    [Senate Hearing 114-469]
    [From the U.S. Government Publishing Office]

                                                            S. Hrg. 114-469

      THE BUREAU OF OCEAN ENERGY MANAGEMENT'S 2017	2022 OUTER CONTINENTAL
                       SHELF OIL AND GAS LEASING PROGRAM

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                                    HEARING

                                   BEFORE THE

                                  COMMITTEE ON
                          ENERGY AND NATURAL RESOURCES
                              UNITED STATES SENATE

                        ONE HUNDRED FOURTEENTH CONGRESS

                                 SECOND SESSION

                                   __________

                                  MAY 19, 2016

                                   __________

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

                           Printed for the use of the
                   Committee on Energy and Natural Resources

               Available via the World Wide Web: http://fdsys.gov

                                      ______

                             U.S. GOVERNMENT PUBLISHING OFFICE

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                   COMMITTEE ON ENERGY AND NATURAL RESOURCES

                        LISA MURKOWSKI, Alaska, Chairman
    JOHN BARRASSO, Wyoming               MARIA CANTWELL, Washington
    JAMES E. RISCH, Idaho                RON WYDEN, Oregon
    MIKE LEE, Utah                       BERNARD SANDERS, Vermont
    JEFF FLAKE, Arizona                  DEBBIE STABENOW, Michigan
    STEVE DAINES, Montana                AL FRANKEN, Minnesota
    BILL CASSIDY, Louisiana              JOE MANCHIN III, West Virginia
    CORY GARDNER, Colorado               MARTIN HEINRICH, New Mexico
    ROB PORTMAN, Ohio                    MAZIE K. HIRONO, Hawaii
    JOHN HOEVEN, North Dakota            ANGUS S. KING, JR., Maine
    LAMAR ALEXANDER, Tennessee           ELIZABETH WARREN, Massachusetts
    SHELLEY MOORE CAPITO, West Virginia

                          COLIN HAYES, Staff Director
                    PATRICK J. McCORMICK III, Chief Counsel
                     KIP KNUDSON, Professional Staff Member
                TRISTAN ABBEY, Senior Professional Staff Member
               ANGELA BECKER-DIPPMANN, Democratic Staff Director
                    SAM E. FOWLER, Democratic Chief Counsel
               SCOTT McKEE, Democratic Professional Staff Member
          STEPHANIE TEICH-McGOLDRICK, Democratic Congressional Fellow

                                C O N T E N T S

                                  ----------

                               OPENING STATEMENTS

                                                                       Page
    Murkowski, Hon. Lisa, Chairman and a U.S. Senator from Alaska....     1
    Cantwell, Hon. Maria, Ranking Member and a U.S. Senator from
      Washington.....................................................     3

                                   WITNESSES

    Hopper, Abigail Ross, Director, Bureau of Ocean Energy
      Management, United States Department of the Interior...........     5
    Hopson, Jr., Hon. John, Mayor, City of Wainwright, Alaska........    11
    Boesch, Dr. Donald, President, University of Maryland Center for
      Environmental Sciences.........................................    17
    Knapp, Dr. James, School of the Earth, Ocean, and Environment,
      University of South Carolina...................................    24
    Manuel, Athan, Director, Lands Protection Program, Sierra Club...    33
    Mason, Dr. Joseph, Hermann Moyse, Jr./Louisiana Bankers
      Association Chair of Banking, E. J. Ourso College of Business,
      Louisiana State University.....................................    47

              ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

    Atlantic Energy Alliance:
        Statement for the Record.....................................    91
    Boesch, Dr. Donald:
        Opening Statement............................................    17
        Written Testimony............................................    19
        Responses to Questions for the Record........................    81
    Cantwell, Hon. Maria:
        Opening Statement............................................     3
    Cassidy, Hon. Bill:
        Editorial dated December 9, 2015 entitled ``Obama's climate
          hypocrisy'' which ran in The Hill..........................    56
    Hopper, Abigail Ross:
        Opening Statement............................................     5
        Written Testimony............................................     7
        Responses to Questions for the Record........................    68
    Hopson, Jr., Hon. John:
        Opening Statement............................................    11
        Written Testimony............................................    13
    International Association of Drilling Contractors:
        Statement for the Record.....................................    97
    Knapp, Dr. James:
        Opening Statement............................................    24
        Written Testimony............................................    26
        Responses to Questions for the Record........................    83
    Manuel, Athan:
        Opening Statement............................................    33
        Written Testimony............................................    36
        Responses to Questions for the Record........................    84
    Mason, Dr. Joseph:
        Opening Statement............................................    47
        Written Testimony............................................    49
        Responses to Questions for the Record........................    89

    Murkowski, Hon. Lisa:
        Opening Statement............................................     1
    Native Village of Pt. Lay (Alaska):
        Resolution for the Record....................................   101

      THE BUREAU OF OCEAN ENERGY MANAGEMENT'S 2017-2022 OUTER CONTINENTAL
                       SHELF OIL AND GAS LEASING PROGRAM

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                             Thursday, May 19, 2016

                                           U.S. Senate,
                     Committee on Energy and Natural Resources,
                                                        Washington, DC.
        The Committee met, pursuant to notice, at 2:53 p.m. in Room
    SD-366, Dirksen Senate Office Building, Hon. Lisa Murkowski,
    Chairman of the Committee, presiding.

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

        The Chairman. The Committee will come to order.
        I apologize that we are starting a little bit late, but we
    had votes that we had to take care of and move forward on two
    Appropriations bills. Although that was good for the order, it
    does mean that we are starting just about a half hour late
    today, and it probably means that some of our colleagues who
    would otherwise have joined us here, we might not be seeing
    because of scheduling issues.
        I appreciate the opportunity this afternoon to conduct
    oversight on the Outer Continental Shelf (OCS) oil and gas
    leasing program. More specifically, the five-year program for
    2017 through 2022 that is being prepared by the Bureau of Ocean
    Energy Management.
        We can start by recognizing that the natural endowment of
    the United States is virtually unrivaled. We have open spaces,
    wilderness, vast forests, national parks, productive seas and
    coastal regions. We have wild rivers, rivers that have been
    harnessed for our economy, soils that have ended famines and
    feed the world and mineral and energy deposits that underpin
    the international financial system and supply a global economic
    system.
        Congress delegated the management and stewardship of one
    portion of that endowment, our nation's Outer Continental
    Shelf, to the Department of the Interior in the 1950's. Since
    then, it has become a valuable source of energy for our nation
    creating economic growth and providing security as it reduces
    our imports from other countries.
        Over the past seven years, however, I have also watched the
    Department's slow but steady abrogation of duty to manage this
    endowment properly. It pains me to say this, but we now,
    effectively, have a Gulf of Mexico leasing program and the
    shadow of a program for three major planning areas in Alaska.
        The Department has concluded after years of study that just
    13 percent of our nation's OCS acreage should be available for
    leasing. It has canceled sales in Alaska where development has
    overwhelming support and has produced only a bare minimum plan
    for 2017 through 2022. I find that unacceptable.
        The Energy Information Administration (EIA) tells us that
    OCS oil production will rise from 17 percent of the U.S. total
    this year to 21 percent in 2017. We could pat ourselves on the
    back about that, or we could recognize that it is the result of
    decisions made years ago, likely in 2007 or perhaps even
    earlier. That in turn should make us consider what kind of
    production the program before us today will yield for our
    nation in 2027 and beyond.
        We are at a rare moment where we can plan ahead to meet our
    future needs without facing a supply or price-related
    emergency, yet we are not taking advantage of it. By choosing
    not to produce here, we are telling other countries, some of
    them rather nefarious, that we would rather buy from them. We
    are giving away the jobs, the revenues, the growth and the
    security that would all come with that energy development.
        The Bureau of Ocean Energy Management (BOEM) removed the
    single Atlantic lease sale in its proposed program. A 2014
    study estimated that a robust Atlantic leasing program could
    result in new oil production of 1.3 million barrels per day and
    280,000 new jobs by 2035. Even if the Atlantic's resources are
    not that prolific, Interior's decision will still cost our
    country for years to come.
        The Department's treatment of the Alaska OCS is also
    extremely frustrating. The proposed program includes just three
    sales with targeted acreage, not the area-wide sales that
    Alaskans have advocated for this past decade. Department
    leaders have implied there is waning interest in Alaska, but
    above all it is the chaotic Federal regulatory regime that is
    discouraging investment.
        The economic activity that we are sending overseas due to
    lack of proper Alaska OCS management means Alaska Native
    communities that have survived for thousands of years in the
    harshest environment on Earth may have to choose between
    schools, health clinics or home heat. Just as our oil pipeline,
    our infrastructure of national significance and vital to the
    entire West Coast is at risk of becoming uneconomic and then by
    law, dismantled.
        I am disappointed by the proposed five-year program for
    2017 through 2022. Oil prices may be relatively low today but
    they will not stay that way, especially if we refuse to provide
    access to new supply. Instead we will find ourselves giving
    away the gains of recent years as our imports, once again,
    rise, our economy, once again, suffers and we, once again, find
    ourselves at the mercy of OPEC.
        The Energy Security Leadership Council released a new
    report this morning, and I would urge members to read it
    carefully. Their Council, with CEOs, former military leaders
    and more, recommends reopening the five-year program for 2017
    through 2022.
        I had hoped that we would not reach that point, but we have
    and especially if the lease sales for Alaska are not
    maintained, we will do just that.
        With that, I will now turn to Ranking Member Cantwell for
    your opening comments, and then we will go to our witnesses.

