[Congressional Record (Bound Edition), Volume 157 (2011), Part 4]
[Senate]
[Pages 5156-5159]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           USE IT OR LOSE IT

  Ms. MURKOWSKI. Mr. President, I would like to take a few minutes this 
afternoon to perhaps switch the discussion from what my colleagues were 
referring to earlier in terms of the budget and speak a little bit 
about the issue of energy--obviously, a topic of great concern.
  The President has addressed it as recently as last week in a major 
address at Georgetown. There have been a lot of discussions about what 
it is we need to do to respond to the higher prices families are paying 
at the pump and just how we deal with the issue of energy in general. 
There has been much discussion about this concept of ``use it or lose 
it.'' I want to speak to that proposal a little bit this afternoon.
  It is a rather strange proposal that claims to address the rising 
cost of oil and gas for America's working families. The premise of this 
is, even with oil at more than $100 a barrel, and even though lease 
terms are already limited by law to 5 to 10 years, energy companies 
somehow are hording Federal lands and refusing to produce the resources 
that are beneath them.
  ``Use it or lose it'' has been presented by this administration and 
others as a way to increase our Nation's energy production. But even a 
cursory review will show this is fundamentally flawed in its premise. 
This proposal will not increase American production. It will not 
increase jobs or create jobs. It will not raise government revenues or 
bolster our security. Instead, I believe it is a diversion from our 
more critical need to produce more of our own resources and to 
streamline our burdensome regulatory processes.
  Now, the idea behind ``use it or lose it'' is to simply punish 
companies for not drilling on lands they have leased, so they either 
drill or they give back the acreage to the government which can then 
resell it to someone else. But, interestingly, this proposal has drawn 
some support from a number of Senators and from the President himself 
who, until recently, have claimed: Well, we can't drill our way out of 
this. We can't drill our way to lower gas prices. America's oil--and we 
have been repeatedly told this--has minimal impact on global prices and 
takes too long to bring online.
  So I do not know, maybe this is a change of heart. If that is so, I 
am glad to see it. I do hope--I do hope--their proposal is a signal 
that, indeed, they would like to see drilling on every leased Federal 
acre onshore, offshore. That is certainly the premise of the proposal, 
even though it is perhaps a pretty major departure from the previous 
positions.
  Now, the advocates of ``use it or lose it'' have pointed out 
correctly that there are millions of acres leased in this country that 
are not currently producing oil and gas, but they have misidentified 
the reason why. Chances are maybe there is just no oil present on that 
land. Perhaps exploration is ongoing or, in many cases, the Federal 
Government has simply blocked the drilling. To add a new penalty to 
this process and to add a new layer to existing bureaucracy will only 
backfire.
  From the outset, I think it is important to understand what is 
involved in oil and gas production. This is an incredibly capital-
intensive, labor-intensive business, and from a technological 
perspective, the process is extraordinarily complex. I think we saw, 
after the Deepwater Horizon, cameras trained a mile below the surface 
of the ocean, and it was described by many as, this is akin to how we 
deal with putting a man on the Moon. This is complicated stuff, and 
there is no ``X marks the spot'' as to where that oil is actually going 
to be found.
  It can take years, not to mention tremendous amounts of money, to 
finally locate these commercial deposits. When there is resource 
present, it takes some teams of some pretty highly skilled and trained 
engineers to figure out how we are going to bring it to market. There 
are the entire legal departments that have to wade through the 
multitude of permits, the analysis, the plans that are required by our 
Federal Government. This process takes a considerable amount of 
patience and for lots of good reasons, but the government is certainly 
not in a hurry to provide leaseholders the approval they need to move 
forward.
  Last week, the Interior Department had an opportunity to explain what 
goes on within the exploration process and show why not all Federal 
leases immediately produce oil and gas. Instead, the Interior 
Department issued a

