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




 
  ONE YEAR AFTER PRESIDENT OBAMA'S GULF OF MEXICO 6-MONTH MORATORIUM 
  OFFICIALLY LIFTED: EXAMINING THE LINGERING IMPACTS ON JOBS, ENERGY 
                    PRODUCTION AND LOCAL ECONOMIES

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

                           OVERSIGHT HEARING

                               before the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                      Wednesday, October 12, 2011

                               __________

                           Serial No. 112-69

                               __________

       Printed for the use of the Committee on Natural Resources



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                               index.html
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          Committee address: http://naturalresources.house.gov



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                     COMMITTEE ON NATURAL RESOURCES

                       DOC HASTINGS, WA, Chairman
             EDWARD J. MARKEY, MA, Ranking Democrat Member

Don Young, AK                        Dale E. Kildee, MI
John J. Duncan, Jr., TN              Peter A. DeFazio, OR
Louie Gohmert, TX                    Eni F.H. Faleomavaega, AS
Rob Bishop, UT                       Frank Pallone, Jr., NJ
Doug Lamborn, CO                     Grace F. Napolitano, CA
Robert J. Wittman, VA                Rush D. Holt, NJ
Paul C. Broun, GA                    Raul M. Grijalva, AZ
John Fleming, LA                     Madeleine Z. Bordallo, GU
Mike Coffman, CO                     Jim Costa, CA
Tom McClintock, CA                   Dan Boren, OK
Glenn Thompson, PA                   Gregorio Kilili Camacho Sablan, 
Jeff Denham, CA                          CNMI
Dan Benishek, MI                     Martin Heinrich, NM
David Rivera, FL                     Ben Ray Lujan, NM
Jeff Duncan, SC                      John P. Sarbanes, MD
Scott R. Tipton, CO                  Betty Sutton, OH
Paul A. Gosar, AZ                    Niki Tsongas, MA
Raul R. Labrador, ID                 Pedro R. Pierluisi, PR
Kristi L. Noem, SD                   John Garamendi, CA
Steve Southerland II, FL             Colleen W. Hanabusa, HI
Bill Flores, TX                      Vacancy
Andy Harris, MD
Jeffrey M. Landry, LA
Charles J. ``Chuck'' Fleischmann, 
    TN
Jon Runyan, NJ
Bill Johnson, OH

                       Todd Young, Chief of Staff
                      Lisa Pittman, Chief Counsel
                Jeffrey Duncan, Democrat Staff Director
                 David Watkins, Democrat Chief Counsel


                                 ------                                

                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Wednesday, October 12, 2011......................     1

Statement of Members:
    Hastings, Hon. Doc, a Representative in Congress from the 
      State of Washington........................................     1
        Prepared statement of....................................     3
    Markey, Hon. Edward J., a Representative in Congress from the 
      State of Massachusetts.....................................     4
        Prepared statement of....................................     5

Statement of Witnesses:
    Auer, Chris, Principal, Crevalle Management Services.........    15
        Prepared statement of....................................    16
    Craul, Bruce W., Chief Operating Officer, Legendary 
      Hospitality, and Chairman-Elect, Florida Restaurant and 
      Lodging Association........................................    26
        Prepared statement of....................................    27
    Galvez, Fernando, Ph.D., Assistant Professor, Department of 
      Biological Sciences, Louisiana State University............    29
        Prepared statement of....................................    31
    Kief, Cory, President, Offshore Towing, Inc., Larose, 
      Louisiana..................................................    18
        Prepared statement of....................................    19
    Reese, Albert L., Jr., Chief Financial Officer and Treasurer, 
      ATP Oil & Gas Corporation..................................    10
        Prepared statement of....................................    12
    Shafer, Sean, Manager of Consulting/Senior Market Analyst, 
      Quest Offshore Resources, Inc..............................     6
        Prepared statement of....................................     8
    Zales, Captain Robert F., II, President, National Association 
      of Charterboat Operators...................................    20
        Prepared statement of....................................    23

Additional materials supplied:
    Mason, Joseph R., Louisiana State University, Statement 
      submitted for the record...................................    62
                                     



 OVERSIGHT HEARING ENTITLED ``ONE YEAR AFTER PRESIDENT OBAMA'S GULF OF 
 MEXICO 6-MONTH MORATORIUM OFFICIALLY LIFTED: EXAMINING THE LINGERING 
       IMPACTS ON JOBS, ENERGY PRODUCTION AND LOCAL ECONOMIES.''

                              ----------                              


                      Wednesday, October 12, 2011

                     U.S. House of Representatives

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Committee met, pursuant to call, at 10:07 a.m., in Room 
1324, Longworth House Office Building, Hon. Doc Hastings 
[Chairman of the Committee] presiding.
    Present: Representatives Hastings, Gohmert, Lamborn, 
Fleming, McClintock, Thompson, Duncan of South Carolina, 
Labrador, Southerland, Landry, Markey, and Holt.
    Also present: Representative Palazzo.
    The Chairman. The Committee will come to order. And the 
Chair notes the presence of a quorum, which under our rules, 
two Members, and we have greatly exceeded that this morning. 
Thank you very much.
    The Committee on Natural Resources is meeting today to hear 
testimony on an oversight hearing on ``One Year after President 
Obama's Gulf of Mexico 6-Month Moratorium Officially Lifted: 
Examining the Lingering Impacts on Jobs, Energy Production, and 
Local Economies.''
    Under Rule 4[f], the opening statements are limited to the 
Chairman and the Ranking Member. However, I will ask unanimous 
consent to include any Members' opening statements on the 
hearing if those statements are submitted to the Committee 
before the close of business today. And without objection, so 
ordered.
    I further ask unanimous consent that the gentleman from 
Mississippi, Mr. Palazzo, be allowed to sit on the dais and 
participate in the hearing today. He expressed an interest to 
do so, and hopefully he is on his way. And without objection, 
so ordered.
    I will now recognize myself for five minutes.

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

    Mr. Hastings. On May 2010, shortly after the tragic 
Deepwater Horizon explosion and oil spill, the Obama 
Administration placed a moratorium on all deepwater drilling in 
the Gulf of Mexico. This official moratorium lasted for nearly 
six months, and was lifted on October 12th, 2010, exactly one 
year ago today.
    The official moratorium, unfortunately, was followed by a 
de facto moratorium that still did not allow businesses and 
their employees to return to work until the first permits were 
issued in February of this year. The Obama Administration's 
inability or refusal to issue permits in a timely and efficient 
manner after the official moratorium was lifted resulted in 
lost jobs and significant economic pain.
    Since the moratorium was imposed, this Committee has heard 
directly from businesses and local community groups about the 
economic impacts. Today, one year later, this hearing is an 
opportunity to follow up again and listen to those from the 
Gulf about what economic conditions are like there today. While 
I recognize that some permits indeed are being issued, there 
are facts and data that demonstrate recovery is moving at a 
pace that continues to hamper job creation and the economy.
    First, permitting activity in the Gulf has dramatically 
declined under the Obama Administration, as shown by this 
chart, and has operated at lows that equate to hurricane-
induced shutdowns. You can see the bottom spike there is 
Katrina. The next spike is Gustav. And you can see where we are 
now in real time, and it equals those areas.
    Additionally, permitting activity has not returned to pre-
Deepwater Horizon levels. The average number of permits issued 
in the six months prior to the Deepwater Horizon incident was 
71 per month. The average number for the last six months was 52 
per month. That is a 20 percent decrease.
    Second, instead of looking at the number of permits issued, 
we should look at the production levels. This chart shows how 
production has declined. The top line is what production in the 
Gulf was projected to be before the spill and the President's 
moratorium. The bottom line represents the actual production. 
As you can see, there is a difference between the two.
    Third, the time it takes to get approval for permits and 
exploration plans is much longer today. Director Michael 
Bromwich has frequently stated that there is not a backup of 
offshore drilling permits waiting for approval and that this 
proves that there is no de facto moratorium. And this chart 
actually helps highlight what Director Bromwich is referring 
to. It shows the number of days it took for specific 
explorations. And by the way, the bottom line there is the 
specific explorations to be accepted and approved in order to 
receive the permit to drill.
    By the way, the horizontal line is the number of days. So 
as you can see from these charts, these plans are being 
approved in a relatively short-term time frame, and credit 
should be given where it is due. But that is only part of the 
story.
    This next chart shows exactly how long it took companies to 
get their plans approved, sometimes nearly 300 days. What this 
chart does is take the last chart and insert below that the 
process to declare it deemed submitted. So companies are 
submitting plans and getting stuck in a back and forth limbo 
through the Department of the Interior that can drag on for 
months.
    This is the step in the whole process that this 
Administration does not talk about. Now, keep in mind, 
companies can't apply for permits until its exploration plan 
has been submitted and approved. That is why it is disingenuous 
to only refer to pending permits and approved permits as the 
Department of the Interior likes to do, because the logjams 
occur before the companies even get to that point. So it is a 
sleight of hand that actually makes the process look more 
efficient, when in fact it isn't.
    And finally, fourth, 11 deepwater rigs have left the Gulf 
of Mexico for foreign countries, such as Egypt and Brazil. 
Every time one of these rigs leaves, it takes away good 
American jobs. And in addition to that, 84 offshore support 
vessels have also left and departed the Gulf. The livelihood of 
communities and businesses throughout the Gulf depend on safe 
and responsible offshore energy production.
    It has been a year and a half since the Deepwater Horizon 
incident, and a year since the President's moratorium was 
officially lifted. It is time to get people back to work and 
get the economy rolling again in the Gulf. And with that, I 
will yield to the Ranking Member for his opening remarks. The 
gentleman is recognized for five minutes.
    [The prepared statement of Mr. Hastings follows:]

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

    In May 2010, shortly after the tragic Deepwater Horizon explosion 
and oil spill, the Obama Administration placed a moratorium on all 
deepwater drilling in the Gulf of Mexico. This official moratorium 
lasted for nearly six months and was lifted on October 12, 2010--
exactly one year ago today.
    This official moratorium, unfortunately, was followed by a de facto 
moratorium that still did not allow businesses and their employees to 
return to work until the first permits were issued in February of this 
year. The Obama Administration's inability, or refusal, to issue 
permits in a timely and efficient manner after the official moratorium 
was lifted resulted in lost jobs and significant economic pain.
    Since the moratorium was imposed, this Committee has heard directly 
from businesses and local community groups about the economic impacts. 
Today, one year later, this hearing is an opportunity to follow-up and 
listen to those from the Gulf about what economic conditions are like 
there today.
    While I recognize that some permits indeed are being issued, there 
are facts and data that demonstrate recovery is moving at a pace that 
continues to hamper job creation and the economy.
    First, permitting activity in the Gulf has dramatically declined 
under the Obama Administration and has operated at lows that equate to 
hurricane-induced slowdowns.
    Additionally, permitting activity has not returned to pre-Deepwater 
Horizon levels. The average number of permits issued in the six-months 
prior to the Deepwater Horizon incident was 71 per month. The average 
number for the past six months is 52 per month. That's a 27% decrease, 
which directly affects jobs and the local economy.
    Second, instead of looking at the number of permits issued, we 
should also look at production levels. This chart shows how production 
has declined. The top line is what production in the Gulf was projected 
to be before the spill and the President's moratorium. The bottom line 
represents actual production.
    Third, the time it takes to get approval for permits and 
exploration plans is much longer today. Director Michael Bromwich has 
frequently stated that there is not a backup of offshore drilling 
permits waiting for approval. . .and that this proves there is no de 
facto moratorium. This chart actually helps highlight what Director 
Bromwich is referring to. It shows the number of days it took specific 
explorations plans to be accepted and approved in order to receive a 
permit to drill. As you can see from this chart, these plans are being 
approved in a relatively short time-frame. But that is only part of the 
story.
    This next chart shows how long it actually took companies to get 
their plans approved-sometimes nearly 300 days. The biggest delay in 
the process, as shown here, is getting the Interior Department to 
accept the exploration plan and declare it `deemed submitted.' 
Companies are submitting plans and getting stuck in a back and forth 
limbo with the Interior Department that can drag on for months. This is 
the step the Obama Administration doesn't talk about.
    Keep in mind, companies can't apply for permits until its 
exploration plan has been submitted and approved. That's why it's 
disingenuous to only refer to pending permits and approved permits--as 
the Interior Department likes to do--because the log jams occurs before 
companies even get to that point. It's a slight of hand to make the 
process look much more efficient.
    Fourth, 11 deepwater rigs have left the Gulf of Mexico for foreign 
countries such as Egypt and Brazil. Every time one of these rigs 
leaves, it takes away good-paying American jobs. In addition, 84 
offshore support vessels have also departed the Gulf.
    The livelihood of communities and businesses throughout the Gulf 
depend on safe and responsible offshore energy production. It's been a 
year and a half since the Deepwater Horizon incident, and a year since 
the President's moratorium was officially lifted. It's time to get 
people back to work and get the Gulf's economy growing again.
                                 ______
                                 

    STATEMENT OF HON. EDWARD J. MARKEY, A REPRESENTATIVE IN 
        CONGRESS FROM THE COMMONWEALTH OF MASSACHUSETTS

    Mr. Markey. Thank you, Mr. Chairman, very much. Most 
Americans likely remember the date April 20th, 2010, as the day 
the Deepwater Horizon exploded and the BP oil spill began. But 
October 12th, 2010, would likely only trigger blank stares. And 
that is the essential problem with this hearing. The Republican 
majority is holding a hearing on the one year anniversary of 
the end of a temporary pause for a couple dozen of the riskiest 
deepwater drilling rigs in the Gulf of Mexico.
    Those few months were important to ensure that rigs were 
safe and that workers and our environment were protected. But 
today, we are having a hearing on that temporary pause as 
though it and not the BP spill itself were the cause of all of 
the problems. Holding a hearing on the impact of a safety check 
following an unimaginable oil spill is a little like holding a 
hearing on the impact of wearing a cast after shattering your 
leg without looking at the accident that required the cast.
    But the Republican majority and the oil industry aren't 
holding hearings to examine the lingering effects from the 
actual oil spill. They are not talking about how the oil spill 
could cost the Gulf region $22 billion over three years and 
lost tourism, according to one study. They are not holding a 
hearing to demand answers about why there have been recurrent 
oil sheens showing up near the site of the Macondo well site a 
year after the accident, or reports of mutations in some fish 
species in the region. And they are not talking about what we 
do to ensure we never have a spill like this occur again.
    So today, let us talk about some of the real lasting 
impacts from the spill itself. Just a few weeks into the BP 
spill, I successfully called on BP to create a $500 million 
scientific research fund. One of the first studies from this 
fund was released just a few weeks ago. That study, conducted 
by a team of researchers from Louisiana State, Texas State, and 
Clemson Universities, shows that fish living in the marshes 
affected by the spill have undergone changes at the cellular 
level that could lead to developmental and reproductive 
problems in these fish.
    The researchers focused on the killifish, which is the most 
abundant fish in the marshes of the Gulf, and an indicator of 
the health of that ecosystem. The researchers found that there 
have been potentially dangerous changes in this one species 
that may indicate the presence of a much larger problem. In 
fact, the researchers concluded that these may be some of the 
same significant early warning signs that we saw in the years 
following the Exxon Valdez oil spill in Alaska, before species 
like the Pacific herring and pink salmon suffered population 
declines.
    We may be seeing the first indications that there are 
lasting effects of the oil spill below the surface of the 
water. There may in fact be a host of ticking environmental 
time bombs in the Gulf whose impact we are only beginning to 
understand. But the most important species impacted by the 
spill has been the resilient people of the Gulf of Mexico. They 
were the ones who lost jobs because of the spill. They lost 
tourism dollars and fishing dollars, and endured the priceless 
impacts on the environment of the Gulf. And families lost 
husbands and sons and brothers on the Deepwater Horizon.
    This Congress should finally end its moratorium on common 
sense and pass legislation to prevent similar spills in the 
future. We should ensure that there is proper monitoring of the 
Gulf ecosystem so that we are ready to adapt to possible 
impacts of the spill on fish and other species. Each time this 
Committee holds another hearing that avoids these 
responsibilities, it does a disservice to the people of the 
Gulf. I yield back.
    [The prepared statement of Mr. Markey follows:]

     Statement of The Honorable Edward J. Markey, Ranking Member, 
                     Committee on Natural Resources

    Most Americans likely remember the date April 20, 2010 as the day 
the Deepwater Horizon exploded and the BP oil spill began.
    But October 12, 2010 would likely only trigger blank stares.
    And that is the essential problem with this hearing. The Republican 
Majority is holding a hearing on the one year anniversary of the end of 
a temporary pause for a couple dozen of the riskiest deepwater drilling 
rigs in the Gulf of Mexico.
    Those few months were important to ensure that rigs were safe and 
that workers and our environment were protected. But today we are 
having a hearing on that temporary pause as though it, and not the BP 
spill itself, were the cause of all problems.
    Holding a hearing on the impact of a safety check following an 
unimaginable oil spill is a little like holding a hearing on the impact 
of wearing a cast after shattering your leg, without looking at the 
accident that required the cast.
    But the Republican Majority and the oil industry aren't holding 
hearings to examine the lingering effects from the actual oil spill.
    They're not talking about how the oil spill could cost the Gulf 
region $22.7 billion over three years in lost tourism, according to one 
study.
    They're not holding a hearing to demand answers about why there 
have been recurrent oil sheens showing up near the site of the Macondo 
well site a year after the accident, or reports of mutations in some 
fish species in the region.
    And they're not talking about what we do to ensure we never have a 
spill like this again.
    So today, let's talk about some of the real lasting impacts from 
the spill itself.
    Just a few weeks into the BP spill, I successfully called on BP to 
create a $500 million scientific research fund. One of the first 
studies from this fund was released just a few weeks ago.
    That study, conducted by a team of researchers from Louisiana 
State, Texas State and Clemson Universities, shows that fish living in 
the marshes affected by the spill have undergone changes at the 
cellular level that could lead to developmental and reproductive 
problems in these fish. The researchers focused on the killifish [KILL-
EE-FISH], which is the most abundant fish in the marshes of the Gulf 
and an indicator of the health of that ecosystem.
    The researchers found that there have been potentially dangerous 
changes in this one species that may indicate the presence of a much 
larger problem. In fact, the researchers concluded that these may be 
some of the same significant early warning signs that we saw in the 
years following the Exxon Valdez oil spill in Alaska before species 
like the pacific herring and pink salmon suffered population declines. 
We may be seeing the first indications that there are lasting effects 
of the oil spill below the surface of the water. There may in fact be a 
host of ticking environmental time bombs in the Gulf whose impacts we 
are only beginning to understand.
    But the most important species impacted by the spill has been the 
resilient people of the Gulf of Mexico. They were the ones who lost 
jobs because of the spill. They lost tourism dollars and fishing 
dollars and endured the priceless impacts on the environment of the 
Gulf.
    And families lost husbands, sons and brothers on the Deepwater 
Horizon.
    This Congress should finally end its moratorium on common sense and 
pass legislation to prevent similar spills in the future. We should 
ensure that there is proper monitoring of the Gulf ecosystem so that we 
are ready to adapt to possible impacts of the spill on fish and other 
species. Each time this Committee holds another hearing that avoids 
these responsibilities, it does a disservice to the people of the Gulf. 
I yield back.
                                 ______
                                 
    Mr. Hastings. I thank the gentleman for his opening 
statement, and want to welcome our panel here today. We have 
Mr. Sean Shafer, Manager of Consulting and Senior Marketing 
Analyst of Quest Offshore Resources; Mr. Al Reese, Jr., Chief 
Financial Officer of ATP Oil & Gas Corporation; Mr. Chris Auer, 
Principal of Crevalle Management Services--did I say that 
correctly?
    Mr. Auer. You did.
    Mr. Hastings. Mr. Cory Kief, President of Offshore Towing; 
Captain Bob Zales, President of the National Association of 
Charterboat Operators; Mr. Bruce Craul, Chief Operating 
Officer, Legendary, Inc.; and Dr. Fernando Galvez, Assistant 
Professor, Department of Biological Sciences, Louisiana State 
University.
    For those of you that aren't familiar with our timing 
lights, your full statement will appear in the record, and many 
times your full statement is longer than what you can speak 
orally for five minutes, and we recognize that. That is why 
your full statement is in the record. But we would like you to 
confine your oral statements to five minutes, and the light in 
front of you, when the green light is on, it means you are 
doing fine. When the yellow light comes on, it means you are 
down to one minute. And then when the red light comes on, it 
means that your five minutes have expired. I would ask you to 
try to confine your remarks within that time frame so that we 
can get onto hearing from all of you, and then have followup 
questions from the Committee.
    So with that, Mr. Shafer, we will start with you, and you 
are recognized for five minutes.

