[House Hearing, 113 Congress]
[From the U.S. Government Publishing Office]




 OPPORTUNITIES LOST: CONSTRAINTS ON OIL AND GAS PRODUCTION ON FEDERAL 
                            LANDS AND WATERS

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

                                HEARING

                               before the

                     SUBCOMMITTEE ON ENERGY POLICY,
                      HEALTH CARE AND ENTITLEMENTS

                                 of the

                         COMMITTEE ON OVERSIGHT
                         AND GOVERNMENT REFORM

                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 16, 2013

                               __________

                           Serial No. 113-27

                               __________

Printed for the use of the Committee on Oversight and Government Reform




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              COMMITTEE ON OVERSIGHT AND GOVERNMENT REFORM

                 DARRELL E. ISSA, California, Chairman
JOHN L. MICA, Florida                ELIJAH E. CUMMINGS, Maryland, 
MICHAEL R. TURNER, Ohio                  Ranking Minority Member
JOHN J. DUNCAN, JR., Tennessee       CAROLYN B. MALONEY, New York
PATRICK T. McHENRY, North Carolina   ELEANOR HOLMES NORTON, District of 
JIM JORDAN, Ohio                         Columbia
JASON CHAFFETZ, Utah                 JOHN F. TIERNEY, Massachusetts
TIM WALBERG, Michigan                WM. LACY CLAY, Missouri
JAMES LANKFORD, Oklahoma             STEPHEN F. LYNCH, Massachusetts
JUSTIN AMASH, Michigan               JIM COOPER, Tennessee
PAUL A. GOSAR, Arizona               GERALD E. CONNOLLY, Virginia
PATRICK MEEHAN, Pennsylvania         JACKIE SPEIER, California
SCOTT DesJARLAIS, Tennessee          MATTHEW A. CARTWRIGHT, 
TREY GOWDY, South Carolina               Pennsylvania
BLAKE FARENTHOLD, Texas              MARK POCAN, Wisconsin
DOC HASTINGS, Washington             TAMMY DUCKWORTH, Illinois
CYNTHIA M. LUMMIS, Wyoming           ROBIN L. KELLY, Illinois
ROB WOODALL, Georgia                 DANNY K. DAVIS, Illinois
THOMAS MASSIE, Kentucky              PETER WELCH, Vermont
DOUG COLLINS, Georgia                TONY CARDENAS, California
MARK MEADOWS, North Carolina         STEVEN A. HORSFORD, Nevada
KERRY L. BENTIVOLIO, Michigan        MICHELLE LUJAN GRISHAM, New Mexico
RON DeSANTIS, Florida

                   Lawrence J. Brady, Staff Director
                John D. Cuaderes, Deputy Staff Director
                    Stephen Castor, General Counsel
                       Linda A. Good, Chief Clerk
                 David Rapallo, Minority Staff Director

      Subcommittee on Energy Policy, Health Care and Entitlements

                   JAMES LANKFORD, Oklahoma, Chairman
PATRICK T. McHENRY, North Carolina   JACKIE SPEIER, California, Ranking 
PAUL GOSAR, Arizona                      Minority Member
JIM JORDAN, Ohio                     ELEANOR HOLMES NORTON, District of 
JASON CHAFFETZ, Utah                     Columbia
TIM WALBERG, Michigan                JIM COOPER, Tennessee
PATRICK MEEHAN, Pennsylvania         MATTHEW CARTWRIGHT, Pennsylvania
SCOTT DesJARLAIS, Tennessee          TAMMY DUCKWORTH, Illinois
BLAKE FARENTHOLD, Texas              DANNY K. DAVIS, Illinois
DOC HASTINGS, Washington             TONY CARDENAS, California
ROB WOODALL, Georgia                 STEVEN A. HORSFORD, Nevada
THOMAS MASSIE, Kentucky              MICHELLE LUJAN GRISHAM, New Mexico

















                            C O N T E N T S

                              ----------                              
                                                                   Page
Hearing held on May 16, 2013.....................................     1

                               WITNESSES

Mr. Tommy P. Beaudreau, Acting Assistant Secretary for Land and 
  Minerals Management, U.S. Department of the Interior
    Oral Statement...............................................     5
    Written Statement............................................     7
Mr. Frank Rusco, Director, Natural Resources and Environment, 
  U.S. government Accountability Office
    Oral Statement...............................................    12
    Written Statement............................................    14

