[House Hearing, 114 Congress]
[From the U.S. Government Publishing Office]
GAO REPORT DOCUMENTS BLM'S CHRONIC MISMANAGEMENT
OF WIND AND SOLAR RECLAMATION BONDS
=======================================================================
OVERSIGHT HEARING
BEFORE THE
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
OF THE
COMMITTEE ON NATURAL RESOURCES
U.S. HOUSE OF REPRESENTATIVES
ONE HUNDRED FOURTEENTH CONGRESS
FIRST SESSION
__________
Wednesday, June 24, 2015
__________
Serial No. 114-12
__________
Printed for the use of the Committee on Natural Resources
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___________
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COMMITTEE ON NATURAL RESOURCES
ROB BISHOP, UT, Chairman
RAUL M. GRIJALVA, AZ, Ranking Democratic Member
Don Young, AK Grace F. Napolitano, CA
Louie Gohmert, TX Madeleine Z. Bordallo, GU
Doug Lamborn, CO Jim Costa, CA
Robert J. Wittman, VA Gregorio Kilili Camacho Sablan,
John Fleming, LA CNMI
Tom McClintock, CA Niki Tsongas, MA
Glenn Thompson, PA Pedro R. Pierluisi, PR
Cynthia M. Lummis, WY Jared Huffman, CA
Dan Benishek, MI Raul Ruiz, CA
Jeff Duncan, SC Alan S. Lowenthal, CA
Paul A. Gosar, AZ Matt Cartwright, PA
Raul R. Labrador, ID Donald S. Beyer, Jr., VA
Doug LaMalfa, CA Norma J. Torres, CA
Jeff Denham, CA Debbie Dingell, MI
Paul Cook, CA Ruben Gallego, AZ
Bruce Westerman, AR Lois Capps, CA
Garret Graves, LA Jared Polis, CO
Dan Newhouse, WA Vacancy
Ryan K. Zinke, MT
Jody B. Hice, GA
Aumua Amata Coleman Radewagen, AS
Thomas MacArthur, NJ
Alexander X. Mooney, WV
Cresent Hardy, NV
Vacancy
Jason Knox, Chief of Staff
Lisa Pittman, Chief Counsel
David Watkins, Democratic Staff Director
Sarah Parker, Democratic Deputy Chief Counsel
------
SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS
LOUIE GOHMERT, TX, Chairman
DEBBIE DINGELL, MI, Ranking Democratic Member
Doug Lamborn, CO Jared Huffman, CA
Raul R. Labrador, ID Ruben Gallego, AZ
Bruce Westerman, AR Jared Polis, CO
Jody B. Hice, GA Vacancy
Aumua Amata Coleman Radewagen, AS Vacancy
Alexander X. Mooney, WV Raul M. Grijalva, AZ, ex officio
Vacancy
Rob Bishop, UT, ex officio
------
CONTENTS
----------
Page
Hearing held on Wednesday, June 24, 2015......................... 1
Statement of Members:
Dingell, Hon. Debbie, a Representative in Congress from the
State of Michigan.......................................... 3
Prepared statement of.................................... 6
Gohmert, Hon. Louie, a Representative in Congress from the
State of Texas............................................. 1
Prepared statement of.................................... 3
Statement of Witnesses:
Ellis, Steven A., Deputy Director for Operations, Bureau of
Land Management, U.S. Department of the Interior........... 16
Prepared statement of.................................... 18
Questions submitted for the record....................... 20
Fennell, Anne-Marie, Director, Natural Resources and
Environment Team, U.S. Government Accountability Office;
Accompanied by Elizabeth Erdmann, Assistant Director,
Natural Resources and Environment Team, U.S. Government
Accountability Office...................................... 7
Prepared statement of.................................... 9
Additional Materials Submitted for the Record:
Bishop, Hon. Rob and Hon. Louie Gohmert, May 1, 2015 Letter
to Director Kornze, BLM.................................... 43
Dingell, Hon. Debbie, June 24, 2015 Letter to Chairman Louie
Gohmert.................................................... 5
Ellis, Steven A., Deputy Director for Operations, BLM, June
3, 2015 Letter to Chairman Rob Bishop...................... 45
List of documents submitted for the record retained in the
Committee's official files................................. 46
Schinkel, De Shann, Realty Specialist, BLM Rawlins Field
Office; Jessica Lewis, Analyst, GAO, e-mail correspondence. 46
OVERSIGHT HEARING ON GAO REPORT DOCUMENTS BLM'S CHRONIC MISMANAGEMENT
OF WIND AND SOLAR RECLAMATION BONDS
----------
Wednesday, June 24, 2015
U.S. House of Representatives
Subcommittee on Oversight and Investigations
Committee on Natural Resources
Washington, DC
----------
The subcommittee met, pursuant to notice, at 10:30 a.m., in
room 1324, Longworth House Office Building, Hon. Louie Gohmert
[Chairman of the Subcommittee] presiding.
Present: Representatives Gohmert, Labrador, Radewagen,
Mooney; Dingell, Huffman, and Polis.
Mr. Gohmert. The Subcommittee on Oversight and
Investigations is meeting today to hear testimony concerning
BLM's ongoing mismanagement of reclamation bonds for wind and
solar energy projects on Federal land.
So this Subcommittee on Oversight and Investigations will
come to order. Under Committee Rule 4(f), any oral opening
statements at hearings are limited to the Chairman and the
Ranking Minority Member and the Vice Chair and a designee of
the Ranking Member. This will allow us to hear from our
witnesses sooner, and help Members keep to their schedules.
Our subcommittee is meeting to hear testimony on a GAO
report documenting BLM's chronic mismanagement of wind and
solar reclamation bonds. I do politely ask everyone in the
hearing to please silence your cell phones and anything else
that makes noise. This will allow minimum distractions for both
our Members and our guests to ensure that we all gain as much
from this as we can.
Since I am not a judge anymore and do not have a bailiff, I
cannot have you carried out if you make noise--at least not
immediately--but anyway, please be polite. I didn't even have
to say anything to the bailiff, he just went and got them out.
That was kind of nice.
[Laughter.]
Mr. Gohmert. I would ask unanimous consent that all of the
Members' opening statements be made part of the hearing record
if they are submitted to the Subcommittee clerk by 5:00 p.m.
today.
Hearing no objection, so ordered.
I will now recognize myself for 5 minutes.
STATEMENT OF THE HON. LOUIE GOHMERT, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF TEXAS
Mr. Gohmert. Reclamation bonds are used to return solar and
wind energy rights-of-way to their pre-developed condition
after authorization to use the land ends. BLM requires right-
of-way holders to provide these bonds so the reclamation costs
are covered in case the energy developer becomes insolvent or
is otherwise unable to pay for reclamation.
If BLM does not have an adequate bond, BLM may have to use
taxpayer dollars to cover the costs. As of April 2014, BLM held
over $100 million in reclamation bonds for solar and wind
projects.
Unfortunately, GAO found that BLM is chronically
mismanaging the wind and solar bond program. The computer
databases BLM uses to track bonds are completely unreliable and
inconsistent with the project files. BLM has bond adequacy
review policies that it does not follow, and 50 percent of the
bonds are overdue for review.
In some cases, BLM holds bonds below the established
minimum amount, in violation of current BLM policy. GAO
estimates that about 30 percent of BLM's wind and solar rights-
of-way are underbonded by a total of about $15 million. Out of
the 33 wind rights-of-way that BLM has granted, over 60 percent
have little or no documentation to support the bond amount. The
remaining 40 percent have inconsistent documentation that
varied widely.
These are not new problems. In 2012, the Office of
Inspector General for the Department of the Interior evaluated
BLM's Renewable Energy Program and found many of the same
issues; but instead of taking corrective action, BLM charged
ahead.
In fact, in 2013 President Obama proposed to increase
renewable energy projects and set an even higher goal for
energy generation on Federal land. The Administration's push
toward more renewable energy was bolstered by millions of
dollars in tax credits and loan guarantees for renewable energy
developers.
It is still unclear whether these problems were merely a
symptom of an agency that was in over its head or if these
breaks on bonding requirements were part of an effort by the
Administration to coddle a preferred industry.
The OIG described this rapid expansion of renewables as a
boom environment and recognized that the volatility of the
renewable energy industry makes reclamation bonds imperative.
Instead of heeding this advice, we are here 3 years later to
hold BLM accountable for the many problems that both the OIG
and now the GAO have documented.
We would like to commend the GAO for doing an
extraordinarily thorough, well-documented, and comprehensible
review. Some issues, by their nature, tend to catch more
attention than others. In this case, that would be particularly
true regarding BLM's inability to demonstrate that it has
adequately safeguarded bonds entrusted to it.
This, however, is emblematic of the broader problems
documented by GAO regarding a program at the Interior that has
woefully been mismanaged for some time.
Recognizing and correcting these problems, this time in
earnest, is particularly important given the emphasis on
promoting renewable energy projects on Federal land. Hopefully
we can start down that path today.
[The prepared statement of Mr. Gohmert follows:]
Prepared Statement of the Hon. Louie Gohmert, Chairman, Subcommittee on
Oversight and Investigations
The Subcommittee on Oversight and Investigations is meeting today
to hear testimony concerning BLM's ongoing mismanagement of reclamation
bonds for wind and solar energy projects on Federal land. This hearing
coincides with the release of a new Government Accountability Office
report entitled, ``BLM has Limited Assurance that Wind and Solar
Projects are Adequately Bonded.''
Reclamation bonds are used to return solar and wind energy rights-
of-way to their pre-developed condition after authorization to use the
land ends. BLM requires right-of-way holders to provide these bonds so
that reclamation costs are covered in case the energy developer becomes
insolvent or is otherwise unable to pay for reclamation. If BLM doesn't
have an adequate bond, BLM may have to use taxpayer dollars to cover
the costs. As of April 2014, BLM held over $100 million in reclamation
bonds for solar and wind projects.
Unfortunately, GAO found that BLM is chronically mismanaging the
wind and solar bond program. The computer databases BLM uses to track
bonds are completely unreliable and inconsistent with the project
files. BLM has bond adequacy review policies that it doesn't follow,
and 50 percent of bonds are overdue for review.
In some cases, BLM holds bonds below the established minimum
amount--a violation of current BLM policy. GAO estimates that about 30
percent of BLM's wind and solar rights-of-way are underbonded by a
total of about $15 million. Out of the 33 wind rights-of-way that BLM
granted, over 60 percent have little or no documentation to support the
bond amount. The remaining 40 percent have inconsistent documentation
that varied widely.
These aren't new problems. In 2012, the Office of Inspector General
for the Department of the Interior evaluated BLM's Renewable Energy
Program and found many of the same issues.
But instead of taking corrective action, BLM charged ahead.
In fact, in 2013 President Obama proposed to increase renewable
energy projects and set an even higher goal for energy generation on
Federal land. The Administration's push toward more renewable energy
was bolstered by millions of dollars in tax credits and loan guarantees
for renewable energy developers.
It is still unclear whether these problems were merely a symptom of
an agency that was in over its head, or if these breaks on bonding
requirements were part of an effort by the Administration to coddle a
preferred industry.
The OIG described this rapid expansion of renewables as a ``boom''
environment and recognized that the volatility of the renewable energy
industry made reclamation bonds imperative.
Instead of heeding this advice, we are here 3 years later to hold
BLM accountable for the many problems that both the OIG and now the GAO
have documented.
I would like to commend the GAO for doing an extraordinarily
thorough, well-documented, and comprehensible review. Some issues, by
their nature, tend to catch more attention than others. In this case,
that would be particularly true regarding BLM's inability to
demonstrate that it has adequately safeguarded bonds entrusted to it.
This, however, is emblematic of the broader problems documented by
GAO, regarding a program that has been woefully mismanaged for some
time.
Recognizing and correcting these problems--this time in earnest--is
particularly important given the emphasis on promoting renewable energy
projects on Federal land. Hopefully we can start down that path today.
______
Mr. Gohmert. At this time I would like to recognize the
Ranking Member for her opening statement. I recognize Mrs.
Dingell for 5 minutes.
STATEMENT OF THE HON. DEBBIE DINGELL, A REPRESENTATIVE IN
CONGRESS FROM THE STATE OF MICHIGAN
Mrs. Dingell. Thank you, Mr. Chairman. It is always good to
be with you, especially on a sunny day after a bad rain last
night. Hopefully this is not indicative of today's hearing.
I want to thank the witnesses for taking the time to be
here today.
First, I want to applaud the Chairman's focus on whether
energy developers on Bureau of Land Management land are
adhering to the polluter pays principle. This common-sense
principle says that if you cause environmental harm, you are
responsible for cleaning it up. It is one way to make sure that
companies do not try to increase their profits by making the
taxpayer cover the clean-up costs.
BLM adheres to this principle by requiring developers with
projects on BLM land to post reclamation bonds. In other words,
the developer has to set aside money to restore the site if the
company cannot do it when it is time for them to leave.
There are a number of reasons a developer might not be able
to pay the clean-up costs, but the best example is that the
company has declared bankruptcy. I am finding that in some
other projects in our own home state right now.
When that happens and there is no bond or other financial
assurance, the taxpayer is stuck with the bill to clean up the
pollution. The GAO report, that is at the center of today's
hearing, identifies about $100 million in bonds for wind and
solar projects on BLM lands, so this is a potentially serious
issue.
The GAO looked at instances when renewable energy companies
have left taxpayers on the hook for clean-up costs, and they
found none. The GAO report found none. Not a single clean
energy project was abandoned by its developer when they moved
off the land.
The GAO report also finds that BLM could be doing a better
job at managing reclamation bonds, and quite frankly, I agree.
So does BLM. All five of GAO's recommendations will be
addressed in a rulemaking that was issued last September, 2014.
Quite frankly, I think there are bigger fish to fry here.
Since the Chairman and I appear to have found common ground
in our concern for preserving the polluter pays principle and
protecting the American taxpayer from polluters, I think it
would be a good use of this subcommittee's time to look at the
issue of self-bonding by the biggest coal companies and
specifically focusing on the use of subsidiaries to create the
appearance of financial strength.
Coal mining companies are able to avoid purchasing the kind
of reclamation bonds required for projects like wind, solar,
and oil and gas development by self-bonding if they can
demonstrate that they are financially strong.
Coal companies that qualified for self-bonding in the past
are now facing declining demand for coal and are suffering from
disinvestment. This is drastically changing the landscape. In
May 2015, the state of Wyoming notified a company that they no
longer qualified for self-bonding. If a company is self-bonded
but cannot cover reclamation costs, in reality who is going to
pay the bill? The taxpayer, and that is the heart of this
hearing.
A 2015 report by the Western Organization of Resource
Councils and others found that self-bonding by coal companies
creates a taxpayer exposure that is far greater than that posed
by clean energy developments on BLM lands. There was an
estimated $3.5 billion in outstanding coal self-bonds as of
2014, compared to $100 million in clean energy bonds on BLM
lands.
The Office of Surface Mining Reclamation and Enforcement is
already investigating the issue. Mr. Chairman, I hope this
subcommittee can build on this hearing today by focusing on
what, as I discovered in my 2:00 a.m. reading, is an even
bigger risk to the taxpayer.
I have respectfully handed you a letter to memorialize this
request for the record so that we could begin a bipartisan
investigation into this issue, and I hope that we can work
together on it.
[The letter dated June 24, 2015 follows:]
U.S. House of Representatives,
Committee on Natural Resources,
Washington, DC 20515,
June 24, 2015.
Hon. Louie Gohmert, Chairman,
House Subcommittee on Oversight and Investigations,
1324 Longworth House Office Building,
Washington, DC 20515.
Dear Chairman Gohmert:
I write to urge you to conduct a bipartisan investigation into the
practice of self-bonding by coal companies, focusing on the use of
subsidiaries to meet self-bonding requirements. It is encouraging that
we have a common interest in this issue, based on today's hearing about
whether energy developers are setting aside enough money to cover their
pollution cleanup costs in case they go bankrupt.
Coal mining companies are able to avoid purchasing the kind of
reclamation bonds required for projects like wind, solar, oil and gas
development by self-bonding if they can demonstrate they are in good
financial health.\1\,\2\ Though only four companies
qualified last year, there was an estimated $3.5 billion in outstanding
coal self-bonds.\3\
---------------------------------------------------------------------------
\1\ 30 CFR 800.12.
\2\ 30 CFR 800.23.
\3\ Western Organization of Resource Councils, the Natural
Resources Defense Council, and the National Wildlife Federation, Fact
Sheet for Undermined Promise II.