 STATEMENT OF SEAN SHAFER, MANAGER OF CONSULTING/SENIOR MARKET 
               ANALYST, QUEST OFFSHORE RESOURCES

    Mr. Shafer. Thank you, Mr. Chairman, and I appreciate the 
opportunity. Despite the official end of the drilling 
moratorium in October 2010, the offshore Gulf of Mexico oil and 
natural gas industry is still feeling the lingering effects of 
the official moratorium. These effects, combined with the 
impact of the subsequent regulatory slowdown are being felt 
throughout the Gulf Coast region----
    Mr. Hastings. Mr. Shafer, could you move that microphone 
closer to you so we can hear?
    Mr. Shafer. Of course. Sorry about that.
    Mr. Hastings. Thank you very much.
    Mr. Shafer. Excuse me. While the offshore Gulf of Mexico 
oil and industry has seen some signs of recovery from the low 
state it was in during the drilling moratorium, activity levels 
are still well below the levels seen before the Macondo 
incident, and well below the levels of the Quest baseline 
forecast before the incident.
    From a permitting rig and drilling activity perspective, 
the industry is at best flat compared to where it was before 
the drilling moratorium, with the growth that had been 
previously expected both delayed and diminished. The only 
industry sector seeing healthy growth is in the development of 
projects not dependent on further near-term drilling. While 
this is positive, the majority of these projects were already 
well in the works before the incident, and are thus seeing 
these major equipment orders despite the moratorium.
    As of the end of September 2011, 21 floating rigs, which 
are defined as those with subsea blowout preventers, are 
operating in the Gulf of Mexico, of which only 18 are currently 
drilling wells. Pre-moratorium, 33 floating rigs were operating 
in the Gulf of Mexico, with 29 drilling wells at that time. 
This indicates a roughly 37 percent drop in both the number of 
rigs operating and drilling. Since the moratorium began, 11 
rigs have left the Gulf of Mexico. Only one of these has 
returned with three rigs currently sitting idle.
    Seven of these rigs have left for African countries, 
including Egypt, Nigeria, Liberia, and the Republic of Congo. 
Three of these rigs have left to South America, including 
Brazil and French Guinea, and the remaining rig recently 
mobilized to Vietnam.
    As of today, none of these operators have announced plans 
to return these rigs to the Gulf of Mexico this year. Two rigs 
are planned for return in early 2012, but neither operator has 
a permit to drill with these rigs yet, casting doubt on the 
likelihood of this happening. This translates to approximately 
60 wells lost based on the original contract terms of these 
rigs. The loss of these rigs amounts to lost spending of $6.3 
billion annual loss of direct employment of 11,500 jobs over 
two years.
    While the number of rigs operating the Gulf of Mexico is 
expected to recover to pre-moratorium levels by the middle of 
2012, this fails to take into account the number of rigs which 
were expected to be operating in the region in 2012 based on 
previously stated operator schedules. While rig counts are 
forecast to return to pre-moratorium levels of 35 floating rigs 
by mid-2012, prior to the incident and subsequent regulatory 
slowdown, operating numbers were expected to have reached 44 
rigs by this point.
    In addition, drilling activity is not expected to return to 
pre-moratorium levels before 2014 due to currently low 
permitting rates and operators not relocated rigs back to the 
Gulf of Mexico. While the Gulf of Mexico is currently seeing an 
uptick in certain types of development activity due to projects 
that were delayed by the credit crunch and economic slowdown, 
overall capital expenditures are down 10 percent from 2009, 
which was already considered a down year for the industry owing 
to macroeconomic conditions.
    Compared with 2008, which would be a better indicator, 
capital spending levels are roughly down by roughly 25 percent. 
Continued regulatory uncertainty will only exacerbate this 
trend, as operators reallocate resources to other major 
offshore provinces. The long-term effects of the moratorium and 
subsequent regulatory slowdown will lead to lower development 
levels in the Gulf of Mexico, which will lower oil and gas 
production levels and associated employment and economic 
activity.
    In fact, the most pronounced effects of the moratorium and 
continued regulatory issues may not be seen until later years, 
due to the long time frames associated with developing offshore 
oil and gas products. With the length of time from first drill 
date to project sanctioning averaging over four years, and the 
length of time from project sanctioning to first production 
averaging over four years as well for major projects, the most 
pronounced effects of the moratorium and subsequent slowdown 
will begin to be seen in the middle of the decade.
    Due to low levels of drilling beginning with the 
moratorium, the number of actionable projects in the Gulf of 
Mexico will begin to decline, which will lead to lower levels 
of development activity. Since the vast majority of spending 
associated with these large capital projects occurs within the 
United States, a wide array of industry sectors will be 
negatively impacted, including such sectors as oil and gas 
machinery, air transportation services, and financial services.
    The offshore oil and gas industry is a key contributor to 
the energy supply of the United States. Additionally, the 
industry contributes both to the gross national product and 
overall employment. The offshore Gulf of Mexico contributed 14 
percent of the oil and gas produced in the United States in 
2010. Additionally, capital investment operational spending by 
the Gulf of Mexico oil and natural gas industry supports 
hundreds of thousands of jobs across multiple sectors and 
regions, supports economic growth, and generates significant 
tax revenues at all levels of government.
    It is therefore critical that permitting return to 
historical rates and that development and production are 
allowed to reach their potential in an environmentally 
responsible manner under a balanced regulatory regime. Thank 
you.
    [The prepared statement of Mr. Shafer follows:]

           Statement of Sean Shafer, Manager of Consulting, 
                     Quest Offshore Resources, Inc.

    Despite the official end of the drilling moratorium in October, 
2010 the offshore Gulf of Mexico oil and natural gas industry is still 
feeling the lingering effects of the official moratorium. These effects 
combined with the impact of the subsequent regulatory slow down are 
being felt throughout the Gulf coast region as well as nationwide.
    While the offshore Gulf of Mexico oil and gas industry has seen 
some signs of recovery from the low state it was in during the drilling 
moratorium, activity levels are still well below the levels seen before 
the Macondo incident and well below the levels of the Quest baseline 
forecast before the incident. From a permitting, rig, and drilling 
activity perspective the industry is at best flat compared to where it 
was before the drilling moratorium, with the growth that had been 
previously expected both delayed and diminished. The only industry 
sector seeing healthy growth is in the development of projects not 
dependent on further near term drilling. While this is a positive, the 
majority of these projects were already well in the works before the 
incident and are thus seeing these major equipment orders despite the 
moratorium.
    As of the end of September 2011, 21 floating rigs (those with 
subsea blow out preventers) are operating in the Gulf of Mexico, of 
which only 18 are currently drilling wells. Pre-moratorium 33 floating 
rigs were operating the Gulf of Mexico with 29 drilling wells at that 
time. This indicates a roughly 37 percent drop in both the number of 
rigs operating and drilling. Since the moratorium began, 11 rigs have 
left the Gulf of Mexico. Only one of these has returned, 3 rigs are 
currently sitting idle.
    Seven of these rigs have left to African countries including Egypt, 
Nigeria, Liberia, and The Republic of Congo. Three of these rigs have 
left to South America, including Brazil and French Guiana. The 
remaining rig recently mobilized to Vietnam.
    As of today, none of the operators of these rigs have announced 
plans to return these rigs to the Gulf of Mexico. Two rigs are planned 
for return in early 2012 but neither operator has a permit to drill 
with these rigs yet, casting doubt on the likelihood of this happening
    This translates to approximately 60 wells lost based on the 
original contract terms of these rigs. The loss of these rigs amounts 
to lost spending of $6.3 billion and annual lost direct employment of 
11,500 jobs over two years.
    While the number of rigs operating in the Gulf of Mexico is 
expected to recover to pre-moratorium levels by the middle of 2012, 
this fails to take into account the number of rigs which were expected 
to be operating in the region (based on stated operator schedules) in 
2012.
    While rig counts are forecast to return to pre-moratorium levels of 
35 floating rigs operating by mid 2012, prior to the incident and 
regulatory slow-down, operating numbers were expected to have reached 
44 rigs by this point. In Addition, drilling activity is not expected 
to return to pre-moratorium levels before 2014 due to low permitting 
rates and operators not relocating rigs back to the Gulf of Mexico.
    While the Gulf of Mexico is currently seeing an uptick in certain 
types of development activity due to projects that were delayed by the 
credit crunch and economic slowdown, overall capital expenditures are 
around 10% lower than in 2009 which was considered a down year for the 
industry owing to macroeconomic conditions. Compared with 2008, which 
would be better indicator, capital spending levels are down by roughly 
25%.
    Continued regulatory uncertainty will only exacerbate this trend as 
operators reallocate resources to other major offshore provinces. The 
long term the effects of the moratorium and subsequent regulatory slow 
down will lead to lower development levels in the Gulf of Mexico which 
will lower oil and gas production levels and associated employment and 
economic activity levels in the economy.
    In fact the most pronounced effects of the moratorium and continued 
regulatory issues may not be seen until later years, due to the long 
time frame associated with developing offshore oil and gas projects. 
With the length of time from first drill date to project sanctioning 
averaging over 4 years, and the length of time from project sanctioning 
to first production averaging over 4 years for major projects, the most 
pronounced effects of the moratorium and subsequent regulatory slow 
down will begin to be seen in the middle of the decade. Due to low 
levels of drilling beginning with the moratorium, the number of 
actionable projects in the Gulf of Mexico will begin to decline which 
will lead to lower levels of development activity. Since the vast 
majority of the spending associated with these large capital projects 
occur within the United States, a wide array on industry sectors will 
be negatively impacted including oil and gas machinery, air transport 
services and financial services to name a few.
    The offshore oil and natural gas industry is a key contributor to 
the energy supply of the United States; additionally the industry 
contributes both to the gross national product and overall employment 
of the country. The offshore GoM industry contributed 14 percent of the 
oil and natural gas produced in the United States in 2010. 
Additionally, capital investment and operational spending by the Gulf 
of Mexico oil and natural gas industry supports hundreds of thousands 
of jobs across multiple sectors and regions, spurs economic growth, and 
generates significant tax revenue at all levels of government.
    It is therefore critical that permitting return to historical 
rates, and that development and production are allowed to reach their 
potential in an environmentally responsible manner under a balanced 
regulatory regime.

[GRAPHIC] [TIFF OMITTED] T0719.001

[GRAPHIC] [TIFF OMITTED] T0719.002

                                 
    Mr. Hastings. Thank you very much, Mr. Shafer. Mr. Reese, 
you are recognized for five minutes.

STATEMENT OF AL REESE, JR., CHIEF FINANCIAL OFFICER, ATP OIL & 
                        GAS CORPORATION

    Mr. Reese. Good morning, Mr. Chairman and Ranking Member 
Markey, and Members of the Committee. I appreciate the 
opportunity to testify here this morning.
    We have seen a lack of understanding of the special role 
that small and mid-sized oil and gas companies like ATP play in 
the safe and efficient development of the Nation's energy 
resources, and the role we play in the creation of jobs and 
other economic benefits.
    ATP's business model is unique: to acquire and develop 
properties which have previously discovered but as yet 
undeveloped oil and gas reserves. This model allows us to 
acquire a lease, often very late in the lease term, and bring 
it to production quickly when it might otherwise not have been.
    Over the past 20 years, ATP has brought to production 98 
percent of the properties that we placed in a development 
program. We have invested $5.4 billion, with a large majority 
of that in the Gulf of Mexico. These properties have produced 
over 28 million barrels of oil and 276 billion cubic feet of 
gas. If ATP had not acquired and developed these properties, 
most, if not all, would still be undeveloped today.
    Despite the relatively small size of our company, ATP is 
the fourth most active operator in the deepwater Gulf of 
Mexico, behind Shell, BP, and Anadarko. We have fewer than 100 
employees, but we regularly use the services of independent 
consultants and contractors, all of which are substantial 
sources of jobs and economic benefits. ATP makes payments to 
royalty owners, vendors, and contractors in 34 different states 
throughout the country.
    ATP incurred acquisition and development costs in the Gulf 
of Mexico of $554 million in 2010, down substantially from the 
$713 million we incurred in 2009, and $747 million in 2008. Our 
flagship, the ATP Titan, was built in shipyards in Texas and in 
Louisiana. The ATP Titan was the first multi-column, deep draft 
floating, drilling, and production structure built in the 
United States. It surpassed all regulatory requirements, and is 
the only floating platform in the Gulf of Mexico with a surface 
blowout preventer on its platform deck, and a second subsea 
shut-in isolation device with blind sheer rams at the mud 
level.
    More than 268 U.S. service and supply companies were 
involved in the construction and installation. Construction 
involved 31 countries, 30 U.S. States. More than 1,100 
suppliers received payment from ATP, and more than 3.9 million 
man hours were expended in its construction.
    ATP is an independent, a small and mid-sized energy company 
which is involved in the Gulf of Mexico operations. The 
independents are important and indeed necessary to the 
effective accomplishment of this Nation's overall energy 
objective. Independents hold a majority interest in most of the 
producing leases in the Gulf of Mexico.
    In 2009, independents were responsible for more than 
200,000 jobs. Before the Macondo incident, that number was 
expected to grow to 300,000 by 2020 and result in $38 billion 
in economic benefit. The impact occurs not only in the Gulf of 
Mexico States, but also in Massachusetts, California, New York, 
Georgia, Illinois, Pennsylvania, and many, many States.
    The efficiency which independents provide requires an 
efficient and predictable regulatory system. This can be 
accomplished without compromising effective regulatory 
oversight, safety, and environmental protection. A recent EIA 
report stated that the Deepwater Gulf of Mexico is the single 
largest contributor of U.S. production growth for the 
foreseeable future.
    Once the moratorium was lifted October 12th, a year ago 
today, it took 139 days for that first permit to be issued. ATP 
was the only company to receive 2 of the first 11 permits. 
Since then, ATP has received six drilling and completion 
permits. While we are employing people today as a result of 
these permits being issued, overall the process has been unduly 
difficult, time consuming, and in our view, an unnecessary, 
contentious process.
    Based on recent history, there is uncertainty that future 
permits and approvals will be issued in a timely manner. We see 
a clear need for continued improvement by the Federal 
Government in expediting the processing plans and permit 
applications and priority consideration of the job creation.
    In conclusion, what has been lost among all the discussion 
is consideration of long-term implications of reduced activity 
in the Gulf of Mexico. According to the 2001 Annual Energy 
Outlook published by the EIA, and I quote, ``Consumption of all 
fuels increases in the 2011 reference case, but the aggregate 
fossil fuel share of total energy use falls from 83 percent in 
2009 to 78 percent in 2035, as renewable fuel use grows 
rapidly. The renewable share of total energy use increases from 
8 percent in 2009 to 13 percent in 2035.''
    What this report says is there a tremendous push for 
renewables. In fact, in this 25-year period, renewable usage 
rises by 62 percent. But 25 years from now, more than three-
quarters of our country's energy will still come from fossil 
fuels: coal, natural gas, and oil. There is a vast resource, 
the deepwater Gulf of Mexico. We can regulate and legislate, 
increase and decrease rules and constraints, but cannot 
regulate or legislate energy into existence. Thank you.
    [The prepared statement of Mr. Reese follows:]

    Statement of Albert L. Reese, Jr., Chief Financial Officer and 
                  Treasurer, ATP Oil & Gas Corporation

Introduction
    My name is Albert L. Reese, Jr. and I am the Chief Financial 
Officer of ATP Oil & Gas Corporation. I have been with ATP since its 
inception in 1991, having served as its Chief Financial Officer for 
eleven years and prior to that, in a consulting capacity as Director of 
Finance. I have worked in the field of finance and management for over 
40 years.

Background
    ATP Oil & Gas Corporation is an international offshore oil and gas 
company focused in the Gulf of Mexico and North Sea. In August 2010, we 
expanded our interest to offshore Israel in the Mediterranean Sea. ATP 
acquires and develops properties, many of which have proved undeveloped 
reserves at the time of acquisition that are economically attractive to 
ATP, but not strategic to exploration-oriented oil and gas companies. 
Since its inception in 1991, the company has had an exceptionally 
strong development success record of 98% of converting non-producing 
properties to commercial production. Recently ATP became the 4thmost 
productive offshore deepwater operator in the Gulf of Mexico, as a 
company that emphasizes critical elements of technology, safety, and 
infrastructure assets. ATP's business model is particularly efficient 
in accelerating production from leases which are nearing their 
expiration date and which, in the absence of ATP's involvement, would 
go back into the lease pool and be developed, if ever, near the end of 
the next ten year lease period. While particularly effective in meeting 
the objectives of promoting jobs and enhancing energy independence, our 
model is also particularly dependent on an efficient and reliable 
permitting and plan approval process, and particularly vulnerable to 
harm from unpredictability and delays.

ATP's Investment in the Gulf of Mexico
    Currently ATP has 55 full-time employees in its Houston office, 7 
full-time employees in its U.K. office, and 2 full-time employees in 
its Netherlands office. ATP regularly uses the services of independent 
consultants and contractors to perform various professional services, 
particularly in the areas of construction, design, well-site 
supervision, permitting and environmental assessment. Independent 
contractors usually perform field and on-site production operation 
services, including gauging, maintenance, dispatching, inspection and 
well testing. All of these contractors and consultants are substantial 
sources of jobs and economic benefits to the industry in which ATP 
operates. In fact, through its normal course of business in any given 
year, ATP makes payments to vendors and other contractors in 42 states 
throughout the country. Thus, though ATP is a ``small' company by oil 
industry standards, it serves a critical role in energy production in 
the Gulf, and provides substantial jobs and economic activity on the 
Gulf Coast and throughout the country.
    At December 31, 2010, ATP had estimated net proved reserves of 
126.4 MMBoe, of which approximately 83.9 MMboe (66%) were in the Gulf 
of Mexico and 42.5 MMBoe (34%) were in the North Sea. ATP's proved 
reserves in the deepwater area of the Gulf of Mexico account for 62% of 
its total proved reserves, and proved reserves on the Outer Continental 
Shelf account for 4% of its total proved reserves. The estimated PV-10 
of its proved reserves at December 31, 2010 was $2.6 billion. At 
December 31, 2010, ATP owned leasehold and other interests in 51 
offshore blocks and 88 wells, including 24 subsea wells, in the Gulf of 
Mexico. ATP operates 82 (93%) of these wells, including 100% of the 
subsea wells.
    ATP owns an interest in 29 platforms, including two floating 
production facilities in the Gulf of Mexico, the ATP Innovator at its 
Gomez Hub and the ATP Titan at its Telemark Hub. A third floating 
production facility called an Octabuoy is under construction for 
initial deployment at its Cheviot Hub in the U.K North Sea, which is 
expected in 2014. ATP operates the ATP Innovator and the ATP Titan, and 
also expects to operate the Octabuoy when it is placed in service. The 
floating production facilities have longer useful lives than the 
underlying reserves, and thus are capable of redeployment to new 
producing locations upon depletion of the reserves. Accordingly, they 
are expected eventually to be moved several times over their useful 
lives.
    Of particular interest is the U.S. construction of the ATP Titan in 
2008-2009. The ATP Titan was the first multi-column, deep-draft, 
floating drilling and production platform structure built in the U.S. 
More than 268 U.S. service and supply companies were involved in the 
construction and installation. Of those companies, 147 were Texas 
companies and 68 were located in Louisiana. Construction involved the 
efforts of 31 countries and 30 U.S. states. More than 1,100 U.S. 
suppliers received payment from ATP. During construction of the hull, 
3.3 million man-hours were expended and there were 600+ jobs created 
onsite at peak manning levels. The topside platform decks required 
600,000+ man hours. Total investment in the ATP Titan is to date close 
to $1 billion.
    During 2010, ATP's cash expended in the Gulf of Mexico for 
additions to oil and gas properties was approximately $534.3 million. 
During 2009, cash expended in the Gulf of Mexico for additions to oil 
and gas properties was approximately $551.4 million. During 2008, cash 
expended in the Gulf of Mexico for additions to oil and gas properties 
was approximately $751 million.

Implications and ramifications
    The Macondo event that occurred in 2010 and subsequent government 
response that has been taken in 2010 and 2011 have had a major impact 
on ATP's operations and ability to move forward with development plans. 
ATP has been severely affected since May 6, 2010, when the Department 
of Interior instructed the predecessor of BOEM to stop issuing drilling 
permits for OCS wells, and to suspend existing OCS drilling permits 
issued after April 20, 2010, and subsequently by the July 12, 2010, 
issuance of a second moratorium, originally scheduled to end on 
November 30, 2010. This second moratorium suspended all existing 
operations in the Gulf of Mexico and other regions of the OCS utilizing 
a subsea blowout preventer (``BOP'') or a surface BOP on a floating 
facility, and suspended pending and future permits to drill wells 
involving the use of a subsurface BOP or a surface BOP on a floating 
facility. Although the second moratorium was lifted on October 12, 
2010, ATP has been and continues to be negatively impacted by the 
drilling moratorium and subsequent related regulatory delays and 
uncertainties.

Industry Implications
    An Energy Information Administration Annual Energy Outlook 2009 
report stated that the Gulf of Mexico, especially the deepwater, is the 
single largest contributor to U.S. production growth for the 
foreseeable future. In 2009, the Gulf of Mexico provided 29% of the 
U.S. daily crude oil production, a 347% increase since 1981. According 
to a recent Quest Offshore Resources study, since the moratorium began, 
11 rigs have left the Gulf of Mexico. Only one of these has returned, 
and 3 rigs are currently sitting idle. Seven of these rigs have left to 
African countries including Egypt, Nigeria, Liberia, and The Republic 
of Congo. Three of these rigs have left to South America, including 
Brazil and French Guiana. The remaining rig recently mobilized to 
Vietnam. That translates to approximately 60 wells lost, based on the 
original contract terms of these rigs. The loss of these rigs amounts 
to lost spending of $6.3 billion, and annual lost direct employment of 
11,500 jobs over two years. Even as rig counts begin to recover, the 
rate of permitting for wells in the Gulf of Mexico, unless it recovers 
to historical levels, will continue to hinder the pace of drilling in 
the Gulf of Mexico. From September 2009 to September 2010, 59% more 
permits (114) were issued than the period of September 2010 to 
September 2011 (50).

Role of the Independents
    There are currently 114 operators of producing leases in the Gulf 
of Mexico. A July 2010 IHS Global Insight report noted that 
Independents hold a majority interest in 81% of producing leases, 66% 
of all Gulf of Mexico leases and 52% of deepwater leases. The study 
also noted that Independents have drilled 50%+ of the exploration wells 
in the deepwater. In 2009, Independents were responsible for 200,000+ 
jobs, which were expected to grow to 300,000+ by 2020, and $38 billion 
in economic benefit, anticipated to grow each year thereafter. 
Additionally, Independents would create $10 billion in Federal and 
state tax revenues, also expected to grow each year thereafter.

