[Senate Hearing 113-122]
[From the U.S. Government Publishing Office]







                                                        S. Hrg. 113-122

                            REVENUE SHARING

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

                                HEARING

                               before the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                    ONE HUNDRED THIRTEENTH CONGRESS

                             FIRST SESSION

                                   TO

                 CONSIDER S. 1273, THE FAIR ACT OF 2013

                               __________

                             JULY 23, 2013




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               COMMITTEE ON ENERGY AND NATURAL RESOURCES

                      RON WYDEN, Oregon, Chairman

TIM JOHNSON, South Dakota            LISA MURKOWSKI, Alaska
MARY L. LANDRIEU, Louisiana          JOHN BARRASSO, Wyoming
MARIA CANTWELL, Washington           JAMES E. RISCH, Idaho
BERNARD SANDERS, Vermont             MIKE LEE, Utah
DEBBIE STABENOW, Michigan            DEAN HELLER, Nevada
MARK UDALL, Colorado                 JEFF FLAKE, Arizona
AL FRANKEN, Minnesota                TIM SCOTT, South Carolina
JOE MANCHIN, III, West Virginia      LAMAR ALEXANDER, Tennessee
BRIAN SCHATZ, Hawaii                 ROB PORTMAN, Ohio
MARTIN HEINRICH, New Mexico          JOHN HOEVEN, North Dakota
TAMMY BALDWIN, Wisconsin

                    Joshua Sheinkman, Staff Director
                      Sam E. Fowler, Chief Counsel
              Karen K. Billups, Republican Staff Director
           Patrick J. McCormick III, Republican Chief Counsel














                            C O N T E N T S

                              ----------                              

                               STATEMENTS

                                                                   Page

Alexander, Ryan, President, Taxpayers for Common Sense...........    36
Brower, Charlotte, Mayor, North Slope Borough, AK................    29
Dupre, Reggie, Executive Director, Terrebonne Levee and 
  Conservation District..........................................    33
France, Cathie J., Deputy Director, Energy Policy, Virginia 
  Department of Mines, Minerals, and Energy......................    50
Haze, Pamela K., Deputy Assistant Secretary, Budget, Finance, 
  Performance and Acquisition, Department of the Interior........     5
Luthi, Randall, President, National Ocean Industries Association.    40
Manuel, Athan, Director, Lands Protection Program, Sierra Club...    45
Murkowski, Hon. Lisa, U.S. Senator From Alaska...................     3
Wyden, Hon. Ron, U.S. Senator From Oregon........................     1

                               APPENDIXES
                               Appendix I

Responses to additional questions................................    65

                              Appendix II

Additional material submitted for the record.....................    85

 
                            REVENUE SHARING

                              ----------                              


                         TUESDAY, JULY 23, 2013

                                       U.S. Senate,
                 Committee on Energy and Natural Resources,
                                                    Washington, DC.
    The committee met, pursuant to notice, at 2:35 p.m. in room 
SD-366, Dirksen Senate Office Building, Hon. Ron Wyden, 
chairman, presiding.

 OPENING STATEMENT OF HON. RON WYDEN, U.S. SENATOR FROM OREGON

    The Chairman. Today the committee has the opportunity to 
hear testimony on S. 1273, the FAIR Act, legislation authored 
by two very valuable members of this committee and personal 
friends, Senator Murkowski and Senator Landrieu. Their bill 
would provide for the sharing of revenues generated by energy 
development on the Federal outer continental shelf with coastal 
States and counties that are located close to that development.
    Virtually everywhere in America where there are Federal 
lands and Federal waters there are practical community leaders 
working together to find ways for their citizens to have good 
paying jobs while they enjoy and preserve their scenic 
treasures.
    For example, in visiting Louisiana and Alaska to meet with 
the constituents of Senator Landrieu and Senator Murkowski, I 
came away convinced that but for the wonderful Cajun accents of 
Senator Landrieu's constituents, the meeting resembled those we 
have in Southern Oregon, where timber industry leaders seek a 
sustainable harvest on Federal lands so we can employ our 
people and environmentalists work constructively to preserve 
old growth. Of course, it takes revenue to pay for the roads 
and parks and schools that spark private investment in job 
creation in these communities. Of course, additional revenue is 
needed for programs that conserve our treasures, our land and 
our water.
    Bumping up against these good causes is a constraint. 
Actually, make that a sequestered Federal budget. So there are 
taxpayer issues involved as well as economic development and 
environmental protection issues.
    For example, the Secure Rural Schools Program that is so 
critical for timber dependent communities in Oregon and 39 
other States, expired last year. Finding funding offsets for 
existing programs, like Secure Rural Schools and the Payment in 
Lieu of Taxes program, has been difficult, let alone finding 
funding for new and unifying policies that help all communities 
with Federal lands and Federal waters.
    Senator Landrieu and Senator Murkowski have worked very 
hard on this issue. They've asked for this hearing. It is a 
matter of long standing interest to them.
    I'm anxious to learn more about the substance of the bill, 
the economic and environmental benefits, how it would be 
financed and to start a discussion on expanding support for the 
communities that provide resources, that in many particulars, 
enrich our whole country.
    Finally, I'm pleased to see that the bill would provide 
incentives for local governments and States to facilitate the 
development of renewable energy. Providing for the share of 
renewable energy receipts makes sense in my view. Of course 
I've long been a strong advocate of renewable energy which must 
and will play an increasing role in our energy mix.
    So we welcome and thank our witnesses, and particularly 
express our appreciation to our two colleagues, Senator 
Murkowski and Senator Landrieu.
    Why don't we have your opening statement, Senator 
Murkowski?
    [The prepared statement of Senator Landrieu follows:]

    Prepared Statement of Hon. Mary L. Landrieu, U.S. Senator From 
                               Louisiana
    Mr. Chairman, thank you for convening this hearing today to discuss 
S. 1273, the FAIR Act.
    I would start by saying that it is long past time that we make 
coastal states the equals of inshore energy producing states by fixing 
the way that our revenues are distributed. The Federal government has 
long treated states who host energy production on Federal lands onshore 
very differently than states that host energy production offshore, 
which is why Senator Murkowski and I introduced the FAIR ACT:
    Currently, under the Mineral Leasing Act, states receive 50% of the 
revenues generated from coal, oil and natural gas development generated 
from royalties, bonus bids and royalty payments.
    Since 1950, $62 billion has been sent to the Federal treasury from 
this production, with $31 billion being returned to the states that 
host the production.
    Yet, offshore production has generated $211 billion for the Federal 
government, yet only $29 million has been shared with the four Gulf 
States that host that production.
    In addition, under the Mineral Leasing Act, another 40 percent of 
the revenues generated go into the Reclamation Fund, which funds water 
projects in 17 Western states.
    OCS revenues generate approximately $7 billion a year for the 
Federal Treasury. In 10 years, that $70 billion. Compare this to an 
informal score by the CBO estimates that the FAIR ACT will cost $6 
billion over 10 years.
    The FAIR ACT would address the Federal government's inequitable 
partnerships in three ways: it will Provide up to 37.5% revenue sharing 
with all states that produce energy off their shores in the OCS, 
regardless of what type of energy is produced.
    It will allow states that produce renewable energy onshore to 
receive 50% of the revenues generated from that production, which is 
the same share states receive from coal, oil and natural gas 
production.
    It will accelerate GOMESA payments to 2014 and lift the arbitrary 
$500 million cap to the four Gulf producing states gradually $100 
million every year until the cap is eliminated in 2024.
    To many who question the need for this money to be shared, or who 
question what its ultimate use will be, I would point out that inland 
states don't have to spend their shared revenues on environmental/
conservation activities, while my state, Louisiana ,went even has 
passed a Constitutional Amendment to require that any funds generated 
from offshore energy production be used directly to fund our Coastal 
Master Plan.
    This master plan to protect our coast is vital not just to my 
state, but to the nation, as Louisiana's Delta, aka America's wetlands, 
contribute over $3 trillion to our economy annually, through seafood 
production, oil and gas and shipping. For example, 13 of the top 20 
ports by tonnage are located along the Gulf Coast, and over 60% of our 
grain export flows through ports near the mouth of the Mississippi.
    This region faces a dire threat, however, and one that needs to be 
addressed quickly. Since 1932, we have lost over 1900 square miles of 
coast, and continue to lose 25 square miles per year-the equivalent of 
one football field per hour.
    I believe then, that is essential that we implement the changes 
laid out in the FAIR Act, not only to fix a long standing inequity, but 
also to prevent the loss of a vital part of America.

        STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR 
                          FROM ALASKA

    Senator Murkowski. Thank you, Mr. Chairman.
    I appreciate your comments, but more importantly your 
willingness to work with us, myself, Senator Landrieu, as we 
try to advance this concept of revenue sharing. I appreciate 
the opportunity to discuss the FAIR Act. Providing revenue 
sharing from my State and all coastal States has been a 
priority of mine for many years. I appreciate your willingness 
to help me move this issue forward.
    It's also a joint effort, of course, with my colleague, 
Senator Landrieu. So thank her in advance for working this bill 
to this point. I know, of course, it's a very important issue 
to the folks in Louisiana and the other Gulf States as well.
    We do have a great panel of witnesses today. We have a very 
distinguished panel.
    We're fortunate this afternoon to have Mayor Charlotte 
Brower from the North Slope Borough in Alaska. It's a big 
sacrifice to leave home this time of year when the weather is 
good and come here to Washington, DC where the weather is not 
good. So I appreciate, Mayor, that you have come to Washington, 
DC to provide the Alaska perspective.
    Thanks to the rest of you that will join us. I appreciate 
your views on the FAIR Act as well.
    I do have to say at the outset, I was very, very 
disappointed to read the Administration's testimony opposing 
the FAIR Act. I believe is has completely missed the point of 
our bill and the efforts to move it forward. The FAIR Act is 
about bringing parity to the Federal revenue sharing program, 
both onshore and offshore.
    Our bill extends the outer continental shelf revenue 
sharing program to all coastal States where oil and natural gas 
development may occur. It also extends the onshore and offshore 
revenue sharing programs to include alternative and renewable 
sources of energy, as you have noted, Mr. Chairman. So when I 
say there is something in this bill for every State, I truly do 
mean that.
    Since it was first introduced we have stated our desire to 
work with the Administration, our colleagues here on the 
committee and others to ensure that. This is why the 
Administration's opposition and apparent disinterest in working 
with us on this bill, as expressed in the written testimony 
that we have received, strikes me as disingenuous. I do hope 
that I have misread the Administration's position, that the 
hearing today is only the beginning of our discussion on these 
issues and that the Administration will work with us as we move 
this bill through the legislative process.
    Now there's been a lot of discussion about the benefits 
that flow to coastal States and communities from offshore 
energy development. But not that much about the impacts to 
these areas that results from this development. We will hear 
this afternoon from Mayor Brower, Mr. Dupre and Ms. France, the 
importance of and the need for revenue sharing for our coastal 
States and communities.
    These funds are absolutely critical for infrastructure to 
support offshore energy activity, emergency and oil spill 
preparedness and response capabilities, mitigation and 
restoration projects and to meet increased demands on public 
services. Of course this list is not exhaustive. Revenue 
sharing is vital for these areas to adequately respond to all 
sorts of impacts associated with enormous influxes of people 
and equipment.
    Now I also believe that the FAIR Act supports the energy 
and the conservation goals that are supported by our 
Administration.
    First, it provides States with the incentive to support 
clean energy projects by requiring them to set up funds for 
programs related to alternative and renewable energy, energy 
efficiency, energy research and development and conservation, 
if they want to receive additional revenues from energy 
development on the OCS.
    Second, it provides a dedicated revenue stream to the Land 
and Water Conservation Fund. I know of no other funding source 
today that can provide this level and a stable level of 
revenues to LWCF.
    Now I'd be remiss if I didn't mention concerns raised about 
the costs associated with our bill. Frankly I think this is 
somewhat the short sighted view of its benefits including 
increased revenues and jobs that flow to the Federal Government 
and our economy from increased offshore energy development. 
States and communities will have less incentive to support this 
development if they're expected to shoulder risks and absorb 
impacts with no opportunity for revenue sharing. That may be 
the reason why some wish to stop our bill from passing, but if 
that is the reason, I hope that we will hear it admitted 
plainly.
    Now I would also remind the committee that Senator Landrieu 
and I are committed, as we have been from the beginning, to 
find acceptable offsets for this bill.
    So to sum up.
    Coastal States and communities are impacted by and share 
the risks of energy development off of their shores just like 
States with development on Federal lands within their borders. 
It is only fair that they be similarly treated. Given the 
impacts associated with commercial development of alternative 
and renewable energy sources, both onshore and offshore, it is 
only fair that the States also share in these revenues.
    So Mr. Chairman, again, appreciate the opportunity to have 
this issue before the committee. I look forward to the 
testimony from both panels and to working with you on these 
important issues.
    The Chairman. Thank you, Senator Murkowski.
    At this time we'll start with the testimony.
    Ms. Pamela K. Haze, Deputy Assistant Secretary for Budget, 
Finance, Performance at the Department of the Interior.
    Senator Landrieu has always been so helpful that she's not 
making an opening statement. I think what we'll do, Ms. Haze, 
after your statement, we'll start with questions from Senator 
Landrieu and then Senator Murkowski, but all our colleagues get 
a chance to ask questions.
    Ms. Haze, we'll make your prepared statement a part of the 
record and please proceed.

   STATEMENT OF PAMELA K. HAZE, DEPUTY ASSISTANT SECRETARY, 
BUDGET, FINANCE, PERFORMANCE AND ACQUISITION, DEPARTMENT OF THE 
                            INTERIOR

    Ms. Haze. Good afternoon.
    Thank you Chairman Wyden, Senator Murkowski and members of 
the committee for welcoming me here today to testify on behalf 
of the Department of the Interior. I'll try and keep my remarks 
brief, but this is a complex issue. I know you're anxious to 
move on to ask questions.
    As you introduced me already, my job in the Department of 
the Interior is to work with the Secretary in overseeing the 
Department of the Interior's budget and fiscal resources. I 
work closely with the bureaus and offices that oversee the 
offshore and the onshore energy programs and the offices that 
collect and distribute revenues from these activities. I am 
here today to express the Administration's views about the FAIR 
Act, S. 1273, Fixing America's Inequities with Revenues.
    The Department of the Interior is the steward of the 
Nation's lands and waters including 500 million acres of public 
lands or about 20 percent of the United States, 700 million 
acres of subsurface lands and 1.7 billion acres of the outer 
continental shelf.
    On these lands and waters there is a rich diversity of 
resources that are drivers for the national economy. In 2011 
oil, gas, coal, hydropower, wind power, geothermal power, solar 
power and other mineral activities on Interior managed lands 
and waters supported nearly 1.5 million jobs and $275 million 
in economic activity. We collect $13 to $15 billion annually, 
billion dollars annually, from mineral extraction and other 
activities of which $5 billion is shared with States, tribes, 
counties and others.
    Onshore energy management is conducted by the Bureau of 
Land Management and is guided by the Federal Land Policy and 
Management Act.
    Leasing and mineral development and the disposition of 
revenues are guided by the Mineral Leasing Act and related 
laws.
    The Bureau of Ocean Energy Management and the Bureau of 
Safety and Environmental Enforcement are responsible for the 
management of the outer continental shelf. They ensure that 
development of oil and gas resources is done in a manner that 
is operationally safe and environmentally sound.
    The Office of Natural Resources Revenue is responsible for 
the management of the mineral revenues generated from Federal 
and Indian lands onshore and offshore. This revenue management 
effort is one of the Federal Government's greatest sources of 
non-taxed revenues.
    Because these Federal lands and resources belong to the 
public, our goal is to ensure environmentally responsible 
development with a fair return to the American people, tribes 
and individual Indians for the use of the resources.
    The distribution of revenues associated with onshore 
Federal lands is generally split between the States and the 
Federal Government.
    Onshore, under the Mineral Leasing Act, 50 percent of the 
money is distributed directly to the State within which the 
specific lease is located; and 40 percent to the Reclamation 
Fund of the U.S. Treasury which finances the Bureau of 
Reclamation's Water projects; and the remaining 11 percent goes 
to Treasury's General Fund.
    Alaska receives an 89 percent share of the revenues from 
certain leases located on Federal lands within Alaska.
    The distribution of revenues generated by the offshore 
program is dictated by the Outer Continental Shelf Lands Act. 
Coastal States control the area and revenues associated with 
development that is within 3 miles of the coastline. The 
balance of the outer continental shelf is managed by the 
Federal Government.
    For the area that is within 3 miles of the State boundary, 
27 percent of revenues generated are shared with the States. 
This is the 8(g) zone.
    For outer continental shelf areas beyond the 8(g) zone, 
revenues generated are distributed as $900 million deposited in 
the Land and Water Conservation Fund, $150 million to the 
Historic Preservation Fund, and 4 Gulf producing States, 
Alabama, Louisiana, Mississippi and Texas and their eligible 
coastal, political subdivisions, receive 37.5 percent of 
qualified revenues from certain leases in the Gulf of Mexico.
    An additional 12.5 percent of revenues are allocated to 
provide financial assistance to States in accordance with 
section 6 for State grants from the Land and Water Conservation 
Fund.
    States within 15 nautical miles of a renewable project are 
eligible to share in a portion of 27 percent of the revenues 
generated from leasing and operation.
    A portion of the rental income is used by our agencies to 
fund ongoing operations and management of the OCS.
    The balance of funds are deposited in the general Treasury.
    Beginning in fiscal year 2017 revenue sharing authorized by 
the Gulf of Mexico Energy Security Act, which I'll commonly 
call GOMESA, expands to include additional leases. We expect 
that the revenue distributions to these coastal States will 
exceed the authorized cap of $500 million.
    In addition to these revenue disbursements, we allocate 
over $5 billion annually to States and others in the form of 
grants and other forms of assistance.
    A recent example is the Coastal Impact Assistance program 
established in the Energy Policy Act of 2005. This program 
authorizes the distribution of nearly $1 billion to eligible 
States and their coastal, political subdivisions. Eligible 
States under this program that receive funds include Alabama, 
Alaska, California, Louisiana, Mississippi and Texas.
    With regard to the FAIR Act you've seen my written 
statement. I'm sorry you're disappointed. The Administration is 
mindful of the view of coastal States that assert a certain 
interest in revenue generated from offshore leasing and 
production. However, we believe that the Congress has addressed 
these interests with the passage of the Submerged Lands Act, 
amendments of the Outer Continental Shelf Lands Act and the 
Gulf of Mexico Energy Security Act.
    The issues that lead to the Administration's position on 
the FAIR Act are important to talk about.
    The first one, the revenue sharing provisions of the FAIR 
Act would reduce the net return to taxpayers from development 
of Federal resources and have a significant impact to the 
Federal Treasury and increase the deficit.
    Second, the bill does not support the President's policy 
goals for conservation and energy outcomes. If enacted the FAIR 
Act would result in a disbursement of 27.5 percent of all OCS 
revenues to coastal States and their political subdivision and 
10 percent of the revenues to coastal States that establish 
funds to support projects relating to alternative and renewable 
energy, energy research and development, energy efficiency or 
conservation activity.
    It would also amend GOMESA to accelerate revenue sharing 
provisions, reduce the amount shared with the Land and Water 
Conservation Fund and revise the current $500 million cap on 
amounts distributed to increase by $100 million per year until 
2025 when the cap would be removed.
    Enactment of the bill would have significant impacts to 
conservation programs. The insufficient Land and Water 
Conservation Fund funding in the bill and the exclusion of the 
majority of Land and Water Conservation Fund programs, such as 
Federal acquisition, are major concerns and are inconsistent 
with the President's budget request for mandatory dedicated 
funding for the Land and Water Conservation Fund programs.
    Enactment would also impact the President's proposal for a 
new energy trust fund for research focused on cost effective 
transportation alternatives to be funded from Federal oil and 
gas management.
    Onshore the FAIR Act would amend section 35 of the Mineral 
Leasing Act to require the Secretary of the Interior to 
disperse 50 percent of receipts from the development of onshore 
alternative or renewable energy to the State within the 
boundaries of which the energy source is located.
    According to information issued by the Congressional Budget 
Office, direct spending would increase by $6 billion over the 
period 2015 through 2023 based on enactment of the FAIR Act.
    That is the conclusion of my statement. I appreciate the 
time. I'm here and happy to answer questions.
    Thank you.
    [The prepared statement of Ms. Haze follows:]

   Prepared Statement of Pamela K. Haze, Deputy Assistant Secretary, 
    Budget, Finance, Performance and Acquisition, Department of the 
                                Interior
    Chairman Wyden, Ranking Member Murkowski, and members of the 
Committee, I am pleased to appear before you today to discuss S. 1273, 
the Fixing America's Inequities with Revenues (FAIR) Act of 2013, which 
would change existing leasing and revenue sharing laws to provide 
additional funds from revenue generated by energy production on federal 
lands and waters to states. The Administration is committed to ensuring 
that American taxpayers receive a fair return from the sale of public 
resources. The revenue sharing provisions of S. 1273 would ultimately 
reduce the net return to taxpayers in every state from the development 
of offshore energy resources owned by all Americans, have significant 
and long term costs to the Federal Treasury, and increase the federal 
deficit. In addition, the bill does not appear to be targeted to 
achieve clear conservation or energy policy outcomes. For these 
reasons, the Administration cannot support the bill.
                              introduction
    As the President has stressed, the Administration is committed to 
promoting safe and responsible domestic oil and gas production as part 
of a broad energy strategy that will protect consumers and reduce our 
dependence on foreign oil. The Department of the Interior manages the 
public lands and federal waters that provide resources critical to the 
Nation's energy security; is responsible for collecting and 
distributing revenue from energy development; and ensures that the 
American taxpayer receives a fair return for development of those 
federal resources.
    The lands and resources managed by the Department are vast. 
Onshore, in the 34 states where federal leases are located, over 37 
million acres are under lease. Offshore, the Department has made 60 
million acres available for development in the past three offshore 
lease sales alone. In the Gulf of Mexico alone there are over 32 
million acres under active lease. These onshore and offshore lands are 
a huge economic engine. The development of 23 percent of domestic 
energy supplies is overseen by the Department, and it collects an 
average of over $10 billion annually through mineral extraction and 
other activities. Roughly half of these revenues are shared annually 
with states, tribes, counties, and other entities, and the remainder is 
deposited in the Treasury's General Fund to contribute to deficit 
reduction. Funds are also disbursed to coastal states under the revenue 
sharing provisions of the Outer Continental Shelf Lands Act and the 
Gulf of Mexico Energy Security Act (GOMESA).
    We take seriously our responsibility to the public for the 
stewardship of our nation's natural resources and public assets that 
generate royalty revenue from federal leases. As described in more 
detail below, revenue generated from leases on the OCS is directed to 
the U.S. Treasury and is used to fund federal conservation programs 
through contributions to the Land and Water Conservation Fund and the 
Historic Preservation Fund. The Administration strongly supports the 
LWCF and the core values it represents and agrees that a portion of the 
proceeds from the sale of these public assets should be reinvested in 
something of lasting value for all Americans in every state.
    The Administration is mindful of the long-held view that coastal 
states should share the benefits of energy development that takes place 
offshore. Although coastal states clearly enjoy significant economic 
benefits from offshore development in the form of jobs and state and 
local tax revenues, there is also significant revenue generated from 
offshore leasing and production in which coastal states claim an 
interest. Congress initially addressed the interests of the coastal 
states in two ways; first, in 1953, with the passage of the Submerged 
Lands Act, which allows coastal states to claim a seaward boundary up 
to three geographical miles from their coastlines, and; second, in 
1986, through the amendment of section 8(g) of the OCSLA, under which 
the Secretary of the Interior provides to coastal states 27 percent of 
all revenues collected on federal oil and gas leases within three miles 
of the state boundary established in the Submerged Lands Act. Lastly, 
in 2006 Congress enacted the Gulf of Mexico Energy Security Act, which 
put in place revenue sharing considerations for coastal states. These 
Congressional actions are discussed in further detail below.
                    development of federal resources
    Recognizing that America's oil and gas supplies are limited, we 
must develop our domestic resources safely, responsibly, and 
efficiently, while at the same time taking steps that will ultimately 
lessen our reliance on foreign energy sources.
    Onshore, the Bureau of Land Management administers over 245 million 
surface acres--more than any other federal agency--which are located 
primarily in 12 western States, including Alaska, as well as about 700 
million acres of onshore subsurface mineral estate throughout the 
nation. Together with the Bureau of Indian Affairs, it also provides 
permitting and oversight on approximately 56 million acres of land held 
in trust by the federal government on behalf of tribes and individual 
Indian owners. BLM is also working with local communities, tribes, 
states, industry, and other federal agencies to build a clean energy 
future.
    Guided by the Federal Land Policy and Management Act, BLM manages 
public lands under a multiple-use mandate, and considers a wide variety 
of factors in its land management decisions. These include industry 
interest, conservation values, protection of the environment, as well 
as other potential uses of the land. Leasing and mineral development is 
guided by the provisions of the Mineral Leasing Act and related laws, 
and rights-of-way for renewable energy projects issued under FLPMA.
    These federal lands and resources, located within state boundaries, 
belong to the public and, as directed by law, BLM places a high 
priority on requiring that energy leasing and development are conducted 
in a scientifically-based, environmentally-sound manner while balancing 
other multiple uses and resource values. The goal is to ensure 
environmentally responsible development of resources on federal and 
Indian lands with a fair return to the American people, states, 
counties, tribes, and individual Indians for the use of their 
resources.
    Offshore, title and ownership of the federal seabed within 3 
nautical miles of the shore (except Texas and western Florida, where it 
is 9 nautical miles), along with right to manage all of the natural 
resources within those boundaries, was given to coastal states by an 
Act of Congress, the Submerged Lands Act, in 1953. Following enactment 
of that Act, coastal states generally control decisions related to 
leasing and developing these lands, including the collection and 
distribution of all revenue, generated from mineral development from 
those lands.
    Under that Act, the Outer Continental Shelf--that portion of the 
lands under the high seas beyond the state boundaries set in the 
Submerged Lands Act--remain under federal jurisdiction, and development 
of resources from the OCS is managed by the Secretary of the Interior 
under the Outer Continental Shelf Lands Act. Prior to the enactment of 
GOMESA in 2006, the only general revenue sharing from leases in the 
federal waters of the OCS came from section 8(g) of the OCSLA, in which 
Congress directed the Secretary to pay to coastal states 27 percent of 
the bonuses, rents and royalties collected within three nautical miles 
of the state boundary. This amendment to the OCSLA was intended to 
provide a fair and equitable division of Federal revenues from near-
shore leases and thereby resolve a Federal-State dispute regarding 
drainage of oil and gas resources from ``common pool'' lands.
    Through its offshore agencies, the Bureau of Ocean Energy 
Management and the Bureau of Safety and Environmental Enforcement, the 
Department manages access to and development of the energy and mineral 
resources on the OCS in a manner that is operationally safe and 
environmentally sound, prevents waste, and provides a fair return to 
the taxpayer for these federal resources. The Office of Natural 
Resources Revenue is responsible for the management of the mineral 
revenues generated from federal and Indian lands onshore and on the 
federal OCS.
    Development and planning on the OCS is guided by section 18 of the 
OCSLA, which requires the Secretary to prepare the 5-Year Program 
consisting of a 5 year schedule of proposed lease sales that shows 
size, timing, and location of leasing activity as precisely as 
possible. The OCSLA mandates that the 5-Year Program must balance the 
priorities of meeting national energy needs, ensuring environmentally 
sound and safe operations, and assuring receipt of fair market value to 
the taxpayer.
    This is a public planning process during which the economic, 
social, and environmental values of the renewable and nonrenewable 
resources in the OCS and the potential impact of oil and gas 
exploration on other resource values of the OCS and the marine, 
coastal, and human environments are evaluated. Throughout, the 
Department's analysis is based on science and research obtained through 
the Environmental Studies Program, Technology Assessment and Research 
Program, and studies from other sources such as other Federal and State 
agencies, the National Academy of Sciences, and universities.
    In order to balance the priorities of national energy needs, 
environmental protection and receipt of fair market value, the OCSLA 
requires the Secretary to consider information on the geographical, 
geological, and ecological characteristics of each region; equitable 
sharing of development benefits and environmental risks; regional and 
national energy markets; other uses of the OCS; interest of potential 
oil and gas producers; the laws, goals and policies of the affected 
states; the relative environmental sensitivity and marine productivity 
of different areas of the OCS; and the relevant environmental and 
predictive information for different areas of the OCS.
    The 5-Year Program thus initiates the process of deciding how, when 
and where it is appropriate to offer oil and gas leases on the OCS. It 
is a detailed, carefully executed, and public process and it is based 
on sound scientific analysis. A key part of safe and responsible 
development of our oil and gas resources is recognizing that different 
environments and communities require different approaches and 
technologies. The Program reflects this recognition, and accounts for 
issues such as current knowledge of resource potential, adequacy of 
infrastructure including oil spill response capabilities, Department of 
Defense priorities, and the need for a balanced approach to our use of 
natural resources.
    Nearly 219 million acres on the OCS will be considered for leasing 
in the current Five Year Outer Continental Shelf Oil and Gas Leasing 
Program for 2012-2017 (Five Year Program.) And the current Five Year 
Program makes all of the OCS areas with the greatest resource potential 
available for oil and gas leasing. Together, these areas contain more 
than 75 percent of the undiscovered, technically recoverable oil and 
gas resources estimated to exist on the OCS. The third lease sale from 
the Five Year Program, scheduled for this August, will offer 21 million 
acres offshore Texas--all the available unleased acreage in the Western 
Gulf of Mexico.
    The majority of lease sales are scheduled for areas in the Gulf of 
Mexico, where resource potential and interest is greatest and where 
infrastructure is most mature. But it also includes frontier areas, 
such as the Arctic, which holds substantial oil and gas potential, but 
also presents unique environmental and operational challenges. In the 
Arctic we must proceed cautiously, safely, and based on the best 
science available.
    We also note that, since the Deepwater Horizon disaster the 
Administration has taken a number of actions to improve the safety of 
offshore drilling. Important offshore drilling safety reforms still 
necessitate action by Congress and the Administration urges the 
Committee to pass those important measures.
                          revenue distribution
    As noted above, while coastal states manage revenues associated 
with activities in state waters, the Office of Natural Resources 
Revenue is responsible for the management of revenues associated with 
federal offshore, onshore, and Indian leases, as well as revenues 
received as a result of onshore and offshore renewable energy efforts. 
This revenue management effort is one of the federal government's 
greatest sources of non-tax revenues.
    The federal government has been collecting revenues from mineral 
production from onshore federal lands since 1920, from Indian lands 
since 1925, and from federal offshore lands since 1953. Since 1982, 
Interior has disbursed $243 billion in mineral leasing revenue to key 
federal programs, state and Indian recipients, and the U.S. Treasury.
    The distribution of revenues associated with onshore federal lands 
is generally split between the states and the federal government. 
Onshore, under the Mineral Leasing Act, 50 percent of the money (net of 
a deduction for administrative costs) is distributed directly to the 
state within which the specific lease is located; 40 percent is sent to 
the Reclamation Fund of the U.S. Treasury, which finances the Bureau of 
Reclamation's water projects in 17 western states; and the remaining 10 
percent goes to the Treasury's General Fund. Alaska receives a 90 
percent share of the revenues from certain leases located on federal 
lands within Alaska (net of the administrative cost deduction), as 
mandated by provisions of the Alaska Statehood Act.
    For offshore leases on the OCS, ONRR distributes collected money to 
U.S. Treasury accounts. In recent years, annual deposits have included 
nearly $900 million to the Land and Water Conservation Fund and $150 
million to the Historic Preservation Fund. The remainder is sent to the 
U.S. Treasury's General Fund where it significantly contributes to 
reducing the Federal deficit.
    Additionally, a portion of revenues from certain offshore federal 
leases--adjacent to the seaward boundaries of coastal states--are 
shared with eligible coastal states and political subdivisions. 
Currently, there are three offshore revenue sharing programs through 
which ONRR distributes a share of revenue from certain federal offshore 
leases to coastal states.
    Under the 1978 Amendments to the OCSLA, certain coastal states and 
the federal government share revenues from OCS oil and gas leases. The 
applicable leases are those located on the OCS within 3 nautical miles 
of the state's seaward boundary. Referenced above, this three mile-wide 
area is commonly referred to as the ``8(g) zone.'' The 1986 amendments 
to the OCSLA require that an affected coastal state receive 27 percent 
of revenues generated from the leasing and development of federal oil 
and gas resources located in the 8(g) zone.
    The Energy Policy Act of 2005 also provided for coastal states and 
the federal government to share revenues from certain OCS renewable 
energy leases. These leases may be located within 3 nautical miles of 
state submerged lands. States within 15 nautical miles of the center of 
a project are eligible to share in a portion of 27 percent of the 
revenues generated from the leasing and operation of renewable energy 
leases.
    Finally, section 105 of the Gulf of Mexico Energy Security Act of 
2006 (GOMESA) established oil and gas revenue sharing from federal 
leases in the Gulf of Mexico for the four Gulf producing States--
Alabama, Louisiana, Mississippi, and Texas--and their eligible coastal 
political subdivisions, as well as the Land and Water Conservation 
Fund. In general, GOMESA provides for the distribution of 37.5 percent 
of qualified revenues among the four States and their coastal political 
subdivisions. An additional 12.5 percent of revenues are allocated to 
provide financial assistance to states in accordance with section 6 of 
the LWCF.
    The GOMESA revenue sharing is split into two phases. During the 
first phase, which began in 2007, 37.5 percent of all qualified OCS 
revenues, including bonus bids, rentals and production royalty, are 
shared among the Gulf oil and gas producing States of Alabama, 
Louisiana, Mississippi and Texas and their coastal political 
subdivisions from those new leases issued in the so-called ``181 Area'' 
in the Gulf's Eastern planning area and the 181 South Area. An 
additional 12.5 percent of these same revenues are allocated to LWCF 
state grants.
    The second phase of GOMESA revenue sharing is scheduled to begin in 
Fiscal Year 2017, and it expands the definition of qualified OCS 
revenues to include receipts from all other Gulf of Mexico leases 
issued after December 20, 2006 from 2002-2007 Gulf of Mexico Planning 
Areas not subject to withdrawal or moratoria restrictions. Importantly, 
payments to Gulf Coast states and allocations to LWCF state grants in 
Phase 2 are collectively capped at $500 million annually; this 
significantly reduces the long-term cost to the Treasury relative to a 
scenario in which the full 50 percent of qualified OCS revenues are 
spent on direct payments to Gulf Coast states and LWCF state grants.
    There have been other programs that distribute assistance derived 
from revenue from the OCS to states and local governments. A recent 
example is the Coastal Impact Assistance Program, established in the 
Energy Policy Act of 2005. This program authorized the distribution of 
$1 billion, in increments of $250 million per year, of OCS revenues in 
each of fiscal years 2007-2010 to eligible states and their coastal 
political subdivisions. Eligible states under this program include 
states with production in adjacent federal waters of the OCS; Alabama, 
Alaska, California, Louisiana, Mississippi, and Texas. The funds were 
made available through a grant program for authorized uses specified in 
the Act, including the conservation, protection or restoration of 
coastal areas; mitigation of damage to fish, wildlife and natural 
resources; and mitigation of the impact of OCS activities through 
funding onshore infrastructure projects and public service needs.
                         s. 1273, the fair act
    If enacted, S. 1273 would, generally, amend section 9 of the OCSLA 
to require the Secretary of the Treasury to deposit 37.5 percent of all 
revenues derived from all rentals, royalties, bonus bids, and other 
sums payable to the United States from energy development on the OCS 
into a special fund in the Treasury; the Secretary of the Interior 
would then be required to disperse a 27.5 percent share of these 
revenues to coastal states and their political subdivisions; the 
remaining 10 percent share of the revenues would be paid to coastal 
states that establish funds to support projects relating to alternative 
and renewable energy, energy research and development, energy 
efficiency, or conservation activity.
    It would also amend section 102(9) of GOMESA to accelerate the 
revenue sharing provisions of that Act; reduce the amount shared with 
the LWCF; and revise and eventually eliminate the current $500 million 
cap on amounts distributed to Gulf Coast states and LWCF. The cap would 
be increased by $100 million per year until FY 2025, at which point the 
cap would be removed entirely. We note that the cost to the Treasury of 
eliminating the cap would be significant, and based on current revenue 
projections and trends, would eventually be in the billions of dollars 
annually.
    According to the Department's preliminary calculations made since 
S. 1273's introduction a week ago, the bill would likely result in a 
reduction of more than $5 billion in deposits to the Treasury through 
2022, and the rate of reduction in deposits would dramatically increase 
thereafter. This loss of revenue to the Treasury is a major concern for 
the Administration as Agencies are already forced to do more with less 
under sequestration.
    It is also significant to note that S. 1273 would provide only 
$62.5 million per year--slightly less than 7 percent of LWCF's annual 
$900 million commitment--to only one aspect of LWCF, the state grants 
component. While the Administration appreciates implicit recognition 
that there is a connection between the OCS and LWCF, the insufficient 
LWCF funding in the bill and the exclusion of the majority of LWCF 
programs are major concerns, and are inconsistent with the President's 
budget request to establish mandatory dedicated funding for LWCF 
programs, with full funding at $900 million annually beginning in 2015. 
Enactment of a mandatory LWCF program is a central element of the 
President's conservation agenda and would ensure continued funding for 
this program designed to make investments in conservation and 
recreation for the American people to balance the development of oil 
and gas resources through the use of its proceeds.
    Onshore, it would amend section 35 of the Mineral Leasing Act to 
require the Secretary of the Interior to disburse 50 percent of 
receipts from development of onshore alternative or renewable energy to 
the State within the boundaries of which the energy source is located. 
The Administration believes that any new disposition of federal energy 
revenues should be targeted to achieve clear conservation and energy 
policy outcomes.
    The Obama Administration has made clear its commitment to reduce 
the deficit and put the Nation on a sound fiscal course. The 2014 
budget request provides a balanced approach to achieve $1.8 trillion in 
additional deficit reduction over the next ten years and replace the 
cuts required by sequestration. The President's Budget for 2014 relies 
on a balanced approach to providing a fair return the Treasury and 
taxpayers from federal energy revenues; the budget counts on the 
expected collections of revenues to fulfill commitments made in the 
budget to the American public, including for example funding the Land 
and Water Conservation Fund, the Historic Preservation Fund, and a new 
Energy Security Trust Fund that would set aside $2 billion over ten 
years for critical, cutting-edge research focused on finding cost-
effective transportation alternatives to oil to protect American 
families from spikes in gasoline prices and allow us to run our cars 
and trucks on electricity or homegrown fuels.
    As discussed above, the revenue sharing provisions of S. 1273 would 
ultimately reduce the net return to taxpayers from development of the 
federal resources on the OCS and affected by the bill, and would add to 
the federal deficit. For these reasons, the Administration cannot 
support the bill.
    Moreover, the Administration has proposed as part of the 
President's Budget a range of oil and gas management reforms that it 
believes will allow taxpayers to receive a better return on development 
its oil and gas resources. In addition, these reforms will provide 
appropriate incentives for companies to diligently develop their unused 
Federal oil and gas leases--held both on and offshore on the OCS. 
Today, more than 70 percent of the tens of millions of offshore acres 
under lease are inactive, including almost 27 million inactive leased 
acres in the Gulf of Mexico. Onshore, about 57 percent of leased 
acres--almost 22 million acres in total--are neither being explored nor 
developed. The American taxpayer, and states as well, will benefit from 
this production and the higher federal revenue generated as a result of 
these reforms.
                               conclusion
    Mr. Chairman, these federal resources are managed for the good of 
the American people, who all share in their ownership. Because this 
legislation will reduce the net return to the public, who own this 
resource; would negatively impact the conservation programs funded 
through the LWCF; misses an important opportunity to improve our energy 
security by establishing and funding the Energy Security Trust; and 
adds to the federal deficit, the Administration cannot support S. 1273. 
I am happy to answer any questions that the Committee might have.