---------------------------------------------------------------------------
However, those large companies are facing declining demand for coal
and divestment. A 2015 report by Western Organization of Resource
Councils, the Natural Resources Defense Council, and the National
Wildlife Federation entitled ``Undermined Promise II'' used publicly
available data to demonstrate that three of the four biggest coal
companies--Arch Coal, Peabody Energy Corporation, and Alpha Natural
Resources--may not qualify for self-bonding anymore.\4\
---------------------------------------------------------------------------
\4\ Western Organization of Resource Councils, the Natural
Resources Defense Council, and the National Wildlife Federation,
Undermined Promise II.
---------------------------------------------------------------------------
In May 2015, the State of Wyoming, which has regulatory authority
over the coal mines through SMCRA, notified Alpha Natural Resources
that they no longer qualified for self-bonding. The state of West
Virginia is also looking into Alpha's self-bonding qualifications,
which covers about $262 million in cleanup costs.\5\
---------------------------------------------------------------------------
\5\ http: // www.reuters.com/article/2015/04/27/us-usa-coal-
exclusive-idUSKBN0NI21220150427.
---------------------------------------------------------------------------
The right to self-bond is unique to coal as an energy source and it
amounts to a major subsidy. Self-bonding allowed Alpha ``to avoid
insurance or provisions of about $400 million for cleanup of mines'' in
Wyoming \6\ Cloud Peak Energy held $200 million in self-bonds at the
end of 2014.\7\ The conversion from paying surety premiums saved them
$2 million per year.\8\ Arch Coal held almost $460 million in self-
bonds and Peabody Energy Corporation held over $1.3 billion in self-
bonds at the end of 2014.
---------------------------------------------------------------------------
\6\ http: // www.reuters.com/article/2015/05/29/alpha-ntrl-resc-
insurance-idUSL3N0YK5AS2015 0529.
\7\ Western Organization of Resource Councils, the Natural
Resources Defense Council, and the National Wildlife Federation, Fact
Sheet for Undermined Promise II.
\8\ Western Organization of Resource Councils, the Natural
Resources Defense Council, and the National Wildlife Federation,
Undermined Promise II, p. 11.
---------------------------------------------------------------------------
Because Arch and Peabody are unlikely to be able to qualify on
their own for self-bonding, they are exploiting vague regulatory
language \9\ to use their subsidiaries to meet financial fitness
thresholds.\10\ The distribution of assets and liabilities between the
parent company and its subsidiary that is necessary to pass the
financial tests, may still leave the taxpayer at risk. Citizen
oversight is difficult because SEC filings or other regulatory
disclosures contain insufficient information to determine that
distribution for the subsidiary.
---------------------------------------------------------------------------
\9\ 30 CFR 800.23.
\10\ Westem Organization of Resource Councils, the Natural
Resources Defense Council, and the National Wildlife Federation, Fact
Sheet for Undermined Promise II.
---------------------------------------------------------------------------
If the mining sites owned by any of these companies are underbonded
because the company will not be able to afford paying out-of-pocket for
reclamation, the taxpayer will be responsible for cleanup costs. An
investigative reporter for Reuters wrote ``If pushed to bankruptcy,
those coal companies could leave behind more than $2 billion in cleanup
liabilities and no clear custodian to cover the costs, other than state
or federal agencies, according to industry officials.'' \11\
---------------------------------------------------------------------------
\11\ http: // www.reuters.com/article/2015/04/27/us-usa-coal-
exclusive-idUSKBN0NI21220150427.
---------------------------------------------------------------------------
Congressional oversight is clearly needed in this area. We must
ensure taxpayer dollars are not needlessly put at risk to cover cleanup
costs when this could be avoided. I stand ready to assist with this
investigation and look forward to working with you.
Sincerely,
Debbie Dingell,
Ranking Member,
Subcommittee on Oversight and Investigations.
______
Mrs. Dingell. Thank you, Mr. Chairman.
[The prepared statement of Mrs. Dingell follows:]
Prepared Statement of the Hon. Debbie Dingell, Ranking Member,
Subcommittee on Oversight and Investigations
Thank you, Mr. Chairman. Thank you to the witnesses for taking the
time to be here today.
First, I applaud the Chairman's focus on whether energy developers
on Bureau of Land Management land are adhering to the ``polluter pays''
principle. This common-sense principle says that if you cause
environmental harm, you are responsible for cleaning it up. It's one
way to make sure that companies don't try to increase their profits by
making the taxpayer cover their clean-up costs.
BLM adheres to this principle by requiring developers with projects
on BLM land to post reclamation bonds. In other words, the developer
has to set money aside to restore the site if the company can't do it
when it's time for them to leave. There are a number of reasons the
developer might not be able to pay the clean-up costs, but the best
example is that the company has declared bankruptcy. When that happens
and there is no bond or other financial assurance, the taxpayer is
stuck with the bill to clean up the pollution.
The GAO report that is at the center of today's hearing identifies
about $100 million in bonds for wind and solar projects on BLM lands.
So this is potentially a serious issue. The GAO looked at instances
when renewable energy companies have left taxpayers on the hook for
clean-up costs, and they found none. Not a single clean energy project
was abandoned by its developer when they moved off the land.
The GAO report also finds that BLM could be doing a better job at
managing reclamation bonds. I agree. So does BLM. All five of GAO's
recommendations will be addressed in a rulemaking that was proposed in
September of 2014. Quite frankly, I think there are bigger fish to fry
here.
Since the Chairman and I appear to have found common ground in our
concern for preserving the polluter pays principle and protecting the
American taxpayer from polluters, I think it would be a good use of
this subcommittee's time to look at the issue of self-bonding by the
biggest coal companies and specifically focusing on the use of
subsidiaries to create the appearance of financial strength.
Coal mining companies are able to avoid purchasing the kind of
reclamation bonds required for projects like wind, solar, and oil and
gas development by self-bonding if they can demonstrate they are
financially strong.
Coal companies that qualified for self-bonding in the past are now
facing declining demand for coal and are suffering from disinvestment.
This is drastically changing the landscape. In May 2015, the state of
Wyoming notified a company that they no longer qualified for self-
bonding. If a company is self-bonded but can't cover reclamation costs,
in reality the taxpayer has to pay the bill. That is the heart of this
hearing.
A 2015 report by Western Organization of Resource Councils and
others found that self-bonding by coal companies creates a taxpayer
exposure that is far greater than that posed by clean energy
developments on BLM land. There was an estimated $3.5 billion in
outstanding coal self-bonds as of 2014, compared to $100 million in
clean energy bonds on BLM land.
The Office of Surface Mining Reclamation and Enforcement is already
investigating the issue. I hope this subcommittee can build on the
hearing today by focusing on this much bigger risk to the taxpayer.
Mr. Chairman, I am respectfully sending you a letter to memorialize
this request for a bipartisan investigation into the issue of self-
bonding in the coal industry and I hope we can work together on this.
______
Mr. Gohmert. Thank you.
I appreciate the input, the observations, and the homework
you did, Mrs. Dingell. You are always well prepared.
At this time we will now introduce our witnesses. First we
have Ms. Anne-Marie Fennell, who is the Director of the Natural
Resources and Environment Team at the U.S. Government
Accountability Office. She is accompanied by Ms. Elizabeth
Erdmann, who is the Assistant Director of the Natural Resources
and Environment Team at the U.S. Government Accountability
Office. We asked her to come since she had been participating
directly.
Also we have Mr. Steven Ellis, who is the Deputy Director
for Operations at the Bureau of Land Management.
I will remind our witnesses that, per Committee Rules, oral
statements must be limited to 5 minutes. Your entire written
statement will be admitted for the record. However, as you
speak, when you get down to 1 minute, the yellow light will
come on; and when the red light comes on, you will then need to
cease your oral statement. So gauge that accordingly.
The entire panel will be allowed to testify before
questioning begins, and the Chair at this time recognizes Ms.
Fennell for 5 minutes.
STATEMENT OF ANNE-MARIE FENNELL, DIRECTOR, NATURAL RESOURCES
AND ENVIRONMENT TEAM, U.S. GOVERNMENT ACCOUNTABILITY OFFICE;
ACCOMPANIED BY ELIZABETH ERDMANN, ASSISTANT DIRECTOR, NATURAL
RESOURCES AND ENVIRONMENT TEAM, U.S. GOVERNMENT ACCOUNTABILITY
OFFICE
Ms. Fennell. Mr. Chairman, Ranking Member Dingell, and
members of the subcommittee, I am pleased to be here today to
discuss our June 2015 report on BLM's policies and practices
for bonding renewable energy development on Federal land.
BLM plays a key role in managing energy produced on Federal
lands, including the growing areas of wind and solar projects.
To ensure compliance with various requirements, BLM directs
developers to obtain bonds to cover the cost of returning the
land to its pre-developed condition when a solar or wind
project terminates; this process is known as reclamation. If
the bonds are inadequate to cover these costs, the Federal
Government may have to pay.
My testimony today highlights the findings of our 2015
report. Specifically I will discuss three areas: first, BLM's
policies for the bonding of wind and solar projects; second,
the amount of bonds held by BLM for the reclamation of wind and
solar projects and how BLM tracks these projects and bonds; and
third, the extent to which BLM ensures that the bonds for wind
and solar rights-of-way are adequate to cover reclamation
costs.
First, BLM has different policies for bonding wind and
solar projects on Federal land. For example, BLM's 2008 wind
policy established minimum bond amounts, but its 2010 solar
policy did not. However, the agency has issued a proposed rule
that would establish consistent requirements for the bonding of
wind and solar projects in several areas, including ensuring
the minimum bond amount.
Second, we found that BLM has about $100 million in bonds
to cover reclamation costs associated with wind and solar
projects on Federal lands. BLM tracks bonds through two data
systems, but we found that neither system was reliable for this
purpose.
Specifically, we found multiple instances in each system
where information was missing, inaccurate, or had not been
updated. Furthermore, the agency does not have a timeliness
standard for wind and solar data entry, contrary to the
standard for its mining program.
Third, we found that BLM had limited assurance that bonds
for wind and solar rights-of-way will cover reclamation costs.
Specifically, we found that about one-third of the wind and
solar development rights-of-way were underbonded by about as
much as $15 million in total.
In addition, we found wide variation in how BLM staff
documented bond decisions for wind and solar rights-of-way. For
example, we found little or no documentation to support the
bond amount for about two-thirds of the wind rights-of-way we
reviewed.
In addition, BLM does not adequately ensure the wind and
solar bond instruments are properly secured, handled, and
stored. BLM staff in two field offices told us that bonds were
stored in files rather than in secured, locked cabinets or a
safe.
Furthermore, there are no policies related to the proper
handling and storage of bond instruments for wind and solar
projects.
BLM also inconsistently adheres to its policies for the
periodic review of the amounts of wind and solar bonds to
verify their adequacy. For example, we found that about half of
the bonds were at least 4 months overdue for review.
In conclusion, BLM does not have detailed policies to
ensure that decisions are accurately documented, bonds are
properly maintained and secured, or standards exist for timely
data entry. As a result, BLM has limited assurance that the
bonds in place will be adequate to cover reclamation costs if
the developer does not meet its obligations.
Given these findings, we made five recommendations in our
report for BLM to develop policies for documenting decisions,
for proper handling and storage of bonds, for timely data
entry, as well as to take steps to ensure projects are
periodically reviewed to ensure bond adequacy.
Mr. Chairman, Ranking Member Dingell, and members of the
subcommittee, this completes my prepared statement.
I am accompanied by Liz Erdmann, who directly worked on
this particular report. We will be happy to respond to
questions.
[The prepared statement of Ms. Fennell follows:]
Prepared Statement of Anne-Marie Fennell, Director, Natural Resources
and Environment, U.S. Government Accountability Office
Chairman Gohmert, Ranking Member Dingell, and members of the
subcommittee, I am pleased to be here today to discuss our June 2015
report on the Bureau of Land Management's (BLM) policies and practices
for bonding renewable energy development on Federal land, which was
released June 23, 2015.\1\ The Department of the Interior's (Interior)
BLM manages more Federal land than any other agency--more than 245
million surface acres--and this land is increasingly being tapped to
meet the Nation's growing demand for energy. BLM plays a key role in
managing energy produced on these lands, including energy from
renewable resources. Through the Energy Policy Act of 2005, Congress
encouraged the Secretary of the Interior to approve non-hydropower
renewable energy projects, including wind and solar projects, with a
total capacity to generate at least 10,000 megawatts of electricity on
Federal lands by 2015. In June 2013, the President proposed an
expansion in renewable energy construction projects and set a new goal
for Interior to approve a renewable energy capacity of at least 20,000
megawatts of electricity from projects on Federal land, which would be
enough capacity to power more than 6 million homes by 2020. Currently,
about 1 percent of the Nation's electricity generated from wind and
solar energy comes from resources on Federal land.
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\1\ GAO, Renewable Energy: BLM Has Limited Assurance That Wind and
Solar Projects Are Adequately Bonded, GAO-15-520 (Washington, DC: June
5, 2015).
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Projects to produce energy from renewable resources can affect
thousands of acres of Federal land and involve significant
infrastructure. The projects may require developers to alter the land's
topography or remove vegetation, physically or through the use of
herbicides, and these actions may affect the site itself or have
potential downstream or off-site effects. As a condition of BLM's
authorization for renewable energy projects, the developer must agree
to remove infrastructure elements and return the land to its
predeveloped condition when the project terminates, a process called
reclamation. To ensure compliance with applicable requirements,
including requirements to reclaim project sites, BLM requires operators
of wind and solar energy projects on Federal lands to obtain bonds. If
an operator fails to return the land to its predeveloped state, the
bond can be used to cover any reclamation costs the Federal Government
may incur. If the bonds are inadequate to cover reclamation costs and
the Federal Government is unable to recover additional costs from the
developer, the Federal Government may have to pay the reclamation
costs.
Wind and solar projects on BLM land are subject to Federal laws and
regulations, as well as BLM policy. The Federal Land Policy and
Management Act of 1976 authorizes BLM to issue rights-of-way on Federal
land for a variety of purposes, including systems for generating,
transmitting, and distributing electric energy.\2\ Right-of-way holders
are required to restore, revegetate, and stabilize the land disturbed
by wind and solar projects within a reasonable time, to a condition
satisfactory to BLM, as approved by BLM in its Plan of Development.\3\
For projects that may have a significant impact on the environment, the
act requires applicants to submit a plan of construction, operation,
and rehabilitation for the right-of-way that complies with applicable
laws and regulations and the agency's stipulations. Federal regulations
authorize BLM to require a right-of-way holder to provide a bond to
secure the obligations imposed by the right-of-way. According to BLM
policy, a bond is required for each wind and solar facility on Federal
land. BLM may require an increase or decrease in the value of an
existing bond at any time during the term of the right-of-way,
according to Federal regulations.\4\
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\2\ A right-of-way is an authorization to a qualified individual,
business, or government entity to use a specific area of Federal land
for a specific amount of time for a certain purpose and with specific
terms, conditions, and stipulations that, among other things, are
intended to protect the environment, Federal property and economic
interests, and the public interest. Wind and solar projects can be
composed of multiple rights-of-way.
\3\ A Plan of Development is a detailed construction, operation,
rehabilitation, and environmental protection plan.
\4\ 43 C.F.R. Sec. 2805.12(g) (2014).
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BLM manages and oversees wind and solar projects in part by
maintaining data on each project electronically in two data systems--
the Legacy Rehost 2000 System (LR2000) and the Bond and Surety System.
LR2000 is BLM's electronic case recordation system that is used to
capture information on the agency's land and mineral projects. In the
case of wind and solar projects, BLM captures information such as the
date the right-of-way was issued, acres authorized, project location,
case status (e.g., authorized, expired, or closed), and the actions
that have taken place. The system also contains bond information for
wind and solar projects, including bond numbers, amounts, and bond
actions, such as the date when a bond was filed, accepted, or returned.
For wind projects, LR2000 contains the number of authorized turbines
and towers. The Bond and Surety System contains bond information, such
as the type and amount of bond, as well as actions taken, including the
date when a bond was filed, accepted, or returned.\5\ BLM staff enter
data about wind and solar projects into LR2000, as well as information
about bonds into the Bond and Surety System.
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\5\ A bond is considered filed when BLM receives the bond
instrument from the right-of-way holder. A bond is considered accepted
once BLM reviews the bond, determines that it has been executed
properly, and notifies the right-of-way holder of the bond's
acceptance. A bond is considered returned when BLM returns the bond to
the right-of-way holder after the holder has successfully completed
reclamation, at which time a bond is no longer necessary.
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My testimony today highlights the key findings of our June 2015
report on BLM's policies and practices for bonding renewable energy
development on Federal land.\6\ Accordingly, this testimony discusses
(1) BLM's policies for the bonding of wind and solar projects on
Federal land; (2) the amount and types of bonds held by BLM for the
reclamation of wind and solar projects, and how BLM tracks these bonds;
and (3) the extent to which BLM ensures that bonds for wind and solar
rights-of-way are adequate to cover reclamation costs.
