[Senate Hearing 108-12]
[From the U.S. Government Publishing Office]
S. Hrg. 108-12
ENERGY PRODUCTION ON FEDERAL LANDS
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HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED EIGHTH CONGRESS
FIRST SESSION
TO RECEIVE TESTIMONY REGARDING FEDERAL ENERGY DEVELOPMENT
ON PUBLIC LANDS
__________
FEBRUARY 27, 2003
Printed for the use of the
Committee on Energy and Natural Resources
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
PETE V. DOMENICI, New Mexico, Chairman
DON NICKLES, Oklahoma JEFF BINGAMAN, New Mexico
LARRY E. CRAIG, Idaho DANIEL K. AKAKA, Hawaii
BEN NIGHTHORSE CAMPBELL, Colorado BYRON L. DORGAN, North Dakota
CRAIG THOMAS, Wyoming BOB GRAHAM, Florida
LAMAR ALEXANDER, Tennessee RON WYDEN, Oregon
LISA MURKOWSKI, Alaska TIM JOHNSON, South Dakota
JAMES M. TALENT, Missouri MARY L. LANDRIEU, Louisiana
CONRAD BURNS, Montana EVAN BAYH, Indiana
GORDON SMITH, Oregon DIANNE FEINSTEIN, California
JIM BUNNING, Kentucky CHARLES E. SCHUMER, New York
JON KYL, Arizona MARIA CANTWELL, Washington
Alex Flint, Staff Director
James P. Beirne, Chief Counsel
Robert M. Simon, Democratic Staff Director
Sam E. Fowler, Democratic Chief Counsel
Dick Bouts, BLM Fellow
Patty Beneke, Democratic Senior Counsel
C O N T E N T S
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STATEMENTS
Page
Alberswerth, David, Director, Bureau of Land Management Program,
The Wilderness Society......................................... 45
Bayless, Robert L., Jr., President, Independent Petroleum
Association of Mountain States................................. 30
Bingaman, Hon. Jeff, U.S. Senator from New Mexico................ 2
Bunning, Hon. Jim, U.S. Senator from Kentucky.................... 2
Domenici, Hon. Pete V., U.S. Senator from New Mexico............. 1
Griles, J. Steven, Deputy Secretary, Department of the Interior.. 4
Leer, Steven F., President and CEO, Arch Coal, Inc., on behalf of
the National Mining Association................................ 35
Murkowski, Hon. Lisa, U.S. Senator from Alaska................... 3
APPENDIXES
Appendix I
Responses to additional questions................................ 69
Appendix II
Additional material submitted for the record..................... 73
ENERGY PRODUCTION ON FEDERAL LANDS
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THURSDAY, FEBRUARY 27, 2003
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 10 a.m., in room
SD-366, Dirksen Senate Office Building, Hon. Pete V. Domenici,
chairman, presiding.
OPENING STATEMENT OF HON. PETE V. DOMENICI,
U.S. SENATOR FROM NEW MEXICO
The Chairman. The hearing will please come to order. This
hearing is taking place to take the testimony on energy
production from our Federal lands. It is my understanding that
Federal lands hold 80 percent of the U.S. oil reserves and 60
percent of the gas reserves. In spite of this significant
resource, only about 5 percent of domestic oil production and
about 11 percent of gas production come from the Federal lands.
Specifically, the committee is interested in how Federal
lands can help to supply the growing daily demands in the
United States. What are the current production levels from
Federal lands? What is the potential for new production? Where
are these resources? And what is being done to develop the
Federal resources and bring them to market?
I decided from my standpoint to forego opening statements
so that we can hear from the witnesses. If any of my colleagues
would like to make an opening statement, you are welcome to do
so as part of your first round of questions.
Before we begin, I would like to inform members that the
record will remain open until 6 o'clock this evening, in order
to submit questions of the witnesses.
We have four witnesses today: Steve Griles, Deputy
Secretary of the Department of Interior. We welcome you here
today, Steve, to testify on the Federal energy resources under
the administration of the Interior Department. We will then
allow time for questions. And then I understand he is on a
tight time schedule, which means he has a plane to catch before
noon.
Following Mr. Griles' testimony, I would like to ask our
other witnesses for their testimony. So let us begin with Mr.
Griles. If that is satisfactory with Senator Bingaman, let us
proceed.
Mr. Secretary, will you proceed?
[The prepared statements of Senators Bingaman, Bunning, and
Murkowski follow:]
Prepared Statement of Hon. Jeff Bingaman, U.S. Senator
From New Mexico
The subject of energy production from federal lands is of great
interest to all of us. These lands contain a wealth of resources and
are used for multiple and varied purposes. They provide rangeland for
the ranching community. Public lands afford unique recreational and
scenic opportunities. These lands are the source of timber, they
provide important fish and wildlife habitat, and last but not least,
they are a vital source of energy for our Nation.
Clearly, the energy resources found beneath these lands make a
significant contribution to meeting our energy needs and must continue
to play that role. Lands administered by the BLM provide 5 percent of
the Nation's oil production and 11 percent of its natural gas
production. In fiscal year 2001, my home state of New Mexico produced
more natural gas from onshore federal lands than any other state and
ranked second in oil production. Federally-administered offshore oil
and gas resources are also crucial to our energy security. The OCS
provided over 25 percent of both the Nation's oil and gas in 2003.