     STATEMENT OF HON. MARIA CANTWELL, U.S. SENATOR FROM WASHINGTON

        Senator Cantwell. Thank you, Madam Chairman, for scheduling
    this hearing to examine the 2017-2022 Outer Continental Shelf
    oil and gas leasing program and I thank the witnesses for being
    here today.
        Offshore oil and gas production is an important part of our
    domestic energy portfolio today, and I acknowledge its role in
    regional and local economies where production takes place.
        As we have discussed today, we keep in mind that the
    potential for oil and gas resulting in these lease programs
    will not contribute to the energy markets in a meaningful way
    for a decade or more. But, during this time, we will see major
    changes in our energy landscape. So we need to plan leasing
    activities in the context of what those future economies will
    look like.
        Last month was the sixth anniversary of the BP Deep Water
    Horizon explosion and oil spill, which was an epic human,
    economic and ecological disaster. Eleven members of the crew
    were killed in an explosion, and 17 others were injured. Oil
    spewed into the ocean for nearly three months, a mile below the
    surface, resulting in the largest offshore oil spill in the
    history of the United States. The 134,000,000 gallons of oil
    released is about 12 times more than the Exxon Valdez Spill.
    What we are learning about the damage from the final natural
    resource damage assessment released just this month is the
    following things:
        First, the Deep Water Horizon spill caused the public to
    lose more than 16,000,000 user days of boating, fishing and
    beach-going experiences. Total recreational use damages due to
    oil spills were estimated at $693.2 million.
        Second, the deep water corals killed by this spill were
    hundreds of years old.
        Third, in some of the species of dolphins, the oil spill
    caused 35 percent increase in death, a 46 percent increase in
    failed reproduction and a 37 percent increase in adverse health
    risk. Tens of thousands of sea turtles were killed by the
    spill, including three of the most critically endangered
    species of sea turtles in the Gulf.
        There are many examples of response activities causing more
    damages than just the oil spill. We must incorporate new
    science about those damages into our decision-making for oil
    spill response and into decisions where we are going to allow
    oil and gas exploration and production.
        It is clear that the Deep Water Horizon disaster could have
    been avoided. Multiple blue ribbon panels all concluded that
    immediate causes of the blowout preventers could be traced to a
    series of systematic failures in risk management and a broken
    safety culture.
        The final version of offshore drilling safety regulations
    published last month addressed some of the primary causes of
    the disaster. It codifies the advances made by industry experts
    and regulators over the last five years. The Department of the
    Interior is continuing its work to finalize the Arctic drilling
    rule. But we cannot stop there.
        Other recommendations by the Oil Spill Commission still
    need to implemented by Congress and action taken. After all,
    the Coast Guard, NOAA and oil spill experts have testified time
    and time again that the United States is not prepared to handle
    a large oil spill. And yet, our response plans and
    infrastructure have not been updated. Nevertheless, we are
    moving into deeper and deeper water and going after oil in
    increasingly challenging environments.
        The Coast Guard has repeatedly stated that we do not have
    the ability to clean up oil in ice, and a spill in an
    ecologically-sensitive area can have dramatic consequences.
        We also have not completed basic navigation charting nor do
    we have some of the forecasting capabilities, in the Arctic,
    despite unpredictable and severe weather conditions that
    contribute to the possibility of a spill.
        All of this poses significant risk for exploration
    activities, which should be considered when making decisions
    about final leasing programs.
        The question must be asked, can we afford the risk at this
    stage? We need to ensure that we can drill safely and respond
    to spills before exploration moves forward in ecologically
    sensitive areas. I urge the Interior to consider the greater
    risk posed while operating in a dynamic and challenging
    offshore environments.
        Lastly, I believe the Atlantic region was rightfully
    removed from the program due to strong local opposition,
    conflicts with other ocean uses and market dynamics. The
    Department of the Interior recognized the potential for
    environmental and economic impacts in competing ocean uses. For
    example, the economic value of commercial fishing in the mid-
    Atlantic area was worth $1.5 billion, and ocean-dependent
    tourism accounts for about $10 billion of economic activity.
    For these reasons, it is not surprising there was significant
    opposition and that citizens and local officials responded in
    those communities.
        Interior should also work to prevent harmful seismic air
    gun testing in areas which impact marine mammals, sea turtles,
    birds, and valuable fish species. With Atlantic drilling off
    the table, we should not subject marine mammals to negative
    impacts such as those that have occurred.
        Once again, I thank the Chair for holding this hearing and
    I look forward to hearing the testimony of all the witnesses.
        Thank you.
        The Chairman. Thank you, Senator Cantwell.
        We will now turn to our distinguished panel. Welcome to all
    of you.
        We will be led off this afternoon by Abigail Ross Hopper,
    who is the Director of the Bureau of Ocean Energy Management
    (BOEM) at the Department of the Interior, welcome.
        We are joined by Mayor John Hopson, who has come all the
    way from the city of Wainwright, Alaska at the top of the
    world, literally. It is a long journey, Mr. Hopson, and we
    appreciate you being here today.
        He will be followed by Dr. Donald Boesch, who is a
    Professor of Marine Science and the President at the University
    of Maryland Center for Environmental Sciences.
        James Knapp is also with us from the School of the Earth,
    Ocean and Environment at the University of Southern California,
    welcome to you.
        Mr. Athan----
        Mr. Knapp. That would be South Carolina, Madam.
        The Chairman. Oh, South Carolina. Okay. I put you on the
    wrong coast. I am sorry. Thank you for the correction.
    [Laughter.]
        Mr. Athan Manuel is with the Committee this afternoon, who
    is the Director for Lands Protection Program with the Sierra
    Club, welcome to you.
        The panel will be rounded out by Dr. Joseph Mason, Hermann
    Moyse, Jr./Louisiana Bankers Association Chair of Banking at
    the E. J. Ourso College of Business at Louisiana State
    University.
        Thank you all for joining us this afternoon.
        I would ask that you try to keep your comments limited to
    five minutes this afternoon. Your full statement will be
    incorporated as part of the record. We look forward to your
    statements today.
        Ms. Hopper, if we can begin with you?