[[Page 5157]]

report that attempts to portray many Federal leases as idle or unused. 
What could have been a very helpful and instructive process was instead 
hopelessly politicized, and that is unfortunate.
  The findings of the Interior Department's report I believe defy 
common sense, general business principles, and what we know to be true 
about the Federal regulatory process. The definition of ``inactive'' 
purposely excludes many important development activities, and there is 
no acknowledgment that oftentimes it is the government itself that is 
causing the delays in drilling.
  I guess one of the more telling examples of what is wrong with the 
Interior Department's new report is its depiction of what is happening 
in Alaska right now. Companies have been trying for years--trying for 
years--to bring their Federal leases in this State of Alaska into 
production. These efforts have been blocked. They have been delayed by 
the Federal Government, especially this administration, and they have 
been blocked at every turn. Despite this, the Interior Department's 
report claims that just 1 percent--1 percent--of Alaska's leases are 
producing and puts the blame on industry. But when I talk to folks back 
home, when I talk to those who are trying every single day, getting up 
and trying their hardest to advance so we can get to levels of 
production, they only find that there is yet one more hurdle, one more 
roadblock that is thrown up and thrown up by the government. It causes 
incredible frustration. It is hard to pick what would be described as 
the best example of companies trying to produce from their leases--
which, I might add, they purchased at the invitation of the Federal 
Government--yet they are being forbidden by the administration from 
pursuing their exploratory operations. It is happening in the National 
Petroleum Reserve Alaska. Think about the name. This is the National 
Petroleum Reserve Alaska. That is pretty ironic. We can't get started 
there, and one of the biggest reasons we can't is we are being 
blocked--the producers are being blocked--from getting a permit to 
build a bridge over a river to get started.
  As regrettable and as ironic as that example is, there is an even 
higher profile example that we see up North, and that is what Shell is 
attempting to do. They have set a record--and a record that is 
certainly not enviable but a record nonetheless--for both dollars 
invested and frustration experienced in return. This is a situation 
where a company has spent a little over $4 billion--this is billion 
with a B--they spent $4 billion to buy Federal acreage in Alaska's 
Outer Continental Shelf nearly 7 years ago. Since that time, Shell has 
done nothing but slog through an incredibly long and incredibly arduous 
permitting process. Air permits that take 6 weeks to acquire in the 
Gulf of Mexico have now been delayed for over 5 years.
  I ask my colleagues to put that in context. A company, at the 
invitation of the Federal Government, purchased leases over 7 years 
ago, has put more than $4 billion into trying to get to exploration, 
has spent 5 years waiting on permits, where in other parts of the 
country permits can be turned around in 6 weeks, and they have yet the 
opportunity to even start. So can anyone honestly suggest we ought to 
punish Shell or any company that is going through this for the Federal 
Government's failure to allow even exploratory drilling to proceed? Is 
it fair that we demand Shell pay the price because the government has 
failed to issue a permit that even the EPA and even the Administrator 
of the EPA has acknowledged poses no human health risk? This is where 
we are sitting right now.
  I was incredulous. I had an opportunity to ask the Secretary of the 
Interior, who is a friend of mine--most certainly a friend who I 
acknowledge has a very difficult job, a very challenging job--but he 
could not assure me that the so-called ``use it or lose it'' fee would 
not apply to the millions of acres of leased land in Alaska, both 
onshore and offshore, where the Federal Government has sold the leases 
but is not allowing drilling activity. It is similar to a commercial 
real estate company offering to rent some office space to you. We go 
ahead. You pay the rent. I never give you the key, so you can't access 
your commercial office space. Then I am going to go ahead and assess a 
fine. We are going to penalize you when you failed to open your doors 
for business. That is kind of what is happening up North. It is not a 
``use it or lose it'' policy, it is ``heads we win, tails you lose.'' 
My colleagues have to imagine: What would such a policy say about the 
way our government conducts its businesses and manages its resources?
  ``Use it or lose it'' is drawn from a desire to do the right thing, 
which is to increase our domestic production, but I also believe it 
reveals a fundamental lack of understanding about how energy resources 
are developed and how they are brought to market. It risks very real 
consequences for our energy production here in America. Because instead 
of encouraging producers to find energy faster, it would actually 
discourage them from discovering it in the first place. Instead of 
creating jobs, it would likely end jobs. Instead of raising new 
revenues for the Federal Government, it would likely diminish 
taxpayers' returns from leasing and production.
  It seems as though every time oil prices are on the rise, we come 
together and we debate how we are going to respond to them and every 
time someone points out we should be producing far more of our own--
frankly, very tremendous resource base--someone steps forward with the 
potential scapegoat, perhaps to distract attention from our need to be 
leasing more new lands. It is like clockwork around here. Instead of 
making the hard choices about what we can do to better insulate 
ourselves from higher crude prices and geopolitical instability, we see 
proposals to impose windfall profit taxes, to pour unprecedented sums 
of money in unproven alternative technologies, to rein in speculators, 
to sue OPEC, to raise taxes and fees on production, and now to force 
companies to act faster or to face greater penalties.
  Until we see some evidence that companies are refusing to develop 
their leases, I have to call it like I see it. ``Use it or lose it'' is 
a ploy to claim that we support increased domestic production, without 
doing anything to ensure that domestic production is the actual result 
of our Federal energy policies.
  There has been a lot of discussion, when we are talking about energy, 
about Brazil and their potential--how that nation is set to 
significantly ramp up its oil production, and we commend the 
Brazilians. They have been able to make a number of very important 
discoveries, estimated at about 50 billion barrels of oil equivalent. 
According to the Wall Street Journal, Brazil's oil production rose by 
876 percent over the past 20 years--876 percent over the past 20 years. 
They are now planning to double their current production in less than 
10 years. So there are pretty remarkable things going on there. Even 
while Brazil is developing their current resource base, they are 
actively looking for more. They are working aggressively. They are 
pursuing that objective while expanding their production and their use 
of alternative energy sources. They are kind of pursuing the ``all of 
the above'' we talk about so often.
  In the United States, we have technically recoverable oil resources 
estimated at 157 billion barrels, more than three times--more than 
three times--what Brazil has recently found. I don't understand. I 
don't understand why we refuse to set the same ambitious goals for 
increasing our production that Brazil has, even as we continue to 
pursue alternative energies that will diversify our supplies equally. 
When it comes to energy, we should strive to be our own best customer, 
not Brazil's.
  As Federal policymakers, we need to think carefully about what we 
demand of any industry, including oil and gas. When we tax something, 
the fact is, we get less of it. I don't think we want to make ourselves 
even more dependent on foreign oil right now. We don't want to 
discourage domestic production, especially under the guise of promoting