 
 OPPORTUNITIES LOST: CONSTRAINTS ON OIL AND GAS PRODUCTION ON FEDERAL 
                            LANDS AND WATERS

                              ----------                              


                        Thursday, May 16, 2013,

                  House of Representatives,
      Subcommittee on Energy Policy, Health Care & 
                                      Entitlements,
              Committee on Oversight and Government Reform,
                                                   Washington, D.C.
    The subcommittee met, pursuant to call, at 10:32 a.m., in 
Room 2154, Rayburn House Office Building, Hon. James Lankford 
[chairman of the subcommittee] presiding.
    Present: Representatives Lankford, Jordan, Chaffetz, 
Walberg, Farenthold, Hastings, Speier, and Horsford.
    Also Present: Representative Lummis.
    Staff Present: Molly Boyl, Majority Parliamentarian; Joseph 
A. Brazauskas, Majority Counsel; Daniel Bucheli, Majority 
Assistant Clerk; Caitlin Carroll, Majority Deputy Press 
Secretary; Sharon Casey, Majority Senior Assistant Clerk; Steve 
Castor, Majority Chief Counsel; Brian Daner, Majority Counsel; 
Adam P. Fromm, Majority Director of Member Services and 
Committee Operations; Linda Good, Majority Chief Clerk; Ryan M. 
Hambleton, Majority Professional Staff Member; Laura L. Rush, 
Majority Deputy Chief Clerk; Jaron Bourke, Minority Director of 
Administration; Nicholas Kamau, Minority Counsel; and Adam 
Koshkin, Minority Research Assistant.
    Mr. Lankford. The Subcommittee on Energy Policy, Healthcare 
and Entitlements come to order.
    I would like to begin this hearing by stating the Oversight 
Committee mission statement. We exist to secure two fundamental 
principles: first, that Americans have the right to know that 
the money Washington takes from them is well spent and, second, 
Americans deserve an efficient, effective Government that works 
for them. Our duty on the Oversight and Government Reform 
Committee is to protect these rights.
    Our solemn responsibility is to hold Government accountable 
to taxpayers, because taxpayers have the right to know what 
they get from their Government. We will work tirelessly in 
partnership with citizen watchdogs to deliver the facts to the 
American people and bring genuine reform to the Federal 
bureaucracy. This is the mission of the Oversight and 
Government Reform Committee.
    To the witnesses, thank you. I am going to do a brief 
opening statement. Our ranking member will do an opening 
statement. We will go straight to your testimony after that. I 
do have to warn you that I have a cold, and for all those who 
have compassion for me and my cold, about three days from now, 
if you shook my hand, you will have great compassion for me. So 
I apologize for that and we will struggle through this 
together.
    The American people, we as taxpayers, we own millions of 
acres of land for our national benefit. We hike, we camp on it; 
we boat, fish, and swim in it; we drive through; and we use the 
resources from it. We protect it for the future and we manage 
it for today. The minerals underlying our public lands are held 
in the public trust and the Department of Interior is in charge 
of managing these materials for the benefit and the profit of 
the American people.
    The Department of the Interior administers 700 million 
subsurface acres in Federal mineral estate and over 1.7 billion 
acres in Federal offshore acreage. There are extraordinary 
quantities of oil and natural gas under these lands and waters. 
These resources promise to deliver two things unimaginable just 
a decade ago: American energy independence and a broad economic 
renaissance.
    A recent economic study found that increasing access to 
Federal resources can generate $127 billion in economic 
activity and 552,000 jobs annually over the next seven years. 
Americans are trying to explore energy on American land are 
facing some roadblocks. At a field hearing last year, this 
committee heard a story from Mike McDonald, a small producer 
with 11 employees and four decades of experience in oil and gas 
production. Mike has a few leases where he has to work with the 
Bureau of Land Management. He testified that once those wells 
run dry, he will never again bid on another BLM lease. The 
reason? He said because he has to interact with the Federal 
Government's bureaucracy.
    Stories like these are all too common. The simple fact is 
the Department's policies have become sometimes onerous, time-
consuming, and costly, so that some producers give up or don't 
even try. The result is billions of dollars in capital left on 
the sidelines, hundreds of thousands of good paying jobs 
foreclosed, and continued dependence on foreign imports. This 
is especially difficult to understand in areas of the Country 
that want the economic development and jobs that come with 
energy exploration.
    The committee understands the Department is obligated to 
manage our oil and gas resources in accordance with acts of 
Congress. However, there is no question that the Department 
possesses discretion to facilitate oil and gas production in a 
timely, responsible, efficient manner, and environmentally 
sensitive. We know the solutions are out there, 
noncontroversial policies the Department can begin to implement 
immediately. We just ask a few questions of today.
    Can we modernize and streamline the permitting process? In 
an electronic world, BLM still relies primarily on hard copies 
and mail. Real-time interfacing can facilitate complicated 
negotiations and dramatically reduce permitting delays.
    Can we rededicate ourselves to an existing pilot program 
that concentrates resources on the busiest, most overworked BLM 
field offices? The program, that was instituted in 2005 to 
ensure that staff and diverse Federal regulatory agencies, 
including BLM, the Fish and Wildlife Service, and EPA, work in 
the same building for each region. This greatly improves 
coordination and reduces delays.
    Can we open more areas to oil and gas lease sales? At our 
confirmation hearing in March, Secretary Jewell stated that her 
goal was to bring balance between conservation and energy 
development. I couldn't agree more, especially now that only a 
tiny sliver, about 5.9 percent of our public lands, are open to 
oil and gas leasing.
    Can we complete a long-promised seismic study in the mid-
and South Atlantic outer continental shelf? This study is 
critical if we hope to take off the blindfold and see what is 
out there.
    One more thing: Can we answer the question--let me put a 
map here on the screen, as well, so everyone can see it. When 
we look at some areas of energy exploration, this is a section 
of North Dakota, and I think the witnesses have a copy of this. 
If you look at the dots, each dot represents a well, and there 
are many areas where you will see a dot right next to where 
Federal lands are located, but not crossing the border. Rarely 
they cross into it. This section of North Dakota has seen a 
tremendous amount of energy exploration, but rarely actually 
venturing into Federal lands.
    The question is, why? They pay less in royalties if they go 
into Federal lands, so you would assume the price is less, so 
why wouldn't they go into Federal lands and explore, because it 
would be cheaper for them? But instead they don't choose to go 
into those areas when they have the opportunity. Why?
    Ultimately, the goal of this hearing is not to condemn the 
Department but, rather, to work with all departments, including 
Secretary Beaudreau, to figure out what is going wrong and to 
find some common sense solutions.
    I now recognize the distinguished ranking member, the 
gentlelady from California, Ms. Speier, for her opening 
statement.
    Ms. Speier. Mr. Chairman, thank you for holding this 
hearing.
    Secretary Beaudreau and Mr. Rusco, thank you for 
participating in it.
    I have a slightly different view on this topic. I think 
this hearing should focus on the thousands of leases for 
millions of acres of Federal land and water that oil and gas 
companies are sitting on, but not producing on. For example, in 
2012, nearly 46 million offshore acres were under lease or 
approved for exploration, while only 6.6 million acres were 
producing any oil or gas. A full 70 percent of the open leases 
for offshore oil and gas production are inactive.
    These are inactive not because they don't have oil and gas. 
They are inactive because they are just not drilling on them. 
It is estimated to contain 17.9 billion barrels of oil and 49.7 
trillion cubic feet of natural gas.
    Even more importantly, we ought to be examining the 
Department of Interior's failure, and I underscore failure, to 
collect the full amount of revenues and royalties that these 
companies owe the American people for the oil and gas they are 
producing or not producing from publicly owned lands. This 
year, the GAO reported to Congress that Government royalty 
collection for oil and gas drilling operations on Federal lands 
are at high risk for waste, fraud, and abuse. Let me repeat 
that: at high risk for waste, fraud, and abuse; precisely the 
kinds of issues that this committee should be focused on.
    While the total and aggregate revenues lost due to 
inaccurate oil and gas production reporting has not been 
determined, it is likely to be a very significant amount. When 
the GAO looked closely at oil and gas leases in the Gulf of 
Mexico, they found that about 5.5 percent of the time companies 
did not submit the necessary royalty reports, potentially 
resulting in $117 million of uncollected royalties. The GAO 
also found that some companies reported negative royalty 
values, potentially costing the Treasury another $41 million in 
uncollected royalties.
    Further, the GAO high risk report to Congress found that 
the Interior Department allowed consistent errors in company 
reported data on oil and gas production on public lands and 
sales data that did not reflect the prevailing market price for 
oil and gas. Now, why would we be not using prevailing market 
prices for oil and gas?
    The GAO also found that the Interior does not utilize 
technologies that could dramatically reduce these errors, such 
as wireless flow meters, similar to the basic smart meter 
technology currently used in 36 million homes nationwide.
    The money we are losing to these reporting errors is 
significant. But if the American people knew that we in 
Congress had authorized royalty-free drilling on public lands, 
they would be throwing more than rotten tomatoes at us.
    Interior data shows that the royalty-free drilling has 
already cost the Treasury nearly $11 billion in lost revenue. 
Royalty-free drilling is estimated to cost an additional $15.5 
billion in foregone revenue over the next 10 years, and may 
ultimately exceed $40 billion, equal to the federal income tax 
paid each year by 9.4 million American families.
    Then let's add the $7 billion of taxpayer subsidies to the 
industry and ask ourselves how many more gifts do we have to 
give to an industry already making record profits.
    As the Country struggles with sequestration, budget 
deficits, and across-the-board cuts, it is truly incredible and 
unjustifiable that the Department of Interior is leaving money 
on the table and in pockets of the oil and gas industry, rather 
than putting it in the people's Treasury.
    This is the Oversight Committee, and we should be doing 
what our mission statement says: securing an efficient and 
effective Government for the American taxpayer. What could be 
more deserving a topic than making sure we collect the 
royalties the oil and gas industry owes the American people? 
Owes. Not prospective; owes. What could be a better time to do 
it than now?
    I hope Chairman Lankford will join me today in taking the 
first steps in that direction by asking the GAO to analyze 
Interior's progress in addressing the challenges GAO identified 
with respect to revenue collected from oil and gas produced on 
lands owned by the American people.
    I thank the chairman and yield back.
    Mr. Lankford. Thank you.
    Members will have seven days to submit their opening 
statements for the record.
    We will now recognize our first and only panel today.
    Mr. Tommy Beaudreau is the Acting Assistant Secretary of 
Land and Minerals Management at U.S. Department of Interior.
    Mr. Frank Rusco is the Director of Natural Resources and 
the Environment, the U.S. Government Accountability Office.
    Thank you both for being here. Pursuant to committee rules, 
we will swear in all witnesses. If you would please rise and 
raise your right hand. Thank you.
    Do you solemnly swear or affirm the testimony you are about 
to give will the truth, the whole truth, and nothing but the 
truth, so help you, God?
    [Witnesses respond in the affirmative.]
    Mr. Lankford. Thank you. Let the record reflect the 
witnesses answered in the affirmative. You may be seated.
    In order to allow time for discussion, both of you have 
been through this before, you know very well about the five 
minute rule on that. We will be a little bit flexible on that 
since this is the only panel, but would enjoy having some time 
for questions, as well, and some interaction on that.
    Mr. Beaudreau, you are first up on this one. Thank you.

                STATEMENT OF TOMMY P. BEAUDREAU

    Mr. Beaudreau. Thank you very much, Chairman Lankford, 
Ranking Member Speier, and members of the subcommittee.
    I thank you for the opportunity to appear today to discuss 
the Interior Department's work to expand responsible energy 
development and production on Federal lands and offshore. I am 
pleased to appear with Mr. Rusco from the Government 
Accountability Office. We have worked closely with Mr. Rusco 
and his team on many issues relating to the stewardship of the 
Nation's energy resources, and I appreciate very much their 
insight and their recommendations.
    Because this is my first appearance before this 
subcommittee, I would like to take a moment to introduce 
myself. I grew up in Alaska. My father worked on the Prudhoe 
Bay oil field, on the North Slope, and he moved our family to 
Alaska during the boom times in the 1970s. Like a lot of those 
workers, he was laid off after the boom times went bust in the 
mid-1980s. So I know firsthand the oil and gas industry's 
central role in driving the Nation's economy and our energy 
security. It is important to energy producing States like 
Alaska, and what the industry means to the men and women who 
work in it and to the families who depend on it for their 
livelihoods.
    I joined the Interior Department in June 2010, in the midst 
of the response to the Deepwater Horizon oil spill, to help 
lead the Department's broad reforms to strengthen offshore oil 
and gas safety and environmental standards, as well as 
strengthen Federal oversight, including the sweeping 
reorganization of the former Minerals Management Service into 
three separate, independent agencies with clear and focused 
missions.
    Following the completion of the reorganization, I became 
the head of the newly formed Bureau of Ocean Energy Management, 
which oversees responsible management of offshore oil and gas, 
as well as renewable energy resources in U.S. waters. I believe 
our reforms have been successful. Offshore oil and gas activity 
is now at a pace exceeding that prior to the spill, and is 
anticipated to increase even further as new exploration and 
development continues and new discoveries are made. And that 
work is happening more safely and more responsibly than ever 
before.
    We have successfully stood up the new oversight agencies, 
and while we will always continue to work to enhance our 
oversight capability and our regulatory efficiency, GAO has 
removed the reorganization from its high-risk list.
    In March I was formally appointed to be the Acting 
Assistant Secretary for Land and Minerals Management at DOI, 
and I now help oversee the stewardship of public lands, as well 
as our offshore energy and mineral resources. DOI is an 
important contributor in implementing the President's all-of-
the-above energy strategy, which includes expanding safe and 
responsible production of our domestic oil and gas supplies, 
both offshore and onshore, and seeking our regulatory and 
oversight efficiencies so as to create a more efficient and 
predictable environment for both Government and industry.
    Chairman Lankford, I think some of the suggestions you 
pointed out to in your opening are exactly in line with what 
our new secretary has in mind and what we have in mind, so I 
look forward to discussing those.
    One of the keys to further unlocking the vast energy 
resources with which our Nation is blessed is ensuring the 
American people that development of those resources is being 
done responsibly and with appropriate protections for the 
environment. The Natural Petroleum Council, NPC, a Federal 
advisory committee, recently completed a study requested by the 
Energy Department, entitled Prudent Development: Realizing the 
Potential of North America's Abundant Natural Gas and Oil 
Resources.
    I would like to highlight one of the four fundamental 
conclusions of that study: that ``Realizing the benefits of 
natural gas and oil depends on environmentally responsible 
development and that the critical path to sustained and 
expanded resource development in North American includes 
effective regulation and a commitment of industry and 
regulators to continuous improvement and practices to eliminate 
or minimize environmental risk.''
    This conclusion is premised on a sophisticated and 
compelling insight into the relationships between industry, 
Government oversight, and the public trust, and I couldn't 
agree with it more. And I believe you alluded to these exact 
same principles in your opening, Chairman. So I look forward to 
discussing more with the committee and the subcommittee today 
about what we are doing exactly along these lines and I look 
forward to your questions. Thank you.
    [Prepared statement of Mr. Beaudreau follows:]


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    Mr. Lankford. Thank you.
    Mr. Rusco.

