[Senate Hearing 114-330]
[From the U.S. Government Publishing Office]







                                                        S. Hrg. 114-330

   THE BUREAU OF LAND MANAGEMENT'S FINAL RULE ON HYDRAULIC FRACTURING

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

                                HEARING

                               BEFORE THE

           SUBCOMMITTEE ON PUBLIC LANDS, FORESTS, AND MINING

                                 of the

                              COMMITTEE ON
                      ENERGY AND NATURAL RESOURCES
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             APRIL 30, 2015

                               __________



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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

           Subcommittee on Public Lands, Forests, and Mining

                        JOHN BARRASSO, Chairman
SHELLEY MOORE CAPITO                 RON WYDEN
JAMES E. RISCH                       DEBBIE STABENOW
MIKE LEE                             AL FRANKEN
STEVE DAINES                         JOE MANCHIN III
BILL CASSIDY                         MARTIN HEINRICH
CORY GARDNER                         MAZIE K. HIRONO
JOHN HOEVEN                          ELIZABETH WARREN
JEFF FLAKE
LAMAR ALEXANDER
                    Karen K. Billups, Staff Director
                Patrick J. McCormick III, Chief Counsel
   Lucy Murfitt, Senior Counsel and Natural Resources Policy Director
           Angela Becker-Dippmann, Democratic Staff Director
                Sam E. Fowler, Democratic Chief Counsel
           Spencer Gray, Democratic Professional Staff Member
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
           
                            C O N T E N T S

                              ----------                              

                           OPENING STATEMENTS

                                                                   Page
Barrasso, Hon. John, Subcommittee Chairman and a U.S. Senator 
  from Wyoming...................................................     1

                               WITNESSES

Kornze, Hon. Neil, Director, Bureau of Land Management, U.S. 
  Department of the Interior.....................................     4
Baizel, Bruce, Energy Program Director, Earthworks...............    12
Sgamma, Kathleen, Vice President of Government & Public Affairs, 
  Western Energy Alliance........................................    18
Watson, Mark, State Oil and Gas Supervisor, Wyoming Oil and Gas 
  Conservation Commission........................................    25

          ALPHABETICAL LISTING AND APPENDIX MATERIAL SUBMITTED

Baizel, Bruce
    Opening Statement............................................    12
    Written Testimony............................................    14
    Responses to Questions for the Record........................    81
Barrasso, Hon. John
    Opening Statement............................................     1
    Letter to Secretary Jewell dated August 19, 2013.............     2
Kornze, Hon. Neil
    Opening Statement............................................     4
    Written Testimony............................................     7
    Responses to Questions for the Record........................    43
Sgamma, Kathleen
    Opening Statement............................................    18
    Written Testimony............................................    20
    Responses to Questions for the Record........................    83
Watson, Mark
    Opening Statement............................................    25
    Written Testimony............................................    27
    Responses to Questions for the Record........................    89
 
   THE BUREAU OF LAND MANAGEMENT'S FINAL RULE ON HYDRAULIC FRACTURING

                              ----------                              


                        THURSDAY, APRIL 30, 2015

                                        U.S. Senate
          Subcommittee on Public Lands, Forests, and Mining
                  Committee on Energy and Natural Resources
                                                    Washington, DC.
    The Subcommittee met, pursuant to notice, at 2:31 p.m. in 
Room SD-366, Dirksen Senate Office Building, Hon. John 
Barrasso, Chairman of the Subcommittee, presiding.

  OPENING STATEMENT OF HON. JOHN BARRASSO, U.S. SENATOR FROM 
                            WYOMING

    Senator Barrasso. The committee will come to order.
    This afternoon the Subcommittee on Public Lands, Forests, 
and Mining will hold its first hearing of the 114th Congress. I 
am pleased to chair this subcommittee, and I look forward to 
working with the Subcommittee's Ranking Member, Senator Wyden. 
He and I visited a little earlier. He has a packed schedule and 
will try to make it to the subcommittee hearing. Other members 
have conflicts but will also try to be here to hear the 
testimony and take part in the questioning.
    Senator Wyden has always been an engaging and willing 
listener when he chaired this panel, and I intend to extend the 
same courtesy to him and to all members of the committee.
    The Public Lands Subcommittee is especially important to my 
home State of Wyoming. In Wyoming, about 47 percent of the 
surface estate and 67 percent of the mineral estate is owned by 
the Federal Government. This means that decisions made in 
Washington have an extraordinary impact on the people of 
Wyoming.
    As Chairman, I will ensure that we bring scrutiny to these 
decisions, especially those that put Federal lands in the West 
at a competitive disadvantage to other areas of the country 
when it comes to energy and specifically mineral production.
    Today, this subcommittee will examine the Bureau of Land 
Management's final rule on hydraulic fracturing. BLM issued its 
final rule on March 20th, 2015. It is scheduled to take effect 
on June 24th. I continue to believe that the BLM's rule is a 
solution in search of a problem. Wyoming has among the 
strictest hydraulic fracturing regulations in the country, and 
these regulations already apply to Federal lands within our 
state.
    In 2013, the Wyoming delegation called on Secretary Jewell 
to exempt Wyoming and other states from this rule.
    [The information referred to follows:]
    
    
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    Secretary Jewell rejected this request and instead provided 
states with an opportunity to obtain a so-called variance from 
the BLM's rule. I am interested to know how the variance 
process works and whether states have any interest in pursuing 
it.
    I am also interested in understanding the larger impact 
that this rule and other regulations will have on oil and gas 
production in the West. In addition to the hydraulic fracturing 
rule, the Obama Administration plans to issue three other major 
rules for oil and gas on Federal lands. The Administration 
plans to issue a new rule for natural gas venting and flaring 
and also rules which would increase royalty rates. These 
regulations and those the Administration has already imposed 
have put Wyoming and the West at an even greater disadvantage 
to other areas of the country.
    According to the Energy Information Administration (EIA), 
Federal onshore natural gas production has decreased by 22 
percent since 2009. EIA has found that Federal onshore natural 
gas production makes up a smaller percentage of total U.S. gas 
production than it has in the last 11 years. Federal onshore 
oil production also makes up a smaller percentage of total U.S. 
oil production than it has in nine years. While these numbers 
reflect new production on State and private lands, they also 
show that Federal lands are becoming less competitive with 
State and private lands.
    Oil and gas production provides thousands of good-paying 
jobs in the West. These jobs are available to individuals from 
all walks of life. They are jobs that can support an entire 
family and allow parents to send their kids to college. The 
people of Wyoming want these jobs, and I will fight to keep 
them in our state.
    If BLM wants to be a good neighbor to the people of Wyoming 
and other Western states, I think it must not only listen to 
their concerns but be responsive to them. Mr. Kornze, I expect 
you to lead in that effort.
    Senator Wyden will offer opening remarks if he arrives.
    Senator Barrasso. At this point I would like to welcome our 
witnesses. Joining us this afternoon is the Honorable Neil 
Kornze, Director of the Bureau of Land Management; Mr. Bruce 
Baizel, the Energy Program Director of Earthworks; Ms. Kathleen 
Sgamma, Vice President of the Western Energy Alliance; and Mr. 
Mark Watson, the Supervisor of the Wyoming Oil and Gas 
Conservation Commission. Welcome to all of you. I look forward 
to the testimony, and your complete statements will be included 
in the record. If you could keep your testimony to five 
minutes, I would certainly appreciate it. Mr. Kornze, we will 
begin with you.