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\6\ GAO-15-520.
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To address these objectives, we reviewed the agency's policies
regarding bonding, the reclamation activities that the bonds are to
cover, and the frequency with which bonds are to be reviewed. We also
reviewed BLM's Notice of Proposed Rulemaking--issued in September
2014--that would revise and codify the agency's current bonding
policies for wind and solar projects. In addition, we obtained wind and
solar project data, as of April 15, 2014, from BLM's LR2000 and its
Bond and Surety System. We worked with BLM officials to resolve data
discrepancies between the two systems and then analyzed the data to
identify the bond amounts and types for each right-of-way. To determine
how BLM tracks these bonds and understand how LR2000 and the Bond and
Surety System are used, the frequency of updates, and the reliability
of the data in each system, we interviewed officials in BLM
headquarters and all 9 BLM state and 11 field offices with wind or
solar energy development projects.
To determine the extent to which BLM ensures that bonds for wind
and solar rights-of-way are adequate to cover reclamation costs, we
conducted an in-depth file review of all wind and solar energy
development projects--45 in total--for which BLM held a bond on April
15, 2014, and interviewed BLM officials and other stakeholders. We
compared the bond held with what is specified in BLM's wind and solar
policies, as well as reclamation cost estimates in the project files,
and we then determined the extent to which documentation of the bond
decision is consistent with government standards for internal
control.\7\ We also interviewed BLM officials to determine compliance
with existing BLM policies, the depth and detail of reclamation cost
estimates, the extent of documentation supporting bond amounts, and the
types of staff involved in determining bond amounts. In addition, we
analyzed whether BLM was conducting reviews to ensure that bonds are in
place, as is called for in BLM policies. Our June 2015 report includes
a detailed explanation of the methods used to conduct our work. The
work on which this testimony is based was performed in accordance with
generally accepted government auditing standards. Those standards
require that we plan and perform the audit to obtain sufficient,
appropriate evidence to provide a reasonable basis for our findings and
conclusions based on our audit objectives. We believe that the evidence
obtained provides a reasonable basis for our findings and conclusions
based on our audit objectives.
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\7\ GAO, Standards for Internal Control in the Federal Government,
GAO/AIMD-00-21.3.1 (Washington, DC: November 1999).
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blm has different policies for bonding wind and solar projects, but a
proposed rule would establish consistent requirements
As detailed in our report, in 2008, BLM issued a wind energy
development policy that includes provisions for bonding wind energy
projects on Federal land.\8\ Among other things, the policy established
a minimum bond amount of $2,000 per meteorological tower for site-
specific and project area testing rights-of-way and $10,000 per wind
turbine for wind energy development rights-of-way.\9\ BLM is to
determine the bond amount for all wind energy development projects
during the right-of-way authorization process ``on the basis of site-
specific and project-specific factors,'' but the policy provides no
further details on these factors or how to calculate the costs. BLM is
to review all bonds for wind development rights-of-way at least once
every 5 years to ensure that the bond amount is adequate.\10\
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\8\ See Bureau of Land Management, IM 2009-043, Wind Energy
Development Policy (Dec. 19, 2008).
\9\ A wind site-specific testing right-of-way is an authorization
to develop individual meteorological towers and instrumentation
facilities with a term that is limited to 3 years. A wind project area
right-of-way is an authorization to develop a larger site testing and
monitoring area, with a term of 3 years that may be renewed. Both wind
site-specific testing and wind project area testing rights-of-way are
used to determine whether a site's wind energy resources meet the
potential for energy development. A wind energy development right-of-
way is an authorization to develop wind energy facilities generally for
a term of 30 years that may be renewed. Facilities include wind
turbines, as well as on-site access roads, electrical and distribution
facilities, and other support.
\10\ A bond adequacy review is a review to determine whether the
bond amount is sufficient to cover the cost of reclamation.
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In 2010, BLM issued a solar energy development policy that includes
provisions for bonding solar energy projects on Federal land that
differ from the bonding provisions of the wind policy.\11\
Specifically, in contrast to the wind policy, the solar policy sets no
minimum bond amount for solar energy development rights-of-way.\12\
Rather, the policy states that BLM is to base the bond amount on a
reclamation cost estimate provided by the right-of-way applicant that
consists of three components: (1) environmental liabilities; (2)
decommissioning, removal, and disposal of improvements and facilities;
and (3) reclamation, revegetation, restoration, and soil stabilization.
A reclamation cost estimate is an estimate of what it would cost a
third party to reclaim the site.\13\ The policy states that the
applicant is to submit the estimate as part of the decommissioning and
site reclamation plan--which defines the reclamation, revegetation,
restoration, and soil stabilization requirements for the project area--
and the overall Plan of Development. In addition, in contrast to the
wind policy, BLM staff are to review annually all bonds for solar
development rights-of-way to ensure that the bond amount is adequate to
ensure compliance with the right-of-way authorization, including
requirements to reclaim the disturbed land.
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\11\ IM 2011-003, Solar Energy Development Policy (Oct. 7, 2010).
\12\ A solar energy development right-of-way is an authorization to
develop solar energy facilities for a term not to exceed 30 years that
may be renewed.
\13\ BLM's policy for mining operations on public lands, which is a
reference tool for BLM's solar energy development policy, states that a
bond must be sufficient to allow BLM to contract with a third party to
reclaim the operations.
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To help ensure compliance with provisions of the wind and solar
bonding policies, BLM has two additional policies that direct BLM state
directors to certify annually that all wind and solar energy rights-of-
way within their respective states have the required bonds and that the
bond data are entered into the Bond and Surety System.\14\ This
certification does not assess whether the amount of the bond would be
sufficient to cover expected reclamation costs. Rather, the annual
certification is intended to ensure that a bond has been provided or
requested for each wind and solar right-of-way. The certification is to
be submitted to BLM headquarters within 30 days after the end of the
fiscal year. In addition, field office staff are to enter all bonds
received for renewable energy projects into LR2000 and the Bonds and
Surety System.\15\
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\14\ See Bureau of Land Management, IM 2011-096, Certification of
Bonding--Wind Energy Site Testing and Wind Energy Development
Authorizations (Apr. 7, 2011), and IM 2013-034, Oversight and
Implementation Plan--Renewable Energy Coordination Office (Dec. 20,
2012).
\15\ IM 2013-034, Attachment 1, Oversight and Implementation Plan,
Solar and Wind Energy Policies.
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In September 2014, BLM issued a Notice of Proposed Rulemaking
related to wind and solar development on Federal lands and requested
public comment.\16\ The proposed rule would revise and codify existing
policies and establish consistent requirements for the bonding of solar
and wind energy projects. Requirements would differ based on whether
projects were located in certain preferred areas--called designated
leasing areas.
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\16\ Competitive Processes, Terms, and Conditions for Leasing
Public Lands for Solar and Wind Energy Development and Technical
Changes and Corrections, 79 Fed. Reg. 59,022 (Sept. 30, 2014) (to be
codified at 43 C.F.R. pts. 2800 and 2880).
Projects outside designated leasing areas. The proposed
rule would establish a minimum bond amount per turbine of
$20,000 for wind energy development projects--a doubling of
the minimum amount currently set in BLM policy--and
establish a minimum bond amount of $10,000 per acre for
solar energy development projects. The minimum bond amount
for wind energy site-specific or project area testing
projects would remain at the amount currently set in BLM
policy, that is, $2,000 per meteorological tower. The
proposed rule would require both wind and solar right-of-
way applicants to submit a reclamation cost estimate to
help BLM to determine the bond amount, and it would outline
specific bond components that must be addressed when
determining the estimated costs. The proposed rule would
not require BLM to conduct periodic reviews to assess
whether the bonds remain adequate to cover potential
reclamation costs, as is specified in the current wind and
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solar policies.
Projects inside designated leasing areas. The proposed
rule would establish a standard bond amount for wind energy
development of $20,000 per turbine and $2,000 per
meteorological tower, as well as a standard bond amount for
solar energy development of $10,000 per acre. BLM proposed
a standard bond amount because these areas would be
identified by BLM as areas with lesser and fewer
environmental and cultural resource conflicts. According to
BLM officials, when a project terminates inside a
designated leasing area, the agency would potentially
reoffer the site for new wind or solar energy development.
As a result, these sites would require less reclamation
than if they needed to be fully reclaimed to their
predeveloped condition and the bond amount required would
be lower. Under the proposed rule, right-of-way holders
would not be required to submit a reclamation cost
estimate.
A BLM official told us that the agency expects the proposed rule to
be finalized by the end of 2015. Once finalized, the official said BLM
plans to rescind the current wind and solar policies and replace them
with policies that would address, among other things, the bonding
process and adequacy reviews not covered in the proposed rule.
blm has about $100 million in bonds for wind and solar projects, but
the systems for tracking these bonds are not reliable
We found that BLM has about $100 million in bonds--primarily in the
form of letters of credit and surety bonds--to cover reclamation costs
associated with 12 solar rights-of-way and 108 wind rights-of-way on
Federal land in nine western states, according to our analysis of BLM
data. See Table 1 for further detail on the values of bond held and
Table 2 for further detail on the types of bonds held.
Table 1: Value of Bonds Held by the Bureau of Land Management for Wind and Solar Projects, by Project Type and
Amount, as of April 15, 2014
----------------------------------------------------------------------------------------------------------------
Project Type Amount Percentage
----------------------------------------------------------------------------------------------------------------
Solar development............................................. $82,615,899 82.2
Wind development.............................................. $17,106,164 17.0
Wind project area testing..................................... $720,216 0.7
Wind site-specific testing.................................... $36,000 <0.1
-------------------------------------------------
Total................................................... $100,478,279 99.9
----------------------------------------------------------------------------------------------------------------
Source: GAO analysis of Bureau of Land Management bonding data. GAO-15-520
Note: Percentage does not equal 100 because of rounding.
Table 2: Types of Bonds Held by the Bureau of Land Management for Wind and Solar Projects as of April 15, 2014
----------------------------------------------------------------------------------------------------------------
Bond Type Amount Percentage
----------------------------------------------------------------------------------------------------------------
Letter of credit.............................................. $49,177,596 48.9
Surety........................................................ $39,361,443 39.2
Personal, including cash...................................... $10,839,677 10.8
Treasury security............................................. $900,000 0.9
Guaranteed remittance......................................... $139,963 0.1
Undetermined a................................................ $47,600 <0.1
Time deposit.................................................. $12,000 <0.1
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Total................................................... $100,478,279 99.9
----------------------------------------------------------------------------------------------------------------
Source: GAO analysis of Bureau of Land Management bonding data. GAO-15-520
Note: Percentage does not equal 100 because of rounding.
a ``Undetermined'' means that BLM could not provide the bond type.
BLM tracks bonds through LR2000 and the Bond and Surety System, but
we found that neither system was reliable for this purpose.
Specifically, we found multiple instances in each system where
information was missing, inaccurate, or had not been updated as
follows:
Missing information. BLM's oversight and implementation
plan for solar and wind energy policies directs field
offices to enter all bonds received for renewable energy
projects into LR2000 and the Bond and Surety System,\17\
but we found instances where bonds had been entered into
LR2000, but not into the Bond and Surety System. We also
found instances where staff did not always enter in the
remarks section of LR2000 the number of wind turbines or
meteorological towers authorized and located on Federal
land, as directed by BLM's wind policy.
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\17\ IM 2013-034, Attachment 1, Oversight and Implementation Plan;
Solar and Wind Energy Policies.
Inaccurate information. We found instances in LR2000 and
the Bond and Surety System where the type of right-of-way
entered for the project was incorrect. For example, one
wind development project's right-of-way had been
incorrectly entered in both systems as a road right-of-
way.\18\ As a result, the bond had not been included in the
annual state bond certification. When BLM reviewed the
bond, the agency determined that the bond amount was
approximately $90,000 less than the minimum set by BLM's
wind policy.
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\18\ A road right-of-way is an authorization to construct a road on
a segment of BLM land.
Information had not been updated. We found instances where
a bond's status or amount had not been updated in one or
both systems. In some cases, the data were several years
out of date. For example, in one case, LR2000 showed that a
bond had been accepted for $40,000 in 1994, and an
additional bond for the same right-of-way had been accepted
for $160,000 in 2011, for a total bond amount of $200,000.
However, BLM had not updated the Bond and Surety System to
show that the $160,000 bond had been accepted, and the
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system contained no information on the $40,000 bond.
The LR2000 data standards for BLM's mining program state that all
data must be routinely entered within 5 business days of each action
taking place.\19\ However, there is no such standard for entering wind
and solar project data into LR2000.\20\ Furthermore, BLM has not issued
data standards for the Bond and Surety System. Because information in
these two data systems was missing, inaccurate, or out of date, BLM has
limited assurance that either system is reliable for tracking wind and
solar bonds to ensure that bonding policies are being followed and that
all projects have the required bonds.
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\19\ Bureau of Land Management, H-3809-1, Surface Management (Sept.
17, 2012).
\20\ Bureau of Land Management, LR2000 Case Recordation Data
Standards for the Lands and Realty Program (revised Apr. 10, 2013).
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BLM has taken some limited steps to improve its bonding data.
Specifically, to reduce potential errors or omissions in the bonding
data in LR2000 and the Bond and Surety System, BLM made changes to link
certain data in the two systems. Starting in late September 2014, when
an action code showing that a bond has been filed, accepted, or
returned is entered into the Bond and Surety System for a particular
right-of-way, the same information is automatically entered into
LR2000. However, when a bond action code is entered into LR2000, the
same information must still be entered manually into the Bond and
Surety System. In addition, these changes only apply to data entered
into the Bond and Surety System starting in September 2014, so all
previously entered data will not be added to LR2000 unless manually
entered.
blm has limited assurance that bonds for wind and solar rights-of-way
will cover reclamation costs
BLM has limited assurance that bonds for wind and solar rights-of-
way will cover reclamation costs. Specifically, we found that 14 wind
and solar development rights-of-way were underbonded by as much as $15
million in total. In addition, we found wide variation in how BLM staff
documented bond decisions for wind and solar project rights-of-way.
Further, BLM does not adequately ensure that wind and solar bond
instruments are properly secured, handled, and stored. BLM also
inconsistently adheres to its policies for the periodic review of the
amounts of wind and solar bonds to verify their adequacy.
Underbonding of wind and solar development projects. We found that
14 out of 45 wind and solar development rights-of-way were underbonded
by as much as $15 million in total--approximately $5.5 million for wind
rights-of-way and as much as $9 million for solar rights-of-way--
according to our review of BLM project files and data.\21\
Specifically, we identified 10 wind rights-of-way where the bond amount
was lower than the $10,000-per-turbine minimum established in BLM's
2008 wind policy. These 10 rights-of-way were underbonded by a total of
approximately $5.5 million. Nine of those rights-of-way were authorized
prior to the 2008 policy; however, for rights-of-way that were
authorized before the policy took effect, BLM officials told us they
directed staff to obtain bonds that meet the $10,000-per-turbine
minimum. BLM officials told us that they are in the process of
obtaining bonds for these nine rights-of-way. One right-of-way was
reauthorized in 2012 at about $1,500 per turbine.\22\ BLM's files show
that the bond amount for the right-of-way was determined using salvage
values of the equipment. While salvage values may be considered in
estimating reclamation costs, BLM officials told us the 2008 policy
does not permit salvage values to be used to reduce the bond below the
$10,000-per-turbine minimum.\23\ BLM officials told us they are
currently developing a reclamation cost estimate for this right-of-way,
which will help them develop a revised bond.
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\21\ We reviewed all BLM wind and solar energy development
projects--45 in total--for which BLM held a bond as of April 15, 2014.
\22\ This right-of-way was underbonded by approximately $3.9
million.
\23\ BLM officials told us that they had originally sought to bond
this project above the minimum, at $25,000 per turbine based on the
size of the turbines, but the right-of-way holder appealed the bond
determination to the Interior Board of Land Appeals. The Interior Board
of Land Appeals is an appellate review body for the Department of the
Interior. According to BLM officials, the board decided to remand the
decision to BLM.
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We also found four solar rights-of-way that may be underbonded by
as much as $9 million. These rights-of-way were part of a single solar
project with a total estimated reclamation cost of approximately $27.5
million.\24\ This figure includes $18.5 million for decommissioning and
removal of project structures and equipment and $9 million for
revegetation and restoration. However, the project is currently bonded
at $18.5 million, an amount that may only cover the decommissioning and
removal of structures. BLM officials explained that because the project
is in California--where recycling of materials is required--the $9
million estimated for revegetation and restoration would be covered by
the salvage value of project structures. While the salvage value
presented in the documents we reviewed may be sufficient to cover those
costs, the project's documentation did not indicate that BLM officials
included these costs when setting the total bond amount.