Current ATP Activities
    ATP was the only company to receive two of the first eleven 
deepwater permits since the moratorium was lifted, due to its 
reputation for safety, environmental responsibility, skillful use of 
advanced technology and a steadfast drive for quality. The ATP Titan in 
2007, built three years prior to the Macondo disaster, was designed and 
built with tens of millions of dollars of redundant safety equipment. 
It surpassed all regulatory requirements, and is the only platform in 
the Gulf of Mexico with a surface blowout preventer (BOP) on the 
platform deck and a subsea shut in isolation device (SID) with blind 
shear rams, which is controlled independently of the rig's surface BOP.
    ATP's near-term operating and development plans in the Gulf of 
Mexico, as well as its longer-term business plan, are dependent on 
receiving additional approvals for deepwater drilling and other permits 
under applications, which have been and will continue to be submitted 
to the Bureau of Ocean Energy Management (BOEM). In the first quarter 
of 2011, ATP received permits to complete the drilling of the third 
well at Mississippi Canyon Block 941 at its Telemark Hub, and to 
complete a well at Green Canyon Block 300. While ATP can satisfy the 
permitting requirements for the additional planned 2011 development 
wells, there is still uncertainty that the permits will be issued or, 
if issued, that they will be received in a timely manner.
    ATP incurred additional costs in 2010 caused by the deepwater 
drilling moratoriums and subsequent drilling permit delays. Some of 
these additional costs are continuing into 2011, and are expected to 
continue. During the second quarter of 2011 throughout 2010, ATP 
recognized impairment of proved Gulf of Mexico oil and gas properties 
of $45.7 million and $3.9 million of unproved Gulf of Mexico 
properties, respectively. The majority of the expense was associated 
with leases which were approaching their expiration dates, and became 
unlikely to be drilled primarily due to the moratorium on drilling in 
the Gulf of Mexico. Drilling interruption costs were $1.2 million and 
$8.7 million in the second quarter of 2011 and 2010, respectively. They 
consist of stand-by costs for drilling operations at ATP's Telemark and 
Gomez Hubs, resulting from the deepwater drilling moratoriums and 
subsequent drilling permit delays.
    We at ATP realize that the Department of Interior and its agencies 
required time to review their programs to make certain that they were 
doing an adequate job of assuring that the operations on its leases 
were safe and adequately protective of the environment. At the same 
time, however, it is difficult for us to understand why some priority 
is not being given to actions that BOEM might do to help our industry 
and the Gulf economy recover from the grave injuries which it suffered 
as a result of the Macondo event and the regulatory response to it. 
Although President Obama has said that jobs and the economy are his 
Administration's number one priority, our experience suggests that the 
priorities at the Department of Interior are solely limited to safety, 
environmental protection and enhancement of government royalty 
revenues. We agree that those are important and serve as the foundation 
of BOEM's mission. However, there is a critical need to correct the 
harm which has been done by the spill and subsequent regulatory 
backlog, and put the Gulf back to work. Jobs created in the offshore 
oil and gas industry cross the gamut of blue-collar jobs requiring a 
high school education coupled with in-house training, to those 
requiring post-graduate degrees. With an efficient, predictable and 
properly motivated regulatory structure, ATP and companies like it can 
continue to make a significant contribution to job creation, revenue 
generation for the federal, state and local governments, and our 
nation's oil independence.
                                 ______
                                 
    Mr. Hastings. Thank you very much, Mr. Reese. Mr. Auer, you 
are recognized for five minutes.

              STATEMENT OF CHRIS AUER, PRINCIPAL, 
                  CREVALLE MANAGEMENT SERVICES

    Mr. Auer. Thank you. My core business deals with 
reclamation operations associated with offshore oil and gas 
production, specifically the abandonment of pipelines, the 
removal of platforms, and site clearance. Operators are 
required to perform reclamation after reserves have been 
depleted. It is all covered until Title 30 CFR 250.
    At any given time during late April to early October, there 
is an average of six to ten heavy-lift vessels working in the 
Gulf of Mexico. Most of these are working in an abandonment 
capacity. The average crew complement of these heavy-lift 
vessels is 100. These vessels are supported by crew boats, 
tugboats, dive boats, helicopters, shore-based facilities, and 
numerous engineering and administrative personnel. In effect, 
an entire micro-economy is developed around abandonment 
activities and these vessels.
    If you shut down just the abandonment work in the Gulf of 
Mexico, it affects thousands of jobs. There are several factors 
that dictate when and how the Gulf of Mexico reclamation work 
is performed, and they are reserve depletion, availability of 
vessels, weather, and permitting. Of these four factors, 
weather and permitting are the two wildcards. The best weather 
working window in the Gulf of Mexico is between late April and 
early October, barring any hurricanes.
    Once weather fronts begin arriving from the north, the seas 
and winds become unpredictable and extreme. Abandonment 
operations conducted in these environments present a higher 
risk to human life and equipment loss or damage. Typical 
permits required for abandonment are: we have an APM, which is 
A Permit to Modify a well bore with pipeline abandonment 
permit, a platform removal permit, a reefing permit, and a site 
clearance permit.
    Since the Macondo accident, the review and approval process 
as related to pipeline and platform abandonment permits, not 
well permits, have become lengthy. I have had platform permits 
take as long as 510 days to reach the approved status, with the 
average processing time post-Macondo being 129 days, as 
compared to a pre-Macondo average of 42 days.
    Such lengthy processing times push work into bad weather 
months or delay it altogether for the work season. These delays 
in turn idle the vessels, render crew and supporting crew 
unemployed. Anything that can be done to streamline the 
permitting process will help, and my recommendations are to 
hire more regional BSEE staff, standardize the permitting 
forms, automate the permitting process, and establish a better 
avenue for variance response.
    The BSEE employees in the New Orleans regional office 
perform a thankless job with a high level of professionalism 
and much diligence. These folks are some of the hardest working 
in the Gulf of Mexico. But as we know, there are capacity 
limits. The BSEE regional staff approving abandonment permits 
needs to be expanded. The first step in lowering approval time 
is to staff the process with the appropriate number to handle 
the workload. That number should be recommended by the regional 
head and honored by the Department of the Interior.
    With the exception of the APM form MMS-124--this is the 
form that you file to plug a well--no other abandonment permit 
application is standardized. For years, there has been talk 
about standardizing these forms, but it just hasn't been done.
    A system similar to eWell should be set up to handle the 
submission of applications, any questions BSEE might have 
concerning the application, quick access to the application 
status, and delivery of the final approval. Sometimes meeting 
the letter of the permit is impossible when we get in the 
field. In these cases, we have to get with BSEE, and we have to 
get a variance. We need some sort of 24/7 quick response force 
set up with these guys so that they can handle these variances 
in a timely manner so that we are not waiting for days for an 
answer.
    Again, the BSEE employees in New Orleans do everything they 
can to make themselves available to us 24/7, but there is not 
enough of them. I mean, we are asking way too much out of way 
too few.
    In closing, I just want to say that the people of the Gulf 
Coast are highly skilled and extremely efficient workers. They 
aren't asking for a handout from their government. They are 
asking for the handcuffs to be removed so that they can do 
their part in keeping the United States rolling. What I am 
suggesting here is not a remarketing campaign, which is what we 
have seen. It is a streamlining campaign.
    I appreciate the opportunity to address the Committee, and 
I am available for any questions. Thank you.
    [The prepared statement of Mr. Auer follows:]

    Statement of Chris Auer, Principal, Crevalle Management Services

    The tragedy of Macondo sent the first shock wave throughout the 
offshore oil & gas industry as it should have. The moratorium imposed 
by President Obama sent the second shockwave. The effects of these 
events are still being felt today.
    My core business deals with reclamation operations associated with 
offshore oil and gas production, specifically the abandonment of 
pipelines, the removal of platforms and site clearance. Operators are 
required to perform reclamation after reserves have been depleted. 
Title 30 CFR Sec. 250 defines the requirements for abandonment as 
covered in this testimony.
    At any given time during late April to early October there is an 
average of six to ten heavy lift vessels working in the Gulf of Mexico. 
Most of these are working in an abandonment capacity. The average crew 
complement of these vessels is one hundred. These heavy lift vessels 
are supported by crew boats, dive boats, helicopters, shore base 
facilities and numerous engineering and administrative personnel. In 
effect an entire micro economy has developed around the activities of 
these vessels and abandonment. Shut down just the abandonment work in 
the gulf and you shut down 1000's of jobs.
    There are several factors that dictate when and how Gulf of Mexico 
reclamation work is performed. They are:
          Reserve depletion
          Availability of vessels
          Weather
          Permitting
Of these four factors weather and permitting are the two wild cards.
    The best weather window for working in the Gulf of Mexico is 
between late April and early October barring any hurricanes. During 
this period, seas are small and weather trends are more predictable. 
Once weather fronts begin arriving from the north, seas and winds 
become unpredictable and extreme. Abandonment operations conducted in 
such environments present a higher risk to human life and equipment 
loss or damage. It also exponentially increases the overall cost and 
time associated with abandonment.
    No abandonment activities may take place without the proper 
approved permits in hand (Ref Title 30 CFR Sec. 250.1703). Typical 
permits required for abandonment are:
          Application for Permit to Modify Form MMS-124 (APM) 
        permit to modify a well bore
          Pipeline abandonment permit
          Platform Removal permit
          Reefing permit
                  Issued by the U.S. Army Corp of Engineers (COE) 
                and the state in which the reefing will take place
          Site clearance permit
    These permits must be submitted to different entities within Bureau 
of Safety and Environmental Enforcement (BSEE) along with accompanying 
support documents for review and comment. Once BSEE has completed their 
review and any additional concerns have been addressed and documented 
an approved permit is issued.
    Since the Macondo accident, the review and approval process as 
related to pipeline and platform abandonment permits has become 
lengthy. I have had permits take as long as 510 days to reach the 
approved status with the average processing time post Macondo being 129 
days as compared to a pre-Macondo average of 42 days. Such lengthy 
processing times push work into bad weather months or delay it for the 
work season all together. These delays in turn idle vessels and render 
crew and supporting crew unemployed. Anything that can be done to 
stream line the permitting process will help. My recommendations are:
          Hire more BSEE staff
          Standardize permitting forms
          Automate the permitting process
          Establish a better avenue for variance response
    The BSEE employees in the New Orleans regional office perform a 
thankless job with a high level of professionalism and much diligence. 
These folks are some of the hardest working in the Gulf of Mexico but 
as we all know there are capacity limits. The BSEE regional staff 
approving abandonment permits needs to be expanded. The first step in 
lowering approval times is to staff the process with the appropriate 
number to handle the work load. That number should be recommended by 
the regional head and honored by Department of Interior (DOI).
    Standardization of permit applications is the second step. With the 
exception of the APM Form MMS-124 required to plug and abandon a well 
bore, no other abandonment permit applications exist. For years there 
has been talk of such standardized forms but no action has been taken. 
Currently most of us who submit permit applications for abandonment use 
our own format. While these formats are consistent in the data they 
contain they differ in its location and format. This further adds to 
the time it takes a BSEE employee to review and approve the permit. It 
would also seem to make training essential new hires difficult. It's no 
secret that large groups tend to operate better when things are 
standardized.
    The aforementioned, standardized forms should be automated as well. 
A system similar to eWell should be set up to handle the submission of 
applications, any questions BSEE might have concerning the application, 
quick access to the application's status and delivery of the final 
approval. Currently meetings, email, traditional mail and telephone are 
the communication methods used for application submission, review, 
comment and approval. Again these methods take time away from the 
processing of the application. These methods should be reserved for 
special cases requiring closer investigation. This is step three.
    My fourth and final recommendation pertains to abandonment work as 
it is being performed in the field. Sometimes meeting the letter of the 
permit is impossible when field work is underway. In these cases the 
operator must notify BSEE regional, explain the issue and ask for a 
variance. As with most critical issues these always seem to happen on a 
weekend at 0200 hrs. If there were some sort of regional Quick Response 
Force (QRF) on duty 24/7 these issues could be handled in a timelier 
manner. Offshore oil and gas operations don't stop for holidays, 
weekends or business hours. Again it is important for me to restate 
that the current BSEE regional employees do everything they can to make 
themselves available to industry 24/7 but there are just not enough of 
them.
    The people of the Gulf Coast are highly skilled and extremely 
efficient workers. They aren't asking for a hand out from the 
government they're asking for the handcuffs to be removed so that they 
can do their part in keeping the United Sates rolling. What I am 
suggesting here is not a remarketing campaign; it's a stream lining 
campaign. I appreciate the opportunity to address the Committee and am 
available for questions and or comments.
                                 ______
                                 
    Mr. Hastings. Thank you very much, Mr. Auer. Next, we will 
go to Mr. Kief. You are recognized for five minutes.

              STATEMENT OF CORY KIEF, PRESIDENT, 
                        OFFSHORE TOWING

    Mr. Kief. Good morning, Chairman Hastings, Ranking Member 
Markey, and all Committee Members. Thank you for the 
opportunity to testify on behalf of Offshore Towing, and how we 
have been impacted in the Gulf of Mexico as a result of the 
drilling moratorium and related issues.
    Offshore Towing is a partnership of three small marine 
towing companies who collectively operate a fleet of seagoing 
tugboats in the Gulf of Mexico, providing services in the oil 
and gas sector, primarily towing drilling rigs to and from 
various locations in shallow water. We are located along the 
Gulf Coast in Larose, Louisiana, and collectively employ about 
110 people.
    Although the moratorium has been lifted, substantial 
negative economic impacts have been felt, and economic 
conditions continue to deteriorate. Challenges with issuance of 
drilling permits from the BOEM to operators are still 
prevalent, causing delays in drilling programs. As we 
understand, at times, the BOEM claims that operators are 
submitting incomplete or flawed drilling plans and other data, 
and the operators claim that the BOEM is dragging their feet 
approving drilling plans and permits.
    Either way, or a combination of the both, drilling 
contractors are leaving the Gulf to go work in other countries 
that have the ability to obtain steady financial commitments. 
These drilling contractors have already demonstrated that they 
will not stay in the U.S. waiting for the government and the 
operators to get their act together and iron out the wrinkles 
in this new regulatory environment.
    Service companies such as ours who depend on the system are 
now facing severe economic decline due to the lack of 
efficiency. Every day, we are seeing more and more equipment 
being taken out of service, which sends more people home 
jobless, which leads to my remarks on the proposed jobs bill 
that is receiving so much attention these days.
    As I understand, one of the elements of the jobs bill would 
grant payroll tax relief to the employer if an employer would 
hire someone who has been jobless for six months or more. For 
my company, this does not create jobs. It is a hiring 
incentive, and that is all. There are no jobs to offer. We 
would not be inclined to hire people simply to get payroll tax 
relief when we don't have enough work for them to do as it 
stands now.
    Further, there is no relief to hire people who were just 
discharged a couple of months ago. I would prefer to hire back 
the people that were discharged a couple of months ago who are 
adequately trained to do their jobs without having to retrain 
new people who don't know what they are doing at my expense. I 
don't think that you folks realize how much time, energy, and 
resources are put into training people to effectively work in 
this industry. The six-month issue is hard to understand.
    On another note, there is no relief or benefits for a 
company like ours, who have had minimal layoffs because we 
don't want to lose our trained workers. Instead, we have 
reduced wages, used our capital, lines of credit, and blends of 
these resources to retain our workers, trained workers. We are 
fighting to survive and keep our employees because economically 
and morally, it is the right thing to do. And all of this 
discussion of underfunded infrastructure spending or tax breaks 
or tax hikes, illegal immigrants in the workplace, I do not 
hear any talk of economic benefits of the Federal Government 
being more efficient or being an advocate for job creation with 
what they have to work with now.
    From my company's perspective, an increased rate of Federal 
permitting in the Gulf of Mexico will bring my employees back 
to a level of security to earn a good living and produce an 
economic environment with the potential to train and hire more 
workers. That is economic stimulus.
    IHS Global Insight and IHS CERA recently conducted a study 
that described a return to regular permitting would result in 
230,000 new or retained American jobs, $44-plus billion in U.S. 
gross domestic product, and about $12 billion in tax revenue, a 
reduction of $15 billion in America's bill for imported oil in 
2012 alone. One-third of these jobs created would be outside of 
the Gulf region in States like California, Illinois, and New 
York. These results prove that the Gulf of Mexico energy 
activity is a national economic generator.
    This country is more in the world than what is being given 
credit for. Americans all over this country depend on each 
other for a variety of different resources. Our leaders need to 
focus on that. This Administration, government, and the media 
need to stop separating American people by creating political 
boundaries to satisfy political agendas. As one businessman 
speaking to his country's leaders, there are more jobs and 
additional State revenues to be realized in this offshore 
energy sector of the Gulf of Mexico. It is your duty as 
stewards of the people to address this.
    Thank you again for your opportunity to speak before you 
today.
    [The prepared statement of Mr. Kief follows:]

                  Statement of Cory Kief, President, 
               Offshore Towing, Inc.,, Larose, Louisiana

    Good morning Chairman Hasting, Ranking Member Markey and all 
committee members. Thank you for the opportunity to testify on behalf 
of Offshore Towing, and how we have been impacted in the Gulf of Mexico 
as the result of the drilling moratorium, and related issues. Offshore 
Towing is a partnership of three smaller marine towing companies who 
collectively operate a fleet of sea going tug boats in the Gulf of 
Mexico, providing services in the Oil and Gas sector, primarily towing 
drilling rigs to and from various locations in shallower water. We are 
located along the Gulf Coast in Larose, Louisiana, and collectively 
employ approximately 110 people.
    Although the moratorium has been lifted, substantial negative 
economic impacts have been felt, and economic conditions continue to 
deteriorate. Challenges with issuance of drilling permits from the BOEM 
to operators are still prevalent, causing delays in drilling programs. 
As we understand, at times, the BOEM claims that Operators are 
submitting incomplete or flawed Drilling Plans and other data, and the 
Operators claim that the BOEM is dragging their feet approving drilling 
plans and permits. Either way, or a combination of both, Drilling 
Contractors are leaving the gulf to go to work in other countries that 
have the ability to obtain steady financial commitments. These drilling 
contractors have already demonstrated that they will not stay in the 
U.S. waiting for the government and the Operators to ``get their act 
together'' and iron out the wrinkles in this new regulatory 
environment. Service companies, such as ours, who depend on this 
system, are now facing severe economic decline due to this lack of 
efficiency. Every day we are seeing more and more equipment being taken 
out of service, which sends more people home, jobless!
    Which leads to my remarks on the proposed ``Jobs Bill'' that is 
receiving so much attention these days? As I understand, one of the 
elements of the Jobs Bill would grant payroll tax relief to an 
employer, if an employer would hire someone who has been jobless for 6 
months or more. For my company, this does not create new jobs, it is a 
hiring incentive and that is all! There are no jobs to offer. I would 
not be inclined to hire people simply to get payroll tax relief when we 
don't have enough work for them to do as it stands now. Further, there 
is no relief to hire people who were just discharged two months ago. I 
would prefer to hire back the people that were discharged a couple of 
months ago, who are adequately trained to do their jobs, without having 
to re-train new people who don't know what they doing, at my expense. I 
don't think that you folks realize how much time, energy and resources 
are put into training people to effectively work in this industry. The 
six month issue is hard to understand.
    On another note, there is no relief or benefits for companies, like 
ours, who have had minimal layoffs, because we don't want to lose our 
trained workers. Instead, we have reduced wages, used our capital, 
lines of credit, and blends of these resources to retain our workers. . 
.. . .trained workers. We're fighting to survive, and keep our 
employees because economically and morally it is the right thing to do. 
In all of this discussion of underfunded infrastructure spending, or 
tax breaks or tax hikes, Illegal Immigrants in the work place, I do not 
hear any talk of economic benefits of the federal government being more 
efficient, or being an advocate for job creation with what they have to 
work with now. From my company's perspective, an increased rate of 
federal permitting in the Gulf of Mexico will bring my employees back 
to a level of security to earn a good living, and produce an economic 
environment with the potential to train and hire more workers. THAT is 
economic stimulus.
    IHS Global Insight and IHS CERA recently conducted a study that 
described that a return to regular permitting would result in:
          230,000 new or retained American jobs
          $44+ billion in US Gross Domestic Product
          About $12 billion in tax and royalty revenue
          A reduction of $15 billion in America's bill for 
        imported oil in 2012 alone
    One third of these jobs created would be outside of the Gulf 
region, in states like California, Illinois and New York. These results 
prove that the Gulf of Mexico's energy activity is a national economic 
generator!
    This country is more interwoven than what it is being given credit 
for. Americans all over this country depend on each other for a variety 
of different resources. Our leaders need to focus on that. This 
administration, government, and the media need to stop separating the 
American people by creating political boundaries to satisfy political 
agendas. As one business man speaking to his Country's leaders, there 
are more jobs, and additional and state revenues to be realized in the 
offshore energy sector of the Gulf of Mexico. It is your duty, as 
stewards of the people, to address this.
    Thank you again for the opportunity to speak before you today.
                                 ______
                                 
    Mr. Hastings. Thank you very much, Mr. Kief, for your 
testimony. Next, we will recognize Mr. Captain Bob Zales. You 
are recognized for five minutes, Captain.