    STATEMENT OF HON. NEIL KORNZE, DIRECTOR, BUREAU OF LAND 
          MANAGEMENT, U.S. DEPARTMENT OF THE INTERIOR

    Mr. Kornze. Thank you, Mr. Chairman. It is great to be here 
with you today. I appreciate the invitation.
    The Bureau of Land Management manages nearly 250,000,000 
acres of surface property and 700,000,000 acres of subsurface 
estate in the nation. That equates to 10 percent of the 
nation's surface and nearly a third of its minerals and soils. 
We manage these lands under the dual mission of multiple use 
and sustained yield.
    The Bureau's work is now more complex than ever, and the 
professionals at the BLM have to make very difficult choices 
every day, but throughout that work we make sure that the 
public has a very strong voice in the work that we do.
    More than 450,000 jobs were supported by the agency and the 
lands that we managed last year, and we are one of only a 
handful of agencies that returns more dollars than we receive 
in appropriations. In fact, for every dollar you appropriate 
here in Congress, we return $5.
    The BLM works diligently to fulfill its role in securing 
America's energy future by supporting the development of oil 
and gas resources on public and Indian lands. From 2008 to last 
year, oil production from those lands increased 81 percent. 
Now, that increase has tracked or exceeded trends on comparable 
State and private lands. Now, natural gas has gone down in 
recent years, but this too has generally tracked the rate of 
production on nearby private and State lands.
    Overall in Fiscal Year 2014, onshore Federal oil and gas 
royalties exceeded $3 billion and tribal royalties exceeded $1 
billion. The BLM is proud to play a critical role in meeting 
the nation's energy needs, and with even more than 100,000 
wells to monitor and oversee, we continue to make lands for oil 
and gas development available in excess of industry demand. 
Right now, the industry has roughly 34,000,000 acres under 
lease, but it is only producing from a third of those lands. 
And last year, the BLM approved 4,400 drilling permits and 
nearly a third of those permits went unused. In total, the 
industry now holds roughly 6,000 permits that are available for 
use today with no further review, no further permitting. They 
are ready to go. That equates to roughly two years worth of 
drilling potential on public lands. We would like to see those 
permits used to bring American jobs and American energy 
forward.
    In supporting this energy development, our oil and gas 
program's highest priority is ensuring that operations are safe 
and responsible. The hydraulic fracturing rule is critical to 
meeting that responsibility.
    Over 90 percent of the wells that are drilled on public 
lands are hydraulically fractured using techniques that are 
significantly more complex than those of the past. Today's 
wells are often much deeper and coupled with advanced 
horizontal drilling techniques, which are quite incredible.
    While these technological advances and the tremendous 
increase in their use has facilitated greater access to oil and 
gas resources, it has also necessitated that the BLM revisit 
its existing rules, which were last updated over 30 years ago. 
The BLM's new rule establishes reasonable, common sense 
standards requiring operators to construct sound wells, to 
disclose the chemicals they use, and to safely recover the 
wastewater that comes back from that drilling process. This 
rule establishes a baseline that many operators are comfortable 
with because they are in many places already implementing the 
practices that we have required.
    Our rule was informed by the technical expertise of our 
engineers in the field, as well as that of state regulators, 
Indian regulators, and industry. The final rule specifically 
recognizes the experience and expertise of our partners.
    We have a track record at the BLM of working successfully 
with states and others to make sure that we avoid duplication 
and delay, and the implementation of the hydraulic fracturing 
rule will be no different. We are actively working with many 
states and tribes that have standards in place for hydraulic 
fracturing to evaluate potential variances from various aspects 
of the BLM rule. These discussions will continue as we work 
closely with states and tribes to ensure successful 
implementation.
    Mr. Chairman, members of the committee, the BLM's rule 
establishes common sense standards that are essential to 
protecting our shared environment while also making sure that 
we have robust energy development in this nation.
    I appreciate the time.
    [The prepared statement of Mr. Kornze follows:]
    
    
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    Senator Barrasso. Thank you, Mr. Kornze.
    Mr. Baizel?

 STATEMENT OF BRUCE BAIZEL, ENERGY PROGRAM DIRECTOR, EARTHWORKS

    Mr. Baizel. Chairman Barrasso, Ranking Member, other 
members of the subcommittee, thank you very much for the 
opportunity to testify before you on the Bureau of Land 
Management's hydraulic fracturing rule. My name is Bruce 
Baizel. I am the Energy Program Director at Earthworks.
    It is Earthworks' hope and the hope of the many communities 
we work with on the ground who experience the impacts of oil 
and gas development that we transition using our public lands 
for clean, renewable energy, not polluting fossil fuels, in 
addition to the recreational opportunities we all enjoy. My 
wife is a ski instructor. She works on public lands. We 
certainly enjoy that.
    Until that transition, we feel it is important to take 
steps to carefully regulate the oil and gas industry to 
minimize harm to our natural resources and public lands. Over 
roughly the last 15 years, the shale revolution has spread 
across our country. The BLM, however, has not updated its oil 
and gas regulations since the 1980's. In the absence of updated 
rules to accommodate this rapidly growing industry, states have 
created a patchwork of regulations that continue to evolve with 
changing industry practices. Yet, a new poll from the 
University of Texas was released today that makes it clear that 
there is support for these new regulations. 60 percent of 
Americans support stronger oversight of hydraulic fracturing on 
public lands.
    While there are many more regulatory improvements that 
could be made, the BLM's final rule governing hydraulic 
fracturing creates a minimum standard, a basic level of 
protection for our public lands, the water that flows through 
them, and the citizens that enjoy their use daily. It also 
delivers the regulatory certainty and consistency that the oil 
and gas industry said it desires.
    The facts are clear. Many states and operators already 
follow the directives contained in the rule, and for these, the 
compliance costs will be negligible. The average well costs 
about $5 million to drill, yet this rule adds only a few 
thousand dollars to that cost. For operators who already follow 
these reasonable standards, the rule will provide little change 
from business as usual.
    This rule also provides states with flexibility by 
providing a waiver procedure for states whose rules are at 
least as protective as the BLM rule. This will ensure that 
these rules are not duplicative of what states currently have 
in place while also allowing states to pass more stringent 
regulations if they so desire.
    I sit on the board of an organization called STRONGER, 
which stands for the State Review of Oil and Natural Gas 
Environmental Regulations. That organization works toward the 
continuous improvement of state oil and gas regulations. We are 
a nonprofit, multi-stakeholder organization that includes 
representatives from state government, industry, and 
environmental representatives. I am one of three environmental 
representatives.
    I was part of STRONGER's original workgroup that in 2009 
and 2010 developed the hydraulic fracturing guideline that 
states should follow. So far, only six states have had STRONGER 
review their hydraulic fracturing regulations, and only one of 
these states has significant public lands, Colorado. Montana 
and Utah have never been reviewed. Wyoming was last reviewed in 
1994, New Mexico in 2001, and California in 2002, years before 
the current shale oil and gas boom.
    The result is that neither the public nor policymakers have 
a real sense of whether states have the necessary regulations 
in place to effectively protect the people and the environment 
from the impacts of oil and gas development.
    Studies performed by Resources for the Future and the 
Groundwater Protection Council illustrate the variations and 
inconsistencies on everything from casing standards to 
definitions of usable groundwater among the Western states with 
significant public minerals. Some states have lessened the 
risks of groundwater contamination from hydraulic fracturing, 
my own state being an example, by tightening their regulations 
in the areas of well integrity, casing, cementing, chemical 
disclosure, and waste disposal, but others have not.
    BLM commonly enters into a memorandum of understanding with 
states to help achieve better coordination. Colorado's 
memorandum of understanding was signed in 2009.
    The variance procedure within the BLM hydraulic fracturing 
rule also fosters this type of cooperation. Rather than 
duplicating, the rule supplements in areas where states have 
yet to make important upgrades. Without the baseline standard 
provided in this rule, BLM would be putting all taxpayers at 
risk as the owners of public land and public minerals.
    Thank you for the opportunity to present the views of 
Earthworks on this important topic, and we appreciate the 
committee's consideration of this important issue.
    [The prepared statement of Mr. Baizel follows:]
    