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\24\ This project consists of four rights-of-way, each with their
own bond.
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Unclear documentation of bond decisions. We found wide variation in
how BLM staff documented bond decisions for wind and solar project
rights-of-way. Specifically, for 21 of the 33 wind rights-of-way we
reviewed, there was little or no documentation to support the bond
amount. For some of these rights-of-way, there was no documentation
because BLM staff defaulted to the minimum amount set by BLM's wind
policy without conducting any site- or project-specific analysis. For
the remaining 12 wind rights-of-way, the project files contained
documentation that BLM officials used to support their bond decisions;
however, this documentation varied widely. For example, for 1 right-of-
way, the holder developed a reclamation cost estimate,\25\ but the
estimate did not reflect the current state of the project and the
estimated costs were greater than the bond that BLM required. And for 6
rights-of-way, the documentation outlined the cost of decommissioning
and removal of structures, but it did not include cost estimates for
revegetation of the project site. We also found that BLM inconsistently
documented bonding decisions for 2 solar rights-of-way. Specifically,
for 1 right-of-way, the holder did not develop a reclamation cost
estimate, as directed by BLM's 2010 solar policy. As a result, it was
not clear from the project files what BLM considered in determining the
amount of the bond that was in place. In another case, BLM allowed the
right-of-way holder to provide the bond in phases as the project was
constructed, but there was no documentation demonstrating how each
phase's reclamation costs were estimated, or what the payment schedule
and amounts of future bonds would be.
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\25\ BLM's wind policy does not direct applicants to develop a
reclamation cost estimate for a wind project right-of-way. However,
according to BLM officials, BLM may direct an individual applicant to
develop a reclamation cost estimate or may develop one itself.
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We also found discrepancies between information in the project
files and what was recorded in LR2000 or the Bond and Surety System in
13 of the 45 wind and solar rights-of way. For example, for 1 wind
right-of-way, the files indicated the applicant's initial plan to build
24 turbines, but LR2000 showed the project had 20 turbines. A BLM
official told us that since the right-of-way's original authorization
in the 1980s, the type and number of turbines had changed over time.
However, there was no documentation of these changes in the files, and
the BLM official told us that, as a result of our inquiry, he had to go
and physically inspect the right-of-way to confirm the type and number
of turbines. Federal standards for internal control call for
transactions and other significant events to be clearly documented and
that the documentation should be readily available for examination.\26\
BLM has not issued policies that direct BLM staff to document
information related to bond decisions in the project files. According
to BLM officials, they will develop these policies once the proposed
rule is finalized.
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\26\ GAO/AIMD-00-21.3.1.
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Inadequate handling and storing of bonds. BLM also does not
adequately ensure that wind and solar bond instruments are properly
secured, handled, and stored. BLM staff in two field offices told us
bonds were stored in the files for the rights-of-way, rather than in a
locked cabinet or safe. In one of these offices, a staff member told us
that about 20 percent of the bond instruments were stored in the
project files, and the remaining bond instruments were stored in a
safe. However, in that office, that staff member told us that someone
had mistakenly shredded the bond instruments kept in the safe because
the individual did not know what they were. According to BLM's manual
regarding records administration,\27\ offices should ensure that
appropriate internal controls and safeguards are in place to prevent
the loss of official documentation. BLM has general guidance on records
retention and storage, and at least one office within BLM's Energy,
Minerals, and Realty Management Directorate has detailed guidance on
the acceptance, assessment, and storage of bond instruments.\28\
However, the National Renewable Energy Coordination Office, which
oversees wind and solar energy projects, does not have policies or
guidance related to the proper handling and storage of bond
instruments. As a result, BLM cannot assure that all bonds are properly
maintained and secured, leaving the Federal Government potentially at
risk financially if reclamation costs are not covered by the right-of-
way holders.
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\27\ Bureau of Land Management, BLM Manual, MS-1270: Records
Administration (October 1992).
\28\ Bureau of Land Management, Fluid Minerals Bond Processing User
Guide (December 1996).
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Inconsistent adherence to periodic review policies. BLM
inconsistently adheres to its policies for the periodic review of wind
and solar bonds to verify their adequacy. BLM's wind and solar policies
direct officials to review the adequacy of wind bonds every 5 years and
solar bonds every year. Of the 45 wind and solar rights-of-way we
reviewed, 23 had bonds that were at least 4 months overdue for an
adequacy review. Some BLM officials responsible for these reviews told
us that they were not aware that bonds were supposed to be reviewed.
Others told us they were aware that bonds were to be reviewed but had
not completed the reviews due to workload and staffing constraints. BLM
officials told us that LR2000 contains information such as the
authorization date that can be used to determine when a right-of-way is
due for review. However, LR2000 does not automatically notify BLM
officials that a right-of-way is due for its periodic review. Several
BLM officials told us that it would be possible to set up an action
code in LR2000 to provide such automatic notification. If reviews of
bond amounts are not conducted in a timely manner, BLM officials cannot
be sure that bonds in place are adequate to cover reclamation costs.
BLM does not have detailed policies to ensure that all bonds are
properly maintained and secured and bond decisions accurately
documented in project files. In addition, BLM has no standard for the
timely entering of data of wind and solar project data into LR2000 and
no data standards for the Bond and Surety System. As a result, BLM may
not have accurate and complete information with which to track wind and
solar bonds, and BLM has limited assurance that the bonds in place will
be adequate to cover reclamation costs if the right-of-way holder does
not meet its obligations. As a result of these findings and to help
ensure that bonds are adequate to cover reclamation costs for wind and
solar projects on Federal land, we made five recommendations to the
Secretary of the Interior in our June 2015 report. Specifically, we
recommended that the Secretary direct the Director of the Bureau of
Land Management to:
develop detailed policies for processing wind and solar
bonds to ensure bonds are properly secured, handled, and
stored;
develop policies that detail how information related to
bonding decisions should be documented in project files;
develop a policy that all data for wind and solar energy
projects be entered in LR2000 and the Bond and Surety
System within 10 business days;
establish data standards for the Bond and Surety System;
and
develop an LR2000 action code to automatically notify BLM
staff that a right-of-way is due for a bond adequacy
review.
In its comments on a draft report, the agency concurred with each
of these recommendations.
Chairman Gohmert, Ranking Member Dingell, and members of the
subcommittee, this completes my prepared statement. I would be pleased
to answer any questions that you may have at this time.
gao contact and staff acknowledgments
If you or your staff members have any questions about this
testimony, please contact me. Other individuals who made key
contributions to this testimony include Elizabeth Erdmann (Assistant
Director), Morgan Jones, Jessica Lewis, Susan Malone, and Jarrod West.
Cheryl Arvidson, Antoinette Capaccio, Kirsten B. Lauber, and Dan Royer
also made important contributions.
______
Mr. Gohmert. Thank you, Ms. Fennell. I appreciate your
testimony.
At this time I would recognize Mr. Ellis for 5 minutes.
STATEMENT OF STEVEN A. ELLIS, DEPUTY DIRECTOR FOR OPERATIONS,
BUREAU OF LAND MANAGEMENT, U.S. DEPARTMENT OF THE INTERIOR
Mr. Ellis. Mr. Chairman, Ranking Member Dingell, and
members of the subcommittee, thank you for the opportunity to
be here today.
BLM manages nearly 250 million acres of surface property
and 700 million acres of subsurface estate in the Nation. That
means 10 percent of the Nation's surface, or nearly a third of
its mineral estate.
We manage these lands under a dual framework of multiple
use and sustained yield. Facilitating the responsible
development of renewable energy resources on public lands is a
cornerstone of the Administration's energy strategy. Since
2009, the BLM has approved 55 renewable energy generation and
transmission projects. This includes 32 solar projects, 11 wind
farms, 12 geothermal plants.
These projects will provide more than 14,500 megawatts of
power, or roughly enough electricity to power 4.9 million homes
and provide over 24,000 jobs in construction and operations.
Renewable energy projects on public lands have already
generated an estimated $8.6 billion in total capital
investments, with the potential for an additional $28 billion
for approved projects that are pending construction.
As stewards of America's public lands, we take very
seriously our responsibility to sustain the health and
diversity of those lands. To ensure that lands are restored
after a project is decommissioned, we require project
developers to post bonds to cover future expenses.
As with all development on public lands, the BLM is
committed to ensuring appropriate bonding of solar and wind
energy projects. We continue to take steps to improve the
processes and procedures for solar and wind energy bonding. For
example, in September of 2014, the BLM issued a proposed
comprehensive leasing rule for solar and wind energy
development that includes mandatory bonding requirements. We
are currently in the process of reviewing comments on the
appropriate minimum bond amounts and will make a determination
as part of that final rule.
Further, as part of the implementation of the final rule,
we plan to update policies to improve recordkeeping and
processing of renewable energy bonds. These policies will
identify standards for proper project file documentation and
establish automated notifications that a right-of-way is due
for bond adequacy review.
The policies will also include a variety of internal
controls: an annual certification by managers that bonds are
properly processed, held in secure locations, and readily
available.
The BLM also has been engaged with GAO to ensure the bonds
for reclamation costs of wind and solar projects are adequately
documented. We appreciate the work of the GAO and generally
agree with their recommendations. We believe that through the
publication and implementation of the proposed competitive
solar and wind leasing energy rule all of GAO's recommendations
will be fully addressed.
We take our responsibility to maintain proper documentation
of bond instruments seriously. We will continue to take steps
to address any identified shortcomings, including training
staff and updating office-specific procedures.
BLM's responsibility to ensure appropriate bonding for
energy projects extends to all types of development on public
lands. For example, we recently solicited public input on
bonding requirements for oil and gas projects on public lands,
updating potentially outdated regulations.
We are also reviewing individual oil and gas well bonds on
a case-by-case basis and raising bonding requirements where
appropriate using existing authorities.
In conclusion, Mr. Chairman and members of the committee,
we remain committed to ensuring that development of all types
of public lands occurs in an environmentally sound manner, and
we will continue to take steps to ensure that projects are
bonded appropriately.
Thank you.
[The prepared statement of Mr. Ellis follows:]
Prepared Statement of Steve Ellis, Deputy Director, Operations, Bureau
of Land Management, U.S. Department of the Interior
Chairman Gohmert, Ranking Member Dingell, and members of the
subcommittee, thank you for the opportunity to testify on the Bureau of
Land Management's (BLM) policies and practices regarding bonding for
wind and solar energy development on Federal lands.
background
The BLM is responsible for protecting the resources and managing
the uses of our Nation's public lands, which are located primarily in
12 western states, including Alaska. The BLM administers more land--
over 245 million surface acres--than any other Federal agency. The BLM
also manages approximately 700 million acres of onshore Federal mineral
estate throughout the Nation, including subsurface estate overlain by
properties managed by other Federal agencies such as the Department of
Defense and the U.S. Forest Service. That's more than 10 percent of the
Nation's surface and nearly a third of its minerals.
Facilitating the responsible development of renewable energy
resources on public lands is a cornerstone of the Administration's
energy strategy. Prior to 2009, the BLM had approved approximately
2,500 MWs of wind and geothermal energy projects or enough electricity
to power nearly a million homes. No solar energy projects had been
approved prior to 2009. Since 2009, the BLM has approved 55 utility-
scale renewable energy generation and transmission projects, including
32 utility-scale solar facilities, 11 wind farms, and 12 geothermal
plants, with associated transmission corridors and infrastructure to
connect with established power grids. If fully built, these projects
will provide more than 14,500 MWs of power, or enough electricity to
power 4.9 million homes, and will provide over 24,000 construction and
operations jobs. The BLM successfully accomplished the Energy Policy
Act of 2005's goal of authorizing over 10,000 megawatts (MWs) of
renewable energy on public lands 3 years ahead of schedule. The BLM
continues to work toward the President's goal to increase permitting of
new renewable electricity generation capacity on public lands to 20,000
megawatts by 2020. Renewable energy projects authorized by the BLM
constitute a major contribution not only to the Nation's energy grid,
but also to the national economy. Projects on public lands have already
garnered an estimated $8.6 billion in total capital investments, with
the potential for an additional $28 billion for approved projects
pending construction.
The BLM is also improving the way it sites and reviews renewable
energy applications by moving toward a competitive process in preferred
development areas, which have been selected to minimize conflict and
increase efficiency. In October 2012, the Department finalized the
Western Solar Plan that identified 17 Solar Energy Zones (SEZs) and
established a blueprint to fast track utility-scale solar energy
permitting within these areas. On June 1, 2015, three projects within
the Dry Lake SEZ in Nevada were approved under this streamlined
permitting process. Using the expedited review process established by
the Western Solar Plan, reviews and approval of these three projects
were completed in 10 months, less than half the amount of time it took
to review and approve projects under the previous application-by-
application process. The Western Solar Plan also provides the
foundation for the BLM's current rulemaking process to codify
competitive solar and wind energy leasing within designated areas.
renewable energy bonding
As stewards of America's public lands, the BLM takes seriously its
responsibility to sustain the health, diversity, and productivity of
those lands. To ensure that projects are reclaimed and that impacts to
the land are restored after a project is decommissioned, the BLM
requires that project developers post bonds to cover potential future
expenses. As with all development on public lands, the BLM is committed
to ensuring appropriate bonding of solar and wind energy projects and
has taken steps to improve the processes and procedures for solar and
wind energy project bonding.
The BLM authorizes renewable energy projects on public lands using
a right-of-way grant under Title V of the Federal Land Policy and
Management Act (43 U.S.C. 1761-1771). The BLM requires project
developers to submit bonds in an amount that the agency has determined
will be adequate to cover the potential costs for hazardous
liabilities, decommissioning, and reclamation of the project site,
should the developer be unable or unwilling to conduct those
activities.
Currently, the BLM requires minimum bond amounts of $2,000 per wind
energy test site, and $10,000 per wind turbine. There is currently no
minimum bond amount for solar energy projects. The BLM does not assess
the bond based on minimum requirements. Rather, the agency determines
the appropriate bond amount based on site- and project-specific
factors, including intensity and duration of impacts as well as
potential reclamation and administrative costs. The reclamation cost
estimate is also based in part on a third party estimate provided to
the BLM. In many cases, the bond amount exceeds the wind energy minimum
requirement, particularly when bonding development projects rather than
test sites. A bond is released only once reclamation has been
satisfactorily completed. The BLM periodically reviews and updates
required bond amounts to ensure that projects are adequately bonded. Of
the 43 wind and solar projects approved by the BLM since 2009, the
agency has required and secured a total of $154 million worth of bond
assurances to cover potential costs associated with reclamation.
On September 30, 2014, the BLM issued a proposed rule that
describes a competitive leasing process for solar and wind energy
leases in designated leasing areas. The proposed rule includes
mandatory bonding requirements for solar and wind energy to ensure
consistency and predictability across the program, including a minimum
bond amount of $10,000 per acre for solar energy development, $20,000
per wind energy turbine, and $2,000 per energy testing site. The BLM is
in the process of reviewing public comments received on appropriate
minimum bond requirements before the rule is finalized. As part of the
implementation of the final rule, the BLM plans to update polices to
improve recordkeeping and processing of renewable energy bonds, such as
identifying proper project file documentation, requiring routine data
on a more timely basis, and establishing an automated notification
process for BLM staff that a right-of-way is due for a bond adequacy
review. The policies will also include a variety of internal controls,
including an annual certification by managers that bonds are properly
processed, held in secure locations, and readily available.
The BLM has also been engaged with the U.S. Government
Accountability Office (GAO) to ensure that bonds are adequately
documented and reviewed to ensure adequacy for reclamation costs for
wind and solar projects on Federal land. Based on the GAO's ongoing
review, the BLM has identified and is implementing improvements to its
recordkeeping and processing procedures for renewable energy bonds. The
finalization and implementation of the competitive solar and wind
leasing rule will fully address the GAO's recommendations. The BLM will
continue to take steps to address office-specific shortcomings,
including training staff and updating procedures.
The BLM takes seriously its responsibility to maintain proper
documentation of bond instruments. During the GAO audit, the BLM was
made aware of a concern that some reclamation bonds for renewable
energy projects in the Rawlins Field Office in Wyoming may have been
mistakenly removed from a safe and shredded. In response, the BLM has
conducted a preliminary review of the bonding status of its renewable
energy projects in the Rawlins Field Office and can confirm that the 21
bonds required for the 18 renewable energy projects within that field
office are adequately documented and in compliance with BLM policy for
holding bond instruments.
bonding on public lands
In addition to the renewable energy arena, the BLM is working to
ensure appropriate bonding for other types of development on public
lands. For example, the BLM's current regulations governing minimum
bonding requirements for oil and gas were established in the 1950s and
1960s and have not been updated since. These minimum requirements--
$10,000 for a lease bond, $25,000 for a statewide bond, and $150,000
for a nationwide bond--no longer bear a relationship to the costs of
reclamation for an oil and gas development site. As a result, the GAO
previously reported that bonds covering oil and gas projects on public
lands may be as much as $968 million below what reclamation would cost
for those wells.