    STATEMENT OF CAPTAIN BOB ZALES, II, PRESIDENT, NATIONAL 
              ASSOCIATION OF CHARTERBOAT OPERATORS

    Mr. Zales. Mr. Chairman and Members of the Committee, my 
name is Robert F. Zales II, and I am appearing today on behalf 
of the National Association of Charterboat Operators. NACO 
thanks you and the Members of the Committee for your kind 
invitation to present testimony on this issue today.
    Congress faces many difficult choices, but also has many 
opportunities. NACO is a non-profit 501[c][6] association 
representing charterboat owners and operators across the United 
States with a substantial number operating in the Gulf of 
Mexico. Sadly, we are acutely aware of the devastating impact 
of the Deepwater Horizon oil spill in the Gulf of Mexico and 
how it has affected the charterboat and commercial fishing 
industries.
    Charter, commercial, and saltwater recreational fishing is 
extremely important to the Gulf of Mexico, both economically 
and socially. According to the recently released preliminary 
report, ``The Gulf of Mexico Regional Ecosystem Restoration 
Strategy,'' by the Gulf Coast Ecosystem Restoration Task Force, 
the Gulf Coast and its natural resources are important to the 
U.S. economy, producing 30 percent of the Nation's gross 
domestic product in 2009.
    The region provides more than 90 percent of the Nation's 
offshore oil and gas, natural gas, production; 33 percent of 
the Nation's seafood; and significant recreation and tourism 
benefits. The five U.S. Gulf Coast States, if considered an 
individual country, would rank seventh in global gross domestic 
product. The Gulf Coast regional economy is highly intertwined 
with its natural resource base, including oil and gas deposits, 
commercial and recreational fisheries, and tourism.
    Incomplete data presented in this report shows a 
conservative number of 535,498 jobs either directly or 
indirectly created by the fishing and charter, commercial, and 
private recreational industries of the Gulf of Mexico, making a 
significant economic input to the Gulf Coast communities and 
the Nation. All of these industries depend on a healthy and 
resilient Gulf.
    In Florida alone, the commercial fishing industry ranks 
seventh in total landings at $169 million annually, and 
produces 10 percent of the Gulf's oyster catch, a $4.5 million 
annual dockside value. Florida leads all States in economic 
return for its marine recreational fisheries. Recreational 
saltwater fishing generates over $5 billion. In 2008 and 2009, 
more than 1 million people bought marine recreational fishing 
licenses, a third from out of state. More than 3,400 for-hire 
charter boat fishing licenses were purchases, generating more 
than $1 million and giving Florida one of the largest charter 
fishing fleets in the world.
    The future health of our Gulf resources is unknown. The 
impact on several key fish species, such as red snapper, vital 
to all fishermen in the Gulf, will not be fully known for 
several years. Little is known about the 2010 recruitment 
class, and will not be fully known for at least three to five 
years.
    We live in fear of the future. Millions of gallons of oil 
are still unaccounted for, and certainly is located somewhere. 
The fish we see in harvest are from year classes prior to the 
blowout. The timing and location of the blowout could not have 
been worse, as the time of year and location of the oil and 
chemicals used were in the bull's-eye to do the most harm.
    BP, through Mr. Feinberg's Gulf Coast Claims Facility, 
guaranteed funds to provided those affected by the impacts of 
the spill, compensation for their economic losses. There is no 
mechanism to provide any financial assistance after 2012, as 
Mr. Feinberg and BP assert the Gulf will be back to normal next 
year, contrary to a report produced from Mr. Feinberg released 
on January 31st, 2011, that state of harvest levels will return 
to normal by the end of 2012. Several renowned fishery 
biologists say it will be a minimum of three years, and could 
be five before we have any real knowledge of the impact of the 
spill.
    Too many of us, the GCCF has been a massive failure, as our 
claims are either still in review or ridiculous offers have 
been made. And now that the Federal court action will begin in 
February 2012, GCCF is dramatically slowing down remaining 
claims efforts.
    In addition to fish species we see, the marine mammals, 
total seabirds, natural and artificial reefs, sand and mud-
bottom and complete ecosystems have been affected. It has been 
reported that the spill still has impacts on sea turtles and 
marine mammals, which can ultimately negatively impact 
fishermen as these protected species interact with various 
fishing gears. So increased time and area closures are another 
concern.
    Another issue affecting our natural resources is the 
increased efforts by the Bureau of Ocean and Energy Management 
Regulation and Enforcement to remove deactivated oil and gas 
platforms from the Gulf. The fishing and oil and gas industries 
have coexisted in the Gulf since the first well was drilled. 
These platforms provide artificial habitat for a wide array of 
fish and coral species. Over time, they have become essential 
fish habitat and house great numbers of fish. NMFS regulations 
require species to have sustainable levels of biomass, and in 
many cases species such as red snapper are now at biomass 
levels never before seen.
    Since January 2010, over 362 platforms have been removed 
from the Gulf, with over 200 more scheduled for removal over 
the next 12 months, just from Federal waters. The number 
removed from state waters was not available, but assumed to be 
over 150. Each platform is home to hundreds of various fish 
species. In most cases, explosives are used to disengage the 
platform from the bottom, which result in massive fish kills 
and also the deaths of protected species such as turtles and 
marine mammals.
    Not only are these species killed and the resource wasted, 
the habitat is permanently removed, reducing critical habitat 
to sustain the resource. These platforms should be allowed to 
remain or at least placed on the bottom to continue to provide 
essential habitat for the resource.
    In closing, I wish to state the charter and commercial 
fleets were once viable, productive, and a sustainable group of 
small business owners. We provide a necessary service to 
individuals who want to fish, consume healthy seafood, enjoy 
our natural resources. Over the last six years, fleets have 
struggled, and yet continued to survive. The impact from 
Deepwater Horizon was almost the last nail in the coffin.
    It is imperative that the health and safety of our Gulf be 
assured. The charter and commercial fleet owners and 
operators----
    Mr. Hastings. Captain Zales, if you could close up, I would 
appreciate it.
    Mr. Zales. OK. Just about five more seconds. The charter 
and commercial fleet owner and operators and crews are the 
first responders to any issue on the water. We are on the water 
daily. We see the conditions of our resource and are first to 
report any problem. We beg to provide information to fisheries, 
to an agency, NMFS, who routinely tells us they know our 
resource better. Thank you very much, Mr. Chairman. I will be 
glad to answer any questions.
    [The prepared statement of Mr. Zales follows:]

          Statement of Capt. Robert F. Zales, Ii, President, 
             National Association of Charterboat Operators

    Mr. Chairman and members of the committee, my name is Robert F. 
Zales, II and I am appearing today on behalf of the National 
Association of Charterboat Operators (NACO). NACO thanks you and the 
Members of the Committee for your kind invitation to present testimony 
on the impact of The Lifting of President Obama's Gulf of Mexico 
Moratorium and to Examine the Lingering Impacts on Jobs, Energy 
Production and Local Economies. Congress faces many difficult choices 
but also has many opportunities.
    NACO is a non-profit 501 (c) (6) association representing charter 
boat owners and operators across the United States with a substantial 
number operating in the Gulf of Mexico. Sadly, we are acutely aware of 
the devastating impact of the Deepwater Horizon Oil Spill in the Gulf 
of Mexico and how it has affected the charter boat and commercial 
fishing industries. I am actively involved in working with Federal, 
States, BP, and local representatives on the impacts to charter boat 
and commercial fishing fleets and their involvement in cleanup, 
economic recovery, and resource damage assessment efforts.
    Charter, commercial, and saltwater recreational fishing is 
extremely important to the Gulf of Mexico, both economically and 
socially. According to the recently released preliminary report Gulf of 
Mexico Regional Ecosystem Restoration Strategy by the Gulf Coast 
Ecosystem Restoration Task Force the Gulf Coast and its natural 
resources are important to the U.S. economy producing 30 percent of the 
nation's gross domestic product in 2009. The region provides: more than 
90 percent of the nation's offshore oil and natural gas production; 33 
percent of the nation's seafood; 13 of the top 20 ports by tonnage in 
the United States; and significant recreation and tourism benefits. The 
five U.S. Gulf Coast states, if considered an individual country, would 
rank 7th in global gross domestic product. The Gulf Coast region's 
economy is highly intertwined with its natural resource base, including 
oil and gas deposits, commercial and recreational fisheries, coastal 
beaches, and waterways for ports, waterborne commerce, and tourism. 
Incomplete data presented in this report shows a conservative number of 
535,498 JOBS, either directly or indirectly created by the fishing 
(charter, commercial, and private recreational) industries of the Gulf 
of Mexico, making a significant economic input to Gulf communities and 
the nation. All of these industries depend on a healthy and resilient 
Gulf.
    In Florida alone, the commercial fishing industry ranks 7th in 
total landings at $169 Million annually and produces 10% of the Gulf's 
oyster catch, a $4.5 Million annual dockside value. Florida also leads 
all states in economic return for its marine recreational fisheries. 
Recreational saltwater fishing generates over $5 Billion. In 2008-09, 
more than 1 Million people bought marine recreational fishing licenses, 
a third from out of state. More than 3,400 for-hire (charter boat) 
fishing licenses were purchased, generating more than $1 Million and 
giving Florida one of the largest charter fishing fleets in the world.
    As a result of the oil spill, the National Marine Fisheries Service 
(NMFS) closed up to 36.6% of all Gulf waters to fishing and harvest of 
fish as of June 2, 2010 with varying degrees of percentage before and 
after with the last reported closure of 0.4% as of November, 2010. 
While these closures were activated to ensure the health to consumers 
from eating possible tainted fish, the impact on the charter and 
commercial fishing fleets and communities was enormous.
    The future health of our Gulf resources is unknown. The impact on 
several key fish species vital to all fishermen in the Gulf will not be 
fully known for several years. Prior to the oil spill key species such 
as red snapper, king mackerel, and many other reef and pelagic species 
were dramatically improving and stock abundance was at levels never 
before seen. Little is known about the 2010 recruitment class and will 
not be fully known for several years.
    We live in fear of the future. Millions of gallons of oil are still 
unaccounted for and certainly is located somewhere. The fish we see and 
harvest are from year classes prior to the blow out. The timing and 
location of the blow out could not have been worse as the time of year 
and location of the oil and chemicals used were in the bull's eye to do 
the most harm.
    BP, through Mr. Feinberg's Gulf Coast Claims Facility (GCCF), 
guaranteed funds to provide those affected by the impacts of the spill 
compensation for their economic losses. There is no mechanism to 
provide any financial assistance after 2012 as Mr. Feinberg and BP 
assert the Gulf will be back to normal next year. Contrary to a report 
produced for Mr. Kenneth Fienberg (An expert opinion of when the Gulf 
of Mexico will return to pre-spill harvest status following the BP 
Deepwater Horizon MC 252 oil spill) released on January 31, 2011 that 
states that harvest levels will return to normal by the end of 2012, 
several renown fishery biologists, say it will be a minimum of 3 years 
and could be 5 before we have any real knowledge of the impact of the 
spill. To many of us, the GCCF has been a massive failure as our claims 
are either still in review or ridiculous offers have been made and now 
that the Federal Court action will begin in February 2012 GCCF is 
dramatically slowing down remaining claims efforts.
    From the beginning of this disaster, various Government (Federal 
and State) agencies were active in obtaining information and working 
with all parties to ensure that our marine resources were unaffected as 
much as possible. Fish sampling by various federal, state, and higher 
educational facilities, began shortly after the blow out. Critical 
testing of fish tissues to determine any health issues was done and 
according to reports by all agencies involved, no health issues were 
determined and all fish from the Gulf were declared safe to consume.
    Over the past several months, there are now reports from some 
fishermen (commercial and recreational) of harvested fish being seen 
with severe lesions, fin rot, damaged internal organs, and according to 
the NMFS possibly infected with Vibrio vulnificus and Photobacterium 
damselae, both very harmful to humans. More studies are now underway to 
determine the extent of these issues and to attempt to discover the 
cause. In some areas of the Gulf, state agencies have issued Special 
Activity Permits to select charter and commercial boats to legally 
harvest any fish that appear to have health issues. These fish are then 
provided to the proper officials to be studied.
    In addition to the fish species we seek, the marine mammals, 
turtles, sea birds, natural and artificial reefs, sand and mud bottom, 
and complete ecosystem has been affected. It has been reported that the 
spill has impacts on sea turtles and marine mammals which can 
ultimately negatively impact fishermen as these protected species 
interact with various fishing gears so increased time and area closures 
are another concern.
    Another issue affecting our natural resources is the increased 
efforts by the Bureau of Ocean Energy Management, Regulation and 
Enforcement (BOEMRE) to remove deactivated oil and gas platforms from 
the Gulf. The fishing and oil and gas industries have coexisted in the 
Gulf since the first well was drilled. These platforms provide 
artificial habitat for a wide array of fish and coral species. Over 
time they become essential fish habitat and house great numbers of 
fish. NMFS regulations require species to have sustainable levels of 
biomass and in many cases species such as red snapper are now at 
biomass levels never before seen. Since January 2010, over 362 
platforms have been removed from the Gulf with over 200 more scheduled 
for removal over the next 12 months just from Federal waters. The 
number removed from state waters was not available but is assumed to be 
over 150. Each platform is home to hundreds of various fish species. In 
most cases explosives are used to disengage the platform from the 
bottom which results in massive fish kills and also the deaths of 
protected species such as turtles and marine mammals. Not only are 
these species killed and the resource wasted, the habitat is 
permanently removed reducing critical habitat to sustain the resources. 
These platforms should be allowed to remain or at least placed on the 
bottom to continue to provide the essential habitat for the resources.
    While the impacts to the resources are extremely important, the 
impact to humans will be substantial. There is currently a study (GuLF 
Study conducted by the National Institute of Environmental Health 
Sciences (NEIHS)) which will be done over a 10 year period and involve 
over 55,000 people who worked in the cleanup process to determine any 
health impact on humans. This includes psychological as well as 
physical issues.

FUTURE NEEDS
    I have attempted to provide the impacts of the blow out above. I 
will try to provide the needs we have for the future. IT IS IMPARATIVE 
THAT THE FINES THAT WILL BE ASSESSED AS PER THE CLEAN WATER ACT (CWA) 
FOR THIS DISASTER IN THE GULF ARE DEDICATED TO THE GULF! The damage was 
sustained in the Gulf so the resulting fines should remain in the Gulf. 
You will hear from many organizations, communities, states, and others 
all with their respective hands out for funding. Charter boat owners, 
operators, and crews and other commercial and recreational fishermen do 
not have organizations with the infrastructure to seek some of this 
funding so we ask for your assistance to help us. We do not seek 
individual economic help from the CWA fines, although should we find in 
3 to 5 years that the fish species we seek are in dire straits we will 
most certainly need financial assistance to survive.
    Our needs are all resource oriented. We must have an ecosystem that 
is capable of sustaining our fishery resources. We must have expanded 
funding for cooperative independent research of our fisheries which 
will utilize vessels from the charter and commercial fishing fleets. 
Cooperative independent research is providing much needed real world 
data on our fisheries and this effort needs to be expanded. The data 
collected under cooperative research grants involves real fishermen in 
areas where they have knowledge of their fisheries. This type data is 
recommended by the NMFS and can be done through grants to non profits 
in conjunction with Universities and state wildlife agencies.
    As a result of the damage and uncertain future of fisheries due to 
the blow out, funding for improved and yearly stock assessments should 
be provided. In the Gulf, most fish stock assessments are conducted 
only every 5 to 7 years. Under the current circumstances 5 to 7 years 
is grossly inadequate as we must know the status of our stocks on a 
more frequent basis to fully understand any impact from the spill.
    We will need adequate funding to ensure our natural and artificial 
reefs are clean and intact. Enhancing our artificial reef system is a 
priority and can start with the immediate cease and desist by the 
BOEMRE of their required removal of deactivated offshore oil platforms.
    Economic and social impact studies of the Gulf charter fleet should 
be fully funded so we know the real impact of the fleet to local 
fishing communities and the Gulf. To date, these studies provide little 
relevant information. This is one area where the GCCF claims issue 
could be improved. There is little information that provides the type 
of economics on the charter fleet that can be used to fully understand 
the impact from lost business. Charter boat owners, operators, and 
crews are unique in how they operate. The charter fleet is a seasonal 
business where the majority of their income is derived in a few months 
and then spread out over the year. When the season begins in April and 
runs through September the money is made in 6 months and then utilized 
over 12. Generally income is not collected per month or week although 
expenses are year round.
    Research funding to further study fish health must also be a 
priority. Our prime interest is to ensure that the fish we harvest are 
safe to handle and to consume. We must know, with reasonable certainty, 
that any fish that appears to be unhealthy is properly handled and 
tested so that consumers can have confidence they are catching and 
eating quality Gulf seafood. Many of the fish health issues have never 
been observed before the blow out so it is a must that the cause of any 
health issues be identified as soon as possible.
    Funding from the CWA should also be used to advertise that the 
charter and commercial fishing fleets are alive, well, and ready to 
serve the public. Funds must be provided to obtain new customers and to 
notify those who left that we are still here and ready to fish in clean 
water, catch quality fish, and provide a healthy product to the 
consumer.
    In closing I wish to state that the Gulf charter and commercial 
fleets were once viable, productive, and a sustainable group of small 
business owners. We provide a necessary service to individuals who want 
to fish, consume healthy seafood, and enjoy our natural resources. Over 
the last 6 years the fleets have struggled and yet continue to survive. 
The impact from the Deepwater Horizon oil spill was almost the last 
nail in the coffin. It is imperative that the health and safety of our 
Gulf be assured. The charter and commercial fleet owners, operators, 
and crews are the first responders to any issue on the water. We are on 
the water daily, we see the condition of our resource and are first to 
report any problem. We beg to provide information on fisheries to an 
agency, NMFS, who routinely tells us they know our resource better. We 
hold a wealth of information and want to be actively involved. We care 
for our Gulf and all things within and around.
    Mr. Chairman, this concludes my testimony. Again, I truly 
appreciate the invitation and opportunity to provide you and the 
committee with this information. I will be pleased to respond to any 
questions.
                                 ______
                                 
    Mr. Hastings. Thank you, Captain Zales. As I said, your 
full statement will appear in the record. Mr. Bruce Craul, you 
are recognized for five minutes.

 STATEMENT OF BRUCE CRAUL, CHIEF OPERATING OFFICER, LEGENDARY 
  HOSPITALITY, INC., INCOMING CHAIRMAN OF THE BOARD, FLORIDA 
               RESTAURANT AND LODGING ASSOCIATION

    Mr. Craul. Yes. Good morning, Mr. Chairman, and thank you 
for the opportunity to speak before yourself and the Committee. 
My name is Bruce Craul. I am the Chief Operating Officer of a 
company called Legendary Hospitality, located in Destin, 
Florida, which is in Northwest Florida, between Panama City and 
Pensacola. I am also the Chairman-Elect of the Florida 
Restaurant and Lodging Association.
    Legendary Hospitality is the operations arm of a company 
that designs, develops, sells, builds, owns, and operates 
hospitality-related industries in Destin, Florida. Our 
businesses include the Emerald Grande, a 780-bedroom resort 
condominium hotel with four star amenities, two festival 
shopping centers, and the Emerald Grande and these are all in 
Destin and in other--Destin Commons is located in the town's 
center.
    We also own and operate Regatta Bay Golf and Country Club; 
Legendary Marine and Marina, an indoor dry stack storage for 
over 700 boats, and the Southeast's largest indoor boat 
showroom; Harborwalk Marina, located on the mouth of the harbor 
at Harborwalk Village, which has 75 wet boat slips for much of 
Destin's charter fishing fleet; and of course, fuel and 
supplies for much of the area's leisure boating community. 
Harborwalk Charters, a booking service, together with three 
charter fishing boats, with all of the ancillary businesses, 
round out our presence in an area that is very dependent on 
tourism in the Panhandle.
    Our real estate development and sales arm has been 
instrumental in progressing Destin's infrastructure and product 
offering to what it is today by developing large parcels of 
land and playing an important role, together with city, county, 
and State in land development code and associated developmental 
needs, rules and regs.
    The Florida Restaurant and Lodging Association, 
headquartered in our State capital in Tallahassee, has over 
10,000 members whose industry employs over a million people in 
the State of Florida, a business which is Florida's largest 
employer. Tourism represents 20 percent of Florida's economy, 
and is the largest industry in Florida with a $57 billion 
economic impact. It also represents $3.4 billion that is paid 
in sales tax revenue.
    The Panhandle of Florida has a 100-day season representing 
70 percent of the business. The rest of the business primarily 
transpires during the spring and fall, which we affectionately 
call our shoulder seasons. The Deepwater Horizon incident 
devastated our businesses last year, and although this summer 
much of our business has returned, thanks to millions of 
dollars being spent on the promotion of tourism derived from 
the BP funds, we are still affected by the lasting effects of 
the Deepwater Horizon incident, including the offshore 
moratorium, since much of our feeder market businesses come 
from our drive markets, many of which are to the west of 
Florida, including Louisiana, Mississippi, and Texas.
    So when jobs are lost in our feeder states, then so is our 
business. When people are thinking about how to pay for 
groceries, a mortgage, or a car payment, going on vacation is 
not even on their radar. While the Florida Restaurant and 
Lodging Association has taken a position over the years not to 
support offshore drilling in Florida, for numerous reasons, its 
board members know that many of our tourists, visitors, and 
convention and conference attendees come from energy-related 
business in the States to our west.
    Many of the condominium and second-home buyers also are 
from Alabama, Mississippi, Louisiana, and Texas. In short, 
while the moratorium cost some jobs, the moratorium was caused 
by the BP Deepwater Horizon disaster. Given the magnitude of 
the spill, it was appropriate to take some time out from 
drilling. The Deepwater Horizon disaster has shown the 
devastating impact that unsafe oil and gas drilling can have an 
effect on coastal communities. The Florida Restaurant and 
Lodging Association has long opposed drilling off Florida's 
coast, and the spill last summer showed us that all of the Gulf 
can be impacted by what happens off another State's coast.
    We also see firsthand that it is slow to rebound, 
considering all that had been affected. A healthy Gulf economy 
needs a healthy Gulf ecosystem. Oil production has a long 
history in the Gulf of Mexico, and so do the hundreds of 
thousands of jobs in fisheries, tourism, and recreation 
directly tied to the health of the coastal and marine 
environment.
    The lessons of the BP disaster must be fully understood and 
remembered. If there is a place for oil drilling in the Gulf of 
Mexico, then it should be governed by a set of rules that exist 
because of, not in spite of, the BP oil disaster. That includes 
a full assessment of the environment and economic damage.
    [The prepared statement of Mr. Craul follows:]

    Statement of Bruce W Craul, Chief Operating Officer, Legendary 
    Hospitality, and Chairman Elect, Florida Restaurant and Lodging 
                              Association