    The Chairman. Thank you very much, Ms. Haze.
    We're going to start with questions from Senator Landrieu 
and then Senator Murkowski.
    Senator Landrieu. Thank you very much.
    Let me begin by thanking you, Mr. Chairman, for your very 
supportive and eloquent opening statement to this important 
hearing.
    I also want to thank the ranking member for your strong 
partnership, Senator Murkowski, and for your drafting expertise 
and support to get this bill not only introduced with me, but 
secure this hearing for today.
    I also want to associate myself with both of their opening 
remarks and to underline with Senator Murkowski said how 
disappointed she is in the Administration's seemingly 
opposition and disinterest. I would just take it a little step 
further to say after losing 14 hundred lives in the rising 
flood waters, devastating flood waters, of Katrina. Fourteen 
hundred people were killed in my State. In the devastation that 
ensued, I find it tragic, the Administration's position on this 
issue.
    Seemingly heartless given the great challenge that's before 
the Gulf Coast States and many of our coastal States with 
rising tides and rising sea levels and changing atmosphere. I 
would describe it more than just opposition and disinterest. I 
think it's tragic.
    I want to ask you something, Ms. Haze. Is it your intention 
or the Department's intention to continue to perpetuate a 
double standard between interior States that keep 50 percent of 
their revenues from coal, oil and gas verses coastal States 
that virtually receive nothing, as you know, virtually nothing? 
I'm sure you're familiar with those numbers.
    I'd like, if you could, answer the question then put those 
numbers in the record.
    Ms. Haze. If I could, I'd first like to clarify that my 
testimony does not say that we oppose the bill. It says we 
cannot support it.
    Senator Landrieu. It's the same thing. But go ahead, please 
answer my question.
    Ms. Haze. To us it was different.
    So I think I would say to you, based on the existing laws 
that are in place and based on the Administration's position 
which I've just explained. I'm here to say that we would 
continue to fund, to do revenue sharing based on the existing 
laws with the----
    Senator Landrieu. So you do support the interior States 
maintaining 50 percent of all revenues generated from coal, oil 
or gas or other minerals? Do you know how much that has brought 
in?
    Ms. Haze. Yes, Ma'am.
    Senator Landrieu. Since the 1950s, just roughly? I know 
it's been going on since 1920, but since the 50s to those 
States?
    Ms. Haze. I don't know that off the top of my head since 
the 1950s, no.
    Senator Landrieu. Do you have it from the 1920s?
    Ms. Haze. I do not.
    Senator Landrieu. OK, I'll tell you what it is from the 
1950s.
    Ms. Haze. Alright.
    Senator Landrieu. It's $30 billion that the Western States 
have maintained.
    Now it's very interesting to me that the President seems to 
have some difficulty with the way that the Senator and I are 
allocating or expressing that the moneys that the coastal 
States would receive would go to conservation. Are you aware 
that these moneys are not directed to conservation in any way?
    Are you aware that there are no restrictions on the 50 
percent for Federal--for interior States?
    Ms. Haze. I am aware that----
    Senator Landrieu. That they do not have to be spent on any 
conservation, any environmental, anything related to the 
environment whatsoever. There's nothing in the law that 
requires that.
    Ms. Haze. I do understand that.
    Senator Landrieu. So that the President is still, although 
our bill, the FAIR Act, would require that the funding go for 
conservation. He still doesn't see any benefit in that?
    Let me ask you this question.
    Are you aware that the coastal area that I represent--well, 
first of all let me ask you this?
    Are you aware that this battle has been going on for 61 
years when President Truman suggested this?
    The Congress should provide for the distribution of 
revenues obtained from oil and gas leases on under seas land. S 
Resolution 20 would have guaranteed the adjacent coastal States 
37.5 percent of the revenues from submerged lands which you 
referred to in your testimony. He said, I would have no 
objection to such a provision which is similar to existing 
provisions under which the States receive 37.5 percent of the 
revenues from Federal Government's oil producing public lands 
within their borders.
    I'm sure that you've read all of the history which is, you 
know, reads like a, you know, modern day drama and saga about 
this going on since the 1920s when interior States got 37 
percent. Coastal States got nothing. Truman offered us 37.5 
percent. It's a long and sad story about why that never 
happened.
    But now interior States not only get 50 percent of their 
revenues with no restrictions how they're supposed to spend it, 
but over subsequent years they get an additional 40 percent to 
mitigate against the damage caused by the mineral extraction. 
Meanwhile all these 60 years the coastal States, including 
Louisiana, have lost the size of the State of Delaware. I don't 
know if Ms. Haze may not be familiar with the largest erosion 
going on on the Continental United States.
    Are you familiar with this map? I think you all produced 
it.
    Ms. Haze. I am.
    Senator Landrieu. The red is land loss since the 1950s. Now 
just bear with me for just 1 minute on this.
    The land loss is from the 1950s. We've lost 19 thousand 
square miles. It's the largest land loss in the lower 48 and 
maybe in the entire United States.
    Are you familiar with a gentleman named John Barry, who 
wrote Rising Tide, a renowned author and he wrote the Great 
Influenza?
    Ms. Haze. I am not.
    Senator Landrieu. OK.
    Well, you might want to pick up, particularly the Rising 
Tide which is a seminal book written on the Mississippi River 
and the Corps of Engineers. I just want to read into the record 
to end my first round of questioning here, Mr. President.
    John Barry, who is literally one of the leading experts in 
the world, he writes,
    To protect the national interest this issue, Speaker 
Gingrich. He's referring to an I call for passage of GOMESA. We 
were happy to see basically, I'm paraphrasing, GOMESA passed. 
The law did pass. But it gave the goal from Louisiana even 
particular, not even close to half a loaf. In effect the Gulf 
Coast States got one slice of bread to split between them while 
inland States with producing lands to continue to get the 
entire loaf.
    But this is the key that I wanted to add here. He says that 
because of dams constructed in Montana and in other States at 
100 percent Federal expense, one third of the sediment coming 
down the Mississippi River, we have less than one third of the 
settlement coming down from the Mississippi River which is what 
is exacerbating this land loss.
    So, I mean, to conclude here. The people of my State cannot 
even begin to understand the position of this Administration to 
support, not 50 percent, 90 percent retention basically, of 
revenues to interior States that do not experience land loss, 
sink-age. That have not lost 14 hundred people in floods in one 
hurricane.
    Yet the coastal States which have produced and what's the 
number please, Luce? It's not 61? It's how much money?
    It's $211 billion, $211 billion is produced off of our 
shore. We can't seem to negotiate a fair share of that when 19 
thousand square miles has been lost.
    This whole entire river functions as an economic lifeblood 
for the entire Nation, not just the 4.5 million people that 
live here. So that is the basis of the FAIR Act.
    My time has expired. I have several more questions. If we 
have time, Mr. Chairman, I'd like to ask Ms. Haze a few more 
questions.
    The Chairman. Without objection the material Senator 
Landrieu has referred to, they'll be put into the record.
    Let's see how far we can go. Maybe we can have some time 
for another couple of questions. I know Senator Landrieu has 
put an enormous amount of time into this effort as has Senator 
Murkowski.
    Ms. Haze. Could I just respond to----
    The Chairman. Of course.
    Ms. Haze. I can't respond to all of that history. I'm not 
familiar with it.
    But I would tell you I personally am very familiar with 
your tireless work in this regard. So I did want to complement 
you on that.
    Senator Landrieu. I appreciate that. But it's getting to 
the point where if we don't get some resolution on this I just 
don't know where else we turn if we can't use our own money 
that we basically generate and happy to share it with the 
Federal Government to use a portion of it to save a coast 
that's valuable asset to the whole Nation. I would argue, the 
world. But thank you.
    Ms. Haze. So, one more response, if I could, is, I think 
Chairman Wyden referenced this very well. Our revenue sharing 
programs in the laws that direct us, in terms of the revenue, 
some revenue sharing programs the funds are provided without a 
requirement. Some are provided specifically for specific 
purposes.
    There's a diversity of them. They're complex. As you know, 
they're driven by Congress.
    So I think it's really important to have that dialog about 
that.
    The Chairman. We are going to have that dialog.
    [Laughter.]
    The Chairman. Senator Murkowski.
    Senator Murkowski. Let the dialogs begin.
    But that is exactly what this FAIR Act is about is to try 
to bring some parity out there. You've mentioned the various 
laws, statues out there that dictate some of the revenue 
sharing that goes. What Senator Landrieu and I have been trying 
to advance is a recognition that right now you have a double 
standard. You have used that terminology and that's exactly 
what it is.
    It somehow is seemingly acceptable and supported and 
embraced onshore, but yet when it comes to offshore it's 
rejected as, well, this just doesn't work. Senator Landrieu 
tried to drill down on this and didn't really get a 
satisfactory answer, as far as I'm concerned.
    Can you explain why the Administration feels that it is 
acceptable and good policy to allow for a level of revenue 
sharing on our Federal lands, as currently exists today, and 
yet when it comes to our offshore resources this is not 
something that the Administration can support?
    Ms. Haze. Senator Murkowski, I would not claim that our 
revenue sharing, our revenue allocation, if you look across the 
board at all of them, are fair. Trying to respond to your 
parity question.
    What comes to my mind is something that's a little off 
topic but if you look at the abandoned mine land program where 
we collect fees off of coal, there is a set source of revenue 
to go in and remediate and clean up abandoned mines. In the 
hard rock area though, there isn't anything comparable. We get 
a claim fee, there is no revenue to clean up thousands of 
abandoned hard rock mines.
    I know that's not the topic of this hearing. But I can't 
really respond in terms of a fairness or parity discussion 
between offshore and onshore.
    Senator Murkowski. Let me ask the question another way.
    In your written testimony, particularly, you discuss the 
benefits to coastal States and communities that host energy 
development off their shores. You talk about the jobs. We would 
agree that there are real benefits.
    But yet there's not discussion about the impacts to the 
coastal communities. Would you acknowledge that there are 
impacts to our coastal communities as a result from the 
offshore development?
    Ms. Haze. I would. I would further say that I believe 
that's why Congress gave the States the role of management of 
the first 3 miles.
    Senator Murkowski. But----
    Ms. Haze. Why we share the 8(g) revenues enacted from 
GOMESA.
    Senator Murkowski. Wait, wait, wait, wait, wait.
    The management of the first 3 miles, what we're talking 
about, particularly in Senator Landrieu's State which, as she 
has noted, is the bread basket of the U.S. energy world here. 
It doesn't make any difference if you are one mile from shore, 
two miles from shore or 30 miles from shore. You still have to 
go from the offshore to Port Fourchon or to Houma or to 
wherever to get your supplies, to get your fuel, to get your 
workers.
    Folks fly in they use your airports. They have their 
children. Then they use your schools. They use your roads.
    Up in the North Slope and we will hear testimony from Mayor 
Brower shortly. We have very limited infrastructure at this 
point in time. We don't have the road system that connects you 
all. We've got limited assets in place right now.
    As we look to that future activity we know we're going to 
have to have some infrastructure. We know that that 
infrastructure does not come cheap. We know that there will be 
impact because we can see from our neighbors to the south.
    So when we talk about well, we have in place a system where 
the States can derive the benefit if the activity is within 3 
miles. You still have to come in from the offshore to receive 
services. So it's the impact to these communities that we're 
talking about here. The distance from the shore is seemingly 
irrelevant.
    What I need to hear is that there is an understanding and 
an appreciation that with offshore development whether it is 
with oil or gas or wind or whatever renewable might be 
offshore, that there's a connection, if you will, to the shore. 
With that connection those communities, that State, is 
impacted. So the reasonable nature of what we are seeking here 
with this legislation is that there be revenues that are 
directed to these impacted areas that would be shared by the 
Federal Government.
    Is that not a reasonable proposition?
    Ms. Haze. I do, I appreciate what you're saying. I do 
understand the point you're making about the infrastructure and 
the support needed.
    In terms of the FAIR Act I would retreat back to my 
statement and just say it's very difficult to justify in budget 
terms. It is, as CBO said, $6 billion. those revenues right now 
are going into the Treasury. There is not an offset identified. 
there are tradeoffs.
    Senator Murkowski. OK. if we're talking about that, if 
we're talking about just trying to find an offset, we're going 
to work to find that offset.
    But what I need to know is that the Administration 
understands that there truly is a double standard that we're 
talking about here between offshore and onshore. You in your 
comments indicated that the Administration is, and these are 
your words, ``mindful of the interests of the coastal states.''
    Ms. Haze. I did say that, yes.
    Senator Murkowski. I need to know that you are mindful and 
you listen and you understand to what is happening to our 
coastal States that are impacted.
    My time has expired and I will defer to my colleagues here. 
Maybe we'll have a chance again for a little bit more. But 
there is an inconsistency here.
    If what we're talking about is these are tough budget times 
and we don't want to take the funding stream that we have 
enjoyed or would hope to enjoy in the future because we're 
going to have to share it with the States. Then let's have that 
discussion. But to somehow suggest that while we've got levels 
of revenue sharing that have been put in place from prior laws 
and basically what the States get is what you can produce 
within 3 miles. I don't think that that is a legitimate 
argument.
    So let's just figure out what it is that we're talking 
about here.
    We're going to have the discussion about how we deal with 
the offsets.
    Thank you, Mr. Chairman.
    The Chairman. Thank you, Senator Murkowski.
    Senator Udall.
    Senator Udall. Mr. Chairman, you are a courageous man. We 
have had periodic dialogs on this important subject for many, 
many decades actually. I think about the illustrious group of 
people who have preceded you sitting in that chair, Senator 
Jackson, Senator Johnson, Senator Murkowski, Senator Bingaman. 
I do think it's important to have this discussion.
    Once again I hope I come with an open mind. I do represent 
a State in the interior of the country. I think sometimes when 
we're talking about onshore and offshore it really is an apples 
to oranges comparison. But I do think this is a worthwhile 
discussion. I know how important it is to Senator Murkowski and 
Senator Landrieu.
    I do have concerns about the broader effects of the 
proposal, particularly on the budget side. I did want to share 
those briefly. Then I want to turn specifically to LWCF, a 
topic we all are very familiar with.
    But on the budget side, I think this, again, speaks to the 
need. I think all 4 of us sitting here or all five. Senator 
Heinrich is here as well. We want to get a broad budget deal 
that puts the Federal Government's balance sheet in a much 
healthier condition over the long term.
    Then we could have some of these spirited discussions about 
what our priorities are and where we direct Federal revenues. 
I, for one, would like to see all trust funds, all dedicated 
funds put off limits starting with social security. It's the 
granddaddy or the grandmother of all the trust funds. But the 
Reclamation fund that Ms. Haze talked about and then of course, 
the LWCF.
    If I could I'd just like to visit with all of you about 
that briefly.
    We've seen the benefits in Colorado when it's been 
appropriately funded. In fact, LWCF underwrote the creation of 
one of our most iconic national parks, the Great Sand Dunes 
National Park. It has helped protect some of our most treasured 
public spaces in the Grand Canyon, the Appalachian Trail. I 
mean the list is a long one.
    I would be remiss if I didn't mention the Great Sand Dunes 
National Park in particular is in Ken Salazar's homeland. We 
created a national park but we also protected the water 
supplies that are so important to the Ag interests in the 
unique San Luis Valley.
    But the LWCF has played such an important role. We made a 
promise back in 1964 to the American people that as we 
developed and exploited our oil and gas resources we'd then set 
aside lands for hunting, for fishing and for recreation and for 
our future generations for people who are going to follow us. 
We haven't kept that promise.
    I'm frustrated that we're talking today about creating some 
new demands, as legitimate and as important as they are, when 
we still haven't fully funded LWCF. We've talked about GOMESA. 
It did make a minor contribution to LWCF. One that I should 
note, the FAIR Act, I think Ms. Haze, cuts in half. I think 
that was a part of what your concern.
    Ms. Haze. Right. That's right.
    Senator Udall. But GOMESA was just dealing with the State 
portion of LWCF. The Federal portion is equally important. 
There are crucial elements if we're going to keep faith with 
the decision that was made in 1964.
    So this really shouldn't be a choice between LWCF and 
anything else. Revenue sharing should be assessed on its own 
merits.
    Meanwhile the deal we all made to fund LWCF is a fairly 
small portion of these annual offshore revenues. I'd like to 
see us keep that promise while we debate what the best way is 
to direct the rest of those resources.
    So Ms. Haze, knowing the Administration's proposals for 
full funding, could you share your perspectives again that are 
related to my concerns and how you think we could better 
approach this issue to ensure that we benefit Americans as was 
intended way back in 1964?
    Ms. Haze. Certainly.
    The President's budget proposes full funding, full 
mandatory funding, for the Land and Water Conservation Fund 
beginning in 2015. The 2014 budget begins to phase that in.
    The Land and Water Conservation Fund has only been fully 
funded once. The discretionary funds that are deposited in the 
Treasury sit there and accrue. I think there are $13 billion 
now un-appropriated. Full funds have only been appropriated 1 
year and so the funds can continue to accrue.
    As you point out we're not fulfilling the commitment of the 
Land and Water Conservation Fund which was intended to have 
conservation outcomes funded from the extraction of oil and gas 
and use of other resources. So that's on the discretionary 
side.
    In the GOMESA authorization, the way it works now is 
ultimately there would be $125 million annually directed to the 
State grants portion of LWCF when sufficient revenues kick in 
from the full slate of leases. Under the concerns we have under 
the FAIR Act is that ultimately when the cap is lifted from the 
GOMESA program, we could be looking at up to $2 billion for 
Land and Water--for those stateside programs.
    The FAIR Act would reduce that funding for the Land and 
Water Conservation Fund to $62.5 million a year. So just a 
straight comparison is $125 million to $62.5 million.
    Senator Udall. Thank you for that clarification.
    Mr. Chairman, if I might, I know my time is expired.
    The Chairman. No, go right ahead.
    Senator Udall. But I wanted to make one additional point. I 
want to share it with everyone that I appreciate that the bill 
includes a provision on revenue sharing for onshore development 
of renewable energy on Federal lands. There is a proposal, a 
similar proposal, that's laid out in what is a free standing 
bill. It's a bipartisan Public Lands Renewable Energy 
Development Act. It's S. 279.
    So that concept is well established. One that I think we 
should pursue. I just want to put that on the record.
    Maybe the group of us ought to sit down and we fully fund 
the FAIR Act and then we fully fund the backlog of LWCF, all 
$13 billion. Maybe there's a big deal to be had here. I may 
damage my fiscal hawk credentials, but I think there's a way to 
find--that's something to think about for the long run because 
our national parks, public lands, need this attention. These 
are resources that have not been available, as you point out, 
Ms. Haze, because they haven't been appropriated.
    Ms. Haze. Could I suggest we also address PILT and Secure 
Rural School?
    Senator Udall. There's a foursome that would be phenomenal.
    The Chairman. Having sorted for the Udall balanced budget 
approach I'll reaffirm your fiscal hawk credentials.
    Senator Udall. Thank you. Thank you.
    The Chairman. I know Senator Landrieu would like to make a 
point too. Senator----
    Senator Landrieu. I just want to clarify something for the 
record.
    Senator Udall. Yes, OK. I've taken more time----
    The Chairman. Right. Senator Landrieu to clarify.
    Senator Landrieu. I just want to clarify something for the 
record. It is not the intention of Senator Murkowski and I to 
diminish or decrease the funding to the Land and Water 
Conservation Fund. It is to remain the same as it is under the 
law. I'll say more about that later.
    If it does, it's not intentional in the drafting. We 
brought that to the attention to the staff, Mr. Chairman. It is 
our intention to maintain, not decrease the level of funding to 
the Land and Water Conservation Fund.
    Perhaps, as this goes on there could be more that could be 
done. But it is not to decrease it in any way.
    The Chairman. Very helpful to know.
    Senator Heinrich.
    Senator Heinrich. I think this is a healthy discussion. 
There are a lot of, sort of, details we probably need to work 
through. I know under GOMESA there is a small portion of 
funding for LWCF that is mandatory. I think that is a direction 
we should be moving in.
    If you look back at the $900 million that's deposited into 
that fund every year and effectively rated, in my view, to 
support the general fund. The un-appropriated balance, if my 
information is correct, which is a little different than what 
you cited, Ms. Haze, is actually $18.779 billion, almost $19 
billion.
    If you look then at the Reclamation Fund, which in theory I 
can understand how someone would think that that's another 40 
percent going to interior States. But it's not being 
appropriated. There's $12 billion as of what we expect for 
FY'13 at the end of FY'13 of un-appropriated funds from the 
Reclamation Fund as well.
    I would simply make the point that in addition to the State 
side portion of LWCF which is very critical. I can't tell you 
how many soccer fields and baseball diamonds and other things 
have been funded across the Nation with that effort. The 
Federal side is equally important.
    In New Mexico where we have 68 thousand jobs tied to 
outdoor recreation. Where hunting and fishing and camping and 
all of those activities drive an enormous portion of our 
economy. That program has been critical to securing properties 
such as the Valles Caldera National Preserve.
    In addition in the 2014 budget it calls for funding for the 
Price's Dairy edition to the new Valle del Oro National 
Wildlife Refuge in the Rio Grande Valley just south of 
Albuquerque as well as the Miranda Canyon addition to the 
Carson National Forest which protects a local drinking water 
resource and a critical watershed that feeds the Rio Grande as 
well, so.
    Can you say a little bit about what the Administration's 
position is in terms of how much is needed to fund those kinds 
of Federal, non-State side projects in 2014?
    Ms. Haze. Our 2014 budget includes a proposal of $600 
million in total for the Land and Water Conservation Fund with 
a balance of Federal acquisition to do some of the acquisitions 
you're talking about like Price's Dairy and continue those 
acquisitions of important inholdings for parks and refuges and 
as well some of the BLM areas. Also State grants to allow 
States to develop recreational opportunities.
    I know Secretary Jewell and Secretary Salazar have both 
been up here to talk with all of you about the importance of 
America's Great Outdoors and investments to support the travel 
and tourism and the economic returns and jobs.
    Also in the Land and Water Conservation Fund request is 
funding for the Forest Service for land acquisition and forest 
legacy.
    Then we have also endangered species grants in that 
request.
    Senator Heinrich. Thank you, Ms. Haze.
    I want to take a moment and just touch on something that my 
colleague from Colorado brought up as well. The bill before us 
today does include a formula to share revenues from renewable 
energy generated on Federal lands from renewables. What I might 
recommend is something that we can continue a conversation 
about is directing a portion of those onshore renewable energy 
revenues to conservation projects like wildlife habitat 
restoration and water resource protection.
    I'm curious as to whether the Administration has a position 
on that kind of an approach to renewables.
    Ms. Haze. I can't answer that. I don't know. I can find 
that out for the record.
    Senator Heinrich. Can you get me that for the record?
    Ms. Haze. Sure, certainly will.
    You were correct. I was trying to come up with Land and 
Water Conservation Fund balances off the top of my head which 
is never a good idea.
    The un-appropriated balance right now is over $18 billion. 
You're right.
    Thank you.
    Senator Heinrich. Thank you, Ms. Haze.
    Mr. Chairman, I'll yield back.
    The Chairman. Senator Barrasso.
    Senator Barrasso. Thank you, Mr. Chairman. Thank you for 
holding this hearing today.
    As a Senator whose home State is impacted by energy 
production on Federal lands I know how important it is for 
States to have access to financial resources to address these 
impacts. It's one of the reasons that I support sharing 
offshore oil and gas revenue with coastal States.
    I applaud Senators Murkowski and Landrieu for their 
leadership in this area.
    I strongly disagree with the suggestion that public land 
States get more than they deserve. Public land States, such as 
New Mexico, Colorado, Utah, California, Montana and Wyoming 
produce an extraordinary amount of energy for this country. All 
of this energy is produced on lands within the States 
respective borders. The Federal Government owns large portions 
of the surface rights and the minerals in the West, hence the 
term public land States.
    In Wyoming the Federal Government owns more than 40 percent 
of the surface acreage and 67 percent of the minerals. In other 
States of the West such as California and Utah, the Federal 
Government owns even more land. Federal ownership restricts the 
economic activity within and the tax base of public land 
States. Federal ownership not only restricts economic activity 
on Federal lands but also economic activity on private and 
State lands.
    This is because Federal, State and private lands are often 
divided along a checkerboard pattern. So it's difficult to 
promote economic activity on State and private lands if, for 
example, a road or electric transmission line or pipeline 
needed to serve a State and private lands must also cross 
Federal land. Federal laws such as the National Environmental 
Policy Act delay these projects for years.
    As a consequence businesses prefer to invest in States with 
little or no Federal land, States such as those along the Gulf 
Coast. I anticipate that we will hear a lot about fairness 
today. The hearing, after all, is on the FAIR Act.
    As the process moves forward I see little value in efforts 
to pit one group of States against another. Such a strategy 
isn't productive and will not help advance the legislation. I 
also think it does a disservice to the challenges that 
individual public land States face on a daily basis.
    Again, I support sharing offshore oil and gas revenue with 
coastal States. I'm confident that others will do the same if 
they consider the merits of this position.
    Ms. Haze, I have a question.
    I'd like to discuss revenue owed to States. Revenue owed to 
States under the Mineral Leasing Act. In March the Department 
of the Interior notified States that it would withhold over 
$109 million of this revenue during the remainder of fiscal 
year 2013.
    The Department said that this is a decision was in 
accordance with the Budget Control Act of 2011, also known as 
the Sequester.
    In May there were a bipartisan group of 10 Senators and 12 
Representatives that joined in sending a letter to the Office 
of Management and Budget. Some of those Senators are members of 
this committee and have been asking you questions earlier 
today. In that letter we asked OMB to confirm that the 
Department would return mineral revenue withheld in fiscal year 
2013 to the States. Do it in fiscal year 2014.
    We explained that a provision within Federal budget law 
required the Department to return withheld mineral revenue to 
the States when sequestration took place in the mid 1980s, same 
situation. The same provision of the law applies to the 
sequester which took effect on March 1st. So to date, OMB has 
not responded to our letter. It's a bipartisan letter by 
members of both sides of the aisle on this committee.
    So can you confirm that the Department will return mineral 
revenue withheld in fiscal year 2013 to the States in fiscal 
year 2014 as demanded by law?
    Ms. Haze. Senator Barrasso, I can confirm that we are 
working to have a final answer to that question. We are working 
closely with OMB, with our solicitors and with their general 
counsel. There are a number of mineral leasing revenue sources. 
What determines whether those funds are returned to the States 
or the counties in 2014 is the underlying statute.
    So we've had to go back and look at the underlying 
statutes. Pretty much consistent with what we did back in the 
1980s but to revalidate and make sure we're doing it correctly. 
We wanted to have an answer to the whole, if you will, menu of 
Mineral Leasing Act and not a partial answer.
    So it's taken us longer than we had hoped. But I think 
we're very close to having an answer.
    Senator Barrasso. So when do you think you'll be able to 
confirm that the revenue will be returned?
    Ms. Haze. I think in the next several weeks we'll be able 
to have an answer. We'd had hoped to have one for the Secretary 
when she went to the Western Governors Association, but we 
weren't able to do it by then. So, soon.
    Senator Barrasso. Thank you, Ms. Haze.
    Thank you, Mr. Chairman.
    Ms. Haze. Thank you.
    The Chairman. The Senator from South Carolina.
    Senator Scott. Thank you, Mr. Chairman.
    I'd like to say thank you to Ranking Member Murkowski and 
Senator Landrieu for your hard work on this very important 
topic.
    Without question I think the opportunity to provide 
financial incentives to the States to get involved in this 
project would be very important. I would say, however, that if 
you look at South Carolina, we are already ready to move 
forward. The fact of the matter is that offshore energy 
production would create jobs and economic opportunities in our 
State that we would look forward to. So we are already waiting.
    As a matter of fact our Governor, Governor Hayley, along 
with the Governors of North Carolina and Virginia sent a letter 
to Secretary Jewell asking to be included in the next 5-year 
offshore plan. Unfortunately it seems like unless we do it 
legislatively, the Atlantic may never be included in the next 
5-year plan.
    When President Obama became President the entire Atlantic 
was available for energy production. But since he's been 
President almost 85 percent of America's offshore energy 
resources are under a moratorium, including the Atlantic.
    While revenue sharing is important, we need access to new 
areas to lease for the promise of new revenues to be meaningful 
to those of us in the Atlantic OCS. I think Mr. Luthi's 
testimony later today will reinforce the necessity and the 
importance of new access in the Atlantic. If you look at over 
the next generation, we could see over 1.2 million jobs and 
over $1.3 trillion of new revenues through of offshore 
activities. So this is very important.
    Current data for us is over 30 years old. The ability to 
collect new information with 21st century technology will give 
us a much better picture of the resource potential in the 
Atlantic.
    Finally since the bill is called the FAIR Act and we do 
like the notion of being fair. I think it would only be 
appropriate and fair if the Atlantic States got the same 37.5 
percent revenue sharing as Gulf States. However, under current 
proposals the 10-percent dedicated to alternative and renewable 
energy could be a challenge.
    I think the States should be able to decide and determine 
the definition of alternative and renewable energy. Every State 
has different energy needs, challenges and resources. If we do 
the right thing, I think we'd find an amazing economy in the 
future, especially in the Atlantic OCS.
    I think the opportunities are amazing. I would love for our 
committee to continue its hard work in the direction of 
including in the next plan, the next 5-year plan, the Atlantic 
OCS and providing the opportunity to seismic it so that we can 
create the same amazing economy that's potentially in our soil 
in Alaska and other places off our coast in South Carolina.
    Thank you.
    The Chairman. I thank the Senator.
    I think Senator Landrieu has some additional questions.
    Do you have some additional questions? Then I'll wrap up 
this panel.
    Senator Landrieu. Just 3 more minutes, if I could.
    First, I would like to introduce for the record the 
statement from John Barry in its entirety.
    The Chairman. Without objection, so ordered.
    Senator Landrieu. I'd also like to put into the record a 
letter of strong support from the America's Wetlands 
Foundation.
    The Chairman. Without objection.
    Senator Landrieu. Also a letter of strong support from the 
Greater Lafourche Port Commission.
    The Chairman. Without objection.
    Senator Landrieu. I will also submit to the record a 
summary of the history, Mr. Chairman, of the Land and Water 
Conservation Fund just to respond to several of my colleagues.
    I want to thank Senator Scott for his encouraging comments 
about working with us. I took note of your suggestions. I think 
there's a path forward for certain.
    But I wanted to underscore before the Senator left that to 
make sure he said this. I think you said you were ready to go 
forward with drilling off your coast with or without revenue 
sharing?
    Senator Scott. No, Ma'am. That was not what I said.
    Senator Landrieu. OK.
    Senator Scott. I said I think the incentives that we 
already see for the potential revenues and the jobs that would 
be created are obviously there already. So the incentives, 
while very important, unless we have the opportunity to 
seimicing and do the exploration necessary for us to determine 
the potential. It doesn't do us any good to have a conversation 
about revenue sharing if, in fact, we're not going to have the 
opportunity.
    Senator Landrieu. But the jobs are the incentive.
    Senator Scott. Because of the jobs are a part of the 
incentive, but the salient point is that because of the 
moratorium it is impossible for us to have a conversation about 
revenue sharing in an area where the moratorium effects--
eliminates the opportunity to share anything.
    So the jobs and the economic opportunity and the engine 
that could be created offshore cannot be created because of the 
moratorium currently.
    Senator Landrieu. OK.
    Thank you so much.
    I wanted to just to add to the record, Mr. Chairman, this 
information about the Land and Water Conservation Fund because 
it has been central to the discussion. I want to highlight the 
GOMESA Act that I was proud to be the lead sponsor with Senator 
Domenici, for my colleagues that support the Land and Water 
Conservation Fund, was the first time the Congress, with our 
leadership, directed mandatory funding for the Land and Water 
Conservation Fund. We consider that a great step forward.
    It may not be as much or as broad as some members would 
like. But it was the first time. I'm very proud because I've 
been a long time supporter of the Land and Water Conservation 
Fund, both the State side and the Federal side.
    But if we're talking about deficits just to get this record 
straight before we go to the next panel, there was an $18 
billion deficit acknowledged by, I think, you Ms. Haze. Is that 
correct under the authorizations for the Land and Water 
Conservation?
    Ms. Haze. I said an $18 billion un----
    Senator Landrieu. Unspent, yes. So you said it's a deficit.
    Ms. Haze. Un-appropriated.
    Senator Landrieu. Un-appropriated balance.
    Ms. Haze. Un-appropriated balance, right.
    Senator Landrieu. If coastal States had received 50 percent 
of the funding our outstanding balance right now is $105 
billion. In other words, had we been receiving 50 percent, like 
interior States, we would have received, since the 1920s, not 
$18 billion, like the Land and Water Conservation Fund. We 
would have received $105 billion.
    That's how short changed the coastal States are. That is 
why we are sitting here with the land loss and no revenues to 
present.
    My last question to you is given the Administration's 
acknowledgement that this land loss exists. As I said I want to 
describe it to you. Then my last question will be this.
    Do you acknowledge that this coastal area operates some of 
the main ports in the United States?
    That 18 percent of all domestic shipping passed through 
Louisiana waters, 20 percent of all exports, 60 percent of all 
U.S. grain exports go down the Mississippi River, and 90 
percent of all commercial fisheries depend in the Gulf on some 
part in their life cycle.
    Do you acknowledge those facts to be true?
    Ms. Haze. I have no way to validate that they're true. I 
don't know.
    Senator Landrieu. But they sound, I mean from what you've 
heard.
    Ms. Haze. You always know way more than I do when I come to 
hearings.
    Senator Landrieu. Thank you.
    Do you acknowledge that this land loss and I think it's 19 
hundred square miles, 19 thousand. Do you acknowledge that it's 
roughly accurate?
    Ms. Haze. I don't have that knowledge either.
    Senator Landrieu. What is the plan of the Federal 
Government to help support its restoration?
    How much money are you willing to put on the table to do so 
if not through the FAIR Act?
    Ms. Haze. So I can't answer that. I'm not empowered by the 
government to answer that question.
    I will tell you there are a variety of programs ongoing 
within the Department of the Interior that look at the wetland 
loss in Louisiana, restoration on private lands. There are the 
RESTORE funds. There are other funds that I know are going into 
the area for restoration.
    I wouldn't even try to sit here and enumerate them all to 
you. You know them probably much better than I do.
    Senator Landrieu. I would just for the record, Mr. 
Chairman, say that to my knowledge besides the RESTORE funding 
which came from a completely different accident, as you know, 
the only money I'm aware of is the $7 million in the Corps of 
Engineer budget. Seven million. Our master plan calls for $50 
billion over 50 years.
    If we could get a portion of this money we could begin to 
address some of the important land loss issues that are 
important to the country.
    Thank you. I'll submit the rest of my questions for the 
record.
    The Chairman. Without objection, so ordered.
    Ms. Haze, thank you for your patience.
    Senator Murkowski, additional questions?
    Senator Murkowski. Were you going to ask questions or?
    The Chairman. I would be happy to wait for you. This is 
your bill.
    Senator Murkowski. I wasn't certain, Mr. Chairman, if you 
were ready to wrap up with Ms. Haze. I just wanted to make 3 
very short points.
    The Chairman. Very good.
    Senator Murkowski. I know we have a panel of 6 after this 
we're all anxious to get to.
    But I do appreciate your comments, Senator Landrieu, on 
providing some of the history and the back up there about LWCF 
because it sounds, based on comments from some of our 
colleagues here today, that perhaps if we can work through this 
issue we might have something to gain some support on both 
sides here.
    But I do think it's important for us to recognize that 
through this FAIR Act what we're doing here is we're providing 
a dedicated funding stream for LWCF. You think about it. It's 
like, so if we didn't have the production going on in the Gulf. 
If we didn't have the energy production domestically here, 
where would we be getting these funds for LWCF?
    It's really pretty tough to find anything out there right 
now. We're looking under every rock. There's not a lot to be 
had.
    So I think it's important for us to recognize that if we 
have these priorities whether it's New Mexico or Colorado and 
the focus on what the Land and Water Conservation Fund has done 
for us, what it's allowed us to build. Whether it is parks. 
Whether it's soccer fields or baseball fields. As important as 
all these are we've got to be able to have those funds. It is 
through our development and our production that we are able to 
allow for this.
    So this FAIR Act does provide for that dedicated stream.
    To my colleague from South Carolina, you mentioned that 
this is not an access bill. I wish it were. But it's not an 
access bill.
    My hope is that it can be the path toward expanded access. 
I think that this is what some of our opponents fear is that we 
might, in fact, actually increase production on our Federal 
lands if we were to allow for a more fair way to share our 
revenues. So I think it is important to recognize that we would 
like to get to that point where we do have more funding to 
direct to some of these important conservation efforts.
    I think it's important to recognize within this bill our 
effort to support clean energy and conservation projects. This 
is not just about let's keep drilling and drilling. This is 
about what we can then do with our revenues from our domestic 
energy and move that in a positive way. So we absolutely do 
dovetail with some of the Administration's priorities when it 
comes to energy and conservation goals.
    Then the final point that I would make and I would ask for 
your comment on this, Ms. Haze, is in your written testimony 
you state that we miss an important opportunity to improve our 
energy security by establishing and funding the President's 
energy security trust. I have pointed out that the President's 
energy security trust is perhaps a little bit different from my 
concept where we actually do provide for access and open up 
more Federal lands so that we can fill up this energy security 
trust.
    But at the same time you are opposing the FAIR Act on the 
grounds that it adds to the Federal deficit. I guess the 
question is how does the Administration then propose to fund 
the energy security trust?
    Ms. Haze. Good question.
    The Energy Security Trust presumes that projected oil and 
gas revenues would increase over the next 10 years from an 
estimated $9.7 billion to $12.5 billion by fiscal year 2023. 
That's based on the existing program in place, the 5-year 
program, lease sales and future projections of revenues, 
royalties and bonuses.
    Senator Murkowski. If I understand the Administration's 
take on this we're going to continue at the clip that we have 
with our activity on Federal lands which, as we know, has been 
greatly reduced when you compare it to activity on our State 
lands. But if we were able to open up greater Federal lands for 
exploration and production, then we would have an ability to 
have new moneys coming in to our Treasury to put into an energy 
security trust, to put into LWCF so that we actually can be 
making a difference with some of these initiatives that, I 
think, folks consider a priority.
    I told you I was going to only have a couple questions. I 
apologize.
    The Chairman. No, Senator Landrieu wanted to wrap up.
    Senator Landrieu. Just to finalize this point. The 
President has an idea of something he wants to fund but he 
neither, he has not, according to what you just said, provided 
an offset. He will be required, like we do, to provide an 
offset because those moneys that you just referred to, the 
increase, are already figured in the budget.
    The only moneys that would not be figured in the budget are 
the moneys referred to by Senator Murkowski which would be any 
new areas to open because current areas are already calculated.
    So he's going to have to find an offset. Good luck.
    Ms. Haze. So to respond quickly.
    The President's budget is balanced in terms of identifying 
revenue sources that balance the planned spending as well. It 
is certainly up to Congress to decide whether to accept some of 
those revenue proposals which we've talked about in some 
earlier hearings.
    Then to your point, Senator Murkowski. I would say we 
totally agree with you about development and goals for 
development. We recently had two sales. There's another sale 
coming in August. So we share your wanting to move forward.
    Thank you very much.
    The Chairman. Thank you, Ms. Haze.
    Let me make a brief statement about where we are and then 
thank my colleagues, Senator Landrieu and Senator Murkowski, 
both of whom have obviously put an enormous amount of work into 
this matter which is so important to their States.
    I mean, the more I listen to this discussion, the more 
struck I am that this would be a very different debate if we 
were starting with a clean slate. In other words, we just 
walked on in here. We had a clean slate. The 3 of us would say, 
look, we've got Federal land and Federal water and all of these 
communities are very much aware of the boom and bust cycle that 
comes about when you're trying to have sustainable development.
    Make sure people have jobs. Make sure you have 
environmental protection.
    But we're not starting with a clean slate. That therein 
lies the challenge. So I'm going to just keep hunting and 
pecking so I can at least figure out what the most relevant 
facts are.
    I have a question for you, Ms. Haze, just on Federal budget 
math in this area so I can understand it all.
    Is it correct that given how the budget process works the 
OCS receipts for the next 10 years, according to the budget, 
have ``already been spent?'' Then they're included in the 
budget baseline because I think that's the way it works. I'm 
not completely sure of this.
    Ms. Haze. Right.
    The Chairman. If you ask me about Medicare spending, I can 
tell you all about that and tax reform and the like. But I'm 
not up on every bit of OCS budgeting yet. But is that 
essentially what's going on? Is that why you have to find ``new 
revenue'' in order to pay for something called revenue sharing?
    Is that essentially the relevant math here?
    Ms. Haze. Yes, sir.
    The baseline for scoring, that the Congressional Budget 
Office uses and the Office of Management and Budget uses 
presumes the current revenue projections out 10 years based on 
the current areas that are open for leasing. The only way you 
could gain, if you were, additional new money and scoring 
credit, would be if you lifted a moratorium on an existing 
area. If you passed a piece of legislation that created somehow 
a new opportunity. That is how it works.
    If I could make one other comment on your previous 
statement?
    The Chairman. You start with that.
    Ms. Haze. Yes, sir. Yes.
    The Chairman. Then you go to this discussion that sometimes 
has folks coming out swinging on the number of leases and where 
they are and the like. But that's essentially how we start the 
taxpayer side and then we have to go to the economic side and 
the environmental side and the like.
    Ms. Haze. Right.
    The Chairman. OK. Anything else you want to add? You've 
been----
    Ms. Haze. I wanted to just add my appreciation for your 
statement about, as it were, the patchwork of laws that are 
already out there. If you were starting with a clean slate it 
would be much easier. But you look back and we have 200 years 
of revenue sharing laws. It makes it very complex for all of 
you.
    So, good luck and thank you.
    The Chairman. Alright. We'll excuse you at this time. Thank 
you.
    I'm struck by how everyone wishes us good luck in all this.
    [Laughter.]
    The Chairman. Alright. Our next panel.
    The Honorable Charlotte Brower, Mayor, North Slope Borough, 
Barrow, Alaska.
    Mr. Reggie Dupre, Executive Director, Terrebonne Levee and 
Conservation District, Houma, Louisiana.
    Ms. Ryan Alexander, President, Taxpayers for Common Sense.
    Mr. Randall Luthi, President of the National Ocean 
Industries Association.
    Mr. Athan Manuel, Director of Lands Protection Program, 
Sierra Club.
    Ms. Cathie France, Deputy Director for Energy Policy, 
Virginia Department of Mines, Minerals and Energy in Richmond.
    Alright. We thank you all.
    We're going to make your prepared statement a part of the 
hearing record in its entirety. So if you can take a few 
minutes and just talk to us. I know that there is practically a 
biological compulsion to just read every word on those pieces 
of paper.
    We'll make your prepared statements a part of the record. 
If you could just talk to us for 5 minutes or so that would be 
great.
    Mayor Brower, welcome