      STATEMENT OF ABIGAIL ROSS HOPPER, DIRECTOR, BUREAU OF OCEAN
              MANAGEMENT, U.S. DEPARTMENT OF THE INTERIOR

        Ms. Hopper. Certainly, thank you. Good afternoon.
        Chairman Murkowski, Ranking Member Cantwell and other
    members of the Committee, I'm pleased to appear before you
    today to discuss the Bureau of Ocean Energy Management's
    development of the 2017-2022 Outer Continental Shelf oil and
    gas leasing program. The Administration is committed to
    ensuring safe and responsible domestic oil and gas production
    as well as developing offshore renewable energy as part of a
    comprehensive energy strategy to grow America's energy economy
    and continue to reduce our dependence on foreign oil.
        As you know the Outer Continental Shelf Lands Act, or
    OCSLA, requires BOEM to propose a schedule of leases every five
    years. This is referred to as the five-year program. We are
    currently in the process of developing that five-year program
    for 2017 to 2022.
        In June 2014 we published a request for information and
    comments and received approximately 500,000 comments. On
    January 29th of 2015, the Department published the 2017-2022
    draft proposed program (DPP) and simultaneously published a
    notice of intent to prepare a programmatic environmental impact
    statement (EIS). During the 60-day comment period following the
    DPP, BOEM received over one million comments and held 23 public
    meetings in communities across the nation.
        The critical information received from the public was
    integrated into the scientific, environmental and social
    analysis that informs the Secretary's decision-making, and that
    decision-making process is defined by statute. As laid out in
    Section 18 of OCSLA, the Secretary of Interior must consider a
    number of factors and balance the potential for environmental
    damage, discovery of oil and gas and adverse impact on the
    coastal zone to determine the size, timing and location of
    lease sales.
        After the Secretary weighed the required factors and
    conducted the appropriate analysis on March 15th of this year,
    BOEM announced the proposed program in the draft EIS. BOEM
    subsequently hosted 12 meetings in Alaska and the Gulf of
    Mexico region and one here in Washington.
        Excuse me.
        I personally had the privilege of attending five of those
    meetings on the North Slope of Alaska including one in Point
    Lay where I met many of the community leaders that are here
    today sitting behind us. I also participated in the public
    meetings as well as one on one meetings with community leaders
    in Kaktovik, Nuiqsut, Point Hope and Kotzebue.
        Additionally, I have recently met with both Governor Walker
    and Lieutenant Governor Malloy--Mallott, excuse me, about the
    five-year program. And while I did not attend the Wainwright
    meeting, my colleagues did and therefore I did not meet Mayor
    Hopson and his community. I recently met with officials from
    the Laguna Corporation when they were here in Washington.
        I've also attended the public meetings in New Orleans and
    Houston and DC. And since the release of the proposed program,
    I've met with representatives from the oil and gas industry,
    from the environmental community and other government
    officials. It is incredibly important to me, personally and to
    my Bureau, to hear from interested parties, community members
    and stakeholders across this country.
        So the comment period for the draft EIS closed on May 2nd.
    We received about 75,000 comments, and the comment period for
    the proposed program remains open. It closes on June 16th.
        After a review of those comments and conduct further
    analysis, we anticipate publishing the proposed final program
    and final environmental impact statement in late 2016.
        So allow me to describe briefly the proposed program. As
    you know it's the second in a three proposal process. It
    includes 13 potential lease sales, ten sales in the Gulf of
    Mexico and three offshore Alaska.
        In Alaska, the proposed program continues to take a
    balanced approach to development utilizing the targeted leasing
    strategy set forth in the current program by identifying one
    potential sale each in the Beaufort, the Cook Inlet and the
    Chukchi Sea planning areas. And at a request by Governor
    Walker, we're considering moving the Beaufort Sea sale up to
    2019.
        The proposed sale also includes ten sales in the Gulf of
    Mexico, obviously one of the most highly productive basins in
    the world, where resource potential and industry interest are
    high and oil and gas infrastructure is well established.
        The proposal includes a new approach to lease sales by
    proposing two annual sales that combine the western, central
    and eastern Gulf of Mexico, not subject to moratorium.
        And then lastly, there are no sales scheduled for either
    the Pacific area or the Atlantic.
        Madam Chairwoman, thank you for this opportunity to be here
    today to discuss our efforts to create an oil and gas leasing
    program, and I look forward to your questions.
        [The prepared statement of Ms. Hopper follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Director Hopper.
        Mayor Hopson, welcome.

    STATEMENT OF HON. JOHN HOPSON, JR., MAYOR, CITY OF WAINWRIGHT,
                                 ALASKA

        Mr. Hopson. Chairman Murkowski, members of the Committee,
    my name is John Hopson, Jr. I'm the elected Mayor for the city
    of Wainwright and the North Slope Borough Assembly as well. I'm
    also a whaling captain and a Commissioner on Alaska's Eskimo
    Whaling Commission.
        Wainwright is one of eight villages on the North Slope. We
    are located on the Chukchi Sea with a population of about 550
    people. Ninety percent of our residents are Inupiat. The North
    Slope Borough is our local government encompassing 95,000
    square miles across Northern Alaska. None of the Borough's
    eight communities are connected by road.
        I'm a shareholder of the Native Corporation for Wainwright
    and also the Native Regional Corporation, ASRC. Like many of
    you here I share the heavy responsibility of providing for my
    family. I'm also responsible for outfitting my whaling crew.
        As an elected official I have a responsibility to our
    residents who wish to protect their traditional way of life
    while also enjoying employment and modern public facilities and
    services.
        As a Commissioner of AWC I work diligently to protect our
    bowhead whale harvest while ensuring the safety of our whalers.
        I serve a community that faces a different reality than
    most Americans. We don't have Costcos or Ford dealerships. We
    are not connected to an electric grid or to the road system.
    Wainwright relies on a subsistence way of life. We hunt bowhead
    whales, caribou, walrus, and seals. It is a way of life we have
    fought hard to protect.
        Our community is empowered by oil and gas development. We
    have proven the two can coexist. Though our communities are
    remote we invest in modern public services, water and sewer,
    health, education, police, fire. Our community depends on jobs
    to support our families.
        As BOEM itself has indicated, the Arctic OCS has incredible
    resource potential. Continued exploration activities lead to
    continued investment and development that our communities are
    dependent on.
        BOEM has expressed concern that Arctic oil and gas
    activities could impact small, isolated communities within our
    region. Wainwright is one of them. We urge BOEM to take
    seriously its responsibility to provide for development in a
    way that will support our communities.
        I have six children that rely on subsistence food--80
    percent of their diet is what we do. I also provide for elders
    and others who cannot hunt. Subsistence takes money. It costs
    money to buy gas, bullets. To put it simply, though we work
    hard to protect our subsistence way of life, we cannot hunt
    without jobs that provide an income. Many people would like to
    see us move toward alternative energy like wind, but wind won't
    power my boat.
        BOEM has already invested heavily in recent years in
    research in the Arctic region and outreach to our communities.
    They also have worked hard to incorporate traditional knowledge
    into its OCS management activities to better support the
    coexistence of Arctic ecosystems, subsistence and OCS oil and
    gas exploration. Why don't we let the program that has been
    developed work?
        Our Native Corporations have created their own offshore
    development company, Arctic Inupiat Offshore. Where else in
    America does BOEM find indigenous people investing proactively
    in offshore? For BOEM to set aside vast areas of the Beaufort
    and Chukchi or give up completely on its Arctic OCS program
    would be to completely fail our communities.
        Some environmental groups and some Members of Congress
    apparently are in love with their own version of the Arctic and
    are engaged in a national effort to stop Arctic oil and gas.
    Extreme environmental protections would mean the end of our
    Arctic communities. Where is the balance in that? Not with me
    and not with my community.
        As an elected official for Wainwright and the North Slope I
    support retaining Arctic lease sales in the OCS in a way that
    protects our communities and the environment. My responsibility
    as an elected leader is to protect our subsistence way of life
    and to provide for financial stability in our region.
        Thank you for the opportunity to provide comments today.
        [The prepared statement of Mr. Hopson follows:]

    [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Mayor, we appreciate it very much.
        Mr. Boesch, welcome.

       STATEMENT OF DR. DONALD BOESCH, PRESIDENT, UNIVERSITY OF
                MARYLAND CENTER FOR ENVIRONMENT SCIENCES

        Dr. Hopson. Senator Murkowski and Senator Cassidy, my name
    is Donald Boesch, and I'm the President of the University of
    Maryland Center for Environmental Science. But I'm here today
    because I was one of the seven members of the National
    Commission on the BP Deep Water Horizon oil spill in offshore
    drilling, so my testimony includes perspectives on the
    Commission's recommendations implementing those
    recommendations.
        I've also been involved as a witness in the trial of BP
    Clean Water Act violations as an advisor to government on
    aspects of the eventual settlement which was concluded just a
    month or so ago. The proposed OCS leasing program on which the
    hearing focuses should be evaluated in the context of steps
    taken by government and industry to reduce environmental and
    safety risk in response to the recommendations and not only our
    Commission but other investigative bodies. So let me briefly
    review those.
        First, the Department of the Interior has taken a number of
    substantive executive actions in response to our
    recommendations and the other recommendations. The former
    Minerals Management Service was reorganized to separate the
    development, revenue and safety enforcement functions thus
    alleviating the inherent conflict of interest of those
    functions. So therefore, we now have the Bureau of Ocean Energy
    Management and the Bureau of Safety and Environmental
    Enforcement, BSEE.
        The Department of the Interior also required that offshore
    operators demonstrate, for the first time, the ability to
    contain deep sea blowouts, if they occur. BSEE had more
    technically trained staff and compliance officers; however, it
    should be pointed out that a GAO report recently found that
    BSEE has made rather limited progress in enhancing its
    investigative capabilities, has restructured in a way that
    actually could weaken environmental compliance and has made
    limited progress in enhancing environmental enforcement.
        BSEE required that the use of the Safety and Environmental
    Management System, SEMS II, backed by third party audits and
    these are moving forward. But these fall short of what the
    Commission recommended based on the experience in the North
    Sea, the safety case of the North Sea.
        Investigations following our Commission reveal significant
    deficiencies in the design, maintenance and operation of the
    Deep Water Horizon blowout preventer. And just last month BSEE,
    six years after the blow out, BSEE issued the final well
    control rules for the design manufacture, repair and
    maintenance, BOPs, the blowout protectors. The American
    Petroleum Institute, however, has strenuously criticized the
    new rule as too costly and too prescriptive. Congress has taken
    some action in response to our recommendations.
        On the positive side, it provided more resources for
    planning in BOEM as well as in better safety procedures in
    BSEE. It passed the RESTORE Act which provides 80 percent of
    the Clean Water Act penalties for long-term environmental and
    economic restoration in the Gulf region; however, Congress has
    not passed legislation to codify this reorganization of the
    former MMS to create BOEM and BSEE.
        Congress has also not raised the oil spill liability limits
    which was raised after the spill from $75 million to $134
    million by BSEE. But that falls well short of the kinds of
    responsibility liabilities that could occur in a major spill,
    mindful of the fact that BP has expended over $55 billion to
    deal with the consequences of the spill at this point.
        Congress has also not enacted legislation that requires the
    industry to pay for support of the appropriate environmental
    science and regulatory review, including the comprehensive
    environmental program, environmental monitoring program, that
    was conceptualized when Congress passed OCSLA. And Congress has
    also not passed the legislation to provide whistleblower
    protection for the offshore oil and gas industry, workers in
    that industry.
        Now having said that, Congress--the oil and gas industry
    has undertaken many steps to reduce the risk of offshore
    exploration and production. In general, most compliance
    companies, most companies, have approved their safety culture
    and procedures quite a bit. Notably in response to Department
    of the Interior's requirement for deep water containment, a
    consortia of companies have formed the Marine Well Containment
    Corporation and the Helix Well Containment Group.
        So I see my time is running out, and you have my written
    testimony. I'm happy to cover in response to any of your
    questions, the other issues that I've raised in my review.
        Thank you, Madam Chair.
        [The prepared statement of Dr. Boesch follows:]