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    Senator Barrasso. Thank you, Mr. Baizel.
    Ms. Sgamma?

 STATEMENT OF KATHLEEN SGAMMA, VICE PRESIDENT OF GOVERNMENT & 
            PUBLIC AFFAIRS, WESTERN ENERGY ALLIANCE

    Ms. Sgamma. Thank you, Mr. Chairman and members of the 
committee.
    Western Energy Alliance represents about 450 companies 
engaged in all aspects of environmentally responsible 
exploration and production of oil and natural gas in the West. 
Our members are proud to produce nearly a quarter of the 
nation's natural gas and oil production while disturbing less 
than a tenth of a percent of public lands.
    The fundamental question related to BLM's rule before us 
today is whether we as a nation want to encourage the continued 
environmentally responsible production of oil and natural gas 
on public lands or do we want to shut it down. If indeed the 
answer is that we want to encourage the continued 
environmentally responsible development, then this rule is 
counterproductive to that goal.
    I would like to make three main points: that the rule has 
not been properly justified; it is redundant with state 
regulation; and, that it cannot be efficiently implemented.
    For the first point, BLM has finalized a costly rule with 
no justification. It can point to no single incident on Federal 
lands that necessitates this rule nor can it articulate one 
risk that is reduced because of this rule. The best BLM does to 
justify the rule is to cite vague notions of public concern, 
but are those concerns valid or just the result of 
misinformation and agitation? A regulator has an obligation to 
the regulated community and to the public to show that there is 
a tangible benefit for any cost, and regulatory costs affect 
not just the regulated industry but society at large in the 
form of higher energy prices, less job creation, and slower 
economic growth. BLM has failed in its obligation, which brings 
me to my next point.
    Why is BLM infringing on state and tribal authority? The 
rule duplicates what states are already doing to protect the 
environment, yet BLM can show no deficiency in state regulation 
that would motivate this rule and it has no evidence that this 
costly rule will be more effective than existing state 
regulations. When the Federal Government feels compelled to 
take action that upsets the balance between States and the 
Federal Government, there should be a compelling reason to do 
so. Lack of a single incident or inability to articulate a 
single risk that is reduced hardly seems compelling.
    In fact, BLM in the rule shows that 99.3 percent of all 
completions over the last couple of years were in states that 
have strict hydraulic fracturing regulations, and if you look 
at APD's approved last year, 99.97 percent are in states that 
have recently updated the regulations. That .3 percent 
represents one well in Kansas, and oh, by the way, Kansas is 
updating the rules as we speak.
    BLM has tried to deflect criticism regarding the 
duplication of state regulation by suggesting that states can 
obtain a variance if the rules meet or exceed the requirements 
of the rule; however, there is no genuine mechanism in this 
rule for them to do so. State regulations already meet the 
goals of BLM's rule, yet they are not doing it in the exact 
prescriptive manner that BLM now demands. States are tailored 
to conditions on the ground, and states wisely retain 
flexibility to enable them to innovate and do things like more 
water recycling and more reuse of water, less fresh water need.
    Finally, a major problem of this rule is that BLM simply 
does not have the resources or wherewithal to implement it. BLM 
petroleum engineering personnel are already spread too thin, 
and this rule will result in longer delays in the permitting 
process. Leadership at BLM has tacitly admitted this fact as 
they are hurrying to meet with states and try to convince them 
to sign MOU's. Were the rules designed to provide a genuine 
mechanism for granting a state variance and truly deferring to 
state rules, then an MOU so stating would make sense. But in 
the absence of such a mechanism, states are wise to refrain 
from entering into an MOU.
    So here before us, we have a rule that is not properly 
justified with discernible environmental benefit. It infringes 
on state authority and cannot be reasonably implemented. We 
urge this subcommittee to pass legislation to roll back the 
rule.
    Thank you very much.
    [The prepared statement of Ms. Sgamma follows:]
    
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    Senator Barrasso. Thank you very much, Ms. Sgamma.
    Mr. Watson?

