[House Report 112-67]
[From the U.S. Government Publishing Office]
112th Congress Rept. 112-67
HOUSE OF REPRESENTATIVES
1st Session Part 1
======================================================================
PUTTING THE GULF OF MEXICO BACK TO WORK ACT
_______
May 2, 2011.--Committed to the Committee of the Whole House on the
State of the Union and ordered to be printed
_______
Mr. Hastings of Washington, from the Committee on Natural Resources,
submitted the following
R E P O R T
together with
DISSENTING VIEWS
[To accompany H.R. 1229]
[Including cost estimate of the Congressional Budget Office]
The Committee on Natural Resources, to whom was referred
the bill (H.R. 1229) to amend the Outer Continental Shelf Lands
Act to facilitate the safe and timely production of American
energy resources from the Gulf of Mexico, having considered the
same, report favorably thereon with an amendment and recommend
that the bill as amended do pass.
The amendment is as follows:
At the end of title I add the following:
SEC. 102. EXTENSION OF CERTAIN OUTER CONTINENTAL SHELF LEASES.
(a) Definition of Covered Lease.--In this section, the term
``covered lease'' means each oil and gas lease for the Gulf of
Mexico outer Continental Shelf region issued under section 8 of
the Outer Continental Shelf Lands Act (43 U.S.C. 1337) that--
(1)(A) was not producing as of April 30, 2010; or
(B) was suspended from operations, permit processing,
or consideration, in accordance with the moratorium set
forth in the Minerals Management Service Notice to
Lessees and Operators No. 2010-N04, dated May 30, 2010,
or the decision memorandum of the Secretary of the
Interior entitled ``Decision memorandum regarding the
suspension of certain offshore permitting and drilling
activities on the Outer Continental Shelf '' and dated
July 12, 2010; and
(2) by its terms would expire on or before December
31, 2011.
(b) Extension of Covered Leases.--The Secretary of the
Interior shall extend the term of a covered lease by 1 year.
(c) Effect on Suspensions of Operations or Production.--The
extension of covered leases under this section is in addition
to any suspension of operations or suspension of production
granted by the Minerals Management Service or Bureau of Ocean
Energy Management, Regulation and Enforcement after May 1,
2010.
Purpose of the Bill
The purpose of H.R. 1229 is to amend the Outer Continental
Shelf Lands Act to facilitate the safe and timely production of
American energy resources from the Gulf of Mexico.
Background and Need for Legislation
Following the Deepwater Horizon explosion, in May 2010 the
Obama Administration placed a moratorium on all shallow-water
and deepwater drilling in the Gulf of Mexico (GOM). Despite
officially lifting the moratorium in October 2010, the Obama
Administration continued to slow-walk the permitting process,
imposing a de facto moratorium, and keeping thousands of
Americans out of work in the process.
Prior to the Deepwater Horizon incident, there were 52
approved and pending permits for drilling in the GOM. Since the
time the Administration officially lifted the moratorium in
October, there only 10 permits for deepwater drilling in the
GOM had been issued by the middle of April 2011. Of these 10,
only two were a permit for new deepwater exploration; seven
permits were simply reissued for projects that had previously
been approved prior to the Deepwater Horizon incident. This
means that 10 months later, over 40 projects that were approved
and underway remain stalled.
Furthermore, prior to the Deepwater Horizon incident, there
were 33 deepwater exploration rigs in the GOM. Since the
Administration's actions in 2010, 12 rigs (seven deepwater,
five shallow) have moved out of the GOM, bound for other
regions, each taking with it hundreds, and potentially
thousands, of jobs.
In February 2011, Seahawk Drilling, which owned and
operated 20 rigs in the GOM, declared Chapter 11 bankruptcy due
to the Obama Administrations de facto moratorium. According to
the company's president:
The government's drastic slowdown in the issuance of
permits for shallow-water drilling operations--in which
companies work in familiar geological formations,
typically in less than 500 feet of water, mostly
seeking to produce natural gas--has all but crippled
the industry . . . Seahawk's bankruptcy risks the jobs
of more than 500 loyal employees, a number already
diminished 50 percent from pre-spill levels because of
attempts to save the company by cutting payrolls since
last April.
