very much focused on the issues of spill response and
emergency response of the kind that you are describing. I
recently named the head of the new oil spill response function
in BSEE, a very experienced career person who has been engaged
with the Coast Guard and other agencies for a long time.
We have in development a detailed and unfortunately
probably lengthy rulemaking process to really change the
contours of what is going to be required for oil spill response
plans. The reason it will take long is because multiple
agencies need to be involved and be comfortable with the
revisions to the current system that we have.
So I completely agree with you that this is a very
important area for us to continue to be focusing on. This will
be located in BSEE. It will be elevated. It will be a national
program, unlike the former status of the program in the agency.
And we will move forward smartly to work with the Coast Guard
and our other partners to make sure that adequate focus is put
on spill response, related issues, not only by the government,
but by industry as well.
Ms. Tsongas. Does a team within BSEE envision a situation
where a worst-case scenario at a particular site is so
environmentally damaging that a permit should not be issued?
And if so, what would such a scenario entail, and how often do
you think this might occur?
Mr. Bromwich. It would really be more likely to come up on
the resource management side of the house. That is where I
think you may not have been here yet. That is where the bulk of
the environmental work will be done in the agency. It will be
done in the context of examining exploration plans, which is
generally the umbrella for a set of wells that are ultimately
drilled.
There will be a modest amount of environmental work done in
BSEE at the time that the individual drilling permit is
submitted. But the bulk of it will be in the resource
development agency, or BOEM. And if the exploration plan raises
too many questions or issues with respect to the high risk of a
spill, the plan won't be approved, and no permits can be
submitted unless there is an approved plan.
Ms. Tsongas. Thank you.
Mr. Lamborn. And is the gentlelady finished?
Ms. Tsongas. Yes.
Mr. Lamborn. OK. Thank you. I now recognize Representative
Landry of Louisiana for five minutes.
Mr. Landry. Good morning, Director. First of all, I would
like to say that I disagree with the Wall Street Journal's
article. I would like you to tell us what operators told you
that those deep water rigs are coming back, because I wish they
would tell their employees that.
Yesterday I was on the telephone on radio getting
questions, taking questions, in Lafayette, Louisiana. And not
operators but contractors consistently told me that they are
still laying off people. Their businesses are still suffering.
So, you know, I intend to look into that article.
Now, let me just also say this. You know, I believe in
trying to fulfill the President and our promises to help
promote job growth and economic activity. Wouldn't you want to
do that as well?
Mr. Bromwich. Absolutely.
Mr. Landry. OK. Now, I know you think I am going to ask you
for some more permits, but that is a given. I would like you to
consider----
Mr. Bromwich. We will stipulate to that, Congressman
Landry.
Mr. Landry. I would like to consider what I have come to
believe as the next greatest impact to our smallest operators
in the Gulf of Mexico, operators who are developing America's
energy on the shelf, in a place that we all have agreed has a
proven safety record and does not present the opportunity to
repeat the same type of accident that we had. And this issue is
in the implementation of SEMS, the Safety Environmental
Management Systems.
It currently has the greatest impact of derailing business
activity, setting back contractors and hurting job growth. Now,
what I want to ask you to consider is--I am not going to ask
you not to implement it, only in phasing it in--in what I see
as a government-industry friendlier manner. And I would like
the other side of the aisle to pay close attention.
What I have, I have a draft letter that I will submit to
you. We are going to try to get some additional signatures on
that. What I would like you to consider doing is continuing the
implementation, continuing the audit, and focus on manned
platforms rather than non-manned platforms, and also consider
basically placing a suspension of civil penalties for a period
of 12 months, because our small operators are spending millions
of dollars. Contractors are extremely confused in the
implementation of this. And what I am afraid to do at a time
when the permitting process is costing them money--we are not
getting--we are going to dispute the level of permitting
activity.
I have operators who have not drilled. These are small
operators. This is not Shell, Exxon, Chevron. These are our
small independent producers. Some of them have decided never to
go back to the shelf again. And I would not like to see that. I
would like them to get back on the shelf. I believe that they
probably create a tremendous amount of jobs here at home. And
so the thought would be to have an enforcement mechanism where
we would have a time period where both industry and BOEMRE
could work through this large bureaucratic mess because as I
will note in the letter, BP had a SEMS program in place prior
to Macondo.
The industry has embraced it. And so I just want to make
sure we are not fining these guys for paper trail infractions.
What would be your opinion of that?
Mr. Bromwich. Congressman, as you probably know, we
actually issued the original SEMS rule a year ago. And
precisely because we were concerned about the kinds of issues
you have just raised, we deferred enforcement for a year. So,
we have not begun the actual process of doing inspections or
reviews, and we are not doing that until November of 2011.
So there has already been a deferral because I think we
were realistic in recognizing that particularly small and mid-
sized operators might have to do some significant work. Now,
what would be helpful, Congressman, we have held workshops on
SEMS. I know industry has held workshops on SEMS. The Center
for Offshore Safety, which is run by API, has held workshops on
SEMS, and is doing work on that.
I have not heard from contractors or anyone else about
specific problems they are having. I would urge you to urge
them----
Mr. Landry. I am going to.
Mr. Bromwich.--to come see us.
Mr. Landry. I am going to do that. I am going to try to get
them focused on that. I think the problem is--and I would like
you to consider it in my 10 seconds--is that on top of all of
the additional hoops and bureaucratic hurdles that are being
placed in front of them from the permitting process, that they
are trying to look at their revenue source as they implement
all of these. And so I do appreciate the 12-month period that
you have given them. What I am telling you is that I think they
need an additional 12 months, not in the implementation or the
enforcement, but that the enforcement take place in such a
manner that it doesn't penalize the industry immediately.
You can conduct the audits. You can issue a notice of
violation. But you can withhold implementing civil penalties
for that time period so as to give the industry and you all the
opportunity to work through it.
Mr. Bromwich. Congressman, I would be very interested in
hearing about the scope of the magnitude of the problems, and
we will try to be fair and appropriate in our response.
Mr. Lamborn. OK. I have to keep things moving along. We
have time for one more set of questions because there are 9
minutes and 40 seconds left in the vote series, and then we
will have to go into recess. Representative Sarbanes.
Mr. Sarbanes. Thank you, Mr. Chairman. Thank you, Director,
for being here. I want to commend you for your efforts to keep
this reorganization moving in a timely way. It sounds like you
are on track to get it done. I think it is going to make a big
difference in terms of ensuring safety with respect to all of
these operations that the agency oversees. And frankly, it is
good thing for the industry that you regulate because if you
can put new protections in place that create more confidence
over time, that is going to be better for the industry, and we
are going to avoid the kinds of spills that obviously, you
know, undermined that industry for a long period of time.
So I thank you for your work. I wondered if you could--and
I understand that the reorganization can benefit from
codification in law. There is much that you can do without
that, and you have done. But getting it codified makes sense. I
think many of us feel that the opportunity to put in place some
of the other recommendations from the Commission and other
places presents itself at the time of doing that codification,
and we would like to see more of that be part of this. That may
not happen, but that is, I think, the perspective that we
bring.
I wanted to ask you if you could try to quantify--as I look
back on the problems that you tried to address with the
reorganization, my sense is that during the period in which the
lines got very blurred in which I think frankly the agency
became captive of the industry, you could sort of lay that--you
can point to two sources of that. One is that in some cases
people are just being negligent in the jobs they were supposed
to do on the regulatory and oversight side. But the other piece
was that just the structure of it was such that, you know, good
people could lose their way.
Can you in any way kind of sort of quantify the two baskets
that those things fall into? And I assume you will say that now
at least from a structural standpoint, what you have put in
place is such that good people will not lose their way because
those basic protections are there.