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        The Chairman. Thank you, Dr. Boesch.
        Mr. Knapp, welcome.

     STATEMENT OF DR. JAMES KNAPP, SCHOOL OF THE EARTH, OCEAN, AND
               ENVIRONMENT, UNIVERSITY OF SOUTH CAROLINA

        Dr. Knapp. Good afternoon, Madam Chair Murkowski and other
    honorable members of the Senate Committee on Energy and Natural
    Resources. It's my great pleasure and high honor to be here
    today, and I thank you both for holding this hearing and
    assembling, what I perceive to be, a very diverse group of
    voices and perspectives on the issue before us.
        For the record, I am James H. Knapp, Professor in the
    School of the Earth, Ocean and Environment at the University of
    South Carolina. I currently serve as Past Chair of the Faculty
    Senate at the University of South Carolina, Columbia campus.
        By way of background, I was born and raised in California,
    so I did grow up close to the University of Southern
    California, have lived in six and traveled to 49 states with
    the notable exception of the great State of Alaska. So I can't
    wait to be there. And through my profession as an Earth
    Scientist I've worked in and visited more than 40 countries. I
    hold a Bachelor of Science degree with distinction in
    Geological Sciences from Stanford University and a Ph.D. in
    Geology from the Massachusetts Institute of Technology. From
    1988 to 1991 I worked with Shell Oil where I participated
    directly in oil and gas exploration in the Gulf of Mexico. For
    25 years since then, my research team and I have carried out
    both fundamental and applied research in the Earth Sciences
    including the design, acquisition, processing and
    interpretation of seismic surveys both onshore and offshore.
    Many of my former students remain gainfully employed in the
    energy sector despite the significant downturn the industry
    over the last two years.
        For the past eight years I have been a vocal advocate for
    the acquisition of new seismic data on the Atlantic OCS both
    such that the Bureau of Ocean Energy Management might fairly
    execute its statutory obligation to adequately evaluate the
    resource potential of this essentially frontier petroleum
    province and so that those of us in the scientific community
    might perpetuate the fundamental and historic legacy of this
    continental margin.
        One hundred years ago our knowledge of the geology beyond
    the shoreline, not only here in the United States but
    worldwide, was a gross state of ignorance. Beyond simplistic
    soundings of water depth in near shore areas or primitive
    measurements of ocean currents, the nature of ocean basins and
    the submerged portions of continents or continental shelves,
    was largely unknown.
        Beginning in the late 1920's pioneering scientists here in
    the United States first developed a theoretical basis for and
    subsequently the practical application of marine seismic
    surveys, ironically, right here on the Atlantic Coast at the
    mouth of the Chesapeake Bay no less than 150 miles from where
    we currently sit. This marine seismic work which evolved over
    the ensuing decades here on the Atlantic margin of North
    America was literally the stuff of legends involving dedicated
    teams of scientists operating heavy equipment at risk of life
    and limb in the challenging marine environment, all in the name
    of the public interest.
        These seminal studies ultimately led to the recognition
    that the continents are composed of fundamentally different
    rocks than those underlying the ocean basins, discoveries that
    laid the ground work for the eventual scientific revolution of
    plate tectonics in the 1960s. Given the long standing
    significance of these marine seismic surveys we still routinely
    recount this history in our introductory textbooks and courses
    in geology for thousands of college students.
        Obviously neither seismic surveying or offshore exploration
    are new to the Atlantic OCS. More than 240,000 line miles of 2D
    seismic reflection data were acquired off the shores of the
    U.S. Atlantic between the late 1960s and the late 1980s in
    support of an earlier phase of petroleum exploration during
    which 51 offshore wells were drilled. In preparation for these
    activities extensive environmental impact studies were carried
    out by Federal agencies, much as they are today, evaluating the
    potential impacts of seismic surveying and offshore drilling on
    tourism, commercial and recreational fishing and marine
    shipping and commerce.
        These other uses of the marine and near shore environment
    have continued to pace over the last 50 years despite the
    previous efforts for offshore energy development belying the
    claim that such activities are mutually exclusive.
        These legacy seismic data released by the Federal
    Government following a 24-year moratorium or 25-year moratorium
    are providing fundamental new insights on the geologic
    evolution of eastern margin North America.
        Not only does it appear that a significantly larger portion
    of the Southeastern U.S. was once a part of the African South
    American continent than previously thought, but these data are
    helping to identify previously unrecognized faults on the
    continental margin which may pose a significant earthquake and
    tsunami risk to coastal communities along the eastern seaboard.
        We are also analyzing these same data through federally-
    funded research projects to evaluate the potential for wind
    energy development and geologic storage of CO2 in the offshore.
        Despite the enormous scientific value of these legacy
    seismic data, fully 80 percent of the territory that was
    included in the draft five-year plan has never been evaluated
    with commercial seismic surveys. Furthermore, modern seismic
    surveys driven globally by exploration activities over the last
    two decades have ushered in fundamentally new models for how
    continents break and what continental margins evolve.
        I see I have exceeded my time so if I need to stop I will.
        [The prepared statement of Dr. Knapp follows:]

       [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]

        The Chairman. Thank you, Mr. Knapp. We will be sure to ask
    some questions about where we are with the seismic. I
    appreciate it.
        Mr. Manuel, welcome.