There is substantial interest on the part of industry in the
development of coalbed methane in the Rocky Mountain West. Last month,
the BLM issued two final environmental impact statements regarding oil
and gas development in the Powder River Basin, indicating that there
could be as many as 63,000 new coalbed methane wells in drilled on
federal lands in that area. I understand that a similar analysis is
being undertaken with respect to the San Juan Basin, and that
significant new drilling is anticipated in that area, as well. These
wells are projected to provide significant energy resources, but at the
same time raise issues with respect to water duality and quantity and
potential conflicts with other uses of the federal lands, such as for
grazing and coal production. I will be interested to hear the
witnesses' views on this topic.
I also expect that the witnesses will comment on the issue of
access to federal lands for energy development purposes. Because this
is a topic of interest to me, I co-authored a provision in the Energy
Policy Conservation Act Amendments of 2000, calling on the Department
of the Interior to undertake an analysis of oil and gas resources
underlying federal lands and restrictions on their development. The
report that was issued last month focusing on five basins is a helpful
step in providing information on this subject. My goal in seeking this
report is to be certain that the discussion of this topic is focused on
fact and not fueled by rhetoric. I hope that the hearing today will
help us better understand this important subject.
I have voiced my concerns in the past regarding the level of
resources devoted by the Interior Department to the oil and gas leasing
program. I believe that a key reason for backlog and delay in
processing drilling requests is a lack of resources. I also am
concerned that the Department devotes inadequate dollars to the
inspection and enforcement of existing operations. I have received
assurances that this topic is being addressed and I hope that the
Deputy Secretary can confirm my understanding.
Finally, a word about renewable energy. I am pleased that the
President's National Energy Policy called on the Secretaries of the
Interior and Energy to look at ways to increase renewable energy
production on federal lands. I believe that the potential for
environmentally sound renewable energy production on our federal lands
is great. I am particularly interested in hearing what the Department
of the Interior is doing to encourage renewable energy production.
I want to thank the witnesses for their attendance. I look forward
to hearing their testimony.
______
Prepared Statement of Hon. Jim Bunning, U.S. Senator From Kentucky
Thank you, Mr. Chairman.
I appreciate having this opportunity to take a look at the types of
energy production available on federal lands.
This is an important issue to examine when we are trying to put
together a common sense energy policy.
In the past, I think Congress has failed to make progress on energy
because we have fallen into the trap of choosing between conservation
and production.
But now I think that we have escaped that trap and reached the
point where most of us in the Senate understand that a balanced energy
policy must do both--it must help boost production of domestic energy
sources, as well as promote conservation.
As we have seen from the previous hearings on the current state of
oil and gas supply in the United States, America's demand for energy
continues to rise while our supply diminishes.
In the interest of America's energy future, and most importantly,
our national security, we must increase domestic energy production.
We must have an energy policy that helps reduce our dependence on
foreign oil to strengthen our energy independence and to protect
ourselves from dictators like Saddam Hussein and the politics of the
Middle East.
New technology now enables us to increase our production of energy
by operating with less impact on the environment. In fact, today's
domestic operations for producing energy would be conducted under the
most comprehensive environmental regulations in the world.
I look forward to hearing about the possibilities of production of
energy from oil, gas, and coal on federal lands as a way for us to
increase domestic energy production.
I appreciate the time our witnesses have taken today to come
testify.
Thank you.
______
Prepared Statement of Hon. Lisa Murkowski, U.S. Senator From Alaska
Mr. Chairman, thank you for calling this hearing today regarding
energy production on federal lands. As you and the other members of the
committee are aware, this topic is very important to my State of
Alaska. I look forward to hearing the testimony of the panel.
We face an energy crisis in this country. Insufficient supply,
excess demand, and a failing infrastructure unable to deliver energy to
where consumers need it the most are resulting in rising energy prices
that impact every American family and business, impair U.S. economic
growth, and threaten our national security.
And with a war in Iraq very likely the situation shows no sign of
improving. Energy prices continue to rise.
Congress and this committee must take action.
The United States must take a balanced approach to lessening our
dependence on unstable foreign energy sources.
There are solutions to our energy crisis, and the production of
energy on land currently owned by the federal government is one way we
can lessen our dependence on unstable foreign sources of energy.
It is time for us to act.
The members of this committee are very aware that much of the
land--with and abundance of natural resources--of my State of Alaska
are owned by the federal government. Those resources remain unavailable
for production.
67.9 percent of the 586,412 square miles of land in my State of
Alaska is owned by the federal government.
This includes 76 million acres of Wildlife Refuges, 51 million
acres of National Parks, 26 million acres of Bureau of Land Management
lands and 23 million acres of National Forests.
The potential for energy production on federal lands in Alaska is
unparalleled anywhere else in the U.S.
The place to start is ANWR. And we should also consider the
production of energy in the National Petroleum Reserve-Alaska (NPR-A).