                    STATEMENT OF FRANK RUSCO

    Mr. Rusco. Thank you, Chairman Lankford, Ranking Member 
Speier, and members of the subcommittee. I am pleased to speak 
with you today about the Department of the Interior's 
management of oil and gas produced on public lands and waters.
    Interior manages the leasing of public lands and waters for 
oil and gas exploration development and production. These 
activities provide an important domestic source of energy, 
create jobs in the oil and gas industry, and raise revenues 
that are shared between Federal, State, and tribal governments.
    Revenue generated from oil and gas produced from Federal 
leases is one of the largest non-tax sources of Federal 
Government funds, accounting for about $10 billion in revenues 
annually in recent years.
    It is important that Interior strikes the right balance 
between providing access to oil and gas resources, while also 
making the Nation's lands and waters available for multiple 
other uses, including recreation, agriculture, fishing, mining, 
and forestry. In addition, Interior is responsible for 
protecting the environment and for enforcing Federal laws and 
regulations on public lands and waters.
    In recent years, GAO has undertaken many evaluations of 
Interior's management of Federal oil and gas activities and 
found numerous material weaknesses. These weaknesses hamper the 
agency's ability to strike the right balance between 
encouraging domestic oil and gas production on the one hand 
and, on the other, maintaining operational and environmental 
safety while providing reasonable assurance that the public is 
getting the revenues to which it is entitled.
    I will focus the remainder of my remarks on these areas of 
concern.
    In 2012, we reported on changes to Interior's oversight of 
offshore oil and gas activities in the Gulf of Mexico. These 
changes were brought about, in part, as a result of findings of 
inadequate environmental and safety oversight in the Gulf, as 
well as the need to better oversee drilling plans and evaluate 
the performance of offshore oil and gas operators. In that 
report we found that these changes to oversight had initially 
led to increased permitting time frames. At the time, we 
reported these time frames had begun to fall as oil and gas 
industry and Interior became more familiar with the new 
processes.
    We also found that Interior was not collecting data needed 
to identify and evaluate safety and other violations its 
inspectors encountered on offshore drilling rigs and production 
platforms. We made a number of recommendations aimed at 
improving Interior's oversight and permitting processes. 
Interior generally agreed with our recommendations and is 
taking steps to implement them.
    In a 2010 report to Chairman Issa of the full Committee on 
Oversight and Government Reform, we found that Interior has 
been unable to complete production inspections, maintain 
reliable royalty and production data, and provide reasonable 
assurance that the public is receiving its fair share of oil 
and gas revenues. Specifically, in the 2010 report we found 
that Interior has had longstanding challenges in hiring, 
training, and retaining staff in key skilled positions.
    For example, we reported that Interior experienced high 
turnover rates in key oil and gas inspection and engineering 
jobs. In addition to hampering production verification efforts, 
these human capital challenges resulted in delays in issuing 
leases and permits, and have caused Interior to miss its 
statutory and agency goals for performing safety and 
environmental inspections of oil and gas on Federal leases.
    In a 2009 report we found that Interior lacked consistent 
and reliable data on the production and sale of oil and gas 
from public lands and, therefore, cannot provide reasonable 
assurance that it was appropriately assessing and collecting 
royalties.
    In 2008 we found that Interior had not comprehensively 
evaluated its revenue collection structure in over 25 years, 
despite many important changes in the oil and gas industry 
during that time.
    Based on this body of work, we have made numerous 
recommendations to Interior to improve its oversight of oil and 
gas produced on Federal leases. Interior generally agreed with 
our recommendations and has made good progress in implementing 
many of them. However, its management challenges are great and 
we have ongoing work looking at revenue collection efforts, as 
well as Interior's persistent human capital challenges.
    In closing, it is essential that Interior continue to 
improve its management of oil and gas produced on Federal 
leases and address its material weaknesses. The agency must be 
able to provide Congress and the public with reasonable 
assurance that billions of dollars of revenues owed the public 
are being properly assessed and collected. Also, Interior must 
maintain an appropriate balance between efficiency and 
timeliness in leasing and permitting on one hand, and 
protection of the environment and operational safety on the 
other.
    Thank you for the opportunity to speak about these issues. 
I will be happy to respond to any questions you may have.
    [Prepared statement of Mr. Rusco follows:]