STATEMENT OF MARK WATSON, STATE OIL AND GAS SUPERVISOR, WYOMING 
              OIL AND GAS CONSERVATION COMMISSION

    Mr. Watson. Thank you, Chairman Barrasso and members of the 
committee.
    Wyoming was one of the first states to implement 
comprehensive rules on hydraulic fracturing, or fracking, and 
these rules have been enforced on all State, private, and 
Federal minerals since 2010. We were the first state to require 
disclosure of all chemicals used in the fracking process prior 
to issuing a permit. In fact, Secretary of the Interior Sally 
Jewell often cites Wyoming's rules on fracking as a standard 
for other states to follow. Our rules governing wellbore 
integrity and water management have been in place for decades 
and are updated as new technologies become commonplace in the 
energy industry. Wyoming's new baseline water quality rule, 
which requires testing of offsite water wells before and after 
the drilling of a well, and air quality rules in the Pinedale 
area are but a few of the many examples of Wyoming's 
progressive approach to rulemaking.
    Recently the Bureau of Land Management announced a new rule 
on fracking. Not only does this rule come late, it adopts the 
one-size-fits-all approach. It creates confusion and 
bureaucracy in an already complex process. It will inevitably 
lead to delays in the permitting process for operators without 
increasing environmental protection or providing more 
information for the public to review.
    Wyoming maintains public access to the fracking plans, 
which include all the chemicals used, as well as pre-and post-
reporting on fracking operations, in its files and 
electronically on its website. All the information collected on 
fracking operations is available to the public, to industry, 
and to other regulators for use in reviewing best management 
practices, determining fracking impacts to offset wells, or 
even for a homeowner who wants to know what is going on at the 
well near their home.
    Despite Mr. Kornze's testimony, the BLM frack rule has no 
current method to provide any information on a publicly-
available website other than the post-fracking operations 
chemical disclosure reported to FracFocus. While reporting the 
chemical information to FracFocus or another publicly available 
data base is vital, reviewing other details concerning the 
fracking operations can be just as important. It would be very 
difficult for anyone outside of the BLM staff to review 
information related to cement quality, well integrity, 
injection pressures, etcetera using the current information 
systems employed by the BLM. All this data is readily available 
on our website for public viewing.
    In its response to comments under federalism assessment, 
the BLM noted that they do not believe that production from 
Federal lands will be reduced and therefore no financial 
impacts would occur to states as a result of the new fracking 
rule. Currently in Wyoming, 54 percent of our oil production 
and 76 percent of gas production comes from Federal minerals. 
To make a statement that the new fracking rule will not impact 
states such as Wyoming is simply wrong. Currently Wyoming's 
average time for processing a drilling permit is 60 days while 
the BLM processing time is 200 days. Further delays will occur 
with the BLM using the same staff that approves drilling 
permits to now also approve fracking operations. The practice 
of horizontal well drilling further complicates the approval of 
fracking operations. More of the proposed wells in Wyoming are 
encountering a combination of minerals by drilling through and 
producing from a mixture of Federal, fee, and State minerals. 
The uncertainty and potentially long wait times for BLM 
approval of fracking operations will act as encouragement for 
operators to exclude the Federal minerals from the planned 
well. This will potentially strand the Federal minerals, 
leaving them out of the production of the well and thus 
creating waste. There have already been several cases of 
Federal minerals being excluded from drilling and spacing units 
that have been approved by my agency due to the length of time 
it takes for a BLM permit to be approved. The additional delays 
for approval of fracking operations by the BLM will clearly 
provide a disincentive to develop production on Federal 
minerals.
    In comments to the Federal fracking rule, several states, 
including Wyoming, requested exemptions for those states that 
already had comprehensive frack rules in place. The BLM, in an 
attempt to address those concerns, included a section in the 
final rule allowing for states to apply for a variance for all 
wells within the state. However, upon further review and 
meetings with BLM officials in Wyoming, it became apparent that 
the variance was simply a requirement that allowed the BLM to 
require additional information if the state's requirements 
exceeded those objectives of the BLM frack rule. In other 
words, it was a variance for the Federal Government; the goal 
being that both the state and the BLM would receive the same 
package of information. This is clearly a duplication of effort 
that forces operators to comply with two regulatory agencies. 
The Wyoming Oil and Gas Conservation Commission has one office 
versus the BLM who has nine field offices in Wyoming, which can 
lead to varying interpretations when implementing the new frack 
rule. This creates confusion and uncertainty and leads to 
unnecessary delays in the permitting process.
    A better solution would be a mechanism to allow states to 
apply for primacy if they could demonstrate that the objectives 
of the BLM frack rule could be met by the states' rules and 
regulations. This would provide certainty and uniformity in 
enforcing a frack rule for the benefit of citizens and the oil 
and gas industry. The Underground Injection Control Program, a 
program that regulates injection wells, is a prime example of a 
Federal rule that is implemented and enforced by the states.
    In conclusion, Wyoming believes that the states are best 
positioned to regulate hydraulic fracturing. Wyoming has 
successfully imposed its hydraulic fracturing rule on Federal, 
State, and private minerals for five years and has an 
experienced and qualified staff to enforce these rules.
    This concludes my oral testimony. Thank you.
    [The prepared statement of Mr. Watson follows:]
    