In response to the GAO report and in recognition of its potentially
outdated regulations, the BLM has published an Advance Notice of
Proposed Rulemaking soliciting public input on bonding requirements for
oil and gas projects on public lands. The BLM is also concurrently
reviewing individual oil and gas well bonds on a case-by-case basis
using existing authorities. Based on these reviews, the BLM is taking
steps to raise bonding requirements where appropriate to ensure that
bonding levels are commensurate with identified operational risks.
Further, in an effort to strengthen our oil and gas inspection and
oversight capability, the BLM has repeatedly proposed to create a fee
system that would cover the BLM's inspection and enforcement activities
as part of the Administration's budget requests. Those fees will help
the BLM to improve production accountability, safety and environmental
protection, and would parallel a fee system already in place for
offshore oil and gas programs. The BLM continues to look for additional
opportunities to ensure appropriate reclamation of projects while
minimizing potential liability to taxpayers.
conclusion
The BLM is committed to ensuring that development of all types on
public lands occurs in an environmentally sound manner and will
continue to take steps to ensure that all projects are bonded
appropriately. The BLM looks forward to working with Congress as we
continue to address important aspects of bonding on public lands. Thank
you for the opportunity to testify, I am happy to answer any questions
the subcommittee may have.
______
Questions Submitted for the Record by Chairman Gohmert to Mr. Steven A.
Ellis, Deputy Director for Operations, Bureau of Land Management
Mr. Ellis did not submit responses to the Committee by the appropriate
deadline for inclusion in the printed record.
Question 1. The Department of the Interior's Office of Inspector
General (OIG) issued a report in June 2012 on BLM's renewable energy
program. The OIG's 2012 report ``found that BLM [was] poised for a
massive expansion of wind and solar projects'' and that ``BLM ha[d]
taken aggressive action to increase its processing of renewable energy
rights-of-way (ROW) grants.'' The OIG noted that ``BLM's focus on
increasing the number of renewable energy projects . . . exposed some
weaknesses in financial accountability and resource protection
including obligations to protect the Government's financial interests
by collecting rental revenues, managing the bond process, and by
appropriate monitoring and enforcing ROW requirements.'' In light of
these findings, the OIG made nine recommendations, including three that
specifically addressed bonding:
Issue an updated wind IM that clearly requires bonds on
all projects.
Reassess the minimum bond amounts for wind projects as
well as methods for determining the bond amount, including
expanding the use of a bond review team.
Track and manage bond information on all renewable energy
projects, including the amount of the bond, when BLM
requested and received the bond, contact information for
the bonded party, the type of bond, and when the bond
requires updating.
Despite these recommendations--with which BLM substantially
concurred--the Government Accountability Office issued a report in June
2015 that found many of the same problems documented by the OIG 3 years
before were still ongoing. Please explain in detail how BLM implemented
the OIG's 2012 recommendations, including any policy or management
changes that were made, and explain how the deficiencies identified by
the OIG were not corrected over the past 3 years.
Question 2. After reviewing the OIG's report in 2012, BLM asserted
that it would make sure (1) its bonding policies and procedures were
followed; (2) that BLM staff understood the policies BLM had in place;
and (3) that bond information was accurately and promptly entered into
the computer system. Based on the GAO's 2015 report, it appears that
BLM has made no progress in these areas. Please provide the name(s) and
title(s) of the BLM official(s) who was/were responsible for
implementing the OIG's recommendations and describe any steps BLM has
taken to hold such official(s) accountable.
Question 3. BLM points to the September 2014 proposed rule for
bonding as a cure-all for the myriad deficiencies with the wind and
solar bond program. However, BLM has many policies in place currently
that it simply chooses not to follow (e.g., periodic bond reviews).
Please describe how BLM will ensure compliance with the new regulation,
when it has continually and demonstrably failed to ensure compliance
with existing policy.
Question 4. The proposed rule does not include a periodic bond
adequacy review requirement--not even a generic requirement that would
allow flexibility in establishing specific review periods. Given that
fully half of all wind and solar project rights-of-way are past due for
review under BLM's current policy, please explain BLM's rationale for
omitting a periodic bond adequacy review requirement from the new rule.
______
Mr. Gohmert. Thank you, Mr. Ellis. I appreciate your
testimony.
At this time we will begin questioning. First of all, Ms.
Fennell, some of your recommendations are almost identical to
recommendations by the Office of the Inspector General that had
been done several years ago, and I wanted to follow up on some
of those.
But I also appreciated the Ranking Member's comments.
I am recognized for 5 minutes. Sorry.
She made a comment that we had not had any losses as far as
right-of-way damage at this point. Something that had concerned
me--I had seen that out of 31 authorized wind rights-of-way, 21
have been reassigned or had their names changed. Two of those
have gone through bankruptcy, and subsequently a reassignment.
Eight of the 21 have gone through three or more name changes.
Those are the kinds of things that cause concern, that perhaps
we need to be prepared for in the event one of those
bankruptcies in the future does not afford the land and
environment being properly repaired back to where it was before
they came in with the right-of-way.
Ms. Fennell, your team reviewed every single wind and solar
right-of-way for which BLM held a bond as of April 15, 2014. Is
that correct?
Ms. Fennell. Yes, it is.
Mr. Gohmert. During the course of review, GAO conducted
interviews with BLM staff, as I understand it, across the whole
country. Is that right?
Ms. Fennell. Yes, we did interview BLM headquarters, state,
and field office officials that had wind and solar projects.
Mr. Gohmert. Do you know if it was someone with GAO who
interviewed the realty specialist in the Rawlins Field Office
that was responsible for managing the wind and solar bonds?
Ms. Fennell. Yes, we did interview the realty specialist in
the Rawlins office.
Mr. Gohmert. And it was her job to make sure that BLM had a
bond for each wind and solar right-of-way that was managed by
the Rawlins office, correct?
Ms. Fennell. Yes, that is correct.
Mr. Gohmert. Did the realty specialist advise GAO during
her review that she only found about 20 percent of the bond
instruments in the project files?
Ms. Fennell. Yes, she did. In the course of our review, she
was describing the process that she used for the annual
certification process. At that point, she indicated 20 percent
were found in project files.
Mr. Gohmert. And actually those should have been in the
safe. Is that not correct?
Ms. Fennell. They should have been retained in a properly
secured storage cabinet or safe.
Mr. Gohmert. Right. About the other 80 percent, did she
comment on what happened to those?
Ms. Fennell. She did. She indicated that she was not able
to find them. They were surety bonds, which means that they
could be replaced, but she was not able to locate them.
Mr. Gohmert. Well, it appears that she had indicated that
those were shredded. Is that not correct?
Ms. Fennell. During the course of the conversation she did
indicate that she believed that the bonds had been mistakenly
shredded in a safe.
Mr. Gohmert. Yes. I have noted in an e-mail from De Shann
Schinkel on March 20, 2015, just 2 or 3 months ago, that she
did not know the value of all the bonds that were shredded. So
even as recently as March, she was still indicating that those
bonds were shredded, correct?
Ms. Fennell. Yes, that is correct. That was part of an e-
mail that was following up on a number of questions that we had
for her, including the shredding.
Mr. Gohmert. Right, and I had seen that e-mail following
up. Did anybody inquire as to specifically why those bonds
would have been shredded?
Ms. Fennell. She had indicated to us that she thought they
had been mistakenly shredded, but she did not provide any other
elaboration.
Mr. Gohmert. All right. So basically, in summary, we had 20
percent of the bonds that were in project files instead of
being secured as required by policy, and then 80 percent were
gone, apparently shredded, correct?
Ms. Fennell. Yes, at the time of our review, that is what
we were informed.
Mr. Gohmert. Mr. Ellis, I did want to ask you about your
June 3, 2015 letter saying that all the bonds in the Rawlins
office are currently accounted for. You did not elaborate or
answer the questions that were submitted to you by Mr. Bishop
and me, and I am curious why that ended up being glossed over.
Mr. Ellis. Mr. Chairman, when we learned of this matter
through the draft GAO report, I talked to our Acting State
Director in Wyoming, Mary Jo, and asked her to look into this
and to conduct an internal review to see if she could
substantiate this claim and examine the bonding status.
Mr. Gohmert. My question before time expired was very
specific as to why you glossed over this. I was not looking for
an account of what you did, but why you glossed over the fact
that those were missing.
Mr. Ellis. It is my understanding, Mr. Chairman, from the
Wyoming BLM Acting State Director that the bonds are not
missing; that all bonds are accounted for.
Mr. Gohmert. All right. Well, we will have to pursue that
in a second round then.
At this time I will recognize the Ranking Member, Mrs.
Dingell, for 5 minutes.
Mrs. Dingell. Thank you, Mr. Chairman.
I am going to try to get two lines of questioning here
because I myself am confused by some of the last; but I want to
get to what I think is the very important crux of the matter.
Obviously, the GAO report made some findings that disturb
us all; we want to work together and corrective action is
needed. So, Director Ellis, the Majority claims that BLM has
not taking corrective action since these issues were reported
by the Inspector General.
I do not think that is true. Is it not true that you have
issued a rule? Can you talk about that?
When do you think it is going to be final, and when will
things be such that this will be tightened?
Also, what are you doing in the meantime to tighten things
internally before the rule is final?
Mr. Ellis. Well, we have actually made significant
improvements in the process of assessing bonds for renewable
energy products in response to the IG's report of 2012. In the
summer of 2012, the BLM issued policy to ensure field offices
were complying with the existing bonding policy. For example,
it required state directors to certify annually that all right-
of-way bonds are up to date and consistent with policy and
required field offices to enter all bonds into the LR2000
System and the Bond and Surety System.
We also entered into this rulemaking process that you
referred to for wind and solar, to ensure consistency and
predictability across the program. We have not yet completed
that process, but we hope to do so as expeditiously as
possible.
Mrs. Dingell. So, can I just be clear for the record? It
sounds to me like you were following very closely the
recommendations that the external reviews have given you. You
are taking the issues that need to be addressed in rulemaking
and putting them in a rule.
That rule still has to be finalized. You are using the
tools you have, like issuing internal policies and conducting
staff training, to correct other issues. Is that accurate?
Mr. Ellis. That is correct.
Mrs. Dingell. Thank you.
Let's go to shredding. I am about as confused as anybody
from what I just heard. Did I just hear that you shredded 80
percent of the bonds? Ms. Fennell?
Ms. Fennell. During the course of a conversation with the
reality specialist to have an understanding of what their
procedures were for conducting annual certifications, we
learned at that point in time that 20 percent of the bonds were
found in project files that were not in a secured cabinet or a
safe.
The remaining 80 percent we were informed, which were
surety bonds and which had been indicated through the two
database systems that BLM has still existing, were not able to
be found.
Mrs. Dingell. But does it mean they were shredded?
Ms. Fennell. The realty specialist went on to inform us
that she had heard that the bonds had been in the safe and then
were mistakenly shredded.
Mrs. Dingell. So this is hearsay. Let me ask you another
question. One type of bond that can be held is a check. Is that
not correct?
Ms. Fennell. Yes, that is correct.
Mrs. Dingell. And presumably copies are made of that check
for any number of reasons, including information redundancy. Is
that correct?
Ms. Fennell. I believe that is.
Mrs. Dingell. And, Mr. Ellis, you could help me answer.
Both of you were participating in this discussion.
Those checks have personally identifiable information. Do
you have protocols for protecting personally identifiable
information that might include shredding copies of checks after
they have been cashed or rendered unnecessary?
Mr. Ellis. We do protect personally identifiable
information. That is true. We do protect that.
Mrs. Dingell. So is it in the universe of options that the
bonds at issue in the secondhand account--hearsay--of possible
bond shredding mentioned in the GAO report were copies of
checks that were no longer necessary to keep on hand and that
contained personally identifiable information?
One of you want to respond?
Mr. Ellis. Well, I might respond in this way. I was not
part of this group to do the investigation. I have talked to
our Acting State Director, Mary Jo Rugwell. She has indicated
to me that all of the bonds are accounted for. She indicated
that if anything may have been shredded, it could have been----
Mrs. Dingell. So you disagree that 80 percent of the bonds
are missing or not accounted for?
Mr. Ellis. No, all of the bonds are accounted for. The
bonds are accounted for. They are in the safe. That is what I
was told.
Mrs. Dingell. Well, I would just hope--we have to be very
clear--no hearsay or thirdhand information. GAO in its report
said that they had investigated. I think it is very clear we
have to tighten; but I do not want rumors to start off that are
not true either, Mr. Chairman.
Mr. Gohmert. Thank you.
To be clear, my question was about the 80 percent that were
not available previously, not currently, so to set the record
straight there.
At this time the Chair recognizes Mrs. Radewagen for 5
minutes.
Mrs. Radewagen. Thank you, Mr. Chairman and the Ranking
Member.
I also would like to thank the panel for appearing today.
Ms. Fennell, can you explain the reclamation process for
wind and solar projects and describe why reclamation bonds are
important?
Ms. Fennell. Reclamation bonds are important because they
ensure that there is no financial risk to the Federal
Government in the event that the developer is unable to meet
the obligation for reclaiming the land to its preconditioned
state.
Mrs. Radewagen. Now, in some cases reclamation can be very
expensive, and if it is a large project and there is a lot of
infrastructure, reclamation can cost tens of millions of
dollars. Is that right?
Ms. Fennell. Yes, that is correct.
Mrs. Radewagen. What is the total value of wind and solar
bonds held by BLM?
Ms. Fennell. Currently it is $100 million for wind and
solar projects.
Mrs. Radewagen. And that is for how many rights-of-way?
Ms. Fennell. It is 120 rights-of-way, which does include 45
for wind and solar energy development, and then the remainder
would be for wind testing, either project area or site-specific
area.
Mrs. Radewagen. So GAO looked at every single right-of-way
that required a bond, right?
Ms. Fennell. We looked at the processes that BLM had in
place, the policies that they had in place, as well as the
practices that they had in place in general. Then we did a
detailed file review of 45 wind and solar projects.
Mrs. Radewagen. Can you explain how GAO determined those
numbers? Did they come from BLM or did you independently verify
them?
Ms. Fennell. We utilized the BLM data systems to ascertain
the number of wind rights-of-way and solar rights-of-way
projects. In the process of that, we found discrepancies in the
data; so we went and worked with the BLM officials to ensure
that the numbers that we had were correct, and that we were
able to report them in our report.
Mrs. Radewagen. When the GAO team began looking at the data
from BLM, was it consistent?
Ms. Fennell. We did find that the LR2000 and the Bond and
Surety System did have information that was either missing,
inaccurate, or that had not been updated. We were----
Mrs. Radewagen. So the answer would be no?
Ms. Fennell. Correct.
Mrs. Radewagen. The BLM has two separate databases for
tracking wind and solar bond information. During the review,
did you find that they were reliable?
Ms. Fennell. We did not find that they were reliable for
the purpose of tracking the wind and solar rights-of-way.
Mrs. Radewagen. Were the two databases at least consistent
with each other?
Ms. Fennell. We did find discrepancies between the two
systems.
Mrs. Radewagen. During the review, did GAO find that the
two systems were missing information?
Ms. Fennell. Yes, we did.
Mrs. Radewagen. What kind of information?
Ms. Fennell. We found that there was either bond amounts
that were in one system but not in the other system, that dates
would be different, or that project information was not up to
date. So we did find discrepancies between the two systems and
what was contained in both.
Mrs. Radewagen. What about timeliness? Were the databases
at least up to date?
Ms. Fennell. They were not up to date. We did find issues
with both databases in terms of either information in one
database that was up to date and not in another, or sometimes
we found information in the project files that was more up to
date than what was contained in the databases or vice versa.
Mrs. Radewagen. So without implementing GAO's
recommendations, BLM could not have confidence that the
information it keeps on wind and solar bonds is accurate?
Ms. Fennell. Yes, that is correct. That is why we made
several recommendations to ensure that policies or data
standards should be put into place in order to ensure that the
information is up to date, that the data systems are accurate,
and that there is timely entry of information in the data
systems.
Mrs. Radewagen. Thank you, Mr. Chairman.
Mr. Gohmert. I thank the gentlelady.
At this time the Chair recognizes Mr. Huffman for 5
minutes.
Mr. Huffman. Thank you, Mr. Chairman.