The 1.2 million acre 1002 area of the Arctic National Wildlife
Refuge (ANWR) and the 23.5 million acre NPR-A both along Alaska's North
Slope contain a great deal of recoverable oil and natural gas .
The U.S. Geological Survey also estimates that the Coastal Plain
area of ANWR contains between 3.5 and 16 billion barrels of oil. And
the mean average estimate offered by the U.S. Geological Survey and the
Minerals Management Service are that the NPR-A contains 9.3 billion
barrels of oil and 59.7 trillion cubic feet of natural gas. The actual
amounts could be higher.
These resources can be recovered using new technologies that would
minimize the impact on the natural environment and the area wildlife.
We have been over the details of the arguments for and against
responsible exploration in ANWR ad nauseam, so I will not repeat the
myriad of reasons that support my position at today's hearing.
I will simply say that a new energy strategy is needed, and
production on federal lands on the North Slope of Alaska should be part
of the solution to the ongoing energy crisis.
I am committed to seeing that these areas are opened up to
environmentally sensitive oil and natural gas leasing as part of a
comprehensive national energy policy.
Of course, energy production in ANWR and the NPR-A cannot be the
only elements of a national energy strategy. There are many exciting
possibilities for lessening our dependence on foreign imports of
petroleum, besides increasing domestic production, including renewable
resources and other energy alternatives.
While I will fight for oil and gas leasing in federal lands on the
North Slope, I will also work on other initiatives to promote new
technologies that will lessen harmful emissions and improve efficiency.
During the last Congress, this committee considered many proposals
for a new national energy policy. Negotiations got as far as a
Conference Committee, but a compromise could not be reached on many of
the controversial issues.
I hope efforts this year to enact a national energy policy will be
successful. We must work together, and see to it that all the parties
can reach a common ground. I intend to fight for the interests of my
State, while I carefully evaluate the positions of all interested
parties.
The goal of any national energy policy needs to be reducing the
cost of energy, reducing our dependence on unstable foreign energy
imports and reducing harmful emissions.
I will work very hard to see this vision come to fruition.
These initiatives will benefit our economy by reducing costs for
consumers and businesses, and by creating jobs in the energy sectors
and those parts of the economy that support the energy sector.
Finally, Mr. Chairman, I look forward to working with you, and
Senator Bingaman, and the other members of this committee on a national
energy policy that includes environmentally responsible energy
production on federal lands in my State of Alaska.
Thank you, Mr. Chairman.
STATEMENT OF J. STEVEN GRILES, DEPUTY SECRETARY, DEPARTMENT OF
THE INTERIOR
Mr. Griles. Yes, sir. Mr. Chairman, I am Steve Griles, the
Deputy Secretary of the Interior. And as you said, I am on my
way out of town, hopefully before the snowstorm gets here. And
I appreciate the committee allowing me to come before you and
spend some time to talk to you about energy.
Patty Morrison, the Deputy Assistant Secretary for Lands
and Minerals Management, will be here with you the rest of the
morning and is also very knowledgeable on the Department's
energy policies and will be able to respond to other questions
that may come after I leave.
I would like to ask that my statement in totality be
entered into the record. And I will just try to summarize for
you, Mr. Chairman, some of my thoughts.
The Chairman. Without objection, that will be done.
Mr. Griles. America's public lands have an abundant
opportunity for exploration and development of renewable and
nonrenewable energy resources. Energy reserves contained on the
Department of the Interior's onshore and offshore Federal lands
are very important to meeting our current and future estimates
of what it is going to take to continue to supply America's
energy demand.
Estimates suggest that these lands contain approximately 68
percent of the undiscovered U.S. oil resources and 74 percent
of the undiscovered natural gas resources. President Bush has
developed a national energy policy that laid out a
comprehensive, long-term energy strategy for America's future.
That strategy recognizes we need to raise domestic production
of energy, both renewable and nonrenewable, to meet our
dependence for energy.
For oil and gas, the United States uses about 7 billion
barrels a year, of which about 4 billion are currently imported
and 3 billion are domestically produced. The President proposed
to open a small portion of the Arctic National Wildlife Refuge
to environmentally responsible oil and gas exploration.
Now there is a new and environmentally friendly technology,
similar to directional drilling, with mobile platforms, self-
containing drilling units. These things will allow producers to
access large energy reserves with almost no footprint on the
tundra. Each day, even since I have assumed this job, our
ability to minimize our effect on the environment continues to
improve to where it is almost nonexistent in such areas as even
in Alaska.
According to the latest oil and gas assessment, ANWR is the
largest untapped source of domestic production available to us.
The production for ANWR would equal about 60 years of imports
from Iraq.
The National Energy Policy also encourages development of
cleaner, more diverse portfolios of domestic renewable energy
sources. The renewable policy in areas cover geothermal, wind,
solar, and biomass. And it urges research on hydrogen as an
alternate energy source.
To advance the National Energy Policy, the Bureau of Land
Management and the DOE's National Renewable Energy Lab last
week announced the release of a renewable energy report. It
identifies and evaluates renewable energy resources on public
lands.