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    Senator Barrasso. Thank you very much, Mr. Watson.
    Some of the members have questions, and we will start with 
Senator Capito.
    Senator Capito. Thank you, Mr. Chairman, and I appreciate 
all of our witnesses today.
    I wanted to followup with Mr. Kornze. Some of the comments 
that were made by Ms. Sgamma. She mentioned in her presentation 
that you had not identified a single environmental problem 
related, you had not had a single incident that your rule was 
trying to help or an incident that had happened. The question 
it raised in my mind is, have you uncovered any new or 
previously unknown environmental problems or incidents that 
your rule would fix which are not addressed by state laws that 
you could share with us today?
    Mr. Kornze. So the goal of the rule is to address the same 
issues that state regulators are addressing but to do it on a 
nationwide basis, and part of the important point here is that 
the Bureau of Land Management has responsibility for oil and 
gas leases in 32 different states. There are some states who 
have done an excellent job in this area. Not all states have 
been as advanced as states like Wyoming, for instance.
    So related to sort of the purpose of stepping forward on 
this, the same need that the states saw is the same need that 
we see, which is you have much more sophisticated drilling 
techniques being used. You have very intense pressures, a whole 
different scale of pressure being applied to these wells than 
10, 30, 40 years ago when a lot of our regulations were put in 
place. And so the same quality standards that the states see a 
necessity to bring forward new regulation is what has also been 
driving our efforts.
    Senator Capito. But the base question I was asking was is 
there an incident? Has something prompted this in more recent 
history?
    Mr. Kornze. No single incident, no.
    Senator Capito. Let me ask a question about something that 
Mr. Watson mentioned in his opening statement. He mentioned 
transparency, and I think this has been an issue in West 
Virginia. Transparency was one of the issues that the state 
legislature tried to address. He mentioned that all of the 
chemicals and all of the information is there basically in real 
time. Is that basically the interpretation I had, Mr. Watson, 
of what is going on?
    Mr. Watson. As far as the BLM website?
    Senator Capito. No, your website.
    Mr. Watson. Oh, yes. Our website has all the information, 
not just the chemicals.
    Senator Capito. But you said that your understanding of the 
BLM rule would be that theirs would not be as transparent as 
what you have at the state right now. Is that correct?
    Mr. Watson. That is correct.
    Senator Capito. Do you have a response to that?
    Mr. Kornze. Yes, I found that to be an interesting point. 
That actually is something that we are very interested in. We 
have what I think we would broadly recognize as a very old 
system. So we are still using paper files in most offices, and 
so we have a very strong desire to step forward. One thing we 
are working on right now is catching up states like Colorado in 
terms of with our drilling permit application. We are making an 
effort hopefully by the end of this year to go online 
nationwide so that you can submit your drilling permit 
application electronically. You can know where we are at in the 
processing, and that we can hopefully provide better online 
information so you can have the kind of transparency that 
Wyoming has.
    Senator Capito. I think this points to a good illustration 
in that the State of Wyoming is so much more forward-leaning 
than what you have just described at the BLM. Why not cede to 
the State of Wyoming this transparency and let them have the 
state primacy over this? Because they do have a system that is 
fully developed and fully fleshed out. That is what I do not 
understand.
    Mr. Kornze. This goes back to my initial offering that we 
have responsibilities nationwide, and so what we have tried to 
build in this rule is something that provides a basic 
foundation. I think the operators that are working in Wyoming 
are going to have no problem following the rule that BLM has 
laid out because it is very similar to what Wyoming has in 
place.
    So what we developed, the variance process, which has been 
discussed a little bit, to make sure that as has been the case 
for many, many years, when there are Federal rules in place and 
State rules in place, the higher standard is followed and 
everyone carries forward. And so this is the way that oil and 
gas has worked and this is the way that we have worked together 
as a Federal Government and as states for ages. And so there is 
nothing fundamentally different about this rule and about how 
it will work. So we have got a baseline, and I think we are 
excited to work closely with states like Wyoming.
    Senator Capito. Mr. Watson, is that how you see this rule 
in terms of working State/Federal? You basically said you have 
been working like this anyway, and it is going to have very 
little impact in Wyoming.
    Mr. Watson. Well, that is not true as far as fracking 
because the BLM has not imposed any fracking rules. So for the 
last five years, we have imposed our rule on Federal lands.
    Senator Capito. All right, thank you.
    Senator Barrasso. Thank you, Senator Capito.
    Next, Senator Daines.
    Senator Daines. Thank you, Mr. Chairman.
    Kind of building on where Senator Capito was going there, I 
guess I just heard there was not an incident that triggered 
these additional regulations. Is that right, Mr. Kornze?
    Mr. Kornze. That is correct.
    Senator Daines. Furthermore, I have just heard states like 
Wyoming, Colorado--I know there are others--are actually ahead 
in terms of their systems processes and so forth than even the 
BLM processes. Is that correct?
    Mr. Kornze. In some cases, that is true.
    Senator Daines. We in Montana updated our hydraulic 
fracturing rules in 2011. In fact, we have some of the most 
robust chemical disclosure rules in the country. What would I 
tell a Montanan right now and say why the Federal Government 
knows better than we in the state? What do I tell a Montanan 
right now when we have state-of-the-art regulations in place? 
It is working beautifully. We have got to drink the water, 
breathe the air, recreate on these lands. It is close to us. We 
want to preserve and protect it. What do I tell a Montanan 
around why the BLM can come in and tell us a better way to do 
it?
    Mr. Kornze. So without knowing the--I mean, we would want 
to sit down and look side-by-side in terms of if there are 
differences. My guess would be if you do have one of the most 
forward-leaning disclosure rules in the country, that our rule 
will not change the standards that you have to follow. So I 
think what you would tell a Montanan is the Federal Government, 
which has responsibility to a nationwide regulated community, 
all Americans, has made sure that the standards we have--that 
there is a similar standard nationwide to what we have done in 
Montana. So we in Montana can be proud----
    Senator Daines. But also we pay a lot of Federal taxes as 
well. I think they would ask themselves what are we getting for 
our return investment of having Federal hours and tax dollars 
spent with the redundancy arguably putting regulations in place 
that are even backward-looking versus states that really have 
forward-looking, state-of-the-art regs?
    Mr. Kornze. Well, I think it is important to understand how 
oil and gas regulations work. So this goes back to the States 
and the Federal Government working together. So I think the 
gentleman from Wyoming said that has not been the case in 
hydraulic fracturing because BLM has not had a modern rule. We 
had one in the early 1980's but had to be revised to sort of 
catch up to modern practice, which is what we have done. But in 
all other areas, since 1981, the Bureau of Land Management has 
updated 37 different oil and gas regulations. So to us updating 
and in a dance on this nationwide scale with states is nothing 
new. Some states are ahead of us, some states are behind us, 
and this is how the process has rolled forward.
    But I think for your Montanan, you can say, hey, look, this 
is not an onerous rule. This is a common sense rule that 
dovetails well with what we have and----
    Senator Daines. Well, I can tell you most Montanans--when 
the Federal Government comes in and says this is not going to 
be an onerous rule, we do not believe it. It is based on our 
experience.
    I guess this really leads me to another question, which is 
just geological differences and so forth there across the 
country, as we look at hydraulic fracturing. Can you help me 
understand the thought process of BLM when this rule is 