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

        Mr. Manuel. Thank you, Chairman. Thank you for that welcome
    and thank you to Ranking Member Cantwell, Senators Cassidy and
    Heinrich. My name is Athan Manuel, and I direct the Sierra
    Club's Lands Protection Program.
        Sierra Club, as you probably know, is the largest
    grassroots environmental group in the United States. And we
    have 2.4 million members and supporters spread out over 65
    chapters and 450 groups nationwide, and we have active members
    in every state in the country. It's my pleasure to comment
    today on BOEM's five-year plan for the 2017-2022 OCS oil and
    gas leasing program.
        We see this five-year plan not just about drilling but as
    an opportunity to really talk about climate and energy policy,
    and we feel like climate change is one of the most pressing
    global challenges our nation faces. And we think that new
    offshore oil and drilling or offshore oil and gas drilling
    would keep the U.S. dependent on fossil fuels and harm our
    fight against climate change.
        The U.S. under the Obama Administration is leading the
    world, we think, in the fight against climate disruption and
    new offshore drilling and leasing would undercut that
    leadership.
        So far we've been pleased with the trajectory of the five-
    year plan. We're very happy that in March the Obama
    Administration and Secretary Jewell announced that the Atlantic
    was coming out of the five-year plan. We were also happy, we
    were happy that it came out but also very happy that BOEM cited
    the overwhelming grassroots opposition from coastal
    communities, coastal businesses to having the Atlantic included
    in that five-year plan.
        That said, we do encourage BOEM to deny the permits for
    seismic testing. Since drilling is not going to happen there,
    we don't see the need for further seismic testing in that
    region, testing that could harm marine mammals and other marine
    values there off of our coast.
        We're not happy though, unfortunately, that there are still
    13 lease sales in the draft plan, that we see 10 lease sales
    happening in the Central and Western Gulf of Mexico and then
    three off in Alaska, two in the Arctic Ocean. We obviously
    oppose any new drilling in the Outer Continental Shelf. We
    think it's incompatible with coastal businesses and coastal
    ecosystems.
        And as others have mentioned, Mr. Boesch, in particular, in
    the Deep Water Horizon's spill which killed 11 workers and was
    the largest environmental disaster in U.S. history is, kind of,
    the latest evidence that drilling is incompatible with our
    coastlines.
        But again, we mention that really think this isn't just
    about drilling, it's about climate change. We think this fight,
    the climate fight, makes this campaign much more urgent. For
    us, the evidence is clear. The National Climate Assessment says
    unequivocally the planet is warming and over the last half
    century this change has been driven, predominately, by the
    burning of fossil fuels like oil and gas.
        The President has acknowledged that if we're serious about
    fighting climate change two thirds of the fossil fuels need to
    stay under the ground where they are now, the coal, the oil and
    the gas. And we agree with the scientific community that we
    need to keep this oil in the ground if we're serious about
    fighting climate change.
        Again, we mentioned how happy we are about the Obama
    Administration's fight on climate. The Paris Agreement and the
    recent treaty with Canada are just two of the most recent
    examples of that fight, and we think we can continue that by
    dropping the Arctic and the Gulf of Mexico and Cook Inlet out
    of the five-year plan.
        And again, we talked about climate but we're starting to
    see that some of these catastrophic impacts of climate change,
    they're already starting to happen here in the United States,
    including in states that would be impacted by the five-year
    plan.
        In Louisiana, that state loses a football field's worth of
    land every hour. The state is also home to some our nation's
    first climate refugees, the Choctaw and the Houma, who are
    losing their traditional lands and homes due to sea level rise
    and some of the impacts of climate change.
        The same is true on Alaska's North Slope, where 26
    communities have been impacted by climate change. Alaska's
    warming up more than most places in the country. The
    temperatures there have risen over six degrees just in the
    summer.
        As I mentioned there are 26 communities that have been
    suffering. There are residents here from Point Lay and
    Shishmaref, who have suffered the impacts of climate
    disruption. And so it's interesting that these villages are
    being impacted but also so is oil and gas infrastructure where
    the drilling season has been disrupted because of the impacts
    of climate change.
        So and then the last thing about the industry itself is
    it's interesting that BOEM has continued to keep the Arctic in
    the five-year plan even though Shell and the oil industry
    itself seems to be less interested than they were before.
        We saw Shell have a very bad experience there in 2012
    trying to drill an exploratory well that didn't work for them
    in 2015. They didn't find a significant amount of oil. And just
    last week we found out through our friends at Oceania, who
    found out that most of the companies who have leases right now
    in the Arctic Ocean have renounced those leases.
        So you're seeing even it's not just the environmental
    community that's questioning how viable the Arctic should be as
    an oil and gas field, but the industry itself is starting to
    question that.
        Finally, I know we're running out of time, but we're very
    optimistic about solving the climate problem. We think clean
    energy is affordable. It's cheaper in many cases than dirty
    fuels, and those are the kind of energy future we want to see
    for the country and also want to see just transition, in terms
    of energy policy, but also the workers and the communities so
    they can find good paying jobs, represented jobs and jobs that
    are clean and go into the future.
        But thank you for the time, and I appreciate the
    opportunity and look forward to our discussion and questions
    later.
        Thank you.
        [The prepared statement of Mr. Manuel follows:]

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        The Chairman. Thank you, Mr. Manuel.
        Dr. Mason, welcome.

      STATEMENT OF DR. JOSEPH MASON, HERMANN MOYSE, JR./LOUISIANA
     BANKERS ASSOCIATION CHAIR OF BANKING, E. J. OURSO COLLEGE OF
                  BUSINESS, LOUISIANA STATE UNIVERSITY

        Dr. Mason. Thank you, Chairwoman Murkowski, Ranking Member
    Cantwell, members of the Committee for inviting me to testify
    today on the BOEM's 2017 to 2022 OCS oil and gas leasing
    program.
        I'm an economist. I'm not here today to opine on
    environmental science. I leave that to my daughter, who is
    pursuing a Ph.D. in environmental biology and spending
    considerable in Alaska in the course of her studies. She always
    puts me right. [Laughter.]
        Rather, I am here to discuss the sometimes perverse
    incentives created and destroyed by energy policy.
        Overall, the BOEM plans to cut leasing in the Arctic, the
    Atlantic and the Gulf of Mexico. The BOEM's 13 planned sales
    are down from 15 in the prior five-year plan and 16 in the plan
    before that. It's not surprising then that many view the
    current plan as a cut back.
        But despite recent low oil and gas prices, oil and gas
    leases are more valuable to the industry than ever, as well as
    being crucial to income and state and local tax revenues and
    jobs in the Gulf region.
        Most development projects take five to ten years from
    discovery to production. As a result, the first barrel of oil
    from projects under the current plan will not be sold until
    roughly 2022 to 2027. Today's prices are certainly lower than
    at the time of the prior five-year plan, but today's interest
    rates in an environment of low inflation expectation are also
    lower.
        We teach in finance that interest rates can often be much
    more important for valuation than flat prices, and the current
    case is no exception. Yet, BOEM uses a flat three percent in
    their analyses.
        Consider that in March 2009, Moody's seasoned Baa corporate
    bond yield was 8.42 percent while today it is 4.79 percent. On
    that basis, the value of an even stream of production across
    the period starting five years from now and lasting for another
    15 years, is more than six percent greater than in 2009 despite
    the low oil and gas prices.
        With higher risk projects the gains are even greater. B of
    A Merrill Lynch Emerging Markets Corporate Plus Index Effective
    Yield started 2009 at 14.45 percent while today it is 4.86
    percent. Solely because of lower interest rates the value of an
    even stream of production, again, across the period starting
    five years from now and lasting for another 15 years, is 51
    percent greater than in 2009.
        So counter to lay intuition, market interest rates can
    matter more to lease values than prices, thus the Federal
    Government is better off selling leases today rather than
    waiting for inflation expectations to rise. As I showed in some
    of my prior studies substantial economic benefits of such
    leasing of crude, even in the short-term.
        For instance, Shell sunk more than $7 billion into the
    development for drilling in Alaska before abandoning the
    Chukchi Sea project. It's estimated that Shell will spend
    another $1 billion before they wrap up obligations relating to
    the leases. Shell's experience is by no means unique. Since the
    early 2000's large scale projects have required considerable
    upfront investment.
        Using the estimation method for my prior studies of the
    economic contributions of Gulf Energy resources, the lease plan
    under consideration today will contribute roughly some $457
    million to $747 million in annual GDP to the Gulf states,
    create 1,604 to 2,567 jobs for the duration of the development,
    contribute wages of roughly $91 to $146 million to the region
    annually and result in state and local tax revenues of $21 to
    $34 million annually just during the developmental phase.
        The take away here is that every lease that's withheld
    sacrifices considerable economic growth. Economic growth that
    the Gulf states and Louisiana can't spare in the present
    business environment.
        But before I conclude, I want to add one additional detail
    that I don't think my daughter will object to.
    Counterintuitively, the BOEM's cutbacks have a perversely
    adverse effect on CO2 and global warming. A recent research
    project out of Stanford University and the University of
    Calgary, funded by the Carnegie Endowment, estimating the total
    carbon footprint of oil from 30 different regions around the
    world, shows that oil from the Gulf of Mexico is some of the
    cleanest. So by restricting clean output in the Gulf, BOEM is
    not only sacrificing jobs and growth in the Gulf region, it's
    incentivizing dirtier production elsewhere in the world.
        We need a smart energy policy that can tail off the
    dirtiest production, not encourage it without needlessly
    sacrificing jobs and growth for our fellow countrymen.
        Thank you.
        [The prepared statement of Dr. Mason follows:]