I find it noteworthy that the Majority's information on
this hearing, the focus of this hearing, and the questioning
that has happened to date has been strangely silent about dirty
fossil energy projects, and whether they might suffer from some
of the same problems that are being leveled at clean renewable
energy projects, or maybe even worse problems.
Now, Ms. Fennell, the GAO has written many reports on lax
bonding policies and practices regarding the oil and gas
program, too, correct?
Ms. Fennell. Yes, that is correct.
Mr. Huffman. When were the oil and gas bond amounts last
updated?
Ms. Fennell. In our last report that we did in 2011, I
believe that we found that the minimum bond amounts had not
been updated in 50 years.
Mr. Huffman. Right. Since the Eisenhower presidency, I
believe. You have also made findings about the adequacy of the
current bond amounts for oil and gas projects. Is it fair to
say you have found those to be woefully inadequate?
Ms. Fennell. We did find that there were problems
associated with the adequacy of the information that is also
contained in their database systems.
Mr. Huffman. Thank you.
Deputy Director Ellis, on this theme of taxpayer risk from
potential pollution, can you tell me how many renewable energy
projects on Federal land have not been cleaned up by the
developer before they left?
In other words, how many wind and solar projects have ever
left taxpayers on the hook?
Mr. Ellis. To this point, there have been none.
Mr. Huffman. How about oil and gas sites? Could you say the
same of those?
Mr. Ellis. No. I do not have all the numbers with me; I
think in the last 3 years I was made aware that there were
seven instances on oil and gas where there were some
reclamation costs and we did have to go the bond.
Mr. Huffman. I have reference here to a 2010 GAO report
finding that BLM spent $3.8 million to reclaim 295 orphaned
wells in 10 states. Does that sound about right?
Mr. Ellis. I cannot validate those numbers for sure, but I
can tell you we do have orphaned wells--and we have had to
spend some money on orphaned wells--but many of these orphaned
wells, such as those in Alaska were not bonded. They are very
old. They were not bonded.
Mr. Huffman. I believe BLM has identified an additional 144
orphaned wells in seven states that need to be reclaimed as
well; so we are looking at a pretty sizable taxpayer exposure
for orphaned wells and other problems related to inadequate
bonding from oil and gas projects. Is that fair to say?
Mr. Ellis. Yes. The orphaned wells, it is an issue,
particularly in Alaska.
Mr. Huffman. Well, thank you.
Mr. Chairman, I am really struck by what this hearing could
have been if we were really interested in oversight of taxpayer
exposure from these energy projects, and if we did not have an
unwritten rule in this committee and with the House Majority
right now that we can never say anything bad about fossil fuel
energy projects; we have to always pick on clean renewables.
If we were interested, we could take a look at the
inadequate bonding rates that go back to the Eisenhower
administration. We could take a look at this one-of-a-kind,
self-bonding give away to the coal industry that puts them in
an even more risky position relative to protecting the
taxpayer. We could look at the fact that that self-bonding
program inures to the benefit of major coal companies in
millions of dollars each and every year, that we have had
independent reports suggesting that the failing financial
health of those coal companies underscores the risk to
taxpayers right now, and that they may be playing games with
their subsidiaries in order to continue enjoying this one-of-a-
kind self-bonding status that is not available to clean,
renewable energy programs.
All of that is something that we could have addressed. We
could have talked about the fact that instead of picking on
clean renewable energy, which has never cost the taxpayers a
dime, where we have identified some inadequacies and
discrepancies that are being addressed by BLM right now, fixed
in a rulemaking. Instead of that, we could talk about the
actual loss to taxpayers that is occurring and the significant
risk that we face because of these lopsided policies that
continue to tilt the energy playing field in favor of dirty
fossil fuel energy projects.
That all could have made for a great hearing, but
unfortunately we are left with this very shallow farce of an
oversight hearing, and I think that is a tragedy.
With that, I will yield the balance of my time.
Mr. Gohmert. Thank you
At this time I will yield to Mr. Labrador for 5 minutes.
Mr. Labrador. I yield back to the Chairman.
Mr. Gohmert. You yield back or you yield?
Mr. Labrador. I yield.
Mr. Gohmert. Well, thank you.
I realize the gentleman had just come in, but that would
allow me to follow up on a couple of matters. We may want to
look into what we are characterizing as the give aways to coal
companies. I know it surely appears to people that are mining
coal in my district and friends from West Virginia that there
really appears to be a war on coal and so many have been put
out of business. We have so many coal miners that are in the
country that are out of work, and they certainly were not aware
of any give aways since their companies have been put out of
business.
But we also may want to have a hearing on the gentleman's
comment that clean renewables have never cost the taxpayers a
dime. They are costing us a fortune every year, especially when
you look back at Solyndra and some of those that we continue to
prop up with taxpayer monies. Some industries, like coal and
oil and gas, they're allowed to deduct the cost of doing
business as any manufacturer is; yet in the renewables, we just
give money away trying to get people into those businesses,
but----
Mr. Huffman. Would the gentleman yield?
Mr. Gohmert. Well, let me get back to that.
As of this writing, we have not found evidence that bonds
were shredded. Mr. Ellis, you said that. Did you look into
that, as to whether or not they were shredded?
Mr. Ellis. Mr. Chairman, I have indicated that I spoke with
our Acting State Director of Wyoming. I asked her to look into
the matter. She got back to me.
Mr. Gohmert. That was not my question. I was asking if you
did. You are here testifying, and you said as of this writing
we have not found evidence. Having investigated things as a
prosecutor, I know you have to go to the source; and we have an
e-mail as of March that again says that she did not know the
value of the documents that were shredded.
Let me ask you this. It was mentioned that sometimes these
are checks that are used instead of bonds. Do you know if those
were checks that were taken from the safe or that were not
accountable, or were they actually bonds that later were
replaced?
Mr. Ellis. I do not know, Mr. Chairman, the specifics of
checks. I can tell you that we are very pleased that the
Inspector General is looking into this matter. We support----
Mr. Gohmert. I am not interested in who else is looking at
it. I am interested in your department. One of the things that
disturbs me to no end--I like people being held accountable
when they cost the government tremendous amounts of money
unnecessarily--we had someone with Interior that left out
language back in the Clinton administration that has cost this
country billions of dollars in revenue from offshore drilling.
We kept trying to find somebody to be held accountable, and we
were told by Interior, ``Well, we think maybe the person that
did that is no longer with the government.''
She had gone to work for, as we understood it, an oil and
gas company. Now, as I understand it, that person is back with
the Obama administration.
We have to start holding people accountable that do not
follow the rules and that create problems. The letter that
Chairman Bishop and I sent asked you specific questions, or
asked Director Kornze on what date were the bonds shredded. Who
removed the bonds from the safe? Who destroyed the bonds? Are
the individuals responsible for removing and destroying the
bonds currently employed by BLM? Who had access to the safe?
Why were the bonds removed from the safe? Were the entire
contents of the safe removed at the time the bonds were
removed? Were the entire contents of the safe destroyed at the
time the bonds were destroyed? When did the Rawlins Field
Office notify the state office that the bonds had been
destroyed? How was notification provided?
It does not give me any comfort that you say the OIG is
investigating. We were asking for answers from you, and the
best we get in your letter is, ``As of this writing we have not
found evidence that bonds were shredded;'' then you gloss over
it as if there was never a problem in saying the bonds are
appropriately documented and the assets are protected.
Once again, it is like Interior is trying to gloss over
this whole issue where somebody took those bonds out of the
safe, from what we understand; and something happened to them.
Indications were--whether it is hearsay or not--the best thing
we have understood so far is that they were shredded; and yet
we do not have an account from you that you have actually
looked into this serious matter.
Have you looked into these specific matters?
Mr. Ellis. Mr. Chairman, as I responded in my letter and
earlier, the Acting State Director of Wyoming looked into it
and told me that all the bonds were accounted for, that based
on their looking into this, that the bonds were not shredded.
Mrs. Dingell. Mr. Chairman.
Mr. Gohmert. Well, you are not answering the question,
clearly. His letter did not answer the question, but my time
has expired.
I yield 5 minutes to Mr. Polis.
Mrs. Dingell. Would you be willing to yield one moment for
a clarification?
I do think that the Inspector General, it is my hope and
intent I've been told, has an ongoing investigation where all
of the questions that you have asked should be answered; and
that when there are IG investigations, management is asked not
to become involved in the investigations, which would appear to
be intimidating employees.
Is that also part of what we are dealing with right now,
that the IG's office is doing this investigation?
Mr. Gohmert. Well, let's go to Mr. Polis, and then we will
come back. The problem is that we sent a specific letter to the
Director of BLM; and they are dodging it saying, ``Hey, well,
it looks like there is an OIG investigation now.''
So anyway, Mr. Polis, you are recognized for 5 minutes.
Mr. Polis. Thank you, Mr. Chairman.
I want to thank the Chairman for holding this hearing
today, not because of some of the non-issues that the Majority
continues to raise, but because I think this hearing speaks to
the need for improvement in the development of renewable
energies on public lands.
Along those lines, I introduced a bill earlier this month
with Representative Gosar, the bipartisan bill--H.R. 2663, the
Public Lands Renewable Energy Development Act, that would
streamline the regulatory and permitting process for wind and
solar development on public land.
It has been very frustrating to me as a policymaker how oil
and gas is able to develop on public lands without doing NEPA
studies, with minimum permitting delays--usually in a period of
weeks or months--but renewable energy projects often take years
to be able to permit on public lands.
I was going to ask Deputy Director Ellis if he would agree
that encouraging the development of renewable energies on
public lands is a critical national priority and what can the
Federal Government do to streamline and make less costly and
faster the permitting process for renewable energy projects on
public lands?
Mr. Ellis. Well, Congressman, I might respond this way. We
are very proud of the role that the BLM plays in providing the
Nation's energy needs, including renewable energy.
Regarding the bill, the department and the BLM are
committed to responsibly mobilizing the tremendous renewable
energy resources that are available on public lands; and we
share your interest in identifying efficiencies that are
consistent with their multiple use and sustained yield mandate.
We are very proud of the record that we have had,
particularly since 2009. As I indicated in my testimony, when
all of these projects get online, it will be 14,500 megawatts
of power, which is enough to supply a lot of homes. I indicated
in my testimony we are proud of this. This is energy that is
clean. It is renewable; it is clean. It is environmentally
sound energy.
Also with that said, we still have oil and gas. We have
geothermal. We have coal. We have a complete portfolio on
public land.
Mr. Polis. Is there more that you can do administratively,
of course, in addition to Congress and this committee taking up
H.R. 2663, to streamline and reduce the cost or timeline for
approving renewable energy projects?
Mr. Ellis. Let me respond this way, Congressman. As you
probably know, a few years ago we did an environmental impact
statement to identify solar energy zones. I believe there are
about 17 of these. We went through that process so industry
would know that there were areas that they could go where we
felt that the resource conflicts were less than they were in
other areas; and since we had an umbrella EIS over these zones,
we could do the NEPA work faster.
So it really encourages industry to go to those areas.
Mr. Polis. What is the estimate of the time frame for the
NEPA work in those preferential areas?
Mr. Ellis. Boy, in some of those we have been able to get
that NEPA work done in a matter of a year, which is pretty
quick.
Mr. Polis. Would you consider it an analogous project for
wind and geothermal and other forms of renewable energy?
Mr. Ellis. It can take longer if it is outside those zones.
It really depends upon----
Mr. Polis. Well, those were solar zones. Would you consider
a similar process around creating streamlined zones for wind
and geothermal?
Mr. Ellis. Congressman, we have had those discussions.
Mr. Polis. I think that would be welcomed. If you can
submit later, we would love to see a comparison between the
NEPA process in the preferred solar zones and the regular NEPA
process around solar outside of those zones, assuming there has
been some of those pending.
Also, we would love to be updated on your process around
establishing similar zones for other forms of renewable energy
and look forward to working with you on that.
I want to encourage you to take a look at H.R. 2663 as
well, the bipartisan bill that would facilitate zoning for
renewable energy projects on public land.
I yield back the balance of my time.
Mr. Gohmert. I thank the gentleman.
We will start a second round.
Mr. Ellis, were you aware that at least 50 of the orphaned
wells in Alaska were originally drilled years ago by the U.S.
Navy, and it was the Navy that abandoned them?
Mr. Ellis. Yes, Mr. Chairman. I am aware that some of those
are Navy wells. I do not know if it is 50, but I am aware that
some are Navy wells.
Mr. Gohmert. OK, and this is a direct question. Were you
aware or were any of the bonds that were in the Rawlins Field
Office replaced?
Now, you said they are there. But were bonds in the Rawlins
Field Office, any of them, actually replaced?
Mr. Ellis. All right. If I may for clarification purposes,
you are suggesting that the bonds are accountable, that maybe
there were some that were not there and now they are back? Is
that it?
Mr. Gohmert. Unless you are deaf, you have heard another
witness testify that 80 percent of the bonds were not available
in the Rawlins Field Office. Twenty percent were in project
files. Your letter says all of the bonds were accounted for. I
am asking you whether you know whether some or all of the 80
percent that were originally missing, as testified to today,
were replaced.
Mr. Ellis. What I am aware of is that all of the bonds
today are accounted for.
Mr. Gohmert. Have you heard the testimony today that 80
percent of the bonds were missing?
Mr. Ellis. I did hear what GAO had to say.
Mr. Gohmert. Have you investigated whether or not any were
ever missing?
Mr. Ellis. The question I asked the Acting State Director
of Wyoming was to find out, based on what was read in the draft
report, if some bonds had been shredded and if the bonds are
accounted for, and I said earlier----
Mr. Gohmert. Did you ever see the letter that Chairman
Bishop and I sent to Director Kornze?
Mr. Ellis. I did.
Mr. Gohmert. So you ignored all of those questions that we
were asking and you just simply asked, ``Are the bonds there
now? ''
Mr. Ellis. Yes. We asked BLM in Wyoming to look into the
matter and see if there had----
Mr. Gohmert. You just testified that you asked them if the
bonds were there. Is that what you asked?
Mr. Ellis. We asked them, Mr. Chairman, to look into the
matter based on what we saw in the draft report. They responded
to us that the bonds were not shredded, and that all of the
bonds are accounted for and in the safe.
Mr. Gohmert. By the way, I did not swear you in--I think we
are going to start swearing witnesses in--but even if you are
not sworn in, it is a crime to testify untruthfully before a
congressional committee.
Now, the question that I have been trying to get an answer
to is, what happened to the 80 percent? And you are testifying
to this committee, of your own knowledge, that there were no
bonds ever shredded. Is that what you are testifying to?
Mr. Ellis. That is the information that I was given from--
--
Mr. Gohmert. You are willing to stand on that, that no
bonds were ever shredded. You are willing to stand on that
under penalty of testifying falsely?
Mr. Ellis. That----
Mr. Gohmert. Because a lawyer would advise you that if you
do not know, you had better say, ``I do not know.'' But if you
are saying they were not shredded based on the evidence that I
had, then there is an obligation you have to make sure you have
the proper evidence and not mislead this Congress.
So let me ask you again--are you testifying that no bonds
were ever shredded?
Mr. Ellis. Mr. Chairman, as I indicated earlier in my
testimony and in response----
Mr. Gohmert. I am asking you a direct question. Is it your
testimony that no bonds were ever shredded?
Mr. Ellis. I can only testify to what I was told.
Mr. Gohmert. You had better testify to what you know of
your own personal knowledge. Are you testifying to this panel,
to this committee that no bonds were ever shredded? Yes or no?
Mr. Ellis. Mr. Chairman, I asked a question of our Acting
State Director, to look into this.
Mr. Gohmert. So your testimony is the bonds were not
shredded. Is that right? Yes or no?
Mr. Ellis. My testimony is what I had in the record, what I
have----
Mr. Gohmert. So why don't you say, ``I do not know'' ? That
would be a safer answer than saying yes, you inquired and no
bonds were shredded. Because if you say, ``I inquired and no
bonds were shredded,'' I am telling you, Mr. Ellis, you are
misleading this committee. I am asking you--do you want that on
the record? Your testimony is that no bonds were shredded.
Mr. Ellis. I was told by the Acting Director of the state
of Wyoming----
Mr. Gohmert. I am asking you if you stand by what you were
told.
Mr. Huffman. Point of parliamentary inquiry, Mr. Chairman.
I have just heard you interrupt the witness, I think no less
than 10 times.
Mr. Gohmert. When a person asking the question----
Mr. Huffman. Are we entitled to actually get his testimony
or do you intend to shout him down and not let him talk?
Mr. Gohmert. Your point is invalid because a witness is
required to answer the question.
The gentleman is out of order.
Mr. Huffman. The Chairman is out of order.