Mr. Bromwich. Thank you very much for your question,
Congressman Sarbanes. It is a very good question. I think it is
less negligence than the fact that the agency was starved for
resources. The number of installations that our inspectors had
to review and inspect was an astronomical number, over 3,200
facilities right now, not to mention all the drilling rigs.
We now are up to 80 inspectors, but at the time of the
spill, we had about 55 inspectors. So you and I can do the
math, 55 inspectors for, let us say, 3,500 facilities. You
compare that to the UK, where they have about one inspector for
every two installations. You start to get a sense for the
numbers, and the fact that the task, the magnitude of the task
in front of our regulatory personnel, particularly our
inspectors, was impossible.
So I can't completely eliminate the claim that there may
have been negligence in some instances. There is in every
organization, and I am sure there was in the MMS. But people
were being stretched way beyond organizational and human
capacity to do that job.
Now, with respect to your other point, I think that is a
fundamental point. But I think the two in a way converge. There
was a blurring, but the blurring was driven by the fact that
priority was always given to revenue generation. And the
President's Commission found that. It interviewed former MMS
directors, and it asked them, what was your top priority as MMS
director. And without exception, they said, generating revenue
for the Federal Treasury.
Well, if that is your top priority, then balanced resource
development becomes secondary, and regulation and enforcement,
it doesn't even become tertiary. It is in the back of the bus.
Mr. Sarbanes. Let me ask you something real quick because
my time is going to expire. We talked in a prior hearing about
my interest in creating accountability at the highest levels
within these companies. And I have spoken to the notion that
CEOs ought to have some civil liability if they don't oversee
response plans properly and so forth.
Do you feel that there is sort of a single point of
accountability and responsibility in operating within these
companies to your satisfaction, or do you think there is still
more work we could do there?
Mr. Bromwich. I would want to see a specific proposal. I
think we have gotten to a point where we now have that kind of
accountability. What we have through an NTL that we issued last
November is a requirement of a certification from a high level
company official--it doesn't have to be the CEO under our
model, but it has to be a high and responsible corporate
official--that all of the submissions that are made are
compliant with all existing regulations.
So there is now somebody on the hook in a way that there
never was before. Now, could that be changed or modified in
some way? Sure.
Mr. Lamborn. OK. Thank you. Director Bromwich, we do have
to conclude for now. We will go into recess. We only have three
minutes and 52 seconds left to get over and vote. I wish we
could have wrapped up the first panel, but that wasn't
possible, even though we started early. So we will back shortly
after finishing voting, and we will resume and finish up the
first panel, and then go into the second. We will be in recess.
[Recess.]
Mr. Lamborn. The Subcommittee will come back to order.
Thank you for your patience, everyone who waited, especially
Director Bromwich. We know your time is valuable. I hope you
were able to get things done in the previous 60 minutes or so
that we were over at the Capitol. But now we can resume.
Mr. Bromwich. Great.
Mr. Lamborn. We are back in order, and we will finish up
with our questions, and then be done with this portion of the
hearing. The next person in line is Representative Flores of
Texas, and you have five minutes.
Mr. Flores. Thank you, Mr. Chairman. Thank you, Director
Bromwich, for joining us again today. One of the things that I
took back from the last time that you testified was that the
drilling permit process was back on track, and seemed to be
moving in a fairly good pace, and that the things were moving
efficiently.
The problem still remains, though, that activity levels,
where people are actually trying to stick a drill bit in the
ground, in the seabed offshore, are still way below historical
averages. That has a dramatic impact on jobs, American jobs,
and ultimately will have an impact on American energy
production. And that decline in American energy production is
going to have a detrimental effect on the American economy. And
this is just not the time to be experiencing things like that.
So as a result of that concern, I began to do some research
and looked at the prerequisite for drilling permit
applications. And as we all know, it is plans for exploration
and plans for development, and noticed a dramatic slowdown in
that regard. I looked at the IHS data, and you have indicated
today you don't agree with that IHS data, so I have tried to
actually independently see what the data is.
The data on the BOEMRE website, unfortunately, is a little
bit opaque. And so I wasn't able to come to that conclusion.
And I noticed that Senator Vitter sent a letter to you to try
to get to the bottom of the same issues I have got. I am going
to send you a substantially identical letter in the next couple
of days, but it is also going to expand it to talk about
shallow water data as well, and also to ask you if there is a
way that we can--that the American public can look at your data
and drill in and see what is actually happening, where it is a
little less opaque.
So that is one of the directions I will be going later on.
You are somebody that is well-read. I mean, you read the
comments about your agency and about what is happening in
activity. And you tell us that your clients, if you will, the
operators and the contractors, are not complaining about the
relationships with your agency. But when I privately meet with
these companies, they are telling me something different.
They are also saying that the personnel at BOEMRE are
saying to your clients, to these operators and contractors,
thank you for not publicly criticizing us. And that sounds to
me like that could be two things, not only a thank you, but a
warning to not be critical.
So I guess what I would suggest or ask you, is there a way
that we can ask these companies to be more forthcoming when
they are talking to you, and not worry that they are going to
somehow be hurt and their applications for exploration plans or
development plans or drilling permits--can you help me with
that?
Mr. Bromwich. Sure.
Mr. Flores. Is there a way to make this a more collegial
relationship than what we have today?
Mr. Bromwich. I think there is. I think we have been making
enormous strides in that direction. I think I mentioned earlier
that we had a permitting workshop two weeks ago all day long
with many detailed presentations from our folks, as well as
panels from industry helping their colleagues in the operator
community work through the various issues that are associated
with submitting permits.
I obviously can't control what our people say, but I can
control what I do. And I have never turned down a meeting from
an operator or a contractor or anybody else who says that there
are still significant issues that they think are interfering
with or impeding the orderly process of approving plans or
approving permits.
In addition to the permitting workshop, we had a plans
workshop last March, again all day. A couple of hundred
participants from industry attended. The feedback that we got
was extremely favorable. We will continue to do that kind of
outreach. This afternoon, I am meeting with an industry group.
Again, it is something I do all the time, individual operators,
groups of operators and so forth.
Keep in mind, though, that you may be hearing from
contractors. We deal primarily with operators. They are the
ones who submit the plans. They are the ones who submit the
permits. And we obviously can't control what happens, for
example, Congressman, after we approve a permit, how quickly
the drill goes in the ground.
Some time ago, we were actually disappointed to see that of
the number of deep water permits that we granted, only a
minority had spud.
Mr. Flores. Just to clarify what I had talked about before,
the bulk of the comments I am receiving are from the operating
community. My encouragement to you would be to--you set the
culture for the organization as the guy at the top, just like I
used to when I was CEO. And I would ask you to facilitate a
culture of openness and cooperation, where an operator can come
in and feel free to speak freely about what works and what
doesn't work. And then, of course, I will send you the letter,
and you can have time to send more data later on.
Mr. Bromwich. Congressman, I couldn't agree with you more.
I think open relationships and transparency and the freedom to
come in and point out deficiencies or shortcomings in the
process, those are keys to our being able to improve. And so I
agree, tone is set at the top. That is the tone I have tried to
set, and I will continue to do that.
Mr. Flores. Thank you.
Mr. Lamborn. OK. And we will try to continue on and finish
up our first round of questioning. And I know that there is a
hard department time for you in about 15 minutes or so, so we
will honor that.
The next person in the line is Representative Duncan of
South Carolina, for five minutes.
Mr. Duncan. Thank you, Mr. Chairman. Thank you for the
timeliness of this panel. I would like to yield the balance of
my time to Mr. Landry from Louisiana.
Mr. Landry. Mr. Bromwich, I would like to just echo what
Mr. Flores says. And keep in mind that these companies, as they
go through your regulatory hurdles, that they agree with, it
requires resources from their part. And so they have a finite
amount of resource, unlike what we experience at the Federal
Government level. They can't just go and ask Congress for more
money. So, again that is where I think we have a big sea of
difference.