Mr. Chairman, I would like to submit this for the record.*
This report, which has just come out, assess the potential for
renewable energy on public lands. It is a very good report that
we hope will allow for the private sector, after working with
the various other agencies, to where can we best use renewable
resource, and how do we take this assessment and put it into
the land use planning that we are currently going, so that
right-of-ways and understanding of what renewable resources can
be done in the West can, in fact, have a better opportunity.
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* The report has been retained in committee files.
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The Department completed the first of an energy inventory
this year. Now the EPCA report, which is laying here, also, Mr.
Chairman, is an estimate of the undiscovered, technically
recoverable oil and gas. Part one of that report covers five
oil and gas basins. The second part of the report will be out
later this year.
Now this report, it is not--there are people who have
different opinions of it. But the fact is we believe it will be
a good guidance tool, as we look at where the oil and gas
potential is and where we need to do land use planning. And as
we update these land use plannings and do our EISs, that will
help guide further the private sector, the public sector, and
all stakeholders on how we can better do land use planning and
develop oil and gas in a sound fashion.
Also, I have laying here in front of me the two EISs that
have been done on the two major coal methane basins in the
United States, San Juan Basis and the Powder River Basin.
Completing these reports, which are in draft, will increase and
offer the opportunity for production of natural gas with coal
bed methane.
Now these reports are in draft and, once completed, will
authorize and allow for additional exploration and development.
It has taken 2 years to get these in place. It has taken 2
years to get some of these in place. This planning process that
Congress has initiated under FLPMA and other statutes allows
for a deliberative, conscious understanding of what the impacts
are. We believe that when these are finalized, that is in fact
what will occur.
One of the areas which we believe that the Department of
the Interior and the Bureau of Land Management is and is going
to engage in is coordination with landowners. Mr. Chairman, the
private sector in the oil and gas industry must be good
neighbors with the ranchers in the West. The BLM is going to be
addressing the issues of bonding requirements that will assure
that landowners have their surface rights and their values
protected.
BLM is working to make the consultation process with the
landowners, with the States and local governments and other
Federal agencies more efficient and meaningful. But we must
assure that the surface owners are protected and the values of
their ranches are in fact assured. And by being good neighbors,
we can do that.
In the BLM land use planning process, we have priorities,
ten current resource management planning areas that contain the
major oil and gas reserves that are reported out in the EPCA
study. Once this process is completed, then we can move forward
with consideration of development of the natural gas.
We are also working with the Western Governors' Association
and the Western Utilities Group. The purpose is to identify and
designate right-of-way corridors on public lands. We would like
to do it now as to where right-of-way corridors make sense and
put those in our land use planning processes, so that when the
need is truly identified, utilities, energy companies, and the
public will know where they are Instead of taking two years to
amend a land use plan, hopefully this will expedite and have
future opportunity so that when the need is there, we can go
ahead and make that investment through the private sector. It
should speed up the process of right-of-way permits for both
pipelines and electric transmission.
Now let me switch to the offshore, the Outer Continental
Shelf. It is a huge contributor to our Nation's energy and
economic security.
The Chairman. Mr. Secretary, everything you have talked
about so far is onshore.
Mr. Griles. That is correct.
The Chairman. You now will speak to offshore.
Mr. Griles. Yes, sir, I will.
Now we are keeping on schedule the holding lease sales in
the areas that are available for leasing. In the past year,
scheduled sales in several areas were either delayed, canceled,
or put under moratoria, even though they were in the 5-year
plan. It undermined certainty. It made investing, particularly
in the Gulf, more risky.
We have approved a 5-year oil and gas leasing program in
July 2002 that calls for 20 new lease sales in the Gulf of
Mexico and several other areas of the offshore, specifically in
Alaska by 2007. Now our estimates indicate that these areas
contain resources up to 22 billion barrels of oil and 61
trillion cubic feet of natural gas.
We are also acting to raise energy production from these
offshore areas by providing royalty relief on the OCS leases
for new deep wells that are drilled in shallow water. These are
at depths that heretofore were very and are very costly to
produce from and costly to drill to. We need to encourage that
exploration. These deep wells, which are greater than 15,000
feet in depth, are expected to access between 5 to 20 trillion
cubic feet of natural gas and can be developed quickly due to
existing infrastructure and the shallow water.
We have also issued a final rule in July 2002 that allows
companies to apply for a lease extension, giving them more time
to analyze complex geological data that underlies salt domes.
That is, where geologically salt overlays the geologically
clay. And you try to do seismic, and the seismic just gets
distorted. So we have extended the lease terms, so that
hopefully those companies can figure out where and where to
best drill. Vast resources of oil and natural gas lie, we hope,
beneath these sheets of salt in the OCS in the Gulf of Mexico.
But it is very difficult to get clear seismic images.
We are also working to create a process of reviewing and
permitting alternative energy sources on the OCS lands. We have
sent legislation to Congress that would give the Minerals
Management Service of the Department of the Interior clear
authority to lease parts of the OCS for renewable energy. The
renewables could be wind, wave, or solar energy, and related
projects that are auxiliary to oil and gas development, such as
offshore staging facilities and emergency medical facilities.
We need this authority in order to be able to truly give
the private sector what are the rules to play from and buy, so
they can have certainty about where to go.