Mr. Gohmert. Thank you.
If we are not allowed to get questions answered by
witnesses, then these hearings are worthless.
Mr. Huffman. Exactly, so let him answer and then it will
not be worthless.
Mr. Gohmert. He would not answer the question.
Mr. Huffman. You can shout on YouTube any time you want.
Mr. Gohmert. I am asking the question one final time. I
realize we do not have a Department of Justice that has carried
out any prosecutions so far, but some day we will; and I am
asking you--are you standing by testimony that no bonds were
shredded?
Mr. Ellis. Mr. Chairman, I will respond in two ways. One,
the Inspector General is investigating this. I look forward to
the Inspector General getting down and finding the facts of----
Mr. Gohmert. Well, that is not answering the question. You
are saying that you did not do your job. You will let somebody
else investigate.
Mr. Ellis. No, what I am saying is that we inquired. I had
the Acting State Director inquire----
Mr. Gohmert. And you believe that? That is your testimony.
No bonds were shredded.
Mr. Ellis. That is the information that was provided to me.
Mr. Gohmert. And you stand by that. You believe it.
Mr. Ellis. The information that was provided to me. With
that said, I look forward to reading the----
Mr. Gohmert. Do you believe it or not?
Mr. Ellis [continuing]. Inspector General's report.
Mr. Gohmert. I am just trying to get an answer. You
provided that information to Congress. Do you believe no bonds
were shredded?
Mr. Ellis. All I can go by, Mr. Chairman, is what I am told
by----
Mr. Gohmert. I am asking you: do you believe no bonds were
shredded?
Mr. Ellis. It is my understanding from the BLM in Wyoming--
--
Mr. Gohmert. Do you believe no bonds were shredded?
Mr. Ellis. I can only go by what I was told.
Mr. Gohmert. Do you believe no bonds were shredded?
Mrs. Dingell. Point of order, Mr. Chairman.
Mr. Gohmert. We are trying to get an answer to the question
that the witness will not answer.
Do you believe it or not? You are the Assistant Director.
Just answer the question.
Mrs. Dingell. Mr. Chairman, can I respectfully say that we
have an Inspector General's investigation going on. We are
dealing in hearsay, period. I do not like anybody's reputation
and integrity being done on hearsay.
I think the GAO study looked at it, and they could not find
enough information. The Inspector General is. We are all very
concerned about hearsay reports, but even when the GAO looked
at it--badgering the witness today is not going to get us any
further. I think we look forward to the Inspector General's
study.
Mr. Gohmert. There is an explanation. Credibility is always
an issue. This gentleman made inquiry, and his testimony as to
the credibility of the information he got is always going to be
an issue, whether the OIG looks into it or not. If he did not
believe the information he got, that is certainly important
whether the OIG looks into it or not.
But, frankly, I am so tired of government officials hiding
behind some other answer and not doing their jobs when laws and
regulations are being violated. They put people in prison for
violating them if you are not in the government, and yet nobody
is held accountable in the government. I want that to stop, and
that is why I kept pushing for an answer.
So, sir, do you believe that no bonds were shredded based
on the credibility of the people that told you?
Mr. Ellis. Mr. Chairman, based on what I know of our Acting
State Director--she indicated that based on them inquiring and
looking at that, that no bonds were shredded.
Mr. Gohmert. Were they replaced?
Mr. Ellis. I have full confidence in Mary Jo's feedback on
this.
Mr. Gohmert. All right. My time has expired.
The gentlelady, Mrs. Dingell, is recognized for 5 minutes.
And if they do not answer your questions, then you have however
long it takes to get an answer.
Mrs. Dingell. So, Mr. Chairman, I really wanted to get into
some more substantive issues; but I really want to say, first
of all, none of us wants to see things and we need to tighten
the process. The GAO study is there, two different rulemakings.
A second one I want talk about, too, on oil and gas.
But I want to be clear for the record. Is it not true that
we keep original bond instruments because it is best for
recordkeeping, but holding the original bond document does not
impact the ability of the BLM to use the bonds if necessary. In
order for that bond to be released back to the project
component, the BLM still has to submit a request to the bond
company asking for that to occur?
In the event that BLM does not have the original document,
a duplicate can be made by that bonding company that serves as
appropriate documentation for that bond. So while we are
looking at processes that none of us approve of and we are
getting cleaned up, is it not true that that could be how we
now have the rest of those bonds accounted for?
Mr. Ellis. Congresswoman, yes, we do have to go back to the
company if there was----
Mrs. Dingell. But you can account for 80 percent of those
documents if they were not found when somebody was initially
looking at it. So that would account for the discrepancy
between the 20 percent and the 80 percent, potentially.
Mr. Ellis. I cannot say from my----
Mrs. Dingell. You do not know how, but that would be one
form.
Mr. Ellis. That would be one form.
Mrs. Dingell. Thank you. That is all I want, a simple yes
or no.
I do not want to have a war on anything, Mr. Chairman, but
even the Pope has said that we have to worry about the
environment. So I worry about all of this.
I want to put this in context though. In a report from
2010, the GAO calculated that we not only have proposed
rulemaking on wind and solar, but there is one right now on oil
and gas as well. The GAO calculated that over 20 years BLM has
reclaimed 295 oil and gas wells at a cost of $3.8 million. That
is about $13,000 per well.
That seems low to me since those numbers are probably
higher now that fracking is so widespread, but I will go with
it.
Mr. Ellis, do you know how many wells there are on public
lands right now?
Mr. Ellis. Approximately 95,000.
Mrs. Dingell. OK. So 95,000 wells at $13,000 per well comes
to about $1.2 billion in well reclamation cost BLM could have
to cover if the bonds are not enough to cover them. So does BLM
hold $1.2 billion bonds from the oil and gas industry?
Mr. Ellis. We do not. That number is about $186 million.
Mrs. Dingell. So are you saying that the potential cost of
reclaiming these wells is at least $1 billion more than what
you actually hold from oil and gas companies? And why?
Mr. Ellis. Congresswoman, if you look at the oil and gas
bonds, they are based on a number of factors, and that includes
the past reclamation performance of the company. We often do
not require full bonding in oil and gas for the reclamation.
In fact, part of it is based on the track record of the
company. If the company has a good track record, then sometimes
we hold less than the full reclamation amount. Now, that could
be accounting for part of this. Generally oil and gas
companies, our experience has been they are pretty good at
reclaiming these areas.
Mrs. Dingell. I think in my 2:00 a.m. reading I heard that
called performance bonding. Is that correct?
Do you allow performance bonding for renewable energy
companies?
Mr. Ellis. We do for renewable energy under this rule that
we are working on.
Mrs. Dingell. But do you right now? Under existing law, do
you?
Mr. Ellis. No, we do not for wind and solar.
Mrs. Dingell. Is it not true that you require bonds for the
full calculated cost of liabilities to the United States?
Mr. Ellis. It is for wind and solar.
Mrs. Dingell. So, BLM gives exceptional leniency to oil and
gas companies compared to renewable energy companies; and BLM
requires performance bonding for oil and gas projects, but not
for renewable energy projects.
It sounds as though BLM is tough on renewable energy
developers. In fact, I think it sounded even tougher. Since my
colleagues on the other side of the aisle are interested in
this underbonding, I trust that they will support BLM's
advanced notice of proposed rulemaking of April 2015 that tries
to correct oil and gas underbonding.
A statement on the Majority's Web site indicates opposition
to that, which I cannot understand given your interest in the
renewables.
Thank you, Mr. Chairman. You can have my 7 seconds back.
Thank you.
Mr. Gohmert. The Chair recognizes Mrs. Radewagen for 5
minutes.
Mrs. Radewagen. Thank you, Mr. Chairman.
Ms. Fennell, when GAO reviewed all the bonds that BLM had,
you found that most of the bonds are held as letters of credit
or surety bonds; but there was one bond worth almost $50,000
that is described as undetermined. In the report, it says BLM
could not provide the bond type.
How can BLM hold a bond that is undetermined?
Ms. Fennell. We asked that very question, and they were not
able to provide an answer. This was how it was recorded in the
databases. So, when we replicated the table that you're
referring to in our report, where we list out the various types
of bonds, we did include that, given that that was part of the
total.
Mrs. Radewagen. Did GAO try to determine the bond type?
Ms. Fennell. We followed up with questions, but we did not
determine the bond type because we were not able to receive
responses to our questions as to what it was.
Mrs. Radewagen. It seems like this is yet another example
of missing or inaccurate information that BLM has on these
bonds.
In another example, the GAO report says that a BLM employee
had to drive out to the right-of-way and count the number of
wind turbines that were on the property because the databases
in the project file were so confused. Is that correct?
Ms. Fennell. As part of our review of the data, when we
found discrepancies or inaccurate information, we would go back
and speak with the BLM officials to clean up the data. As a
result of our inquiry, that was, indeed, the case where they
did go out and verify the number of turbines.
Mrs. Radewagen. The OIG report issued in 2012 covered a lot
of the same issues that the GAO report covers. Ms. Fennell, are
you aware of any other documents that identified concerns with
handling wind and solar bonds?
Ms. Fennell. The IG report and our report, I believe, are
the more recent reports related to the bonding for wind and
solar.
Mrs. Radewagen. What about bond handling policies? Does BLM
have any specific policies for properly storing wind and solar
bonds?
Ms. Fennell. They do not. As a result of not having a
policy in place, we made a recommendation that one should be
developed so that there would be proper handling, accounting,
and storing of wind and solar bonds.
Mrs. Radewagen. If there is no real guidance, then where
are these bonds being stored?
Ms. Fennell. We found that in two field offices, they had
indicated to us that there were bonds that were maintained in
project files that were not properly secured in a locked
cabinet or safe. Those are illustrative of the problems that we
found, which is that there is no guidance. Therefore, we made
the recommendation that guidance should be established.
Mrs. Radewagen. Mr. Ellis, the 2012 IG report highlights
the need for close supervision of solar projects on Federal
land and perhaps explains why BLM is required to review bonds
annually. The report found that solar projects frequently go
through name changes, reassignments, and of course,
bankruptcies. Some of us may have heard of Solyndra.
Have renewable projects been pushed to expand at a pace
that BLM cannot keep up with?
Also, why are BLM employees not aware that bonds were
supposed to be reviewed as discussed in the GAO report?
Mr. Ellis. The things that we do--we have turnover of
employees; and sometimes employees, it is possible they may not
all be as familiar with the time frames of when they are
supposed to look at these things.
This is being clarified in the new rule that we are working
on, and so it is not inconceivable that we would have
situations out there where employees may not be totally
familiar with these things. I think what our goal is to do, and
we have taken these steps, is to try to train these employees
and help them understand what the rules are as far as looking
at these things.
It is being clarified in the new rule to provide greater
consistency across the landscape.
Mrs. Radewagen. Is this a management task too large for BLM
to responsibly administer?
Mr. Ellis. No. We are a very complex agency. We do many,
many things. This is one of those things that we do in a
multiple use and sustained yield mission. So we have many, many
tasks and many things. Right now, we are dealing with a severe
fire situation in Alaska. We have many things in our portfolio.
With that being said though, I would say that the GAO, in this
instance, what they bring to us is always valuable. We always
learn from these things. It is very valuable.
And as we indicated in the recommendations that they have--
I believe there are five of them. In four of them, we say we
are going to accept these recommendations. I think there was
one where we went partially, because we think that by accepting
these we will get at some of the very things, Congresswoman,
you mentioned.
Mrs. Radewagen. Thank you, Mr. Chairman.
Mr. Gohmert. I thank the gentlelady.
At this time--I could not remember if you had had a second
round or not. Mr. Huffman is recognized for 5 minutes----
Mr. Huffman. Thank you, Mr. Chairman.
Mr. Gohmert [continuing]. Or however long it takes to get
answers to your questions.
Mr. Huffman. Well, I will let the witness actually answer
when I ask questions, and we will see how that goes.
We have had this hearing that is supposed to be about the
policies and practices for the bonding of energy projects on
Federal land, BLM specifically. That is nominally the subject
of this hearing. It is focused on clean renewable energy
projects and a few discrepancies that are being addressed, that
have been acknowledged, but that have not cost the taxpayer any
money.
When we point out the lopsided nature of exposure to
taxpayers and costs to taxpayers when it comes to dirty fossil
fuel energy projects, twice now in this hearing there has been
some intellectual sleight of hand by the Majority.
They brought up Solyndra. Now, I just want to ask you,
Deputy Director Ellis, did Solyndra ever have an energy project
on BLM land?
Mr. Ellis. No.
Mr. Huffman. No. So they would never have any bonding
issues with Solyndra if we were talking about the subject of
this hearing, right?
Solyndra, in fact, was a technology that received some loan
guarantees through a Department of Energy program. It has
nothing whatsoever to do with the subject of this hearing, but
it has come up twice when we point out something that should be
the subject of this hearing, and that is the enormous taxpayer
exposure from inadequate bonding rates for oil and gas projects
set in the 1950s and 1960s and the hugely permissive self-
bonding, one-of-a-kind rule for coal energy projects.
When we talk about those things, the Majority changes the
subject and talks about Solyndra. Now, we could talk about the
subsidy issue. We could talk on that side of it about the
equally disproportionate subsidies that have gone to fossil
fuel energy projects over the decades and that continue to this
day. It would tell a similar story about a playing field for
energy that is hugely tilted in favor of dirty fossil projects.
We could have that conversation, but that would probably
best occur in the Energy and Commerce Committee. Here in this
committee, though, I want the record to be crystal clear that
we could have focused on things that are really costing the
taxpayers money right now, and that is the inadequate bonding
of dirty fossil energy projects.
Instead, we have chosen this ``tempest in a teapot'' over
some anomalies and discrepancies involving clean renewable
projects; none of which have failed, none of which have cost
the taxpayers any money. As you have testified, Deputy Director
Ellis, at the end of the day, it appears that all of the bonds
are going to be accounted for.
So I just want to say to you, Deputy Director, that you
have kept your composure and kept your cool in the face of some
questioning that I find disappointing, to be charitable. Never
have I seen so much hostility, bullying, and animus directed at
something that was just so disproportionately and relatively
insignificant, frankly, in the scheme of things. It's as if
this were a Benghazi hearing over a few discrepancies that are
already being addressed in a rulemaking.
Mr. Gohmert. If the gentleman is accusing me of animus, I
would ask that----
Mr. Huffman. My apologies to you. This is my time, Mr.
Chairman. My apologies to you that you have suffered through
some questioning that I think is beneath the dignity of this
committee and the House of Representatives.
Mr. Gohmert. I would ask that the gentleman's words be
taken down for accusing me of animus. That is an improper
accusation under the House rules.
Mr. Huffman. When you say that someone is lying and being
dishonest, that is not animus?
Mr. Gohmert. I did not accuse anybody of lying; and, no,
you can make the allegation without animus. Animus violates the
rules, and I would ask the gentleman's words be taken down.
Mr. Huffman. There will be a lot of words taken down, I'm
sure Mr. Chairman, including many of yours.
Mr. Gohmert. The Chair recognizes Mr. Labrador for 5
minutes.
Mr. Labrador. Ms. Fennell, thank you for being here.
During your examination of BLM's bonding of wind and solar
projects, did you examine the information in the two data
systems, the LR2000 and the Bond and Surety System?
Ms. Fennell. Yes, we did.
Mr. Labrador. In your report, you state that you worked
with BLM officials to resolve data discrepancies. Were the
officials you worked with familiar with how the two systems
operated?
Ms. Fennell. Yes, they were.
Mr. Labrador. Did the BLM officials you worked with provide
an explanation for the missing, inaccurate, and out-of-date
information in the systems?
Ms. Fennell. For each case that we asked questions about,
they were able to work with us to explain what the information
should be. We went back and forth multiple times in order to
ensure that the data was reliable enough for purposes of
reporting out in our report.
Mr. Labrador. But if the data was inaccurate, how were you
able to rely on their statements about what the data should be?
Ms. Fennell. We reviewed documentation in the project
files. We looked at the data that was contained in both
databases, and then we continued to work with the BLM officials
to clean up the data so that we could report out on the
numbers.
However, we did find that, for tracking purposes, neither
system was reliable, because we found information that was
missing, or inaccurate, or that had not been updated.
Mr. Labrador. Was it that the systems were not reliable, or
unreliable, or was it that the data was not being input into
the system?
Ms. Fennell. There were a combination of factors. In fact,
some of the data entry issues became the basis of some of the
recommendations that we have made in order to ensure that
policies and standards are put into place to allow for timely
data entry and for also ensuring that data standards are
established for the Bond and Surety System.
Mr. Labrador. So what was their explanation for not
inputting the data correctly?
You say the data was available. What was their explanation
for just not doing their job correctly?