I wanted to ask you, there was an article that came out
which said that at the current rate of permitting, even at the
current rate, we would lose an additional eight rigs in the
Gulf of Mexico. And so I don't understand how operators can be
telling you that the 12 that are coming back, or that have
left, may be coming back when there are articles that say that
at the current permitting pace, we would probably lose an
additional eight.
And so in light of those comments, I can't see how the Wall
Street Journal can sit there and say that we have, you know,
gotten back to robust drilling in the Gulf of Mexico. Could you
give me about a minute reply?
Mr. Bromwich. Sure, Congressman. I have not read the Wall
Street Journal article. I had only been told about before. And
it is not the Wall Street Journal saying it. It is political
officials in Louisiana who are saying it. One of them is----
Mr. Landry. No. He says----
Mr. Bromwich.--quoted prominently.
Mr. Landry. No, no, no. What he says--excuse me. I just
want to correct that. He just says that there is optimism out
there. And I think that optimism is the fact that we are
getting some permits.
Mr. Bromwich. Exactly.
Mr. Landry. And we may be seeing a thaw.
Mr. Bromwich. Exactly. And then many of the other comments
are from operators, executives in major companies. Mr. Odum,
the North American head of Shell, is quoted as being very
bullish about the future of the Gulf of Mexico. So it is not
the Wall Street Journal as I read it making it up out of thin
air. It is based on conversations and discussions they have had
with agency--rather with operator, executives, and officials,
as well as people who see the activity around them.
Mr. Landry. With that, Mr. Chairman, I would like to yield
the balance to Mr. Flores.
Mr. Lamborn. OK.
Mr. Flores. Thank you, Mr. Landry. In April, right after
the CR was passed, you testified that your agency was given 47
million of the 68 million they requested for Fiscal Year 2011.
And so you were given a significant amount of money to try to
recalibrate your agency to fit the responsibilities that you
have. Can you tell me how many people you have hired to work on
permitting?
Mr. Bromwich. I don't have the specific number that we have
hired for permitting specifically. I know that we have hired a
number. What we calculated is the difference between what is in
the President's request for Fiscal Year 2012 and what was in
the House Appropriations Committee mark would mean that we
would have a shortfall of approximately 20-plus permitting
personnel, again new personnel that we would have hoped to
bring on that would expedite the permitting process, that if we
are not given that level of funding we won't be able to bring
on.
Mr. Flores. But you have added personnel for this function.
Is that correct?
Mr. Bromwich. Sorry?
Mr. Flores. You have added personnel.
Mr. Bromwich. Yes, yes.
Mr. Flores. OK, OK. If you can, if you can get somebody to
get that number to me, that would be helpful.
Mr. Bromwich. Sure.
Mr. Flores. I mean, we are getting close to the end of the
fiscal year. Have you expended all of the dollars that were you
were appropriated for this purpose?
Mr. Bromwich. We are working hard to expend as many of them
as we can. We are running into some issues relating to
recruitment, frankly, of drilling engineers. I gather industry
is running into some of the same problems. And at the salaries
we pay, it is not only a challenge right now. I think it is
going to be a continuing challenge. So we have some ideas and
strategies that we are going to pursue to try to make sure that
we have an adequate number of drilling engineers to make sure
that we are able to continue processing permits and actually
process them at a more rapid level than we are able to now.
Mr. Flores. OK. So at this point in time, it is not really
a shortage of dollars as much as a shortage of being able to
get people in the seats to be able to process permits.
Mr. Bromwich. Yes, it is partly that. But based on the
conversations that I have had with operators, particularly some
of the big companies that are heavily invested in the Gulf of
Mexico, they think that the pace of their activity is ramping
up now. They think it will continue to ramp up, and ramp up
significantly.
So what I try to do is look around the corner and
anticipate where we are going to be X months from now. I don't
want to be in a situation where the backlog has grown. And so
that is why I am so concerned about ensuring that we have
adequate funding so we can make the efforts to hire the
engineers who will be in place to review the permits.
Mr. Flores. OK. Thank you. I yield back.
Mr. Lamborn. OK. I recognize Representative Rivera of
Florida.
Mr. Rivera. Thank you. I yield my time to Representative
Landry.
Mr. Bromwich. You are a lucky man today.
Mr. Landry. I know. Our relationship. Open and transparent
is going to apply to Congress as well, right?
Mr. Bromwich. Absolutely.
Mr. Landry. OK, all right. A couple of things. Can you
explain how you addressed the recommendation of the President's
handpicked commission with regards to MMS reorganization,
particularly with respect to those areas where you disagreed
with the commission's recommendation?
Mr. Bromwich. Well, we disagreed with very little in the
President's Commission's recommendations. We thought that they
were sound, that they were reasonable, that they were based on
a lot of hard work by some very smart and experienced people.
The one distinction that I think we had is they
recommended, as I think you know, that there be an independent
safety authority, a Presidential appointee, with a term of
years, and that that entity within Interior have a direct
report to the Secretary of the Interior.
I think that is a serious proposal, worthy of serious
consideration. But because of our concerns with maintaining
operational integrity and operational efficiency, our judgment
was that it was a step too far right now, and that it was
important to make sure that there continued to be coordination
between the two agencies that were about to split apart. And
moving it more separate than what we are doing would create
risks that I am not comfortable with at this moment.
And so that is the main difference. It is a nuance, I
agree. But because I know the agency, I think, better than any
outsider, I thought that that was a step too far.
Mr. Landry. Let me ask you this. Of the rigs that have left
the Gulf of Mexico, do you know if that was the latest
generation of rigs? Do you know--I guess my question is, as
rigs leave the Gulf of Mexico--or is America experiencing the
latest generation of those types of deepwater drilling rigs,
leaving and leaving only in the Gulf of Mexico an older, first,
second, rather than third-generation type drilling rig?
Mr. Bromwich. I can't give you a definitive answer to that,
Mr. Landry. But I know that when we talk with operators, and
they talk about their current and short-term plans, they
frequently brag about the sophistication of the new rigs that
they are bringing back.
So it is not scientific. I can't give you numbers on that.
But I think they understand that the newer rigs are more likely
to more easily satisfy some of our requirements. And so that is
what they tell me about. But I don't have specific data at my
fingertips right now. But my sense is that coming back into the
Gulf or coming for the first time into the Gulf are quite
sophisticated, new drilling rigs.
Mr. Landry. Do you have a timing when we might experience
the first rig actually coming back to the Gulf of Mexico?
Mr. Bromwich. I think that has already happened,
Congressman.
Mr. Landry. OK. I am going to go back and check on that. Do
you believe that the current pace of permitting provides
certainty in the market and will not affect potential revenue
generated for the upcoming lease sale in the Western Gulf
scheduled later this year?
Mr. Bromwich. I think there is a lot more certainty now
than there was a number of months ago. I think we are providing
that through the recent pace of permitting. And I think through
our continued efforts to talk to operators, to make sure that
their questions are being answered, doing things like holding
plans, workshops, and permitting workshops, and frankly raising
the quality of the permit applications that we get.
One of the things that came out during this workshop was
that there are huge gaps and data errors in many of the permit
applications that we get. And so it is clear that if we are
going to approve the permits, we have to get compliant permit
applications. And that has been a significant problem.
With the guidance that we have given, the additional
educational efforts that we have done and will continue to do,
I think we will begin to see more compliant applications, and
well be able to therefore review and approve them even more
swiftly.
Mr. Landry. With the last 40 seconds, I would like to yield
to Mr. Flores.