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Mr. Lankford. Thank you.
    I will recognize myself for five minutes for the first 
round of questioning.
    Mr. Beaudreau, I am sure you are hearing all of this from 
Mr. Rusco as well on some of the recommendations, and I know 
that some of the recommendations have already been implemented 
and there is a process going on, but let me talk to you 
specifically on some of the Federal permitting issues.
    Can you point to a State right now that is not doing a good 
job regulating oil and gas? Do you know of a State that is 
having an issue with that in their regulatory system?
    Mr. Beaudreau. My concern is not with criticizing any 
particular State's regulatory and oversight regime with respect 
to oil and gas. My concern is with ensuring that the Interior 
Department, BLM specifically, fulfill its obligations under its 
statutes for Mineral Leasing Act and our broad responsibility 
for stewardship of Federal lands, which includes reconciling a 
host of multiple uses. It is embedded in our mission.
    Mr. Lankford. Sure.
    Mr. Beaudreau. So that is what we are focused on, is 
fulfilling our responsibilities under Federal law, not to 
criticize any particular State. That said, there are a lot of 
examples within States, Wyoming, Colorado, just to name two, 
that have best practices that we can draw on in utilizing our 
oversight as well.
    Mr. Lankford. So the question is, from what Mr. Rusco is 
mentioning, there are serious issues right now with human 
capital, I think was the term that you used, of just managing 
what we have now, and then the concern is that Interior is 
looking to then add also an additional fracking rule on top of 
that, what we already have. We already can't keep up with the 
permitting time periods, there are dramatic delays to try to 
get a basic permit; there are all kinds of human capital that 
is a problem managing now; and then we are talking about adding 
another layer on it from there.
    I am trying to look for an issue here. They already receive 
a State permit to do exploration for energy; they already have 
standards they have to abide by. I am trying to figure out why 
add an additional responsibility when we are having a tough 
time keeping up with the previous responsibilities. Does that 
make sense?
    Mr. Beaudreau. Yes. And there are a couple components to 
it.
    Mr. Lankford. Okay.
    Mr. Beaudreau. One is fulfilling our underlying 
responsibilities.
    Mr. Lankford. But can that be delegated to a group? Do you 
have the authority to be able to say, okay, I am going to 
designate this person or certify this State or recognize a 
State that is doing a good job like you mentioned, Colorado or 
Wyoming or other areas, and say, okay, they are doing a great 
job, they are certified, they have it?
    Mr. Beaudreau. To frame it slightly differently, we can't 
delegate that authority, but we can draw from best practices 
being used by States like Colorado, like Wyoming. So I think 
there is something to that and, frankly, that is something we 
are considering in the context of our re-proposed hydrofracking 
rule.
    The second issue, and you alluded to it in your opening, is 
a resource allocation issue. We need greater flexibility to be 
able to direct BLM's permitting resources to areas with demand. 
Your map shows it. North Dakota: tremendous demand, tremendous 
opportunity. BLM's resources aren't properly aligned to meet 
that opportunity and that demand. And part of what we would 
like, and part of what Secretary Jewell has already talked 
about, is greater flexibility to match up with a very nimble 
industry in the oil and gas industry.
    Mr. Lankford. Is that something that is explainable when 
you look at that map of North Dakota, to try to figure out why 
there is so much energy exploration around Federal lands, 
rather than on Federal lands, I mean, literally stationing 
wells on the border on private lands all the way around it at 
times?
    Mr. Beaudreau. I think there are a couple dimensions to it. 
I think there is the resource issue that we have discussed. I 
also think there is, in general, because of this multiple use 
mission that we have on Federal lands and because the American 
people have a lot of different interests in how Federal lands 
are used, we have to manage those potential conflicts and do 
our best to, very early in the process, de-conflict those areas 
so that they don't get tied up in litigation.
    Mr. Lankford. So how do States manage that and we don't? Is 
there something that we can fix legislatively to be able to 
repair that, or is it some new authority you need, or just a 
reorganization within the structure itself?
    Mr. Beaudreau. I think we have undertaken substantial 
reforms of our leasing process. We brought protest rates way 
down over recent years because of the reforms. So part of it is 
public engagement; part of it is the reforms that we have put 
in; and part of it, and I do think Congress can help with this, 
is additional flexibility in providing us resources and with 
how we use those resources.
    Mr. Lankford. Okay. We will follow up on that in a moment, 
then, and come back from there.
    Let me yield to the ranking member, Ms. Speier.
    Ms. Speier. Thank you, Mr. Chairman.
    Secretary Beaudreau, 76 percent of the offshore acres 
leased for development already are not being used for oil 
extraction. How many acres has the Department actually leased 
out of the total Federal estate?
    Mr. Beaudreau. I don't have that precise number. What I can 
speak to is some of the reasons why that happens and some of 
the reforms we put in place to encourage diligent development 
of leases acreage.
    Ms. Speier. Well, let me just ask the questions and see 
where we go from there, and maybe you can incorporate that 
answer.
    I am trying to find out whether this is a anti-competitive 
action that we are allowing to take place under our watch, 
where some companies are buying up leases, not actually 
drilling on them, but setting it up so at some future time they 
have access to them and no one else can. So I want to know 
about whether or not we should create some kind of rule around 
use it or lose it, because these leases go on for how long?
    Mr. Beaudreau. It depends. There is variability under OCSLA 
and how long the leases can be issued for. The maximum is 10 
years. So we are quite concerned with diligence, with operators 
using drilling, the lease holdings that they have. It is for 
those reasons that, with respect to offshore leasing, we have 
implemented a number of reforms in that area as well, including 
increasing the minimum bid that an operator has to put on the 
table to acquire an acre of OCS property or lease. We have 
increased that minimum bid from $35 historically to $100 today, 
and I think what we have seen over the last couple lease sales 
in the Gulf of Mexico is the impact of this focus on diligence.
    We are not seeing broad acquisition of acreage; we are 
seeing much more focus on highly prospective areas, and that is 
encouraging because we want to see investment in areas that are 
prospective and we want to see operators drill those areas and 
bring it into production.
    Ms. Speier. Okay, in 1996 Congress attempted to encourage 
deepwater drilling. Do we need to encourage deepwater drilling 
today?
    Mr. Beaudreau. If the reference is to royalty relief, I 
don't believe any form of royalty relief with respect to 
offshore oil and gas is appropriate. Our current leases do not 
include royalty relief.
    Ms. Speier. Okay. I want to talk about the 24 companies 
that pay no royalties for the leases they have. Who are they?
    Mr. Beaudreau. I can't list for you the companies, but they 
are the companies who purchase leases under a regime that 
provided royalty relief. Some of those leases are in production 
now.
    Ms. Speier. Are these big companies?
    Mr. Beaudreau. Some of them are, yes.
    Ms. Speier. Are they the Exxons, the Mobils, the Standard 
Oils? Are these big companies that have these oil-free leases?
    Mr. Beaudreau. Some of them are, yes.
    Ms. Speier. I mean these royalty-free leases?
    Mr. Beaudreau. Royalty-free. Some of them are. Some of them 
have lease contracts that provide for royalty relief under 
their leases, and that is a legal obligation that we are stuck 
with.
    Ms. Speier. And how long are those leases good for?
    Mr. Beaudreau. Again, variability. Once those leases are 
brought into production, the term is indefinite as long as the 
lease is producing.
    Ms. Speier. So they have an indefinite lease to drill oil 
and pay no royalties to the taxpayers of this Country?
    Mr. Beaudreau. Under their lease contract, under those 
legal terms that were in effect at the time they acquired their 
lease, yes, as long as they are producing from that lease, 
those terms apply including, the royalty relief.
    Ms. Speier. Am I the only one who thinks that is a little 
outrageous?
    Mr. Hastings. Would the gentlelady yield?
    Ms. Speier. Yes. I would be happy to.
    Mr. Hastings. Well, the question you ought to ask is why 
did the administration in charge then let those leases out. I 
mean, a contract is a contract.
    Ms. Speier. I understand that.
    Mr. Hastings. And while there may be some concerns about 
that, I think that the question is why were the leases let out 
in the first place.
    Ms. Speier. Evidently, the leases were made at that point 
in time to encourage this deepwater drilling, I am assuming. Is 
that correct?
    Mr. Beaudreau. I wasn't here then, and that is not the 
policy that I would favor today, let me put it that way.
    Ms. Speier. All right, so my time is about to expire, but 
when these leases are granted and then they don't act upon 
them, is there any cost to the Department?
    Mr. Beaudreau. So, in general, again, our policy is to 
encourage diligence, because we want to see acreage that we 
lease brought into production. We do collect rentals during the 
period, during the term of the lease prior to production, but I 
think there is an opportunity cost when we see investment in 
acreage that isn't drilled, isn't brought into production, as 
opposed to acreage that is more prospective. So in that sense I 
think there is an opportunity cost to the American people 
there.
    Ms. Speier. I yield back.
    Mr. Lankford. Thank you.
    Mr. Chaffetz.
    Mr. Chaffetz. Thank you, Mr. Chairman.
    Mr. Beaudreau, in the current law there is a use it or lose 
it provision, correct? The Secretary of Interior has the power 
to cancel a lease if they don't produce within 10 years?
    Mr. Beaudreau. There are diligence requirements within the 
lease. You have to drill a well under the lease within the 
lease term or the lease expires.
    Mr. Chaffetz. So there are use it or lose it. A hundred 
percent of everything that is leased does not actually get into 
production, right, because there isn't necessarily the assets 
below the ground that we thought there were going to be, 
correct?
    Mr. Beaudreau. That is a geologically true statement, yes.
    Mr. Chaffetz. And getting into production, I mean, it is 
not as if, once you get the lease, you can just flip on the 
switch, right? These things can take years, up to 10 years, to 
actually get into production, correct?
    Mr. Beaudreau. That is correct. And in some of the high-
value prospective areas that are emerging in the Gulf of 
Mexico, for example, there is a lot of assessment and work a 
company has to do before those areas can be brought into 
production. That is true.
    Mr. Chaffetz. Secretary Jewell has testified in her 
confirmation hearing that there was a need for ``balance 