    Good Morning, my name is Bruce Craul, and I am the Chief Operating 
Officer of a company called Legendary Hospitality, located in Destin, 
Florida, which is in Northwest Florida between Panama City and 
Pensacola. I am also the Chairman Elect of the Florida Restaurant and 
Lodging Association.
    Legendary Hospitality is the operations arm of a company that 
designs, develops, sells, builds, owns and operates Hospitality related 
industries in Destin, Florida. Our businesses include The Emerald 
Grande; a 780 bedroom resort condominium hotel with four star hotel 
amenities; two festival shopping centers; one called HarborWalk 
Village, where the Emerald Grande is located on the Destin Harbor and 
the other is Destin Commons located in the town's center.
    We also own and operate Regatta Bay Golf and Country Club, 
Legendary Marine and Marina; an indoor dry stack storage for over 700 
boats, and the southeast's largest indoor boat showroom. HarborWalk 
Marina located at the mouth of the harbor at HarborWalk Village which 
has seventy five wet boat slips for much of Destin's Charter fishing 
fleet, and of course fuel and supplies for much of the area's leisure 
boating community. HarborWalk Charters, a booking service, together 
with our three Charter fishing boats along with other ancillary 
businesses round out our presence that is very dependent on tourism in 
the Panhandle.
    Our real estate development and sales arm has been instrumental in 
progressing Destin's infrastructure and product offering to what it is 
today by developing large parcels of land and playing an important role 
together with the city, county and state with its land development code 
and associated development codes, rules and regulations.
    The Florida Restaurant and Lodging Association, headquartered in 
our State Capital in Tallahassee, has over 10,000 members who employ 
over a million people in the State of Florida, a business which is 
Florida's largest employer. Tourism represents 20% of Florida's economy 
and is the largest industry in Florida with a 57 billion dollar 
economic impact.
    The Panhandle of Florida has a 100 day season representing 70% of 
the year's business. The rest of the business primarily transpires 
during the spring and fall shoulder seasons. The Deepwater Horizon 
incident devastated our businesses last year and although this summer 
much of our business has returned, thanks to millions of dollars being 
spent on the promotion of tourism derived from BP funds, we are still 
affected by lasting effects of the Deepwater Horizon incident, 
including the offshore moratorium, since much of our feeder market 
business comes from our drive markets, many of which are to the west of 
Florida. Louisiana for example is our number two feeder market barely 
trailing the Atlanta metro area. So, when there are jobs lost or 
affected in our feeder states, then our business is affected. When 
people are thinking about how to pay for the groceries, the mortgage or 
car payment, going on vacation is not even on their radar.
    While the Florida Restaurant and Lodging Association has taken the 
position over the years to not support offshore drilling in Florida, 
for numerous reasons, its board members know that many of our tourists, 
visitors, and convention and conference attendees are from energy 
related businesses in the states to our west. Many of our condominium 
second home buyers collectively are from Alabama, Mississippi, 
Louisiana, and Texas. Since many of the energy related businesses 
employees are not even vacationing, you can surmise that they are not 
buying second homes either.
    When the moratorium was put in place, one of our partner's sons, 
Shane Guidry, the President and CEO of Harvey Gulf International in 
Louisiana, one of the largest companies that move rigs, informed us 
that they would be moving a lot of the rigs from the Gulf. They said 
that the owners of the rigs could not afford to stay and wait out the 
moratorium and that most certainly the same rigs could be used in other 
parts of the world. Harvey Gulf International whose task is to tow and 
or carry rigs from one place to another moved the following rigs; The 
Clyde Boudreaux, a Shell rig to Brazil, the Transocean Armante an EL 
rig to Africa, Shell's Paul Romano rig to Egypt, Noble Energy's Ensco 
7500 to Israel, the Ocean Monarch to Vietnam, the Transocean Marianas 
to Africa, two jack rigs, the Rowland Gorilla II and Rowland Gorilla 
III to the Middle East, and Shell's Ensco 8501 to the Middle East. The 
rigs are gone and of course no one really knows when or if they will be 
coming back since rigs are in demand all over the world.
    All of the jobs associated with these rigs left our Gulf area. The 
electricians, the crew boat operators, painters, plumbers, caterers, 
managers and supervisors, etc. are still unemployed or have left the 
area to go to where they can find work. Harvey's CEO, Shane Guidry told 
me this past Saturday that the permitting process still is lengthy so 
it will be a long time before we see the economic benefits of returning 
vessels and rigs to Louisiana which ultimately benefits Northwest 
Florida and overall Florida tourism.
    Federal Regulations are not all new when it comes to ``managing'' 
the Gulf and certainly not less impactful to the Gulf coast economies. 
Permitting processes for maintaining our navigable water ways are long, 
cumbersome, expensive and restrictive. Two additional examples that we 
deal with every day involve the Army corps of engineers and the Gulf of 
Mexico Fishing Management Council.
    Tropical storms or even just sustained winds over the course of 
several days can have a huge impact on the Destin's Pass connecting the 
Destin Harbor to the Gulf of Mexico. One would think that the home of 
Florida's largest charter fishing fleet would be at the top of the list 
when it comes to maintaining our waterways. Our Gulf Coast economies 
are very dependent on the Gulf and even more so this year since last 
year our Charter and Commercial fishing fleet were out of business due 
to the Deep Water Horizon incident.
    The Gulf of Mexico Fishing Management Council which determines 
which species of fish can be caught as well as how much can be caught 
are restrictive to our economies since recreational fisherman want to 
keep the fish that they catch instead of throwing them back because 
they are out of season. Our local and state Charter Boat Associations 
attend all of the Federal and State Hearings concerning the fisheries 
management but it is rare that they don't compromise to the point that 
it is detrimental to our economies.
    According to estimates in a 2000 study by the University of West 
Florida's Haas Center for Business Research and Economic Development, 
Destin's charter fishing industry injects approximately $175 million in 
direct spending to the local economy and supports 7,242 jobs either 
directly or indirectly. These numbers represent a significant portion 
of Florida's $5.5 billion fishing industry and the 75,000 jobs 
statewide that the industry supports. According to the Haas study, the 
majority of the economic impact of the charter fishing industry comes 
from the spending of tourists who are attracted to the area by the 
fishing industry. The study shows that tourist spending on lodging, 
restaurants, transportation, retail merchandise, entertainment, and 
other goods and services results in an overall economic activity 
totaling approximately $317 million and supports approximately 6,775 
jobs in the area. Tourism spending represents 90.8% of the total 
economic activity that is generated by the fishing industry and 93.5% 
of the jobs that the industry supports according to the Haas study.
    In summary, I would like to thank the committee for providing me 
the opportunity as a representative of many to come before you to 
speak. I welcome any questions that you may have regarding the 
aforementioned or any related questions regarding tourism, jobs, and 
how the public and private sector can work more closely together to 
create jobs and stimulate the economy along the Gulf Coast.
    Thank you.
                                 ______
                                 
    Mr. Hastings. Thank you very much for your testimony, and 
Dr. Galvez, you are recognized--before you are recognized, Dr. 
Galvez, I understand that your oral testimony will include ten 
slides instead of the two that you submitted prior to. Would 
you commit to seeing that all ten slides are available to all 
the Committee Members ASAP
    Dr. Galvez. Yes, I will. Thank you.
    Mr. Hastings. OK. You are recognized for five minutes.

 STATEMENT OF FERNANDO GALVEZ, ASSISTANT PROFESSOR, DEPARTMENT 
       OF BIOLOGICAL SCIENCES, LOUISIANA STATE UNIVERSITY

    Dr. Galvez. Good morning, Mr. Chairman, Mr. Ranking Member, 
and the distinguished Members of the House Committee on Natural 
Resources. My name is Fernando Galvez. I am an Assistant 
Professor in the Department of Biological Sciences at Louisiana 
State University. My team, in collaboration with Dr. Andrew 
Whitehead at LSU, is leading a collaborative research endeavor 
to study the effects of the BP Deepwater Horizon oil spill on 
marsh fish in the northern Gulf of Mexico.
    I would like to discuss some of the recent findings of our 
research published on August 26, 2011, in the proceedings of 
the National Academy of Sciences. To my knowledge, this is the 
first report in the scientific literature on the biological 
effects of the Deepwater Horizon oil spill in fish. The close 
proximity of Louisiana State University to the northern Gulf of 
Mexico, and our capacity to mobilize quickly in the first few 
days following the explosion of the Deepwater Horizon oil 
platform provide us the unique opportunity to study the 
biological effects of this unprecedented and tragic event.
    We chose the Gulf killifish as our test organism because it 
is the most abundant fish in the coastal marsh of the Gulf of 
Mexico, and thus an excellent environmental sentinel. Indeed, 
it is our canary in the coal mine. Tissues were collected from 
fish at six different sites from Louisiana to Alabama, and 
sampling was performed in early May 2010, before oil made its 
landfall in September 2010, when much of the oil had 
disappeared from the water surface.
    We also sampled the water and sediments from each site for 
hydrocarbon analyses, and satellite imaging provided an 
estimate of proximity of the oil spill to each site. Now, 
without going into too many specifics, we found dramatic 
cellular effects in fish collected from coastal Louisiana, 
coinciding with the timing and location of oil contamination. 
Cellular effects were predictive of adverse health 
consequences, including developmental and reproductive 
impairment, toxicity, and even death.
    Fish scale cells, which are important for maintaining 
critical fish body function, appear damaged and showed cellular 
changes, diagnostic exposure to the toxic components of 
hydrocarbons. What was equally striking was that these 
biological effects persisted, even though chemical testing 
found only low to non-detectable concentrations of hydrocarbons 
in fish tissues.
    In other words, although chemistry suggested that these 
fish were safe for human consumption, it was unable to detect 
any of the sublethal, biological effects in Louisiana fish we 
observed. The magnitude of tissue, cellular, and genetic 
effects seen in fish from our oil site in Louisiana suggests 
impacts on fish growth, reproduction, development, and 
performance, all highlighting the potential ecological 
consequences of exposure.
    We also found that most of the oil in the marsh is not in 
the water, but rather tied up in the sediment, where it is 
found in extremely high concentrations. A big lesson from the 
Exxon Valdez is that sediments can act as a long-term reservoir 
of oil that can persist to expose animals to toxic 
concentrations over long periods of time.
    In current studies, we are finding that embryos exposed to 
these oil sediments are hatching at lower frequencies and are 
showing developmental abnormalities in that embryos that do not 
go on to hatch successfully are smaller and listless. 
Additionally, sediments from oil sites appear to be almost as 
toxic today as they were during the peak of oil in the summer 
of 2010.
    What our data describe are the early warning signs that 
have been shown in the past to correlate well with population 
level declines, as seen with Pacific herring, pink salmon, and 
the sea otter in the years that followed the Exxon Valdez oil 
spill. What we don't know is how widespread these effects are 
going to be over space in time, and whether the responses we 
see in killifish also exist in other ecologic and important 
species or in fish of commercial importance. We need to be 
measuring these endpoints in many species to know the full 
extent of the problem. We can wave our hands all we want, but 
unless we collect these biological data, it will be difficult 
to link the oil spill to future population declines.
    Another important point is that we need to be making these 
measurements over the long-term to get a better handle on 
multigenerational effects, which although time-consuming are 
the most predictive of population and community-level effects.
    I would like to conclude by making one brief statement 
regarding research funding. Emergency funding for scientific 
research was virtually nonexistent for several months following 
the Deepwater Horizon oil spill. In fact, Dr. Whitehead and I 
paid for the initial funding of this research with our own 
credit cards before our Dean of Science graciously pitched in 
for expenditures.
    With time, we were able to secure funding through the 
invaluable NSF rapid program and through the Gulf of Mexico 
research initiative. However, in my opinion, the Federal 
Government needs to do a better job of providing a reliable 
source of emergency funding to support transparent, cutting 
edge, and unbiased academic research following natural and 
manmade environmental disasters, especially since early event 
data are the most critical to obtain.
    Thank you for your attention, and I would be pleased to 
answer your questions.
    [The prepared statement of Dr. Galvez follows:]

       Statement of Fernando Galvez, Ph.D., Assistant Professor, 
     Department of Biological Sciences, Louisiana State University

    Good morning Mr. Chairman, Mr. Ranking Member, and the 
distinguished members of the House Committee on Natural Resources. I 
thank you for the opportunity to testify today. My name is Fernando 
Galvez. I am an Assistant Professor in the Department of Biological 
Sciences at Louisiana State University. My team, in collaboration with 
Dr. Andrew Whitehead at LSU, is leading a collaborative research 
endeavor to study the effects of the BP Deepwater Horizon oil spill on 
marsh fish in the northern Gulf of Mexico. I would like to discuss some 
of the recent findings of our research published on August 26, 2011 in 
The Proceedings of the National Academy of Sciences (www.pnas.org/cgi/
doi/10.1073/pnas.1109545108; see Abstract of publication below). To my 
knowledge, this is the first report in the scientific literature on the 
biological effects of the DWH oil spill in fish. In my written 
testimony, I will also discuss some of the difficulties we encountered 
in doing this research, and some of the remaining issues that impede 
the ability of academic institutions to conduct similar work.
    Following the Deepwater Horizon (DWH) drilling disaster on April 
20, 2010, in the Gulf of Mexico, acute oiling and the resulting 
mortality of marine wildlife were evident. The close proximity of 
Louisiana State University to the northern Gulf of Mexico and our 
capacity to mobilize quickly in the first few days following the 
explosion of the DWH oil platform, provided us the unique opportunity 
to study the biological effects of this unprecedented and tragic event. 
In contrast, the sublethal effects, critically important for predicting 
long-term population-level impacts of oil pollution have not been well 
described following the DWH disaster. Here we report effects of oil 
exposure on fish resident in Gulf of Mexico coastal habitats.
    We chose the gulf killifish as our test organism because it is the 
most abundant fish in the coastal marsh of the Gulf of Mexico and thus 
an excellent environmental sentinel. Indeed, we are using it as our 
canary in the coal mine. Unlike other fish species in the Gulf, we 
understand a lot about their ecology, physiology, biochemistry, and 
genetics, and have excellent experimental tools at our disposal to use. 
Tissues were collected from fish at six different sites from Louisiana 
to Alabama (Figure 1), and sampling was performed in early May 2010, 
before oil made its landfall, in July 2010, during the peak of oil 
landfall, and in early September 2010, when much of the oil had 
disappeared from the water surface. We also sampled the water and 
sediments from each site for hydrocarbon analyses, and satellite 
imaging provided an estimate of the proximity of surface oil to each 
site. An important and unique feature of this study is that we have 
data collected from fish before oiling. These pre-event data are 
extremely rare in toxicological studies, and add to the strength of our 
conclusions. To collect these early-event data required the ability to 
mobilize our research programs quickly.
    Without going into too much detail, we found dramatic cellular 
effects in fish collected from coastal Louisiana coincident with the 
timing and location of oil contamination. Cellular effects were 
predictive of adverse health consequences, including developmental and 
reproductive impairment, toxicity, and death. Fish gill tissues, which 
are important for maintaining critical fish body functions, appeared 
damaged and showed cellular changes diagnostic of exposure to the toxic 
components of hydrocarbons (Figure 2). What was equally striking was 
that these biological effects persisted even though chemical testing 
found only low to non-detectable concentrations of hydrocarbons in fish 
tissues. In other words, although chemistry suggested these fish were 
safe for human consumption, it was insufficient to predict or detect 
any of the sublethal biological effects in Louisiana killifish we 
observed. The magnitude of tissue, cellular, and genetic effects seen 
in fish from our oiled site in Louisiana suggest impacts on fish 
growth, reproduction, development, and performance, all highlighting 
the potential ecological consequences of exposure.
    We also found that most of the oil in the marsh is not in the 
water, but rather tied up in sediment, where it is found in extremely 
high concentrations. A big lesson from the Exxon Valdez is that 
sediments can act as a long-term reservoir of oil that can persist to 
expose animals to toxic concentrations over long periods of time. In 
current studies, we are finding that embryos exposed to oiled Louisiana 
sediments are hatching at lower frequencies and are showing 
developmental abnormalities, and that embryos that do go on to hatch 
successfully are smaller and listless. Additionally, sediments from 
oiled sites appear to be almost as toxic today as they were during the 
peak of oiling in the summer of 2010.
    What our data describe are the early-warning signs that have been 
shown in the past to correlate well with population-level declines as 
seen with Pacific herring, pink salmon, and the sea otter, in the years 
that followed the Exxon Valdez oil spill. What we don't know is how 
wide spread these effects are going to be over space and time, nor 
whether the responses we see in killifish also exist in other 
ecologically-important species, or in fish of commercial importance. We 
need to be measuring these end points in many species to know the full 
extent of the problem. We can wave our hands all we want, but unless we 
collect these biological data, it will be difficult to link the oil 
spill to future population declines. Another important point is, that 
we need to be making these measurements over the long-term to get a 
better handle on multi-generational effects, which although time-
consuming and resource-intensive, are the most predictive of population 
and community level effects.
    Research on the DWH oil spill has provided several important 
insights I would like to conclude by making brief statements regarding 
research funding, access to sample sites during the peak of oiling, and 
access to Mississippi Canyon 252 oil.

Reliable Sources of Federal Funding Are Required to Promote Early-
        Response Research Following Natural and Man-Made Natural 
        Disasters.
    Emergency funding for scientific research was virtually non-
existent for several months following the DWH spill. In fact, Dr. 
Whitehead and I paid for the initial funding of this research with our 
own credit cards before our Dean of Science graciously pitched in for 
expenditures. With time, we were able to secure funding through the 
invaluable, NSF RAPID program and through the Gulf of Mexico Research 
Initiative (GRI). Unfortunately, the National Science Foundation was 
faced with budgetary constraints at the end of the fiscal year that 
limited their ability to provide extensive funding. Furthermore, GRI 
money took up to 4 months to disseminate, making it difficult to pay 
for early time point sampling. Although these funds were well received, 
they consisted of small amounts of funding over short durations. Both 
factors precluded hiring additional staff to conduct the work. Instead, 
we were forced to divert existing students and postdoctoral fellows 
from existing projects due to the time-sensitive nature of the DWH 
work. In my opinion, the federal government needs to do a better job of 
providing a reliable source of emergency funding to support 
transparent, cutting-edge, and unbiased academic research following 
natural and man-made environmental disasters--especially since early-
event data are the most important.
    For the past 20 years the Department of Interior has directed funds 
through the BOEM (formerly MMS) to LSU for the purpose of conducting 
environmental research that is directly relevant to oil and gas 
exploration in the Gulf of Mexico. The funding has been administered 
through LSU's Coastal Marine Institute (CMI). Ironically, at a time 
when the importance of such ongoing research has never been more 
apparent, this funding is at risk of being eliminated or significantly 
reduced. We urge congress to take action to insure that this important 
funding is at least maintained and hopefully increased. This funding 
has allowed for sustained long-term environmental research and could be 
a good vehicle for providing rapid-response funding that was so 
desperately needed in the early stages of the Macondo disaster. 
Further, it would also be helpful to urge BOEM to modify its long-
standing policy of requiring 1:1 institutional match. Especially during 
this period of dramatically reduced funding for higher education, this 
matching requirement is a substantial impediment for innovative 
research.

Access to Sample Sites Should be Available to University Researchers.
    It is understandable the need to regulate the movement in and out 
of coastal habitats following oiling, however far too many researchers 
found it difficult or impossible to gain access to critical sample 
sites along the northern Gulf of Mexico. Private security companies and 
local police were used to keep people at bay, while citizens became 
increasingly cynical of BP and federal agencies for the complete lack 
of transparency. University researchers who did manage to obtain 
funding were finding it difficult to complete projects due to the 
inability to gain access to field sites. Fortunately, our research 
group managed to obtain a BP Access Pass, which allowed us 
uninterrupted access to sample sites. Ironically, had we not obtained 
this permission, we likely may never have had the opportunity to sample 
the Grande Terre, Louisiana site during the height of oiling when 
sublethal biological effects were most pronounced.

Access to South Louisiana Sweet Crude from Mississippi Canyon 252
    It has been exceedingly difficult for researchers to obtain 
Louisiana sweet crude from Mississippi Canyon 252 (MC252), or even 
comparable surrogate oil, for toxicity testing under controlled, 
laboratory conditions. Early on, researchers were provided with 
standard letters from BP stating that oil was not available for 
distribution. Some laboratories did manage to obtain limited quantities 
of MC252 oil, but its distribution was once again disrupted when a 
federal judge issued a preservation order requiring its storage. With 
that said, a formal request process to obtain small quantities of MC252 
does exist, although researchers need to complete an application 
process ensuring that the oil is absolutely necessary. Regardless, BP 
does not appear to have made any significant shipments of the oil to 
academic researchers capable of conducting independent and transparent 
research. Recently, a surrogate well was drilled capable of producing 
oil of similar chemical composition to that of MC252. Like the case for 
MC252, its distribution has been slow to transpire and subject to the 
same application process. As an example, my colleague, Dr. Andrew 
Whitehead, received a letter from BP confirming that shipment of a 
surrogate crude had been approved, and would be arriving soon. Seven 
months later, his group still has no oil, putting this federally-funded 
research in serious jeopardy.

Importance of Basic Science Research Funding:
    It should be clearly noted that much of the tools, techniques, and 
paradigms applied in our oil spill research was facilitated by advances 
in basic sciences research (as distinguished from applied science 
research). For example, incredible recent advances in comparative 
physiology, cell biology, molecular biology, and genome biology, 
facilitated through basic science sources of support such as the 
National Science Foundation, were critically important for enabling the 
discoveries that we have made about the effects of this oil spill. 
Basic science has been, and will remain, the foundation upon which 
applied science discovers solutions to immediately practical problems 
for example in health and environmental sciences. However, funding for 
basic science in the United States, for example through the National 
Science Foundation, has remained flat or declined in recent years, 
whereas support for applied sciences, such as through the National 
Institutes of Health, has remained relatively robust. We think that 
this is short-sighted. Funding for basic sciences in the United States 
must be considerably increased as an investment for remaining 
internationally competitive.
    Thank-you for your attention. I would be pleased to answer your 
questions.

Abstract from Recent PNAS publication:
    The biological consequences of the Deepwater Horizon oil spill are 
unknown, especially for resident organisms. Here, we report results 
from a field study tracking the effects of contaminating oil across 
space and time in resident killifish during the first 4 months of the 
spill event. Remote sensing and analytical chemistry identified 
exposures, which were linked to effects in fish characterized by genome 
expression and associated gill immunohistochemistry, despite very low 
concentrations of hydrocarbons remaining in water and tissues. 
Divergence in genome expression coincides with contaminating oil and is 
consistent with genome responses that are predictive of exposure to 
hydrocarbon-like chemicals and indicative of physiological and 
reproductive impairment. Oil-contaminated waters are also associated 
with aberrant protein expression in gill tissues of larval and adult 
fish. These data suggest that heavily weathered crude oil from the 
spill imparts significant biological impacts in sensitive Louisiana 
marshes, some of which remain for over 2 months following initial 
exposures.