  STATEMENT OF CHARLOTTE BROWER, MAYOR, NORTH SLOPE BOROUGH, 
                           BARROW, AK

    Ms. Brower. Chairman Wyden, Members of the Congress, my 
pleasure to meet you, Senator Landrieu and also our great, 
distinguished Senator from our great State of Alaska, Senator 
Murkowski.
    For the record, my name is Charlotte E. Brower and I want 
to thank you for this opportunity to testify before this 
subcommittee on a very important subject. I am the Mayor of the 
North Slope Borough. I am an Inupiat Eskimo.
    I've traveled over 4,000 miles to speak to you on this 
important issue. I feel this is so important for my people to 
state it on the record.
    The North Slope Borough is a county level, home rule 
government for the Alaska's Arctic. It is also the largest 
municipality in the United States encompassing over 94 thousand 
square miles and more than 8 thousand miles of Arctic 
coastline. That's nearly the size of the great State of Oregon, 
where I went to high school.
    The majority of the Borough residents are Inupiat Eskimos 
and we are heavily dependent upon marine mammal to sustain our 
physical health and our cultural and spiritual well being. But 
the importance of subsistence in our coastal communities and 
marine environment goes beyond the need for food. Our unique 
Inupiat culture, our traditions and our connections to our 
ancestors and history are also tied to our subsistence 
lifestyle to our custom of sharing with others and to 
celebrating and protecting our connection to the land and 
ocean.
    We're always mindful and--of the critical need to protect 
the environment and preserve our culture and our resources. 
However, we also face this reality. We recognize that our 
ability to continue to provide even basic services to our 
communities depend largely upon our revenue stream generated by 
the development of oil and gas resources found under the land 
and ocean around us.
    Without these oil and gas revenues the North Slope Borough 
would not be able to maintain the air strips, health care 
facilities, water and sewer, search and rescue or other 
essential services we provide in our villages.
    What many people do not fully understand is that the 
infrastructure enjoyed today by other coastal States like paved 
roads is limited to non-existence in the North Slope. We don't 
have ports or harbors. Our communities are not linked by 
highways or railways or power lines.
    One acute problem we face is the extreme high cost of 
building infrastructure and providing services.
    To you, to give you an example a gallon of milk costs $10 
today in Barrow. But for me, with 25 grandchildren, $10 a 
gallon is not good. That same gallon of milk costs even more in 
some of our villages for as high as $18 a gallon. Now imagine 
the cost to the Borough for new roads, upgrades or air strips, 
new health care facilities or modern utilities.
    We also face the threats to the infrastructure we have in 
place today with the Arctic Ocean now ice free for longer 
period, every spring and fall seasonal storms are eroding the 
land around our villages in some cases over to 5 feet to 6 feet 
per year. Our homes are threatened by this erosion. Our roads, 
landfills and utility systems also are threatened.
    Now put yourself in my position. I have to worry about the 
storm. I have to wonder which storm will flood the underground 
system of tunnels we have that allows us to have indoor 
plumbing.
    Oil and gas revenues shared under the FAIR Act would have 
immediate effect of allowing governments like the North Slope 
Borough to complete projects that are critical to protecting 
our people and our infrastructures. It is also worth noting 
that oil and gas companies, scientists and Federal agencies, 
including the U.S. Coast Guard all use our local 
infrastructure. Without it, there would be no OCS development.
    To adequately support this OCS activity moving forward, 
even greater infrastructure investments will also need to be 
made. Revenue sharing would enable the Borough to maintain and 
bolster our search and rescue capabilities, invest in oil spill 
preparedness, support port and harbor infrastructure 
development and to bring modern communication systems to North 
Slope villages.
    While these investments would obviously benefit Federal, 
State, local and private stakeholders, they are investments 
that should be made by the local governments that are tasked 
with maintaining local infrastructure and services.
    In summary, we live in the most undeveloped regions in our 
Nation. Investments must be made in the infrastructure 
necessary to ensure that OCS development can be conducted 
safely and responsibly. The burden of providing such 
infrastructure should not fall solely on the people that have 
the most to lose in the event of an oil spill.
    S. 1273 represents a fair and equitable approach to 
allowing local governments to make the infrastructure 
investments necessary to support OCS activities and to maintain 
the health and welfare of their people and environment.
    [Speaking Inupiat] For this important message to all 3 of 
you that are here. Thank you.
    [The prepared statement of Ms. Brower follows:]

 Prepared Statement of Charlotte Brower, Mayor, North Slope Borough, AK
    Chairman Wyden, Senator Murkowski, and Members of the Committee:
    I want to thank you for the opportunity to provide comments on 
behalf of the North Slope Borough regarding S. 1273, the ``Fixing 
America's Inequities with Revenues Act of 2013'', or ``FAIR Act''. I am 
particularly pleased that S. 1273 focuses on the fair and equitable 
distribution of a portion of revenues derived from energy development 
on Outer Continental Shelf (OCS) areas adjacent to coastal states. 
Congress should pass this legislation now, because this legislation 
helps to ensure that State and local governments will have resources 
they need to keep up with infrastructure requirements, expand emergency 
response and search and rescue capabilities, take an active role in oil 
spill preparedness, and work to maintain healthy communities and a 
healthy ecosystem.
    The North Slope Borough is a home rule Arctic government--a coastal 
political subdivision of the State of Alaska and a county-level 
government. The North Slope Borough is the largest municipality in the 
United States, encompassing over 94,000 square miles, including more 
than 8000 miles of Arctic coastline. The Borough stretches from the 
U.S.-Canada border to the western border of Alaska, across the Beaufort 
and Chukchi Seas.
    The majority of Borough residents are Inupiat Eskimos. And we are 
heavily dependent upon marine mammals (such as bowhead and beluga 
whales, seals, and walrus) to sustain our physical health and our 
cultural and spiritual well-being. The importance of Subsistence in our 
coastal communities and marine environment goes beyond the need for 
food. Our unique Inupiat culture, our traditions, and our links to our 
ancestors and history are also tied to our Subsistence lifestyle, to 
our custom of sharing with others, and to celebrating our connection to 
the land and ocean.
    We are always mindful of the critical need to protect the 
environment and preserve our culture and our resources. However, we 
also recognize that our ability to continue to provide even basic 
services to our communities depends largely upon a revenue stream 
generated by the oil and gas industry, which today primarily operates 
on state land in our region. Without these revenues, the North Slope 
Borough would not be able to maintain the airstrips, healthcare 
facilities, water and sewer, search and rescue, or other services we 
provide in our villages.
      s. 1273 supports state and local government investments in 
                             infrastructure
    S. 1273 will enable State and local governments to maintain local 
infrastructure and invest in new infrastructure. What many people in 
the Lower 48 do not understand is that the infrastructure enjoyed today 
by other coastal states--like paved roads, deep draft ports, and modern 
communications--is limited or nonexistent on the North Slope. We have 
no deep water port. Our communities are not linked by highways or 
railways or electric lines or communication lines.
    As the oil and gas industry looks for opportunities to develop 
offshore resources, I must be prepared--as the elected representative 
of my communities--to meet the challenges of offshore development. 
Senators Lisa Murkowski and Mark Begich and Congressman Don Young 
strongly support revenue sharing for Alaska and Alaska's coastal 
political subdivisions because they understand the need for revenue 
sharing and the enormous financial cost of supporting healthy 
communities in rural Alaska.
    Most people do not understand the challenges Alaska's rural 
governments face. But everyone can understand the impact of higher 
costs to their own bottom line. As one example, a gallon of milk costs 
$10 today in Barrow--and Barrow is a regional hub community. That same 
gallon of milk might cost $18 or more in some of our villages. Other 
food items such as fresh fruits and vegetables are even more expensive 
relative to what you might pay in the Lower 48 or even other parts of 
Alaska. Why? Because the cost of transportation in our region is very 
high. And now imagine the cost to the North Slope Borough for new 
roads, upgrades to airstrips, new health care facilities, or new sewer 
or water or gas lines that must be built through permafrost.
    We also face threats to the infrastructure we have in place today. 
With the Arctic Ocean now ice-free for a longer period every spring and 
fall, seasonal storms are eroding the land around some of our 
villages--in some cases over 5-6 feet per year. A single moderate storm 
last year cost the Borough more than a million dollars in response 
costs. In just the last ten years, the coastline near the City of 
Barrow has receded toward an old landfill that holds tens of thousands 
of barrels of Navy and Air Force waste. Ten years ago, the ocean was 
200 feet away from the landfill--now it is 120 feet away.
    Coastal erosion also threatens the City of Barrow's ``utilidor'' 
system, which is an underground system of tunnels designed to protect 
the city's utilities from the cold. This system provides indoor 
plumbing to our residents and eliminates the need for outhouses and 
water delivery by truck. And like most other things in the Arctic, it 
is very expensive. A moderate storm almost breached the utilidor last 
fall with its severe surge. In response, the Borough has committed 
money to an erosion mitigation project in Barrow. The State of Alaska 
has also committed money to the project. But it is a very big project, 
and OCS revenues could be a critical component in helping us work to 
protect Barrow and other North Slope communities that are similarly 
impacted.
    The cost to keep our communities safe is often exorbitant, and with 
limited federal funds available for local coastal mitigation projects, 
we seek a fair share of OCS revenues, derived from our backyard, to 
ensure that we can continue to keep our communities safe.
    I would also note that the oil and gas industry, researchers, and 
federal agencies, including the U.S. Coast Guard, all use our local 
infrastructure--our airports and roads and hospitals. We welcome people 
to our community, and we were grateful for the Coast Guard's presence 
in Barrow during the 2012 drilling season, but we ask that Congress 
recognize the cost to our community of maintaining and expanding 
critical infrastructure as industry develops offshore resources.
s. 1273 supports state and local government investments in research and 
          the sound management of coastal and ocean ecosystems
    S. 1273 will enable State and local governments to support the 
research and baseline data collection programs that will ensure local 
resources are protected. This is especially true in Alaska where we 
deal with extremes in climate and the unique needs of rural Alaska 
Native communities.
    OCS revenues would support the Borough's Department of Wildlife 
Management, which engages in a range of land and ocean management work, 
and conducts much of the critical scientific research that we need--and 
that you need--to ensure offshore oil and gas development proceeds 
safely.
    There is a great deal of research needed to understand how best to 
mitigate the impact of oil and gas development on the Arctic 
environment, and the North Slope Borough can and should be a part of 
that effort.
    OCS revenues also would support the Borough's sound management of 
coastal and ocean ecosystems in an area larger than Wyoming. In 
previous times, when the Borough received a share of OCS revenues under 
the Coastal Impact Assistance Program enacted as part of the Energy 
Policy Act of 2005, the Borough invested in projects that supported, 
among other things, the restoration and rehabilitation of coastal areas 
and assessments of sensitive lands, waters, bowhead whales and other 
marine mammals, and the development of mitigation measures to reduce 
impacts. Revenues derived from S.1273 will be critical in allowing the 
Borough to undertake similar projects moving forward.
 s. 1273 supports state and local government investments in oil spill 
                  response and emergency preparedness
    Finally, S. 1273 supports the role of State and local governments 
in emergency preparedness associated with offshore energy development, 
including oil spill response preparedness. These funds would enable the 
Borough to purchase helicopters and other types of aircraft that have 
the capabilities to conduct search and rescue operations and transport 
people and equipment to remote areas should the need arise. Funds would 
also allow for the development of port and harbor infrastructure that 
can service oil spill response vessels, provide staging areas for oil 
spill response equipment, and improve the logistical capabilities of 
industry and government. Lastly, OCS revenues would support bringing 
broadband communications to the North Slope and developing 
communication centers that will be important for supporting industry 
and governmental activities and responding to emergency events.
    In summary, the people of the North Slope live in one of the most 
undeveloped regions in our nation. Investments must be made in the 
infrastructure necessary to ensure that OCS development can be 
conducted safely and responsibly. And the burden of providing such 
infrastructure should not fall solely on the people that have the most 
to lose in case of an oil spill. S. 1273 represents a fair and 
equitable solution in enabling local governments to make the 
infrastructure investments necessary to support OCS activity and to 
maintain the health and welfare of the North Slope's people and 
environment.

    The Chairman. Thank you very much. Very eloquent.
    Mr. Dupre.

STATEMENT OF REGGIE DUPRE, EXECUTIVE DIRECTOR, TERREBONNE LEVEE 
                   AND CONSERVATION DISTRICT

    Mr. Dupre. Mr. Chairman, members of the committee, my name 
is Reggie Dupre. I am currently the Executive Director of the 
Terrebonne Levee and Conservation District in Houma, Louisiana.
    I'd like to thank Senator Landrieu for allowing me to speak 
here today and for her tireless efforts for the citizens of 
Louisiana. It is indeed an honor and a privilege for me to be 
here.
    Prior to becoming the Executive Director of the Terrebonne 
Levee District I served as a State Senator representing the 
coastal areas of Terrebonne and Lafourche parishes. These two 
parishes have experienced coastal erosion rates higher than 
anywhere else in the United States.
    In late 2005 I was the lead author of a constitutional 
amendment that dedicated 100 percent of all future offshore oil 
and gas revenues to the task of restoring and protecting 
Louisiana's coast. This constitutional amendment received a 
unanimous vote of the Louisiana legislature and was approved in 
2006 by 82 percent of the voters in a State wide election. The 
State of Louisiana is currently operating on a master plan for 
the coast which includes $50 billion of projects designed to 
stabilize our coast and protect wetlands. This massive 
undertaking will not be possible without utilizing the 
recurring source of offshore oil and gas revenue sharing.
    In 2009 I decided to leave the State Senate to become the 
Executive Director of the Terrebonne Levee District. My 
community had been the subject of a Federal hurricane 
protection study since 1992 through a project called Morganza 
to the Gulf. Although the project was authorized for 
construction by Congress in the 2007 Water bill, it was quickly 
placed in the re-evaluation mode by the Congress in light of 
lessons learned from Hurricane Katrina.
    This was a very disturbing event since the citizens of 
Terrebonne Parish had been counting on the protection to be 
provided by the project and have even taxed themselves in 2001 
to pay their non-Federal cost share.
    In 2008 the leaders of Terrebonne Parish decided to start 
the Morganza project using only local and State funding. To 
date my district has completed $225 million of construction on 
the first phases of Morganza and the citizens of Terrebonne 
voted to tax themselves a second time in December 2012 to 
continue this effort.
    This local effort, while substantial, will not be enough to 
accomplish the task. Offshore revenues, which all 
infrastructure as an eligible use, are the only source constant 
and large enough to continue work on the Morganza project and 
others like it.
    Finally I want to share with you my experiences growing up 
in Pointe-aux-Chenes, Louisiana, a small coastal community on 
the Terrebonne/Lafourche boundary line. This is a small fishing 
community made up of Native Americans and French descendants 
which is literally at the epicenter of coastal erosion and land 
loss. The deterioration and slow destruction of this community 
has been my driving force in public service and professional 
life.
    I have witnessed in my lifetime a thriving community and 
culture reduced to a small community currently on life support. 
These coastal efforts are the only hopes for this area and many 
others around the State of Louisiana. It is important to note 
that the efforts and sacrifices of the people of coastal 
Louisiana have paved the way for the economic expansion of this 
country.
    The Delta region of Louisiana has been sacrificed to 
accommodate the building of the Mississippi River levees in the 
early 20th century. The rates of subsidence and coastal erosion 
were exponentially advanced and the problems that we are facing 
today are a result. Navigation and commerce throughout the 
country has been saved.
    The heartland has been spared flooding of the mighty river. 
The positive economic impact of this work to the country is 
immeasurable. But my region is gasping for survival as a 
result.
    Today the people of Louisiana's gift to the country is 
affordable, domestic energy through the in-service of the oil 
and gas industry. My region is a leader of this service 
especially that of deep water oil and gas production. Our 
ability to work on the coast is threatened by our problems, but 
our dedication and resilience answers the call each time.
    I want to leave you today with a quote from an article 
written in 1897 in National Geographic magazine by a well known 
engineer at the time. His name was E. L. Corthell. His article 
was in response to the debate that was occurring in the late 
1800s on what secondary effects the leveeing of the Mississippi 
River would have on the Delta areas of Louisiana.
    Mr. Corthell wrote, ``While it would be generally conceded 
that the present generation should not be selfish. Yet it is 
safe to say that the development of the Delta country during 
the 20th century by a fully protective levee system, at 
whatever cost the riparian states and the Federal Government, 
will be so remarkable that the people of the whole United 
States can well afford, when the time comes to build a 
protective levee against the Gulf waters.'' Written 116 years 
ago.
    You see action taken by the Federal Government in the early 
1900s is destroying my homeland before my eyes. The question 
before you, is it fair for Congress to pass the FAIR Act? The 
answer is absolutely.
    I thank you once again for the opportunity to speak before 
you. I'll be happy to answer any questions.
    [The prepared statement of Mr. Dupre follows:]

  Prepared Statement of Reggie Dupre, Executive Director, Terrebonne 
                     Levee & Conservation District
    Mr. Chairman and Members of the Committee, my name is Reggie Dupre. 
I am currently the Executive Director of the Terrebonne Levee & 
Conservation District in Houma, Louisiana.I would like to thank Senator 
Landrieu for allowing me to speak before you and for her tireless 
efforts for the citizens of Louisiana. It is indeed an honor and a 
privilege to be here. Today I will speak with you about my experiences 
in guiding legislation on the state level for dedication of offshore 
revenues, my current role of implementing large scale protection and 
restoration projects, and finally my experience growing up in a coastal 
community which is literally washing away every day from the Gulf of 
Mexico's intrusion on the coastal parishes of Louisiana.
    Prior to becoming the Executive Director of the Terrebonne Levee 
and Conservation District, I served as a Louisiana State Senator and 
was Chairman of the Louisiana Senate Natural Resources Committee. My 
district covered all of the coastal areas of Terrebonne and Lafourche 
Parishes. These two parishes have experienced coastal erosion rates 
higher than anywhere in the United States. In late 2005, I was the lead 
author of the Constitutional Amendment that dedicated 100% of all 
future offshore oil & gas revenues to the task of restoring and 
protecting Louisiana's coast. This Constitutional Amendment received a 
unanimous vote of the Louisiana Legislature and was approved in 2006 by 
82% of the voters in a statewide election. The state of Louisiana is 
currently operating on a master plan for the coast which includes $50 
billion in projects designed to stabilize our coast and protect 
wetlands. This massive undertaking will not be possible without 
utilizing the the recurring source of offshore oil and gas revenue 
sharing.I believe the constitutional dedication of our federal revenue 
sharing helped pave the way for Congress to pass GOMESA in late 2006.
    In 2009, I decided to leave the State Senate to become the 
Executive Director of the Terrebonne Levee District. My community had 
been the subject of a federal study since 1992 to protect the citizens 
of Terrebonne and Lafourche Parishes through a project called Morganza 
to the Gulf. Although the project was authorized for construction by 
congress in the 2007 WRDA, it was quickly placed into re?evaluation 
mode by the Corps for further study and re?engineering in light of 
lessons learned from Hurricane Katrina. This was a very disturbing 
event since the citizens of Terrebonne Parish have been counting on the 
protection to be provided by the project and had even taxed themselves 
in 2001 to pay their non?federal cost share. In 2008, the leaders of 
Terrebonne Parish decided to start the Morganza Project using only 
local and state funding and, to date, my district has completed $225 
million of construction on the first phases of Morganza and the 
citizens of Terrebonne again voted to tax themselves in December, 2012 
to continue this effort. This local effort, while substantial, will not 
be enough to accomplish this task. Offshore revenues, which all 
infrastructure as an eligible use, are the only source constant and 
large enough to continue work on the Morganza project--and others like 
it.
    Finally I want to share with you my experiences growing up in 
Pointe?aux?Chenes, Louisiana; a small coastal community on the 
Terrebonne and Lafourche parish boundary line. This is a small fishing 
community made up of Native Americans and French Descendants which is 
literally at the epicenter of coastal erosion and land loss. The 
deterioration and slow destruction of this community has been my 
driving force in public service and professional life. I have witnessed 
in my lifetime a thriving community and culture reduced to small 
community currently on life support. These coastal efforts are the only 
hopes for this area and many others around the state of Louisiana.
    It is important to note that the efforts and sacrifices of the 
people of coastal Louisiana have paved the way for the economic 
expansion of this country. The delta region of Louisiana has been 
sacrificed to accommodate the building of Mississippi River levees in 
the early 20th century. The rates of subsidence and coastal erosion 
were exponentially advanced and the problems that we are facing today 
are the result. Navigation and commerce throughout the country has been 
saved, the heartland has been spared flooding of the mighty river, and 
the positive economic impact of this work to the country is 
immeasurable. But my region is gasping for survival as a result.
    Today, the people of Louisiana's gift to the country is affordable 
domestic energy through its service of the oil and gas industry. My 
region is a leader in this service especially that of deep?water oil 
and gas production. Our ability to work on this coast is threatened by 
our problems but our dedication and resilience answers the call each 
time.
    I want to leave you today with a quote from an article written in 
1897 in National Geographic Magazine by a well know engineer of that 
time. His name was E. L. Corthell and his article was in response to a 
debate that was occurring in the late 19th century on what secondary 
effects the leveeing of the Mississippi River would have on the delta 
areas of Louisiana. Mr. Corthell wrote, ``While it would be generally 
conceded that the present generation should not be selfish, yet it is 
safe to say that the development of the delta country during the 
twentieth century by a fully protective levee system, at whatever cost 
to the riparian states and the Federal Government, will be so 
remarkable that people of the whole United States can well afford, when 
the time comes, to build a protective levee against the Gulf waters. . 
.''
    You see, actions taken of the Federal Government in the early 20th 
century is destroying my homeland before my very eyes. The question 
before you is, ``Is it fair for Congress to pass the FAIR Act.'' The 
obvious answer is ABSOLUTELTY! Passing legislation that rectifies the 
inequitable treatment between on and offshore states with respect to 
revenues generated by federal oil and gas activities is not only fair, 
but will allow the State of Louisiana the ablity to restore and protect 
our vanishing coast.
    I thank you once again for the opportunity to speak today. I will 
be happy to answer any questions.