between conservation and energy development on public lands.'' 
My understanding is that less than 6 percent of all land 
actually has oil and gas production on it. Is that number 
correct, less than 6 percent?
    Mr. Beaudreau. To talk about sort of areas, sort of broadly 
is difficult; different areas have different resources.
    Mr. Chaffetz. Statistically, though, we are able to look at 
the acres that are open for drilling. I mean, it is a fairly 
easy statistical thing. I will take your word for it if you 
don't have that number right in front of you, but the point I 
guess I would like to make is that less than 6 percent of the 
land in this so-called balanced approach is actually open to 
oil and gas drilling.
    Let me move on, because my time is eroding here. I really 
would like to explore the personnel challenges that Mr. Rusco 
highlighted. I don't know if I have time to go deep into this, 
but one of the concerns here is the number of new leases. Let 
me kind of read some statistics and see if you think there is 
any problem.
    Between the fiscal years of 2009 and 2011, the number of 
new leases offered by the Department of Interior fell by 42 
percent. In Utah we had a drop of nearly 64 percent, and you 
can see the concern because these numbers really bear out over 
the next 10 years, they don't necessarily show up in the 
immediate time. So why is the number of leases dropping so 
dramatically at the time that our Country needs so much energy 
production?
    Mr. Beaudreau. So there are currently 49,000 oil and gas 
leases on Federal land. Twenty-three thousand of those leases 
are producing. So again, on the issue of leasing reform to try 
to encourage onshore development, reduce conflict, we have 
focused very intensely on de-conflicting those areas so that, 
when leases occur, when we issue leases, operators have a much 
easier time, much more straightforward without objection, 
without lawsuits, to operating those leases.
    Mr. Chaffetz. Okay, well, if that is true, then why, in 
2007, of the approved 7,124 permits had an average time of 196 
days to get through the process. In 2012 you only approved 
4,256 permits, with an average time of 228 days. So States will 
take 10 to 15 days to go through this approval process, but you 
are actually approving a lot less permits and it is taking more 
time.
    Mr. Beaudreau. So on the general point of improving the 
process, trying to reduce times within recognition of our 
responsibilities for stewardship of Federal lands, I agree with 
you, I think there is an opportunity, and I think BLM embraces 
this, I think there is an opportunity to bring greater 
efficiency to the permitting process. There are dimensions to 
that; resources is part of it, aligning ourselves with industry 
on what the opportunities are part of it, bringing greater 
efficiency----
    Mr. Chaffetz. Help with the resources, because I am going 
to run out of time here. If you are going from 7,000 permits 
down to 4,200 permits and you are taking an extra 30 days to do 
it, explain to me the personnel changes between 2007 and 2012. 
Do you have less personnel? Do you have more personnel? Is 
there a turnover problem?
    Mr. Beaudreau. Well, GAO has been very helpful in pointing 
this out. We do have challenges recruiting petroleum engineers, 
for example, the people involved in permitting that activity; 
there is a lot of competition for those folks, including with 
industry. That is a general problem. There are opportunities 
for greater efficiencies. Introducing an electronic system, a 
straightforward system could shave weeks off of permitting 
times. We are open to that, we want that to happen, and it is 
something Secretary Jewell has already focused quite 
specifically on.
    Mr. Chaffetz. Do you know do you have less people or more 
people?
    My time has expired, I yield back, but if the gentleman 
could answer do we have more personnel or less personnel than 
we did in 2007.
    Mr. Beaudreau. I can't answer that specifically, but I know 
personnel challenges are a persistent issue, well documented by 
us and by the GAO.
    Mr. Chaffetz. If you could help get back to us, that would 
be great.
    Thanks, chairman. Appreciate everybody's indulgence.
    Mr. Lankford. Thank you.
    Mr. Farenthold.
    Mr. Farenthold. Thank you very much, Mr. Chairman.
    I would like to turn just for a couple seconds to offshore. 
As I hear from some of our Texans involved in offshore 
drilling, there was, in the past, back when it was MMS and 
BOEMRE, there was a much more cooperative attitude between the 
regulators and the drillers. Oftentimes, when a drilling rig 
would become available on short notice, permits could be pushed 
through rapidly. Now the permitting process is taking much 
longer and, in fact, sometimes permits aren't being issued 
until one or two days before the proposed drilling date, and 
the reports that I have heard anecdotally are the Government is 
actually sitting on these permits until right before because 
they are thinking there might be a change in the law. Doesn't 
it seem like you ought to issue the permits when they are done 
under current law, and deal with changes in regulations when 
and if they actually happen?
    Mr. Beaudreau. So following the Deepwater Horizon spill, 
part of what we did is we introduced very strong, heightened 
standards around drilling safety and environmental protection. 
It is true that for a period of time after the introduction of 
those standards there was uncertainty around the permitting 
process and permits did take a long time to issue. We are three 
years removed from that. I met with oil and gas CEOs, along 
with Secretary Jewell, just last week in Houston, at OTC, and I 
think what we have seen, and this has not been by accident, has 
been the product of a lot of hard work and close engagement 
with industry is a much more predictable permitting time frame, 
and time lines for issuing permits have dropped dramatically 
over time. So to answer sort of the last point you made about 
whether we are intentionally sitting on permits in anticipation 
of regulatory changes, I will tell you that is absolutely not 
true.
    Mr. Farenthold. Great. That is reassuring to hear. As a 
result of the Deepwater Horizon, BSEE is also looking at new 
regulations with respect to blowout preventers. Do we have any 
idea how that is coming along and when we can expect to see 
something?
    Mr. Beaudreau. The BOP rule, obviously coming out of 
McConda, one of the central issues was the performance of the 
Deepwater Horizon blowout preventer. That was a focus of the 
President's commission review, as well as DOIs investigation, 
and there is substantial need for continued improvement with 
respect to BOPs. We put in some rules already. The BOP rule is 
a high priority for BSEE. I would expect the draft rule to be 
published sometime this year.
    Mr. Farenthold. I know the producers are looking forward to 
knowing what they have to deal with, so the sooner that comes 
down----
    Mr. Beaudreau. And we look forward to engaging on it. Part 
of what we need to do is continue engagement with industry 
around these rules.
    Mr. Farenthold. All right. I want to get to some of the 
things that some of the other questions have dealt with, 
specifically dealing with the allegation that oil and gas 
producers are sitting on their Federal leases. What I tend to 
hear is there is a permitting issue and it takes them a real 
long time to get a permit. Now, I also hear that there are 
reports that there are 6,000 approved, but unused drilling 
permits. Are you aware of the reporting of that number of 
unused permits, we are counting ones that have gone beyond the 
two year deadline in the permit and actually aren't still under 
an active permit?
    Mr. Beaudreau. I am aware that there are a substantial 
number of APDs that BLM has approved that have not been drilled 
on. That is part of what we are focused on, is how are we using 
our resources. Are we lining up our resources with 
opportunities that industry wants to pursue? They are waiting 
for permits in those areas while, in the meantime, we are 
approving permits that don't get drilled. That doesn't make 
sense.
    Mr. Farenthold. I want to get to that number again, because 
I think there is an issue there. Are you all counting, in that 
6,000 number, coal bed methane that nobody is really doing 
anymore?
    Mr. Beaudreau. I can look into that for you.
    Mr. Farenthold. I would appreciate it. Now, are you aware 
of a problem with unused, undrilled leases and unused permits 
on State land, as opposed to Federal land?
    Mr. Beaudreau. I am not familiar with that issue, no.
    Mr. Farenthold. I think you will find that you don't have 
nearly the problem on State land that we do on Federal land.
    I see my time has expired. I yield back.
    Mr. Lankford. Thank you.
    Mr. Hastings.
    Mr. Hastings. Thank you, Mr. Chairman, and thank you for 
having this hearing.
    Mr. Beaudreau, good seeing you again.
    Mr. Rusco, I know you have been very quiet. I don't have a 
question for you, either.
    Mr. Beaudreau. I was just thinking he needs more questions.
    Mr. Hastings. Mr. Beaudreau, I noticed in your testimony, 
which, of course, is much longer, your written testimony, which 
is much longer than your oral testimony, you made no mention of 
the impending rule on hydraulic fracking. You mentioned it just 
briefly in reference to Mr. Lankford. Why didn't you mention 
that in your testimony?
    Mr. Beaudreau. My understanding of the purpose of the 
hearing was to talk about resource access, so I wanted to 
address that in my written testimony. I am happy to talk about 
where things stand with hydrofracking.
    Mr. Hastings. Where does it stand?
    Mr. Beaudreau. The publication of the revised proposed rule 
is imminent; not a matter of months, a matter of days.
    Mr. Hastings. We heard it is going to be this afternoon.
    Mr. Beaudreau. That may be true. I don't know.
    Mr. Hastings. Well, if it is, would you convey to Secretary 
Jewell that, as chairman of the Natural Resources Committee, we 
would very much like her to be there to discuss the rule and 
the potential impacts of that rule?
    Mr. Beaudreau. I will convey that, yes.
    Mr. Hastings. If you will.
    Now, were you personally involved at all in that writing of 
that regulation, the fracking rule?
    Mr. Beaudreau. I, in my capacity as acting ASLM, have 
reviewed the rule. I didn't personally draft any of it, but I 
have reviewed it.
    Mr. Hastings. You say you personally drafted part of it?
    Mr. Beaudreau. No, I have not personally drafted it; I have 
reviewed it.
    Mr. Hastings. Okay.
    Mr. Beaudreau. It will be published soon. As far as I know, 
it is not final yet, but it will be published soon and I have 
reviewed it.
    Mr. Hastings. Well, we have heard 3:00.
    One issue, though, in that that I do want to ask you 
regarding, and that is there have been different costs of what 
the rule would cost an individual well. Your Department has at 
least made public said that they thought that cost would be 
about $11,000 a well, yet other analysts, independent analysts, 
have looked at that and they say that the cost could be 
$200,000 and maybe as high as $375,000 per well. Why would you 
think that, within the industry, there would be that big of a 
discrepancy?
    Mr. Beaudreau. I think part of what we are asking for 
comment on in republishing the rule is on the economic impacts 
of the rule. So I think there probably is a range of potential 
costs associated with compliance of the rule depending on the 
complexity of the well, depending on the technology being used, 