Mr. Chairman, it is my understanding that today Chairmen
Tauzin and Barton, Senator Inhofe, and others will be
introducing the President's Clear Skies legislation. Although
that proposed legislation will have the jurisdiction on another
committee, if enacted, it will assist in stabilizing the use of
coal and gas in this country for electric generation, as well
as reducing air emissions.
Mr. Chairman, this legislation will reduce emissions more
rapidly, more surely, and more cheaply than the current
standards. In so doing, coal-fired utilities and that issue
will give certainty and a rational approach to emissions
reductions. And the American consumer will have cleaner air and
more reliable electric generation, which is energy.
Witnesses before this committee this week, as I read in the
paper, indicated that gas prices are at extremely high levels.
They are. $12 at Henry Hub two days ago is extraordinary. Each
year electric generation is being built exclusively for gas.
Gas is what most American consumers are relying on heat their
homes, in many instances. We must provide assurances and long-
term stability to the utility community so we can continue to
assure a diverse source of fuels, including coal and electric
generation. That is what the Clear Skies legislation will do.
In concluding, I just want to say that it is a pleasure to
be with you. And it is also going to be a pleasure to work with
you. We need to get the national energy legislation that the
President has proposed enacted. We look forward to working with
each of you to see how we can best accomplish that.
Mr. Chairman, thank you.
The Chairman. Thank you very much, Mr. Secretary.
[The prepared statement of Mr. Griles follows:]
Prepared Statement of J. Steven Griles, Deputy Director,
Department of the Interior
Mr. Chairman and Members of the Committee, thank you for the
opportunity to appear here today to discuss energy production on
Federal lands. I would like to discuss the key role the Department of
the Interior has in meeting the nation's energy needs. I am accompanied
by Patricia Morrison, Principal Deputy Assistant Secretary for Land and
Minerals Management.
our energy future
America faces an energy challenge. Energy use sustains our economy
and our quality of life, but a fundamental imbalance exists between our
energy consumption and domestic energy production. We must look at ways
to narrow the gap between the amount of energy we use and the amount we
produce. There is no one single solution. Achieving the goal of secure,
affordable and environmentally sound energy will require diligent,
concerted efforts on many fronts on both the supply and demand sides of
the energy equation.
President Bush's National Energy Policy report laid out a
comprehensive, long-term energy strategy for securing America's energy
future. That strategy recognizes that to reduce our rising dependence
on oil and gas, we must also increase domestic production. The
President proposes to open a small portion of the Arctic National
Wildlife Refuge (ANWR) to environmentally responsible oil and gas
exploration using newly available, environmentally friendly technology.
ANWR is by far the largest untapped source of domestic petroleum and
would equal nearly 60 years of imports from Iraq.
In 1998, a United States Geological Survey assessment of petroleum
resources of the 1002 region of ANWR estimated the expected mean volume
of technically recoverable oil beneath the 1002 area to be 10.4 billion
barrels. For comparison, the U.S. currently consumes about 7 billion
barrels per year. Of this, the U.S. imports about 4 billion barrels and
produces about 3 billion barrels.
Most media coverage focuses on the production of traditional energy
sources in the National Energy Policy, but increased energy
conservation and alternative and renewable sources are also critical
components of the President's balanced, comprehensive policy. Good
stewardship of resources dictates that we use energy efficiently and
conserve resources. Thus, fossil fuel development is only a part of the
solution to our Nation's energy issues. Americans have already made
great strides in using energy more efficiently. Since 1973, the United
States economy has grown nearly three times faster than energy use, in
part due to more efficient use of energy. Had we continued to use
energy as intensely as in the 1970's, the United States would have
consumed about 177 quadrillion BTUs of energy in 2001, compared to
actual consumption of approximately 97 quadrillion BTUs. To put that in
perspective, the 80 quadrillion BTUs saved is more than the total
amount of energy produced in the United States from all sources oil,
gas, coal, nuclear, renewable--in the year 2000.
alternative and renewable energy
Alternative and renewable sources of energy can also play an
important role in helping meet our increased energy needs. To this end,
the National Energy Policy encourages development of a cleaner, more
diverse portfolio of domestic energy supplies. The Policy includes
measures to aid in the development and expansion of renewable energy
technologies in use today, including geothermal, wind, solar, and
biomass, as well as continued research into using hydrogen as an
alternative energy carrier. Such diversity helps to ensure that
Americans will continue to have access to the energy they need.
Between 1975 and 2000, total renewable energy production in the
United States increased from about 4.8 to 6.8 quadrillion BTUs,
supplying about seven percent of the Nation's energy consumption in
2000. By 2020, renewable energy production is forecast to rise to about
8.6 quadrillion BTUs, but still will account for only about seven
percent of consumption.
Thus, for the present and as far as the future can be reasonably
forecast, renewable energy is likely to remain an incremental source of
supply supplementing fossil fuels as our primary source of energy.
Renewable and alternative energy sources are currently considered a
``step'' energy technology, but they can be an important component to a
diversified domestic energy portfolio especially for addressing
distributed energy and peak demand needs. At the Department of the
Interior, Secretary Norton has convened two conferences focused on
renewable resources.