    The Chairman. Thank you, Mr. Dupre.
    Let's go now to Ms. Alexander.

 STATEMENT OF RYAN ALEXANDER, PRESIDENT, TAXPAYERS FOR COMMON 
                             SENSE

    Ms. Alexander. Good afternoon. Thank you for the 
opportunity to testify today.
    Our mission at Taxpayers for Common Sense is to achieve a 
government that spends taxpayer dollars responsibly and 
operates within its means. As such I'm going to limit my 
comments to the fiscal implications of S. 1273.
    Increasing the State revenue shares for energy development 
in Federal waters, as S. 1273 proposes, would siphon revenue 
from the Federal coffers for decades to come. The preliminary 
Congressional Budget Office score for the bill indicates that 
S. 1273 would increase direct spending by $6 billion between 
2015 and 2023, not including likely implementation costs. 
Furthermore CBO estimated an additional increase in deficits of 
$5 billion over 2023.
    I'm happy to hear you guys are working on offsets. But in 
its current form it doesn't have any and violates paygo. At a 
time when we should be discussing how to bring in more revenue 
to the Federal Treasury, not less, this policy is short 
sighted.
    Natural resources from Federal lands and waters can and do 
provide a great benefit to the entire Nation. Taxpayers for 
Common Sense does not oppose offshore drilling in Federal 
waters. We believe with proper taxpayer safeguards and the 
application of fair market royalties that Federal resources can 
and must be used to meet our Nation's energy, transportation 
and mineral needs. But additional Federal resources derived 
from new drilling must go to Federal taxpayers.
    TCS does oppose any legislative measure that would allow 
States to receive a greater percentage of oil and gas revenues 
than is allowed under the traditional divisions of the Federal 
and State waters. We oppose any measures to direct any 
additional percentage of royalties collected on new leases in 
Federal waters to the States. Our concern with S. 1273 is the 
diversion of royalties from federally owned oil and gas 
resources at a cost to the Treasury of approximately $6 billion 
over 9 years.
    The Gulf of Mexico and Energy Security Act already directs 
a portion of revenue derived from new leases in Federal waters 
in the Gulf of Mexico to the States rather than to the Federal 
taxpayers. Since 2006, this law has cost taxpayers more than a 
billion dollars. In its current form will cost billions more in 
years ahead.
    Providing an increased share to the States for development 
in Federal waters does nothing to change the economics of 
energy development. Oil and gas, wind or other offshore 
developers would owe the same royalties, rents and fees at the 
end of the day either to the States or the Federal Government. 
Thus it reduces Federal revenues without adding any incentive 
toward energy development.
    Federal taxpayers are due the royalties derived from leases 
operating in Federal waters because those waters are 
administered, protected and managed by Federal, not State 
agencies at a cost to Federal taxpayers. Federal taxpayers fund 
the agencies charged with royalty collection and lease 
regulations. Additionally the U.S. Coast Guard, not the States 
inspects and regulates the offshore drilling rigs. It also 
performs vessel regulation, search and rescue, security and 
pollution response.
    Unlike onshore energy operations offshore energy operations 
do not occur in any State. The impact of operations beyond 
State waters reaches well beyond any one State and has natural 
implications. States do get the money from waters directed 
dedicated to the States under Federal law and we believe this 
should continue in any new drilling in State waters.
    In addition States get economic development benefits from 
energy operations in Federal waters near their coasts. But all 
Americans should get the revenue from royalties, rents and 
bonus bids in Federal waters. The revenue sharing changes made 
in GOMESA in 2006 authorized up to $500 million in annual 
Federal revenue losses starting in 2016 for activity in the 
Federal waters in the Gulf of Mexico.
    S. 1273 would extend similar revenue sharing provisions to 
new leases in Federal waters near other coastal States 
resulting in an additional multi-billion dollar loss to the 
taxpayers.
    Perhaps most importantly, S. 1273 would also increase and 
ultimately remove the $500 million cap on State revenue shares 
in GOMESA starting in 2015 significantly increasing Federal 
losses.
    TCS also has concerns with S. 1273 directing 50 percent of 
the revenue derived from onshore renewable energy production to 
the affected State because it does not address the fundamental 
problems with the current system governing renewable energy 
production on Federal lands.
    TCS supports moving to a competitive leasing process for 
renewable energy production and the application of fair market 
value royalty for all energy produced from those leases.
    Without addressing the inappropriate use of right of way 
authorizations, S. 1273 falls short for taxpayers.
    The country is now facing a nearly $17 trillion debt and 
across the board budget cuts. Many things need to be done to 
resolve the Nation's fiscal woes not the least of which is 
ensuring Federal taxpayers get the revenue they deserve from 
resources they own. The last thing Congress should be doing is 
giving away Federal resources.
    You know, I'm mindful to what I hear about the needs in the 
States that have offshore energy development. But the Federal 
Government also has incredible needs right now. We have a huge 
debt, significant deficits and there are many, many, many unmet 
needs for the Federal Government and Federal taxpayers.
    Thank you.
    [The prepared statement of Ms. Alexander follows:]

 Prepared Statement of Ryan Alexander, President, Taxpayers for Common 
                                 Sense
    Good afternoon Chairman Wyden, Ranking Member Murkowski, and 
distinguished members of the Committee. Thank you for the opportunity 
to testify today on the FAIR Act, S. 1273. My name is Ryan Alexander, 
and I am President of Taxpayers for Common Sense (TCS), a national, 
non-partisan budget watchdog organization.
    The mission of Taxpayers for Common Sense is to achieve a 
government that spends taxpayer dollars responsibly and operates within 
its means. Over the last 17 years, TCS has worked actively to ensure 
that taxpayers receive a fair return on resources extracted from 
federal lands and waters. Royalties and fees collected from resource 
development represent a significant source of income for the federal 
government and must be collected, managed and accounted for in a fair 
and accurate manner. As the rightful owners, taxpayers are entitled to 
fair market compensation for the resources extracted from our lands and 
waters, just like any private landowner.
    Unfortunately, over the years taxpayers have lost billions of 
dollars on royalty-free oil and gas leases and royalty-free hard rock 
mineral operations on federal lands. Outdated laws and an inadequate 
and sometimes corrupt royalty collection system have also cost us 
billions. In today's budget climate of across-the-board budget cuts, we 
cannot afford to lose this valuable revenue. These problems must be 
resolved as we move forward with additional mining and energy 
production on federal lands and waters.
    Today's hearing to examine legislation regarding energy revenues in 
federal waters certainly raises important issues. But increasing the 
state revenue shares for energy development, as the ``FAIR Act'' 
proposes, would siphon valuable revenue from the federal coffers for 
decades to come. As currently drafted, the bill has no offset and we 
expect its score against the federal budget will show significant cost 
to the taxpayer. At a time when we should be discussing how to bring in 
more revenue--not less--to the federal Treasury, this policy would not 
only be costly, but also dangerously short-sighted.
energy legislation must ensure fair and accurate collection of revenues 
            for extraction of our federally-owned resources
    Natural resources derived from federal lands and waters can and do 
provide great benefit to the entire nation. In addition to their end 
use and overall domestic economic benefit, their extraction provides 
valuable revenue to federal coffers, with the potential to provide much 
more.
    To this end, federal lands and waters must be mined, drilled or 
otherwise developed in a manner that protects taxpayers' interests, 
first and foremost. Appropriate fees, rents and royalties must be 
collected and long-term liabilities such as potential clean-up or 
mitigation costs must be shouldered by the extractive industries, not 
by taxpayers.
    While federally owned natural resources currently provide around 
$10 billion annually to the Treasury, this amount falls dramatically 
short of what is rightfully owed to the federal Treasury. For example, 
taxpayers are currently losing billions of dollars on royalty-free oil 
and gas leases in the Gulf of Mexico, as well as royalty-free 
operations for hard rock mineral extraction on federal lands. We must 
fix these problems so that we can recoup what we are owed.
    TCS is not opposed to offshore drilling in federal waters. But 
additional federal resources derived from new drilling must go to 
federal taxpayers, the rightful owners of those resources. We believe 
with proper taxpayer safeguards and the application of fair market 
royalties, federal resources can and must be used to meet our nation's 
energy, transportation, and mineral needs. Determining whether it is in 
the national interest to drill should include an evaluation of offshore 
resources and potential income, and also potential long-term 
liabilities.
    Taxpayers for Common Sense is opposed to any legislative measure 
that would allow states to receive a greater percentage of oil and gas 
revenues than is allowed under existing federal-state revenue- sharing 
provisions for royalty payments. We oppose any measure to direct any 
additional percentage of royalties collected on new leases in federal 
waters to the states. Further, we would like to see the revenue-sharing 
provisions of GOMESA repealed and the original federal/state shares 
reinstated. Revenues from traditionally defined federal waters must be 
directed to the federal Treasury.
          current federal royalty revenue already falls short
    TCS believes there are many areas where reform is needed to ensure 
fair and accurate royalty collection. Many of these changes will help 
both the federal government and the states acquire more revenue from 
federal energy leases.
    To begin, the federal government must have a clear, transparent 
collection system that has sufficient oversight and accountability. The 
many scandals that plagued the Minerals Management Service (MMS), the 
agency that for nearly three decades ran the government's royalty 
collection system, demonstrated how corrupted the system can become.
    For years the Government Accountability Office (GAO) has found that 
the Department of Interior has not done enough to monitor and evaluate 
its royalty collections. GAO has included royalty collection in its 
last two reports on high-risk federal programs and activities. A report 
in 2008 found that the DOI had not reviewed how it was compensated for 
extracted oil and gas from public lands for more than 25 years and had 
no system in place to even determine whether or not such a reassessment 
was needed. A 2010 study found that DOI had no way to determine if it 
was accurately measuring the amount of resources taken from public 
lands, making it unlikely the federal government is being fairly 
compensated. On top of these collection issues, the U.S. has some of 
the lowest underlying royalty rates in the world.
    Second, no lease should be able to operate royalty-free. Leases 
issued under the Deepwater Royalty Relief Act of 1996 are currently 
required to pay no royalty. Congress should not give away publicly 
owned assets. Taxpayers are losing billions on these leases and will 
lose far more when many of these idle tracts begin production. Several 
options have been proposed in the House and Senate to address this 
issue, but none have been enacted into law.
    Finally, other reforms to existing onshore oil and gas operations 
could also provide more valuable revenue for taxpayers. In 2010, GAO 
found that taxpayers would receive $23 million more in royalty revenue 
annually from additional natural gas obtained from federal lands, if 
companies were required to capture vented or flared natural gas in 
cases where it is economically feasible.
    Although some progress has been made to fix the system since the 
dismantling of MMS in 2010, the Department of Interior's new royalty 
management structure is still a work-in-progress. Since royalty 
collection has remained on the GAO's high-risk list, despite the new 
system at DOI under the Office of Natural Resources Revenue, it is 
clear the agency still has work to do in this area.
           state revenue-sharing changes proposed in fair act
    At the same time that federal taxpayers are already losing valuable 
royalty revenue, the FAIR Act proposes siphoning more money from our 
federally owned oil and gas resources.
    The Gulf of Mexico Energy Security Act (GOMESA) already directs a 
portion of revenue derived from new leases in federal waters in the 
Gulf of Mexico to the states rather than to federal taxpayers. Since 
2006, this law has cost taxpayers more than a billion dollars and in 
its current form will cost billions more in the years ahead.
    Revenue-sharing provisions, like those proposed in S. 1273, siphon 
billions of dollars in valuable revenue from the general Treasury. Not 
only is this bad policy, in today's fiscal climate it is downright 
foolish. Providing an increased share to the states for development on 
federal land would do nothing to encourage energy development, as it 
doesn't affect the bottom line of the oil and gas, wind, or other 
offshore developers--they would owe the same royalties, rents, and fees 
at the end of the day either to the states or to the federal 
government. Thus, it reduces federal revenues without adding any 
incentive toward energy development.
    Federal taxpayers are due the royalties derived from leases 
operating in federal waters because those waters are administered, 
protected, and managed by federal--not state--agencies at a cost to 
federal taxpayers. Federal taxpayers fund the agencies charged with 
royalty collection and lease regulations. Additionally, the U.S. Coast 
Guard, not the states, inspects and regulates the offshore drilling 
rigs; it also performs vessel regulation, search and rescue, security, 
and pollution response. Unlike onshore energy operations, offshore 
energy operations do not occur in any state. The impact of operations 
beyond state waters reaches well beyond any one state and has national 
implications.
    States do get the money from waters dedicated to the states under 
federal law and we believe this should continue in any new drilling in 
state waters. In addition, states get economic development benefits 
from energy operations in federal waters near their coasts. But all 
Americans should get the revenue from royalties, rents and bonus bids 
in federal waters. These waters are more than six miles from the coast 
and nine miles in parts of the Gulf of Mexico. State waters are within 
three miles of their respective shoreline.
    The changes made in the 2006 GOMESA legislation, which gave the 
Gulf states a larger share of federal revenues, demonstrate how large 
the revenue losses can be to federal taxpayers. Under GOMESA, Gulf 
states receive 37.5% of the royalty income from certain newly opened 
areas in federal waters of the Gulf. Beginning in 2016 they will 
receive 37.5% of royalties from new leases throughout the Gulf's 
federal waters, and up to $500 million annually. The new revenue-
sharing provisions of S. 1273 would extend these revenue-sharing 
provisions to new leases to other coastal states, resulting in an 
additional multi-billion dollar loss to the taxpayers. S. 1273 would 
also increase and ultimately remove the $500 million cap on state 
revenue, included in the original GOMESA bill, starting in 2015. This 
would dramatically increase federal losses.
                        onshore revenue changes
    The FAIR Act also includes a provision directing 50 percent of the 
revenue derived from onshore renewable energy production to the 
affected state. TCS also has concerns regarding a redirection of these 
funds at this time. While onshore resource extraction does share 50 
percent of the royalty revenues with the states, the minerals are 
permanently removed from the land, and from the state, and we believe a 
shared allocation of revenues is appropriate in that case.
    States do not receive revenue from federal lands rights-of-way, 
which is how renewable energy production is currently administered on 
federal lands. This is because the right-of-way authorizations are for 
temporary uses of the land. Therefore they should not be treated the 
same as mineral leases, which alter the land in a much different manner 
through the extraction of coal, oil, and gas and even (royalty-free) 
hardrock minerals. While there can still be a financial impact to the 
state for development of renewables on federal land, a simple 
redirection of 50 percent of the revenues to the states does not make 
sense.
    TCS does support moving to a competitive leasing process for 
renewable energy production on federal lands and the application of a 
fair market value royalty for all energy produced from those leases. 
Without addressing the underlying problem of the inappropriate use of 
right-of-way authorizations for renewable energy production on federal 
lands, this proposal falls dramatically short for federal taxpayers.
                               conclusion
    The country is now facing a $17 trillion debt and across the board 
budget cuts. Many things need to be done to resolve the nation's fiscal 
woes, not the least of which is ensuring federal taxpayers get the 
revenue they deserve for the resources they own. The last thing 
Congress should be doing is giving away federal resources.
    Federal lands and waters must be used responsibly and taxpayers 
must receive appropriate financial assurances from those companies 
benefiting from resource extraction. Without proper assurances, any 
future financial liabilities will fall on the shoulders of taxpayers.
    There is little that is ``fair'' for federal taxpayers in the 
current bill. Siphoning billions of dollars in valuable federal 
royalties away from the federal Treasury is fiscally irresponsible and 
will simply compound our budget problems.

    The Chairman. Thank you very much, Ms. Alexander.
    Mr. Luthi.

     STATEMENT OF RANDALL LUTHI, PRESIDENT, NATIONAL OCEAN 
                     INDUSTRIES ASSOCIATION

    Mr. Luthi. Thank you, Chairman Wyden, Ranking Member 
Murkowski and thank you for the opportunity to be here this 
afternoon.
    First of all I applaud the efforts of Senators Murkowski 
and Landrieu to draft this important and timely bill. I think 
it's a great first step. I urge the members of the committee to 
take the next step in enhancing America's energy security, 
energy reliability and American jobs.
    The extension of revenue sharing to all coastal States 
coupled with increased access to our outer continental shelf is 
not only reasonable and sound energy policy. But will generate 
economic growth and enhance our national security.
    NOIA is a trade association representing all segments of 
the offshore energy industry. Our approximately 290 members 
develop traditional oil and natural gas and non traditional 
sources such as wind. These dedicated men and women work every 
day to provide a reliable, reasonably priced, energy source to 
fuel our homes, schools, businesses, vehicles and our economy.
    It is my honor to represent them. I'm often in awe of the 
technology that is used to bring this energy to our homes. My 
testimony today will concentrate on the offshore portions of 
the bill.
    We have long advocated a fair and equitable revenue sharing 
formula allowing coastal States to share in the future revenue 
generated off their coasts makes good common sense. Pardon the 
pun, also makes good dollars and cents. Actually a sharing of 
the revenue would create potentially billions of dollars for 
State and Federal treasuries. But it's only by providing 
additional oil and natural gas lease sales can this theoretical 
revenue sharing become a reality. These two policies are an 
inextricably linked, revenue sharing and access.
    The bill recognizes that there are infrastructure demands 
placed on coastal and communities that support offshore energy 
development.
    One prime example is Senator Landrieu's home State of 
Louisiana where LA-1, the two lane highway that runs through 
the southern part of Lafourche Parish is the only road 
providing access to Port Fourchon.
    Likewise in Alaska, another State abundant in energy and 
natural resources, families and communities understand that 
energy and development and nature can and do exist. Many 
committee members recognize this important relationship within 
their States.
    We have the opportunity to address our economic challenges, 
deficit problems and national security. We have effectively 
banned exploration in over 85 percent of the OCS. Other 
countries are moving in the opposite direction. Norway, Ghana, 
Iceland and even Cuba have opened up new offshore areas.
    To my knowledge we are the only country developing its 
offshore energy that has banned access to a majority of its 
resources. In today's global economy companies invest capital 
where they are allowed to work. This could potentially mean the 
loss of jobs in energy for the United States.
    In 2011 Quest Offshore Resources conducted a study of 
economic jobs and benefits created by the offshore oil and 
natural gas industry in the Gulf of Mexico. More than 24 
hundred companies from at least 47 States provided equipment, 
employees and/or services to that offshore industry. These 
States include Oregon, Alaska, Louisiana, Colorado, Idaho, Ohio 
and Wyoming. Yes, I picked those States randomly from the 
study.
    [Laughter.]
    The Chairman. We knew that was a coincidence.
    Mr. Luthi. Yes.
    If the entire OCS were opened it's estimated that the 
offshore industry would sustain about 1.2 million jobs over the 
next 30 years and generate an additional 1.3 trillion in new 
revenues. Congressional delegations from South Carolina and 
Virginia have actually introduced legislation that would open 
up areas off their shore. We urge the committee members to look 
at this seriously.
    Right now there are no revenues coming from 85 percent of 
the OCS. The Federal Government is receiving 100 percent of 
nothing. So under the formula of this bill, assuming there are 
new lease sales, the Federal Government would receive 62 and a 
half percent of something.
    I say only in Washington, DC, hence CBO, OMB, do we think 
that receiving 100 percent of nothing is better than 62 and a 
half percent of something. I'm not an economist. I didn't stay 
at a Holiday Inn Express last night.
    [Laughter.]
    Mr. Luthi. But I do believe revenue, some revenue, is 
preferable to no revenue.
    Our OCS has the potential also from wind, wave, ocean and 
current and tides. All energy sources should be a part of the 
above the all energy approach. We expect great strides from 
non-traditional sources of energy.
    But frankly, EIA predicts in 2024 that coal, oil, natural 
gas and nuclear will still supply about 80 percent, over 80 
percent of our needs. We need to treat all energy sources 
fairly and provide for what is appropriate in the OCS. 
Identifying those areas is important because frankly, we do not 
know. Previous OCS moratoria prevented industry from conducting 
any geological and geophysical activities. The result is that 
we are basing resource estimates upon 30-year-old data.
    In conclusion, we stand on the brink of a new frontier for 
the United States. Our offshore resources can and should and be 
a strategically and prominent part of our Nation's energy 
future.
    At the time I look forward to attempting to answer some of 
your questions.
    [The prepared statement of Mr. Luthi follows:]

     Prepared Statement of Randall Luthi, President National Ocean 
                         Industries Association
    Chairman Wyden, Ranking Member Murkowski: Thank you for your 
invitation to testify before the committee today. I applaud the efforts 
of Senators Murkowski and Landrieu to draft this important and timely 
bill and greatly appreciate Chairman Wyden for scheduling this hearing.
    Members of the Committee, thank you for your interest in this bill, 
and I urge you to take the next step in enhancing America's energy 
security, energy reliability and creating more American jobs. The 
extension of revenue sharing to all coastal states, coupled with 
increased access to more of our Outer Continental Shelf (OCS), is not 
only reasonable and sound energy policy, but also a key to creating 
economic growth and improving our national security.
    First a word about NOIA: NOIA is a trade association representing 
all segments of the offshore energy industry. Our approximately 290 
member companies are involved in the exploration and development of all 
offshore energy resources: both the traditional oil and natural gas and 
the non-traditional including wind. Our mission is to secure reliable 
access and a fair regulatory and economic environment, so our nation's 
valuable offshore energy resources are developed in a safe, efficient, 
and environmentally responsible manner. Our members are a part of the 
workforce involved in energy exploration and development, engineering, 
marine and air transport, vessel construction, manufacturing, financing 
and telecommunications, to name just a few. These dedicated women and 
men work every day to see that our nation has a reliable, reasonably 
priced energy source to fuel our homes, schools, businesses, vehicles 
and economy.
    It is my honor to represent them, and I am often in awe of the 
technology used to bring this energy into our daily lives.
    Since NOIA represents the offshore industry, my testimony today 
concentrates on the offshore portions of the bill, namely the expansion 
of revenue sharing to all coastal states for all forms of offshore 
energy.
    NOIA has long advocated a fair and equitable revenue sharing 
formula for coastal states. We feel that such a policy promotes 
responsible offshore energy exploration and development. Allowing 
coastal states to share in the prospective future revenue generated off 
their coasts from both traditional and renewable offshore energy 
activities just makes good sense and, pardon the pun, also makes good 
cents. Actually, sharing revenue from offshore energy development 
creates potentially billions of dollars for state and federal 
treasuries.
    This bill establishes a formula for the sharing of offshore 
revenues between state and federal governments. However, the bill's 
revenue sharing formula alone is only part of the equation to providing 
more revenue and additional energy security for America. Only by 
providing additional oil and natural gas lease sales in more of the OCS 
can this theoretical revenue sharing become reality. The two policies 
are inextricably linked--revenue sharing and access.
    This bill recognizes that there are infrastructure demands placed 
on coastal states and communities that support offshore energy 
development. One prime example is in Senator Landrieu's home state of 
Louisiana, where LA-1, the two-lane highway that runs through the 
southern part of Lafourche Parish, is the only road providing access to 
Port Fourchon. Port Fourchon services 90 percent of all Gulf of Mexico 
deepwater energy projects, which are of great benefit to the United 
States. Therefore, LA-1 sees heavy traffic and maintenance costs.
    Likewise, in Alaska, another state abundant in energy and other 
natural resources, families and communities understand that energy 
development and nature can co-exist in a symbiotic way. The invaluable 
role that Alaska plays in our energy security would be further 
protected by ensuring offshore revenue sharing so that the State can 
enhance the infrastructure that brings those resources to market. Many 
of the members of this committee are from energy producing states and 
recognize this fundamental relationship.
    Currently less than 15 percent of the OCS is available for oil and 
natural gas exploration and development. (See attachment A.)* The Gulf 
of Mexico Energy Security Act of 2006 provided limited revenue sharing 
for Gulf Coast states. We support allowing all coastal states to 
receive 37.5 percent of the revenues generated by the offshore energy 
industry. We believe, however, that the talk of increased revenue is 
largely theoretical without the inclusion of additional lease sales off 
the coasts of those states who will share in that revenue stream.
---------------------------------------------------------------------------
    * Graphic has been retained in committee files.
---------------------------------------------------------------------------
    America's energy sector is experiencing a revolution. The good news 
is that this revolution has brought thousands of new American jobs and 
billions of dollars in new revenues, not only to the federal treasury 
during a time when our country needs it most, but also to the 
treasuries of countless states and communities across our country. 
According to a recent Congressional Research Service report, about 96 
percent of the increase in oil production since 2007 has occurred on 
non-federal lands. Similarly, natural gas production on the federal 
estate fell by 33 percent since 2007 while natural gas production on 
private and state lands grew by 40 percent.
    We have an opportunity to address our economic challenges, deficit 
problems, and national security vulnerabilities by simply allowing the 
private sector to engage in more responsible and safe energy 
exploration and development. Increased access to federal offshore areas 
must be a part of that discussion. The unfortunate reality, however, is 
that America has effectively banned exploration in over 85 percent of 
its OCS. Other countries are moving in the opposite direction. Nations 
such as Norway, Ghana, Iceland and Cuba have opened up new offshore 
areas for exploration. In fact, to my knowledge, America is the only 
country developing its offshore areas that has banned access to a 
majority of its offshore energy resources. In today's global economy, 
companies will invest capital in the areas where they are allowed to 
operate, which potentially means a loss of jobs and energy for the 
United States.
    Despite the restrictions on federal lands that I noted a moment 
ago, what we have learned from the development on state and private 
lands is that the energy sector is a bright spot in our economy. During 
the last two years, while much of the economy was suffering, oil and 
gas companies were actually providing new jobs.
    To bring this economic dynamic closer to home, in 2011 Quest 
Offshore Resources conducted a study of economic and jobs benefits 
created by the offshore oil and natural gas industry in the Gulf of 
Mexico. In addition to the immediate economic benefits to the Gulf 
region, the study indicated that more than 2,400 companies from at 
least 47 states provided equipment, employees and/or services to the 
Gulf of Mexico offshore industry. The study revealed that states across 
the nation have direct or indirect economic ties to the offshore 
industry. Those states include Oregon, Alaska, Louisiana, Arizona, 
Colorado, Delaware, Hawaii, Idaho, Michigan, Minnesota, Nevada, New 
Mexico, North Dakota, Ohio, South Carolina, South Dakota, Tennessee, 
Utah, Vermont, Washington, West Virginia and Wyoming. Those are just 
the offshore industry connections from the Gulf of Mexico. Imagine the 
economic benefit of opening up more offshore areas. The current de-
facto moratorium on over 85 percent of the U.S. Outer Continental Shelf 
is a key example of how the federal government is standing in the way 
of these American jobs. If the OCS were opened for exploration, it is 
estimated that the offshore industry would sustain 1.2 million new jobs 
over the next 30 years and generate an additional $1.3 trillion in new 
revenues.
    Congressional delegations in states such as South Carolina and 
Virginia have introduced legislation to provide for lease sales off 
their shores. I urge the committee to look at this possibility as part 
of a larger offshore energy policy.
    I'd also like to speak to assertions that offshore revenue sharing 
with coastal states amounts to a raid on the federal treasury by 
diverting funds that would otherwise flow to the federal government. 
Simply put, right now there are no revenues coming from offshore oil 
and natural gas development in about 85 percent of the OCS. Thus, the 
federal government is receiving 100 percent of nothing from these 
areas. Under the formula in this bill, and assuming future lease sales 
in new areas, the Federal government would receive 62.5 percent of 
something. Only in Washington, D.C. would we think receiving 100 
percent of nothing is better than receiving 62.5 percent of something. 
I am not an economist, but I prefer some revenue to no revenue.
    So far my remarks have focused on offshore oil and natural gas 
development, but our OCS also has potential for energy from wind, wave 
and ocean currents and tides. Federal policy differs greatly with 
respect to moving forward on lease sales in new areas for traditional 
energy versus non-traditional energy. While our federal government is 
moving quickly to establish lease sales for wind energy off the 
Atlantic coast, which NOIA strongly supports, federal policies continue 
to restrict traditional energy access to less than 15 percent of the 
OCS. All energy sources should be a part of the all-of-the-above energy 
approach. While we expect great strides in the years to come for these 
non-traditional sources of energy, the Energy Information 
Administration predicts that in the year 2040 traditional forms of 
energy such as coal, oil, natural gas and nuclear will continue to 
supply over 80 percent of our energy portfolio. We need a policy that 
treats all forms of energy development fairly and allows them all to be 
developed where appropriate in the OCS.
    The issue of identifying the most appropriate areas for development 
is also a key question, because frankly we currently do not know the 
answer. Until 2008, the roughly 85 percent of the OCS that is currently 
closed under the administration's 2012--2017 Five Year Plan was closed 
due to congressional and administrative moratoria. These moratoria 
effectively prevented industry from even conducting preliminary 
geological and geophysical (G&G) exploration for oil and natural gas 
reserves. The result is that we are basing resource estimates upon 30-
year old data using older technology.
    Therefore it is critical that the administration quickly complete 
its pending Environmental Impact Statement on Atlantic G&G activities. 
If not completed soon, there will not be any new data to feed into the 
2017--2022 Five Year planning process. However, the only sure way to 
spur this G&G work and determine if there are commercially viable 
assets in the more than 85 percent of unexplored territory, is to 
schedule lease sales and eventually drill new wells. In the Gulf of 
Mexico, the experience has been that industry has discovered many times 
over the amount of oil and natural gas thought to be there in the mid-
1980s. Will there be a similar experience for the mid-and south-
Atlantic and other new areas? We will not know until we look.
    In conclusion, thank you Chairman Wyden, Ranking Member Murkowski, 
Senator Landrieu and all committee members for the opportunity to share 
my thoughts with you today. I firmly believe we stand on the brink of a 
new frontier for the United States. Ten years ago, few thought we could 
be an exporter of natural gas, let alone oil. Our offshore resources 
can, and should, be a strategically prominent part of our nation's 
energy future. The extension of revenue sharing to all coastal states 
along with additional access to the OCS can help make that future 
bright and sustainable.
    I would be happy to answer questions.

    The Chairman. We have never had anyone paraphrase Billy 
Preston, whose song was nothing from nothing.
    [Laughter.]
    The Chairman. You have brought a first to us.
    Mr. Luthi. Thank you, I believe, Mr. Chairman.
    The Chairman. Very good.
    Our next witness is Mr. Athan Manuel with the Sierra Club.