depending on the overall drilling program.
    Mr. Hastings. Not to get ahead of the game, but going 
through that analysis, your $11,000 figure could rise, is that 
correct?
    Mr. Beaudreau. Part of what we want is we want an 
understanding of industry's reaction to the cost analysis, the 
economic analysis that is in the report, and I look forward to 
getting that.
    Mr. Hastings. I always say because what has been sent out 
thus far was your $11,000 and independent analysts 20 times 
that.
    Mr. Beaudreau. There is some economic analysis in the 
revised proposed rule.
    Mr. Hastings. All right. I only have a minute here. I want 
to talk about the national petroleum reserve in Alaska. As you 
know, with your new regulations that came out, there is 
overwhelming opposition to that, and, yet, you state or imply 
in your testimony that there be more access to NPRA. Keep in 
mind, NPRA was put in place in the 1920s as a reserve. Your new 
rule, it looks to me like, restricts the use of NPRA in 
particularly those areas in the eastern part of NPRA, where the 
most potential resources exist. Would you comment on that?
    Mr. Beaudreau. Based on our current understanding of the 
geology, the areas available for potential oil and gas leasing 
in NPRA cover 70 percent of the resource potential.
    Mr. Hastings. Wasn't NPRA designed to have 100 percent?
    Mr. Beaudreau. NPRA includes, among other things, extremely 
sensitive----
    Mr. Hastings. Wait, wait. I didn't ask you that question. 
One could debate that question, because that debate goes on 
with ANWR forever. Was not NPR set aside 100 percent as the 
potential reserve?
    Mr. Beaudreau. NPRA includes reserve around oil and gas, 
that is potential development that is included in the plan.
    Mr. Hastings. Right.
    Mr. Beaudreau. We also, under the law, have responsibility, 
consistent with our general resource management, land 
management responsibility, to conserve those sensitive 
resources, and other interests as well.
    Mr. Hastings. My time has expired, but just briefly, if I 
may, Mr. Chairman.
    Why do you suppose there is so much opposition from the 
people in Alaska on your rule on NPRA?
    Mr. Beaudreau. As an Alaskan myself, I understand and I 
appreciate the concern for resource development; it is the life 
blood of the economy of that state, it is what I grew up with. 
I also appreciate concern for the conservation of resources and 
habitat. Among the Alaska natives, for example, on the North 
Slope, there is substantial concern about caribou herd, about 
migratory animals, and the potential impact of oil or gas 
activity on those uses as well.
    Mr. Hastings. My time has expired. I could go on, but thank 
you very much, Mr. Beaudreau.
    Mr. Lankford. Thank you.
    Mr. Walberg.
    Mr. Walberg. Thank you, Mr. Chairman.
    I thank the panel for being here. Issue of great 
importance.
    Mr. Beaudreau, there appears to be at least 20 projects on 
Federal lands that have been undergoing the NEPA process for 
two, three, even five years. These projects would have created, 
according to a study commissioned by the Western Energy 
Alliance, would have created hundreds of thousands of jobs, 
billions in wages, and billions more in economic activity. In 
fact, it is indicated by 2020 that the resources that would 
have been developed from these projects would have produced as 
much oil and natural gas potentially as what the U.S. imports 
from Russia, Iraq, Kuwait, Saudi Arabia, Venezuela, Algeria, 
Nigeria, and Colombia combined.
    Now, if they are off by one country, it is still an awful 
lot. So let me ask you, with these 20 projects on Federal lands 
that have been undergoing NEPAs process for a significant 
number of years, why is it taking so long for the Department of 
Interior to perform this analysis?
    Mr. Beaudreau. So I am not positive the specific 20 
projects you are talking about, but, in general, part of our 
responsibility under our operating statutes is to analyze 
thoroughly the multitude of uses that are available on public 
lands. That includes energy development, oil and gas 
development, it includes other uses, and it includes 
responsibility for the protection of habitat, as well. So those 
are complex issues. There is also a lot of potential for 
litigation and conflict. So that sets the stage for all of 
these analyses.
    That said, I agree with you that for NEPA processes, as 
well as leasing or permitting processes, they should be 
efficient. And if there are ways to improve the efficiency to 
bring closure to those reviews, that is something that we are 
quite interested in doing.
    Mr. Walberg. Well, I would suggest that we may have some 
answers to that and the efficiencies if we look at what States 
do themselves, even in the length of permitting. For instance, 
North Dakota takes 10 days to get an oil and gas permit, 27 
days in Colorado, 14 in my neighboring State of Ohio; whereas, 
it takes, on average, 228 days to get a Federal permit. 
Wouldn't it be far more efficient for the Federal Government to 
take on the best practices of the States in order to reduce the 
time?
    Mr. Beaudreau. I agree that there are opportunities to 
consider and incorporate best practices from the States. Again, 
we have to do that within our broad responsibilities as 
stewards of Federal lands, so we have issues that we are 
responsible for that we have to fulfill. But there is 
opportunity to look at States for best practices, I agree.
    Mr. Walberg. Well, I would hope that that would be pushed 
up in a fast track, because, again, the States certainly have a 
concern about what goes on in their State. They want to make 
sure that all of the related issues, including animals, that 
the environment protection, the uses by humans for various 
recreational purposes, they are concerned about that as well; 
in fact, maybe more so individually as States than the Federal 
Government should be. So I question the fact that it takes 
significantly longer, inordinately long times for getting these 
permits to get in place resources that we have.
    Could you tell us of any specific efforts moving toward?
    Mr. Beaudreau. A couple I have mentioned already. We want 
to align better resources, align our resources better with the 
opportunities. We want to bring additional people onboard, and 
that is included in our budget request for 2014, a way to bring 
additional people onboard to help manage the workload. And I 
think there are a lot of opportunities modernizing our 
regulatory process, moving towards a more electronic system 
that, if implemented, can shave weeks off of the permitting 
process. So there is ample opportunity there.
    Mr. Walberg. Mr. Chairman, I yield back.
    Mr. Lankford. Mrs. Lummis.
    Mrs. Lummis. Thank you, Mr. Chairman.
    I want to go through some of the comments that have been 
made in the testimony from Mr. Beaudreau and make some comments 
on those.
    One of the remarks that you made, Mr. Beaudreau, is that 
the amount of producing acreages and new wells is up and oil 
production rose by 18 percent since 2008, reaching its highest 
levels in a decade. You know, I would point out that it takes 
about five years after a lease has been issued to get wells in 
full production, so most of those wells were issued on Federal 
lands during the Bush era. The average number of new leases 
under the Obama Administration represents a 35 percent decline 
compared to the Bush era, and a 52 percent decline compared to 
the Clinton era.
    I would also point out that oil production on Federal lands 
is down 7 percent; natural gas production in Federal lands is 
down 23 percent; coal production on Federal lands is down 7.7 
percent; uranium is stymied by BLM regulations; huge reserves 
of uranium have been locked away in Arizona.
    I would also point out that your thoughts about approval of 
APDs that have not been filled represent a misunderstanding, I 
believe, of how this works. Industry pays the entire cost of 
acquiring an APD, so they don't really have an incentive to get 
an APD and not use it. You have to keep a steady stream of APDs 
in the pipeline, so to speak, to ensure future production, and 
I would point out that, in Wyoming, about 2400 of undrilled 
APDs exist; they are all in coal bed methane wells. The 
economics of drilling for coal bed methane have collapsed, so 
these wells are economically unviable. Hence, using the 
argument that industry held almost 7,000 approved APDs that had 
not been filled, thereby providing them with sufficient 
inventory into the future is simply economically erroneously.
    Also, I would add my concern that while, even if BLM is 
using 77 days to complete an APD, the law requires that the BLM 
complete its APDs in 30 days. So 77 days is still in violation 
of the law. As has been pointed out previously, most States are 
able to do it in less than 30 days themselves, leaving one to 
ponder why BLM continues to violate the law in that regard.
    Mr. Chairman, given all these facts and the fact that I 
see, in my State, where the vast majority of minerals are 
produced on Federal lands and that the Federal Government is, 
by far, the largest single landowner in the State, and that I 
see part of the reason that our unemployment remains low is 
that dozens and, in fact, hundreds of people that I know 
personally have pulled up stakes and gone to the Balkan in 
North Dakota to work in the oil and gas fields up there because 
that is their area of expertise, and that is where the 
production is and it is all on private land.
    So can you really tell them that the Department of the 
Interior is doing all it can to produce domestic energy from 
public lands?
    Mr. Beaudreau. So, as I have said during the course of my 
testimony, we are quite interested and quite committed to doing 
even more to encourage production from Federal lands, oil and 
gas production, coal production from Federal lands.
    Mrs. Lummis. Sir, what specifically?
    Mr. Beaudreau. As I have described, so, for example, talk 
about unused APDs. From my perspective, and I don't take issue 
with your description that companies need to make their own 
sort of capital decisions about when and where to drill and 
they want to have APDs in their pocket to give them 
flexibility, but from the standpoint of overseeing an agency 
that is resource constrained, I do have concerns. Why are we 
putting time and effort into or are we using our resources 
properly?
    Mrs. Lummis. Sir, then why are we using BLM resources to 
designate things like blueways, which are not authorized by 
statute, as new, contrived ways to gain control over lands that 
are adjacent to waterways? Why are there BLM guidance on 
wildlands management practices when the wildlands designation 
was never put into place, yet you are managing by those?
    The problem here is that the Department of the Interior, I 
believe, is misallocating its resources.
    Mr. Chairman, I yield back.
    Mr. Lankford. Mr. Beaudreau, did you want to respond to 
that? I will let you respond.
    Mr. Beaudreau. Only broadly to sort of reemphasize the 
point that I do believe there is substantial opportunity to 
better align the BLMs resources to be responsive to 
opportunities from industry, so that is something that we are 
very focused on. We want to bring resources into BLM for a host 
of reasons, including to be responsive to observations and 
recommendations from GAO. So I take your point. I don't want to 
argue it, only to say I do think there is opportunity to align 
our resources in a better way.
    Mr. Lankford. There was a statement made earlier that it 