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        The Chairman. Thank you, Mr. Mason.
        I want to start where you have left off this afternoon,
    because we had a hearing before the Energy Committee just a
    couple weeks ago about how the Federal Government should
    respond in a low price environment such as what we are
    experiencing now. You have outlined some of what you have
    described as, kind of, the perverse outcomes and outcomes that
    one might not expect in a low price environment.
        I think you have outlined well that it is not just the
    price that you need to look to, it is the interest rates as
    well and that BOEM should respond now, taking advantage of the
    fact that we are in this environment.
        Director Hopper, let me ask you to respond to that because
    I think what Mr. Mason has outlined is very important. When we
    withhold the leases, particularly at this time, you do
    constrain economic opportunity. How do you respond within BOEM
    to what he has outlined here this afternoon?
        Ms. Hopper. Thank you for that question.
        So I would point to two things. One is that we, under our
    current lease plan, as we are in a low oil price environment at
    the moment, we are continuing with the lease sales in the Gulf
    of Mexico. And if you look at the trajectory over the last few
    years the amount of acreage we're offering is consistent but
    the number of leases that are being bid on by companies has
    declined steadily. And I think that speaks to, kind of, the
    economic realities that companies are facing in this oil price
    environment.
        And so, I think I would argue that's not just an interest
    rate, but sort of the available capital that those companies
    have.
        And then in our plan for the next five-year program, we do
    look at different price scenarios. So we don't make any
    assumption about what the oil price will be. We look at $40,
    $100 and $160 barrel prices, sort of, to game out different
    scenarios that would happen. I think that kind of sensitivity
    analysis addresses some of his concerns about sort of locking
    us into any particular price point.
        The Chairman. Well in recognizing the long lead times that
    it takes, particularly in a place like the Arctic, I think we
    recognize that if you had Arctic lease sales being held today
    that Americans don't see the benefit from that oil for years,
    considerable years, from where we are.
        Again recognizing what you have outlined Mr. Mason in terms
    of the multiple factors that are at play there, I would like to
    think that it is not a low price environment that would drive
    some of the decisions coming out of BOEM.
        Director Hopper, you know that my top priority for the '17
    through '22 plan has been to maintain the three Alaska sales
    that BOEM has proposed. The entire Alaska delegation has
    submitted a letter to you. Governor Walker has joined in the
    support as well as the vast majority of Alaskans.
        Now you mentioned in your opening comments that part of the
    rationale for removing the Atlantic sale was opposition from
    some coastal communities and citizens. You have also outlined
    in your statement the meetings that you have attended with
    folks up in the states in various communities. How would you
    describe the views of most Alaskans and of the Alaska State
    Government in terms of supporting or opposing lease sales in
    the OCS right now?
        Ms. Hopper. I'll start with the second half of your
    question because I think it's a little simpler that the meeting
    with your Governor, your Lieutenant Governor, obviously reading
    the letters from you, I would say there's consistent support to
    keep the Alaska sales in the next five-year plan.
        In my meetings with, and I was in--on the North Slope, I
    would say there was a real variety of opinion. I did not leave
    with one consensus opinion. There were folks like the Mayor who
    were very articulate in their support for keeping offshore oil
    and gas development in the next five-year plan. There were
    others who were equally articulate and passionate about
    removing those sales. So I think it is a much more complicated
    and nuance conversation then some I'd appreciate.
        The Chairman. I am assuming you are aware of the many
    public opinion polls that have been conducted including one
    from 2014 that showed more than 70 percent of Alaskans support
    development within our region of the OCS? So it is not just
    going to specific communities.
        Ms. Hopper. Right.
        The Chairman. And talking to a few key individuals, but the
    broader statewide support for advancement of these sales in the
    Arctic OCS.
        Ms. Hopper. Yes, yes, Chair. Madam, I'm aware of that,
    thank you.
        The Chairman. I guess the bigger question is whether you
    will treat that lack of local opposition and the overwhelming
    support of Alaskans in favor of development as a reason to
    retain the three Alaska OCS sales in the final program?
        Ms. Hopper. I think, Chairman, it would be premature to
    make any statement about the fate of those Alaska sales in the
    final program. The Secretary, as I mentioned, as you know, she
    has several factors that she has to consider, the position of
    the state government is one of them. The other uses of the
    ocean is another important one which is where some of the local
    input comes in. And so, she will take those as well as the
    other statutory factors in her decision.
        The Chairman. Well I appreciate you saying that. I did
    happen to notice that today, as you were meeting with a group
    of Alaskans, and hopefully a group that I am going to be
    visiting with very shortly, you tweeted a picture out of them,
    which I do not have any problem with that. In your tweet, you
    clearly outlined that they are opposed to drilling in the
    Arctic.
        I looked at it and said it does not necessarily show me
    that there is impartiality within BOEM. I looked at it and
    said, you know, how do we not conclude that the die is already
    cast and that your agency has already decided what it is that
    you are going to be doing?
        Ms. Hopper. Well, I didn't write that tweet, but I am
    familiar with it. I'm sorry if you took that impression from
    it. Our agency tweets a lot of pictures from our meetings. We
    think it's a good way to represent the many stakeholders that
    we visit with.
        The Chairman. Have you or your office tweeted a picture
    after a meeting with Alaskans who actually support drilling in
    the Arctic?
        Ms. Hopper. We certainly have tweeted many pictures from
    all of our public meetings and there were certainly Alaskans
    who were very supportive of oil and gas. So I wouldn't want to
    opine, you know, who exactly is in the photos, but we certainly
    have tweeted a variety of stakeholders that we've met with.
        The Chairman. I want to get to my colleague from Louisiana
    here. I looked at your tweet and I thought this would appear to
    me that you are not acting with the level of impartiality that
    we expect the Agency to do.
        Senator Cassidy.
        Senator Cassidy. Thank you, Madam Chair.
        First I request that I be permitted to submit for the
    record an editorial we wrote. My office looked at the same
    research that Dr. Mason referred to that the Gulf of Mexico oil
    is far cleaner than that oil produced, say, by Iran. When we
    see market share it actually releases tons more greenhouse
    gases. That is not hyperbole; that is literal. I think it is
    365,000 tons per year, if I remember correctly. So----
        The Chairman. We will include that within the record. Thank
    you for bringing that up.
        Senator Cassidy. Thank you.
        [The information referred to follows:]