STATEMENT OF ATHAN MANUEL, DIRECTOR, LANDS PROTECTION PROGRAM, 
                          SIERRA CLUB

    Mr. Manuel. Oh, I got a red light.
    Thank you, Mr. Chairman and Ranking Member Murkowski and 
members of the committee. My name is Athan Manuel. I'm the 
Director of the Lands Protection Program for the Sierra Club 
and represent 2.1 million members from around the country.
    We have members in all 50 States and have over 65 chapters 
in those 50 States. I appreciate the opportunity to testify 
this morning on the FAIR Act.
    I'll try and not read my testimony to take your advice, 
Chairman Wyden, at the start here.
    The Chairman. Great.
    Mr. Manuel. But obviously the Sierra Club, I think it's not 
news, opposes Senate Bill 1273. We've been a long standing 
opponent of revenue sharing for many of the reasons that Ms. 
Alexander cited in her testimony that--and if you look at 
what's happening here in Washington and around the country--we 
think our Nation faces two very great challenges.
    One is with the Federal budget deficit and sequestration.
    The other one is climate change.
    We think, unfortunately, this bill takes us backward on 
both of those very important issues.
    Diverting this much revenue from the Federal Treasury back 
to the States would be a significant financial hit to the 
Federal Treasury and increase the deficit. So we would oppose 
that. But we also don't want to see any incentives for new oil 
and gas drilling primarily because of the issues surrounding 
both spills and pollution that are associated with offshore 
drilling as we saw from the Deep Water Horizon spill or other 
spills in the last 30 or 40 years.
    But also we see most of these issues though under the 
umbrella of climate change. That if we're serious about 
fighting climate change we need to start taking measures to get 
our Nation off of fossil fuels and speed ourselves into a clean 
energy economy where we produce domestic, clean sources of 
energy that keep jobs here in the United States and don't 
contribute to climate change.
    So that's our primary opposition to this is both from a 
financial and from a climate perspective.
    In terms of the oil and gas industry itself, we don't think 
they really need many more incentives. I mean the industry is 
doing quite well. The number of rigs have tripled since 
President Obama has come into office. The U.S. is producing a 
record amount of oil in the last couple of years. The current 
5-year plan does allow for access to 85 percent--75 percent of 
the estimated undiscoverable and technically recoverable oil 
that's currently open in the Central and Western Gulf.
    So for all those reasons we think that is why we oppose 
these measures.
    On renewables we do think, though, that we should find a 
path forward to provide more financial incentives for renewable 
energy. Again, because it would help us fight climate change 
and reduce domestically produced sources of energy.
    On LWCF finally we are big fans of LWCF. We do want to see 
it fully funded and funded to the $900 million. But for both 
LWCF and renewables we don't want to see them attached to a 
bill that would keep our Nation hooked on fossil fuels and 
continue on the path of dirty energy.
    So for all those reasons we appreciate the opportunity to 
speak on the bill, but have to speak in opposition to the FAIR 
Act.
    Thank you for the time and the opportunity.
    [The prepared statement of Mr. Manuel follows:]

Prepared Statement of Athan Manuel, Director, Lands Protection Program, 
                              Sierra Club
                            i. introduction
    Mr. Chairman and members of the Committee, good morning. My name is 
Athan Manuel, and I am the Director of Lands Protection for the Sierra 
Club. I am here representing more than 2.1 million Sierra Club members 
and supporters who belong to more than 65 chapters and 450 groups 
nationwide. We are the largest environmental grassroots organization in 
the country. I am very appreciative of the opportunity to testify this 
morning regarding S. 1273, the Fixing America's Inequities with 
Revenues (FAIR) Act.
    The FAIR Act will increase and accelerate the sharing of federal 
offshore oil and gas revenues with coastal states. It will send as much 
as 37.5 percent of offshore energy production revenues to coastal 
states, while gradually eliminating the current $500 million annual cap 
on payments to those states. In addition, it expedites the second phase 
of revenue sharing under the Gulf of Mexico Energy Security Act 
(GOMESA), expanding qualifying revenues to include those from 
additional leased areas of the Outer Continental Shelf (OCS).
    ii. the fair act directs federal revenue to a handful of states
    In 1947, the Supreme Court granted the federal government 
``paramount rights'' to the Outer Continental Shelf.\1\ Citing the 
federal government's essential role in commerce and national security, 
the Court gave it ``full dominion of the resources of the soil under 
that water area, including oil.''\2\ This ruling was twice affirmed as 
states continued to bring claims to the OCS.\3\
---------------------------------------------------------------------------
    \1\ United States v. California, 332 U.S. 19, 38 (1947).
    \2\ Id. at 39.
    \3\ United States v. Louisiana, 339 U.S. 699 (1950) (rejecting 
Louisiana's claim to ownership of the seabed extending twenty-seven 
miles into the Gulf of Mexico); United States v. Texas, 339 U.S. 707 
(1950) (rejecting Texas' claim to ownership of the seabed extending 
twenty-four miles into the Gulf of Mexico).
---------------------------------------------------------------------------
    Although our coastal waters belong to all Americans, the FAIR Act 
will divert billions of dollars in federal revenue to a handful of 
coastal states. Annual revenues from mineral leases on federal lands 
are one of the government's largest sources of non-tax income. Last 
year, revenues from offshore oil and gas leasing and production totaled 
nearly $7 billion.\4\
---------------------------------------------------------------------------
    \4\ Office of Natural Resources Revenue, ``Reported Revenues: 
Federal Offshore in All Offshore Regions'' (2013). Available at http://
statistics.onrr.gov/ReportTool.aspx.
---------------------------------------------------------------------------
    Recent estimates place the deficit for this fiscal year at $642 
billion.\5\ Several members of Congress have referred to this as the 
biggest, most fundamental challenge we face.\6\ Yet in a time of 
sequestration and budget challenges, the FAIR Act will deplete federal 
revenues and increase the deficit.
---------------------------------------------------------------------------
    \5\ Congressional Budget Office, ``Updated Budget Projections: 
Fiscal Years 2013 to 2023'' (2013). Available at http://www.cbo.gov/
publication/44172.
    \6\ See e.g., Bonner County Daily Bee, ``Crapo: Debt is biggest 
challenge'' (2011). Available at http://www.bonnercountydailybee.com/
news/local/article_ab88c336-d5f6-11e0-b530-001cc4c03286.html; News 
Room, ``Corker Says President's Budget `Makes a Mockery of the American 
People', Fails to Address the Biggest Challenge Facing the Country'' 
(2012). Available at http://www.corker.senate.gov/public/index.cfm/
news?ID=90a01dbc-cde4-4a9c-ab07-0dbc78d414b9.
---------------------------------------------------------------------------
    Moreover, a recent report exposed gross mismanagement in 
Mississippi of millions of federal dollars derived from federal 
offshore leasing.\7\ An audit of the Coastal Impact Assistance Program 
(CIAP), which awards grants to oil-producing states for projects 
related to coastal conservation and restoration, found that lax federal 
oversight has led to almost $30 million dollars in questionable 
spending. In one case, an official from the Mississippi Department of 
Marine Resources used CIAP funds to buy a yacht club from a friend--the 
state paid $3.7 million for the property, but allowed the seller to 
continue operating the business and collecting revenues.
---------------------------------------------------------------------------
    \7\ Office of Inspector General, ``Management of the Coastal Impact 
Assistance Program, State of Mississippi'' (2013). Available at http://
www.doi.gov/oig/reports/upload/ER-IN-MOA-0013-2011Public.pdf
---------------------------------------------------------------------------
   iii. the fair act provides incentives for states to put critical 
                       coastal economies at risk
    In addition to being ill-considered from a national economic 
perspective, the FAIR Act will provide an incentive for coastal states 
to agree to new or additional offshore oil and gas development, 
development that could put booming local economies at risk. While only 
a few big oil companies will profit from drilling off of our coasts, 
all Americans stand to profit from keeping our oceans, beaches and 
coastal economies clean and healthy.
    The importance of coastal communities to our nation cannot be 
underestimated. Americans take almost two billion trips to the beach 
each year and spend billions of dollars in coastal communities.\8\ Our 
coastal recreation and tourism industry is the country's second largest 
employer; for every one job in the oil and gas sector, there are 84 
jobs in the region's leisure and hospitality industries.\9\ According 
to the World Tourism & Travel Council, tourism in America employs over 
14.7 million people, 10 percent of the American workforce, and accounts 
for 8.8 percent of the national GDP, bringing in $1.3 trillion. This 
makes America's coastal recreation and tourism industry the second 
largest employer in the nation.
---------------------------------------------------------------------------
    \8\ United States Environmental Protection Agency, ``Water: 
Beaches'' (2013). Available at http://water.epa.gov/type/oceb/beaches/
basicinfo.cfm.
    \9\ Bureau of Labor Statistics (2010). Available at http://
www.bls.gov/cew/gulf_coast_leisure_hospitality.htm.
---------------------------------------------------------------------------
    In addition to tourism, coastal economies are heavily reliant on 
commercial and recreational fishing. The two generate close to $200 
billion annually in sales and support over 1.4 million jobs.\10\
---------------------------------------------------------------------------
    \10\ National Oceanic and Atmospheric Administration , ``Fisheries 
Economics of the United States 2009'' (2011). Available at http://
www.st.nmfs.noaa.gov/st5/publication/econ/2009/FEUS%202009%20ALL.pdf.
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    Every aspect of offshore oil and gas development threatens our 
coastal waters and communities. Exploration, drilling, and 
transportation raise the risks of catastrophic oil spills, and expose 
our air, water, and wildlife to significant amounts of pollution.
Oil Spills
    Where drilling takes place, oil spills are inevitable. There have 
been at least 347 large spills (more than 2000 gallons) in the OCS 
since 1964\11\, smaller spills are a regular occurrence, and chronic--
and chronically unaddressed--spills continue to this day from abandoned 
wells.\12\ The results of an oil spill can be catastrophic for marine 
life and coastal economies. When oil reaches our beaches, it clings to 
every rock and grain of sand. As the Deepwater Horizon experience so 
amply demonstrated, even in calm waters thick with infrastructure 
current cleanup methods are incapable of removing more than a small 
fraction of the oil spilled in marine waters. Offshore drilling 
operations are especially vulnerable during hurricanes, a very real 
threat in the Gulf of Mexico where the majority of oil drilling occurs. 
In 2005, hurricanes Katrina and Rita caused 124 oil spills. Between the 
two storms, 741,000 gallons were spilled in the Gulf of Mexico.\13\
---------------------------------------------------------------------------
    \11\ Bureau of Safety and Environmental Enforcement, ``Spill 
Summaries OCS Spills ? 50 Barrels CY 1964--2012'' (2013). Available at 
http://www.bsee.gov/uploadedFiles/BSEE/Enforcement/
Accidents_and_Incidents/Spills%20greater%20tha n%2050%20barrels1964-
2012%20(As%20of%20August%203,%202012).pdf
    \12\ See e.g., NBC News, ``Gulf Awash in 27,000 abandoned wells'' 
(2010). Available at http://www.nbcnews.com/id/38113914/ns/
disaster_in_the_gulf/t/gulf-awash-abandoned-wells/; FOX News, ``27,000 
Wells Abandoned, Unchecked in Gulf'' (2010). Available at http://
www.foxnews.com/us/2010/07/07/gulf-awash-abandoned-oil-gas-wells/
    \13\ Minerals Management Service, ``Estimated Petroleum Spillage 
from Facilities Associated with Federal Outer Continental Shelf (OCS) 
Oil and Gas Activities Resulting from Damages Caused by Hurricanes Rita 
and Katrina in 2005'' (2006).
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    The 2010 Deepwater Horizon oil spill dramatically demonstrated how 
drilling can destroy fishing and tourism industries, and cost rather 
than create jobs. Two hundred million gallons of oil were spilled in 
the Gulf of Mexico, affecting 16,000 miles of coastline.\14\ Many 
businesses are still struggling to recover three years later.\15\
---------------------------------------------------------------------------
    \14\ United States Coastguard, ``On Scene Coordinator Report 
Deepwater Horizon Oil Spill'' (2011). Available at http://www.uscg.mil/
foia/docs/dwh/fosc_dwh_report.pdf
    \15\ See, e.g., CNN, ``Empty Nets in Louisiana Three Years after 
the Spill'' (2013). Available at http://www.cnn.com/2013/04/27/us/gulf-
disaster-fishing-industry; Gulflive, ``Three Years after BP Oil Spill, 
Jackson Economy Still Hurt But Fewer Tar Balls Seen'' (2013). Available 
at http://blog.gulflive.com/mississippi-press-news/2013/04/
three_years_after_bp_oil_spill.html.
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Climate Change
    Pollution produced by oil and gas drilling accelerates the global 
climate change, causing our planet's temperatures to rise more quickly. 
Average global temperature has increased by more than 1.3F over the 
last century.\16\ In addition to forever altering our coastal 
landscape, the resulting rise in sea levels will necessarily damage our 
coastal tourism economies by pushing visitors away from our beaches. 
Following a year of climate disasters--from droughts and wildfires to 
record heat and superstorm Sandy--it is clear that we cannot mitigate 
climate disruption with more of the same.
---------------------------------------------------------------------------
    \16\ United States Environmental Protection Agency, ``Climate 
Change Indicators in the United States'' (2013). Available at http://
www.epa.gov/climatechange/science/indicators/weather-climate/
temperature.html
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Drilling in America's Arctic
    The expansion of drilling in the Arctic is particularly troubling. 
This area is too sensitive, too ecologically important, and--as the 
grounding of the drill rig Kulluk and indeed Shell's entire failed 
program demonstrated last year--too volatile for oil drilling. Three 
oil and gas lease sales are already conditionally scheduled for the 
Alaska OCS--the Chukchi Sea and Cook Inlet in 2016, and the Beaufort 
Sea in 2017. These waters are home to the entire U.S. population of 
polar bears, millions of migratory birds, and endangered Bowhead 
whales. Oil leasing threatens the sustainability of this natural area 
and the livelihood and integrity of Native Alaskan communities, and we 
simply should not be holding more leases in our Arctic waters.
    While as explained above additional revenue sharing is not 
justified anywhere in our opinion, even the consideration of it in 
America's Arctic is particularly ironic given the demise of the 
federal-funded and incentivized Alaska Coastal Management Program. Such 
programs--established under the umbrella of the Coastal Zone Management 
Act--empower local communities to control development in their coastal 
areas, and provide them with resources and expertise to better 
understand and influence state and federal development proposals. 
Alaska had a robust plan covering its 33,000 miles of coasts, and its 
choice to reject local control and standards should not be rewarded 
with more federal money coming from development that threatens those 
very coasts.
    Even if we could extract oil safely, burning and releasing that 
much carbon into our atmosphere would mean global climate disaster. The 
Arctic is especially vulnerable to climate disruption. It is warming 
twice as fast as the rest of the country and specialized wildlife are 
struggling to keep up. Permafrost is melting, shifting building 
foundations and roads. Wildlife migration patterns are changing, which 
means hunters must travel further and take longer to feed their 
families. Our last wild frontiers should be permanently protected, not 
opened to drilling that will destroy landscapes, hurt local 
communities, and fuel climate disruption.
 iv. we should create incentives for states to abandon dirty fuels in 
               favor of safe and affordable clean energy
    The Sierra Club strongly feels that the best place to create 
domestic energy jobs is by focusing on renewable energy and energy 
efficiency. The renewable energy industry is providing clean, 
affordable, and reliable electricity across the United States. To 
support this industry, good green jobs are being created and they're 
overwhelmingly based here in the U.S. The sectors that have 
demonstrated the most dramatic job growth are the wind, solar, and 
energy efficiency. In fact, studies show that every dollar invested in 
clean energy creates three times as many jobs as every dollar invested 
in oil and gas.\17\
---------------------------------------------------------------------------
    \17\ http://www.peri.umass.edu/fileadmin/pdf/
other_publication_types/green_economics/economic_benefits/
economic_benefits.PDF
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    Instead of encouraging states to accept dirty offshore oil and gas 
development, we should provide states with greater incentives to 
embrace clean, safe renewable energy options. The renewable energy 
industry is providing affordable and reliable electricity across the 
United States. To support this industry, good green jobs are being 
created and they are overwhelmingly based here in the United States.
    Countries across the world are already taking advantage of offshore 
wind turbines to harness the energy of strong, consistent ocean winds. 
Offshore wind energy offers something valuable to our economy and 
national security--an inexhaustible source of domestic energy. With 53 
percent of our population living on the coast, offshore wind resources 
could supply enormous amounts of renewable energy to major coastal 
cities where energy demands are high. \18\
---------------------------------------------------------------------------
    \18\ Bureau of Ocean Energy Management, ``Offshore Wind Energy'' 
(2013). Available at http://www.boem.gov/Renewable-Energy-Program/
Renewable-Energy-Guide/Offshore-Wind-Energy.aspx.
---------------------------------------------------------------------------
    Our wind resource potential is estimated at 4,223 gigawatts, 
roughly four times the generating capacity of the current United States 
electric grid. If only a fraction of that potential is developed, it 
would fulfill a substantial portion of our nation's energy needs.\19\ 
This month, in its first lease sale for commercial energy projects, the 
federal government will auction off approximately 164,000 acres of 
federal waters. If fully developed, this area could produce enough 
electricity to power over one million homes.\20\
---------------------------------------------------------------------------
    \19\ Id.
    \20\ The New York Times, ``U.S. to Lease Federal Waters for 
Commercial Offshore Wind Energy'' (2013). Available at http://
www.nytimes.com/2013/06/05/business/energy-environment/us-to-hold-sale-
for-offshore-wind-energy-leases.html?_r=0.
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    Renewable energy sources will help us achieve true energy 
independence. The National Renewable Energy Laboratory (NREL) recently 
completed a several-year study to evaluate the future of renewable 
energy technologies in the United States.\21\ The study found that 
renewable energy sources, like wind and solar, could provide 80 percent 
of our electricity by 2050. Combined with a more flexible electric 
system, renewables could meet the contiguous United States' electricity 
demands every day and every hour of the day. As a result, we would reap 
substantial environmental benefits; renewable use will reduce 
greenhouse gas emissions, helping to combat climate disruption, while 
solar photovoltaic and wind plants use little or no water. In addition, 
the NREL found that the cost associated with this level of renewable 
generation is comparable to other ``clean-energy'' scenarios, such as 
nuclear or natural gas.
---------------------------------------------------------------------------
    \21\ National Renewable Energy Laboratory, ``Exploration of High 
Penetration Renewable Electricity Futures'' (2012). Available at http:/
/www.nrel.gov/docs/fy12osti/52409-1.pdf
---------------------------------------------------------------------------
    In June, as part of his plan to combat climate change, President 
Obama made a commitment to double renewable electricity generation by 
2020.\22\ To reach this goal, we must invest in a range of energy 
technologies, while improving grid flexibility. Congress should 
continue to raise the fuel economy of our cars, encourage the use of 
renewable energy like wind and solar power, and adopt other, existing 
energy-saving technologies that cut pollution, curb climate disruption, 
and create good jobs.
---------------------------------------------------------------------------
    \22\ Executive Office of the President, ``The President's Climate 
Action Plan'' (2013). Available at http://www.whitehouse.gov/sites/
default/files/image/president27sclimateactionplan.pdf
---------------------------------------------------------------------------
    v. opening new areas to offshore oil and gas development is not 
                necessary, nor will it lower gas prices
    The FAIR Act provides an incentive for states to adopt offshore oil 
and gas drilling, despite the fact that doing so makes little sense. 
Many areas already made available for drilling are not in use; as of 
this time last year, nearly 72 percent of the area leased for oil and 
gas development on the Outer Continental Shelf, totaling 26 million 
acres, was idle, neither producing nor undergoing exploration.\23\
---------------------------------------------------------------------------
    \23\ U.S. Department of the Interior, ``Oil and Gas Lease 
Utilization--Onshore and Offshore: Updated Report to the President'' 
(2012). Available at http://www.doi.gov/news/pressreleases/
loader.cfm?csModule=security/getfile&pageid=239255.
---------------------------------------------------------------------------
    Moreover, further offshore oil and gas development will do little 
to lower gas prices. Despite record oil and gas production, the 
national average price of gasoline on January first was $3.29--the 
highest starting point for a year ever.\24\ Due to a combination of 
improved fuel efficiency standards and rising oil and gas production, 
the International Energy Agency (IEA) estimates that the United States 
could become energy independent by 2035.\25\ The report stresses, 
however, that growing independence will not insulate the U.S. from the 
global market--because gas prices are set worldwide, reducing imports 
is unlikely to reduce gas prices. Instead, we will remain intimately 
tied to, and ultimately dependent on, the rest of the world. The only 
way to become truly energy independent is to eliminate our oil 
dependence altogether by developing alternative, renewable energy 
sources.
---------------------------------------------------------------------------
    \24\ Testimony of Chris Plaushin, before the U.S. Senate Committee 
on Energy and Natural Resources: ``To explore the effects of ongoing 
changes in domestic oil production, refining and distribution on U.S. 
gasoline and fuel prices''. Available at http://www.energy.senate.gov/
public/index.cfm/files/serve?File--id=e55fe608-639f-42e6-825c-
b43811699fee
    \25\ International Energy Agency, ``World Energy Outlook 2012'' 
(2012). Available at http://www.iea.org/publications/freepublications/
publication/English.pdf
---------------------------------------------------------------------------
    VI. The FAIR Act directs only minimal funds to the Land and Water 
Conservation Fund--a fund established to protect our most treasured 
places
    The Land and Water Conservation Fund (LWCF) protects our open 
spaces using offshore oil and gas revenues. Since its creation, it has 
protected nearly five million acres of public lands--including Grand 
Canyon National Park, the Appalachian National Scenic Trail, and 
Pelican Island National Wildlife Refuge, our nation's first federal 
refuge.\26\ Through its state assistance program, which provides 
matching grants to help states and local communities protect parks, 
playgrounds, and wilderness trails, the LWCF has benefited nearly every 
county in America.
---------------------------------------------------------------------------
    \26\ Land and Water Conservation Fund Coalition (2013). Available 
at http://www.lwcfcoalition.org/about-lwcf.html
---------------------------------------------------------------------------
    The FAIR Act directs only $62.5 million to the LWCF, less than 
seven percent of the $900 million it is congressionally authorized to 
receive annually. It provides a completely insufficient level of LWCF 
funding, putting our most treasured natural, cultural, and recreational 
areas at risk. These special places could be lost forever if not 
purchased and conserved by the public.
    The Sierra Club supports fully funding the LWCF at $900 million a 
year. However, it should be funded independently of a revenue sharing 
program.
                             vi. conclusion
    In a time of sequestration, the FAIR Act directs billions of 
dollars of much needed federal revenue to a few coastal states. In 
addition, it provides incentives for states to continue to rely on 
dirty fuels, placing our crucial coastal economies at risk. Instead, we 
should encourage states to embrace cleaner, safer forms of renewable 
energy, such as offshore wind energy.
    Increased offshore drilling does not make sense for our country. It 
will neither eliminate our dependence on a global market, nor lower gas 
prices--but it will keep us dependent on fossil fuels, threaten coastal 
economies and ecosystems and contribute to climate change and 
disruption. The only way to become truly energy independent is through 
the development of domestic renewable energy sources.
    Thank you again for the opportunity to submit testimony regarding 
the FAIR Act.

    The Chairman. Alright. Thank you. I know you're going to 
get some questions in a moment.
    Let's wrap up this panel with Ms. Cathie France. Welcome.

STATEMENT OF CATHIE J. FRANCE, DEPUTY DIRECTOR, ENERGY POLICY, 
       VIRGINIA DEPARTMENT OF MINES, MINERALS, AND ENERGY

    Ms. France. Good afternoon. The recovering trial attorney 
in me would never stay on script so you're lucky because I'm 
just going, sort of, summarize.
    The Chairman. Good. Good.
    Ms. France. I do thank you for letting us submit written 
because in these comments I did give a pretty robust background 
on the McDonnell Administration's advocacy for more access. 
We've had a roller coaster of activity as far as being included 
with Lease Sale 220. Then it being pulled back, delayed several 
times.
    So I guess for lack of time sake, we would associate 
ourselves with Mr. Luthi's comments but we do think access, 
particularly off the coast of Virginia is important. But 
recognize that this bill doesn't cover that. It covers what 
would happen if we did have that access and what is fair as far 
as revenue sharing.
    I will also point out the history that I've included on our 
efforts in the space of offshore wind. Governor McDonnell has 
taken a very staunch, all of the above approach. I'm always a 
little taken aback by the comments that we have to pick winners 
and losers when it comes to energy production. That there's 
this false line at 3 miles off the coast as far as what the 
impacts are and the burdens or the benefits and who should 
share them.
    All of this rhetoric, to me, and to the Administration 
really sets up an us versus them when it comes to the States 
verses the Federal Government in energy production and doing 
what's right for the citizens of this Nation. Instead this 
Administration feels like the us versus them should be all of 
us, the States and the Federal Government against the them 
that's currently providing a lot of our energy resources.
    Frankly, a lot of them are people who don't like us very 
much.
    So this Administration, the McDonnell Administration's 
approach to the Obama Administration has been agree to disagree 
where we have to. Put in what we think the State's rights 
should be. But when it comes to energy production, let's work 
together.
    I think you'll see in the timeline in the history of how 
we've tried to work with Former Secretary Salazar and the 
Administration both on increased access and on offshore wind 
development. You will see that we've truly tried to be a 
partner with the Federal Government when it comes to energy 
production. So that turns us to this bill in particular and our 
support for revenue sharing.
    Virginia has one of the most robust ports on the Eastern 
seaboard, really in the Nation. We have extensive heavy marine 
construction capabilities, Maritime support infrastructure and 
an unlimited air draft for transit, air and sea.
    But with offshore energy production whether it's oil, 
natural gas or wind, there will be upgrades that need to be 
made to the infrastructure at our port facilities themselves 
and for transportation in and out of that port. I don't just 
mean rail and roads, but also pipelines and transmission lines 
to bring that energy to the rest of Virginia but also to the 
region, to other States, inland States and the other States in 
the region.
    So again, that line, that false line, that at 3 miles out 
everything is OK and the State should just have this unfunded 
mandate to provide all the additional infrastructure to move 
this energy to where it's needed, is really a little bit 
disingenuous.
    We, our General Assembly, has passed legislation that says 
if we were to share in that revenue 70 percent would go to our 
Transportation Trust Fund which covers our road, rail and port 
facilities. That's how they're funded in our State budget.
    Another 10 percent would go to our localities to help with 
transportation and other infrastructure, like schools, as the 
Senator pointed out, you know, when you have increased 
employees and families that move into the area.
    Further, again, you know, we've been a true partner in the 
coastal management system in providing coastal and wetland 
protection and ensuring that we minimize the impacts to the 
environment and ensure the integrity of the coastline in 
Virginia. Again, this false line. To think that the State would 
have no role in that and would not have to partner with the 
Federal Government in doing that if this offshore energy 
production occurred, is just false.
    It is a true partnership between the States and the Federal 
Government to mitigate those impacts and to ensure the 
integrity of our coastline moving forward. So again, we feel it 
would be unfair to expect for the State to uphold its end of 
the deal if the Federal Government gets all the resources to do 
so.
    Finally I would just point out, you know, that this winner 
and loser mentality of oh, this is all about fossil fuels. 
Governor McDonnell believes in the all of the above approach. 
This bill, very astutely, does provide for increased research 
and development of alternative and renewable energy sources.
    In our legislature when we passed the legislation that says 
how we would use any cost share or any revenue share that was 
allocated to us, we also gave 20 percent to our Virginia 
Coastal Energy Research Consortium which is a consortium of 
universities and energy companies in Virginia that do R and D 
on alternative and renewable resources and try to get them to 
commercialization.
    So again I want to thank you for your time. That's just a 
brief summary. I appreciate your consideration of the written 
results. I'd ask that you seriously consider a vote in favor of 
this bill.
    [The prepared statement of Ms. France follows:]

  Prepared Statement of Cathie J. France, Deputy Director for Energy 
          Policy, VA Department of Mines, Minerals and Energy
    Chairman Wyden, Senator Murkowski, members of the Committee, good 
afternoon. My name is Cathie J. France. I am the Deputy Director of 
Energy Policy at the Virginia Department of Mines, Minerals, and Energy 
and a key advisor to Governor McDonnell on energy issues. Thank you for 
the opportunity to present at today's hearing. This is a very important 
issue for Virginia.
    While I am speaking on behalf of the McDonnell Administration, my 
comments also generally reflect the majority view of the citizens of 
the Commonwealth, our state House of Delegates and state Senate, as 
well as Virginia's two U.S. Senators and a majority of our 
Representatives in the U.S. Congress.
    As you know, Virginia's bipartisan political leadership has 
expressed time and again their support for development of offshore oil 
and gas off of the coast of Virginia, as well as the development of 
offshore wind.
                 virginia's support of ocs development
    Immediately after his election in November of 2009, Governor 
McDonnell expressed his desire to both Interior Secretary Salazar and 
President Obama that the Administration proceed with the previously 
scheduled OCS Lease Sale 220 off Virginia. In February 2010, the 
Virginia General Assembly passed legislation expressing its support for 
determining the extent of oil and natural gas resources 50 miles or 
more off the Atlantic shoreline, including appropriate federal funding 
for such an investigation, permitting the production and development of 
oil and natural gas resources 50 miles or more off the Atlantic, and 
inclusion of the Atlantic Planning Areas in the Minerals Management 
Service's draft environmental impact statement with respect to oil and 
natural gas exploration, production, and development 50 miles or more 
off the Atlantic shoreline.
    Virginia was thrilled when, in March of 2010, the President 
announced Lease Sale 220 would proceed as part of the 2007-12 five-year 
plan. In April 2010, Secretary Salazar came to Richmond and met with 
Governor McDonnell to discuss the scheduled Virginia 220 Lease Sale. In 
announcing his plan to expand offshore oil and gas exploration, 
President Obama said, ``this is not a decision that I've made lightly. 
It's one that Ken and I--as well as Carol Browner, my energy advisor, 
and others in my administration--looked at closely for more than a 
year. But the bottom line is this: Given our energy needs, in order to 
sustain economic growth and produce jobs, and keep our businesses 
competitive, we are going to need to harness traditional sources of 
fuel. . .''. Virginia could not agree more with this statement and was 
extremely disappointed when the President announced the cancellation of 
Lease Sale 220 in May of that year.
    The President went on to say, ``There will be those who strongly 
disagree with this decision, including those who say we should not open 
any new areas to drilling. But what I want to emphasize is that this 
announcement is part of a broader strategy that will move us from an 
economy that runs on fossil fuels and foreign oil to one that relies 
more on homegrown fuels and clean energy. And the only way this 
transition will succeed is if it strengthens our economy in the short 
term and the long run. To fail to recognize this reality would be a 
mistake.''
    Unfortunately, as we all know, on April 20, 2010 the Deepwater 
Horizon/Macando blowout occurred and on May 7, 2010 Interior 
indefinitely postponed the comment period and canceled the public 
meetings to scope the EIS for Virginia Lease Sale 220.
    On May 27, 2010, President Obama announced the cancellation of 
Virginia Lease Sale 220 and on December 1, 2010, Interior announced 
that further east coast development would be postponed until the 2017-
2022 five-year plan.
    Virginia objected strongly to the Bureau of Ocean Energy Management 
and Interior Secretary Salazar's decision to leave development of 
Virginia's offshore energy resources out of the proposed 2012-2017 OCS 
plan. The Governor sent a letter to Secretary Ken Salazar in November, 
2011 and had a member of his Cabinet testify at the public hearing on 
the Proposed 2012-2017 Five year OCS Plan urging Interior to provide a 
means to execute the Virginia Lease Sale 220.
    Virginia supported the Administration's initial pause to evaluate 
what happened in the Gulf after Macondo. Governor McDonnell stated 
clearly that Virginia only wanted to proceed after a thorough 
investigation of the failure of the safety systems that led to the 
accident.
    Virginia would have understood had that investigation caused a 
delay in proceeding with Virginia's sale such that we would have been 
pushed into the next five year plan, 2012-2017. But there is absolutely 
no reason why a Virginia sale should have been pushed out to the 
following plan, 2017-2022. We are encouraged by the recent actions by 
the House to pass the Offshore Energy and Jobs Act which would expedite 
the opening of areas off the coast of Virginia to offshore natural gas 
and oil production and allow for equitable revenue sharing.
            virginia's support of offshore wind development
    Virginia has also been a leader in supporting the development of 
offshore wind. In 2006, as part of its comprehensive energy plan, the 
Virginia General Assembly passed legislation declaring it the policy of 
the Commonwealth to support federal efforts to examine the feasibility 
of offshore wind energy being utilized in an environmentally 
responsible fashion. In 2009, they adopted a ``first of its kind'' in 
the nation Permit By Rule to streamline permitting of small (< 100 MW) 
land-based and offshore renewable energy projects by addressing all 
issues of species and habitat, water quality and other state regulatory 
issues in a single permitting process agreed upon by all interested 
agencies and other stakeholders.
    In 2010, the General Assembly approved Governor McDonnell's 
proposed Green Job Creation Tax Credit, an annual $500 tax credit for 
every green job created with a salary of $50,000 or more, for five 
years and up to 350 jobs. In 2011, they approved Governor McDonnell's 
creation of a new Clean Energy Manufacturing Incentive Grant program to 
focus existing resources for energy development incentives on targeted 
nuclear, wind, solar and biomass alternative energy projects. The 
legislation expanded Virginia's economic incentive programs for those 
companies willing to locate and innovate in the Commonwealth and will 
help make Virginia a hub for clean and renewable energy production.
    Further, the Governor supported the work of former Interior 
Secretary Ken Salazar's offshore wind consortium to reform the 
permitting process and develop leasing and permitting timelines that 
would support financing and actual project development which led to the 
Secretary's ``Smart from the Start'' program. The Governor also created 
the Virginia Offshore Wind Development Authority (VOWDA) which oversees 
the data gathering, research and planning that must be done to support 
offshore wind development off of Virginia's coast and track issues as 
they arise, and makes recommendations for promoting Virginia offshore 
wind development. VOWDA, in partnership with the Virginia Coastal 
Energy Research Consortium conducted several studies to quantify 
Virginia's offshore resource, and the transmission resources needed and 
available to support development of that offshore resource. The 
Commonwealth also partnered with the Bureau of Ocean Energy Management 
to conduct a regional ocean geological survey, which will provide data 
about the ocean floor that will be made available to developers. We 
have also submitted applications for two research leases--one in the 
wind area designated by the Department of the Interior in federal 
waters, and one adjacent to the Wind Energy Area designated for 
commercial development to facilitate turbine testing and future 
gathering of metocean data. Finally, the Commonwealth engaged with BOEM 
on their interagency task force to help deconflict military and 
commercial maritime interests in defining the Wind Energy Area and 
designing the sale notice for lease of that area. We are excited for 
that auction to take place on September 4, 2013.
    I provide all of this information to demonstrate Virginia's 
continuous commitment to an all of the above approach to energy 
production, reduction in our dependence on foreign oil, and our 
dedication to the safe and responsible production of our offshore 
resources. I would like to turn now to the reasons we believe that this 
cannot be done without a fair and equitable revenue sharing of offshore 
revenues for coastal states.
                      support for revenue sharing
    Virginia has one of the most robust ports in the United States with 
extensive heavy marine construction capabilities, major maritime 
support infrastructure with unlimited air draft transits between port 
and sea,. We are up to the challenge of providing the needed 
infrastructure for oil and gas exploration and development and the 
production of offshore wind. There will, however, be upgrades needed to 
our port infrastructure and to the transportation outlets leading to 
and from the Port once production of our offshore resources begins. We 
strongly believe that these infrastructure upgrades should be supported 
by money generated by revenue collected from the companies proposing to 
develop our offshore resources. In fact, in 2010, the General Assembly 
passed legislation that would dedicate 70% of any revenues and 
royalties paid to the Commonwealth as a result of offshore natural gas 
and oil drilling and exploration to the Transportation Trust Fund and 
10% to the localities of the Commonwealth for improvements to 
infrastructure and transportation. The cost allocation provided for in 
the FAIR Act would provide the funds needed to accomplish these 
important infrastructure upgrades.
    Further, Virginia would be required to support additional coastal 
and wetland protection and mitigation programs to ensure minimum 
impacts to the environment and maintain the integrity of our coastline 
during the development of our offshore resources. Additionally, we 
would partner with the federal government to implement safety programs, 
coordinate development operations with our military operations and 
commercial maritime interests and provide funding to help prevent or 
potentially respond to future incidents caused by weather events that 
may be beyond our control. It is very important that the federal 
Administration and the Commonwealth continue to work as partners in 
these important areas and it would be inequitable for the federal 
government side of the partnership to receive the only financial 
support for its efforts. This bill recognizes that and we applaud the 
Senator for encouraging the states and the Administration to work 
together and the provision of resources for both to be able to hold up 
their end of the deal.
    Finally, Virginia has made a commitment to use part of any revenue 
shared from offshore production for research and development related to 
alternative and renewable energy. The legislation passed by the General 
Assembly dedicates twenty percent of such revenues and royalties to the 
Virginia Coastal Energy Research Consortium which is a consortium of 
universities and energy companies in the Commonwealth dedicated to 
researching alternative and renewable energy innovations such as wave, 
tidal, wind, biodiesel production from algae, etc. This bill recognizes 
the importance of continuing to invest in research and development of 
innovative alternative and renewable sources of energy by dedicating an 
additional ten percent of the revenue generated by offshore production 
and we are committed to continuing that partnership as well.
    Thank you for your time and consideration this afternoon. I urge 
you to vote in favor of this bill and to enhance our energy security, 
our energy reliability, future innovation for alternative energy 
sources and the creation of many American jobs. Offshore energy 
production, along with revenue sharing to all coastal states, is 
necessary to create the partnership needed between the states and the 
federal government to create economic growth and improve our national 
security.