designed without application to legacy shallow gas wells and 
conventional fields?
    Mr. Kornze. Can you restate the question?
    Senator Daines. So the rule did not take into account the 
application of legacy shallow gas wells and conventional 
fields.
    Mr. Kornze. Well, anyone that drills a well after June 
24th, I believe the day is, will have to follow this if they 
are using hydraulic fracturing. So it applies----
    Senator Daines. I thought there was an exception for the 
rule for shallow gas wells.
    Mr. Kornze. Not that I am aware of. If I am incorrect, I 
will come back to you.
    Senator Daines. Okay, because more than half the wells in 
Montana will need exception to that rule. So I am just 
concerned this approach is a one-size-fits-all when clearly 
just looking at geology, there is a lot of difference between 
deep and shallow wells.
    How many years has the BLM been working on this rule?
    Mr. Kornze. I believe--well, Secretary Salazar held a forum 
in I believe it was October 2010--October or November.
    Senator Daines. So it has been about five years, roughly.
    Now, I am understanding the rule needs to be implemented 
less than 90 days after it was released in March. Is that 
correct?
    Mr. Kornze. That is true. And by law, we are only required 
60 days. We extended 30 additional days because we were doing 
outreach with industry and with states and making sure that we 
have more time.
    Senator Daines. If it was a five-year process to develop 
the rule, is there a reason you are only giving the states less 
than 90 days for enforceability?
    Mr. Kornze. Well, I will tell you throughout this process I 
am proud of the outreach that we have done and the coordination 
with states. I have spent time in Denver sitting down with the 
State of Wyoming's regulators, the State of Colorado's 
regulators, with Utah, with tribes. I have gone to reservations 
in North Dakota to sit down with tribal members and tribal 
regulators to understand how they are approaching this. So I 
think we have been robust in our engagement. We actually took 
the unusual step of having two different draft rules. So we had 
one in 2012 and I believe one----
    Senator Daines. But the states will have less than 90 days 
before they must enforce the rules. Is that right?
    Mr. Kornze. And I appreciate you are trying to get me to 
answer. So the point is we have had a long, collaborative 
conversation on this, and so there should not be any surprises.
    Senator Daines. I am out of time. Mr. Chairman, thank you.
    Senator Barrasso. Thank you, Senator Daines.
    Senator Lee?
    Senator Lee. Thank you, Mr. Chairman.
    Mr. Kornze, you mentioned a minute ago that some states 
were better than others in their existing regulations of 
hydraulic fracturing. What can you tell me about what issues 
you might have found in Utah? Were there issues with Utah's 
regulations that you found inadequate, and if so, what were 
those?
    Mr. Kornze. I appreciate the question, Senator Lee.
    As we worked on this and we sat down with state regulators, 
with industry, with environmental organizations, with the 
general public, what we were looking at is what are the best 
management practices. So we did not necessarily take it upon 
ourselves to sort of say Utah is good or bad or Kansas is good 
or bad. We tried to look at where is this leaning, where is it 
now, what are the best practices.
    Senator Lee. So it was not necessarily the case that any 
state was inadequate.
    Mr. Kornze. No.
    Senator Lee. And if no state was inadequate, then why was 
it necessary to come up with a national standard particularly 
in light of the geology that differs from one state to another?
    Mr. Kornze. Well, I will tell you that only roughly half of 
the states that we have oil and gas leases in that we have 
oversight responsibility for have stepped forward and regulated 
in this area of hydraulic fracturing.
    Senator Lee. Okay. But of those states, you have not found 
any to be inadequate in their regulation?
    Mr. Kornze. Well, I am saying we have not taken it upon 
ourselves to make that kind of judgment. So that was not the 
approach that we took. But roughly half of the states that we 
regulate in have not stepped forward to regulate in this area.
    Senator Lee. Okay.
    Mr. Kornze. So our standards that we have just put forward 
would be the baseline standards on public lands. There 
otherwise would not be standards on those Federal lands.
    Senator Lee. Okay, so that is a good point. If that is the 
case, if you have got a number of states that do not have any 
regulations at all and you have got other states that do have 
regulations, none of which are inadequate, why not allow those 
states that have regulations that you have now acknowledged are 
adequate to remain in effect rather than being replaced by a 
national rule?
    Mr. Kornze. So that comes to the variance process and how 
oil and gas has worked in terms of regulation. So if the State 
of Utah historically has had basic standards for, let us say, 
disposal of water or basic drilling techniques, those would be 
laid against the standards that the Bureau of Land Management 
has put forward for Federal lands, and our regulators would 
work together in the field, and they would say which standard 
is higher, more restrictive, and that standard would apply. So 
if Utah had exceeded BLM standards in a certain area, we would 
be following Utah's standards on public lands.
    Senator Lee. Will this not inevitably extend the period of 
time that it takes to get regulatory approval, given that the 
rule contemplates a need to either get this approval from BLM 
as part of the APD process or outside the process separately? 
Now, in my state, in Utah, it already takes about 200 days to 
get an APD approved. Do you think it is reasonable to expect 
BLM field staff to take on this added responsibility of 
approving these fracking permits and to not expect additional 
delays in the process?
    Mr. Kornze. So we have looked at this, and I believe this 
is spoken to in the rule that we expect the additional workload 
on our end is about four hours per drilling application. So 
there is additional information that we are going to be looking 
at. So is there an increase? Yes. Is it significant? We do not 
see it as such. Do I think that 200 days is a great number? I 
do not. And so we are working aggressively to see what we can 
do to bring that down. We were at 300 days a few years ago. I 
am proud that we have made this progress. And this online 
permitting system that I mentioned earlier, I think, is really 
going to help us step forward and hopefully make some system 
changes that will help permitting times across the country.
    Senator Lee. Okay.
    I want to get back to the state-by-state issue we talked 
about a minute ago. If the rule allows for variances, is that 
not basically what we were already doing under the process that 
utilized memoranda of understanding? In the case of Utah, for 
example, there was a memorandum of understanding that had just 
recently been entered into. So in light of that, why not just 
respect the MOU? Why not just honor the MOU and allow that to 
stand?
    Mr. Kornze. So the MOU's are very helpful and important. It 
was mentioned earlier in another witness' testimony about what 
these are. And I tell you we have been reaching out to states 
sort of since I got involved in the Bureau of Land Management's 
oil and gas program. The efficiencies that are possible through 
these MOU's, making sure that--let us say, for instance, in a 
big state like yours that there is one state well down by 
Kanab, but we have 100, and vice versa up in Box Elder County, 
we have got two and you guys have got 50. We can sort of have 
resource sharing and workload sharing that can make a big 
difference. So that is the point of some of the MOU's, but also 
we can use those MOU's to codify an understanding of what kind 
of variances might be allowable between State rules and Federal 
rules. So we have had these conversations.
    So the MOU you spoke to is partially focused on efficiency 
of working together, but the MOU's we are talking about today 
in the context of a variance would be more specific to these 
rules. So because we now have a rule, that is what prompts the 
conversation and hopefully the updating of that MOU.
    Senator Lee. Thank you for your answers. I appreciate your 
testimony and your hard work on this, but my time has expired.
    I do want to state for the record I have got concerns. This 
appears to me to be something that could well be a solution in 
search of a problem. I have not heard testimony today 
indicating a single problem with a single state's regulation of 
hydraulic fracturing. Not a single one. In light of that, I 
struggle a lot with the idea that we need a new national 
regulatory scheme.
    Thank you, Mr. Chairman.