Mr. Flores. Thank you, Mr. Landry. Director Bromwich, in
your testimony, you were not supportive the Chairman's proposal
to split the agency on a pre-sale/post-sale basis, if you will,
saying that would increase bureaucracy. However, it appears in
the organizational structure that you are trying to operate
under or the other direction you are trying to go, we are
splitting the folks who review the drilling plans from the
folks who review and approve drilling permits.
So it seems like we are not consistent in terms of talking
about style of bureaucracies here. How do you recognize this? I
mean, you are saying that the Chairman's idea on the one hand
is not necessarily a good idea. On the other hand, we are
operating that way today. And again, I am just concerned about
the slow pace of drilling activity, and I think this is one of
the things that may be causing it. So you can reconcile this
for me.
Mr. Bromwich. Sure. I was really talking this morning about
the Chairman's proposal in the discussion draft. And my main
concern about that is that by putting the plan's function in
the safety authority, that there would need to be under law a
very robust environmental analysis and review that would need
to be done in the safety authority, at the same time that with
respect to the five-year plan and individual lease sales, there
has to be a very robust environmental review and analysis
capability in BOEM.
What concerns me the most is you are going to have dueling
environmental analyses that may conflict. And I just thought
that was a very unhealthy thing to create in the structure.
Putting permits in a separate place, there is very close
interaction between what permitting officials need to do and
the information they get from drilling engineers and inspectors
who are carrying out review functions and inspections
functions.
So it was a much more logical fit to put the permitting
authority in the safety and environmental enforcement agency
than to put it together with plans. It makes much more sense.
Mr. Flores. I yield back the rest of my time.
Mr. Lamborn. All right. That concludes our questions.
Director Bromwich, thank you for being here and for your
testimony.
Mr. Bromwich. Thank you, sir. I appreciate it.
Mr. Lamborn. OK. And by the way, Members of the Committee
may have additional questions to submit to you in writing, and
I would ask that you would respond to those in writing as well.
Thank you.
OK. We will now have our second panel, and I would like to
invite Mr. Albert Modiano, President of the U.S. Oil and Gas
Association; and Dr. Donald Boesch, Commissioner of the
National Commission on the BP Deepwater Horizon Oil Spill and
Offshore Drilling.
Like all our witnesses, you written testimony will appear
in full in the hearing record, so I ask that you keep your oral
statements to five minutes as outlined in our invitation
letter. Our microphones are not automatic, so you have to turn
them on when you are ready to begin.
The timing lights work with a green light at the beginning,
and after four minutes a yellow light goes on, and then a red
light at five minutes. And, Mr. Modiano, you may begin.
STATEMENT OF ALBERT MODIANO, PRESIDENT,
U.S. OIL AND GAS ASSOCIATION
Mr. Modiano. Thank you very much. Good morning. Well, we
are getting close to afternoon, but good day. It is a pleasure
to be invited to address the Chairman's discussion draft to
reorganize the Interior Department's offshore energy agencies.
I am Alby Modiano, President of the U.S. Oil and Gas
Association. The U.S. Oil and Gas Association is the Nation's
oldest trade association for oil and gas. We have over 4,500
individual members. It is the only national association with
divisions in the States along the vital Gulf of Mexico, and
they include the Texas Oil and Gas Association, the Louisiana
Mid-Continental Oil and Gas Association, the U.S. Oil and Gas
Association of Mississippi-Alabama, and as well as our inland
division, the Mid-Continental Oil and Gas Association of
Oklahoma.
My own background and bonafides to look at this activity is
that before USOGA, I was a civil servant acting as a deputy
director of MMS.
The Chairman has drafted an effective plan on how Congress
should delegate its authority to the Secretary of the Interior
to undertake the Nation's business of Federal leasing,
approving development activity, safety, environmental review,
sustain Federal workforce competency, and royalty collection.
But reorganization should be guided by several fundamental
principles. The new organization should have clear lines of
authority. It should be given adequate funding to do its
mission, and it should be given the means to discharge its
responsibilities as effectively and efficiently as possible.
The draft legislation does draw lines of clear authority.
It proposes an organic act for the new organization and
establishes a new Under Secretary, with Assistant Secretaries
and managing new bureaus. By proposing an organic act, the
legislation recognizes that Congress should have an important
role in approving the new organization's leaders through its
constitutional powers of advice and consent.
Senate confirmation hearings often spark additional
congressional and public discussion of national priorities. And
such review of the department's oil and natural gas mission
would likely benefit from such confirmation hearings.
The draft places the new Office of Natural Resource
Revenues under the DOI's management for policy and budget.
Collecting revenues is a question of accounting and accuracy,
and making sure that the rules are followed. In fact, the word
royalty comes from an age when the king collected a payment for
bounty obtained on royal lands. Americans expect no less from
the use or our commonwealth.
When the department awards a Federal oil or natural gas
lease, it must collect royalty in an efficient, accurate, and
timely manner. In placing the Office of Natural Resource
Revenue within the department's policy and budget organization
the Committee should carefully consider if royalty collection
and enforcement is separated enough from policy and budget
operations.
Just as the threat of intermingling, perceived
intermingling, or perceived opportunity for intermingling of
priorities at odds with one another was a concern when royalty
operations were under the MMS roof, some might argue that
unless a new office truly stands alone, such concerns remain
unaddressed.
In addition to clear lines of authority, providing adequate
funding is critical. The new Under Secretary for Land and
Resource Management and new bureaus must receive the adequate
funds they need to succeed. You cannot reorganize your way out
of accidents, but you can better organize talent and resources
to reduce the risk to as close to zero as humanly possible.
The new Bureau of Ocean Energy Safety will need adequate
funds to develop and sustain its critical programs because
safety is more than a budget cycle. It is a continuing priority
year-in and year-out.
In addition to providing clarity and funding, the
organization led by the Under Secretary must be given the means
to discharge its responsibilities as efficiently as possible.
By creating a new organization with an additional layer of
bureaucracy, the Under Secretary, is efficiency really
improved? Probably yes.
Having an Under Secretary is one means for Congress to
bring greater gravitas to Federal management of energy
development. There is no way to ensure better means and greater
efficiency than giving it a higher profile. The Federal energy
portfolio would have a higher status that it does not today by
virtue of its elevated role within the department reporting to
an Under Secretary. And Under Secretary has a great ability to
compete for needed resources and to look over its entire
organization.
The industry hopes that these organizational changes
provide the best means to manage the Interior Department's
offshore energy agency so that government can act in a timely,
efficient, and seamless manner. The discussion draft
establishes clear lines of authority, a commitment to adequate
budgeting and staffing, and provides the means to discharge the
responsibilities.
We are more concerned that the new organization is a
success rather than the exact organizational structure created.
We support the draft's approach to reorganize the Department of
Interior's energy agencies.
[The prepared statement of Mr. Modiano follows:]
Statement of Albert Modiano, President, US Oil & Gas Association
Thank you for the invitation to the US Oil & Gas Association to
comment on the Chairman's Discussion Draft to Reorganize the Interior
Department's Offshore Energy Agencies.''
The US Oil & Gas Association is the nation's oldest oil and natural
gas trade association. It was founded in October 1917 in Tulsa,
Oklahoma as the Mid-Continent Oil & Gas Association following the
United States' entry into World War I. A principal purpose of the
Association's formation was to provide essential supplies of petroleum
and petroleum products to the allied forces; helping the Allies, ``. .
.to float to victory on a wave of oil.'' The US Oil & Gas Association's
contribution to victory helped establish it as an Association in which
individuals working cooperatively could resolve mutual problems and
achieve great results.
Over the past ninety-four years the US Oil & Gas Association has
been a strong advocate in public policy debates for the individuals who
build and sustain the U.S. petroleum industry. These individuals
represent companies of all sizes in the domestic industry, majors,
independents; family owned companies, small partnerships as well as
single entrepreneurships.