    The Chairman. Thank you very much.
    We'll start with Senator Landrieu.
    Senator Landrieu. Thank you very much, Ms. France for that 
energetic support of our bill. We look forward to working with 
you. Tell the Governor we appreciate his support and all the 
Governors that have leaned forward to give some good 
suggestions for our bill.
    Senator Dupre, thank you so much for coming. Your voice has 
been really extraordinary, not only in our State, but the Gulf 
Coast and your leadership.
    Could you just underscore the cost of our coastal 
protection and restoration plan? Give a minute about how that 
plan was developed over the course of Republican and Democratic 
Governors, scientists, stakeholders, just a minute about that? 
What will happen to that if we don't get a steady, reliable 
stream of revenue? What will happen to our State and to the 
district that you have so ably represented?
    Mr. Dupre. Thank you, Senator Landrieu.
    We currently operate in the State of Louisiana on a $50 
billion master plan. This is the first 2012 revision of this 
master plan. This concept started with two major issues as a 
result of Hurricane Katrina. I was the lead author of both of 
them.
    One of them was, obviously I discussed it before, the 
constitutional dedication of all future oil and gas revenues 
which we passed.
    The second one was creation of the Coastal Restoration and 
Protection Authority in consolidating and integrating those 
efforts under one umbrella in Louisiana and ordering that new 
agency with not one extra dollar of taxpayer moneys and 
bureaucracy. Just consolidating what we had into creating the 
first of its kind, master plan for both coastal restoration and 
hurricane protection. It was totally disconnected before 
Katrina.
    So those are the two small, silver linings that came as a 
result of major public policy shift on the State level in 
Louisiana as a result of Katrina.
    It's going to take a massive amount of money to fix the 
problems that have been caused in the last 90 or so years in 
the State of Louisiana.
    Senator Landrieu. So prior to Katrina what you're 
testifying is that while we had a master plan or a vision for 
how to save this coast, it was not jointly connected with 
hurricane protection.
    Mr. Dupre. Hurricane protection.
    Senator Landrieu. It was disjointed also in the sense that 
there was no stream of revenue but under various different 
Governors it kept evolving until Katrina hit. Then it really 
came together. Now we have a plan.
    Would you say that there's a general consensus of 
scientists about?
    Mr. Dupre. Oh, of course. As a consensus and like I said 
both the CPRA bill and the OCS Revenue Sharing bill on the 
constitutional amendment and adoption of the first master plan 
and of the revision of the master plan. All 4 of these major 
issues received a unanimous vote in Louisiana Legislature.
    So this is a huge, huge issue in our State. Eight-two 
percent of the people voting to, in some cases in North 
Louisiana against their own economic interests, voted to 
support this type of dedication.
    Senator Landrieu. Ms. Alexander, let me ask you two 
questions. I'm disappointed in your lack of support for this 
bill. I just want to be clear where Taxpayers from Common 
Sense--Taxpayers for Common Sense. I'm looking for the common 
sense here.
    You said that you don't support the bill because we don't 
have an offset. Would you support the bill if there was 
additional access to pay for what we are asking for?
    Ms. Alexander. We don't take a position on access. I want 
to be very clear. I mean, we generally take a position that 
revenues from Federal waters should go to the Federal Treasury.
    Senator Landrieu. OK. Let me stop you there then because I 
think it would be very interesting. I just want to make this 
for the taxpayers that maybe belong to your organization that 
live along the coast.
    I don't know if you're aware that 60 percent of all 
taxpayers in America live within 50 miles of the coast, 60 
percent? So those taxpayers, who are paying taxes to the 
Federal Government to build the roads and all the 
infrastructure that Ms. France talked about, that Mr. Dupre has 
talked about, that Ms. Brower has talked about. Those are 
taxpayers too.
    I think they would be shocked to hear you represent their 
interests that they are not entitled to share in the revenues 
that they are helping to produce for the Federal Government, 
those Federal taxpayers. I think they would be shocked to hear 
that your organization representing their interest in that way.
    Do you have any polling data from your people that live 
along the coast?
    Ms. Alexander. We don't have polling people. But we have 
taken this position for several years. I've testified on this 
and people----
    Senator Landrieu. I'll tell you the next time I do a poll--
--
    Ms. Alexander. Our position is very public.
    Senator Landrieu. The next time I do a poll I'm going to 
poll it. Because I cannot imagine Federal taxpayers that live 
along the coast not believing that your organization is up here 
basically testifying that they have to pay 100 percent of the 
roads, the schools, the raised taxes on themselves, roads, 
schools and everything so that the Federal Government can get 
those revenues and basically spend it on Federal operating 
expenses.
    I just cannot believe they would support it. But anyway.
    Then just let me ask one question, Mr. Manuel, finally. You 
don't support the bill either. The Sierra Club has never 
supported this bill or this concept.
    Do you support though the idea that Federal lands on 
interior States belong to all Americans? Do you support the 
revenue sharing that exists now in Wyoming and New Mexico or 
you all don't support that either?
    Mr. Manuel. No, we don't challenge that.
    Senator Landrieu. You don't challenge that. You think 
that's fine. Why is that fine?
    Mr. Manuel. That seems to be the law. Just like on revenue 
sharing for----
    Senator Landrieu. But if the law is wrong you wouldn't 
recommend it be corrected?
    Mr. Manuel. We have----
    Senator Landrieu. The Sierra Club doesn't try to amend laws 
that they think are unjust just stop new ones?
    Mr. Manuel. No, we try and do that too. But we have never 
taken a position on changing the revenue sharing----
    Senator Landrieu. OK.
    Could I ask the Sierra Club, I mean, just if you would, as 
a, you know, would you do a poll of your members and just let 
us know if they think that that revenue sharing for interior 
States is fair? Ask them to describe or explain to us why they 
wouldn't have that same view for, you know, for Federal lands 
offshore?
    Mr. Manuel. I'd be happy to bring it up with our board 
and----
    Senator Landrieu. OK. That would be great. I'm going to 
write you a letter asking that and if your board could explain 
it because it's puzzled me for a long time. Thank you.
    Mr. Manuel. You're welcome.
    The Chairman. Thank you, Senator Landrieu.
    Senator Murkowski.
    Senator Murkowski. Thank you, Mr. Chairman.
    You know I can't help but be struck that with the 
priorities that have been expressed here today by members on 
this committee.
    Whether it's for support for Land and Water Conservation 
Fund.
    Whether it's support for renewables moving us away from 
fossil fuel.
    Whether it's support for just conservation efficiency.
    Clearly the desire all of us, I don't care where you are, 
but the desire for jobs and a stronger economy. I keep coming 
back and Senator Landrieu, I'm thinking that this is the 
perfect bill. We have to figure out a way to help with job 
creation, stronger economy.
    When you've got a stronger economy this is how we deal with 
our debt and deficit issues. From a taxpayer's perspective I 
would like to think that most of us would rather find other 
ways to pay for these things rather than increasing taxes on 
our families and on our businesses and how we can move to this 
next generation of energy sources. We all recognize that it's 
going to take money to help build this out.
    I can't think of a way that within our communities, within 
our States, that this is not a positive way for us to address 
some of these very difficult, challenging issues. So I remained 
perplexed. We've talked a little bit about the double standard 
again.
    Mr. Manuel, you've just reinforced that you think that that 
double standard is somehow OK. I just have a real tough time 
with that.
    I want to ask, I guess it would be directed to you, Mr. 
Luthi. From your perspective and we've been talking a lot about 
the oil and gas side here. But I think it is important to 
recognize that this bill is broader than that. It presents 
opportunities.
    What was the level of interest in developing alternative 
and renewable energy resources within the OCS given what you're 
hearing within your association? Is this something--is this a 
concept that is intriguing and others would look toward 
development?
    Mr. Luthi. Absolutely. The development of what we often 
refer to as the non-traditional sources and particularly on the 
OCS, wind is the most talked about at the moment.
    Senator Murkowski. Sure.
    Mr. Luthi. The wind blows a lot off the coast of the United 
States. It's a valuable resource. If you look at the coastal 
United States, Senator Landrieu, you brought up the number of 
people who live near the coast.
    It is a logical place to have, you know, energy development 
because you're going to be supplying some of the major areas. 
So certainly that is there. What has been, of course, part of 
the problem has been is distance and cost because right now 
those are more expensive to build offshore than they are on.
    But as you see as the industry develops I think you're 
going to see those costs come down. We believe, you know, 
again, all of the above energy. Treat them all fairly. Treat 
them all the same.
    We believe that there is a great option for traditional and 
non-traditional sources in the OCS.
    Senator Murkowski. When you talk about the costs.
    Say, for instance, the development of offshore wind. OK, 
the costs of that particular project may go down. But you still 
have impact to wherever you are jumping off from to go to that 
offshore wind energy site, not unlike the impact that you will 
have with development of more traditional fuels.
    So I think what we keep coming back to is we don't want to 
discourage this development. We acknowledge that this will be 
good for our country, good for our economy and good for a lot 
of different reasons but that there is impact to development. 
So recognizing that, let's figure out how we can lessen the 
impact to that same group that is host.
    At this point in time I'd turn to you, Mayor Brower. You 
mentioned you have 8 thousand miles of coastline within your 
Borough, 94 thousand square miles of land that you, as Mayor, 
are tasked with. Can you speak just a little more directly to 
some of the strains on the Borough's resources that you have 
seen just in these few years?
    You know, Shell, obviously is not offshore right now. But 
they were gearing up over these past few years. What strains on 
Borough's resources have you seen as a result of that?
    Ms. Brower. Mr. Chairman Wyden.
    The Chairman. Yes.
    Ms. Brower. Honorable Senator Murkowski. Housing is a very 
big strain. I believe that it's very well received as one of 
the worst catastrophes to our region is lack of housing.
    The North Slope Borough in 2004 turned over every Housing 
Authority to its TNHA, Tagiugmiullu Nunamiullu Housing 
Authority, which is part of the HUD program and no longer does 
housing. We were hoping that with the new operations that Shell 
Oil would have just off our shores would bring in more revenues 
that we could be able to help our residents in housing needs. 
But that's not one issue that I can begin to say.
    The other infrastructure issues that we are is we miss, 
like about, 4 feet from our flood in November. The next flood I 
expect my whole town in Barrow to be wiped out just by 
infrastructure lost. That is a concern.
    We're on ice infested waters. We're worried about oil 
spill. However as whalers, as hunters, as grandparents, as 
mothers, fathers, we embrace what the Federal Government has 
told us that this is in your trust. Interior Department says 
this is in your trust. We believed them.
    We always believe what the United States says to us. But 
they turn around and says another. So when we heard about this 
revenue sharing, we automatically were happy because now we're 
able to do revenue sharing. We're able to bring at least some 
coffers into our government so that we can provide the service.
    The Federal Government has since left us. Yes, we have a 
new hospital. But we're worried that it's going to be all North 
Slope Borough who is going to take full responsibilities.
    There are other issues that I've gone and testified before 
on, just on the NPRA legacy wells. But the most important is 
our services to our residents. I have 10 villages which 
includes Prudhoe Bay.
    I have a total of 11,000 people. About 9,000 are at least 
permanent residents. A thousand in and out, maybe 2,000 at the 
most that are from the whole United States, international 
waters, coming in to work in Prudhoe Bay.
    Now imagine in 5, 6 years when the OCS really begin. I'm 
already being asked by the Korean government to come off my 
port. What port? I don't have a port in North Slope. I don't 
have a port in Barrow, Alaska.
    So they want to put out over thousands of Koreans off my 
shores. I'm sorry. I don't have no place for you. Please leave. 
Go to the next village that has the port.
    That's the infrastructure that I'm only asking that the 
Federal Government at least help us. So we were elated when the 
United States Coast Guard was going to make a presence in our 
region. We're going to spend money so we can keep them. They 
choose to go to the next community so that they can pay a lower 
rent.
    I have a solution. But I'm not going to say it right now.
    Senator Murkowski. Mayor, thank you.
    The Chairman. Thank you all very much. I think we've got a 
vote in a few minutes.
    I just had a question about a program that has expired, but 
I want to see if it did any good as we are part of this effort 
to educate ourselves. In the Energy Policy Act of 2005, 
Congress enacted an OCS Impact Assistance Program under which 
$1 billion was dedicated to addressing State and local impacts 
from Federal OCS development.
    Did either of you, Mr. Dupre or Mayor, did either of your 
areas get any money from this? If so, how did it work? What can 
you tell us, if anything?
    In other words, this was a program. My understanding is it 
was a 4-year program, something like that.
    Mr. Dupre. It was a 4-year program. I think Louisiana got 
54 percent of the $1 billion. All of it went to environmental 
projects. Some of them are just now going to bid very shortly 
because of permitting and other regulations.
    Actually had 6.3 million for two environmental water 
control structures along the Morganza alignment which we'll be 
building within the next few months.
    So, yes it has----
    The Chairman. Was it a useful program?
    Mr. Dupre. Very, very. It was very useful.
    The Chairman. Used it primarily for environmental.
    Mr. Dupre. It's not long term. It's not recurring.
    The Chairman. Got it.
    Mr. Dupre. That's the only problem with it. But it is a 
very useful program, especially on environmental type projects.
    The Chairman. Very good.
    Mayor, would like to add anything on that point? Do you 
recall anything about that program?
    Ms. Brower. I don't recall, but we have a similar program 
which is the National Petroleum Reserve Act which we receive, 
where the money is given to the State. Then we receive only 
through a grant. We don't get direct moneys from the Federal 
Government.
    That has been sustainable. But it can be improved.
    The Chairman. OK. We have Senator Barrasso on his way. I'm 
going to let him, if he arrives, ask questions. But I do want 
to give the last word to Senator Landrieu and Senator 
Murkowski.
    Senator Landrieu.
    Senator Landrieu. I just have two brief questions. I'm 
still just intrigued with the Taxpayers for Common Sense.
    Ms. Alexander, are you aware that, I guess, a similar 
thinking went into a couple of years ago when the New Orleans 
area argued that we needed to have about a billion dollars in 
addition Federal funding for our levee construction. We were 
turned down. I know you may not remember that. It was about, 
actually before I got here.
    John Breaux and Bennett Johnston were the Senators and 
Russell Long had argued that, you know, 1 day New Orleans would 
get hit by a major storm. It would be really a smart 
expenditure of Federal dollars to at least join with the locals 
to put up a billion dollars for the levee. That wasn't done.
    You know what happened in 2005, Katrina came. It cost the 
Federal taxpayers, that you claim to represent, $120 billion. 
So my question would be is sometimes is it important to spend a 
little bit on the money on the front end to save a lot on the 
back end or you don't agree with that either?
    Ms. Alexander. I definitely agree that sometimes it's 
important to spend a little bit of money on the front end to 
save money on the back end. We work a lot on flood control. We 
work a lot on the Army Corps of Engineers.
    I don't remember the specific instance you're talking 
about. But we have had staff working on Army Corps of 
Engineers, Mississippi River and flood control for a long time. 
We often pay for----
    Senator Landrieu. That's good. That's good. That's very, 
very good because that's exactly what the underlying principle 
of the FAIR Act is is to spend a little bit of money now and 
save a lot of money at the end.
    Mr. Manuel, I'm going to put up this here because I know 
the Sierra Club is one of the major environmental organizations 
in the country and you all may say, the world. This is the 
largest erosion project in the continental United States. What 
is the Sierra Club's plan to fix this?
    Mr. Manuel. I think we're part of the coalition in the Gulf 
that wants to see the area restored.
    Senator Landrieu. So what are your specific plans to 
generate funding? Do you have an estimate of how much it would 
cost?
    Mr. Manuel. I'll have to get back to you on that.
    But I think we're concerned like you are about sea level 
rise and the loss of wetlands and super storms. That's all 
related to climate change.
    Senator Landrieu. So what is the Sierra Club's plan to 
secure the livelihood of the people and their life and their 
health and their communities? I mean, there are hundreds of 
communities that are threatened here. Do you have a plan to 
help them?
    Mr. Manuel. I think we do. I'm happy to follow up with you 
on that.
    We have signed on to the coalition efforts in the wake of 
Katrina and in the wake of the Deep Water Horizon to--and we 
know it's a long term project to restore those----
    Senator Landrieu. Where would we get long term money if not 
from revenue sharing? Where will that come from?
    Ms. Alexander says we don't have even that.
    Mr. Manuel. Senator, we're not advocating for the repeal of 
GOMESA. You guys have revenue sharing coming from GOMESA.
    Senator Landrieu. With a $500 million cap split 4 ways 
where the interior States have no cap. We have a $500 million 
cap split 4 ways. So that would basically generate a maximum of 
$100 million a year.
    The project costs $50 billion over 50. I don't think $100 
million a year is going to do it. Do you?
    Mr. Manuel. No, but I'm happy to follow up with you on 
that.
    Senator Landrieu. OK. That's all.
    Alright. Then let me just add with this visual. I've been 
to the North Slope. I haven't been to the North Slope, but 
where did I go? They said to the village that fell into the 
big--Kaktovik and I went to Barrow. No, I think I went to 
Barrow.
    Anyway I've been to the coast of Alaska out in the middle 
of, you know, Shishmaref. It's just breathtaking. I've been to 
Grand Isle in Louisiana, one of our little islands.
    Whether you're standing right on the coast of Oregon or on 
the coast of Louisiana, on the coast of Alaska or the coast of 
Florida, what you see are these communities that can just look 
with their own eyes and see either windmills, rigs producing 
billions and billions of dollars of revenues for the Federal 
Treasury and for the private sector. These children that stand 
on this beach and these people that stand on these shores don't 
have an emergency room to go to. Some of them do not have clean 
drinking water. I have to listen to the Sierra Club and the 
Taxpayers for Common Sense and other opponents of this common 
sense legislation to simply ask to share a portion of the 
revenues for the necessary infrastructure, necessary to provide 
the host platform for the economic activity to occur.
    Do you think you just wave a magic wand and the oil and gas 
just flows out of the ground and jumps into everybody's tanks?
    How do you think the oil and gas get into people's tanks? 
When they fill up at the gas station do you think that there 
are a bunch of fairy godmothers out there that just wish a 
magic wand?
    I'll tell you how it gets there. The poor people in Alaska, 
the poor people in South Louisiana, that can't get one penny to 
build a gravel road, get up every day and walk to the shore, 
fly off in helicopters and ports and have to sit here and 
listen to the Federal Government say, we can't share a penny 
with you. I will not rest until this injustice is fixed.
    The Chairman. Let's do this. I think they may have called 
the vote.
    Let's see if we can have Senator Barrasso's questions and 
we will conclude for the day.
    Senator Barrasso. Thank you, Mr. Chairman.
    Mr. Luthi, the Obama Administration argues that its 
policies open up offshore areas which contain more than 75 
percent of the undiscovered, technically recoverable oil and 
gas resources estimated to exist on the outer continental 
shelf.
    Ms. Haze repeated this claim in her written testimony to 
the committee. However, in your testimony you state that 
America has effectively banned oil and gas exploration over 85 
percent of the outer continental shelf. That less than 3 
percent of the outer continental shelf is currently leased for 
energy exploration or production.
    So could you just help the committee reconcile your 
testimony with the claims from the Administration?
    Mr. Luthi. Thank you, Senator, Mr. Chairman.
    Yes, I can. If you only look in one area that's all you 
know. That is the approach, of course, that the Administration 
presented here today.
    We've only been looking in 15 percent of the OCS for 
probably 40, 50 years. So therefore, it is certainly, if you 
have sales in that area it's covering the known resources.
    The fact is we don't know what's in 85 percent of the rest 
of the OCS.
    Senator Barrasso. So is it fair to say the Administration's 
claims are misleading?
    Mr. Luthi. I think they're accurate as far as that girl 
stated. But again, if you only look at a narrow window that's 
all you're going to see is a narrow window.
    Senator Barrasso. You testified that the bill's revenue 
sharing formula alone is only part of the equation to providing 
more revenue for additional energy security for the country.
    You explain that revenue sharing in additional access to 
offshore areas are inextricably linked.
    You go on to say that right now there are no revenues 
coming from offshore oil and natural gas development in about 
85 percent of the outer continental shelf.
    That the Federal Government, as you said, is receiving 100 
percent of nothing from these areas.
    Would you expand upon the importance of providing 
additional access to offshore oil and gas resources as we 
consider this revenue sharing legislation?
    Mr. Luthi. Thank you. Mr. Chairman and Senator Barrasso, 
thank you for reading the testimony. I'm impressed.
    Absolutely. We think it is important that you actually--
there's a couple of reasons I'd like to talk about.
    One is we need greater diversity from the oil and gas area. 
The Gulf of Mexico does a fantastic job in supplying almost a 
third of our Nation's oil. I think it's about 17 percent of our 
Nation's gas.
    It's done well. It does great. But as we've talked about 
before if a hurricane happens to come into the area, the Gulf 
of Mexico, it's easily 90 percent of that production is shut 
down. It should be shut down for safety reasons.
    Wouldn't we be better off if we were able to diversify the 
source of that oil and gas to possibly the East Coast, possibly 
more of California? Again for energy security, energy 
reliability, we should be opening up more areas in the OCS.
    Senator Barrasso. Just one final question. In your 
testimony you encourage the committee to consider legislation 
to provide oil and gas lease sales off the coast of Virginia 
and South Carolina.
    Would it be fair to say that industry supports even limited 
efforts to open up additional areas to offshore oil and gas 
leasing?
    Mr. Luthi. Yes.
    Senator Barrasso. OK, thank you.
    Thank you, Mr. Chairman.
    The Chairman. I thank my colleagues. I thank all our 
witnesses. We've been at it for, as you all have seen, for well 
over 2 hours.
    As I indicated some time ago that this is not something 
where we come with a clean slate, if there was a clean slate 
this would be a different debate. Because there is decades and 
decades of history and we have economic issues. We have 
environmental issues. We have taxpayer issues.
    This is going to be a very, very significant challenge. But 
I think my colleagues to a one, have handled this discussion in 
a thoughtful way. We've gotten some good answers on the record.
    Thank you all for your patience.
    With that the Committee on Energy and Natural Resources is 
adjourned.
    [Whereupon, at 4:50 p.m. the hearing was adjourned.]
                               APPENDIXES

                              ----------                              


                               Appendix I

                   Responses to Additional Questions

                              ----------                              

      Response of Reggie Dupre to Question From Senator Murkowski
    Question 1. Please provide some examples of projects underway or 
completed due to payments received through the revenue sharing program 
established under GOMESA. If there was not revenue sharing in the Gulf, 
where would funds to complete these projects come from, or would the 
projects not be undertaken?
    Answer. There are no completed projects funded from GOMESA because 
LA does not begin to receive significant Fed revenue sharing till 2017-
18. However, this is the only recurring source of Fed revenue we can 
depend on for coastal protection projects. As I stated in my testimony 
in July, the voters of LA approved my State Constitutional Amendment in 
2006 by an 82% margin that dedicated 100% of all revenue sharing to 
coastal protection or infrastructure projects directly related to 
coastal wetland losses.
       Response of Reggie Dupre to Question From Senator Landrieu
    Question 1. Thank you again for your testimony. Can you please 
restate how much money is needed under the Coastal Protection and 
Restoration Authority's Plan (CPRA) to save the Louisiana Delta?
    And if we do not find a way to protect this coast, what does our 
nation stand to lose?
    Answer. According to the 2012 LA coastal master plan, it is 
estimated that it will take $50 billion to restore La's coast to a 
sustainable level. Without Fed revenue sharing (GOMESA and/or Proposed 
FAIR) there is no recurring source of Fed revenue to help us protect 
LA's vulnerable coastal communities. If these communities continue to 
be unprotected, the infrastructure and jobs providing approx 30% of the 
U.S.'s energy supply will be threatened. Such a situation will result 
in a bad economic situation for the entire nation.
                                 ______
                                 
       Response of Pamela K. Haze to Question From Senator Wyden
    Question 1. In the Energy Policy Act of2005, Congress enacted an 
OCS coastal impact assistance program (ClAP), under which $1 billion 
was dedicated to addressing state and local impacts from Federal OCS 
development.

   Please provide a chart that sets forth the amounts paid to 
        each state and local political subdivision under this program, 
        and if available, the use to which the funds were put?
   What kind of Federal oversight is there with respect to the 
        use of the funds? Does the Secretary need additional authority 
        to ensure that the funds are used as required by law?

    Answer. The amounts paid to each state and local political 
subdivision are included in the following chart:


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

    Projects under the State ClAP Plans address one or more of these 
authorized uses: (1) Projects and activities for the conservation, 
protection, or restoration of coastal areas, including wetlands; (2) 
Mitigation of damage to fish, wildlife, or natural resources; (3) 
Planning assistance and the administrative costs of complying with this 
section; (4) Implementation of a federally-approved marine, coastal or 
comprehensive conservation management plan; and (5) Mitigation of the 
impact of Outer Continental Shelf activities through funding of onshore 
infrastructure projects and public service needs.
    Beginning in FY 2012, oversight and responsibility for management 
of the ClAP program has been delegated to the U.S. Fish and Wildlife 
Service, and it operates under the Service's Wildlife and Sport Fish 
Restoration Program (WSFR). Prior to this the program was administered 
by the Bureau of Ocean Energy Management, Regulation and Enforcement 
(successor to the Minerals Management Service). The administration of 
ClAP is modeled after the WSFR grant management system and adheres to 
the regulations at 43 CFR Part 12, Administrative and Audit 
Requirements and Cost Principles for Assistance Programs. The Service 
applies the same established policies and grant review and monitoring 
protocols to ClAP that are used to administer similar mandatory grant 
programs like Pittman-Robertson Wildlife Restoration, Dingell-Johnson 
Sport Fish Restoration, and the formula-driven portion of State and 
Tribal Wildlife Grants. Since February 2012, ClAP land acquisition 
protocol requires both a certified appraisal and a certified review 
appraisal using the Uniform Appraisal Standards for Federal Land 
Acquisitions.
    All projects approved for ClAP funding are described in a State 
ClAP Plan that is reviewed by the public, submitted by the respective 
governors and approved by the responsible DOl administrative bureau. 
Each approved project in the plan was evaluated independently by the 
responsible DOl bureau prior to funding and found to conform to one or 
more of the five authorized uses mandated in the Energy Policy Act 
of2005. The ClAP grants that have been awarded by the Service have been 
reviewed and determined to substantially address the project 
description and objectives in the approved State ClAP Plan. Proposed 
projects that have minor deviations from the descriptions in the 
approved Plans are addressed through an amendment process that includes 
public review where project objectives could be affected.
    The Energy Policy Act of 2005, Section 384, provided the necessary 
framework for grants to address the many issues related to conservation 
and mitigation efforts in the oil and gas producing states. The federal 
regulations for grant administration, notably 43 CFR Part 12 and 49 CFR 
Part 24, provide sufficient regulatory authority for the Service to 
administer ClAP in an effective, efficient, accountable and transparent 
manner.
    Responses of Pamela K. Haze to Questions From Senator Murkowski
    Question 1. During testimony, questions were raised about the 
status of the Department's Programmatic Environmental Impact Statement 
for seismic activity to assess the OCS resources base in the Atlantic 
Ocean. Please provide a status update on when the final EIS may be 
expected.
    Answer. The goal is to complete the Programmatic Environmental 
Impact Statement (PElS) by the end of the year. Completion of the PElS 
is part of the Department's strategy to evaluate potential future 
offshore oil and gas leasing in new areas. This PElS is part of the 
region-specific strategy to responsibly develop modern information 
about the significance and location of oil and gas resources to inform 
future decisions about whether leasing in the Atlantic would be 
appropriate and where such leasing should take place. Through this 
process, BOEM is also actively working to identify and evaluate 
potential conflicts with existing uses in these areas, including with 
the military.
    Question 2. Your testimony ignored the provisions in the FAIR Act 
(S.1273) that provide revenue sharing to states only if they establish 
funds in their treasuries to support clean energy and conservation 
projects. Do these provisions not support the Administration's energy 
and conservation goals?
    Answer. As noted in the statement for this hearing, the 
Administration's concerns with the legislation are broad. The 
Department's preliminary calculations show that the legislation would 
likely result in a reduction of more than $5 billion in deposits to the 
Treasury through 2022, and the rate of reduction in deposits would 
dramatically increase thereafter. Similarly, the Congressional Budget 
Office's preliminary estimates, released shortly before the hearing, 
estimate that if enacted the legislation would increase direct spending 
by approximately $6 billion over the 2015-2023 period. This loss of 
revenue is a major concern for the Administration, particularly during 
this time of sequestration. The bill would add to the federal deficit, 
while missing important opportunities to strengthen core conservation 
programs through mandatory Land and Water Conservation Fund (LWCF) 
funding and to improve our energy security by establishing and funding 
the Energy Security Trust. These uses would benefit all states, 
including both those with offshore drilling taking place in adjacent 
Federal waters and those without.
    While the Administration appreciates the concept of creating 
incentives for states to move toward development of alternative and 
renewable energy and supports additional conservation activities and 
projects, it appears that the language inS. 1273 would require only the 
establishment of such a fund by a state in order to receive a share of 
the 10 percent reserved for distribution in section 9(b)(1)(B)(ii). The 
language does not require that the revenue disbursed to a state under 
this provision be placed in that fund, and there are no enforcement 
mechanisms in the bill to ensure that the revenue disbursed to a state 
is spent for the fund purposes. It therefore appears that a state could 
use federal revenue received under this provision for any purpose, 
including those unrelated to clean energy and conservation.
    Question 3. Your testimony chastised the Senate for ``missing an 
important opportunity to improve our energy security by establishing 
and funding the Energy Security Trust.'' However, you oppose the FAIR 
Act (S.1273) because it adds to the federal deficit. Please explain how 
the Energy Security Trust will be funded. What are the offsets for this 
trust fund?
    Answer. The President's proposed Energy Security Trust would set 
aside $2 billion over 10 years to support research into a range of 
cost-effective technologies, such as advanced vehicles that run on 
electricity, homegrown biofuels, fuel cells, and domestically produced 
natural gas. As noted at the hearing, the mandatory funds would be set 
aside from royalty revenues generated by oil and gas development in 
federal waters of the OCS. The Trust is paid for within the context of 
the overall budget. In the FY 2014 Budget, the Administration has 
offered a variety of mandatory savings proposals that could be used to 
offset the cost of this new mandatory proposal; this includes mandatory 
savings proposals associated with DOl programs as well as those from 
other agencies.
    Question 4. To what extent are DOl personnel deployed temporarily 
or on a full-time basis overseas to support the development of offshore 
oil and gas resources outside the United States? Please include a full 
list of countries.
    Answer. With the understanding that the term ``deployment'' means 
long-term stationing, the Department does not deploy personnel overseas 
to support the development of offshore oil and gas resources of other 
countries. As a leading natural resource and science agency of the 
United States, DOl conducts international activities to accomplish the 
Department's mission and support complementary U.S. foreign policy 
priorities. As part of these efforts, the DOl engages and collaborates 
with its international counterpatis to promote best practices for 
sustainable safety and environmental protection as well as to provide 
limited technical assistance regarding governance of energy resources 
in conjunction with the Department of State's (DOS) Energy Governance 
and Capacity Initiative. The DOS provides funding to support technical 
assistance conducted at its request.
     Responses of Pamela K. Haze to Questions From Senator Johnson
    Question 1. Your testimony notes that the FAIR Act (S. 1273) would 
likely result in a reduction of more than $5 billion in deposits to the 
Treasury through 2022. In fact, CBO provided an initial estimate that 
the bill would increase direct spending by approximately $6 billion 
between 2015 and 2023. I share the Administration's concern about the 
impact such a substantial loss of revenue to the federal government, 
particularly as we are facing sequestration and substantial budget 
deficits. Though this loss of revenue would be felt across agencies, 
how do you foresee it impacting priorities within the Department of 
Interior? I am particularly interested in potential impacts to the 
Department in light of chronic underfunding of federal priorities like 
Indian education programs, BIA law enforcement and congressionally 
authorized rural water projects.
    Answer. The reduction in revenue from the Treasury that would 
result from enactment of S. 1273 would most certainly increase the 
deficit and would exacerbate the pressure we already face to tighten 
budgets and spending in other areas throughout the government, which 
will impact all Federal programs, including those in the Department of 
the Interior.
    Question 2. The FAIR Act eliminates the cap on revenues shared with 
Gulf Coast states after fiscal year 2025, which would dramatically 
increase the forgone revenue to the federal government. Can you provide 
additional detail on how much federal revenue would likely be lost each 
year after this cap is eliminated?
    Answer. The significant number of assumptions required to calculate 
future revenue make it time consuming and difficult to accurately 
forecast lost revenue in the out years. However, by using past years of 
actual revenue generated from leasing activity on the Outer Continental 
Shelf, it is possible to get a general sense of how payments made to 
states under the current program and authorities might compare to 
payments under the program that would be put in place by S. 1273, 
excluding the cap on revenues.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Thus, under current law the states received $675.6 million during 
the period FY 2003-2012. Based on the terms of the FAIR Act, had the 
same program been fully in place at the time these payments were made, 
we estimate that the coastal states would have received an additional 
$20.8 billion in revenue sharing payments over same period (as noted in 
the table above).
    To calculate these estimates, Interior made several assumptions, 
including:

   The figures do not presume which states might have 
        established, pursuant to section 2(b), funds to support 
        projects and activities relating to alternative or renewable 
        energy, energy research and development, energy efficiency or 
        conservation in order to receive an additional10 percent 
        disbursement. Therefore, 27.5 percent was used for each state. 
        If all benefiting coastal states established such funds, the 
        state payment totals would likely be at least one-third higher 
        than those listed above.
   The legislation has a $500 million payment cap beginning in 
        2014 and increasing by $100 million each year until 2025, after 
        which there is no cap on this revenue sharing. The figures 
        above do not presume a fixed dollar cap on payments, but 
        provide a best approximation of the cost of revenue sharing 
        once payments are fully phased in under S. 1273.
   The revenue sharing percentages for the four Gulf of Mexico 
        states are based on current leases and may not reflect leases 
        in place each year. Interior estimates that this could inflate 
        Alabama and Mississippi shares by one or two percent.