According to the Obama Administration's own estimates, the
six-month ``official moratorium'' (May-October 2010) on
drilling cost up to 12,000 American jobs. However, the long-
term impacts of the de facto moratorium could be significantly
higher. A study by Dr. Joseph Mason of Louisiana State
University predicts that if the de facto moratorium were
sustained for 18 months, there could be a loss of 36,137 jobs
nationwide, with 24,532 jobs lost in the Gulf Coast region
alone.
According to the Louisiana Mid-Continent Oil and Gas
Association, each drilling platform averages 90-140 employees
at any one time (two shifts per day), and 180-280 for two two-
week shifts. Additionally, each exploration and production job
supports four other positions; therefore, 800-1,400 jobs per
idle rig platform are at risk if production does not resume as
soon as possible. Wages for those jobs average $1,804 weekly,
making potential lost wages more than $5-10 million per month,
per platform.
The Obama Administration's glacial pace in issuing permits
is crippling the offshore industry and causing thousands of
Americans to remain out of work. The 30 and 60 day timelines in
H.R. 1229 are absolutely necessary to prevent the
Administration from continuing to slow-walk the permitting
process and to prevent future de facto moratoria. The
Administration's permitting pace has even been challenged in
the courts. In February, a New Orleans judge gave the
Administration 30 days to act on five GOM drilling permits,
calling the delays ``increasingly inexcusable,'' and stating,
``The government is under a duty to act by either granting or
denying a permit application within a reasonable time . . .
[N]ot acting at all is not a lawful option.''
This legislation does not require the Administration to
automatically reissue permits. Rather it simply requires the
Secretary of the Interior to review existing and new permit
applications in a timely manner. Prior to April 2010, the
Administration typically approved permits, certifying that all
environmental and safety applications had been demonstrated, in
five to 15 days. Therefore, the up to 60 days provided in H.R.
1229 to make a decision is sufficient and prevents the
imposition of a de facto moratorium. The 60-day deadline
ensures timely answers will be provided on permit
applications--either yes or no. As requested by the
Administration, Congress voted to increase the Department of
the Interior's budget for Fiscal Year 2011 to ensure the agency
has the resources to ensure a continuous, reliable permitting
process.
By writing two safety reforms into law, H.R. 1229 will make
drilling safer and requires more rigorous oversight by amending
the Outer Continental Shelf Lands Act to require, for the first
time in law, that oil and gas lease holders receive an approved
permit to drill before drilling an offshore well in all federal
waters. Moreover, it specifically requires the Secretary of the
Interior to conduct a ``safety review'' to ensure proposed
drilling operations ``meet all critical safety system
requirements, including blowout prevention, and oil spill
response and containment requirements.''
To prevent costly and time-consuming lawsuits from delaying
progress in offshore energy production, the legislation
provides for an expedited hearing process in the legal system.
Legal rights are protected and any concerned citizen or group
will be able to have his or her day in court. H.R. 1229 will
simply expedite the legal process so that the issue can be
resolved and offshore production, which is critical to keeping
Americans employed and ensuring a reliable domestic supply of
oil and natural gas, can steadily continue. It is important too
that the Obama Administration's official and de facto moratoria
are not replaced by never-ending lawsuits aimed at stalling or
blocking American offshore energy production.
As a result of an amendment adopted during Committee
consideration of this bill, H.R. 1229 also extends the terms of
leases expiring in 2011 by one additional year. This extension
is in addition to any suspension of operations or production
granted by the Secretary of the Interior after May 1, 2010.
After the Obama Administration imposed the moratorium and would
no longer issue permits, the Secretary should have directly
suspended oil and gas leases already existing in the GOM. If no
permits were to be issued for GOM leases, the lease terms
should have been extended to ensure fair treatment and prevent
companies from investing millions of dollars for no return.
Furthermore, with the uncertainty of future lease sales, if
these leases expire, it is unclear when, if ever, those areas
will come back up for leasing. The Obama Administration has
refused to give fair treatment to leaseholders whose production
and permits were unilaterally and completed halted or blocked
during the moratorium.