The Association has over 3,500 individual members, covering the
full spectrum of the domestic petroleum industry. The Association is
unique among industry trade groups. It is the only national association
with Divisions in the States along the vital Gulf of Mexico; which
include the Texas Oil and Gas Association, the Louisiana Mid-Continent
Oil and Gas Association, the Mid-Continent Oil and Gas Association of
Oklahoma and the US Oil & Gas Association Mississippi/Alabama Division.
During my career I was a civil servant in the Department of Energy
and in the Department of the Interior, Minerals Management Service
(MMS) working on energy and oil and natural gas policy. At MMS, I first
served as Director of the Office of Policy and then as the MMS Deputy
between the years 1989 and 1993.
The Chairman has drafted an important discussion document on how
Congress should reorganize MMS and delegate its authority to the
President and Secretary of the Interior to undertake the nation's
business of federal leasing, approving development activity, safety,
environmental review, sustained federal workforce competency and
collecting the revenues associated with such activities.
Reorganization should be guided by several fundamental principles.
The new organization should have clear lines of authority, it should be
given the budget and staffing that it needs to do its mission, and it
should be given the means and opportunity to discharge its
responsibilities as efficiently as possible.
The USOGA shares and supports the need to establish clear lines of
authority for oil and natural gas operations on federal lands and the
Outer Continental Shelf and the collection of federal royalties. The
discussion draft draws new lines of clear authority by establishing a
new organization chart and adopting this organization by an act of
Congress. With these clear lines of authority, it strengthens the
Department of the Interior's ability to undertake resource development,
facility inspection, workplace safety and environmental stewardship.
The Chairman's reorganization plan defines new institutional
reporting responsibilities (with new supporting organizations and
programs) and new Bureaus with focused and circumscribed priorities in
a way that makes their role and mission understandable and accessible
to all.
The Chairman's discussion draft moves beyond the reorganization
steps taken by Department of the Interior over the past year. It
proposes an organic act for the new organization. It establishes a new
Under Secretary and Assistant Secretaries. The two new Bureaus
reporting to the Under Secretary, Energy and Land Minerals, are: the
Assistant Secretary Ocean Energy Safety (comprised of the Bureau of
Ocean Energy and Ocean Energy Safety Service) and an Assistant
Secretary Land and Minerals Management (comprised of the Bureau of Land
Management Office of Surface Mining, reclamation and Enforcement). It
also moves the existing Bureau of Land Management and the Bureau of
Reclamation under the new Under Secretary. A new Under Secretary with
direct congressional authority helps to make Department's resource
development activities and policies more transparent and accountable to
the public and Congress.
By proposing an organic Act establishing the Under Secretary,
Assistant Secretaries and Bureaus in place of MMS, the discussion draft
recognizes that Congress should have an important role through its
power of advice and consent in approving the President's appointees
nominated to lead and manage these activities. Senate confirmation of
the President's appointments to the Department of the Interior's Under
Secretary and Assistant Secretaries for Energy Lands and Minerals is an
important part of checks and balances. Senate confirmation hearings
often spark additional congressional and public discussion of national
priorities and goals. The country's federal oil and natural and gas
development policies would likely also benefit from such confirmation
hearings.
The discussion draft also codifies that the Assistant Secretary for
Policy, Management, and Budget manage the Office of Natural Resources
Revenue responsible for collecting all federal royalties and revenues
for onshore and offshore energy production. It makes clear that royalty
collection operations must be separated from leasing, safety and
environmental responsibilities However, a closer look if this action
establishes clearer lines of authority, or not, should continue to be
reviewed in greater depth.
Collecting federal royalty payments it is a question of rules,
accounting and accuracy.
The rules for such payments, accounting, auditing report records,
and enforcement remains today, fundamentally, the same as the origin of
the word ``royalty'' implies- the King's collection of a share of the
purse gained from any use and bounty obtained on the royal hunting
grounds. A royalty payment for the value at the site of the catch is
owed to the King. Americans expect no less from the use of its
commonwealth. When the public, through the Department, awards a federal
lease contract for oil or natural gas production, it expects to be paid
its royalty share of the value of this resource taken at the point of
its production.
This committee and the Chairman should consider whether, or not,
the royalty collection and enforcement mission is really separated
enough from the general policy and budget operations of the Department
of Interior if it is housed in the policy and budget office. Just as
the intermingling, threat of intermingling, or perceived opportunity
for intermingling of priorities at odds with one another, was a concern
when it was under the MMS roof, some might argue that unless this
operation truly stands alone these concerns remain unaddressed.
Given all of the above, the Chairman's draft does provide greater
clarity, competency, efficiency, and accountability to responsible
resource development.
In addition to drawing clear lines of authority and accountability,
providing adequate resources are critical for success. The new Under
Secretary for Land and Resource Management and Bureaus must receive the
necessary funds needed to succeed.
Congress ultimately determines funding.
Much of the impetus for reorganization came from concerns over
royalty collection, safety and environmental review practices.
In addressing safety, you cannot organize your way out of
accidents, but you can help all participants understand and adopt
operating practices to bring the risk as close to zero as humanly
possible. Many of the Chairman's proposals to address safety issues
will mean authorizing and appropriating money to develop these
programs. Safety evaluation and improvement never ends, it is a
continuing priority year in year out. Congress should provide the
necessary funds to keep these programs robust and moving forward.
Environmental stewardship is akin to safety. Studies, reviews and
scientific analyses take resources of staff and money.
Following the organizing principles of establishing clear lines of
authority and a commitment to funding it is also important to review
reorganization plans as to whether or not the new organization is also
given the means to discharge its responsibilities as efficiently as
possible.
The industry agrees with the goals of reorganization, but it is
important to note that there is some concern about whether, or not,
some parts of the plan provides the most efficient means to discharge
its various missions.
The question asked is does adopting an organic act help or distract
from the goals of the proposed reorganization? Does creating a new
bureaucracy help the Department of the Interior better manage its
offshore agencies? In the end, is efficiency really improved?
In this case, some express concern that by reforming MMS (and
adding some new missions) under an organic legislative mandate,
Congress has created a new bureaucracy and a new energy monarch that
might be less efficient, prone to mission creep, and lead to unintended
consequences. The wiles of organizations and their development over
time can be erratic and institutionalizing congressional power and
authority at a single point, is a step that should be taken with
serious review and scrutiny.
However, consolidation also has many merits, and creating an Under
Secretary, as stated before could be a very efficient way to organize.
In addition, an Under Secretary also creates a champion for the
Department's energy portfolio bringing both clearer and greater
authority to the management, of its offshore energy activities. An
Under Secretary could be champion for budget and staff, and give
undivided management attention to keeping the trains on time. An Under
Secretary could help increase the pace of energy development and
highlight its importance. On the other hand, some are skeptical that
separating under different entities the review of exploration plans and
drilling permits could slow everything down and in the end not be
efficient government. That is certainly a potential outcome, unless,
again, there are adequate resources and staff assigned to these
activities.
Of particular importance to the industry is the emerging and future
role of the Center for Offshore Safety that the industry has
established in Houston, Texas. The President's panel that studied the
BP accident recommended the creation of an independent safety body to
review all phases of drilling operations so as to assure that industry
meets the highest international standards. The industry took the
recommendation to heart by establishing and funding just such an
institution. This safety institute is designed to address many of the
same safety concerns expressed by the current administration and by the
Chairman--as demonstrated by the programs and organization proposed.
The industry's Center for Offshore Safety is modeled on similar
organizations established by foreign oil companies and the nuclear
power and chemical industries. The goal is to improve the offshore
safety through better and more efficient management and operations. The
Committee should continue to study the draft's proposal to establish an
Ocean Energy Safety Service--so that the shared goal of safety is
coordinated among government, industry and others so that it does not,
unintentionally, become a forum only for academic debate, at the
expense of adopting and deploying the latest, best safety scenarios.