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    Mr. Hastings. Thank you very much for your testimony, and I 
thank all of you for your testimony. I very much appreciate 
your being here today. As I mentioned at the outset, this was 
one year since the moratorium was lifted, and we wanted to hear 
from you. I should note that the Committee did have a hearing 
down in Houma, Louisiana, to hear firsthand from people on the 
ground.
    I have a question for Mr. Reese. I am sure that you have 
noticed that this Committee has gone back and forth with 
Director Bromwich as to whether permitting and plan approvals 
are returning to the pre-moratorium pace. And I am not asking 
you to comment on that because you are here to present your 
findings and so forth.
    That said, one area that I think we could all benefit from 
a little bit more clarification is something that I alluded to 
in my opening statement that is represented in this slide, and 
that is the ``deemed submitted'' issue which shows up on this 
bar graph as the red bars. In the data that we see of the 
exploration plans that have been approved so far this year, 
some took hundreds of days just to be ``deemed submitted.''
    We all know that you need an approved plan to even get to 
the permit stage. And I am not sure if you have direct 
experience with this process. But if you could walk us through 
the difference between when a company first sends their 
exploration plan and how that is different from being ``deemed 
submitted.''
    Before the Macondo exploration, I guess really the 
underlying question, if you could address that, did it take 
nearly a year, as some of these ``deemed submitted'' plans do, 
to get the exploration plan? I mean, it seems to me that seems 
to be a long time frame. So if you could elaborate on that, I 
would appreciate it.
    Mr. Reese. Thank you, Mr. Chairman. I will do my best. I 
think our Chairman and President, our CEO, Paul Bulmahn, at our 
annual meeting used an object, and I think it begins to explain 
what you are seeing with your lines up here. Prior to the 
Macondo incident, a typical application, permit application, 
would be somewhere between 30 and 40 pages long.
    The most recent permit application that we submitted--and 
my numbers are a little vague, but in the neighborhood of about 
3,600 pages. So we went from having a 30- to 40-page document 
for submittal to 3,600 pages. And I can assure you, someone at 
the BOEM, MMS, whichever organization it was, was responsible 
for reading all of that.
    Prior to the incident, there was a very good relationship 
between the application process, and it was interactive. It was 
not cozy, as it has been said before. I can assure you of that. 
We have nothing but the greatest things to say about the people 
in the field at the BOEM.
    So at that particular point, when you are dealing with 
3,600 pages, you automatically have a lot more time 
constraints, versus in the past, there was a normal process in 
working back and forth, and you ultimately got a ``deemed 
submitted.'' A company couldn't just hand something to the 
former MMS, today the BOEM, and have them say, OK, you now have 
30 days. No. There was a process, but everyone knew what that 
process was.
    Today, there are still unknowns as to what is in the 
process. Part of it is nothing more than new rules and 
regulations. So what is happening, and I appreciate this slide. 
If there is a way I could get a copy of this slide, I would 
love to be able to use this. Intuitively, we knew this was 
going on. I have never seen it presented, and I compliment you 
and your staff for putting this together.
    But, yes, today what you have is ``deemed submitted'' 
starts the time running. And if the BOEM does not have to start 
their clock running until it is, quote, ``deemed submitted,'' 
there is an initiative on their part to get it ``deemed 
submitted.''
    Mr. Hastings. And so what you are saying is that prior to 
this, before the Macondo incident, while the 30 or 40 pages, 
there may be some give and take, like you said, it wasn't cozy, 
I mean, not to say----
    Mr. Reese. No, it was not.
    Mr. Hastings. It wasn't necessarily adversarial, but it was 
at least working together to try to get an outcome. The mere 
fact that that is 3,000 pages--I think that is what you said.
    Mr. Reese. 3,600 is the number I remember.
    Mr. Hastings. Is bound to slow the whole process down, and 
that--to oversimplify, is that the reason why that red bar is 
probably much higher, simply because of that mere fact of the 
quantity?
    Mr. Reese. I think there are two things here. One, I will 
stick with the facts, and that is the fact, if you have a 
3,600-page document, it is going to take a longer period of 
time. The other is, is it a tone coming from the top? What is 
causing the delay? If there is a desire to get something 
approved, and approved safely, to get it approved now, you will 
have the tone at the top say this is what we want to do, and 
the people that are in charge of that will get it done.
    On the other hand, if the tone at the top is we want to 
slow-walk this, we don't want to encourage drilling in the Gulf 
of Mexico, we want to have a longer period of time for this to 
happen, then you are going to have that. That is editorial, I 
will admit. The facts are you are dealing with a lot more 
pages. The editorial part is what is the tone at the top to get 
the new energy out of the ground.
    Mr. Hastings. Well, that is one of the reasons we are 
having this hearing, to try to ascertain that, and we will make 
sure that you get a copy of that slide.
    Mr. Reese. Thank you very much.
    Mr. Hastings. And with that, I recognize the gentleman from 
Massachusetts, Mr. Markey.
    Mr. Markey. I thank the Chair very much. First of all, I 
just want to say that the Majority's Interior Appropriations 
bill has cut $35 million of the Administration's request, which 
will lead to 20 fewer engineers to review these applications. 
So you can't have it both ways. You can't kill the program that 
the Administration wants in order to expedite the handling of 
it, and then complain that it is not being handled fast enough, 
OK? And that is again the duality of everything that is 
happening here.
    You have another thing happening on the House Floor on an 
ongoing basis that makes it very difficult to in any way square 
up with the Republicans say they want to have happen, and then 
what the Administration says they are willing to do in order to 
speed up the process, and then the Republicans kill that, OK? 
So that $35 million, I hope, is going to be restored. But I 
think the chances of that are zero, OK, because they do want to 
dramatically underfund what Director Bromwich can do.
    Dr. Galvez, over 6,100 birds, 600 sea turtles, and 150 
mammals, including dolphins, were collected dead in the Gulf of 
Mexico region during the Deepwater Horizon disaster. But your 
study is one of the first to examine the sublethal impacts of 
the spill on fish in the Gulf. Your research has found that 
there are cellular changes in the most abundant species of fish 
in the marshes of the Gulf that are the same types of early 
warning signs we saw following the Exxon Valdez spill.
    Could we potentially be headed for a similar population 
decline in fish or other species in the Gulf as we saw 
following the Exxon Valdez?
    Dr. Galvez. Well, it is certainly a little early to tell. 
But some of the warning signs are clearly there. In the Exxon 
Valdez, it took several years, approximately four years, before 
some of the true population level effects were really seen. And 
in those cases, some of the same things that we are starting to 
pick up were also happening in those animals.
    Interestingly, in some of the work that is not published, 
we are finding that when we are exposing animals to the 
sediments, that these animals are essentially not doing very 
well in the sediments, and they continue not to do well. These 
animals are dying. They are not absorbing their yolk, which is 
normally what an embryo before it hatches, become a larva, what 
it would do in order to grow. These animals are smaller, and so 
these animals will not do well in the environment.
    And so potentially, any organism that spends a good portion 
of its time, especially during early development, in the marsh, 
which is where we are finding the vast majority of the oil, 
potentially will be affected.
    Mr. Markey. Thank you, Dr. Galvez. And last week, by the 
way, in this Committee, the Majority was so concerned about sea 
lions eating salmon--they ate 3,000 salmon last year off the 
entire West Coast--that they put a license to kill sea lions if 
any of them would get caught eating fish. So here we have the 
entire Gulf of Mexico and all these species down there----
    Dr. Galvez. Yes.
    Mr. Markey.--and just tremendous impacts that they can 
have, not upon 3,000, but almost uncountable numbers of fish, 
and we are not seeing the same attention being paid to that as 
we saw to the sea lion issue with 3,000 salmon total on the 
West Coast.
    Dr. Galvez, in your study, you noted the chronic, sublethal 
impacts of the oil spill continued to be detected 22 years 
after the Exxon Valdez. Following the BP spill, do you expect 
that we could see negative impacts to fish and other species in 
the Gulf for many years, as we did in Alaska?
    Dr. Galvez. Well, certainly there is the potential. They 
are vastly different spills in terms of geology, in terms of 
climate. However, what is of most concern is that the oil is in 
the sediment, and if you dig down into the sediment, you see 
that this oil is still relatively fresh. We still have oil 
coming into these marshes. And the concern is that marsh is 
habitat for so many organisms. It is really the fertile 
crescent. So much of the fisheries rely at some point in their 
life on that marsh environment to collect their prey.
    And so there is the potential--as I said in my testimony, 
we need to be doing the research to really monitor the 
recovery.
    Mr. Markey. Well, let me ask you this again, Doctor. In 
your testimony, you explained that BP is not providing 
researchers like yourself similar Louisiana sweet crude to what 
spilled from the nearby wells for controlled toxicity testing 
so that we can better understand how this oil might impact the 
Gulf ecosystem. Can you talk about why it is so important for 
researchers like yourself to be able to test similar oil?
    Dr. Galvez. Well, every crude oil is vastly different in 
terms of its molecular characterizations and the types of 
compounds that make up that crude oil. And each of these 
compounds is vastly different toxicities. And so we want to be 
able to match as closely as possible, preferably with the MC252 
oil, so that we can study how those specific components are 
acting on there because some components are going to act in 
different biological pathways. And so it is important to do 
those studies.
    Mr. Markey. So again, what we have learned over and over 
again is that BP has been more concerned with its own bottom 
line than it has been with what is going on in the bottom of 
the ocean. And their unwillingness to provide you and other 
scientists with the information you need in order to do these 
kinds of studies is just a further indication of BP's 
unwillingness to cooperate in what should be an historic 
investigation to find out what is going on right now in the 
Gulf of Mexico. I thank you, Doctor.
    Dr. Fleming [presiding]. I thank the gentleman, and I now 
recognize myself for five minutes for questions. I listened 
very carefully to a lot of the comments made today. By the way, 
I am from Louisiana, as is my good friend, Mr. Landry, and 
obviously we have been following this whole issue very closely. 
We appreciate the work from LSU also on these studies, but we 
hear discussions about oil sheens that have been observed. Of 
course, we know most of the oil in the ocean today leaks 
organically from its bottom so that is not an unusual 
occurrence to see oil sheens.
    Fish mutations, we know fish mutate constantly, as do most 
of the lower species. Cellular-level changes, I don't know, 
that all seems a bit of a stretch to most of us in Louisiana. 
Commissioner Mike Strain of Agriculture tells us that the 
sampling of our fish, particularly those that we are using for 
consumption, shows virtually no hydrocarbon evidence. In fact, 
he assures us that we have the most tested and the safest 
seafood that is being consumed today.
    And I think even, Mr. Galvez, or Dr. Galvez, I am not sure, 
that you said that there was little or no hydrocarbon evidence 
in the tissues that you are seeing. I will get to you in a 
moment. I will give you a chance. Just we are pressed for time 
here.
    But the point is that what really, in the view of the 
people of Louisiana, the problem has been with this incident 
has been, number one, the perception that there has been damage 
to the fish population and to the beaches, and this has been 
true of Florida, where people are not coming when in fact 
everything is pristine. So there has been a perception problem 
that we have had to overcome, not an actual ecological 
disaster.
    Number two, perception problem about the safety of the 
seafood, and we are able to prove that we have the safest 
seafood in the world. But third, and most importantly, is what 
is happening offshore with drilling. And if you look again, if 
you will glance up to the slide, you see that the red bar is by 
far the largest portion in terms of days, which adds perhaps on 
average of 200 days to the process. The Obama Administration 
gives us a similar graph, except that their days are compressed 
to something in the average of 25 to 30.
    So the difference that we see here, and what we are 
observing, what the industry is observing, is around 200 days 
of slow-walking permits before we actually get to the real 
activity that is going on. That is what I would like to focus 
on, and I will open this up to the gentlemen who are in the 
industry. Is this in fact what you are seeing, that it is sort 
of the pre-permit process, where you are actually filling out 
forms, and nothing is happening for a number of weeks and 
months before you actually get to it, something that is very 
difficult for us to bear down on and really change?
    I will open that up and be happy to hear different 
impressions on that.
    Mr. Reese. Yes. I am from the E&P industry, and I will 
continue to answer that question. Yes, it has been very 
difficult, and I think the most frustrating aspect has been 
what rules and regulations are being imposed to get to the 
``deemed submitted'' point. We have submitted applications. 
Time goes by. We ask, and we are very active, I do not want to 
say that we are just sitting back waiting for the phone to 
ring. We are constantly in BOEM's office working with them to 
try to understand, and many times it is just a level of 
frustration.
    Dr. Fleming. I think what I am understanding is that there 
is no certainty in the process.
    Mr. Reese. Exactly.
    Dr. Fleming. That somehow something out of your control, 
somebody could be shuffling papers deliberately. Somebody could 
be ignoring applications deliberately, or it could be there is 
just not enough staff. It could be that somebody from above is 
given orders to sit on something for a minimum of three months 
before you send it on. You really don't know what is going on.
    Mr. Reese. That is the real, real issue. It is the level of 
uncertainty associated with getting to the ``deemed submitted'' 
process. There are certain items of permits that I will 
compliment BOEM on. Typically, the completion element, you need 
a--normally, you will need anywhere from four to six permits 
for every well that you drill, but a completion permit is 
normally obtained within a few days. That they seem to be 
pretty good on. But trying to get to the exploration plan, the 
DOCD, or the ultimate drilling permit to allow you to start 
drilling, that has been very frustrating.
    We have already taken two permits that we had hoped to do 
in early 2012, and we recognize at this point those will in all 
probability be late 2012 or early 2013 permits.
    Dr. Fleming. OK. Well, thank you for that because that is 
really what I am hearing, is uncertainty. I am also 
understanding that there is a certain cycle, and there are 
certain times of the year that you can go out and take rigs 
down, plug the drilling sites, or perhaps start them back up 
again. And so if you don't get that permit approved within a 
certain window, then you may have to wait another six months or 
a year before you can go back again. Is that also the case?
    Mr. Reese. That is correct. Essentially what you have--and 
these are rules that have come in since Katrina and Rita--you 
are not allowed to moor up, put a rig in place within, I 
believe, five miles of another fixed structure or floating 
structure in the Gulf of Mexico during hurricane season, 
recognizing that most deepwater wells will take you 45 days, if 
it is a side track, and it could easily be over 100 days if it 
is a brand new well. Do the math, from June 1st to roughly the 
middle of October, and what you find, unless you are on 
location, moored up and ready to go, by sometime in the March 
to April, maybe as late as May, standpoint, if you don't make 
that window, you might as well forget any new deepwater 
drilling that is within five miles of a fixed or floating 
structure until some time in October-November.
    Dr. Fleming. OK. Thank you. And I apologize to my 
colleagues. I went a little further over than I intended to. So 
next, I will recognize Mr. Holt for five minutes. Mr. Holt?
    Mr. Holt. Yes.
    Dr. Fleming. You are recognized, sir, for five minutes.
    Mr. Holt. Thank you, Mr. Chairman. I would like to follow 
up on one point. And first of all, thanks to all the witnesses. 
Mr. Galvez, we were talking about the effects on the fisheries 
and the ecological balance of the Gulf. When someone mentioned 
recently that, well, fish mutate, it just happens, are the 
changes that you have detected, the cellular changes in the 
fish, is this abnormal, or is this normal mutation?
    Dr. Galvez. Well, the mutation--yes, it happens over the 
course of thousands of years, many, many generations. You will 
get evolution. But some of the changes that we are observing, 
some of the cellular changes in the gill are completely 
abnormal. I am a fish physiologist by training, and I will tell 
you firsthand that the level of damage that we are seeing on 
those gills are going to impair the ability of those organisms 
to take up the oxygen from the environment.
    Mr. Holt. And let me go back now to the oil spill. Is the 
oil still in the environment?
    Dr. Galvez. Yes, it is.
    Mr. Holt. Now, in the marshes and areas, some of it I guess 
is still in the sediment, and probably will be for some time.
    Dr. Galvez. Yes, it is.
    Mr. Holt. Is that sediment important to the fisheries, or 
is it only the open waters that are important to the fisheries?
    Dr. Galvez. Well, certainly in that environment where 
killifish and other organisms, they use that environment, that 
habitat as safety, so they hide amongst the marsh grasses. Some 
organisms, some flat fish, for instance, utilize that sediment. 
Other organisms bury within the sediment. Killifish is in such 
shallow water that it is exposed continually to that sediment.
    Mr. Holt. So obviously what we are trying to get at is 
whether it is important to stop and think or whether we should 
be charging full speed ahead. Do you think we have done all the 
thinking that should be done to understand the effects of what 
we have experienced and what the fishermen have experienced and 
what the other people who depend on the life of the Gulf have 
experienced?
    Dr. Galvez. If history is a lesson, and it should be, I 
think that the potential ecological effects are yet to become 
apparent, my concern. I would like to add that Louisiana 
seafood, in my opinion, is still safe to eat because we are not 
seeing the accumulation of the hydrocarbons in those animals.
    But what we are seeing are these subtle cellular effects 
that are going to make it more difficult for organisms to 
survive in an ever-changing environment.
    Mr. Holt. OK. Mr. Kief, you in your testimony, and a number 
of my colleagues and others, have talked about delays in this 
issuing of permits. Now, the Majority of the House here in the 
Appropriations bill for the Interior has underfunded the agency 
that is responsible for issuing the permits, to the tune of 
about $35 million. The Director of BOEMRE has told this 
Committee it could mean a shortfall of perhaps 20 permitting 
engineers, which means that permits will not be issued as 
quickly as the department would otherwise issue them.
    Do you think this underfunding is wise in light of the 
concern you have raised? Or what would 20 additional permitting 
engineers do to help expedite the permitting?
    Mr. Kief. Well, either that, or how about a permitting 
process that was less than 50 pages turning to 3,600. That is 
part of the problem.
    Mr. Holt. OK. So you are happy with fewer permitting 
engineers?
    Mr. Kief. Oh, no. I wish the permitting process was----
    Mr. Holt. Mr. Auer, what do you think about that?
    Mr. Auer. Can we afford to lose----
    Mr. Holt. Should we be laying off permitting engineers? 
Would that make it better for permitting?
    Mr. Auer. The engineers that would help for my permits, if 
I have one guy, and he is taking 120 days, give me another one, 
and maybe it is cut in half, OK? I don't need $35 million to 
get my permits approved. They need some help.
    Mr. Holt. Are you the only person out there seeking 
permits?
    Mr. Auer. No, I am not. But we all seek the standard form.
    Mr. Holt. Mr. Reese, do you think it is wise to cut back on 
those who would issue the permits?
    Mr. Reese. I think if we are looking for a reason to not 
issue permits, and the determination is the reason we are not 
issuing them is there are not enough people, then no, that is 
not a wise decision. However, if the fault is the fact that the 
process is flawed, and you can throw 35 people or 135 people, 
but you are still going to have a flawed process, I think the 
focus has to be on the process, not the number of people.
    Mr. Holt. OK. So one well-intentioned permitter with a good 
process will do it, I suppose. Mr. Chairman, my time has 
expired. Thanks.
    Dr. Fleming. Mr. Holt yields his time back, and I now 
recognize the gentleman from South Carolina.
    Mr. Duncan of SC. Thank you, Mr. Chairman. As important as 
this issue is to me, I am in markup in Homeland Security, so I 
would like to yield my entire five minutes to the gentleman 
that understands drilling equals jobs, Mr. Landry from 
Louisiana.
    Mr. Landry. Thank you, Mr. Duncan. I certainly appreciate 
the time, and the people from South Louisiana appreciate that 
as well.
    Chris, your area of expertise is primarily in the plugging 
abandonment consulting business. Is that correct?
    Mr. Auer. That is correct.
    Mr. Landry. OK. And so you are the guy who is responsible 
for obtaining the permits that help oil and gas companies 
properly abandon and seal off wells and reserves that have been 
depleted.
    Mr. Auer. That is correct.
    Mr. Landry. And then you also aid in the removing of idle 
iron.
    Mr. Auer. I do.
    Mr. Landry. OK. And I would suspect that you work for 
multiple operators.
    Mr. Auer. I do.
    Mr. Landry. OK. And again, you are the person who is 
responsible for getting those permits.
    Mr. Auer. I am, yes.
    Mr. Landry. Are you sitting on any of those permits?
    Mr. Auer. I absolutely don't sit on any of the permits. 
They are written and submitted as fast as possible.
    Mr. Landry. And so as soon as you get them, you get to 
work.
    Mr. Auer. Absolutely.
    Mr. Landry. Are you having any problems once you get your 
permit, are you having any problems procuring the equipment and 
the services necessary to do that work?
    Mr. Auer. Absolutely not. And where we are at right now is 
the permitting is so slow, and it has pushed so much work, 
there are dye boats and heavy-lift vessels stacked at the 
beach. The rates we are seeing, I don't know how the companies 
are making any money. The assets are there.
    Mr. Landry. So, if I asked you if you thought that there 
are operators out there who actually have a PNA permit at their 
office that they are not acting upon, would you believe me?
    Mr. Auer. Actually, I would. And the only reason I think 
that they would not act on it is if it ran into a bad weather 
window. And there is a safety issue then, if we run further 
into the year. That would be the only reason to not act on a 
PNA permit.
    Mr. Landry. Mr. Reese?
    Mr. Reese. Yes, sir.
    Mr. Landry. Are you sitting on any PNA permits?
    Mr. Reese. I am sorry. Say again?
    Mr. Landry. Do you all have any PNA permits at ATP that you 
all are not acting upon?
    Mr. Reese. Not other than because of a weather window or 
scheduling equipment and things of that nature, no. We would be 
acting on everything that we would have.
    Mr. Landry. On the PNA side, do you know if there is a lack 
of equipment or services available for you to do your work?
    Mr. Reese. I am not aware of that. It is not my area of 
expertise, but I am not aware of there being lack of ability to 
get equipment for that.
    Mr. Landry. Mr. Shafer.
    Mr. Shafer. Relative to PNA and really any types of 
permits, I think what we are seeing right now is historically 
in the Gulf of Mexico, there has always been a small backlog, I 
guess you would say, of permits, which once you finish one job 
and move on to the next job, and not have your assets, whether 
it be PNA, equipment, and heavy-lift barges, drilling rigs, you 
know, normally you would like to move them immediately. A lot 
of this equipment is very expensive. The crews are very 
expensive. And so historically, you have always had a small 
backlog of permits, just enough to move the equipment around. 
And right now, it is quite the opposite.
    As Chris had mentioned, what we are seeing now is equipment 
on the beach, in the ports, sitting there, not working, and 
available for work.
    Mr. Landry. Now, Chris, let me ask you, you have had some 
difficulty, as everyone else, but on the PNA permitting side 
and removing idle iron that the Administration, Secretary 
Salazar, Director Bromwich have gone on record as early as two 
months after the Macondo incident, saying that it is something 
that they want to see happen in the Gulf of Mexico. What do you 
think the biggest obstacle is? If you said to this Committee, I 
would suggest that BOEMRE or BSEE does this now, what would it 
be that you would suggest?
    Mr. Auer. They need to staff appropriately. They need to 
standardize the forms. We don't have standardized forms for 
abandonment. Everybody does it a different way. And they need 
to automate it, just the same way they do with wells. And there 
needs to be more focus. The fish are important, and I 
appreciate Dr. Galvez's research and everything. But the most 
important animal that is affected by this is the human animal. 
And we need to turn our focus to that, and that needs to be 
their focus as well. Keep seeing what the effect is on the 
environment, but we are the environment. And nobody seems to 
understand that.
    Mr. Landry. Well, and so, let me ask you this. It was my 
understanding that each well is different in the PNA permitting 
process. So how would you standardize that?
    Mr. Auer. Well, the wells have a standard form called an 
APM form. That is real simple. That has been in play forever. 
Any time you want to modify a well bore, you file an APM form. 
The platform removal application, 30 CFR 250, has a list of 
questions that you answer, as most government regulations do. 
Build a form where you can fill in the blank because when you 
hire new people at BOEM, this is kind of specialized. But when 
you hire new people, it is easier to train them. Same thing we 
did in the Army when we were all in the Army. Easy forms, learn 
how to use it. Automate it so that I can get online and see, 
just like I can with the well permits, and see where it is at, 
what questions have been asked.
    Currently, I have to pick the phone up, and I have to call 
the one or two approving personnel at BSEE and ask them, hey, 
where is this permit at. What is the status? That takes time 
from them. It takes time from me. We shouldn't be there, not in 
today's world. Real simple.
    Mr. Landry. Thank you.
    Mr. Hastings [presiding]. Thank you very much. Next we will 
recognize the gentleman from Florida, Mr. Southerland.
    Mr. Southerland. Thank you, Mr. Chairman. First of all, I 
would like to thank everyone for coming to testify. And I know 
I have a constituent here, Captain Bob Zales. Thank you for 
making the 1,000-mile trip up to Washington. And also Mr. 
Craul. Thank you for coming.
    I want to ask Mr. Craul, I am familiar with your company, 
even though Destin is not in my district, but I am familiar 
with your company. You kind of outlined your business 
interests, which are varied along the Gulf Coast. You have a 
reputation of being a class organization, and you invest in the 
communities that you are in.
    With all the holdings you have, you create jobs, OK? We do 
a lot of things up here. A lot of proposals come forth by 
individuals who have never created a job in their life. And I 
am just asking, though, what is the single greatest factor that 
Legendary Hospitality looks at in making a business investment?
    Mr. Craul. Supply and demand. As demand goes up, meaning 
the increase in business to our area, is what creates jobs. So 
if there is more people coming, more people buying, more people 
renting, more people purchasing fuel, so on and so forth, then 
we are ready to build more, which creates jobs to take care of 
that demand.
    Mr. Southerland. I know that some of the questioning is 
trying to get us off of the topic that we actually asked you to 
come 1,000 miles to participate in. Does the moratorium that we 
have been dealing with, does it help or hurt demand?
    Mr. Craul. Well, it is difficult to determine exactly how 
much of our business was affected by the moratorium because it 
is a part of our business. Not all of our business is from 
Louisiana and so forth, but certainly if you have a reduction 
in jobs and a feeder market, there is going to be an effect to 
the businesses in Florida.
    Mr. Southerland. You know, I noticed some of the other 
witnesses, Mr. Reese, you had made a very good presentation, 
and you talked about being in other countries as well. How 
challenging is it for this moratorium, compared to other 
countries, in the permitting process that you go through in 
other markets?
    Mr. Reese. The uncertainty that we have been dealing with 
for the past year is unprecedented anywhere else. You do not 
have this uncertainty associated with it. We are in the UK. We 
are in the Netherlands. We are also in offshore Israel. In each 
of those, the permitting is challenging. But the rules and 
regulations have far more clarity, and the time frames there 
are much more definitive.
    Mr. Southerland. So certainty, obviously, kind of off of 
what Mr. Craul was mentioning, I know that investors do want 
certainty. And so the moratorium has injected more uncertainty 
for you. And I would expect it has done so for any other 
business interest.
    One of the things I would like to ask, Doctor, I know it 
has been touted on the other side of the aisle that we are not 
interested in research. I am very proud to be a co-sponsor of 
the Restore Act that deals with research. And so I just want to 
go ahead and put that claim to rest. Inside that bill, it deals 
with a lot of research because we do want to know.
    I will say this, though, that if BOEMRE doesn't want to 
issue permits, budgeting them $35 million more is not going to 
change that, OK? This thing that you just throw money at 
departments, and all of a sudden they just start changing their 
view of the world is kind of looking through glass houses.
    But, Dr. Galvez, I want to thank you for the research that 
you are doing. I do believe in research. I do believe we need 
to know, especially in the area of our fisheries. Mr. Zales 
knows the importance of good research and not making fisheries 
decisions based on ten-year old data that is inconclusive.
    In your own testimony, you stated that it is too early to 
tell. You mentioned the words ``speculation'' and ``unknown.'' 
There are things that are yet to become apparent. You know, I 
think that does validate the need for more research. But one of 
the things I wanted to state, you talked about not having the 
sweet crude that you needed to do your investigation. You said 
that you sent a letter, and that you still haven't received it, 
seven months in. That has got to be aggravating, to need 
something and not be able to get it for months in and months 
out.
    Dr. Galvez. Well, what is particularly aggravating is that 
the approval for the oil was obtained over seven months ago. So 
you----
    Mr. Southerland. Here is what I want you to do, though, 
because my time is running out. I want you to welcome you to 
the world that these guys all live in, needing something badly 
and never, ever getting it. Welcome to the wonderful world of 
small business and private enterprise. I wish you didn't have 
to deal with that. But I am glad that other people see the 
aggravation that industry has to deal with on a day-in, day-out 
basis.
    Dr. Galvez. If I can comment briefly.
    Mr. Hastings. Briefly.
    Dr. Galvez. The university is like a small business in that 
I have 14 staff that I feed by them the dollars.
    Mr. Southerland. I hear you, man.
    Dr. Galvez.--my research dollars. And in this uncertainty, 
it is difficult.
    Mr. Southerland. Absolutely. We all agree.
    Mr. Hastings. The time of the gentleman has expired. And 
the Chair recognizes the gentleman from Louisiana, Mr. Landry.
    Mr. Landry. Thank you, Mr. Chairman. Mr. Reese.
    Mr. Reese. Yes, sir.
    Mr. Landry. You have been with ATP since its inception, 
correct?
    Mr. Reese. 1991, yes, sir.
    Mr. Landry. When ATP started out, were you all a deepwater 
player or a shallow-water player?
    Mr. Reese. We were exclusively a shallow-water player. It 
was formed by Paul Bulmahn, as he says, on the floor of his 