Committee Action
H.R. 1229, the Putting the Gulf of Mexico Back to Work Act,
was introduced on March 29, 2011, by Natural Resources
Committee Chairman Doc Hastings (R-WA). The bill was referred
primarily to the Committee on Natural Resources, and
additionally to the Committee on the Judiciary. Within the
Committee on Natural Resources, the bill was referred to the
Subcommittee on Energy and Mineral Resources. On April 6, 2011,
that Subcommittee held a hearing on the bill. On April 13,
2011, the Full Natural Resources Committee met to consider the
bill. The Subcommittee on Energy and Mineral Resources was
discharged by unanimous consent. Congressman Rush Holt (D-NJ)
offered amendment designated 003 to the bill; the amendment was
not adopted by a roll call vote of 15-25, as follows:
Congressman Bill Flores (R-TX) offered amendment designated
016, which was adopted by voice vote. Congressman John
Garamendi (D-CA) offered amendment designated 004, which was
not adopted by a roll call vote of 15 to 27, as follows:
Committee Ranking Member Edward J. Markey (D-MA) offered an
amendment designated 002, which was not adopted by a roll call
vote of 16 to 27, as follows:
Congressman John Garamendi (D-CA) offered and withdrew
amendment designated 020. The bill was then favorably reported,
as amended, to the House of Representatives, by a roll call
vote of 27 to 16, as follows:
Committee Oversight Findings and Recommendations
Regarding clause 2(b)(1) of rule X and clause 3(c)(1) of
rule XIII of the Rules of the House of Representatives, the
Committee on Natural Resources' oversight findings and
recommendations are reflected in the body of this report.
Compliance With House Rule XIII
1. Cost of Legislation. Clause 3(d)(1) of rule XIII of the
Rules of the House of Representatives requires an estimate and
a comparison by the Committee of the costs which would be
incurred in carrying out this bill. However, clause 3(d)(2)(B)
of that rule provides that this requirement does not apply when
the Committee has included in its report a timely submitted
cost estimate of the bill prepared by the Director of the
Congressional Budget Office under section 402 of the
Congressional Budget Act of 1974. Under clause 3(c)(3) of Rule
XIII of the Rules of the House of Representatives and section
403 of the Congressional Budget Act of 1974, the Committee has
received the following cost estimate for this bill from the
Director of the Congressional Budget Office:
U.S. Congress,
Congessional Budget Office,
Washington, DC, April 27, 2011.
Hon. Doc Hastings,
Chairman, Committee on Natural Resources,
House of Representatives, Washington, DC.
Dear Mr. Chairman: The Congressional Budget Office has
prepared the enclosed cost estimate for H.R. 1229, the Putting
the Gulf of Mexico Back to Work Act.
If you wish further details on this estimate, we will be
pleased to provide them. The CBO staff contact is Kathleen
Gramp.
Sincerely,
Douglas W. Elmendorf.
Enclosure.
H.R. 1229--Putting the Gulf of Mexico Back to Work Act
Summary: H.R. 1229 would modify the standards and
procedures governing federal leases and permits for private
companies to develop oil and gas resources on the Outer
Continental Shelf (OCS). It would extend the duration of
certain leases set to expire by December 31, 2011, as well as
other leases affected by specified procedural matters. The bill
also would establish deadlines for administrative actions on
permit applications and establish procedural and other limits
on judicial review of civil actions involving energy projects
in the Gulf of Mexico.
Pay-as-you-go procedures apply to H.R. 1229 because
enacting the legislation would affect direct spending. CBO
estimates that enacting this bill would reduce offsetting
receipts from OCS leases by $10 million in 2013 (such
reductions would have the effect of increasing direct
spending). We estimate that enacting the bill would increase
direct spending by $6 million over the 2012-2016 period but
would have no significant net effect over the 2012-2021 period.
Enacting H.R. 1229 would not affect revenues.
H.R. 1229 contains no intergovernmental or private-sector
mandates as defined in the Unfunded Mandates Reform Act (UMRA)
and would impose no costs on state, local or tribal
governments.
Estimated cost to the Federal Government: The estimated
budgetary impact of H.R. 1229 is shown in the following table.
The costs of this legislation fall within budget function 950
(undistributed offsetting receipts).