The effort to reorganize and redirect the work of the former
Minerals Management Service addresses many of the concerns about real
or perceived conflicts by partitioning the mission across three new
agencies. The Chairman's draft proposes steps and establishes organic
congressional approval. The industry hopes that these changes provide
the means to discharge these responsibilities as efficiently as
possible so that operational and regulatory programs regarding onshore
and offshore exploration, leasing, plan approval and permitting
continue to be undertaken in as timely, certain, efficient and seamless
manner as possible.
Again, a review of the Chairman's discussion draft in terms of it
establishing clear lines of authority, a commitment to adequate budget
and staffing to do its mission, and providing the means to discharge
its responsibilities as efficiently as possible finds that these
organizing principles are embedded in the reorganization proposal. In
the end, however, the most important measure of a reorganization's
success is if it works as intended--and as the industry relies so much
on the actions of the Department for access, leasing and permit review
it is critical that a new bureaucracy make things better, not worse.
______
Mr. Lamborn. All right. Thank you. Mr. Boesch, you may
begin.
STATEMENT OF DONALD BOESCH, PRESIDENT, UNIVERSITY OF MARYLAND
CENTER FOR ENVIRONMENTAL SCIENCE, COMMISSIONER, NATIONAL
COMMISSION ON THE BP DEEPWATER HORIZON OIL SPILL AND OFFSHORE
DRILLING
Mr. Boesch. Great. Thanks very much, Mr. Lamborn and
Members of the Committee, for the opportunity to talk to you
today. I am here on behalf of the Oil Spill Commission. I was
one of the seven members. And we are very pleased that you are
taking up legislation to enact part of our recommendations, and
I would add my support and our support of my fellow former
commissioners to the idea of codifying this in legislation so
that it maintains itself from administration to administration.
You know, yesterday the report of the joint investigative
team was released, the Coast Guard and BOEMRE, about the
specific causes, of the accident. And we commissioners and our
staff who worked hard on our report, which was delivered eight
months ago, were very reassured by the fact that it basically
agreed with our analysis that we delivered at the time, and
maybe provide greater level of confidence of the nature of the
particular incident that we need to try to deal with and
correct. So just like getting a second opinion from another
doctor, this is helpful.
The other difference between our two investigations,
though, is that our investigation was independent. We were not
part of government. So the report delivered yesterday by BOEMRE
is not going to address internal reorganizational structural
issues within BOEMRE. So on that basis, we made recommendations
that went beyond the proximate issues related to that spill.
Many of the issues that have been discussed in terms of the
need to separate the functions better, we are very pleased that
the BOEMRE, under Secretary Salazar and Director Bromwich, have
taken those steps. Let me specifically hone in, in the
interests of the short amount of time we have, in what our
recommendations actually said with respect to the two models
that we have, the BOEMRE reorganization model and Mr. Hastings'
draft bill.
First of all, the issue of the function of BSEE, as BOEMRE
is now calling it, the Bureau of Safety and Environmental
Enforcement, versus the Ocean Energy Safety Service in Mr.
Hastings' bill, our analysis came down more like Mr. Bromwich
described in that we would activities related to environmental
analysis and management of the resource, management of leases
and so on, and put them in the ocean management group, whereas
the issues that should be at arm's length regarding permitting
should be in the safety and enforcement division.
We also, as Mr. Bromwich just pointed in response to Mr.
Landry's question--the one distinction in our recommendations
from that that BOEMRE has enacted is that we recommended that
this environmental safety and enforcement branch be actually an
independent agency within Interior.
Let me give you a brief understanding of why we recommended
that. We heard all sorts of suggestions when we did our work,
from everything is just fine, it is just one bad actor, no need
to make any changes, to you really need to take these functions
out of Interior altogether. There were proposals to put this in
OSHA, the Occupational Safety and Health Administration, and
EPA.
Our view is that this really needs to be under the
responsibility given under the OCS Lands Act to the Secretary
of the Interior, but that we saw enough to see the inherent
conflicts of interest of having the permitting and final safety
analysis and enforcement done within the agency that actually
managed the resources well.
So that is the reason for our recommendation. As Mr.
Bromwich said, he thinks our proposal has merit. It may be
harder to do, but we think ultimately it is going to be
important to do that in order to gain the confidence of the
American people that we are managing this resource well.
Finally, let me just say that although this is an important
step with respect to the reorganization in BOEMRE, the
codification of that reorganization, there are many other
things in our recommendations that we hope that this Committee
and other cognizant committees of Congress would pay heed to.
Just related to BOEMRE, there are issues that already have been
discussed about funding.
As Mr. Bromwich said, these things are going to cost money
to do it well, and we all know that we are dealing with a
budget deficit and looking for reductions. So we are having to
compete for that. We felt that our analysis related to other
types of fees that are provided on industry, regulated
industries, could be easily appropriated in this case, and that
the cost of these services are actually quite small compared to
the value of the resource to the industry and to the American
people.
The other thing which was pointed out just briefly about
the difficulty of recruiting people into key positions, I don't
know whether this requires congressional authority or Office of
Personnel Management, but some flexibility needs to be given to
the department to allow for appropriate salaries to recruit
those people.
Finally, let me just say there are a whole bunch of other
recommendations in our report regarding safety of operations,
oil spill response, environmental restoration, and so on. We
would hope that Congress would, in a progressive way, then
begin to look at, as they have in this particular case with
respect to the reorganization of MMS. Thank you.
[The prepared statement of Dr. Boesch follows:]
Statement of Donald F. Boesch, Commissioner, National Commission on the
BP Deepwater Horizon Oil Spill and the Future of Offshore Drilling
Chairman Lamborn, Ranking Member Holt, and members of the
Subcommittee, I am pleased to offer the perspectives of the National
Commission on the BP Deepwater Horizon Oil Spill and the Future of
Offshore Drilling on legislation to reorganize the Department of the
Interior's offshore energy agencies. I served as one of the seven
members of this Commission that delivered its report to the President,
Congress and the American people on January 11 of this year. In my
regular employ, I am the President of the University of Maryland Center
for Environmental Science, but I brought to my service on the
Commission previous experience with offshore oil and gas exploration
and production issues in the Gulf of Mexico.
As I know you are aware, the Commission's report contains numerous
recommendations for improving the safety of offshore operations,
safeguarding the environment, strengthening oil spill response,
advancing well containment capabilities, overcoming the impacts of the
spill and restoring the Gulf, ensuring financial responsibility, and
moving to frontier areas. Among those recommendations are
recommendations for promoting congressional engagement to ensure
responsible offshore drilling. In that light, the former Commissioners
are pleased that the Subcommittee is having this hearing to consider
draft legislation that addresses important Commission recommendations
regarding reorganization of the former Minerals Management Service
(MMS).
Prior to the Deepwater Horizon accident MMS was not only
responsible for offshore leasing and resource management; it also
collected and disbursed revenues from offshore leasing, conducted
environmental reviews, reviewed plans and issued permits, conducted
audits and inspections, and enforced safety and environmental
regulations. The Commission found that the mingling of distinct
statutory responsibilities--each of which required different skill sets
and fostered different institutional cultures--led inevitably to
internal tensions and a confusion of goals that weakened the agency's
effectiveness and made it more susceptible to outside pressures.
At the core of this tension was a trade-off between, on the one
hand, promoting the ``expeditious and orderly development'' of offshore
resources, as mandated by the Outer Continental Lands Act of 1978,
while also ensuring, on the other hand, that offshore development
proceeded in a manner that protected human health, safety, and the
environment. Demand for lease revenues and pressure to expand access
and expedite permit approvals and other regulatory processes often
combined to push MMS toward elevating the former goal over the latter.