living room, and I helped him along with a couple of other 
gentlemen, and we basically took two projects in 1993-94, put 
them on production. It cost about $7 million or $8 million for 
our first two projects. And January of 1995, we were on 
production.
    Mr. Landry. So two projects, living room, a couple of guys. 
It is the American dream.
    Mr. Reese. Absolutely, it is.
    Mr. Landry. Taking a risk. You could have drilled some dry 
holes.
    Mr. Reese. Yes, sir, we could have, and we did.
    Mr. Landry. And then today, you are--
    Mr. Reese. We are the fourth most active operator in the 
Deepwater Gulf of Mexico, behind BP, Shell, and Anadarko.
    Mr. Landry. Amazing, amazing. Now, here is the question. If 
you all had to go back in that living room today, under the 
current regulatory environment, in 11 years, could you be what 
you are today?
    Mr. Reese. No.
    Mr. Landry. One more time.
    Mr. Reese. No. I can give you a longer answer, but the 
answer----
    Mr. Landry. No, no. I know. Look, I believe you. I am 
sitting here because I believed that last year when I ran. See, 
in 1995, I started a business with a friend of mine, $10,000. I 
didn't have $7 million. I wish I had had it.
    Mr. Reese. We didn't have $7 million. We had to go find it.
    Mr. Landry. But you see, that is what I did. And then I 
sold some of those businesses, and we employed a lot of people, 
a lot of people who have gone on to do a lot better things. 
Some of them make more money than me now, guys that worked for 
me. And I recognize that this Federal Government is destroying 
that American dream. It is destroying the ability for guys like 
you all to get back in that living room 11 years ago and do 
what they are doing today.
    Mr. Reese. To have a group of true entrepreneurs like Paul 
was, like I was, and joining him, and doing what we did, I hate 
to say it. I think that is a thing of the past. The rules, the 
regulations, the costs associated, whether it is shallow-water 
drilling or deepwater or the like. Our first deepwater project, 
we took a project from Texaco. Unocal was our partner. That was 
about an $80 million project. And our most recent project, 
Telemark, is about $1.5 billion.
    Mr. Landry. And in those 11 years----
    Mr. Reese. It has been 20 years.
    Mr. Landry. Did you have any Macondo-like accidents in the 
Gulf of Mexico?
    Mr. Reese. No. There has been 58,000 wells drilled in the 
Gulf of Mexico, more than 58,000. One had a real problem, one 
out of 58,000.
    Mr. Landry. All right. And I am guessing that your safety 
record is a great record. I mean, I think you care about your 
employees.
    Mr. Reese. Yes. I mean, no one has a totally unblemished 
record in this industry, I will admit that. You can't be in 
this industry and have total----
    Mr. Landry. Well, my driving record is not unblemished. I 
want you to know that.
    Mr. Reese. You shoot par every time you go out to play 
golf? No. That is not going to happen.
    Mr. Landry. And a lot of it is my fault.
    Mr. Reese. I know. Sometimes things happen. But no. We have 
an impeccable safety record. When we designed the Titan, we put 
a blowout preventer on the surface of the Titan. We also have a 
shut-in device--it is called a SID--on the mudline. 
Effectively, we have two blowout preventers on a deepwater 
platform, one at the surface and one in the mudline.
    Mr. Landry. And I would imagine that if the government had 
not done a thing but check its own self in what caused the 
Macondo well and investigated BP for the accident on that rig, 
is it safe to say that the industry--would you have been 
looking at that accident and trying to determine what you could 
do to ensure that you company wouldn't have that same type of 
accident?
    Mr. Reese. Two quick things. The first answer is absolutely 
yes. Any time there is an accident, you want to know what 
happened. What should have happened, and what would have kept 
us all from being here today, is when the incident occurred--we 
have seen airplanes fall out of the sky. Toyota had problems, 
things of that nature. What should have happened was an 
immediate cease for anyone using the equipment that the Macondo 
well was using, to find out was the problem with the equipment, 
was it operator error, or what, immediately shut that down, and 
you would not have heard a peep out of the Gulf of Mexico, 
independents or majors, because that is what we would have done 
to find out--we are using--I am not saying we did. We are using 
the same piece of equipment they did. Is that a problem?
    Unfortunately, it was a let us punish and let us put this 
entire industry out of business for awhile. And that is the 
reason we are sitting here today. It was an inappropriate 
response to an accident.
    Mr. Landry. Thank you.
    Mr. Hastings. The time of the gentleman has expired. The 
Chair recognizes the gentleman from California, Mr. McClintock.
    Mr. McClintock. Well, to follow up on that, the blowout in 
the Gulf was basically a mechanical failure of a blowout 
preventer stack. Is that correct?
    Mr. Reese. I am not going to answer that directly because I 
am not informed, and I think that gets into litigation. If you 
don't mind, I think, yes, that was clearly part of the problem. 
Was that the cause of the problem? Was it operator error? Was 
it something else? I am going to let other people----
    Mr. McClintock. Well, it seems to me when there is an 
airplane crash, the NTSB goes to work to determine what was the 
cause of that crash, and then adds additional protections to 
assure that that doesn't occur again.
    Mr. Reese. That is correct.
    Mr. McClintock. In the case of a mechanical malfunction, 
you identify what was the mechanism that malfunctioned, and how 
do we build them in the future so that that doesn't happen 
again. The government didn't do that as far as I can tell, at 
least didn't give priority to that. Instead, as you point out, 
it vastly expanded the bureaucracy that oversees this activity 
without any kind of focused attention on the actual problem.
    Mr. Reese. I would agree with that.
    Mr. McClintock. And what we are being told by the Minority 
is, well, we have to add more bureaucrats. But as you pointed 
out, you have gone from permits that were 40 pages to permits 
that are now 3,600 pages.
    Mr. Reese. The typical permit was about 30 to 40 pages. The 
one that Paul used at our annual meeting was 3,600.
    Mr. McClintock. So that is roughly a 9,000 percent increase 
in bureaucracy. Maybe instead of more bureaucrats, what we need 
is a little less bureaucracy. That is obviously rhetorical. I 
am trying to get a handle on the economic damage that was done 
by the blowout itself, and the economic damage that was done by 
the government in its response to the blowout. Do you have 
figures that would help me on either, anyone on the panel?
    Mr. Shafer. The one figure that I quoted in my testimony 
was 11,500 jobs. And that is actually a very conservative 
figure. That figure is really related only to the Deepwater 
drilling rigs that have left the Gulf of Mexico. And so that 
figure would include the actual crews of the rigs, the people 
working on the vessels that supply the rigs with various things 
like fuel, food. I am sure you can imagine the logistical 
difficulties of basically a floating city in 10,000 feet of 
water very high, lots of people onshore working--engineers 
designing wells, designing that kind of stuff, and just extreme 
logistical difficulties of operating offshore.
    So that is a very conservative figure, 11,500 direct jobs.
    Mr. McClintock. Those are direct----
    Mr. Shafer. Those are direct jobs, absolutely.
    Mr. McClintock. That doesn't include the spinoff 
activities. Has there been any economic assessment of the 
damage done by the moratorium.
    Mr. Shafer. Absolutely. My company did a study, and I think 
it was somewhere around 100,000 jobs--I'm trying to include 
those direct jobs, indirect, and induced jobs. I don't have the 
exact figure in front of me. There is also the effect going 
forward, which I think----
    Mr. McClintock. Any dollar figure in any of the studies 
that has been undertaken so far?
    Mr. Shafer. I don't have it in front of me, but again, it 
is in the tens of billions of dollars. Like I said, just from 
those rigs, $6.3 billion is the figure we have estimated.
    Mr. McClintock. So 100,000 direct and indirect unemployed, 
and obviously billions of dollars of economic damage done by 
the government in response to the blowout. What was the damage 
of the blowout itself? Do we have estimates on that?
    Mr. Shafer. I don't, sir.
    Mr. McClintock. Anyone on the panel?
    Mr. Reese. I think the only number that has really been 
used is the $20 billion that BP had to basically put into the 
fund. I think they are trying to say that was the total 
economic damage. But clearly, it is not. That was the direct 
damage. As for indirect damage, we had to let a rig go. That 
rig is now over in Africa. Those are untold numbers at this 
point.
    Mr. McClintock. It would be interesting to get that figure. 
From what I have seen, it appears that the government may have 
done as much damage to the economy as the accidental blowout 
did.
    Mr. Shafer. Sir, and I think the $20 billion figure, which 
was the amount that BP had to set aside to deal with the 
ongoing effects of the spill, I am not sure if that has 
actually all been paid out. I think that was more an estimate 
that was made by the Administration, rather than an actual 
figure.
    Mr. McClintock. And that was compensated. That is 
compensation for the damage. So that was compensated damage as 
opposed to the economic damage done by the government's 
policies, which has been uncompensated to the people affected.
    One other quick question. Can you give me a picture of the 
number of rigs that have left the Gulf as a result of the 
government's policies, and any chance of getting them back any 
time soon?
    Mr. Shafer. Yes, sir. As I said in my testimony, the number 
of rigs that have left the Gulf of Mexico is 11. Relative to 
them returning, there is currently two of those rigs that are 
planned to return. One of them is off French Guinea, so it is 
off South America. And actually, the company that is the 
operator of that rig, Coldwell Energy, still does not have a 
permit to drill, which definitely opens up the question of if 
they will bring the rig back when they don't have a permit to 
drill.
    And the other company is Murphy Oil and Gas, who actually 
is talking about divesting out of some of their Gulf of Mexico 
properties. So, again, the possibility of that rig returning 
seems to be declining rapidly every day for both those rigs. 
And of the rest of the rigs, there is no plans for them to 
return.
    Mr. Lamborn [presiding]. OK. We will go to our next 
questioner, which happens to be myself. So I will just jump 
right in. Thank you all for being here. At this point, I think 
we are beyond the fact that the length of the shutdown and 
slowdown in the Gulf was both unwarranted and unnecessary. We 
are at the point where we are trying to find out the lasting 
and ongoing impacts on job creation in the Gulf, and how to 
help revive the Gulf.
    One of the problems we hear so often that affects business 
in uncertainty. With offshore rigs costing as much as half a 
million dollars per day to lease, uncertainty can be especially 
lethal for small businesses. As they scale down offshore 
operations and employees, all of the secondary and tertiary 
businesses follow suit. And the same is true of the mom and pop 
businesses in the local port cities, and even beyond the Gulf. 
Al Reese in his testimony noted the vendors and contractors in 
42 States that rely on offshore operations.
    So my first question for those of you on the panel who 
helped run a business, how many people do you employ now, 
roughly, and how many have you had to let go?
    Mr. Auer. I have got--I don't know. I am at 22, and I don't 
think it is how many I have let go. It is what would be my 
capacity to expand. And I could probably double that, if we had 
some permitting stuff going the way it should be.
    Mr. Lamborn. Thanks.
    Mr. Kief. We have approximately 110 employees, and capacity 
to employ 125. And once again, my question is that there are 
companies like us that are avoiding layoffs by using capital 
and lines of credit to maintain our workforce. And that 
threshold is about to be met to where we are going to have to 
discharge more people, and we are trying to avoid that, hoping 
that this system gets straightened in a quick fashion.
    Mr. Lamborn. OK.
    Mr. Kief. If not, we are going to have to do that.
    Mr. Lamborn. OK. Anyone else?
    Mr. Reese. We have less than 100 people in our company, but 
we make use of suppliers, contractors, and people of that 
nature. Any time we drill a well, we estimate somewhere around 
1,000 people are going to be impacted, whether it is the 
caterers, the boat owners, the people of that nature. Clearly, 
in the past year and a half, we pushed off three wells that I 
can think of sometime into 2013 or beyond. As I said, one of 
those rigs has left and gone over to Africa, and we are just 
waiting to get permits on two wells. So well over 3,000 just in 
three particular wells.
    Mr. Lamborn. OK, thanks. I will go on to my next question, 
and this is for Mr. Reese. The exodus of American manufacturing 
jobs is a story no one likes to be reminded about, but the 
reality is that our Nation is competing every day with the 
growing economies like those of China and India to keep jobs 
here. So when I hear about your company investing nearly a 
billion dollars building the ATP Titan, the first multi-column, 
deep-draft, floating, drilling, and production platform built 
in the USA, this is truly an American success story.
    The Titan is on the cutting edge of technological 
innovation. From what I understand, it utilizes two blowout 
preventers, increasing safety through redundancy. Can you tell 
us more about what went into building the Titan, and things 
Congress might be able to do to promote more rigs being 
constructed right here in the United States?
    Mr. Reese. Certainly. And I think part of it has to do with 
specifics to the industry, and part of it is just an overall 
working with more employment nationwide. We wanted to build the 
Titan, and we wanted it to be homegrown. It was built in 
Louisiana, and it was built in Texas. Those are the two ports. 
As I said, over 30 countries were involved in it. We sent 
checks to over 31 different States from employers for that, and 
that was all told about a billion dollars just for the Titan, 
the mooring, and the pipelines associated with that.
    I think the main thing that we would like to see that would 
encourage us to continue to be here would be more general, and 
that is getting people back to work. How can we reduce payroll 
taxes? How can we give encouragement to companies that would 
hire people. ATP will use and utilize many of the contractors 
that are sitting here as we get more wells, more production, 
and the like. The main thing we need is the permits to be able 
to say, we are going to drill another well. We are going to 
build another Titan.
    We have another one in construction right now that will 
ultimately be another billionish dollar unit. We are looking 
offshore Israel. And as a result of looking offshore Israel, we 
have already been to the groups here in Washington that can 
help fund that, Ex-Im Bank, and we believe there is a 
possibility that they may be able to contribute partially to 
that construction for the American component.
    So these are the things that are going to be necessary. The 
other thing--and please don't take this wrong--I think a lot of 
things that the government can do is to, I will use the term, 
get out of our way. We don't necessarily need help. Every time 
there is a problem, we don't need government to solve it for 
us. If government can say this is a problem that belongs to the 
industry, this is something that we will be able to handle. The 
independents and the majors have been doing that for quite some 
time.
    Mr. Lamborn. Well, thank you for that answer. And I have to 
agree with you on that last point. It is just amazing that some 
people turn to government first, when I want to turn to the 
American people--the ingenuity, creativity, the hard work that 
we have seen in the hundreds of years of our Nation's history. 
It has been proven time and time again. So I love that answer. 
Thank you for being here, and thank you all for being here and 
for your answers.
    And now we will go to our last questioner, Representative 
Thompson of Pennsylvania.
    Mr. Thompson. I thank the gentleman. Gentlemen, thanks for 
your testimony. Mr. Reese, I want to follow up on the Titan 
that you just talked about. In your testimony, you noted that 
the blowout preventer was installed. Was that required by 
regulation?
    Mr. Reese. The blowout preventer, yes. One blowout 
preventer is required. A second blowout preventer----
    Mr. Thompson. You have two, right?
    Mr. Reese.--is not required. We designed that into the 
system in 2007. Why? Because we felt it was necessary for a 
permanently moored rig to have two types of blowout preventers. 
It was not required, costs literally tens of millions of 
dollars extra to do that.
    Mr. Thompson. Well, you anticipated my second question. I 
was going to ask why the second one, if only one was required. 
Thank you.
    Mr. Craul, thanks for being here on behalf of the 
hospitality industry. We are going to a fair amount of natural 
resource extraction in landlocked Pennsylvania, and our 
hospitality services is booming as a result of it. We can't 
build hotels fast enough, and so which has been really good. I 
also understand that the hotel industry can be seasonal. I grew 
up in a small family sporting goods store, and we had a marina 
on a lake. Trust me, our window of opportunity was a lot less 
than 100 days, and I know how vulnerable that can be.
    The losses that were realized, they were compensated with 
the vendors that were in the industry?
    Mr. Craul. The answer was--they were compensated?
    Mr. Thompson. Yes, were they compensated?
    Mr. Craul. You mean from BP?
    Mr. Thompson. Correct.
    Mr. Craul. Well, that isn't over yet.
    Mr. Thompson. OK. But progress.
    Mr. Craul. There is plenty of litigation and so forth. 
There were some checks in the mail, but there were some 
businesses----
    Mr. Thompson. That is how progress is put in place.
    Mr. Craul. It was slow.
    Mr. Thompson. Right.
    Mr. Craul. But there is progress.
    Mr. Thompson. Well, that defines government, slow, 
sometimes. I understand that, no matter what. Mr. Craul, there 
was some conversation to that, it is slow and it is ongoing. 
But since that time, frankly, with the moratorium, if the oil 
and gas industry is reduced by 25 percent permanently, not just 
slowed down now, but permanently due to a slowdown in 
permitting, I was wondering what the impact would have on your 
industry going forward in the long term, given we are talking 
about higher unemployment. We are talking about under-
employment for some folks. We are talking about less wages, 
less disposable income, and loss of jobs.
    The one job I just heard about was a toll pusher for over 
$200,000 a year. Does that have an impact on your industry 
long-term?
    Mr. Craul. Absolutely. Yes, as I said in my testimony, we 
have a lot of States to our west where the people drive in to 
our market in Florida, and not just the Panhandle. They go down 
to Orlando. They go to Miami. They go all over the State. And 
so if there is a reduction in jobs anywhere within our drive 
market, it is going to have an effect.
    Mr. Thompson. Right. And I don't think there is anybody 
going to come with any kind of compensation for that, and that 
will be a permanent pretty negative impact on our hospitality 
services.
    Just a question for all the panel. Again, back in 
landlocked Pennsylvania, the Forest Service stopped issuing 
permits for drilling natural gas in my congressional district, 
and it was the National Forest. But that was over a year it 
lasted, and I got to tell you, it drove unemployment up 
significantly, and we lost not just the direct industry jobs, 
but the indirect jobs.
    And I have heard a number of you gentlemen talk about the 
indirect jobs in pretty general terms. I was wondering, what 
are the specific jobs that would be considered indirect jobs? 
What are the kinds of jobs that have been driven out, that have 
been lost in these local communities and economies that your 
suppliers or resources, obviously the hospitality jobs? Any 
thoughts?
    Mr. Reese. From the E&P side, I guess we kind of are at the 
top, meaning that we are the ones that do most of the 
employment here. Whether it is a drilling operation or a 
production operation, we have operators that are onsite. We 
have catering. We have boats. We have helicopters. All of that 
goes into what we do. And I will let these gentlemen that we 
would employ speak.
    Mr. Kief. We are in that category. We are in the towing 
business, and we move drilling rigs for the folks like Mr. 
Reese, and so we are being affected by that. Then the trickle-
down happens to go into our suppliers, the people that supply 
goods like cable and rope and consumables and insurance and 
stuff like that. They are being affected further down the road.
    Mr. Thompson. Yes, sir.
    Mr. Zales. And I would like to add just one thing, and I 
don't know how you calculate this. But when you get into our 
businesses, into the charter business--and clearly 
Representative Landry's guys in Louisiana, because, I mean, 
these oil workers are there. His for-hire guys have lost 
business, and I don't know how many there are that have left 
the business entirely. It trickles all the way down into that, 
and then it goes further than that into the people that supply 
me, the support businesses, the fuel people, the tackle shops, 
the marinas. If I am hurting, they are hurting. So, it trickles 
all the way down.
    Mr. Kief. One more thing to add, we had a couple of guide 
fishermen, charter fishermen that used to work for us that got 
let go because we had to make some cutbacks, and that was one 
of the places where we had to start.
    Mr. Thompson. OK. Thank you, Chairman.
    Mr. Lamborn. OK. Thank you. With the indulgence of the 
Committee, we will have a very, very brief second round. There 
is one Member in particular burning to ask some more questions, 
and then maybe one or two others. But I would like to recognize 
Mr. Landry of Louisiana.
    Mr. Landry. Thank you, Mr. Chairman. I will be brief. I 
want to tell you, Captain Zales, that I remember last year when 
I was running for this office and coming up here to Washington, 
and sitting down with the head of the Realtors Association in 
the middle of the BP oil spill, and she just didn't know what 
she was going to do. Oil was on the beach in Florida, and I 
told her that the bigger problem was going to be the 
moratorium. I did tell her that, and she looked at me like she 
couldn't understand. I said, ``I am telling you that oil is 
going to be cleaned up.'' You are not going to have anybody 
going back to the beach in Louisiana and Mississippi and those 
areas if you don't get people to work.
    And so it is all a hand-in-glove industry. It just trickles 
down into every facet of our life, and it shows up at the pump 
for people in the northern part of this country.
    Real quick, Cory, Mr. Kief, I would like to just ask you a 
few questions on SEMS compliance, safety environmental 
management system. Are you familiar with that?
    Mr. Kief. Yes, sir.
    Mr. Landry. I had a discussion with Director Bromwich a 
couple of weeks ago in this Committee, where I talked to him 
about my concern about the scheduled implementation of SEMS, 
and he told me that he has not heard a word about the 
implementation of SEMS being a problem for the industry. Do you 
believe that?
    Mr. Kief. No.
    Mr. Landry. OK. Well, my concern is that BP had a SEMS in 
place when the accident occurred. So, it is not something that 
is going to prevent another Macondo incident. But who do you 
think the implementation of the SEMS impacts more, the major 
oil and gas companies, or the small operators?
    Mr. Kief. The smaller operators.
    Mr. Landry. Mr. Reese, are you familiar with SEMS?
    Mr. Reese. I am very, very familiar with the concept of it. 
I do not deal with it on a daily basis. But we are going 
through that right now.
    Mr. Landry. Do you feel like what Mr. Kief said is 
accurate?
    Mr. Reese. Yes. It reminds me of Sarbanes-Oxley to a great 
extent. When we had Sarbanes-Oxley come in place, we came 
through a review that was impeccable. But the one thing we 
didn't have, we didn't have a whole lot of documentation. We 
needed to buy hundreds of three-ring notebook binders to make 
sure we did everything correctly.
    Mr. Landry. Now, my suggestion, after talking to the 
industry, because the industry doesn't--is not opposed to SEMS.
    Mr. Reese. No.
    Mr. Landry. But my suggestion to the Director, which I 
would like to just ask all of your opinions--Mr. Shafer, you as 
well--whether you oppose it. And it is OK. You can, believe you 
me, I have no problem if you tell me it is bad and that BOEMRE 
go ahead and implement the audits of SEMS, but work with the 
industry before we start penalizing the industry, so everyone 
understands that they are getting into, both them and us. That 
is one idea. Do you all have a----
    Mr. Kief. Well, we instituted a SEMS plan starting in 2005, 
and it took us until 2010 to complete it. It took five years, 
and they are trying to compress it into one year, and that is 
the problem. In a nutshell, that is it.
    Mr. Landry. You see, he can tell me no because he is a 
voter as well. Mr. Kief, how could we implement SEMS in a 
manner that allows the industry who has embraced it to get it 
implemented in the Gulf Coast without harming smaller 
operators?
    Mr. Kief. I think maybe some of the larger companies have 
the resources to do it, and then the smaller companies may not, 
not in as much time as they are being mandated to do it in. It 
is all about time.
    Mr. Landry. It is a time issue.
    Mr. Kief. Yeah. I believe it is necessary, and it really 
does have its benefits, except that the transition pieces are 
wrong.
    Mr. Landry. So long it took you five years instead of one 
year.
    Mr. Kief. Five years.
    Mr. Landry. OK. Thank you, Mr. Chairman. I yield back.
    Mr. Lamborn. Thank you. I will recognize myself for one 
question. Captain Zales, could you fill us in on what your 
opinion is of the program that Mr. Feinberg is operating?
    Mr. Zales. It is a failure. For some people, it has been 
great. For the majority of them, it has been a time-consuming 
process. The fishing industry, whether it is charter or 
commercial, is very unique, and it depends on the area. There 
is no standard one-size-fits-all. And the program that was 
developed has kind of been a typical government-type thing 
that, here it is, and this is the way it works. And a lot of 
people fall through the cracks, and those people are 
struggling.
    And it is like when they are talking about a small tugboat 
operation. When you are looking at a charter fishing or a 
commercial operation, my business is a family business. I am an 
only child. We have been in business 46 years and are 
struggling today to try to maintain that business because of 
the regulatory impacts that we have had from the Fisheries 
Service and everybody else.
    And in this process, we don't have the resources to go out 
and hire attorneys and do everything that needs to be done to 
properly dot all the Is and cross the Ts. And it is a struggle 
to try to do that. And in that respect, it is a massive 
failure, and it is where they are putting time constraints on 
the process. Like I say, I mean, this GCCF thing is supposed to 
go through 2012, and they are claiming everything is going to 
be perfect after that, where clearly it may not be. And I hope 
it is, but it may not be.
    And now that the trial is coming into play in February 
because the Federal judge said he is going to trial, now BP is 
looking back and saying, well, we will roll the dice here. We 
may or may not do this. So there is big fear within the fishing 
sector that this whole process may go away. And if we are not 
part of a lawsuit, then everybody loses out.
    Mr. Lamborn. OK. Thank you. That concludes our questioning. 
I want to thank all the witnesses for being----
    Mr. Markey. Mr. Chairman, if I may.
    Mr. Lamborn. Certainly. I would like to recognize, just in 
the nick of time, the Ranking Member of the Committee, 
Representative Markey of Massachusetts.
    Mr. Markey. Thank you very, very much. Again, a few notes 
here. There were 116 rigs in the Gulf right now, and there were 
122 before the spill. So we are getting back to normal. The 
Wall Street Journal has reported last month that drilling has 
returned to near normal levels. There are 23 rigs currently 
drilling wells in water deeper than 3,000 feet, the same number 
as two years ago. So this is a hearing on where are we today. 
So that is where we are today, and that is good news.
    The Gulf of Mexico production, in 2008, when President Bush 
was President in his last year, 2008, there were 1.16 million 
barrels per day drilled in the Gulf of Mexico. And in 2011, 
right now the estimate is 1.40 million barrels. So right now, 
under Obama's leadership, and notwithstanding all the problems 
that we have had down there, we are now ahead of what happened 
in Bush's last year.
    So that is good news, and I think everyone should really be 
praising President Obama for dramatically surpassing President 
Bush in his last year, notwithstanding all of the problems that 
occurred in the Horizon spill. So that is good news for 
everyone out there as well. And that is 250,000 barrels per day 
greater than Bush in his last year.
    And I might also add that in the crocodile complaints which 
we hear about the delay in the processing of any of these 
applications, again I urge the Majority to remove their block 
on adding the 20 additional engineers. OK. If you tie someone's 
hands behind their back who is asking for the help, which they 
need in order to get the work done, you can't then really with 
all sincerity then point the finger back at this person and 
say, you are not getting the work done. Bromwich is telling the 
Majority, I need 20 more engineers. You give me the 20 more 
engineers, and I will be processing stuff like it was 
chocolates on Lucy Ricardo's chocolate factory--what was that? 
Conveyor belt in the most famous ``I Love Lucy'' episode, OK? 
So they are ready to go and start to process these 
applications, but they need 20 more people. It just can't be 
Lucy Ricardo and Ethel Mertz. They need a few more people to 
help them out. And I think that whole chocolate conveyor belt 
which is the oil of the Gulf of Mexico will basically move a 
lot more quickly in terms of the applications process.
    So again, I beg the Majority, give Mr. Bromwich the help 
that he needs in order to process these applications. And 
please let us not continue to have this false accusatory 
environment, where the very agency which has brought us to a 
point where it is 250,000 barrels per day in the Gulf of Mexico 
higher than Bush's best efforts up to his day in 2008, and then 
say that you are going to deny the success of Obama on the 
basis of how quickly the applications are processed, even as 
they are saying if you give us 20 more people, we will get it 
done for you, and at a pace that is consistent with what the 
oil industry wants.
    So I guess I would ask each one of you down there, yes or 
no, would you want the 20 additional engineers to go on the 
payroll who could process these applications more quickly? Yes 
or no, right down the line.
    Mr. Shafer. I mean, I think----
    Mr. Markey. No. Yes or no.
    Mr. Shafer. Yes.
    Mr. Markey. Yes, yes. Thank you.
    Mr. Reese. Twenty people at $35 million? That is $1.7 or 
$1.8 million per person?
    Mr. Markey. Do you want the 20 additional engineers?
    Mr. Reese. Not at that amount of money.
    Mr. Markey. OK, good.
    Mr. Reese. There is the problem.
    Mr. Markey. Yes or no, do you want the additional 
engineers. Let us keep going down there.
    Mr. Auer. I am going to hold my comments.
    Mr. Markey. You don't have a view on it? OK.
    Mr. Auer. No, not for you.
    Mr. Kief. Under those pretenses, no.
    Mr. Markey. Oh, no. Interesting.
    Mr. Zales. And I am going to relay the National Marine 
Fisheries Service, absolutely not.
    Mr. Markey. OK, great. OK, next?
    Mr. Craul. No.
    Mr. Markey. No? Yes, sir.
    Dr. Galvez. Yes.
    Mr. Markey. Yes. OK, thank you. Well, that is interesting 
to me. OK. And it helps to answer a lot of what is going on. 
You want to persecute the agency that is asking for help, and 
then claim that you are persecuted because they are not moving 
more quickly. And so that is kind of the interesting 
paradoxical situation that you put yourself in as witnesses. 
But I appreciate the difficulty of your dilemma. I yield back 
the balance of my time.
    Mr. Lamborn. OK. Thank you, Mr. Ranking Member. I would 
like to remind him that it takes five to ten years to bring a 
complicated, especially deep well, online. So when you count 
back five or ten years, I think we see where the credit really 
goes.
    That will conclude our hearing. I want to thank the 
witnesses for being here. Members of the Committee----
    Mr. Markey. If the gentleman would yield, I think you aimed 
at me. I think that you have to give President Obama some 
credit for degree of credibility, and having the worst 
environmental disaster of all time, and trying to give credit 
for President Bush for the success which President Obama has 
had after the worst environmental accident of all time, caused 
in fact by the dereliction of duty by the personnel named by 
President Bush to the MMS----
    Mr. Lamborn. OK. Reclaiming my time----
    Mr. Markey. It is a very difficult line of logic to follow.
    Mr. Lamborn. OK. Reclaiming my time, I would also like to 
submit for the record testimony of Joseph R. Mason of Louisiana 
State University, dated October 12th. Without objection.
    [The statement of Joseph R. Mason submitted for the record 
follows:]