--------------------------------------------------------------------------------------------------------------------------------------------------------
By fiscal year, in millions of dollars--
-------------------------------------------------------------------------------------------
2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2012-2016 2012-2021
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CHANGES IN DIRECT SPENDING
Estimated Budget Authority.................................. 0 10 -1 -1 -2 -2 -2 -2 0 0 6 0
Estimated Outlays........................................... 0 10 -1 -1 -2 -2 -2 -2 0 0 6 0
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Basis of estimate: For this estimate, CBO assumes that H.R.
1229 will be enacted before the end of fiscal year 2011 and
that the Department of the Interior (DOI) will conduct federal
lease sales in the Gulf of Mexico according to the schedule
included in the President's budget request for fiscal year
2012. Bonus bids, rental fees, and royalty payments for OCS
leases are recorded in the budget as offsetting receipts, which
are an offset to direct spending.
Under current law, OCS leases expire within a specified
period of time unless the lessee has begun to produce oil or
gas or has met certain production-related standards. After a
lease expires, it is re-auctioned as part of the next lease
sale. Typically, some of the expired leases are acquired in the
subsequent sales; in recent years, the uptake rate for newly
available leases has ranged from 13 percent to 46 percent.
Thus, provisions extending the duration of certain OCS leases
would affect the timing of projected bonus bids for those
expired leases.
Based on information from DOI, CBO estimates that H.R. 1229
would extend the term of approximately 100 leases. Over half of
those leases are in the Western and Eastern Gulf of Mexico that
will expire by December 31, 2011, and be re-auctioned later in
fiscal year 2012. Relative to CBO's baseline projections of OCS
bonus bids, changes in existing lease terms would reduce
offsetting receipts (an increase in direct spending) in 2013 by
about $10 million. Such costs would be offset by higher sales
proceeds in subsequent years, resulting in no significant net
effect over the 2012-2021 period.
Finally, based on information from DOI, CBO estimates that
implementing the bill would have no significant effect on
spending subject to appropriation.
Pay-as-you-go considerations: The Statutory Pay-As-You-Go
Act of 2010 establishes budget reporting and enforcement
procedures for legislation affecting direct spending or
revenues. The net changes in outlays that are subject to those
pay-as-you-go procedures are shown in the following table.
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By fiscal year, in millions of dollars--
--------------------------------------------------------------------------------------------------
2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2011-2016 2011-2021
--------------------------------------------------------------------------------------------------------------------------------------------------------
NET INCREASE OR DECREASE (-) IN THE DEFICIT
Statutory Pay-As-You-Go Impact....................... 0 0 10 1 -1 -2 -2 -2 -2 0 0 6 0
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Intergovernmental and private-sector impact: H.R. 1229
contains no intergovernmental or private-sector mandates as
defined in UMRA and would impose no costs on state, local, or
tribal governments.
Estimate prepared by: Federal Costs: Kathleen Gramp; Impact
on State, Local, and Tribal Governments: Melissa Merrell;
Impact on the Private Sector: Amy Petz
Estimate approved by: Theresa Gullo, Deputy Assistant
Director for Budget Analysis.
2. Section 308(a) of Congressional Budget Act. As required
by clause 3(c)(2) of Rule XIII of the Rules of the House of
Representatives and section 308(a) of the Congressional Budget
Act of 1974, this bill does not contain any new budget
authority, credit authority, or an increase or decrease in
revenues or tax expenditures. According to the Congressional
Budget Office, enactment of this bill would reduce offsetting
receipts by $10 million in 2013 and such reductions would have
the effect of increasing direct spending, in this case by $6
million over the 2012-16 time period.
3. General Performance Goals and Objectives. This bill does
not authorize funding, and therefore clause 3(c)(4) of rule
XIII of the Rules of the House of Representatives does not
apply.
Earmark Statement
This bill does not contain any Congressional earmarks,
limited tax benefits, or limited tariff benefits as defined
under clause 9(e), 9(f), and 9(g) of rule XXI of the Rules of
the House of Representatives.
Compliance With Public Law 104-4
This bill contains no unfunded mandates.
Preemption of State, Local or Tribal Law
This bill is not intended to preempt any State, local or
tribal law.