    Senator Barrasso. Thank you, Senator Lee.
    Senator Daines, would you like to go with another round of 
questioning? Go right ahead.
    Senator Daines. Thank you, Mr. Chairman.
    I just want to go back on that shallow well issue and 
clarify. Our understanding is there is no exception for shallow 
wells written in the rule, but we have been told by field staff 
that they would have to give exception to shallow wells. Is 
that your understanding?
    Mr. Kornze. I have not read into the specific issue, so if 
I could followup with you after the hearing.
    Senator Daines. Well, that is what we have been hearing 
back in Montana, and the point is about half of the 800 wells 
in Montana are shallow wells.
    Mr. Kornze. Are these coalbed methane wells? Is that what 
you are talking about?
    Senator Daines. They call them shallow legacy wells. They 
would likely receive an exemption, but we would have to make 
that application for it. So it, again, just looks like, as 
Senator Lee mentioned, it is a solution in search of a problem 
right now.
    I want to turn to Ms. Sgamma. In the BLM rule, it says it 
will actually facilitate oil and gas development. Do you 
believe it will speed up, facilitate development of Federal 
lands?
    Ms. Sgamma. Well, adding more Federal regulation and red 
tape rarely does speed things up.
    I think BLM has minimized the implementation of this rule. 
I think they have minimized both the cost and the effort. There 
is an entirely new decision point that is in this rule that 
requires engineering staff at BLM to make determinations on 
things. And if there are certain readings, certain pressure 
testing readings--and probably Mr. Watson can explain that 
better, but there are things that BLM has to be notified of and 
may require an operator to wait until an answer comes back from 
BLM. And there is nothing in the rule that requires BLM to 
respond in a certain amount of time. So we just do not see how 
this rule can be easily implemented.
    Four hours of staff time when you have got additional 
engineering information that has to be gone through, decision 
points on whether the hydraulic fracturing process can go 
forward, and then of course, on industry's side, this is not a 
simple rule to enforce. It is not just a matter of, oh, we are 
already doing it anyway. An operator could be already 
voluntarily doing most of the things in this rule, but the 
additional paperwork requirements and the additional 
information that must be supplied will just by necessity take 
additional staff time.
    Senator Daines. So continuing on that line of thinking, the 
Administration has proposed increased royalty fees and other 
fees for oil and gas on Federal lands. Will increasing royalty 
fees on Federal lands in your opinion facilitate or deter oil 
and gas development?
    Ms. Sgamma. Well, it will continue the exodus off of 
Federal lands and onto adjacent private and State lands, or 
what happens a lot is producers move from states in the West 
predominated by Federal lands like Montana and Wyoming and 
other areas of the country where they do not have that 
additional red tape. You know, the Interior Department has 
chosen to take more resources from industry in the form of 
additional regulation. And you know, it takes years longer not 
just at the permitting stage but at every stage from leasing to 
environmental analysis to the permitting stage to get a project 
approved and completed.
    Senator Daines. So if the exploration moves completely off 
of Federal lands, what does that mean to the taxpayer?
    Ms. Sgamma. The taxpayer will get much less revenue return, 
and we have seen revenue onshore go down over the last several 
years.
    Senator Daines. Director Kornze, I want to go back to the 
discussion about tribes, and I appreciate the outreach you have 
had to tribes. Back in Montana, we believe that our tribes 
should have the freedom to develop their own natural resources 
if they choose especially due to the high unemployment rates 
that we see, oftentimes in excess of 50 percent, and the need 
for essential services in their communities. Yet, it is my 
understanding that some tribes have expressed concerns about 
the BLM's proposed rule.
    Director, can you expand on the tribal consultation process 
that BLM underwent with Indian tribes on this final rule?
    Mr. Kornze. We have been consulting with tribes throughout 
the process. We had a very significant collaboration and 
consultation process during the drafting and during the comment 
periods around that. And so that was part of my visit to the 
Three Affiliated Tribes, was we were holding regional tribal 
conversation where many tribes from Montana attended.
    Senator Daines. With all of that input that you received, 
how many changes to the final rule occurred to accommodate the 
tribe's concerns?
    Mr. Kornze. I am sorry.
    Senator Daines. With all the input you received from the 
tribes, how many changes occurred to the final rule to 
accommodate their concerns?
    Mr. Kornze. I could not give you a strict number, but I can 
tell you that tribal input did have an imprint on this bill and 
you can see it in what we developed.
    Senator Daines. Just maybe as a followup, it would be 
helpful to get the specific changes made to the rule as a 
result of the input the tribes gave this process.
    Mr. Kornze. We should be able to provide that to you.
    Senator Daines. All right, thank you.
    Thanks, Mr. Chairman.
    Senator Barrasso. Thank you much, Senator Daines.
    Mr. Kornze, BLM received public comments urging your agency 
to examine the impacts that the hydraulic fracturing rule was 
going to have on states. The comments called on the BLM to 
conduct what is known as a federalism assessment under 
Executive Order 13132. BLM responded to the comments in its 
final rule. The final rule says the BLM believes that there 
will be no financial impacts to the states as a result of this 
rule. It goes on to say that the BLM does not believe that 
production from Federal lands will be reduced as a result of 
this rule. Therefore, a federalism assessment, it says, is not 
required. Did the BLM rely on any empirical data to show that a 
rule of this significance would not reduce oil and gas 
production on Federal lands?
    Mr. Kornze. We can provide you an answer on the federalism 
assessment. That is a fairly specific corner of the rule, but 
we would be happy to get back to you on that.
    Senator Barrasso. We would like for you to submit any data 
that you used, as part of the hearing record, because we are 
just trying to figure out the basis of BLM's statement that the 
rule will not reduce oil and gas production on Federal lands. 
For most of us, we think that is hard to believe and we are 
trying to figure out what helped you come to that conclusion.
    Mr. Kornze. If you do not mind me taking a second, I do 
think there is an interesting narrative that Federal regulation 
drives away investment. We have places like in the Marcellus 
shale where there is an abundance of natural gas opportunity 
but also significant infrastructure. So we have seen 
development of natural gas move to areas like that and in 
places like Wyoming that are rich in natural gas, there has 
been a decline. But it does not mean that those resources will 
not be developed when there is more resource. I think it is 
more the market reacting to whatever is happening today.
    But there is also an interesting counter-example where if 
you look at where BLM rules apply, they apply to both public 
lands and to tribal lands. And on tribal lands during this 
Administration there has been an almost 500 percent increase in 
oil production. And so that is under the rules the Federal 
Government has. We have seen an almost 500 percent increase, 
and so I think that tells a story of where there is significant 
opportunity, you will see significant production.
    Senator Barrasso. I would say as Chairman of the Indian 
Affairs Committee, 500 percent could be five times the amount 
of a very little amount, just a little bit more, because we 
continue to hear significant stories of inability of the Indian 
tribes and on Indian reservations opportunities to actually use 
the resources because of additional impact of Federal 
regulations making it that much harder to use significant 
amounts of resources that are there.
    Mr. Watson, you have been 31 years on the Wyoming Oil and 
Gas Conservation Commission. Do you believe that this rule is 
going to have a negative impact on oil and gas production on 
Federal lands?
    Mr. Watson. Oh, it definitely will, and I have already seen 
it with the delay in permitting.
    Senator Barrasso. Ms. Sgamma, what are your views on the 
same thing? With all your experience, do you believe the rule 
will negatively impact oil and gas production on Federal lands?