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        Senator Cassidy. Ms. Hopper, hello.
        When you took the Atlantic lease sales off the table I
    guess you gave several reasons, local opposition, being one you
    mentioned. Yet when I look at this--all four Governors of the
    affected states, all eight Senators, the majority of the
    congressional delegation, the majority of the public comments
    received by the agency and by polling, the majority of the
    folks polled in these states.
        So just it just take a vocal minority showing up to derail
    that which governors, congresswomen and congressmen, Senators,
    those polled, etcetera, would otherwise want?
        Ms. Hopper. Senator, as you know there are many factors and
    many of which we cited in our decision. So the position of the
    state is one of them. The many uses of the ocean, the other
    uses of the ocean is another.
        Senator Cassidy. I will come to that.
        Ms. Hopper. Certainly.
        Senator Cassidy. But first, can a small vocal minority
    override the will of the majority of the people in a state, the
    Governors, the Senators and the Congress folk, specifically
    when the regulation suggests that you are supposed to consider
    the position of the governors and the governors are all for it?
        Ms. Hopper. That position was considered.
        Senator Cassidy. So back to my question. Does a small vocal
    minority override that overwhelming other wide support?
        Ms. Hopper. I can't answer that question because it was not
    the only consideration.
        Senator Cassidy. Okay, then let's go to some of the other
    reasons.
        I think one of the other reasons given was about dual use.
    Other places, other entities have to use it. Now, the Gulf of
    Mexico has like 50,000 oil wells. We have a far more productive
    fishery than the Atlantic. We have 11 of the top 20 ports in
    the nation, and we have at least two air bases that use that
    area and the Atlantic is about 70 times bigger. Do I have that
    number right? How much? Seventy-five percent bigger.
        So if we are going to have a problem with competing use it
    seems like we would have seen it with the 50,000 oil wells in
    the Gulf of Mexico not with a proposed oil well or oil wells in
    the Atlantic.
        So tell me again the rational for that competing use and
    why it is such an issue here but it has not been seen to be an
    issue in the Gulf of Mexico?
        Ms. Hopper. Sure. Certainly.
        I think one of the really important differences between the
    Gulf and the Atlantic is that in the Gulf there is a long
    history of coexistence. Those industries developed and co-
    existed together. And you didn't start with 50,000, you started
    with a couple and those have grown together.
        On the Atlantic, we were looking at a potential lease sale
    in an area that did not have development. There's certainly
    been a few exploratory wells in the past, but no development.
    And as you look at the, you talked about fishing, which is an
    important industry on the East Coast, the recreation I think
    Senator Cantwell----
        Senator Cassidy. Now can I come back to the recreation?
    There is a 50-mile buffer.
        Ms. Hopper. Certainly.
        Senator Cassidy. So it is beyond the sight line.
        Ms. Hopper. Right.
        Senator Cassidy. And it is beyond where most recreational
    people would be.
        As we speak of that, again, I have a sense that BOEM
    decided what they wanted and they worked backwards to find
    rationale. I am looking at your answers and I do not mean to be
    disrespectful, but there is a lot at stake here, a lot of jobs,
    a lot of royalty, the prosperity of our country. So let me ask
    you this. You did approve for wind. BOEM has approved for wind
    farms offshore that obviously competes. It takes place. It
    still takes some construction.
        What is the difference between the wind farms and the
    wells? Why would there not be an issue of competition with one,
    there is a competition with--and by the way, let me just also
    say, you also would not start it with 50,000 wells in the
    Atlantic either. It would gradually grow, if it grew at all.
        But let's move on. So wind farms are okay but oil wells are
    not?
        Ms. Hopper. I think one of the important differences is as
    you look at development you have to look at the risk of an oil
    spill. There's no system we have in place that can guarantee
    there will be no oil spill. And so, that obviously is not a
    concern with wind farms. It is a concern with oil and gas
    development.
        Senator Cassidy. So it is an existential threat?
        Ms. Hopper. No, I wouldn't say it was existential, sir.
        Senator Cassidy. In the sense that it could occur,
    absolutely can occur and it has occurred in the past.
        We do not venture so in a sense everything else, kind of,
    let's put it to the side because a vocal minority overriding is
    that is not as important.
        And the competing use. Well, we have other reasons we will
    do windmills.
        And the recreational. It is 50 miles off the border.
        It ultimately comes back to the fear of the oil spill.
        Ms. Hopper. None of these are dispositive. They are--it's a
    cumulative analysis. And so if you try to get me to say one of
    them was the deciding factor, I'll not be able to do that.
        Senator Cassidy. I have to say that the original three and
    not a very good case has been made for it. I say that not to be
    assaultive, I don't. But when I look at your original three
    rationales that we discussed, none of them seem compelling.
    They just seem to kind of support where you already were if you
    decided to decide that way.
        Okay, well in that case, we cannot prove a negative, right?
    We can never prove that something bad will not happen. So if we
    cannot prove a negative it sounds like we are going to be
    paralyzed in terms of never, ever, considering any other
    development because there might be something bad that happens.
    Fair statement?
        Ms. Hopper. I would not say that for every planning area I
    will say that's--that was one of the things we thought about--
    --
        Senator Cassidy. Well if you cannot prove a negative and if
    that is a strong rationale as to not proceed, it just seems
    like that follows.
        Ms. Hopper. I don't agree.
        Senator Cassidy. Then how would you phrase it differently?
        Ms. Hopper. I would say that in some of our other areas in
    the Gulf of Mexico and in the lease sales in Alaska, we weighed
    those many factors and came to a different decision.
        Senator Cassidy. So the oil containment policies that you
    have in the Gulf of Mexico are not adequate for the Atlantic,
    that consortium that has been placed by the major oil companies
    to control any underwater oil spills? Is that inadequate?
        Ms. Hopper. I believe that if there was a similar kind of
    containment system--you keep trying to make me say that it was
    one piece and therefore that was inadequate, and I'm not
    willing to cede that point. It was several, several factors.
        Senator Cassidy. But it seems like it is, and again, not to
    be disrespectful, but Director, it seems as if none of them are
    very strong but cumulative they seal the deal which again,
    seems kind of counterintuitive. In fact, it just seems odd.
    None of the individual arguments are strong, but cumulatively
    they become strong. With all due respect it just seems as if
    you had a decision and you worked backward.
        I will yield to the Chair, and I assume you have a second
    round? [Laughter.]
        Ms. Hopper. Thank you, Senator.
        The Chairman. Yes, we do.
        Well Director Hopper, you raised the risk associated with
    exploration in the Arctic OCS and the study or the review
    directed by Secretary Moniz to the National Petroleum Council,
    the review of Arctic development. I think that, perhaps,
    surprised a lot of people because of really the very, very
    favorable responses towards opportunities within the Arctic and
    recognizing that there are challenges out there.
        I think dispelling some of the myths as to how hard or as
    to how risky. I do not know if I could ask you what
    recommendations out of that review you were perhaps most taken
    with, but I think clearly there is a recognition that you look
    to the potential that we have, you look to what we know with
    regards to our abilities to operate in the offshore. Certainly
    within the Arctic some of the risk, I think, has perhaps been
    overstated or the difficulty, the degree of difficulty, again,
    has been overstated.
        I want to direct some questions to you, Mayor Hopson. Can
    you describe for the Committee the extent of the interactions
    that you have had as Mayor with BOEM on the development and
    evaluation of the 2017-2022 plan? To what extent have you been
    involved in consultation?
        Mr. Hopson. We had a meeting about a month ago with the--
    BOEM came in and had a community meeting, and in that meeting
    there was no opposition to oil and gas and OCS. There are
    concerns of the set asides that BOEM has introduced. It would
    be restricting the ability for our communities as well, and
    we've made that clear with BOEM. We've had one meeting. That's
    the extent, and I hope they understand our position.
        The Chairman. So they came out to you, presented and you
    were able to express support or opposition?
        Mr. Hopson. I had asked the community to see if anybody is
    objecting to my comments in supporting oil and gas, and there
    was no one that stood up and objected to what I had said.
        Another member of the community spoke in support of
    development. I've also asked the community if they objected to
    his statements, and there were none.
        It's very clear that we need development, eight communities
    on the North Slope. As an Assembly member I have to figure out
    how I'm going to provide school, police, fire, health clinics
    and the budget is about $400 million. The Federal Government
    will not give our region $400 million a year to sustain us.
        Find me an alternative, and I'll be willing to work with
    you or the Department, the Administration. Find me an
    alternative revenue source to provide a livelihood for my
    communities. We have no timber, we have no fisheries and we
    have no tourism. We are very isolated, and we have to rely on
    what we have which is a tax base from the Prudhoe Bay oil
    fields. Ninety-five percent of the board's budget comes from
    oil and gas, so every one of our eight communities is surviving
    on oil and gas money.
        The Chairman. Mayor, I have made OCS revenue sharing a
    significant priority of mine. My colleague from Louisiana, a
    host, as a state of major offshore development. They have long
    fought for fair and equitable revenue sharing. They and the
    other Gulf Coast states. Alaska is not part of a revenue
    sharing proposal.
        You have mentioned finding the resources whether it be to
    provide for policing or schools or roads. How significant would
    revenue sharing be to a community like Wainwright?
        Mr. Hopson. Revenue sharing would be a big thing in my
    community. We have an NPRA grant process for development or
    leasing in the NPRA, and we use funds to provide services for
    children, for elders and the community in general and to
    provide local government support for my city.
        Revenue sharing from OCS would be a big thing, even to a
    small community like mine. And it may help, and it would help
    and will help other coastal communities as well in finding
    funding to provide recreation, just to name one, for our
    children.
        The Chairman. You have mentioned that Wainwright and the
    other coastal villages up there, subsistence is how you live.
    It defines you, the hunt for the whale, not only as a food
    source but so much more. There is a recognition that
    subsistence takes money in order to go out to hunt, in order to
    go out to whale, it does take resources.
        I think that perhaps there has been this misconception that
    it is an either/or proposition. You are either able to have an
    oil and gas development up on the North Slope and subsistence
    will no longer exist, that the whale will be gone, that the
    caribou will leave, or nothing. So it is an either/or choice.
        Do you believe that is the case or do you believe that you
    can have development in your region that will allow for
    economic opportunity for jobs and revenue while still having
    the subsistence lifestyle that you and your family and families
    for generations have lived off of?
        Mr. Hopson. For the life of Prudhoe Bay it is proof that
    our communities can coexist with oil and gas with subsistence.
    A snow machine runs anywhere from $10,000 to $12,000. A boat
    runs, just an 18-foot boat with a motor, can run you anywhere
    up to $20,000. Last year we were paying over $7 a gallon just
    to drive my truck, my boat, my four-wheeler.
        We need development. We need infrastructure to be able to