As part of its efforts to advance the President's National Energy
Policy, the BLM recently released a joint report with the Department of
Energy that identifies and evaluates renewable energy resources on
public lands. The BLM will use the report's findings to prioritize
land-use planning activities, and to increase the development and use
of renewable energy resources on public lands.
energy production from federal resources
The Department of the Interior has administrative and managerial
responsibility for the Bureau of Land Management (BLM), the Minerals
Management Service (MMS), and the Office of Surface Mining Reclamation
and Enforcement (OSMRE). All of these bureaus are undertaking
significant initiatives to fulfill the President's National Energy
Policy, and are working diligently to promote environmentally sound
production of our Nation's energy resources. The BLM and MMS have
authorities to offer lands under their jurisdiction to produce mineral
and energy (renewable and non-renewable) resources consistent with
environmental protection goals.
The Department of the Interior manages approximately 500 million
surface acres of land, with the BLM managing 262 million surface acres
and more than 700 million subsurface acres of Federal mineral estate.
MMS manages approximately 1.76 billion acres of offshore Federal
mineral estate. These lands and resources currently account for 30% of
total domestic energy production--including 48% of geothermal
production, 35% of natural gas production (25% offshore and 10%
onshore), 35% of coal production, 35% of oil production (30% offshore
and 5% onshore), 20% of wind power, and 17% of hydropower production.
new energy resources
Deepwater areas of the Gulf of Mexico are expected to provide
substantial volumes of new natural gas production, but it may be
several years before that area reaches its potential. The shallow
waters of the Gulf of Mexico hold the greatest promise for new
resources of natural gas to meet the Nation's near-term gas needs. MMS
is taking steps to develop economic incentives to spur industry
activity in this area of the Gulf. Beginning in 2002, MMS started
providing royalty relief as part of OCS lease sale terms to encourage
production from wells on new leases drilled to deep horizons (greater
than 15,000 feet total depth). This deep gas play, expected to hold
between 5 and 20 trillion cubic feet (Tcf) of gas, can be developed
quickly due to existing infrastructure in the shallow waters of the
Gulf. MMS also issued a final rule in July 2002 that allows companies
to apply for lease suspensions for exploration of subsalt resources.
Coalbed natural gas, also known as coalbed methane, accounts for
about 9.6% of the total natural gas reserves in the United States. The
Rocky Mountain States of New Mexico, Utah, Colorado, Wyoming, and
Montana hold an estimated 30 to 48 Tcf of undiscovered natural gas
resources associated with coal. This represents the second largest gas
resource in the United States behind the Gulf of Mexico. While many
areas of the United States are experiencing declining natural gas
reserves, the Rocky Mountain resources are largely untapped and the
amount of newly discovered gas in the area is increasing on a daily
basis.
I am recused from certain matters involving the subject of coalbed
natural gas and do not directly participate in them. Thus, I will speak
here only to the Secretary's position on these issues. The majority of
the coalbed natural gas is in the federal mineral estate. As good
stewards of these domestic natural gas reserves and consistent with the
National Energy Policy directive to facilitate our domestic energy
supplies, we should develop these resources in an environmentally-
responsible manner to sustain our Nation's quality of life in the face
of our increasing demand for natural gas.
Coalbed natural gas from public lands can and should play a role in
meeting increasing energy demands. Congress established a policy of
multiple use for much of the federal lands, which the Department
strongly supports. Many uses, including access for energy development,
can co-exist on public lands, if properly managed. We do not believe
the public lands and resources should be put off limits to development.
Today the Nation meets over 50% of demand for petroleum products with
imports. Many of these imports are vulnerable to disruptions resulting
from instabilities in exporting Nations or regimes. Thirty percent of
our total domestic energy production comes from Federal lands and
resources. Without the contribution of public resources, the country's
energy supply would be even more dependent on foreign sources. And, of
significance for the public lands states that are anywhere from 30% to
80% Federally-managed, the development of these resources can help
western rural economies by creating jobs, new wealth, and tax revenue.
the epca inventory
In January 2003, BLM delivered to Congress the first Energy Policy
Conservation Act (EPCA) inventory of 59.4 million acres managed by
Federal agencies in five study areas in the West. The areas contain the
bulk of the known natural gas and much of the known oil resources under
public management in the onshore United States. The EPCA inventory
provides an estimate of undiscovered technically recoverable resources
and proved reserves of oil and gas beneath the five basins and an
inventory of the extent and nature of limitations to their development.
All information gathered as a result of the EPCA effort will be
integrated into the BLM's ongoing land use planning efforts are a
cornerstone for future energy production from public lands. The BLM has
also prioritized a number of land-use planning efforts that have major
oil and gas components.
energy rights-of-way
Federal lands are important to the rights-of-way needs of the
energy industry and utilities, especially in the western United States.
BLM estimates that 90% of the oil and natural gas pipeline and electric
transmission rights-of-way in the western U.S. cross federal lands. The
BLM alone administers approximately 85,000 rights-of-way, including
approximately 23,000 for oil and gas pipelines.