Changes in Existing Law Made by the Bill, as Reported
In compliance with clause 3(e) of rule XIII of the Rules of
the House of Representatives, changes in existing law made by
the bill, as reported, are shown as follows (existing law
proposed to be omitted is enclosed in black brackets, new
matter is printed in italic, existing law in which no change is
proposed is shown in roman):
OUTER CONTINENTAL SHELF LANDS ACT
* * * * * * *
Sec. 11. Geological and Geophysical Explorations.--(a) * * *
* * * * * * *
[(d) The Secretary may, by regulation, require any lessee
operating under an approved exploration plan to obtain a permit
prior to drilling any well in accordance with such plan.]
(d) Drilling Permits.--
(1) In general.--The Secretary shall by regulation
require that any lessee operating under an approved
exploration plan--
(A) must obtain a permit before drilling any
well in accordance with such plan; and
(B) must obtain a new permit before drilling
any well of a design that is significantly
different than the design for which an existing
permit was issued.
(2) Safety review required.--The Secretary shall not
issue a permit under paragraph (1) without ensuring
that the proposed drilling operations meet all--
(A) critical safety system requirements,
including blowout prevention; and
(B) oil spill response and containment
requirements.
(3) Timeline.--
(A) The Secretary shall decide whether to
issue a permit under paragraph (1) within 30
days after receiving an application for the
permit. The Secretary may extend such period
for up to two periods of 15 days each, if the
Secretary has given written notice of the delay
to the applicant. The notice shall be in the
form of a letter from the Secretary or a
designee of the Secretary, and shall include
the names and titles of the persons processing
the application, the specific reasons for the
delay, and a specific date a final decision on
the application is expected.
(B) If the application is denied, the
Secretary shall provide the applicant--
(i) in writing, clear and
comprehensive reasons why the
application was not accepted and
detailed information concerning any
deficiencies, and
(ii) an opportunity to remedy any
deficiencies.
(C) If the Secretary has not made a decision
on the application by the end of the 60-day
period beginning on the date the application is
received by the Secretary, the application is
deemed approved.
* * * * * * *
DISSENTING VIEWS
We oppose H.R. 1229 because it would impose artificial and
arbitrary deadlines on the Department of the Interior to
approve permits to drill. One year after the BP Deepwater
Horizon spill, this legislation could actually make offshore
drilling less, rather than more, safe by potentially limiting
the review of drilling permits by the agency charged with
overseeing the industry.
On April 20, 2010, at about 10 p.m., an explosion occurred
on the Deepwater Horizon oil drilling rig in the Gulf of
Mexico. There were 126 people on board at the time. Fifteen
people were injured and eleven workers were killed. The
Deepwater Horizon, owned by Transocean Ltd., was under a
contract with BP to drill an exploratory well. BP was the
lessee of the area in which the rig was operating. At the time
of the explosion, BP and Transocean were in the process of
temporarily closing the well, in anticipation of future,
commercial production. Halliburton had completed some cementing
of casings in the well less than 24 hours prior to the
accident.
On April 22, 2010, the Deepwater Horizon rig sank and two
days later, remotely operated vehicles (ROVs) found oil leaking
from the broken riser pipe. Ultimately, oil would continue
leaking from the Macondo well for 87 days before being capped
on July 15, 2010. The government's Flow Rate Technical Group
(FRTG) concluded that during that period, oil had been leaking
into the Gulf of Mexico at a rate beginning at 62,000 barrels
per day and ending at 53,000 barrels per day prior to the well
being capped. According to the FRTG, a total of 4.1 million
barrels of oil were spilled into the Gulf of Mexico, with an
additional 800,000 barrels having been captured aboard
containment ships responding to the crisis. The BP Deepwater
Horizon oil spill ultimately became the largest offshore oil
spill in the history of the United States.
The majority has refused to consider legislation to
implement the recommendations of the Independent National
Commission on the BP Deepwater Horizon Oil Spill and Offshore
Drilling or to improve the safety of offshore drilling.
Representatives Markey, Holt, along with other House Democrats
introduced H.R. 501, to implement the recommendations of the BP
Commission, on January 26, 2011. The majority has also refused
Ranking Member Markey's request to hold hearings with the
companies involved in the spill--BP, Transocean, Halliburton
and Cameron--or with the largest oil companies that are the
industry leaders--ExxonMobil, BP, Shell, Chevron and
ConocoPhillips.