[[Page 5158]]

it, and we have no reason to add yet another layer to an already 
daunting regulatory system.
  I strongly urge us in the Senate, in the Congress, to recognize ``use 
it or lose it'' for what it is. It is an attempt to extract more money 
from the companies, not to extract more energy from the ground. It is 
not the right approach for America, and it will not move our energy 
policy in the right direction.
  I do take comfort in one fact, and that is this: At least the debate 
is now about how to produce more oil and not whether to produce more 
oil. My work on the Energy Committee and certainly what goes on in the 
State of Alaska has taught me much about how and how not to achieve 
greater oil production if we want more domestic production--and I think 
we all recognize the President's verbal commitment to this and the 
change of heart amongst some of my colleagues--it is time to eliminate 
the needless redtape and allow access to America's huge resources that 
are still off-limits.
  I thank the Presiding Officer for the time and the opportunity to 
speak this afternoon on yet another aspect of our country's much needed 
energy policy and how we can continue to find ways that will move us 
toward a future where we do engage in energy sources that are clean and 
renewable while also harvesting our bountiful supply in this country as 
we find ways to produce more domestically.
  Mr. NELSON of Florida. Mr. President, will the Senator yield for a 
question?
  Ms. MURKOWSKI. Yes.
  Mr. NELSON of Florida. Mr. President, first of all, I wish to say to 
the Senator from Alaska that she knows of my respect for her and my 
personal friendship with her and my personal opinion that she is one of 
the finest Senators we have.
  I do want to ask the Senator a question, and it is a circumstance 
that I happen to be here next in line to speak about a different 
subject than the Senator spoke about. This Senator is one of those 
sponsors of the ``use it or lose it'' legislation. I certainly will 
defer to the Senator from Alaska with regard to Alaska and the drilling 
offshore there.
  My question is about the drilling of the Gulf of Mexico, which this 
Senator has some familiarity with, and that there are 37 million acres 
in the Gulf of Mexico under lease, where the oil is. But of the 37 
million acres, there are only 7 million that are drilled. Thirty 
million acres are not drilled, and it has been that way for years and 
years. The Senator makes a compelling argument with regard to Alaska, 
but how can that argument apply to the 30 million acres in the Gulf of 
Mexico that are not drilled but, as the Senator has said, ought to be 
drilled?
  Ms. MURKOWSKI. Mr. President, I appreciate the question of my 
colleague from Florida, as we recognize that coming from different 
parts of the country, where we have access in close proximity to the 
oil and gas resource, but we recognize that there are differences 
between where we are in our geography and perhaps the approach.
  In the Gulf of Mexico, I think your climate allows for exploration 
and production probably 365 days out of the year, which is a little bit 
different than in our arctic environment. We respect that. To the 
Senator's question, which is a very legitimate and fair question--this 
is why we had hoped so much that with this report from the Department 
of the Interior, it would have allowed for a breakdown so we could 
understand what is happening with these many thousands of leases that 
are out there and existing. What is the true status? To put it in idle 
or unuse is not very clear, quite honestly. What does that mean? Are we 
in the exploratory phase and so we are not in production? And what 
category is that? Is this an older lease about which perhaps they have 
determined there simply is not the--for instance, if you are drilling 
in some deep waters, it is extraordinarily costly. As I mentioned, 
these are complex, and the technologies are quite considerable. If you 
have done some exploration but you find very limited or perhaps 
nothing--as I mentioned, we don't have that magic X that leads us right 
down to what we call in the north the ``elephant find.''