    Question 3. When Congress established the Land and Water 
Conservation Fund (LWCF) in 1965, there was a direct recognition that 
as oil and gas resources on the outer continental shelf are developed 
and depleted, a portion of revenue should be reinvested in conservation 
and public lands as a means of providing a lasting benefit to the 
American people. In my state and nationwide, LWCF has helped invest in 
public lands that provide new opportunities for sportsmen, anglers and 
other recreational users. LWCF has also helped keep working landscapes 
in agriculture while increasing important wildlife habitat. As the 
committee considers new mandatory commitments of revenue from the OCS, 
can you elaborate on how this legislation might impact the link between 
the development of these federal OCS resources with reinvestment in 
conservation?
    Answer. The Administration strongly supports the LWCF and the core 
values it represents and agrees that a portion of the proceeds from the 
sale of these public assets should be reinvested in something of 
lasting value for all Americans in every state. The commitment for the 
Land and Water Conservation Fund, proposed by President Kennedy and 
enacted in 1964, is to use a portion of the proceeds from the 
development of our public lands and waters for investments in 
conservation and recreation.
    Instead of strengthening LWCF as the Administration has proposed in 
the FY 2014 Budget, S. 1273 would weaken it. As noted in the testimony 
for this hearing, the Administration appreciates the implicit 
recognition that there is a connection between the OCS and LWCF, but S. 
1273 limits the funding available for the LWCF state grants component 
available under current law, capping the existing mandatory allocation 
for these grants at $62.5 million per year.
    As such, the bill is inconsistent with the President's budget 
request to establish mandatory dedicated funding for LWCF programs, 
with full funding at $900 million annually beginning in 2015. Enactment 
of a mandatory LWCF program is a central element of the President's 
conservation agenda that is designed to make investments in 
conservation and recreation for the American people to balance the 
development of oil and gas resources through the use of its proceeds.
    Moving to reduce funding for this program also sets a precedent 
that could jeopardize continued funding for the program, which reduces 
landscape fragmentation, making it more efficient to protect wildlife 
habitat, respond to wildfires and other natural disasters, and increase 
recreational access on the lands and waters that belong to the public.
     Responses of Pamela K. Haze to Questions From Senator Landrieu
    Question 1. Since 1932, Louisiana has lost 1900 square miles of 
coastal land, with the vast majority of the loss coming in the areas 
surrounding the mouth of the Mississippi and the population centers of 
New Orleans, Houma, Slidell and Lafayette.

   Do you think that this area is of great significance to all 
        Americans, and that this coast is ``a public asset'' in which 
        the Federal government should invest to provide lasting value 
        for all Americans in every state? Or do you think that this 
        land loss is just a problem for Louisiana to fix alone?
   If your answer is yes, that this is a public asset for all 
        Americans, then can you tell me what the Administration's plan 
        is for saving the Louisiana Delta? How much money is the 
        Administration allocating to stop the coastal erosion and help 
        rebuild the Delta, an effort which is estimated to cost over 
        $50 billion over the coming decades?

    Answer. Coastal Louisiana and Mississippi represents one of the 
nation's most dynamic, complex, and important aquatic ecosystems. The 
Administration recognizes the economic, cultural, and environmental 
importance of this region as well as the profound challenges it faces 
amid longstanding ecological decline. Conservation and restoration of 
resilient and healthy ecosystems in the Gulf of Mexico and surrounding 
regions is a national priority.
    The FY 2014 President's Budget request includes $54 million for 
Gulf Coast ecosystem restoration for Interior programs, including the 
operation of Gulf Coast parks and refuges and work of the USGS. The 
parks and refuges in the region along with programs oriented to 
wetlands conservation and protection and coastal restoration are 
focused on addressing issues such as wetlands loss and protection of 
Gulf resources. USGS operates a state of the art wetlands laboratory in 
Louisiana that examines solutions and techniques to reduce wetlands 
loss.
    In addition, there are significant resources that are allocated to 
the region in the form of revenue sharing, grants for sport fish and 
wildlife restoration, protection and conservation of wildlife and 
fisheries, payments in lieu of taxes to compensate local jurisdictions 
for the loss of tax revenue, and historic preservation, among others. 
In 2012 a total of $47 million was allocated to the State of Louisiana 
for these programs; $41 million to Alabama; $33 million to Florida; $18 
million to Mississippi; and $72 million to Texas. We are not able to 
provide a breakdown of the amounts used or allocated to the Gulf Coast 
from these amounts. Louisiana is also positioned to receive over $1 
billion in Gulf Coast restoration funding through a variety of 
mechanisms, including the Natural Resource Damage Assessment process, 
the RESTORE Act, and criminal and civil settlements with BP and 
Transocean stemming from the Deepwater Horizon incident.
    Question 2. It seems to me that your testimony is a double standard 
with current law. Under the Mineral Leasing Act (MLA), states receive 
50% of the revenues generated from energy production on Federal lands 
within their borders.

   Do you believe that the natural resources on Federal lands 
        within states belong to all Americans?
   Do you think that these MLA payments to states reduce the 
        net return to all taxpayers?
   Do you think sending nearly $2 billion a year back to MLA/
        interior states has significant long term costs to the Federal 
        treasury?
   Do you think that that these payments to states increase the 
        federal deficit?

    Answer. The Administration is committed to ensuring that American 
taxpayers receive a fair return from the sale of public resources, 
regardless of whether those resources are on public lands within state 
boundaries or offshore on the federal Outer Continental Shelf. Congress 
passed the Mineral Leasing Act (MLA) -which is applicable to 
development of federal land in all states-in 1920, and Alaska's 90 
percent share was also enacted many decades ago in a different 
environment and under significantly different circumstances. The MLA's 
legislative history indicates that the purpose of section 35 of the 
Act, which provides for the distribution of funds, was generally to 
provide compensation to states for the loss of tax revenue that would 
have been received from those lands, located within state boundaries, 
that prior to the passage of the MLA would have been eligible to pass 
into private ownership in fee. See 58 Cong. Rec. 7772-7774 (1919). This 
is not the case with lands on the federal Outer Continental Shelf, 
which are by definition, beyond and outside of any state boundaries.
    Question 3. Your testimony highlights that one of the reasons the 
Administration cannot support the FAIR ACT is because ``the bill does 
not appear to be targeted to achieve clear conservation or energy 
policy outcomes.''

   Are you aware that under the Mineral Leasing Act, states can 
        spend their share on essentially whatever they want, including 
        public infrastructure, schools, hospitals and the like?

    --Do you consider these to be conservation or energy related 
            purposes?

   Are you aware that under the Gulf of Mexico Energy Security 
        Act (GOMESA), the legislation directs the revenues shared with 
        the states to coastal restoration, hurricane protection and 
        mitigation of natural resource damage?

    --Do you consider these purposes related to conservation or energy?

    Answer. As noted in response to the previous question, mineral 
resource development on Federal lands onshore occurs within state 
boundaries, whereas OCS development occurs wholly outside of state 
boundaries. Also, Congress passed the Mineral Leasing Act in 1920 in a 
significantly different environment, under significantly different 
circumstances, and for different purposes--compensation to states for 
loss of tax revenue that would have otherwise been received from 
activity taking place within state boundaries.
    Because the rationale for revenue sharing differs substantially 
between onshore and offshore lands, the expectation for how Federal 
revenues may be shared with states can also differ. Under the 
applicable revenue sharing provisions of GOMESA, Congress directed that 
all amounts received by states and political subdivisions be used for 
projects and activities for the purposes of coastal protection, 
including conservation, coastal restoration, hurricane protection, and 
infrastructure directly affected by coastal wetland losses; mitigation 
of damage to fish, wildlife, or natural resources; implementation of a 
federally-approved marine, coastal, or comprehensive conservation 
management plan; and mitigation of the impact of outer Continental 
Shelf activities through the funding of onshore infrastructure 
projects. The full scope of these funding categories is broad, and 
unlike Federal programs funded through LWCF, there is no enforcement 
mechanism to ensure that these funds are spent for the intended 
purposes. The FAIR Act appears to expand on GOMESA's general revenue 
sharing payments to certain coastal states, while limiting OCS revenues 
that would be dedicated to LWCF programs under GOMESA.
      Responses of Pamela K. Haze to Questions From Senator Udall
    Question 1. Are the funds provided to the states and local 
political subdivisions under GOMESA required for any specific purpose, 
such as environmental restoration?
    Answer. Under section 105 of GOMESA, 50 percent of qualified Outer 
Continental Shelf revenues collected are to be deposited in the general 
fund of the Treasury, and the other 50 percent are to be disbursed as 
follows:

   75 percent of the funds are provided to coastal producing 
        states and their political subdivisions.
   The remaining 25 percent of those funds are to provide 
        financial assistance to states in accordance with section 6 of 
        the Land and Water Conservation Fund Act of 1965.

    GOMESA specifies that the funds provided to coastal producing 
states and their political subdivisions are to be used only for:

    --Projects and activities for the purposes of coastal protection, 
            including conservation coastal restoration, hurricane 
            protection, and infrastructure directly affected by coastal 
            wetland losses;
    --Mitigation of damage to fish, wildlife, or natural resources;
    --Implementation of a federally-approved marine, coastal, or 
            comprehensive conservation management plan;
    --Mitigation of the impact of outer Continental Shelf activities 
            through the funding of onshore infrastructure projects; or
    --Limited planning assistance and certain administrative costs.

    As noted in response to the previous question, the full scope of 
these funding categories is broad, and unlike federal programs funded 
through LWCF, there is no enforcement mechanism to ensure that these 
funds are spent for the intended purposes.
    Question 2. Would you please provide a chart displaying the acreage 
in the Federal OCS adjacent to each producing coastal state and acreage 
of onshore public land in each state West of the lOOth meridian? Also, 
would you please provide a chart displaying total annual revenues 
resulting from OCS oil and gas development and production as well as 
the amount that would have been shared annually with the coastal states 
and political subdivisions as a result of oil and gas development and 
production, assuming the FAIR Act had been in place. Please provide 
this information for each of the 10 past years. This should help us 
better understand the impact of this legislation.
    Answer. Leasing on the Outer Continental Shelf is authorized and 
carried out under the Outer Continental Shelf Lands Act. Because state 
boundaries do not extend beyond state waters, the Bureau of Ocean 
Energy Management considers the acreage in proximity to a producing 
coastal state by looking at the Planning Area that is otT a state's 
coast. Planning Areas are identified in the Five Year OCS Oil and Gas 
Leasing Program. The following chart shows the acreage by Planning 
Area, with adjacent coastal producing states, for those areas with 
active oil and gas leases, as well as the total acreage in each 
planning area under active lease:


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    Onshore, the Bureau of Land Management manages the public lands for 
multiple uses and sustained yield, which includes activities as varied 
as energy production, mineral development, livestock grazing, outdoor 
recreation, and the conservation of natural, historical, cultural, and 
other important resources.
    In the following chart, the tenn Federal Mineral Lands refers to 
on-shore federal minerals that are part of the BLM's responsibilities 
to manage, and includes federal surface lands both in the public domain 
and acquired lands for all federal agencies, as well as subsurface 
federal mineral rights. The column to the right contains the acreage 
for each state under lease as of 12/5112.
    Generally, for onshore lands the interested developer nominates 
land to be leased. Public lands are available for oil and gas leasing 
only after the nominated lands have been reviewed and evaluated for 
availability and suitability through the BLM's multiple use planning 
process prior to offering these lands at a competitive oil and gas 
lease sale.


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    The significant number of assumptions required to calculate future 
revenue make it time consuming and difficult to accurately forecast 
lost revenue in the out years. However, by using past years of actual 
revenue generated from leasing activity on the Outer Continental Shelf, 
it is possible to get a general sense of how payments made to states 
under the current program and authorities might compare to payments 
under the program that would be put in place by S. 1273, excluding the 
cap on revenues.
    The tables below provide mmual OCS reported revenues, annual OCS 
revenue disbursements to states, and estimates for the amounts that 
would have been shared annually with states assuming the FAIR Act had 
been in place.
                   offshore revenues (by fiscal year)


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


fiscal year offshore revenue disbursements to states (includes 8(g) and 
                         gomesa disbursements)


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


  estimated additional offshore revenue shared under the fair act by 
                              fiscal year


[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]


    To calculate these estimates, Interior made several assumptions, 
including:

   Sec. 2(b) revenue sharing--the figures do not presume which 
        states might have established funds to support projects and 
        activities relating to alternative or renewable energy, energy 
        research and development, energy efficiency or conservation in 
        order to receive an additional 10 percent disbursement. 
        Therefore, 27.5 percent was used for each state.
   The legislation has a $500 million payment cap beginning in 
        2014 and increasing by $100 million each year until 2025, after 
        which there is no cap on this revenue sharing. The figures 
        above do not presume a fixed dollar cap on payments, but 
        provide a best approximation of the cost of revenue sharing 
        once payments are fully phased in under S. 1273.

    The revenue sharing percentages for the four Gulf of Mexico states 
are based on current leases and may not reflect leases in place each 
year. Interior estimates that this could inflate Alabama and 
Mississippi shares by a percent or two.
    Question 3. The supporters of this legislation correctly note that 
states within whose exterior boundaries federal lands are located get a 
higher percentage of mineral leasing revenues than states with oil and 
gas leasing and production in adjacent Outer Continental Shelf areas. 
Is there a legal or historical justification for this disparity? If so, 
please explain.
    Answer. The legislative history of the Mineral Leasing Act of 1920 
indicates that the purpose of section 35 of the Act, which provides for 
the distribution of funds generated from oil and gas leasing, was 
generally to provide compensation to states for the loss of tax revenue 
that would have been received from those lands, located within state 
boundaries, that prior to the passage of the leasing Act would have 
been eligible to pass into private ownership in fee. See 58 Cong. Rec. 
7772-7774 (1919). As noted in the Department's testimony for this 
hearing, title and ownership ofthe federal seabed within 3 nautical 
miles ofthe shore (except Texas and western Florida, where it is 9 
nautical miles), along with right to manage all of the natural 
resources within those boundaries, was given by Congress to coastal 
states with passage of the Submerged Lands Act. Lands on the federal 
OCS beyond that boundary have remained under federal jurisdiction and 
are managed by the Department of the Interior for the benefit of all 
Americans.
    Question 4. I have several questions about the revenues that are 
expected to be shared with the coastal states and local political 
subdivisions and the Land and Water Conservation Fund (LWCF) under S. 
1723 and under current law, the Gulf of Mexico Energy Security Act of 
2006 (GOMESA). Do you have any estimates of the total cost to the 
Federal Treasury over the next 40 years if S. 1273 is enacted as 
currently drafted?

   Do you have estimates of how much each state will receive in 
        revenue sharing over the next 40 years under S. 1273?
   How much is each state expected to receive over the next 40 
        years in revenue sharing under GOMESA?
   How much is the LWCF expected to receive under S. 1273?
   How much is the LWCF expected to receive under GOMESA?
   How much are local political subdivisions expected to 
        receive over the next 40 years under S. 1273?
   How much are local political subdivisions expected to 
        receive over the next 40 years under GOMESA?

    Answer. The Department's preliminary calculations show that the 
legislation would likely result in a reduction of more than $5 billion 
in deposits to the Treasury through 2022, and the rate of reduction in 
deposits would dramatically increase thereafter. Similarly, the 
Congressional Budget Office's preliminary calculations, released 
shortly before the hearing, estimate that if enacted the legislation 
would increase direct spending by approximately $6 billion over the 
2015-2023 period.
    The significant number of assumptions required to calculate future 
revenues make it time consuming and difficult to accurately forecast 
revenue disbursements in the out years for either states or local 
political subdivisions. However, as noted in the response to question 2 
above, by using the past ten years of actual revenue generated from 
leasing activity on the Outer Continental Shelf, it is possible to 
compare payments made to states under the current program and 
authorities with the program that would be put in place by S. 1273, 
excluding the cap on revenues.
    With regard to funding for the Land and Water Conservation Fund 
(LWCF), the Administration strongly supports the LWCF and the core 
values it represents and agrees that a portion of the proceeds from the 
sale of these public assets should be reinvested in something of 
lasting value for all Americans in every state. The commitment for the 
Land and Water Conservation Fund, proposed by President Kennedy and 
enacted in 1964, is to use a portion of the proceeds from the 
development of our public lands and waters for investments in 
conservation and recreation.
    Instead of strengthening LWCF as the Administration has proposed in 
the FY 2014 Budget, S. 1273 would actually weaken it. As noted in the 
testimony for this hearing, the Administration appreciates the implicit 
recognition that there is a connection between the OCS and LWCF, but S. 
1273 limits the funding available for the LWCF state grants component 
available under current law, capping the existing mandatory allocation 
for these grants at $62.5 million per year.
    As such, the bill is inconsistent with the President's budget 
request to establish mandatory dedicated funding for LWCF programs, 
with full funding at $900 million annually beginning in 2015. Enactment 
of a mandatory LWCF program is a central element of the President's 
conservation agenda that is designed to make investments in 
conservation and recreation for the American people to balance the 
development of oil and gas resources through the use of its proceeds.
    Moving to reduce funding for this program also sets a precedent 
that could jeopardize continued funding for the program, which reduces 
landscape fragmentation, making it more efficient to protect wildlife 
habitat, respond to wildfires and other natural disasters, and increase 
recreational access on the lands and waters that belong to the public.
    Question 5. Is it the position of the Administration that any 
legislation providing for dedicated funding for the LWCF should fund 
the Federal side of LWCF as well as the State side of the LWCF?
    Answer. Yes, the Administration's proposal would permanently 
authorize annual funding for the LWCF for the Department of the 
Interior and Department of Agriculture. The budget proposes $600 
million in total LWCF funding in 2014, with $200 million in 
discretionary funds and $400 million in mandatory funding. Beginning in 
2015, the LWCF would be fully funded with mandatory funds at $900 
million each year. The program balances the allocation of these funds 
for Federal acquisition and State grants.
                                 ______
                                 
    Responses of Ryan Alexander to Questions From Senator Murkowski
    Question 1. You have stated that revenues from development on the 
Outer Continental Shelf should be deposited directly into the federal 
treasury because the federal government manages activities in those 
waters, not the states. However, the states and local communities bear 
the costs of supporting this development. Why should they be forced to 
put forth great sums of money to support development in federal waters 
and share the risk of an oil spill or other emergency and not share in 
a portion of the revenues?
    Answer. As stated in Taxpayers for Common Sense testimony, federal 
taxpayers are due the royalties derived from leases operating in 
federal waters because those waters are administered, protected, and 
managed by federal--not state--agencies at a cost to federal taxpayers. 
Federal taxpayers fund the agencies charged with royalty collection and 
lease regulations. States may pay for additional infrastructure for oil 
and gas development, but also benefit from increased jobs and economic 
development associated with any land based activity associated with the 
offshore development. Other federal assistance through education, 
transportation and other federal programs is available to these 
communities, as it is to any other community across the country.
    Additionally, your question correctly points out that the states 
will ``share'' in the risks of an oil spill or emergency. Federal 
waters are 6 or more miles from the state's coastline, therefore the 
impacts of any spill or accident will likely have implications for 
multiple states, or countries and place great burden and liability on 
the federal taxpayer. Further, in the event of an offshore accident 
federal assistance would be available, as with any other major disaster 
declaration.
    State waters are closer to the shoreline and royalties derived from 
that drilling are and should continue to be directed back to the 
applicable state.
    Question 2. You indicated your opposition to the FAIR Act (S.1273) 
is due, at least in part, to the lack of an offset. Senator Landrieu 
and I have committed to finding offsets for this bill. Does this change 
your position on the bill? If not, why not?
    Answer. Taxpayers for Common Sense is concerned with the budget 
impacts of S. 1273, especially given it has no current offset, making 
its budget implications particularly egregious. But the passage of S. 
1273 would have far-reaching, negative implications for the federal 
taxpayer over the long-term with or without an offset. Since the bill 
fundamentally alters the federal-state revenue sharing provisions for 
drilling activities in federal waters, taxpayers will lose billions of 
dollars in future revenues--revenue that under existing law would be 
directed to the U.S. Treasury to the benefit of the entire nation, not 
solely a handful of coastal states. Most offsets are for ten years, 
whereas this cost-sharing change would be made permanent.
    Furthermore, the country is facing a roughly $650 billion deficit 
this year and large estimated deficits for many years to come. Any 
offset identified would be better ``spent'' reducing this deficit and 
relieving pressure on the debt rather than enabling federal royalty 
revenue to be redirected to the states.
     Responses of Ryan Alexander to Questions From Senator Landrieu
    Question 1. As you know, the purpose of this hearing is to shed 
light on the inequities that exists between the Federal government's 
partnership with inland states, and the lack of partnership with 
coastal states that also produce much needed energy for this country. 
Your testimony indicates that you are against revenue sharing for 
coastal states that produce energy from Federal waters, and advocate 
for the repeal of GOMESA.

   Do you also advocate for the repeal of the revenue sharing 
        portion of the Mineral Leasing Act? If not, why not?

    --If your answer talks about the impacts that these states suffer 
            from this energy production, do you not believe that 
            coastal states also suffer from energy production offshore?

    Answer. At this time, Taxpayers for Common Sense is not actively 
advocating for a repeal of the current onshore revenue sharing 
provisions, but we would actively oppose the increase of the current 
share to the states, and would likely support any legislative effort to 
increase the federal royalty share for onshore extraction.
    However, it is important to note that drilling for oil and gas in 
offshore federal waters does not occur in any one state, unlike 
drilling on federal lands within state boundaries. Impacts to land, 
air, and water for the surrounding local communities for onshore 
development are very different than for offshore development in federal 
waters. The impacts of offshore development in federal waters on the 
nearest state are much more dispersed and the risk of harm is shared 
with nearby states and any accident would bear national implications 
for federal taxpayers.
    Question 2. As you know, OCS receipts are approximately $7 billion 
a year, and could grow with increased access and production. Most of 
all this revenue is generated in the Gulf of Mexico. At the same time, 
the U.S. spent $327 billion on oil imports in 2011. If the U.S. had to 
make up for the GOM OCS production, we would then have an additional 
$53 billion a year that this country would have to spend on oil 
imports, instead of the $7 billion a year our Federal treasury receives 
from this production (and this is just in royalties, bonus bids and 
rentals).

   Do you think it is wiser to continue to spend hundreds of 
        billions of dollars on importing oil instead of producing it 
        domestically? Or do you think it is not so ``short-sighted'' to 
        enhance the Federal government coffers by partnering with 
        willing coastal states to produce this energy while also 
        providing them a percentage of the revenues generated for 
        hosting the production?

    Answer. Natural resources derived from federal lands and waters can 
and do provide great benefit to the entire nation. In addition to their 
end use and overall domestic economic benefit, their extraction 
provides valuable revenue to federal coffers, with the potential to 
provide much more.
    Taxpayers for Common Sense is not opposed to offshore drilling in 
federal waters. But additional federal resources derived from new 
drilling in federal waters must go to federal taxpayers, the rightful 
owners of those resources. We believe with proper taxpayer safeguards 
and the application of fair market royalties, federal resources can and 
must be used to meet our nation's energy, transportation, and mineral 
needs. Determining whether it is in the national interest to drill 
should include an evaluation of offshore resources and potential 
income, and also potential long-term liabilities.
    Taxpayers for Common Sense does not believe providing new subsidies 
for coastal states is an appropriate use of federal OCS royalty 
revenues, regardless of whether that subsidy is to entice states to 
provide access for offshore drilling, or simply lining the coffers of 
states that already allow access. Oil and gas development offshore in 
federal waters should occur based on a variety of long-term factors, 
but not based on redirecting money from the federal treasury.
    Thank you again for seeking our input on the FAIR Act.
                                 ______
                                 
    Response of Charlotte Brower to Question From Senator Murkowski
    Question 1. What are priority projects for the borough should 
revenue sharing for Alaska be established?
    Answer. The top priority project for the North Slope Borough is to 
construct a large sea wall to protect the community of Barrow and its 
critical infrastructure from storm surge and coastal erosion.
    In addition to the Barrow sea wall project, the Borough would 
direct additional resources towards:

   Upgrading the Wainwright Airport to support increased air 
        traffic;
   Building and upgrading existing utility systems for power 
        generation and water and sewage treatment;
   Constructing small harbor and port facilities capable of 
        servicing and supporting oil spill response and other vessels 
        in Barrow, Wainwright, and Point Lay;
   Bringing in fiber optic, broadband communication lines to 
        North Slope communities;
   Bolstering North Slope Borough Search and Rescue 
        capabilities;
   Monitoring and other scientific programs relating to Arctic 
        species, ecosystems, etc.;
   Coastal erosion mitigation projects in all affected North 
        Slope Communities; and,
   Health impact studies and monitoring programs.
                                 ______
                                 
      Response of Randall Luthi to Question From Senator Murkowski
    Question 1. Please provide some examples of onshore-based 
infrastructure, services and other needs that are necessary to support 
the offshore oil and gas industry.
    Answer. Where offshore energy development occurs, there is a 
natural demand for services onshore to support offshore activity, 
including the thousands of people who work offshore. In fact, for 
example, along the Gulf Coast where nearly all domestic offshore energy 
development occurs, much of the economic impact in coastal communities 
is created through the oilfield services and maritime industries that 
support offshore energy activity.
    The offshore industry and individual businesses contribute hundreds 
of millions of dollars and countless services to local communities, 
primarily through an enhanced local tax base and direct and indirect 
jobs created throughout the community. These jobs are not simply ``oil 
and gas'' jobs, but also involve businesses including, but not limited 
to, caterers, real estate development, transportation services, vessel 
and parts manufacturing and fabrication, and ship repair.
    As a case in point, Lafourche Parish in southeast Louisiana 
supports about 90% of the deepwater Gulf of Mexico offshore activity. 
This region is home to some of the most critical infrastructure that 
services a large portion of our domestic energy supply, most notably 
Port Fourchon and the Louisiana Highway 1 (LA1) energy corridor. In 
this particular region, in order to support offshore activity, a need 
has developed over the decades for additional service ports, processing 
facilities, highway infrastructure, fueling stations, and general 
community services related to housing, health care and education. In 
many instances, these enhanced community assets and services would not 
be available were it not for the offshore industry's presence.
      Response of Randall Luthi to Question From Senator Landrieu
    Question 1. Thank you for agreeing to testify today. Your 
association represents not only the oil and gas offshore industry, but 
also the offshore renewable industry. I agree with you that we should 
produce as much energy here at home that we can and that we should look 
to opening more access to places that are willing to host energy 
production, whether it is production of traditional energy or 
alternative energy.
    As you well know, the Department of Interior releases information 
on what technically recoverable resources exist in the OCS. Is it your 
recollection that when DOI releases these estimates that they decrease 
each time, or do they actually increase? If they increase, can you 
please to why you believe they increase? Also, do you expect the GOM 
OCS to continue to be a large producer of this nation's energy in the 
next decade?
    Answer. The Department of Interior periodically releases resource 
estimates based on currently available data and currently available 
technology. As we have seen time and again over the past few decades, 
these estimates have been significantly surpassed based on updated data 
and continually advanced and new technology. As an example, in the mid 
1980's, it was estimated that 9 billion barrels of oil existed in the 
Gulf; that projection now stands at approximately 48 billion barrels, 
which is roughly a 500% increase.
    Similarly, this problem of underestimated resource projections 
exists for other, non-offshore related resources as well. U.S. oil 
``reserves'', as deemed by the federal government, were estimated to be 
20 billion barrels in in the 1940's, whereas we have produced, and in 
fact consumed, over 167 billion barrels over that period of time. The 
reason for this discrepancy lies in the fact that the term ``reserves'' 
includes only those resources that have already been discovered on 
lands and waters that are available to access at that given point in 
time, and based on the technology and the prices at that particular 
time.
    Right now, the federal government estimates that about 3.3 billion 
barrels of oil and approximately 31.3 trillion cubic feet of natural 
gas exist off the East Coast United States. These estimates are based 
on 1980's data. Based on historical trends in the Gulf and also the 
development boom that has occurred within interior states, one could 
extrapolate those experiences to expect that much more will actually be 
found and produced in the Atlantic.
    As I mentioned earlier, a critical part of the equation in energy 
exploration and development is ascertaining current data based on 
current technology to assess what resources lay below the surface. 
Conducting seismic analysis is key to discovering the potential of 
untapped resources, and it has been nearly two generations since 
seismic testing was last conducted along our eastern seaboard. The 
significant technological advances that have occurred since those last 
seismic studies were conducted have made those previous resource 
estimates essentially irrelevant. While seismic data is necessary for 
collecting new information about the existence and extent of our energy 
resources, and while it is imperative that we move forward in 
collecting that data in a timely manner, the only true barometer for 
the potential of these resources is actual exploration and production. 
In the case of the Gulf of Mexico and also onshore, the actual amount 
of oil and natural gas produced from these lands has far exceeded our 
estimates many times over.
    In my opinion, based on current trends related to technological 
advancements and increasingly effective and efficient extraction 
techniques such as directional drilling, I would expect the resource 
estimates to continue to increase in both the Gulf of Mexico region, as 
well as those estimates attributed to the Atlantic.
                                 ______
                                 
     Responses of Athan Manuel to Questions From Senator Murkowski
    Question 1. Are there any changes that could be made to the FAIR 
Act (S.1273) to obtain your support?
    Answer. No, the Sierra Club strongly opposes revenue sharing from 
new off shore oil and gas drilling, and incentives to expand off shore 
drilling.
    Question 2. You testified about the importance of ``empowering 
local communities to control development in their coastal areas.'' 
Doesn't the FAIR Act (S.1273) provide this type of empowerment by 
providing a steady source of income to coastal communities to respond 
to infrastructure and other community needs?
    Answer. We do not think the FAIR Act empowers local communities. 
Instead, the bill provides financial incentives for new drilling, 
drilling that will negatively impact coastal economies and ecosystems. 
At the hearing even supporters of the FAIR Act acknowledged that 
coastal states should be compensated for bearing the burden and 
negative impacts of offshore drilling (I am paraphrasing; that is not 
meant to be a direct or attributed quote from a specific Senator).
    Question 3. You testified that additional oil and gas development 
will do little to lower gas prices. However, according to the Energy 
Information Administration, 5 years ago, when domestic production was 
lower than it is today and oil prices were much higher ($147/barrel), 
the price of gasoline averaged $4.16/gallon. Today, production is way 
up, oil prices are much lower ($106/barrel), and the price of gasoline 
averages about $3.63/gallon. How do you square EIA's data with your 
testimony?
    Answer. The World Energy Outlook 2012 by the EIA estimates that 
even if the U.S. becomes energy independent the price of oil--and 
therefore gasoline--will continue to be set worldwide. As a result 
increased off shore drilling is unlikely to reduce gas prices in the 
U.S. Where the oil is produced does not impact price. For instance, 
Alaska produces millions of barrels of oil a year but Alaskans do not 
pay less for gasoline.
    Finally, five years ago the price of gas spiked due to a number of 
global and local factors. Since 2011, prices have been relatively 
steady and high, between $3 and $3.50 a gallon, even as domestic 
production has risen.
      Responses of Athan Manuel to Questions From Senator Landrieu
    Question 1. You highlight in your testimony that coastal waters in 
the OCS belong to all Americans. I agree.