takes about 228 days to get a permit, on average. Is that you 
think is a typical permit for oil and gas wells? Is that the 
new number?
    Mr. Beaudreau. I think there is variability in that, 
depending on what time points you look at and what region you 
look at.
    Mr. Lankford. So it differs from office to office?
    Mr. Beaudreau. Yes.
    Mr. Lankford. Is it possible for this committee to get a 
copy, then, of the different time periods that it takes for 
each office? I am sure you have a master breakdown of all the 
offices, the time period it takes for each. To come up with an 
average of 228 days, there has to be a compilation of all of 
those somewhere. Can we get a copy of that by office?
    Mr. Beaudreau. We can look into that. I am not sure what 
state the data is in right now, but we can provide something 
responsive to your request.
    Mr. Lankford. Yes. We want to get something specifically by 
office so that we will know. My understanding is some offices 
are as short as 90 days. If that is so, then that means some 
offices are closer to 400 days.
    Mr. Beaudreau. Without getting into the numbers, I am sure 
there is variability.
    Mr. Lankford. Okay, great. We will look forward to getting 
a chance to get that.
    Let's talk a little bit about the frac rule. Mr. Hastings 
brought that up as well. Talk me through the science behind 
that. There seems to be something that is working its way 
through the process. Why now, on creating a new frac rule on 
Federal lands?
    Mr. Beaudreau. So, again, we have our responsibilities with 
respect to oversight of Federal lands, and some of the key 
areas that we are concerned with, that were reflected in the 
original proposed rule, will be carried through to the revised 
proposed rule, are basically three areas: one, disclosure of 
fracking fluids. And, again, there is a lot of good work being 
done in different States on this issue, and part of the reason 
why we took a step back to re-propose is to do further 
evaluation of those issues.
    Mr. Lankford. Right. Something like FracFocus.
    Mr. Beaudreau. Something like FracFocus, exactly. And 
whether that would sort of be useful and fit in a way to 
address the issue.
    Second, well integrity issues to ensure and provide public 
confidence that there is not comingling between fracking fluids 
and aquifers and drinking water, again, within the theme of 
giving the public assurance that this activity can be done 
safely and responsibly.
    And the third big area is managing and dealing with 
flowback, how that is managed and how that is contained.
    So, again, the rule will be put out soon. Mr. Hastings 
suggests this afternoon. I knew it was imminent. That is when 
the Department is doing it.
    Mr. Lankford. But is there a specific State that raises 
this to the top? That is what I am trying to figure out. It is 
obvious there has been a repetitive theme here: you are short 
of staff; you are short of resources; you are having difficulty 
keeping staff that are qualified to do this. So now we are 
expanding into a new area. Is there a State in particular that 
is driving this, that you would say because of this, they are 
not overseeing what is happening in their State, well, we need 
to step in and add another layer of something?
    Mr. Beaudreau. Again, the perspective here isn't criticism 
of any particular State or any particular----
    Mr. Lankford. But States all do that already, is that 
correct? So they are going to go through a State permitting 
process and State requirements to be able to drill, and then 
now there is going to be another layer of the Federal process 
as well?
    Mr. Beaudreau. We want to have a process that is familiar 
to operators, that takes best practices from States in which 
operators work, but to have it apply uniformly across Federal 
lands. That is our responsibility and I think what you will see 
in the fracking rule is very commonsense, straightforward 
measures that address those three issues that I described that 
are primary concerns, but also are ways to address those 
concerns that are familiar to industry and that industry can 
comply with.
    Mr. Lankford. So consistent fracking rules that would go 
all the way from Pennsylvania to New Mexico to Oklahoma to 
wherever?
    Mr. Beaudreau. On Federal land.
    Mr. Lankford. Okay. I am still struggling with one of the 
big issues here. Well, let me get into a separate issue, 
because if we have time we will mention this one last thing.
    In California there seems to be an issue going on with some 
of the leasing. And my question is did BLM violate the Mineral 
Leasing Act of 1920 when they cancelled the sale in California?
    Mr. Beaudreau. So those lease sale cancellations I think, 
was BLM, and this was a decision that came from the State 
office in California, and it was based on resources. It was, 
let's try to focus, in budget-constrained times, focus on 
permitting and issues under existing leases.
    Mr. Lankford. Right. But the law actually states that you 
have to do that four times a year. Is there still a plan to 
catch up on that, to try to fulfill the requirements of the law 
as well?
    Mr. Beaudreau. So I believe the office intends to have a 
lease sale before the end of the year. We are talking with the 
office about ensuring that their leasing program and where they 
are in the leasing program is consistent with the requirements 
under the Mineral Leasing Act.
    Mr. Lankford. But in your testimony you have a statement 
that you have accelerated some of the renewable processes in 
leasing. By the way, great, all that. I want to see all the 
permits and I want all the above coming out as well. All these 
need to be fixed on this. But I am a little confused on where 
we have resource issues where one that is a consistent sales 
process is now cancelled, saying we don't have enough money, 
and at the same time we are accelerating other permits. Can you 
help me balance those two out?
    Mr. Beaudreau. Part of it is just different areas of 
expertise. In order to go through a permitting process with 
respect to oil and gas APDs and drilling permits, you need 
petroleum engineers. Those are people who are in high demand.
    Mr. Lankford. So this is not necessarily a we don't have 
money because of sequestration or whatever it is, it is the 
people that you are lacking to be able to fulfill this.
    Mr. Beaudreau. It is a combination of those things; it is 
resources where demand is from industry and it is also human 
capital and expertise. There are a lot of dimensions to this 
issue.
    Mr. Lankford. Obvious requirement to fulfill the law in 
this as well.
    Mr. Beaudreau. Yes.
    Mr. Lankford. Ms. Speier.
    Ms. Speier. Mr. Chairman, thank you.
    On that issue, since it is California and I represent parts 
of California, those two leases were two small, I underscore 
small lease sales, and the importance here is to note that the 
two delayed lease sales would have auctioned off approximately 
33,000 acres of public land. But what the industry has declined 
to say in their consternation about that was that over the last 
month the Bureau of Land Management auctioned off 132,941 acres 
of public lands in other States. So let's keep all of this in 
perspective.
    And to follow up in terms of perspective, Mr. Chaffetz had 
asked a question on the amount of time it took to process APDs, 
and I can actually give you the data, secretary. BLM processing 
time has decreased. In fact, in 2006 it took 127 days; in 2011 
it now takes 71 days. You now have the lowest number of pending 
APDs since 2004. So let's kind of stay focused on what is 
really going on.
    Mr. Rusco, we have just ignored you, and it is time to ask 
you some questions. You stated that in September 2008 we 
reported that Interior collected lower levels of revenue for 
oil and gas production in the U.S. Gulf of Mexico than all but 
11 of 104 oil and gas resource owners in the Country. So you 
are basically saying that our collection rate was lousy, if I 
am not mistaken.
    Mr. Rusco. We looked at a number of studies that had 
compared how much revenue was collected by other countries, by 
some States, and some private entities, and the Gulf of Mexico 
was definitely in the low end of that spectrum. It is important 
to say that since that report, the royalty rates in the Gulf of 
Mexico have been raised twice, so I am not sure what the 
current state would be if we looked at that.
    Ms. Speier. So what is the cost of potential waste, fraud, 
and abuse in drilling of oil and gas and collection of 
royalties for those activities on Federal lands and water?
    Mr. Rusco. We can't make an estimate of that. What we found 
is that a number of processes, in particular data processes and 
clarity of data elements are lacking, and because of that you 
can't tell sometimes when there is something missing. We found 
that, systematically, Interior has missed inspection 
requirements for reviewing production verification and, 
therefore, you don't have assurance that oil and gas is being 
measured correctly and you also don't know whether it is being 
reported correctly.
    We have made recommendations to fix a lot of those problems 
and Interior is taking steps to do so, but we are still in the 
process of looking at that.
    Ms. Speier. So can GAO tell us how much additional revenue 
would have been paid if Interior had been utilizing the new 
technologies to locate and prevent venting and flaring of 
natural gas on Federal lands?
    Mr. Rusco. Not precisely, but we did find that the amount 
of methane that is vented in the process of gas production and 
oil production far exceeded what was reported by several 
percentage points difference, and if that were counted, then 
royalties would be due on that amount.
    Ms. Speier. So you have now placed Interior and this 
particular revenue collecting function on your high-risk list 
for three years. It seems like they have been dragging their 
feet a lot in terms of implementing your recommendations. What 
additional recommendations do you think they should be 
embracing that they haven't, and what can we do as the chair 
and ranking member on this committee to assist you in making 
sure that the taxpayers in this Country get their money's worth 
from these leases?
    Mr. Rusco. I think that Interior has been very diligently 
addressing recommendations. What we are looking for is an 
overall strategic and high management level approach to 
addressing these problems. We want to see Interior taking a set 
of problems associated, say, with their IT systems and their 
data, and we want them to say this is strategically how we are 
going to deal with this, not addressing one recommendation here 
and one recommendation there.
    We need the same thing in terms of a workforce plan, a 
strategic plan for addressing human capital issues. It has been 
mentioned that the resources aren't always where they are 
needed. There has been a big revolution in shale production, 
and a lot of production in the United States has moved from one 
area to the next. We have talked about coal bed methane. That 
is not economic, so a lot of staff are in offices that were 
addressing issues related to coal bed methane development, and 
now they are in the wrong place.
    So there are some issues that Interior can address, and 
some of them are strategic and some of them are some 
flexibility to move people around, move resources.
    Ms. Speier. All right. Thank you.
    Mr. Lankford. Mr. Horsford.
    Mr. Horsford. Thank you, Mr. Chairman. Happy belated 
anniversary, by the way. Hope you had a good time.
    I just came from my Natural Resources Committee and this is 
