[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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                     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.]

                                 
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