  So I think it is important to understand what it is that we have and 
the status of these leases. This information is critical to us, because 
if they are in the exploratory phase, and it is taking longer because, 
quite honestly, we have higher standards with the environmental 
permits, which are taking more time, and I think we realize after the 
Deepwater Horizon situation and a great deal of scrutiny on MMS, quite 
honestly, we didn't have sufficient numbers issuing permits within that 
agency to keep up. So we need to understand where the issue is, where 
the problem is. There may, in fact--and I will concede on the floor 
that there may be some leases that are in existence where the producers 
have said: You know what, we only have so much ability to move forward 
with the financing of all of this, so we are going to explore and 
produce in wells 1, 2, and 3, but on 4 and 5 we are not prepared to 
advance on them as quickly. We think they may have potential, but we 
don't know that. How can we help to facilitate that? Do we need more 
people within MMS to help expedite the permits? What does it mean to be 
an idle lease?
  I will digress for a moment, if I may, because I think it is 
important for people to recognize that when we are talking about 
exploration in the Arctic, a 5-year or 10-year time period is simply 
not sufficient, because we cannot explore 365 days a year. Most times, 
the season is limited to about 60 days during the coldest, darkest, 
most difficult time of the year. But that is when the ground is frozen, 
when the permits are issued for exploration. So it takes multiple 
seasons to even get through the exploration phase.
  I think it is important to recognize that not all leases are equal. 
Not every lease that a producer purchases from the government actually 
has anything worth developing. We need to know and understand a little 
bit more. We hoped to have learned that from the Department of the 
Interior report. Unfortunately, it didn't give the detail we had hoped 
for. I appreciate my colleague's question.
  Mr. NELSON of Florida. Mr. President, as the Senator from Alaska is 
leaving the floor, I will say to her that I appreciate her point of 
view and what she has expressed. There is certainly an opportunity for 
working something out.
  As I stated in my question to her at the outset, this Senator doesn't 
know a lot about the leases in Alaska, but I certainly do know a lot 
about the leases in the Gulf of Mexico. For 30 million acres in the 
Gulf of Mexico to go undrilled for years and years, where out of a 
total of 37 million acres are leased but only 7 million acres are 
actually drilled and produced, it seems to me there is a wonderful 
opportunity for a lot more production, not just in 7 million acres but 
30 million acres additionally. And if the company that holds that 
lease, and has held the lease for years, is not going to drill it and 
produce, then let somebody else do it. That was the theory behind this 
Senator's sponsorship of that legislation.
  As the Senator from Alaska has pointed out some differences in her 
State, it seems to me that this is, as the Good Book says, a place 
where people of good intentions can come and reason together.
  Mr. President, I want to speak on another subject. I will tell my 
colleague that I am not going to be speaking very long. This will be 
short. I want to bring this to the attention of the Senate.
  This is the Wall Street Journal from last weekend. Here is an article 
with the headline ``Transocean Cites Safety in Bonuses.''
  This is worth this Senator reading for the Record and calling to the 
attention of the Senate:

       Transocean Ltd. had its ``best year in safety performance'' 
     despite the explosion of its Deepwater Horizon rig that left 
     11 dead and oil gushing into the Gulf of Mexico, the world's 
     largest offshore-rig company said in a securities filing on 
     Friday.
       Accordingly, Transocean's executives received two-thirds of 
     their target safety bonus. Safety accounts for 25 percent of 
     the equation that determines the yearly cash bonuses, along 
     with financial factors including new rig contracts.