MMS lacked either a clearly articulated mission or adequate guidance
for balancing its different missions leading to inefficient management
and a tendency to defer to industry, which intervened to shorten time
frames for plan and permit reviews, block rulemaking concerning royalty
valuation, and delay and weaken rules aimed at improving the safety
management of operations.
All of these problems were compounded by an outdated organizational
structure, a chronic shortage of resources, a lack of sufficient
technological expertise, and the inherent difficulty of coordinating
effectively with all the other government agencies that had statutory
responsibility for some aspect of offshore oil and gas activities.
Besides MMS, other offices of the Department of the Interior as well as
the Departments of Transportation, Commerce, Defense, and Homeland
Security, and the Environmental Protection Agency (EPA) were involved
in some aspect of the many faceted facilities and operations, from
workers on production platforms to pipelines, helicopters, drilling
rigs, and supply vessels.
In the weeks and months following the Macondo well failure the
Secretary of the Interior renamed MMS the Bureau of Ocean Energy
Management, Regulation and Enforcement (BOEMRE) and he and the Bureau's
new director began to implement a plan to split its responsibilities
into three separate offices. The Office of Natural Resources Revenue
was moved into the Department's Office of Policy and Budget and BOEMRE
was organized into the Bureau of Ocean Energy Management (BOEM) and the
separate Bureau of Safety and Environmental Management (BSEE). Our
Commission, after considering the views of many parties, including
those who argued that the safety and environmental management functions
must be placed in a separate department of the government, concluded
that they should remain in Interior, but be independent of BOEM and
insulated from the pressures to increase production and maximize lease
revenues by having this independent authority report to the Secretary.
The Commissioners are pleased to see that the discussion draft
legislation by Chairman Hastings codifies in law the executive actions
taken to segregate the revenue (Office of Natural Resources Revenue),
ocean energy management (Bureau of Ocean Energy) and safety and
environmental enforcement (Ocean Energy Safety Service) functions.
However, the legislation would not take the step of separating the
reporting line of the Ocean Energy Safety Service from the Assistant
Secretary of Ocean Energy and Safety, leaving that office the
functional equivalent of the present BOEMRE Director. We urge the
authors and members of the subcommittee to consider that step in order
to provide the level of insulation that the Commission felt necessary.
We suggest consideration of our recommendation that the director of the
Ocean Energy Safety Service be a qualified executive appointed by the
President for a five-to-six year term and confirmed by the Senate. And,
we further urge the members to consider that if we are to learn from
the painful lesson of the Macondo blowout, environmental protection, as
well as energy resources management, should be an important
responsibility of the Bureau of Ocean Energy.
While the Commission did not consider the appropriate
organizational level (e.g. Assistant Secretary versus Bureau director)
within the Department of the Interior, it is not clear to us what is
gained by elevation of the present BOEMRE to an Assistant Secretary
level and the elevation of the Assistant Secretary for Land and
Minerals to an Undersecretary for Energy, Lands and Minerals. These
pairs of units seem functionally equivalent.
The former Commissioners are pleased to see the establishment of a
National Offshore Energy Health and Safety Academy [Section 3 (d) (10)]
and an Outer Continental Shelf Safety Advisory Board under the Federal
Advisory Committee Act (Section 5). The advisory board seems similar to
the Ocean Energy Safety Advisory Committee that has been established by
the BOEMRE Director under FACA. Perhaps some cross-comparison would
help sharpen its organization and function.
The Oil Spill Commission made another recommendation that seems
germane to the scope of the discussion draft legislation: providing
appropriate resources for the reorganized programs. Mindful of the
federal budget pressures, the Commission recommended that the budgets
for these new offices as well as existing agencies come directly from
fees paid by the offshore industry, akin to how fees charged to the
telecommunications industry pay for the expenses of the Federal
Communications Commission, which is essentially fully funded by such
regulated industry payments. Under existing law, while the industry
pays substantial amounts for leases and royalties to compensate the
American public for the extraction of their resources, it pays modest
inspection fees that contribute only about 3 percent of BOEMRE's annual
budget. By our estimation the cost of essential management, including
environmental assessments and regulatory functions, could be covered by
fees that amount to a few cents per barrel of oil produced, scarcely
enough the affect the price of oil on the world market or the price of
gasoline at the pump.
Finally, while the proposed legislation is a positive first step,
there are many other recommendations of the Oil Spill Commission that
merit consideration of legislation by the Congress. These range from
ensuring the statutory authority of the safety and environmental
management program, to improving interagency oil spill prevention and
response, and to environmental restoration. We urge the Natural
Resources Committee and other committees with appropriate jurisdiction
to keep the Commission's report on the top of the desk and firmly in
mind in addressing these issues.
______
Mr. Lamborn. OK. Thank you for your testimony as well. We
will now begin our questioning. I am hopeful that we can get
things done and wrap up this hearing before the next series of
votes. So I am just going to jump right in.
Mr. Modiano, Director Bromwich spoke about how they
analyzed and considered splitting up functions of BOEMRE by
pre-lease versus post-lease activities. The Director's primary
reason for not going this route with his reorganization is due
to concerns with increasing environmental analysis duplication
and bureaucracy.
With your knowledge of how these processes worked when they
were combined at MMS, do you have any critical analysis of
those processes and how the best way to separate them in a way
that makes the process more efficient versus slower and more
bureaucratic would be?
Mr. Modiano. I think that the Chairman's draft does take
into account the best way to handle these issues. When the
Director was talking about the fact that he thought that there
would be duplicative efforts, I am not sure that that is
necessarily the case because so much depends upon developing
working relationships that should share similar data and
analysis, considering that they are working in the same parts
of the ocean on the same problems, or onshore.
So it seems to me that in the environmental community, as
long as people maybe more efficiently develop common sets of
environmental data and then share it, I don't necessarily think
you would have to suffer by having a delay. I don't really see
it that way.
Mr. Lamborn. Well, I think that having an Under Secretary
at the helm with the particular goal in mind for safe energy
production on Federal lands might help. What do you think about
that?
Mr. Modiano. I agree. I think that when you give a higher
status within a community, and this community is the Department
of the Interior, you are also giving it a higher status among
government and here within Congress. And because, as I said,
you are the delegators of the authority, you create and allow
any position in government to do what they want. And so by your
naming a person an Under Secretary, you have given them the
opportunity to have greater gravitas within the concerns and
missions that they are trying to pursue.
He sits at a table in which he can coordinate better across
the board. I think the Under Secretary, in fact, in the end
will be a good idea. And, of course, many of the jobs, as we
all know, in government and leadership depend upon the quality
of people that we put in them. And again, the Congress would
have an opportunity to ask these questions upfront before this
person takes his seat at the table by advice and consent.
Mr. Lamborn. OK. Thank you. And last, you mentioned that
separating out the revenue collection functions of MMS into its
own agency is of great importance, and that makes perfect
sense. How about splitting up the rest of MMS functions,
leasing, environmental analysis, plan and permit review, and
enforcement? Do you have any concerns given your experience in
working for the agency in the past that may come with splitting
up these duties between different agencies and the impacts it
could have on the process, pace--I imagine it must be done very
carefully.
Mr. Modiano. Yes. I agree that it should be done very
carefully. But again, the operations and the missions that you
are asking the department's new organization to undertake, the
way that you have created the buckets and filled them in the
Chairman's draft I think makes sense.
In terms of my comments on the royalty collection part, I
think that royalty collection is such a different duck than the
other operations that we are talking about that it needs to
just stand alone and report to the Secretary probably. It is
one of those things where it is almost like your office of an
inspector general, where it should be there. It should have
accountants. It deals with its trust responsibilities of the
department because of its relationship to Indians and the
Indian royalty collection. And so for me, it seems as if it is
less tainted if it gets involved in other policy concerns, you
know, that might go on in the Office of Budget and Management.
