[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

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

                                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 

21-988                         WASHINGTON : 2017 
-----------------------------------------------------------------------
  For sale by the Superintendent of Documents, U.S. Government Publishing 
  Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; 
         DC area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, 
                          Washington, DC 20402-0001           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
               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

                              ----------                              


                         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:]
    
   [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
 
   
    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:]
    
    
  [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
  
    
 
    
    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:]
    
    
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
   
       
    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:]
    
 [GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]
   
     
    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.]

                      APPENDIX MATERIAL SUBMITTED
                              ----------                              




[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]






                                   [all]