[[Page 5159]]


  It is hard for me to believe that. Even if it were to meet some 
mathematical formula of awarding bonuses to executives at oil 
companies, why in the world that company would not have been sensitive 
enough to the families of 11 people who lost their lives as a result of 
what the President's task force investigating the Deepwater Horizon oil 
explosion and spill--the task force cochaired by our former colleague 
from Florida, Bob Graham--which said that the main responsibility for 
that explosion was the fact that the blowout preventer did not work as 
it was designed to. Who was the owner and operator of that? Transocean. 
We know there are lawsuits that are going on between BP, which had the 
lease, and Transocean, its subcontractor, which had the equipment that 
was supposed to work to prevent the spill that malfunctioned. Those 
lawsuits are going to be going on for some period of time, sorting it 
out. But the investigation, done by a highly respected investigative 
task force, came to that conclusion. And here that very same company, 
whose blowout preventer deep on the floor of the ocean malfunctioned, 
causing the explosion--11 lives were lost, and untold billions of 
dollars of damage was done to the economies of the Gulf States, and who 
knows how many billions of dollars of damage to the marine life and the 
ecology of the Gulf of Mexico, and safety is cited by this company as a 
reason for giving bonuses to its executives.
  That defies common sense. It defies reason. I am sufficiently 
agitated about this--even with the company coming out and issuing some 
kind of retraction--that this Senator intends to ask the Secretary of 
the Interior, Secretary Salazar, what authority he has to regulate not 
only the leases of oil and gas tracts, such as BP, which held the 
lease, but also what authority he has to regulate the rig owners, such 
as Transocean and other subcontractors, which actually had the 
responsibility for the safety of the drilling operation, and that 
safety did not work.
  I am going to ask our Committee on the Environment, chaired by 
Senator Boxer--I have already talked to her and her staff director--to 
hold hearings on the questionable response, the cleanup, the 
environmental and financial practices not only of Transocean but its 
contractor, BP. What in the world is going on?
  Why do I bring BP into this? Well, it is not only that they held the 
lease. It was interesting. Last week, the head of the Washington office 
of BP came in to give me an update. We had a very good, amiable chat, 
and I asked a simple series of questions. One of the questions I asked 
was: With all of our people down there, many of them losing their 
businesses, losing their homes to foreclosure, because they don't have 
income as a result of the tourism trade that was affected by the BP 
bill, what was all this about?
  The first full payment was a $10 million payment paid in full from 
the Gulf Coast Claims Facility to a BP partner. The head of BP in 
Washington said he did not know. It has been in the newspaper over and 
over. I have asked the question over and over. I have written to the 
Department of the Interior, as well as to BP, and I have written to the 
Gulf Coast Claims Facility and have received no answer to the question, 
why was the first payment paid in full in damages done to a business 
partner of BP? The representative of BP could not answer the question.
  I think the Senate Committee on Environment and Public Works ought to 
get into that issue. I am going to also ask the Finance Committee in 
the Senate to hold hearings on the financial practices of BP and 
Transocean and other corporations such as those--a corporation such as 
Transocean that I think is domiciled in Switzerland and that holds a 
lot of its assets and earnings abroad, earnings that come as a result 
of doing business in the United States but of which those earnings are 
held abroad and taxes are not paid for the privilege of doing that 
business and earning profits in its business that is conducted in the 
United States.
  We owe this to our taxpayers. This Senator certainly owes it to his 
constituents who have suffered mightily as a result of this BP 
oilspill, along with the malfunctions that went along in the procedures 
and in the equipment of that tremendous disaster that so many have 
suffered so long.
  Mr. President, I yield the floor.
  The PRESIDING OFFICER. The Senator from South Dakota.

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