a topic that we have had several hearings on in that committee 
as well, and I do want to indicate that although the title of 
this hearing is Opportunities Lost, I really feel like there is 
a bit of a misnomer on what has been done, and we have covered, 
again, this topic many times in our Natural Resources 
Committee.
    Some say that the Obama Administration is against the oil 
and gas industry and has erected artificial barriers to fossil 
fuel energy production and generation, but that is simply not 
what the facts bear out. In 2011, the U.S. exported more 
gasoline, diesel, and other oil-based fuels than it had 
imported. This was the first time since 1949 that the U.S. was 
a net exporter of oil products. And according to the 
International Energy Agency, by 2020 U.S. oil production will 
rise to 11.1 million barrels per day, making the U.S. the 
largest crude oil producing nation.
    So, Mr. Beaudreau, is it fair to say the record high oil 
and gas production seen in recent years is the result of the 
Obama Administration's all of the above energy strategy?
    Mr. Beaudreau. Some of the statistics you described I am 
not familiar with, but, in general, yes. This Administration, 
this Department is committed to an all-of-the-above energy 
strategy that includes oil and gas production on Federal lands 
and waters, includes coal production, includes standing up and 
developing renewable energy resources. So the Interior 
Department is truly where all of the above happens, and I think 
we have seen results from that.
    Ten years ago nobody would have thought you were sane if 
you were talking in realistic terms about the potential for 
energy independence. That kind of conversation is happening 
now. The natural gas boom has the potential to be truly 
transformative not only with the energy industry, but with 
manufacturing, transportation, and other industries. So it is 
an exciting time and we do embrace all of the above.
    Mr. Horsford. Thank you. Just to follow up, some would say 
that the Administration should not take credit for the high 
record of high levels of domestic natural gas production 
because most of it was produced on non-Federal lands. I come 
from Nevada, where over 80 percent of our lands are controlled 
by the Federal Government but, again, according to the White 
House, natural gas production from public lands increased by 6 
percent during the first three years of the Obama 
Administration, compared to the last three years of the 
previous administration. Would this be considered a significant 
increase, in your opinion?
    Mr. Beaudreau. I think it is a reflection of our commitment 
to the development of energy resources. So taking credit or 
avoiding blame is not really my interest. My interest is 
providing for the Nation's energy security, making resources 
available in a responsible and safe way. And as you pointed 
out, I think our record bears out that commitment and that 
strategy.
    Mr. Horsford. Just briefly, Mr. Rusco. Over the past five 
years you have found that the Department of the Interior may 
not be properly assessing or collecting revenues owed to the 
American people. Can you elaborate further on that?
    Mr. Rusco. There are a number of facets to that. One is 
that, as we talked about, human capital challenges and not 
having enough people to go out and do production verification 
inspections, so in some cases there are problems with that that 
are unresolved.
    We have also seen issues with data collection and data 
management, where incorrect data elements have been entered in 
terms of production or royalties owed or prices, and Interior 
is taking steps to sort of improve their IT systems, but there 
are still challenges.
    Mr. Lankford. I want to do a quick follow up on this as 
well. Mr. Horsford's question was an excellent question, but 
the wording was important here.
    Mr. Beaudreau, he asked you the increased production of oil 
and gas in the United States, is that a result of Obama 
Administration policy decisions. It almost sounded like you 
said yes on it. For instance, the first three years of 
increased production of natural gas, those leases were not done 
during the Obama Administration time, they were done during the 
previous administration time. I am trying to figure out which 
policies in particular from the Administration have increased 
the production of oil and gas in the United States.
    Mr. Beaudreau. Our broad strategy and our broad policies to 
promote responsible energy development I think are the right 
ones.
    Mr. Lankford. So you are saying without those policies we 
would not have had increased production of oil and gas in 
America?
    Mr. Beaudreau. I think the suggestion that this 
Administration is somehow opposed to or seeks to obstruct 
energy production isn't borne out by the facts.
    Mr. Lankford. No, no, that wasn't the question. The 
question was the increased production is a result of. That is 
different than saying it is opposition, because there is 
obviously a lot of oil and gas exploration happening. But the 
question was an excellent question: Is it a result of Obama 
Administration policies that we have increased oil and gas?
    Mr. Beaudreau. I think it is completely consistent with the 
Obama Administration policies to promote responsible and safe 
energy development, and I think we have seen that borne out and 
I think this Administration's record is very good on all of 
that.
    Mr. Lankford. I think there would be a few studies that 
would disagree with that, just in process, and just based on 
length of time and process and leases that happened on Federal 
lands when the Administration came in and inherited those 
leases and the production, versus new leases now. We have 
gotten three years previous on the listing, about a 55 percent 
decrease of new leases that are happening on Federal lands and, 
as I mentioned on the map to you before, in North Dakota it is 
interesting to look at and see you have all this production 
everywhere but Federal lands, and it seems to me even though 
they pay fewer royalties, they tend to go everywhere else but 
to try to get away from Federal policies and Federal 
implementation of that to go to State or private entities for 
that.
    So that is the only challenge here, is to say if the 
Administration wants to take credit and say what we have done 
has led to this is different than this has happened on our 
watch and we haven't opposed it. So that is all I am trying to 
clarify.
    Mr. Beaudreau. And the only point I am making is what is 
happening with energy development and the opportunities that we 
are seeing as a result of energy development are things that 
this Administration supports. We have implemented reforms to 
try to promote energy development, reduce conflict, with the 
ultimate goal of increasing the economic opportunity offered by 
energy, providing for greater energy security and providing for 
the economic opportunity that comes with all of that, and to do 
it safely and responsibly.
    So to talk about credit or blame I think is beside the 
point in a lot of respects. I think we do support what is 
happening on the energy front; it is good for the Country for 
all the reasons we talked about, and we are going to continue 
to pursue it.
    Ms. Speier. Mr. Chairman, will you yield?
    Mr. Lankford. Sure.
    Ms. Speier. To give yet another perspective, there is 
plenty that the Administration could have done to impede energy 
development, you could argue. They did not do that. And whether 
these leases originated during the Bush Administration or the 
Obama Administration, the fact is it is a good news story and 
the Administration hasn't done anything to impede those leases.
    Mr. Lankford. I would suggest that there are a lot of 
producers around the Country that would argue with that 
statement, that there hasn't been something to impede the 
production of energy, not just from Interior, but from EPA and 
other regulations, and slow-walking permits. There would be 
some dispute, I would say, if we had some producers here, 
whether there hasn't been a difficulty going after some of 
those things.
    Ms. Speier. Well, would you admit that we actually have 
seen an increase in production? I mean, that is what we are 
talking about, who are we going to give credit to for the 
increase in production.
    Mr. Lankford. We have absolutely seen an increase in 
production, and that is based on new technology dealing with 
horizontal drilling and fracking. When you do directional 
drilling and the fracking in new areas, as has been mentioned 
by Mr. Rusco as well, trying to move and shift people into the 
correct places to actually do the permitting does a significant 
shift to us in the Federal side and trying to permit that. So 
they have moved to State and private lands to try to go after 
energy that is plentiful there.
    Just 20 years ago we thought we were running out of natural 
gas and the Federal Government was telling us to only use coal 
because we were running out of natural gas. Now there is a 
dramatic shift to come back and say we have so much natural 
gas, we are seriously looking at exporting and, quite frankly, 
I believe we should be exporting.
    Ms. Speier. So, Mr. Chairman, would you yield again?
    Mr. Lankford. Absolutely.
    Ms. Speier. Let me just say that it is not an asset that is 
wasted. The asset of oil or gas being drilled on Federal lands, 
it does not dissipate because it is not permitted and oil or 
gas is not being drilled. One could argue that we are sitting 
on a gold mine, and if we wait to permit, we are going to make 
more money for the taxpayers of this Country. So there are lots 
of different ways to look at this.
    I yield back.
    Mr. Lankford. Sure. Well, the challenge of that is, in the 
days ahead, we need to find every way that we can to be energy 
independent as quickly as we can. All the geopolitical reasons, 
all the military reasons, everything that we would see as a 
super power that we can provide our own energy as fast as we 
can, as efficiently as we can, safely, and clean for the 
environment as we can.
    One last statement, then I am going to close out as well, 
and that is that the statement again about States and whether 
States can handle overseeing fracking and permitting. The 
question just about memorandums of understanding that Interior 
commonly does with States that is a common practice, in fact, 
around the Federal Government with States, is there a way to be 
able to allow States to be able to oversee what happens on 
Federal lands to accelerate the permitting process on this and 
to have clear guidelines, and then the limited staff that you 
have is able to then make sure that those guidelines are being 
kept?
    Mr. Beaudreau. So, again, we have our authorities; it is 
our responsibility to fulfill and to meet those authorities 
under Federal law. So we can't delegate any of that to the 
States or anybody else. That said, and I think you will see 
some reflection of this in the revised proposed fracking rule, 
for example, we are quite interested in taking best practices, 
looking at what States are doing; not causing duplication for 
operators, so that if they can demonstrate compliance with our 
standards, because that is what they are doing on State land, 
that should make it much more straightforward for operators.
    Mr. Lankford. Okay, thank you.
    Ms. Speier, do you have any other questions, thoughts?
    Ms. Speier. No.
    Mr. Lankford. Thank you.
    With that, this committee is closed.
    [Whereupon, at 11:57 a.m., the subcommittee was adjourned.]

                                 
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