Ms. Fennell. There were several reasons that were cited,
including that there had been a downsizing of the land
examiners that did a lot of the data entry, leaving a lot of
the work to the realty surety specialist; and they had workload
and resource constraints.
In addition, some cited training as well, in terms of not
being as familiar with some of the coding and some of the data
entry requirements for the systems; so there were a combination
of factors that explained why there were timeliness issues
associated with the data entry.
Mr. Labrador. Mr. Ellis, thank you for being here.
Are you familiar with the process BLM employees use to
enter bonding information into the LR2000 and the Bond and
Surety System?
Mr. Ellis. I am aware of the two systems that we have,
Congressman. Also, in the GAO report, they did have some
findings here; and we acknowledge that we need to establish a
requirement for routine data entry. We acknowledge this, and
this is something we are working on.
We realize that there were some issues between the two
systems.
Mr. Labrador. So how often is this information supposed to
be updated?
Mr. Ellis. Well, the requirement--what GAO recommended was
5 business days. This is difficult. In our new policy that we
are coming out with, we pushed this to 10 business days.
Really, Congressman, our employees, who would have to be land
law examiners, have a lot on their plates, and so we think----
Mr. Labrador. So who is ultimately responsible to make sure
that the information is properly recorded?
Mr. Ellis. Generally our staff in the field offices in the
districts, our realty specialist and land law examiners are the
individuals that input that data.
Mr. Labrador. Are all BLM employees trained on how to use
the LR2000 and the Bond and Surety System?
Mr. Ellis. They are not. For example, if employees
generally do not work in that arena, no, they would not be
trained. But our goal is to train the people that normally use
the system as part of their job.
Mr. Labrador. So after the Inspector General found
inaccurate bond information in the system, can you tell me what
steps were taken after the report was issued to ensure that the
information was properly recorded?
Mr. Ellis. What we have asked the employees to do is to
look at those deficiencies that were found and update the
information.
Mr. Labrador. And are they doing that? Has that been done?
Mr. Ellis. It is my understanding that they are doing it. I
cannot tell you if it has all be completed, but I can get back
to you on that.
Mr. Labrador. Thank you.
Mr. Gohmert. The gentleman yields back. At this time Mrs.
Radewagen, you are recognized for 5 minutes.
Mrs. Radewagen. Thank you, Mr. Chairman.
Ms. Fennell, does BLM consistently follow its current
periodic review policy?
Ms. Fennell. We found that for half of the rights-of-way
that they were delayed in terms of conducting those reviews.
The policy states the frequency by which adequacy reviews are
to be conducted, and we found that in half of the time they did
not follow that. In fact, half were overdue by at least 4
months.
Mrs. Radewagen. When GAO looked at how often BLM conducted
periodic reviews, what did you find?
Ms. Fennell. We found that for the projects that were due
to have a periodic review based on the policies that are in
place, that half of them were at least 4 months overdue in
terms of having those reviews conducted.
Mrs. Radewagen. The report says 23 out of 45 wind and solar
development rights-of-way were at least 4 months overdue for an
adequacy review. That is over 50 percent.
When GAO asked the BLM officials who were responsible for
conducting these periodic reviews why they had not been done,
the officials had three excuses: some said they did not know
the bonds were supposed to be reviewed; some said they were too
busy to review the bonds; and some said the computer system had
not alerted them when it was time to review the bonds.
The excuses were, number one, ``I do not know.''
Number two, ``I was too busy.''
Number three, ``The computer system did not remind me.''
Ms. Fennell. Yes, that is correct. Those were the reasons
that were cited, which led to the basis for one of our
recommendations, which is to adjust the LR2000 System to
establish a code that would allow for a triggering mechanism to
remind the staff that reviews are to be conducted.
Mrs. Radewagen. Thank you, Ms. Fennell.
Mr. Ellis, do you think it is acceptable for BLM officials
to not do their jobs because they do not know what their job
is, they are too busy to do their job, or because the computer
did not remind them to do their job?
Mr. Ellis. Congresswoman, first of all, the GAO report
flagged this issue of the alert system; we think that is a
great idea, and we do plan to implement that.
As indicated about the 5-day time frame, oftentimes a
realty specialist will go to the field on a Monday, and they
might be out of the office for 5 days. They may not even be
back in until the following Monday, and so we think it is
important that this work be done. Don't get me wrong. It is
important that this information be entered. Anything that we
can do, such as an alert system to help remind employees,
telling supervisors that this is something that has to be done
in a timely manner, these are processes and steps that we
intend to implement. We are taking this recommendation very
seriously from GAO.
Mrs. Radewagen. Thank you, Mr. Chairman. I yield back.
Mr. Gohmert. The gentlelady yields back.
I just have a couple of quick questions for Ms. Fennell,
and I am looking at page 30 of your report, not your testimony,
Ms. Fennell. You had indicated specifically in the conclusions
that BLM has no policies in place to ensure that wind and solar
bond instruments are properly handled and stored.
Do you still stand by that statement in your report, Ms.
Fennell?
Ms. Fennell. Yes, that is correct.
Mr. Gohmert. And you indicated earlier that 20 percent of
the bonds were in project files and not in a secure place.
Eighty percent were not available.
Do you have an explanation as how there are bonds now that
are representing those 80 percent that were missing?
Ms. Fennell. I do not have an explanation at this time.
What we were told is that bonds, when they are missing, can be
replaced.
Mr. Gohmert. So, I take it your opinion is they were
probably replaced?
Ms. Fennell. I believe that the BLM replied to our report
indicating that they had now accounted for the documents; so I
would assume that they had been replaced based on the
conversations that they had when we asked them what would
happen when bonds were missing.
Mr. Gohmert. So you do not know whether they were replaced
or found, and obviously Mr. Ellis does not know either. You do
not know of your own volition, your own knowledge?
Ms. Fennell. We do not know. We spoke with these
individuals at the BLM field offices. What we found was that
this was illustrative of the issue that there was no guidance
in place in terms of how to properly store, secure, and handle
wind and solar bonds, which then became the basis of our
recommendation, Mr. Chairman.
Mr. Gohmert. All right. Thank you.
Do you care for any follow-up?
Mr. Huffman. I have no questions.
Mr. Gohmert. All right. At this time we appreciate all of
the participants in the hearing today. If anyone wishes to ask
additional questions in writing, they have up to 5 business
days in which they can be included in the record. That would
also include any other Members who wish to submit additional
information. They will have up to 5 business days in which they
can be submitted.
Members of the committee, thank you for your participation.
I need to introduce into the record a letter dated June 3,
2015, from Steven A. Ellis, Deputy Director of Operations, U.S.
Department of the Interior to the Honorable Rob Bishop,
Chairman. I also ask unanimous consent to include as part of
the record, a letter to the Honorable Neil Kornze, Director of
BLM from Chairman Bishop and me, dated May 1, 2015. Also, an e-
mail of March 20, 2015, from De Shann Schinkel to Jessica
Lewis, and below that is a November 3, 2014 e-mail from Jessica
Lewis to Ms. Schinkel, so that there is no question about what
they said. I ask unanimous consent that those be submitted as
part of the record.
Hearing no objection, so ordered.
[The letters dated May 1, 2015 and June 3, 2015, and e-
mails dated March 20, 2015 and November 3, 2014 follow:]
SUBMISSIONS FOR THE RECORD FROM CHAIRMAN GOHMERT
U.S. House of Representatives,
Committee on Natural Resources,
Washington, DC 20515,
May 1, 2015.
Hon. Neil Kornze, Director,
Bureau of Land Management,
U.S. Department of the Interior,
1849 C Street NW, Room 5665,
Washington, D.C. 20240.
Dear Director Kornze:
The Subcommittee on Oversight and Investigations (``Subcommittee'')
recently learned that a number of reclamation bonds for renewable
energy projects on federal lands managed by the Bureau of Land
Management's (``BLM'') Rawlins Field Office were removed from a safe
and shredded. The wrongful destruction of these bonds, which are
intended to cover the removal costs of improvements and facilities, as
well as re-vegetation, restoration, and soil stabilization of the
project area, is deeply concerning and raises questions about gross
mismanagement on the part of BLM.
In order for the Subcommittee to better understand the
circumstances surrounding the destruction of these bonds, and the
policies, procedures, and safeguards BLM has in place to ensure the
safekeeping of sensitive financial instruments, the following
information and documents are necessary and required to be furnished:
(1) Please answer the following questions regarding the destroyed
bonding instruments stored at the Rawlins Field Office:
a. On what date were the bonds shredded?
b. Who removed the bonds from the safe?
c. Who destroyed the bonds?
d. Are the individuals responsible for removing and
destroying the bonds currently employed by BLM?
e. Who had access to the safe?
f. Why were the bonds removed from the safe?
g. Were the entire contents of the safe removed at the time
the bonds were removed?
h. Were the entire contents of the safe destroyed at the
time the bonds were destroyed?
i. When did the Rawlins Field Office notify the State
Office that the bonds had been destroyed? How was notification
provided? Who provided the notification?
j. When was the Washington, D.C. BLM Office, the Department
of the Interior, the Department of Justice, or any other
federal agency notified that the bonds had been destroyed? How
was notification provided? Who provided the notification?
k. At the time the bonds were removed and destroyed, were
valuables or cash kept in the Rawlins Field Office safe? What
is the total actual or estimated value of any such valuables or
cash that were maintained in the safe?
(2) Please describe how BLM determined which bonds were kept in the
safe and which were not.
(3) Please describe how BLM identified which bonds were destroyed.
(4) Please describe any policies in effect at the time the bonds
were destroyed governing access to the safe in the Rawlins
Field Office (e.g., who has the combination, what documents
are to be kept there, destruction of documents kept in the
safe, etc.) and provide copies of any such policies.
(5) Please describe any policies in effect at the time the bonds
were destroyed governing the proper receipt and storage of
bonds for renewable energy right-of-ways and provide copies
of any such policies.
(6) Please provide a list of the bonds that were destroyed,
including:
a. The amount of the bond;
b. The type of bond instrument (e.g., letter of credit,
surety bond, U.S. treasury securities, etc.);
c. The right-of-way holder who provided the bond;
d. The project or site covered by the bond; and
e. The issuer of the bond, if applicable.
(7) Please confirm that a number of bonds kept in the Rawlins Field
Office were not secured in the safe and were not destroyed.
Please provide a list of any such bonds, including:
a. The amount of the bond;
b. The type of bond instrument (e.g., letter of credit,
surety bond, U.S. treasury securities, etc.);
c. The right-of-way holder who provided the bond;
d. The project or site covered by the bond; and
e. The issuer of the bond, if applicable.
(8) Please provide copies of the LR2000 and B&SS records for each
renewable energy bond kept by the Rawlins Field Office
since January 2012.
(9) Please confirm the current bonding status for each right-of-way
for which a bond was destroyed, and describe any steps BLM
has taken to replace the bonds.
(10) Please confirm that BLM halted operations on sites for which the
applicable bond was destroyed, until such time as BLM
obtained a replacement bond.
(11) Please provide all emails and communications between the Rawlins
Field Office, the Wyoming State Office, and the Washington,
D.C. BLM Office concerning the destruction of the bond
instruments. For all individuals involved in such
communications, please identify their titles and contact
information.
(12) Please provide all emails between BLM and the Department of the
Interior or its bureaus, the Department of Justice, or
other federal agencies concerning the destruction of the
bond instruments. For all individuals involved in such
communications, please identify their titles and contact
information.
(13) Please provide all emails and communications concerning the
destruction of the bonds between BLM officials or staff and
the right-of-way holders whose bonds were shredded.
It is expected that all requested documents and information will be
provided to the Committee by May 15, 2015. Instructions for complying
with this request are attached.
Sincerely,
Rob Bishop, Chairman,
Committee on Natural Resources.
Louie Gohmert, Chairman,
Subcommittee on Oversight & Investigations.
______
United States Department of the Interior,
Bureau of Land Management,
Washington, D.C. 20240,
June 3, 2015.
Hon. Rob Bishop, Chairman,
Committee on Natural Resources,
Washington, DC 20515.
Dear Chairman Bishop:
Thank you for your letter dated May 1, 2015, to Director Neil
Kornze regarding reclamation bonds for renewable energy projects in the
Bureau of Land Management (BLM) Rawlins Field Office (RFO) in Wyoming.
Director Kornze asked that I respond to you on his behalf.
You stated that the Committee's belief is ``that a number of
reclamation bonds for renewable energy projects on Federal lands
managed by [BLM RFO] were removed from a safe and shredded.'' The BLM
takes seriously its responsibility as steward of America's public lands
and is committed to sustaining the health, diversity, and productivity
of those lands. Adequate bonding to ensure full reclamation of projects
on Federal lands is important to the BLM fulfilling its mission. A
preliminary review of the bonds for the renewable energy projects
within the RFO indicates that all bonds are appropriately documented
and that Federal assets are fully protected. As of this writing, we
have not found evidence that bonds were shredded. We understand that
the Inspector General is conducting an inquiry into this matter and we
stand ready to cooperate fully with those efforts.
As a general matter, the BLM authorizes renewable energy projects
on public lands under its management using a right-of-way grant under
Title V of the Federal Land Policy and Management Act. The BLM requires
project developers to submit bonds to the agency to cover the potential
cost of reclamation should the developer be unable or unwilling to
conduct those activities itself. A bond is released when reclamation is
satisfactorily completed, or when a project is cancelled or
discontinued after preliminary survey work and reclamation is not
required.
For the RFO, the BLM has processed 18 renewable energy projects
that required bonds, with some of those projects requiring more than
one bond to cover different aspects of the development. As a result,
the RFO entered into 21 bond agreements worth a total of $170,000. The
BLM has confirmed that the documentation for all 21 bonds is currently
in compliance with BLM policy for holding bond instruments.
The BLM is committed to ensuring appropriate bonding for all energy
development on public lands. In fact, the BLM recently worked with the
Government Accountability Office (GAO) to identify areas of improvement
in the processing and recordkeeping of wind and solar project bonds.
The BLM has issued a proposed rule that would, among other things,
standardize bonding requirements for solar and wind projects. The BLM
intends to proceed to a final rule in the coming months and will
implement process improvements consistent with the GAO's
recommendations.
In addition to the renewable energy arena, the BLM is also working
to ensure appropriate bonding of other types of development on public
lands. In response to a GAO report on oil and gas projects, and as part
of a broader conversation about oil and gas reform, the BLM has
solicited public input on bonding for oil and gas projects on public
lands. The BLM looks forward to working with Congress as we continue to
address that important aspect of bonding on public lands.
We appreciate your interest in this matter. If you or your staff
has additional questions, please feel free to contact me. A similar
letter is being sent to Representative Louie Gohmert, Chairman of the
Subcommittee on Oversight and Investigations, who cosigned your letter.
Sincerely,
Steven A. Ellis,
Deputy Director for Operations.
From: Schinkel, De Shann
Sent: Friday, March 20, 2015 3:36 PM
To: Lewis, Jessica M
Subject: Re: Foote Creek Wind documents
Hello Jessica,
I was working on Foote Creek casefile this week and could not find
where I followed up on your e-mail. Please excuse my tardiness in
getting this information for you, and find below the followup.
If you have any questions please let me know . . . Thanks!
1. Bond Acceptance Letter is attached.
2. POD date: August 17, 1995
3. I do not know the value of all bonds that were shredded.
De Shann B. Schinkel
Realty Specialist
Bureau of Land Management
Rawlins Field Office
1300 N Third Street/P.O. Box 2407
Rawlins, Wyoming 82301
* * * *
On Mon, Nov 3, 2014 at 1:54 PM, Lewis, Jessica M wrote:
Hi Ms. Schinkel,
I just wanted to follow up with you regarding the Foote Creek Wind
(ROW#: WYWY-142464) project documents that were discussed during the
conversation with GAO a couple weeks ago. Do you have the bond
acceptance letter for this project and can you send it to me
electronically? Also, did you find a date for the plan of development
for the project? Lastly, do you know the value of all the bonds that
were shredded?
Thank you for your assistance and please let me know if you have any
questions.
Jessica M. Lewis
Analyst, Natural Resources and Environment Team
Government Accountability Office
441 G Street NW
Washington, DC 20548
______
Mr. Gohmert. And if there is nothing further, then this
hearing is adjourned.
[Whereupon, at 12:10 p.m., the subcommittee was adjourned.]
[LIST OF DOCUMENTS SUBMITTED FOR THE RECORD RETAINED IN THE COMMITTEE'S
OFFICIAL FILES]
GAO-15-520. U.S. Government Accountability Office Report, June
2015. RENEWABLE ENERGY--BLM Has Limited Assurance That Wind and
Solar Projects Are Adequately Bonded
[all]