    tax so that we can employ people so they have the opportunity
    to hunt.
        The world is banking on saving animals without thinking of
    my life, my children's life. Where are we going to live? If we
    shut down development we're--what are my options? Anchorage?
    Juneau? Washington, DC? Is that where I'd have to move to?
        That's what we're looking at if we don't have the
    opportunity to develop. It's our only revenue to be able to
    live at home.
        Hunting, you have to buy bullets. You have to buy supplies
    to outfit your hunt.
        They talk about alternative energy. Wind-powered boats are
    not going to cut it. Solar-powered. We need oil and gas. We
    need unleaded fuel. We live off of diesel to heat our homes,
    and we need that as well. Every one of our communities, with
    the exception of Barrow and Nuiqsut, who has natural gas, all
    of us have stove oil to be able to do that.
        I have to pay for my heating bill. I have to pay for my
    utilities, my telephone while at the same time buying supplies
    to go hunt. We have proven the two can coexist, development and
    subsistence.
        People have been put to work when Shell came up. A lot of
    our community members were working. When Shell pulled out we
    are trying to find areas of where people can go back to work.
    They're unemployed. We need development. It just amounts to
    that.
        Climate change is a big topic that I heard today as well.
    How are we allowing the Federal Government's public dollars to
    be spent here in Washington, DC if the Administration truly
    believes in climate change and the next 50 years in all models
    this city will be underwater? But you're not, the Government is
    not allowing us to build that home. That--where's the balance
    in that?
        What about my life? We're the endangered species, not the
    animals, the people are.
        The Chairman. Mayor, thank you.
        I promised that I would let you finish your comment, Mr.
    Knapp, about seismic, and you have indicated that in terms of
    the updates in the Atlantic OCS.
        I think I heard you right in saying that 80 percent of the
    data that we have has not been evaluated. I have a question on
    that as well as if we are to do new seismic surveys what would
    we see that is different from what we were able to obtain in
    the 70's and in the 80's?
        Dr. Knapp. Thank you for that question, Madam Chair.
        So to clarify the reference to the 80 percent, that's 80
    percent of the territory that was included in the draft
    proposed plan, has never had any surveying of a commercial
    nature.
        So all of the previous surveying that had taken place was
    basically on what we call the Continental Shelf. But there's
    vast areas of the edge of the continent that were under
    consideration that have not only never had a well drilled but
    they've never even been imaged by seismic data. And that was
    the 80 percent.
        The Chairman. Okay.
        Dr. Knapp. So I guess it gets to the issue about the new
    seismic data.
        There's still vast areas on the Outer Continental Shelf
    which have never been imaged with any seismic data. But beyond
    that, the analogy I would make for the need for the new seismic
    data, I would say is with the Hubble Telescope when it was
    launched with great expectation and it all of a sudden came
    clear that there were problems with it. We couldn't see much.
    When they went up to actually fix the lens on the telescope all
    of a sudden we can see the whole universe.
        And the analogy is that the way that seismic technology has
    evolved since these surveys were last acquired on the Atlantic
    is on that scale. It's amazing the level of technology and
    sophistication that goes into these modern seismic surveys. And
    then, so it's not just a matter of going out and retreading the
    same ground but it's ground that we simply can't see the level
    of detail that we would need to or any exploration company
    would, if they were serious about going to explore for oil and
    gas.
        And part of that is also that essentially all of the data
    that were collected in the 70's and 80's were what we refer to
    as 2D data. The state of the art nowadays is not only 3D but
    typically 4D data, and that just doesn't exist here on the
    Atlantic.
        The Chairman. Right.
        So with the absence of a scheduled lease sale in the
    Atlantic you have folks that are saying well, there is no value
    in collecting any new seismic in the Atlantic OCS. What do you
    say to that?
        Dr. Knapp. I would challenge that assumption because, first
    of all, as I said in my testimony, the Federal Government is
    congressionally-mandated to do an evaluation.
        The Chairman. Right.
        Dr. Knapp. Of the resource potential of the OCS, and I
    would submit that that's impossible to do with the current
    data. But beyond that I would say there are two additional
    issues.
        One, if there were to be a lease sale sometime in the
    future, it would be entirely prudent to engage in the
    acquisition of the data and the analysis of it now such that we
    can fairly evaluate whether a sale is even appropriate, whether
    there is a resource base there. I think that's the way I
    understand the OCSLA legislation having been established. At
    first you evaluate the resource and then see if there's an
    economic incentive to go explore for it.
        And the other issue that I would bring to the table is that
    in today's world it's become clear from a scientific standpoint
    that we learn a lot about one continental margin by looking at
    the opposing continental margin. And if we look to the
    continental margin of West Africa it's awash with new
    discoveries of oil and gas on a regular basis. And a part of
    the strategy, I think, is even in the absence of a lease sale
    there would be an interest to collect new seismic data on this
    margin to better understand what's going on in Africa.
        The Chairman. Well, I appreciate what you have said and
    would concur that the imperative to understand what it is that
    we have so that we can make rational decisions, so that we can
    put lease sales up. It seems to me that you do it when you have
    the knowledge based on the inventory.
        Let me ask you, Director Hopper, your analysis of the
    connection between industry interest in investing whether it is
    in Alaska or the Atlantic. If industry has a good sense as to
    what the resources may be within an area they are probably
    going to have greater interest or greater likelihood to
    participate in lease sales. It takes a lot of money up front to
    be competitive in these. Is what Mr. Knapp saying what you
    folks in BOEM concur with?
        Ms. Hopper. Yes, thank you, Chairman.
        Let me go back to it. I just want to address one thing you
    raised because it's been bothering me since we last spoke.
        If there was anything about our twitter feed, and I
    certainly will go back and take a careful look at it, that gave
    the impression that there was some predetermined outcome or
    that BOEM was not impartial, I personally apologize for that.
    That is not at all the way that we operate, so.
        The Chairman. That was my impression. It might not be
    others, but----
        Ms. Hopper. Well, I just wanted us to be clear with each
    other. So thank you for raising it.
        So in July 2014 BOEM put out a record of decision, our
    final programmatic environmental impact statement on G and G,
    so seismic testing on the Atlantic. And since that time we've
    been looking. We have permits pending.
        We can have a long conversation about why they're still
    pending which I'm happy to do, but I do think that we would
    agree that more information is always better. And we have
    actually used some of those analogous coasts, specifically
    Africa, to update our assessment.
        So we do, every five years, we do update the assessment of
    the oil and gas resource around the nation. Because we did have
    new data from those analogous studies, we updated, sort of off
    cycle, the Atlantic in 2014.
        So, yes, would I agree with the professor that more
    information is better and provides good decision making?
    Absolutely.
        The Chairman. Let me ask Dr. Knapp, if you can speak to the
    risks that may be posed to marine mammal populations when
    marine seismic surveys are conducted?
        Dr. Knapp. Well let me say at the outset I am not a marine
    biologist, so I could not claim to be an authority in that
    respect. But I think there's a--I've testified previously in
    other hearings that in 1991 the Federal Government, through the
    National Marine Fisheries Service, started monitoring what are
    called unusual mortality events in U.S. waters.
        And in the succeeding 25 years that they've been
    monitoring, these are unusual mortality events of large
    populations of marine mammals. And if you look at the data that
    they've assembled, they're equally divided between the Pacific,
    the Atlantic and the Gulf of Mexico. Two of those areas there's
    been no commercial seismic activity, the Pacific and the
    Atlantic. And yet in the Gulf of Mexico, there's been
    continuous seismic activity over that period of time.
        So I think there are any number of ways in which the data
    that we have suggests that there's no correlation, there's no
    demonstrable correlation between seismic activities either here
    in the U.S. or worldwide that shows that there is a significant
    or long-lasting threat to either marine mammals or the marine
    environment.
        The Chairman. Thank you.
        We have gone over by about 15 minutes longer than I had
    planned for this hearing, but I want to ask one last question
    of you, Director Hopper.
        We, in the state, have great interest, as you know, in
    offering area wide lease sales, and the lease sales in the Gulf
    have traditionally been on area wide acreage across a planning
    area.
        Now I understand the proposed program is offering lease
    sales across Western and Central planning areas. Again, the
    State of Alaska, I think, has been persistent, consistent on
    its request to move to the area wide approach within the state.
    We keep getting pushed back and resistance on that. Why is
    that?
        Ms. Hopper. I think that the reason why we have done
    targeted leasing, identified targeted leasing in this current
    five-year plan, as well as the one that is pending, is because
    we think it is, sort of, let's all of us focus on the areas
    that are the most important to industry and do a good
    evaluation of those.
        And so there are important environmental concerns to think
    about, subsistence needs to think about. And if industry can
    highlight for us the areas that they're most interested in we
    can understand those areas and target our thinking in those
    areas.
        The Chairman. But that is unique to Alaska.
        Ms. Hopper. Alaska is a frontier area as--and the Gulf of
    Mexico is not.
        The Chairman. Alaska, we were pretty busy in the 1980's.
        Ms. Hopper. True.
        But there is just the one that is producing, the one area
    in the Beaufort that is producing the reservoir. But there is
    not a Federal facility yet. So we still consider it frontier.
        The Chairman. Oh, I understand that. I understand that a
    great deal.
        I just, I recognize that we use, perhaps, terms of
    convenience in describing Alaska as perhaps this wild, unknown
    frontier that we do not happen to know a lot about. Truth be
    told, the amount of exploration that was conducted in the
    1980's was quite significant.
        I think the beauty of it is that we have forgotten all
    about it because we did not have any problems. We did not have
    the issues and the concerns that many had feared and simply did
    not materialize.
        Now there were events that led industry to look other parts
    around the world after that, but to suggest that somehow or
    other this is so special and so unique that we are going to
    treat it differently than we treat any other area within the
    OCS when it comes to the planning for the sales, I understand
    that there are differences.
        Again I think we have been very clear and very persistent
    and consistent on this, and we continue to be pushed back by
    the Administration in a request for area wide lease sales,
    something that, I think, would make good sense for all that are
    involved.
        I could probably spend most of my afternoon with you all
    but we are not able to do so. I will thank you for the time
    that you have given the Committee.
        Know that while, again, many others were not participating
    this afternoon they have expressed great interest to me about
    what we have taken up this afternoon and great interest in the
    future of our OCS and its opportunities.
        So I will thank you for your contributions this afternoon
    and look forward to future discussion.
        And with that, the Committee stands adjourned.
        [Whereupon, at 4:18 p.m. the hearing was adjourned.]

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