Our challenge is to improve and expand the existing network of
pipelines and transmission lines to meet the increased demand for
energy. One way to meet that challenge is to identify and designate
right-of-way utility corridors on public lands in a collaborative
manner. The Department has been working with the Western Governors'
Association and the Western Utility Group to do just that. The
designation of utility corridors through BLM land use plans provides an
important tool in the planning and location of future pipelines and
assists in the processing of rights-of-way applications on the public
lands.
offshore resources
As you may know, Federal offshore lands on the Outer Continental
Shelf (OCS) encompass 1.76 billion acres. However, of this total, about
600 million acres are currently off limits to oil and gas leasing. This
action has been extended by Presidential directive through 2012.
Nevertheless, industry activities on the remaining areas available for
development, particularly the 40 million acres currently under lease,
make the OCS an essential part of ensuring the energy and economic
security of the United States.
At the end of December 2002, the Department estimated that Federal
offshore lands produce about 1.7 million barrels of oil each day,
accounting for 30 percent of the oil produced in the United States.
This makes the OCS the largest single source of oil for the U.S.
economy (larger than Saudi Arabia or our neighbor to the north,
Canada). In addition to oil, the OCS is also a major source of the
Nation's natural gas, making a contribution of about 13 billion cubic
feet per day, or about 25 percent of the Nation's domestic production.
More than 90 percent of these resources come from the Gulf of Mexico
OCS, with the rest coming from leases offshore California and the
Beaufort Sea offshore Alaska.
With major projects slated to come online in the next few years
(including Thunder Horse, the largest discovery in the U.S. in the past
30 years), we project that OCS production could easily reach 2 million
barrels per day in the next few years and account for over a third of
domestic crude oil production. Natural gas production is expected to
remain at its current level, or increase slightly.
At the Department, we are taking steps to ensure that the OCS
remains a solid contributor to our Nation's energy and economic
security by holding sales in available areas on schedule. The OCS 5
Year Oil and Gas Leasing Program for 2002-2007, which was approved in
July 2002, calls for 20 lease sales in the Gulf of Mexico and certain
areas offshore Alaska during that timeframe. We estimate that these
areas could contain economically recoverable resources of up to 22
billion barrels of oil and 61 trillion cubic feet of natural gas.
In 2002, the Department's Minerals Management Service held the
128th and 129th competitive oil and gas lease sale since OCS leasing
began in 1954. For these two Gulf of Mexico sales alone, MMS leased
over 800 tracts, bringing in more than $500 million in revenue from
high bids for the American people. Next month, on March 19, 2003, the
Department will hold the 130th lease sale in the program. Since 1953,
more than $140 billion has been brought into the U.S. Treasury from OCS
lease sales.
In addition to holding the lease sales outlined in the 2002-2007
program, MMS has developed a series of economic incentives to encourage
industry to explore ``frontier areas'' where business risks are very
high, and to facilitate getting the most production possible from
available OCS acreage. The MMS continues to offer a royalty incentive
program for deepwater leases in the Gulf of Mexico, and has expanded
the incentives to promote development of natural gas from deep horizons
in shallow waters. These leasing incentives come in the form of a
royalty suspension for specified amounts of production from these
areas. Currently, MMS is considering extending the shallow water, deep
gas royalty relief provisions to leases purchased before 2002. MMS has
also offered lease extensions for certain qualifying exploration
activities that focus on reservoir targets that occur beneath
subsurface salt sheets.
For offshore areas of Alaska, MMS is considering various incentives
in addition to changes in suspension policies that will allow more time
for exploration activity to occur. Additionally, MMS is evaluating its
business processes program wide to take advantage of opportunities to
make the permitting process for drilling wells more efficient.
offshore alternative energy proposal
For the past 50 years, the Department has leased the OCS for oil,
gas, and other minerals under the mandates of the OCS Lands Act.
However, in recent years we have seen a growing interest by the private
sector in developing alternative energy projects located on the OCS,
such as renewable energy production from currents, wind and waves, and
floating supply bases and other facilities that would directly support
OCS oil and gas development.
In an effort to facilitate these innovative projects and to ensure
that the Federal government's economic and land use interests are fully
protected, the Administration submitted legislation to Congress in June
2002 that would set up a statutory framework for reviewing and
permitting such activities that are not otherwise covered by statute.
It was developed in close collaboration with other Federal agencies
with permitting authority on the OCS and would provide the Department
with a full suite of regulatory tools necessary to comprehensively
manage non traditional OCS energy and related activities.
The Administration continues to strongly support enactment of such
legislation and looks forward to working closely with Congress on this
important issue. We firmly believe that we must encourage new and
innovative technologies to help us meet our increasing energy needs.
Enactment of this legislation will be one important step in helping us
meet those needs.
conclusion
We will continue to operate under Secretary Norton's leadership and
vision for managing the public resources--through communication,
cooperation, and consultation in the service of conservation. The
essence of this goal is to continue to forge new and stronger
partnerships with other Federal and state agencies, Tribal governments,
and all of our stakeholders--including Congress--to create greater
opportunities for the responsible development of energy resources on
Federal lands.
In summary, the following actions have been implemented or are
being considered to facilitate the President's National Energy Policy:
The BLM has recently released a joint report with the
Department of Energy that identifies and evaluates renewable
energy resources on public lands. The BLM will use the report's
findings to prioritize land-use planning activities, and to
increase the development and use of renewable energy resources.