        Statement submitted for the record by Joseph R. Mason, 
                       Louisiana State University

    Thank you for this opportunity today to submit a written statement 
on the lingering impacts of the Obama administration's six-month 
moratorium on offshore drilling for oil and natural gas. It has been 
one full year since this moratorium was officially lifted. Yet, U.S. 
federal energy policy today remains woefully out of balance.
    These policies, or quite frankly lack thereof, have had severe 
consequences for U.S. domestic oil production since the moratorium was 
lifted. According to the U.S. Energy Information Administration (EIA), 
U.S. domestic production will decrease by 250,000 barrels per day (bpd) 
each year going forward under the current production policy regime. In 
particular, EIA estimates that, in the Gulf of Mexico (GOM) alone, oil 
production will decline approximately 14 percent both in 2011 and 2012 
due to the administration's unwillingness to grant expedient and 
sufficient access to U.S. reserves.
    In sum, not very much has changed in the Gulf region--and the 
country at-large--since my initial study on this topic in July of last 
year, ``The Economic Cost of a Moratorium on Offshore Oil and Gas 
Exploration to the Gulf Region.''
I. Continued Regulatory Burdens
    The current regulatory framework charged with overseeing the U.S. 
oil and natural gas industry has continued to hamper economic growth 
generally and the oil and natural gas sector specifically. Since the 
offshore moratorium has been lifted, executive agencies such as the 
Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) 
have worked tirelessly to prove their worth and flex their muscles. As 
such, new agencies like these regularly undergo dramatic power shifts 
before settling into anything that could be considered a stable role in 
the U.S. regulatory framework. And these types of power struggles and 
yearning for approval inevitably lead to rampant inefficiencies.
    Jim Noe, senior vice president, general counsel and chief 
compliance officer of Hercules Offshore Inc., the largest shallow-water 
drilling company in the Gulf of Mexico, recently noted that, ``the 
backlog of permits awaiting decisions within the Department of the 
Interior just reached its highest level since the Gulf spill 1 1/2 
years ago.''
    The pace at which new permits for new wells are issued has come to 
an almost complete crawl. The current average is 5.2 per month; this 
level has not been evidenced since energy demand plummeted in 2009.
    But laborious regulations and continued delays are not the only 
costs threatening U.S. oil and natural gas operations. The 
administration's continued advocacy of repealing Section 199 of the 
American Jobs Creation Act and Section 1.901-2 of the U.S. Department 
of the Treasury Regulations (``dual capacity'') presents the industry 
with additional challlenges. Those changes would eliminate domestic and 
international tax credits for the U.S. energy sector. Although 
regulators are hoping to raise substantial revenues from the repeals, 
the fully-scored economic cost of the regressive legislation could 
further debilitate the oil and natural gas sector and most likely 
result in decreased tax revenues from the industry.
    The Peterson Institute for International Economics detailed the 
harmful effects of the administration's new proposed taxation schemes. 
In a new policy brief, US Tax Discrimination Against Large Corporations 
Should Be Discarded, authors Gary Clyde Hufbauer and Martin Vieiro 
argue that, ``If the targets of discrimination are the nation's largest 
firms, the country will find it harder to compete on a global scale in 
industries that require dedicated research, industries that exhibit 
huge scale economies, and industries that network across national 
borders.'' U.S. oil and natural gas firms are, by and large, some of 
the nation's largest and most internationalized of companies.
    In looking at the political economy of new regulatory arrangements 
like BOEMRE, therefore, we must look with skepticism and concern upon 
both the political motivations of the regulatory officials charged with 
enforcing the rules, and the economic power that will be concentrated 
in those regulatory officials as a result of their influence over the 
implementation costs and economic redistribution. Without restraint, a 
toxic mix of politics and power may damage both the industry and the 
environment.
II. Painful Consequences of Administration's Negligent Energy Policies
    Using my July 2010 report's results--but also accounting for delays 
following the official end of the six-month moratorium--is it evident 
that regional economic losses continue to grow.

[GRAPHIC] [TIFF OMITTED] T0719.009


    .epsTable 1 shows that output losses continue to mount with stalled 
development in the GOM, rising from $2.1 billion regionally and $2.8 
billion nationally to $3.3 billion and $4.4 billion, respectively. Job 
losses are estimated to have increased from 8,000 regionally and 12,000 
nationally to 13,000 regionally and 19,000 nationally. Lost wages 
previously estimated to amount to $500 million regionally and $700 
million nationally are now $800 million regionally and $1.1 billion 
nationally. Finally, lost tax revenues estimated to be $100 million on 
the state and local level and $200 million on the national level now 
amount to $155 million and $350 million, respectively.
    With the latest jobs figures released last week from the U.S. 
Bureau of Labor Statistics (BLS) showing national unemployment remains 
at 9.1 percent, we simply cannot afford to give up any more economic 
activity.
III. Conclusion
    IHS Global Insight recently published a study that puts the impacts 
on jobs, energy production and local economies of the Obama's 
administration's precarious attitude toward conventional energy into 
clear context. The report states that, next year, releasing 
restrictions on ``the [Gulf oil and gas] industry could create 230,000 
American jobs, generate more than $44 billion of U.S. [gross domestic 
product], contribute $12 billion in tax and royalty revenues, produce 
150 million barrels of domestic oil, and reduce by $15 billion the 
amount the U.S. sends to foreign governments for imported oil.''
    Nonetheless, oil and natural gas production is set to decline in 
response to higher taxes, onerous government regulation and greater 
political uncertainty. That means less jobs, lower wages, and lower 
gross domestic product (GDP) growth than would otherwise occur. Those 
are indisputable laws of economics, regardless if policymakers agree 
with them or not. In the spirit of hope, I look forward to the day the 
administration realizes the very real pain that its energy policies are 
having on U.S. job creation, capital allocation and broader economic 
recovery, as well as the environmental threats, political instability, 
and market volatility that come from meeting U.S. energy needs from 
foreign supplies.
                                 ______
                                 
    Mr. Lamborn. And Members of the Committee may have 
additional questions for each of you possibly, and if so, they 
will submit them to you in writing. We would ask that you 
respond to those in writing as well. If there is no further 
business, without objection, the Committee stands adjourned.
    [Whereupon, at 12:14 p.m., the Committee was adjourned.]

                                 
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