   Do you agree that all Federal lands onshore belong to all 
        Americans? And if yes, what is the difference between Federal 
        lands onshore vs. Federal lands offshore?
   Onshore states enjoy what could be termed a partnership with 
        the Federal government to produce our nation's natural 
        resources. Do you believe that states that help our nation 
        extract our offshore natural resources deserve a similar 
        partnership? Why or why not? If not, why are they less 
        deserving?

    Answer. Federal lands onshore belong to all Americans, and they 
share in the revenue generated by natural resource development since 50 
percent goes to the federal government (with the exception of Alaska; 
they benefit from a double standard whereas the state receives 90 
percent of the revenue from activity on federal lands there).
    The current 50-50 split between the states and federal government 
is mandated by Section 317 of the Federal Land Policy and Management 
Act of 1976 (FLPMA). In addition to establishing that revenue split, 
FLPMA expanded the scope of The Wilderness Act and Sierra Club 
supported the legislation. I cannot determine, however, if we took a 
specific position on Section 317 (we are checking our archives and will 
get back to you if we find any information regarding our position on 
Section 317).
    Regarding the Outer Continental Shelf, the Sierra Club agrees with 
the Supreme Court that due to the essential role in commerce and 
national security, the Federal government and Congress should determine 
what happens with revenue and ``resources of the soil under that water 
area, including oil.'' Americans can and should influence coastal 
policy by petitioning and lobbying state and local elected officials, 
the federal government and their elected representatives in Congress, 
something the Sierra Club has been doing for more than 125 years. And 
coastal states do control what happens in the first 3--or 9 in the 
Gulf--miles off their state.
    Finally, off shore states do enjoy a partnership with the Federal 
government via the Coastal Zone Management Act which provides states 
with resources and expertise to better understand and influence state 
and federal development proposals. Once again, Alaska is the exception 
since Governor Parnell and the Alaska Legislature did not renew the 
Alaska Coastal Management Program.
    Question 2. Your organization supports offshore wind development.

   Do you believe that states that host this offshore wind 
        development should receive a portion of the revenues generated 
        from this production?
   Do you think that states should have a choice or a say in 
        whether they can develop energy resources, whether oil or wind, 
        off their shores?

    Answer. As I mentioned is my testimony, the Sierra Club sees all of 
our future energy decisions under the umbrella of fighting climate 
disruption. Therefore, we do support incentives for off shore wind and 
other clean energy programs that do not contribute to climate change or 
keep our nation dependent on fossil fuels. We support financial 
incentives for clean energy development, but oppose incentives for new 
drilling such as revenue sharing and support the repeal of tax breaks 
and subsidies for the oil and gas industry. The Sierra Club's position 
is that the development of off shore renewables such as wind power is 
the best way to protect local coastal economies and ecosystems from the 
pollution and risks associated with off shore drilling, and create 
local, clean energy jobs.
    Question 3. You state in your testimony that oil and gas 
development is ``dirty'' and you insinuate that you wish the U.S. would 
end all offshore oil and gas development.

   The National Academy of Sciences estimates that a negligible 
        amount of oil found in our waters can be attributed to oil 
        spillage related to production-typically less than 1% average 
        per year. Further, they estimate that roughly 63% of oil found 
        in our waters results from natural seepage, and 4% from 
        tankage. Since failing to produce oil off our shore would 
        increase oil imports, largely reliant on tankers, this would 
        certainly result in a good deal more oil in our oceans. 
        Wouldn't it follow that, given the inflexibility of demand, 
        producing oil domestically is in fact the more ecologically 
        sensitive option?

    Answer. According to the CRS Report ``Oil Spills in U.S. Coastal 
Waters: Background, Governance, and Issues,'' while underwater seeps of 
oil account for almost two thirds of the oil in U.S. waters, the 
releases occur very slowly and are widely dispersed. These natural 
seeps have occurred for many years, and therefore plants and animals 
have adapted to the low concentrations of oil. Since the ecosystems 
have adapted to the gradual seepage, they are able to grow and thrive 
in these areas.
    By comparison, the spills caused by the Deepwater Horizon were 
much, much larger and as you know severely damaged coastal economies 
and ecosystems in the Gulf. Unlike oil from natural seepage, spills 
from platforms, pipelines, tankers and transportation barges occur in 
much higher concentrations. The increased concentration of pollutants 
from spills caused by petroleum extraction and transportation can 
severely harm wildlife, habitat, and coastal ecosystems. This elevated 
concentration of oil can cause even the smallest spill to devastate a 
fragile underwater community.
    Finally, regarding tankers and imports, the Sierra Club sees demand 
for imported oil decreasing thanks to a number of factors, primarily 
the new fuel economy standards for cars and light trucks announced by 
the Obama Administration last year.
    Question 4. Are you aware that almost 1.4 million barrels of oil a 
day are produced offshore in the Gulf of Mexico OCS-representing 
roughly 27% of our domestic oil production and 15% of our domestic 
natural gas production? Are you aware that the U.S. produces more in 
the GOM OCS than we import from Saudi Arabia, second behind Canada in 
U.S. crude oil imports.

   If this production goes away, where, in your opinion, where 
        should the U.S. get this energy from?

    Answer. The Sierra Club is not lobbying to end off shore drilling 
where it already occurs, in the central and western Gulf and off the 
coast of southern California. However, we do oppose the expansion of 
drilling into areas that are currently undeveloped or un-leased (the 
Arctic Ocean, the eastern Gulf of Mexico, the Atlantic and Pacific).
    As stated in our testimony, the Sierra Club strongly feels that the 
best place to create new domestic energy jobs, and clean sources of 
energy, is by focusing on renewable energy and energy efficiency. The 
National Renewable Energy Laboratory (NREL) found that renewable energy 
sources, like wind and solar, could provide 80 percent of our 
electricity by 2050. Wind power was the fastest growing source of U.S. 
energy in 2012.
    Question 5. I finally want to clear up a portion of your testimony 
that I think is misleading regarding the LWCF. Your testimony states 
that ONLY $62.5 million is directed to the LWCF from offshore OCS 
receipts under the FAIR ACT. The FAIR ACT directs a mandatory $62.5 
million a year to the stateside of the Fund, which is more than the 
$42.2 million sent last year. $900 million of offshore OCS receipts 
already goes into the LWCF, but these are discretionary funds, meaning 
that Congress still has to appropriate these funds. The FAIR ACT funds 
are in addition to the discretionary funds. I have heard from many LWCF 
advocates over the years who beg for a mandatory stream of revenues 
into the LWCF.

   Your testimony states that funding for the LWCF should be 
        funded independently of a revenue sharing program. As such, it 
        is the position of the Sierra Club that the LWCF should not be 
        funded by a mandatory OCS revenue sharing program?

    Answer. Thank you for the information regarding the additional 
funding to LWCF from the FAIR Act. However, the Sierra Club does not 
support linking LWCF funding with the kind of new revenue sharing 
included in the FAIR Act. We support having Congress allocate the full 
$900 million funding for LWCF from the receipts collected from existing 
oil and gas drilling.
                              Appendix II

              Additional Material Submitted for the Record

                              ----------                              

                       Statement from John Barry
    My name is John Barry. I want to thank the committee for the 
opportunity to submit this statement.
    I'm speaking only for myself but would like to note that, while I 
make my living as an author, I am Vice President of the Southeast 
Louisiana Flood Protection Authority East, which is responsible for 
protecting most of metropolitan New Orleans. I serve on numerous 
advisory committees including at MIT's Center for Engineering Systems 
Fundamentals and the Johns Hopkins Bloomberg School of Public Health's 
Center for Refugees and Disaster Relief, have advised the United 
Nations and the World Health Organization on disasters, an adjunct 
professor at the Tulane School of Public Health and Tropical medicine, 
and my work has been honored three times by the National Academies of 
Science.
    This is not a partisan issue. After Hurricane Katrina, questions 
were raised whether it made sense to rebuild New Orleans. Newt Gingrich 
and I co-authored a response in Time Magazine, stating, ``The most 
tough-minded answer to that question demonstrates that rebuilding and 
protecting New Orleans is in the national interest.''
    We made that judgment because if further investment is not made--
and this statement is as true today as it was when we made it--coastal 
erosion will continue, and it will threaten the nation's ability to 
produce and refine oil, it will threaten the existence of Louisiana 
ports, which in turn threatens America's international 
competitiveness--18 percent of all domestic shipping passes through 
Louisiana waters, while 20% of all exports and 60% of grain exports go 
down the Mississippi River--and, since well over 90% of all commercial 
fish species in the Gulf depend on Louisiana's coast for some part of 
their life cycle, it will threaten the very existence of the great 
fishery which is the Gulf of Mexico.
    To protect the national interest, in that article Speaker Gingrich 
and I called for passage of a law which gave Gulf states the same share 
of royalties from off-shore oil and gas revenue in Louisiana waters 
that inland states get from mineral production on federal land within 
their borders. A law did pass, but it gave the Gulf, and Louisiana in 
particular, not even close to half a loaf. In effect, Gulf states got 
one slice of bread to split between them, while inland states with 
producing land continue to get an entire loaf each.
    Now, seven years later, Senator Landrieu has introduced legislation 
to fix this, to treat Gulf states the same way the federal government 
treats inland states. This legislation is in the national interest now, 
just as it was before.
    Inland states have justified their receipt of 50% of the revenues 
paid to the federal government for oil, gas and coal produced on 
federally-owned land within their borders by arguing that the 
extraction of these resources puts strains on their infrastructure and 
environment, and they need compensation for that burden.
    No part of the United States--indeed, no part of the developed 
world--has suffered as much environmental damage because of the 
extraction of natural resources as Louisiana. Since the 1930s, the 
state has lost 1900 square miles of coastal land, roughly the area of 
Delaware, with most of that land loss occurring in recent decades. That 
coastal land served as a buffer against hurricane storm surge. Without 
it, populated areas along the coast from Lake Charles, near the Texas 
border, to New Orleans and Slidell, near the Mississippi border, are 
much more vulnerable to hurricanes than they used to be. The lost land 
once provided a natural buffer between people and the sea; its 
disappearance has increased the danger to lives and property on the 
coast.
    There are multiple causes of that loss. For example, just six dams 
in Montana, North Dakota, and South Dakota--built entirely with federal 
dollars for hydroelectric power, flood protection, and irrigation--have 
caused a 30% decline in the amount of sediment the Mississippi River 
carries, and that sediment loss makes it much more difficult to keep 
coastal Louisiana healthy and protected from hurricanes.
    But one of the most important causes of the land loss is oil and 
gas exploration and production. There are two chief ways in which oil 
and gas production has led to destruction of the Louisiana coast. 
First, so much volume has been extracted from some inland areas that 
the surface has literally sunk; sometimes the surface has even been 
covered by water, in effect drowning it. In addition, to service oil 
and gas exploration and production the industry dredged more than 
10,000 miles of canals through coastal Louisiana and left 13,000 miles 
of spoil banks. Every inch of those 10,000-plus miles lets salt water 
penetrate into and eat away at the marsh, while the spoil banks 
interfere with natural hydrology.
    Not all land loss can be directly tied to a cause, but according to 
a study by the Mineral Management Service--a federal agency considered 
so cozy with the oil and gas industry that it was effectively 
dissolved--the energy industry is responsible for 59% of the loss which 
can be directly attributed to a cause. No one, not the old Mineral 
Management Service and not industry scientists, disputes that the 
energy industry is responsible for a significant share of the 
destruction of coastal Louisiana.
    It is only fair then that oil revenues be used to protect 
Louisiana's land and people. Louisiana, alone among states, has passed 
a state constitutional amendment guaranteeing that its share of revenue 
from the Outer Continental Shelf oil and gas production to restoring 
and protecting its coast. Its Coastal Protection and Restoration 
Authority, on which I sit, has produced a Master Plan which passed the 
state legislature unanimously and which has been widely praised by the 
scientific community and even held up as a model for others to emulate. 
One reason for the praise is that it makes clear that the state is 
prepared to make difficult choices, that not everyone's home or 
community can be preserved--much less protected--and that we cannot 
even save the existing coast line.
    But the Master Plan is also the state's last best hope to have any 
chance of maintaining a viable coast. It is the country's last best 
hope to protect all the benefits it gets from the region, from oil 
refining and production to the port system. And even with all the 
sacrifices the state is prepared to make, the plan still costs $50 
billion over the next 50 years.
    No funding stream exists to carry out this plan. The BP spill will 
generate enough money to start the process, but there is nothing now 
extant to do more than that.
    The FAIR Act will do that. It will properly send money from oil and 
gas production to Gulf states and give Louisiana--and the nation--a 
fighting chance to preserve its coast, with all the national benefits 
that go with it.
    The FAIR Act calls for nothing more than that the federal 
government to treat all American citizens the same way. I support the 
FAIR act. And so should any fair-minded person, so should every person 
who believes in protecting the national interest, and so should every 
person who believes that we make our own future.
    Thank you.
                                 ______
                                 
                         Greater Lafourche Port Commission,
                                  Port Fourchon, LA, July 23, 2013.
Hon. Ron Wyden,
Chairman, U.S. Senate, Committee on Energy and Natural Resources, 304 
        Dirksen Senate Building, Washington, DC.
    Dear Senator Wyden:

    Thank you for convening a hearing of the U.S. Senate Committee on 
Energy and Natural Resources to discuss the inequitable situation 
facing many coastal energy producing states. Unlike interior states 
which have evenly divided revenues (royalties, severance, and bonuses) 
with the federal Treasury since 1920, Gulf Coast States were only 
recently granted access to a portion of this revenue in 2006, and it is 
imperative that we expedite the delivery of these funds to the 
producing states who maintain the infrastructure and manage the 
ecosystems that support America's working coast.
    The Fixing America's Inequities with Revenues Act (FAIR Act) 
proposes a balanced solution that strengthens the partnership between 
state and federal governments and gives all coastal producing states a 
fair share of the revenue generated off their coast. Coastal 
communities bear a disproportionate share of the costs associated with 
offshore energy development, and it should be a national priority to 
invest in their resiliency and sustainability.
    Port Fourchon, for example, services over 90% of the Gulf of 
Mexico's deepwater production and provides nearly a fifth of our 
nation's oil supply. According to a 2011 Department of Homeland 
Security study, if Port Fourchon closed for 90 days, it would result in 
a reduction of 120 million barrels of oil and 250 billion cubic feet of 
gas production over a 10 year period.
    The RESTORE Act guarantees that the Gulf States impacted by the 
Deepwater Horizon oil spill will have the resources they need to 
recover, but it will not begin to address the decades of deterioration 
that occurred during the growth of our offshore energy industry. Today, 
we have an opportunity to leverage this one-time restoration funding 
with a secure, viable long-term funding source. I strongly support the 
FAIR Act and encourage you to carefully consider the benefits this 
legislation would have for our nation.
            Sincerely,
                                    Chett C. Chiasson, MPA,
                                                Executive Director.
                                 ______
                                 
                              America's Wetland Foundation,
                                    New Orleans, LA, July 23, 2013.
Hon. Ron Wyden,
Chairman, U.S. Senate, Committee on Energy and Natural Resources, 304 
        Dirksen Senate Building, Washington, DC.
    Dear Senator Wyden: Thank you for convening a hearing of the U.S. 
Senate Committee on Energy and Natural Resources to discuss the 
inequitable situation facing many coastal energy producing states. 
Unlike interior states which have evenly divided revenues (royalties, 
severance, and bonuses) with the federal Treasury since 1920, Gulf 
Coast States were only recently granted access to a portion of this 
revenue in 2006, and it is imperative that we expedite the delivery of 
these funds to the producing states who maintain the infrastructure and 
manage the ecosystems that support America's working coast.
    The Fixing America's Inequities with Revenues Act (FAIR Act) 
proposes a balanced solution that strengthens the partnership between 
state and federal governments and gives all coastal producing states a 
fair share of the revenue generated off their coast. Coastal 
communities bear a disproportionate share of the costs associated with 
offshore energy development, and it should be a national priority to 
invest in their resiliency and sustainability.
    Port Fourchon, for example, services over 90% of the Gulf of 
Mexico's deepwater production and provides nearly a fifth of our 
nation's oil supply. According to a 2011 Department of Homeland 
Security study, if Port Fourchon closed for 90 days, it would result in 
a reduction of 120 million barrels of oil and 250 billion cubic feet of 
gas production over a 10 year period.
    The RESTORE Act guarantees that the Gulf States impacted by the 
Deepwater Horizon oil spill will have the resources they need to 
recover, but it will not begin to address the decades of deterioration 
that occurred during the growth of our offshore energy industry. Today, 
we have an opportunity to leverage this one-time restoration funding 
with a secure, viable long-term funding source. The State of Louisiana 
took a decisive step years ago, constitutionally dedicating any and all 
GOMESA revenues received solely to coastal restoration and protection. 
I strongly support the FAIR Act and encourage you to carefully consider 
the benefits this legislation would have for our nation.
            Sincerely,
                                           R. King Milling,
                                                          Chairman.
                                 ______
                                 
       Statement of Anne M. Milling, Founder, Women of the Storm
    ``Play fair'' is what we, the Women of the Storm, women from the 
five Gulf Coast states, had instilled in us as children! And today we 
urge the federal government to play fair. It is our contention that our 
sister interior states benefit richly from revenue derived from land 
based energy production while we, the Gulf Coast with its extensive 
outer continental-shelf drilling, are totally short changed.
    With our serious wetland crisis.... loss of more than a football 
field of land every 50 minutes, Louisiana has responded intelligently 
and smartly. We have created a Trust Fund, insuring that such federal 
dollars will be used solely to improve our environment, and we have 
crafted a serious master plan, outlining the necessary projects to 
restore our coast, which serves all Americans.. Dollars from the FAIR 
Act will be placed in trust and will be used to implement this plan, 
which would be beneficial not only to Louisiana but to the entire 
country.
    The Women of the Storm, a non-political, grassroots organization, 
urges Congress and the Administration to play fair and to pass the FAIR 
act. These dollars must be returned now to the area impacted by 
exploration and drilling and must be dedicated to restoring a rapidly 
vanishing coast.
                                 ______
                                 
                                Environmental Defense Fund,
                                    Washington, DC, August 2, 2013.
Hon. Ron Wyden,
Chairman, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
Hon. Lisa Murkowski,
Ranking Member, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Chairman Wyden and Ranking Member Murkowski:

    Thank you for the opportunity to provide a statement for your July 
23rd hearing record as the Committee on Energy and Natural Resources 
continues consideration of S. 1273, the FAIR Act of 2013. The 
Environmental Defense Fund (EDF) does not have a position on the FAIR 
Act or the general practice of sharing energy production revenues with 
states; we do, however, believe there is an opportunity in Louisiana to 
use such revenues for a valuable environmental outcome.
    The State of Louisiana has constitutionally dedicated any revenues 
shared by the federal government from OCS oil and gas production for 
the sole purpose of ``coastal wetlands, conservation, coastal 
restoration, hurricane protection and infrastructure directly impacted 
by coastal wetlands losses.'' These purposes are consistent with the 
State of Louisiana's broadly supported 2012 Coastal Master Plan for a 
Sustainable Coast, which provides a compelling reason for EDF to engage 
in revenue sharing as a policy matter.
    EDF recognizes the national importance of the Mississippi River 
Delta ecosystem, the severity and immediacy of the threats it faces, 
and the compelling need to advance the coastal restoration measures 
included in the Master Plan. The Plan utilized a state-of-the-art 
systems approach to coastal planning and a science-based decision 
making process that resulted in a plan that effectively invests 
available financial resources to make the greatest progress toward 
achieving a sustainable coast. It is specifically designed to maximize 
both risk reduction and land creation coast-wide, and it includes a 
comprehensive list of restoration and protection projects developed 
through the application of science-based decision criteria.
    The Master Plan identifies $50 billion in specific projects and 
policies to be implemented over 50 years to provide comprehensive storm 
flood damage reduction and wetland restoration, by integrating flood 
protection, habitat restoration, and navigation into the planning 
framework. As part of the adaptive management framework, the Master 
Plan includes a program that will solicit and evaluate cutting-edge 
technologies and other innovations that can be used to achieve the most 
efficient, cost-effective and sustainable approaches to project 
implementation, monitoring and adaptive management.
    Thank you for bringing to light some of the vital coastal 
restoration needs in Louisiana. We look forward to future opportunities 
to work with your committee.
            Sincerely,
                                    Steve Cochran Director,
                               Mississippi River Delta Restoration.
                                 ______
                                 
                      South Central Industrial Association,
                                                         Houma, LA.
Hon. Ron Wyden,
Chairman, U.S. Senate, Committee on Energy and Natural Resources, 304 
        Dirksen Senate Building, Washington, DC.
    Dear Senator Wyden:

    Thank you for convening a hearing of the U.S. Senate Committee on 
Energy and Natural Resources to discuss the inequitable situation 
facing many coastal energy producing states. Unlike interior states 
which have evenly divided revenues (royalties, severance, and bonuses) 
with the federal Treasury since 1920, Gulf Coast States were only 
recently granted access to a portion of this revenue in 2006, and it is 
imperative that we expedite the delivery of these funds to the 
producing states who maintain the infrastructure and manage the 
ecosystems that support America's working coast.
    The Fixing America's Inequities with Revenues Act (FAIR Act) 
proposes a balanced solution that strengthens the partnership between 
state and federal governments and gives all coastal producing states a 
fair share of the revenue generated off their coast. Coastal 
communities bear a disproportionate share of the costs associated with 
offshore energy development, and it should be a national priority to 
invest in their resiliency and sustainability.
    Port Fourchon, for example, services over 90% of the Gulf of 
Mexico's deepwater production and provides nearly a fifth of our 
nation's oil supply. According to a 2011 Department of Homeland 
Security study, if Port Fourchon closed for 90 days, it would result in 
a reduction of 120 million barrels of oil and 250 billion cubic feet of 
gas production over a 10 year period.
    The RESTORE Act guarantees that the Gulf States impacted by the 
Deepwater Horizon oil spill will have the resources they need to 
recover, but it will not begin to address the decades of deterioration 
that occurred during the growth of our offshore energy industry. Today, 
we have an opportunity to leverage this one-time restoration funding 
with a secure, viable long-term funding source. I strongly support the 
FAIR Act and encourage you to carefully consider the benefits this 
legislation would have for our nation.
            Sincerely,
                                                Lori Davis,
                                                    SCIA President.
                                 ______
                                 
                                    The Nature Conservancy,
                                      Arlington, VA, July 23, 2013.
Hon. Ron Wyden,
Chair, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
Hon. Lisa Murkowski,
Ranking Member, Committee on Energy and Natural Resources, U.S. Senate, 
        Washington, DC.
    Dear Chair Wyden and Ranking Member Murkowski:

    I am writing on behalf of The Nature Conservancy to provide a 
statement on what we believe to be the key principles regarding revenue 
sharing programs for receipts derived from the development of the Outer 
Continental Shelf (OCS) lands as the Senate considers S.1273 by 
Senators Murkowski and Landrieu and related legislation.
    The Conservancy is neither for nor against the practice of sharing 
with states those revenues derived from OCS development off their 
coasts. However, we urge that any revenue sharing program that is 
implemented should ensure that a significant portion of any funds 
directed to states are used to address the cumulative ecological 
impacts of OCS development. Further, any such legislation should also 
include dedicated funding for the Land and Water Conservation Fund 
(LWCF) to support all LWCF programs (including state and federal grant 
programs) to benefit the nation as a whole.
    The attached statement lays out our principles in greater detail. 
We look forward to working with the Committee on these issues and the 
other important aspects of a revenue sharing bill as indicated in the 
attached.
            Sincerely,
                                            Robert Bendick,
                               Director, U.S. Government Relations.

      Attachment.--Statement of The Nature Conservancy on S. 1273
    Mr. Chairman and members of the Committee, The Nature Conservancy 
appreciates the opportunity to present this statement as the Committee 
discusses S.1273 and options for revenue sharing programs derived from 
the development of Outer Continental Shelf (OCS) lands.
    The Nature Conservancy is an international, non-profit conservation 
organization working around the world to protect ecologically important 
lands and waters for nature and people. Our mission is to conserve the 
lands and waters upon which all life depends. We are best known for our 
science-based, collaborative approach to developing creative solutions 
to conservation challenges. Our on-the-ground conservation work is 
carried out in all 50 states and more than 30 foreign countries and is 
supported by approximately one million individual members. With public 
and private partners, we have conserved nearly 15 million acres of land 
in the United States and Canada, 102 million acres internationally, and 
work at more than 100 marine sites worldwide.
    The Conservancy is neither for nor against the practice of sharing 
with states those revenues derived from OCS development off their 
coasts. We recognize that those states often bear costs associated with 
remediating environmental degradation (including habitat loss and both 
routine and catastrophic oil spills) from development on OCS lands and 
associated transport and onshore infrastructure. We also recognize that 
resources on the OCS belong to the American people and should be 
administered by the federal government to benefit the American people 
as a whole.
    Given that, the Conservancy submits that revenue sharing 
legislation should address two fundamental issues. First, any revenue 
sharing program should ensure that a significant portion of any funds 
directed to states are used to address the cumulative ecological 
impacts of OCS development. Second, the legislation should include 
dedicated funding for the Land and Water Conservation Fund (LWCF) to 
support all LWCF programs (including state and federal grant programs) 
to benefit the nation as a whole by addressing conservation and 
recreation needs nationwide. Dedicated funding for LWCF represents a 
fair and important investment back into the nation's important natural 
places with revenues derived from the extraction of the nation's 
valuable natural resources.
    The remainder of this document lays out in more detail these and 
other principles that we believe should be addressed in any legislation 
that alters the disposition of OCS revenues.
    Use of funds allocated to states.--The Conservancy is neither for 
nor against sharing a portion of OCS revenues with states, but 
advocates that in any revenue sharing program a significant portion of 
funds that go to states be directed to conservation purposes. 
Environmental impacts from offshore leasing should, in the first 
instance, be mitigated by the developer as part of the project(s), 
especially when the project impacts wetlands or federal trust species. 
However, there are also cumulative impacts of offshore energy 
development such as habitat degradation and coastal erosion that are 
typically not mitigated at the project level, and it is important for 
states to address these impacts. Therefore, a significant portion of a 
state's revenue share should be directed to addressing those 
unmitigated cumulative impacts, including through coastal protection 
and restoration and investments in natural infrastructure such as 
forested wetlands, marshes, oyster reefs, barrier islands, and dune 
systems.
    This recommendation is in line with the former Coastal Impact 
Assistance Program (CIAP) and the Gulf of Mexico Energy Security Act of 
2006 (GOMESA). Additionally, we note the general responsibility of the 
federal government to ensure that federal funds are expended for the 
intended purposes, and recommend that revenue sharing programs include 
provisions that enable the federal government to meet that 
responsibility, such as requiring that the GAO examine the use of funds 
provided to the states and submit to Congress a report at regular 
intervals on how those funds were spent.
    Dedicated funding for LWCF.--The Land and Water Conservation Fund 
was authorized in 1965. Since then the vast majority of funding for 
LWCF has always come from OCS oil and gas revenues. LWCF was designed 
to ensure that $900 million per year of these revenues would be 
allocated to conserving our nation's natural and cultural heritage and 
enhancing opportunities for the American people to connect with that 
heritage through visitation, outdoor recreation, and tourism. However, 
since its enactment more than $17 billion in OCS revenues that should 
have gone to LWCF have been diverted to other purposes. Any new revenue 
sharing program should include full and dedicated funding for LWCF. 
Reinvesting in the nation's natural places through the LWCF ensures 
that all citizens are compensated for the sale of our federal 
resources.
    It is worth noting that the LWCF program is not just about 
acquiring land for the public trust. LWCF programs conserve working 
landscapes that support the forest, farming, and ranching industries; 
provide access for hunters, anglers, and other recreation visitors to 
our federal lands and waters; and support the $646 billion outdoor 
recreation industry. LWCF investments have supported projects in every 
state and 98 percent of counties across the country.
    LWCF has been the key to protecting state, local and national 
parks, wildlife refuges, forests and other federal lands, working 
forests and ranches, recreational trails and recreational access points 
for all Americans. Therefore, we urge that a portion of OCS revenues 
support all LWCF programs, including federal and state grants programs. 
Stateside LWCF programs have enabled the conservation of many important 
natural areas, but federal programs are also a critical companion for 
establishing national parks, wildlife refuges, and other areas that can 
be enjoyed by all Americans. Expanded OCS leasing.--The Conservancy is 
neither for nor against the practice of offshore oil and gas 
development overall. However, we submit that offshore leasing and 
eventual OCS development should be evaluated based on site-specific 
environmental conditions and risks. Further, those risks should be 
evaluated using the best and newest information and findings. Various 
bills have been introduced in the Senate and passed by the House to 
expand offshore leasing. These bills are problematic because they 
mandate that new leasing occur (outside of the evaluation process) and 
proceed according to a fixed schedule established in statute. Such an 
approach either eliminates or severely limits thorough environmental 
and public interest reviews for all stages of OCS leasing as currently 
called for in the Outer Continental Shelf Lands Act (OCSLA). Those 
environmental and other reviews are essential to reducing environmental 
risks and impacts and to ensuring that leasing is in the national 
interest, and should not be eliminated or weakened by any legislation 
relating to development of OCS resources.
    Therefore, should revenue sharing legislation move forward, we 
strongly encourage that the Committee and Leadership make every effort 
to avoid provisions either in the bills as introduced or in proposed 
amendments that would mandate offshore leasing in particular locations 
and/or establish fixed timelines for leasing actions.
    Measures to improve the safety and reduce environmental impacts of 
offshore oil and gas activity.--While we continue to learn lessons from 
the Exxon Valdez and Deepwater Horizon oil spills, one thing is clear: 
even in moderate weather conditions, and even in heavily developed 
areas with significant experience in oil spill response, the ability to 
contain oil, once accidently released into the environment, is limited. 
Moreover, the Deepwater Horizon spill illustrated how drilling under 
challenging conditions (in that case deep water) greatly increases the 
risks and reduces our ability to respond in a timely and effective 
manner.
    Following the Deepwater Horizon catastrophe, the President 
appointed the The National Commission on the BP Deepwater Horizon Oil 
Spill and Offshore Drilling (Commission). The Commission presented 
their recommendations in a final report in January 2011. Since then, 
both industry and the Administration have taken significant steps to 
improve their operations and reform the regulatory system for offshore 
oil and gas development, respectively. However, Congress has yet to 
enact legislation incorporating the recommendations of the Commission. 
We urge Congress to do so, both to formalize the many improvements made 
by industry and federal agencies, and to address many of the 
Commission's recommendations that require Congressional action at the 
outset.
    Revenue sharing for onshore renewable energy development.--The 
Conservancy advocates for the responsible siting of energy development 
onshore and offshore regardless of the energy source. We support 
regional planning for energy and infrastructure development that seeks 
to minimize environmental conflicts by employing the mitigation 
hierarchy: avoid, minimize, and fully offset impacts, and that this 
approach should be directly tied to any energy revenue sharing 
legislation. Therefore, the Conservancy supports the leasing and 
revenue sharing program set out in the bipartisan bill, S.279 Public 
Land Renewable Energy Development Act of 2013, and would encourage the 
Congress to adopt the approach reflected in that legislation more 
broadly in other future legislation addressing energy development of 
all kinds. The bill also directs 35 percent of the federal renewable 
energy receipts to a fund for conservation activities--investing some 
of the funds derived from the use of our natural resources into the 
protection and restoration of our public lands--a principle that should 
guide all energy development permitted on federal lands and waters.
    Affirming the importance of transitioning away from carbon-
intensive energy choices.--To reduce the economic, health, and 
environmental costs of climate change, the Conservancy advocates that 
Congress and the Administration pursue a national energy policy that 
will reduce U.S. carbon emissions by 80 percent by 2050. We strongly 
believe that the U.S. should be a global leader in reducing its carbon 
emissions. Such a policy, which could include solutions such as carbon 
capture and storage, is not only essential to reducing the impacts of 
climate change, it will also lessen our current economically and 
geopolitically unstable dependence on fossil fuels. That in turn will 
avoid or lessen the economic and political pressure to develop fossil 
fuels in sensitive areas or in risky areas where the dangers of adverse 
ecological impacts resulting from fossil fuel development are 
especially high.
    Thank you again for the opportunity to provide this statement. 
Revenue sharing legislation has the potential to address important 
issues such as the restoration of coastal and marine areas impacted by 
offshore development and the reinvestment in our nation's resources 
through the LWCF. Moving forward, the Conservancy looks forward to 
working with the Committee on these issues and the other important 
aspects of a revenue sharing bill as indicated above.

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