    Ms. Sgamma. Absolutely. You know, there are just so many 
additional requirements on Federal lands and so many different 
policies that have been put in place over the last several 
years that are slowing development on Federal lands and just 
making it more difficult. Our members continually tell us that 
they avoid at all costs Federal lands.
    Senator Barrasso. In an answer to a previous question, you 
said something about you hardly ever see a situation where more 
red tape and regulations make things actually easier. If you 
could actually find any time that they have made things easier, 
if you could submit that for the record, I think that would 
be---- [Laughter.]
    Ms. Sgamma. I will do some research.
    Senator Barrasso. Thank you. Do not waste a lot of time, 
though. Thank you.
    Mr. Watson, in your testimony, you discussed the variance 
process. I understand that a state may apply for a variance if 
a state's own hydraulic fracturing rule meets or exceeds the 
objective of the BLM's rule. You explained that a variance does 
not give a state authority to enforce its own rules on Federal 
lands. Instead, a variance allows the BLM to apply alternative 
or additional regulations to its final rule. This brings a 
whole new meaning to the phrase ``no good deed goes 
unpunished.''
    So if your understanding of a variance is correct, does the 
State of Wyoming have any incentive to obtain a variance?
    Mr. Watson. Not for Wyoming. There would be no incentive at 
all.
    Senator Barrasso. So, Mr. Kornze, would you like to comment 
on that?
    Mr. Kornze. You know, the State of Wyoming and the Bureau 
of Land Management are in the midst of discussions, and so the 
reports I have gotten out of that are general in nature, but 
there is a sense that they have been productive and that 
Wyoming is pursuing these conversations in potential pursuit of 
a variance.
    Senator Barrasso. Mr. Watson, I understand the oil and gas 
producers in Wyoming are already taking steps to avoid Federal 
oil and gas. Specifically, oil and gas producers are 
establishing what are known as spacing units which include 
private and State lands but exclude Federal land. Would you 
discuss this at greater length for the committee?
    Mr. Watson. So a spacing unit just defines the area that 
one well will drain and it includes Federal, State, and fee. So 
we see a lot in the examiner hearings, which I have done a lot 
of, where the actual wellbore at one point there will be 
Federal lands, and they will just cut that out. So basically we 
call it spacing them out, or for instance, the east half might 
be Federal. The west half is fee. They will just space the west 
half and just leave the Feds out. So I see that all the time.
    Senator Barrasso. Ms. Sgamma, in your testimony, you tell 
us the actions of the Department of the Interior over the last 
several years lead us to the conclusion that the real goal is 
to discourage responsible energy development on Federal lands, 
pushing it to adjacent private and State lands or to areas of 
the country that are not predominated by public lands.
    Would you please expand upon your comments for the 
committee?
    Ms. Sgamma. We have just seen several policies that really 
are not furthering the goal of more oil and natural gas 
development on Federal lands. I mean, I think we can all agree 
that we want them done in a environmentally responsible manner. 
We feel that we have achieved a balance by providing quite a 
large energy resource while disturbing a small percentage of 
public lands. So some of the policies include leasing reforms 
that have added additional layers of NEPA and additional delays 
in the leasing process. We have seen land use planning 
restrictions and resource management plan amendments that leave 
us scratching our heads trying to think how we can possibly 
operate in areas when there are so many overlaying regulations. 
You cannot even find a month in a year that there is not 
something that is keeping you off development, and those are 
going to get worse when the sage grouse amendments come out. We 
have seen stalled project environmental analysis. There are 
several projects in Wyoming, for example, that are in the 
eighth year and there is just no end in sight or no plan for 
moving those NEPA documents.
    Recently we have seen very hostile, retroactive audits 
based on new interpretations of the regulations, and we have 
seen things like more acreage being put off. I mean, the latest 
example is in the Arctic National Wildlife Refuge where 12 
million acres is not going to be considered for oil and gas 
development.
    And now, as you mentioned, we have got a new rulemaking 
process on increasing the royalty rate. I mean, when you have 
already made it so much more expensive to operate on Federal 
lands and your breakeven point is so much higher on Federal 
lands because of all of the additional costs, raising the 
royalty rate simply will make a lot of development uneconomic.
    Senator Barrasso. Thank you.
    Mr. Kornze, I understand the BLM examined state hydraulic 
fracturing regulations as it developed its final rule. BLM 
reviewed existing regulations in Wyoming, as well as 
California, Colorado, Montana, New Mexico, North Dakota, 
Oklahoma, Texas, and Utah. According to BLM, these states 
accounted for 99.3 percent of the total oil and gas wells 
completed on Federal and Indian lands from 2010 to 2013.
    Do you know which, if any, of these states have actually 
failed to regulate hydraulic fracturing in a sufficient manner?
    Mr. Kornze. Well, as noted earlier, we were looking for 
best practices. We have 32 different states that have oil and 
gas leases that we have oversight responsibility for, and so we 
drew from many sources, including many states like the ones you 
mentioned, for those best management practices to lay down a 
basic common sense standard that should apply nationwide 
wherever Federal lands are drilled on.
    Senator Barrasso. Well, I think it is disappointing to 
people here who are listening in on this that we cannot really 
get an answer to the question from the Administration of which 
of these states does not measure up. It does not seem that the 
Administration can find fault in the state hydraulic fracturing 
regulations of any of these states. That to me says that the 
BLM's final rule is redundant and unnecessary. I think that is 
the kind of a thing that Senator Lee made reference to of a 
solution in search of a problem.
    I do have one additional question. The BLM has not yet 
issued a final environmental impact statement for an oil and 
gas project in Wyoming since 2008, and it is now 2015. So BLM 
has not issued a final environmental impact statement for an 
oil and gas project in Wyoming since 2008. Currently there nine 
environmental impact statements for oil and gas projects in 
Wyoming pending with BLM. I know you have not been there the 
whole time. I am well aware of that. Some of these impact 
statements have been pending with BLM for eight years. I think 
it is inexcusable for any Federal agency to be in that 
situation.
    Do you have any idea when we can expect BLM to issue some 
of these final environmental impact statements for these 
projects?
    Mr. Kornze. So I am glad you asked this question. The 
Governor's office has raised the same issue with me, so I have 
looked into it. We do have those nine projects that are moving 
forward. About half of those came in in the last two years.
    One of the exciting things about Wyoming in the oil and gas 
realm on public lands is we have 100,000 wells nationwide that 
we have oversight responsibility for right now. There are 
almost 40,000 that are going to come online through these nine 
EIS's just in Wyoming alone. So we are very much leaning 
forward into the process. The Continental Divide-Creston is 
probably going to be the first one to come through that system. 
So we expect some progress on that and one or two other major 
EIS's this year that will speak to thousands and thousands of 
additional wells in Wyoming.
    Senator Barrasso. Well, thank you.
    Ms. Sgamma, do you see these sorts of delays in other 
states?
    Ms. Sgamma. Utah. Utah is the other state with several 
projects being held up.
    Senator Barrasso. Thank you.
    Without any other members here, I appreciate each of you 
being here today to testify, to share your insights.
    The hearing record will stay open for two weeks. Some of 
the other members of the committee who were not able to be here 
today may supply additional questions in writing, and I would 
hope that you would be able to get back to them with answers in 
a timely manner. Thank you.
    With that, this hearing is adjourned.
    [Whereupon, at 3:31 p.m., the hearing was adjourned.]

                      APPENDIX MATERIAL SUBMITTED

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