H.R. 1229 would require the Secretary of the Interior to
act on a drilling permit request within 30 days. While the
legislation would allow the Secretary to twice extend the time
period for 15 days, the Secretary would have to provide written
notice to the company, which would include ``the names and
titles of the persons processing the application, the specific
reasons for the delay, and a specific date a final decision on
the application is expected.''
More troubling, under the legislation, if the Secretary has
not made a decision on a drilling permit within 60 days it
would be ``deemed approved,'' whether or not safety or
environmental review had been completed. As we learned with the
BP Deepwater Horizon disaster, the oversight and regulation of
offshore drilling needs to be more robust. Reducing the safety
review done by the Interior Department prior to drilling, as
the legislation could do, would make offshore drilling less
safe and is the completely wrong legislative response in the
wake of the BP spill. Moreover, the majority's legislation
could result in more drilling permits being rejected, as the
Interior Department may be forced to reject permits if the
safety and environmental review has not been completed, rather
than allowing them to be deemed approved.
While this legislation contains some vague language on
safety, requiring the Secretary to ensure that the proposed
drilling operations ``meet all critical safety system
requirements, including blowout prevention and oil spill
response and containment requirements,'' it would not require
anything more than what the Interior Department is already
doing.
In addition, the problem the majority purports to be
addressing with this legislation--the speed of permitting in
the Gulf--is one that does not even exist. Following the
temporary pause on deepwater drilling last year, which
Secretary Salazar lifted on October 12, 2010, the oil industry
was not able to demonstrate that it possessed the capacity to
contain a deepwater blowout until February 2011. Once oil
companies demonstrated they had the capability to contain a
blowout, the first deepwater drilling permit was issued 11 days
later, on February 28, 2011. There have now been a total of 10
deepwater drilling permits issued since that time. In addition,
the Bureau of Ocean Energy Management, Regulation, and
Enforcement (BOEMRE) has also approved 39 shallow-water permits
since last October, nearly matching the average from before the
spill.
This legislation also includes provisions that would limit
judicial review of all energy projects in the Gulf of Mexico.
Title II would require all litigation to be held in the 5th
circuit court, require that any challenge be filed within 60
days, and prohibit the awarding of any attorneys' fees,
expenses or other court costs. These provisions represent a
massive overreach by the majority on the Natural Resources
Committee and are not even within the jurisdiction of the
Committee.
Democrats offered a number of amendments to this
legislation designed to improve the safety of offshore
drilling. Each amendment was rejected with all Republican
Members of the Committee voting no. Representative Holt offered
an amendment that would have struck the language in H.R. 1229
deeming drilling permits approved after 60 days. This amendment
would have improved the safety of offshore drilling by ensuring
that permits are not issued without environmental review.
Representative Garamendi offered an amendment that would have
implemented a recommendation of the National Commission on the
BP Deepwater Horizon Disaster and Offshore Drilling, that any
industry safety organization be separate and apart from the
American Petroleum Institute (API), which is the trade
association that advocates for the oil industry.
Finally, Ranking Member Markey offered an amendment that
would have inserted specific safety requirements for blowout
preventers, well design, casing and cementing. This amendment
would have improved the safety requirements for offshore
drilling based on what we have learned from the BP spill.
Similar language passed the Energy and Commerce Committee in
the last Congress in a unanimous, bipartisan vote of 48-0.
However, all of the Majority members of the Natural Resources
Committee voted against this same language.
H.R. 1229 is the exactly wrong legislative response to the
BP disaster. Rather than acting to make off-shore drilling
safer and smarter, the Majority is moving to make drilling
faster and looser. We oppose this effort.
Edward J. Markey.
Peter A. DeFazio.
Betty Sutton.
John P. Sarbanes.
Raul M. Grijalva.
Gregorio Kilili Camacho Sablan.
Michael M. Honda.
Eni F.H. Faleomavaega.
Dale E. Kildee.
Niki Tsongas.
Ben Ray Lujan.
Frank Pallone, Jr.
Colleen W. Hanabusa.
John Garamendi.
Grace F. Napolitano.
Rush D. Holt.