Mr. Lamborn. OK. Thank you. And at this point, I would
recognize Representative Sarbanes for five minutes.
Mr. Sarbanes. Thank you, Mr. Chairman. I am going to move
my chair. First of all, thank you both for being here.
Dr. Boesch, I assume that you--and I think maybe you have
already alluded to this if not said it directly. But I assume
you believe that in the Congress' response to what was one of
the biggest disasters we have had in recent memory in terms of
environmental impact, should go beyond just a simple
codification of the reorganization that has occurred, and
should do more to respond to some of the recommendations that
your commission put forward.
Dr. Boesch. Yes, Mr. Sarbanes. There are any number of
areas that could quite likely require legislation that have to
do with some of the details of the regularity authority within
the reorganized MMS or BOEMRE. They have to do with interagency
coordination of issues and oil spill response, as well as
environment permit review. They have to do with one of the
areas that I have worked a good part of my career on that I
think is important going forward of environmental restoration
of the Gulf Coast after the spill.
So there are a number of actions I think that are there in
our report that can't be done by executive agency action alone.
Mr. Sarbanes. It is a great missed opportunity because the
way things work, frankly, in the public and around here is that
you get people's attention for a certain period of time, and if
you don't seize the moment, then you can lose it forever. And I
hope the majority here in the House of Representatives will be
more open to the notion we ought to take advantage of this
moment in time to address some of these other concerns.
One of them I gather is also the fee structure that would
help support, for example, the inspection operations of the
agency. And maybe you could speak to that real briefly.
Dr. Boesch. Right. I think Mr. Bromwich talked a little bit
about that, about the cost of the additional inspectors, the
reviewers of permits and so on that are going to be required,
the challenges they have with regard to the pay grades for some
of these folks.
Just on a personal level, I actually lived in Houma,
Louisiana, in Mr. Landry's district, until 1990. When I left
there in 1990, 3 percent of the oil produced in the Gulf of
Mexico was from deep water, greater than 1,000 feet. Now it is
like 80 percent. And during that same time frame, that is 20
years, the budget of MMS declined rather than increased. So
this is an agency which has been resource starved. It needs
reorganization. But it needs the resources.
We know the fact that you are in an impossible situation
with looking for budget cuts, and any new costs are going to be
very difficult to fit in. And it seems to us to be appropriate.
There are many other examples where the industry pays for the
cost of their regulation.
Mr. Sarbanes. Well, my impression is surely the industry is
in a position to afford what again would, even increased, would
represent a modest contribution to help with the resources of
the agency.
Before my time runs out, I have been very focused from the
beginning of this disaster on the degree of accountability that
ought to go to the people at the very top. And I think one of
the problems at BP was you didn't have that accountability.
Now, I have taken that view as far as thinking that, you
know, there ought to be some civil liability that falls on the
CEO of a company, who ought to be required to test, for
example, and certify to the adequacy of a response plan, spill
response plan. I know that in testimony before your commission,
the CEOs of ExxonMobil and Shell Offshore spoke to this issue
of how you change the culture of an organization so that people
have a culture of safety and vigilance with respect to these
things, and how you make sure that at the very top that
accountability exists.
And I am still worried that at BP, for example, and perhaps
other parts of the industry, you don't have that
accountability. Can you speak to the testimony that you heard
on that point and your view of it?
Dr. Boesch. Yes, just in brief. And it is archived. The
video is archived, so it is very compelling. Rex Tillerson, the
CEO of ExxonMobil, and Marvin Odum, the CEO of Shell U.S.,
basically gave from their own company's experience--Exxon a
commitment that the leadership made after the Exxon Valdez to
improve their reputation. It was essential to their business
plan. And Mr. Tillerson talked very compellingly about that.
Mr. Odum had just come, before he met with us, from
helicoptering offshore to go to an offshore platform to give an
award to someone who pulled the lever and shut things down. It
turned out to be a false alarm, but basically the idea was to
tell people in their company that this is OK. Safety is first.
Mr. Sarbanes. Thank you. I yield.
Mr. Lamborn. OK, thank you. Representative Landry.
Mr. Landry. Dr. Boesch, I hope the gentleman from Maryland
would agree to maybe if he wanted to look for additional
revenue or have the industry pay for a little more, if we could
tie that to getting back to pre-permitting levels. You know,
that seemed maybe something the industry may be interested in
if we could speed the pace of the permitting process.
Also, real quickly, I wanted to ask you--and I also have a
question for Mr. Modiano. Are you concerned as any--because it
seems like I remember in your report you made mention of the
differentiation between shallow water and deep water drilling
since you lived down there. Are you afraid that we may be
painting with too broad of a brush the industry in the Gulf of
Mexico as a whole, and would you say that there exists the need
to acknowledge there are really two separate industries in the
Gulf of Mexico, both a shall water and a deep water industry?
Dr. Boesch. I don't know if they are exactly separate, but
there are different challenges. As you know, the deep water
industry, which has grown so dramatically and has produced so
much oil, has found rich resources, have inherent challenges
not only because of the water depth, but most importantly
because of the pressure in these deeper formations. It is a
whole other level of risk. So for that reason--and I think that
is why you see BOEMRE now having different rules and
requirements for deep water drilling.
Having said that, you know, the shelf industry is old now,
so it has got a lot of infrastructure. It has got a lot of
pipelines and other things which pose other kinds of risks and
so on that need attention as well.
Mr. Landry. Right. So treating them the same would not be
the right thing to do.
Dr. Boesch. Right. I don't think that is what is being
proposed or being done, anyway.
Mr. Landry. OK. Mr. Modiano, I have to tell you, I thank
you for including in your testimony the importance of
efficiency as an important fundamental that should guide
reorganization. Given your experience at MMS, do you think our
proposal is something that does that?
Mr. Modiano. Yes, I do, because I thought long and hard
about it, and somehow, when you clear up levels of authority,
and you make changes of command easier, and you know that at
the end of your own organization, you are pretty much at the
level of the Secretary's office by being able to go to an Under
Secretary, things become more efficient. You don't have to
necessarily take your Assistant Secretary's time to go across
the department and hold interdepartment decisions. Your Under
Secretary can do that for you and resolve things quicker.
So I think that by putting new authorities and higher
authorities within it will make it more efficient. It is one of
those things you watch in government and it is not a tangible,
but you can feel it when companies have a greater vertical
ladder, you somehow get things done quicker than if you have to
stay horizontal within the department.
Mr. Landry. Thank you. Would you like to expand on Dr.
Boesch--on the question that I gave concerning shallow water
and deep?
Mr. Modiano. I think absolutely you are right. I mean,
there are different engineering challenges between shallow
water and deep water. There are different levels of risk. There
are different ways that you approach things. Even the physical
presence of the types of instrumentation that is used may be
more accessible closer to shore than offshore.
At the same time, the resources of the companies are
different. It is a different type of company that might be
dealing in the offshore versus the onshore, and therefore they
might need separate types of ways that they can work with the
department so that in terms of enforcement and how things
happen and what inspectors come out, there is an understanding
that we are dealing in the millions and not hundreds of
millions of dollars of levels with companies.
And so I think that that sensitivity has to be appreciated
and has to be built into the work that the new structure has.
You are absolutely right.
Mr. Landry. Thank you. Mr. Chairman, I yield back.
Mr. Lamborn. OK. I want to thank the panel for their
testimony. Members of the Committee may have additional
questions for the record, and I would ask that you respond to
those in writing. If there is no further business to come
before the Committee, the Committee stands adjourned.
[Whereupon, at 12:08 p.m., the Subcommittee was adjourned.]