To ensure that the OCS remains a solid contributor to our
Nation's energy and economic security by holding sales in
available areas on schedule, we approved a 5-year Oil and Gas
Leasing Program in July 2002 that calls for 20 lease sales in
the Gulf of Mexico and certain areas offshore Alaska during
that timeframe. We estimate that these areas could contain
economically recoverable resources of up to 22 billion barrels
of oil and 61 trillion cubic feet of natural gas.
MMS is acting to increase energy production in promising,
shallow waters of the Gulf of Mexico by providing royalty
relief in OCS lease sale terms to encourage production from new
wells drilled to deep horizons (greater than 15,000 feet total
depth). This area of the Gulf of Mexico is expected to hold
between 5 and 20 trillion cubic feet (TCF) of gas and can be
developed quickly due to existing infrastructure in the shallow
waters of the Gulf.
MMS is considering providing similar shallow water, deep gas
royalty relief to leases purchased before 2002.
MMS issued a final rule in July 2002 that allows companies
to apply for lease term extensions that will provide additional
time to analyze complex geophysical data in area under salt
sheets. Vast resources of oil and natural gas may underlie
sheets of salt in the OCS, which makes it difficult to obtain a
clear image of the subsalt geology. This will help identify and
define drilling targets and accelerate discovery and production
of deep natural gas as well as foster new technology.
The Department completed the EPCA inventory this year. The
EPCA inventory provides an estimate of undiscovered technically
recoverable resources and proved reserves of oil and gas
beneath the five basins and an inventory of the extent and
nature of limitations to their development.
BLM is completing the necessary land management planning for
the two major coalbed methane basins in the United States: San
Juan and Powder River Basin. BLM's completion of these plans
will allow for considerable additional drilling, which will
increase the production of natural gas from coalbed methane.
BLM is developing an approved methodology for drilling permit
approval and are improving our coordination with regard to land
owners in the regions. In addition, BLM is improving the
necessary coordination and consultation with State and other
federal agencies to address the concerns that have been raised
and to make the process more efficient.
The BLM has prioritized a number of land-use planning
efforts that have major oil and gas components. Once the public
process is completed, this will expedite the development of
natural gas and oil.
The Department is working with State and local governments
as well as with industry on identifying and designating right-
of-way utility corridors on public lands. For example, the
Department has been working with the Western Governors'
Association and the Western Utility Group to do just that.
The Department is taking steps to ensure that the OCS
remains a solid contributor to our Nation's energy and economic
security by holding sales in available areas on schedule. In
past years, scheduled sales in several areas were either
delayed, cancelled or put under moratoria even though they
appear on a 5-year schedule. This did not provide industry with
the certainty it needs to make long-term investments in the
OCS.
In support of the President's goal of streamlining
permitting of energy projects, MMS has initiated a multi-year
effort designed to increase our efficiency in processing
applications to permit drilling of OCS wells.
The Administration submitted legislation to Congress in June
2002 that would set up a statutory framework for reviewing and
permitting alternative energy and energy-related activities not
otherwise explicitly covered by statute. This legislation will
include renewable energy projects, such as wind, wave or solar
energy; and energy-related projects that are ancillary to OCS
oil and gas development, such as offshore staging facilities
and emergency medical facilities.
Thank you for the opportunity to testify before you today. I
welcome any questions the Committee may have.
The Chairman. The various reports that you have alluded to
will be made part of the record. They will be adjunct to the
record. We thank you for bringing them. And I assume--have they
been distributed heretofore, or are you just bringing them up
today?
Mr. Griles. They have been given to the committee. But we
will make copies available to the committee, sir.
The Chairman. All right.
The Chairman. Mr. Secretary, I have a few questions. And
then I will yield to Senator Bingaman. He has to leave for a
little while and will return. Then we will go to our side for
questions before we take the next witness.
Again, we appreciate your coming. And thank you for your
succinct testimony. We hope that we can work with you and with
the reports and the President's program in putting together a
bill in the not-too-distant future, which will yield results
this year.
Let me talk a little bit about the EPCA report.
Mr. Griles. Yes, sir.
The Chairman. Does it tell the full story when it comes to
the impediments and delays associated with oil and gas leasing
on Federal lands?
Mr. Griles. No, sir. It does not give the full story, an
entire story. It was--in the opinion of the Bureau of Land
Management, when they started this study, I think it was in
2000, 2001, it did not give the full story. It gave as best
story as it could. But there are other things that it does not
deal with, like some of the impediments that go through the
leasing processes and the appeals processes and those kind of
things.
But I think that it gives an overview of where the oil and
gas is. And by using that and incorporating it into the land
use plans, we hope that it will at least give some
understanding of what we believe the future should be for these
land use plans for oil and gas development.
The Chairman. What specific action is the BLM taking with
regard to the EPCA report?
Mr. Griles. Well, what it will do, sir, it is incorporating
today into these ten land use plans that are underway. We
prioritized all the land use plans that we thought would
respond to the President's energy plan. And this EPCA report
will be integrated into those land use plans so that the public
and all stakeholders will know what we believe the potential
will be for oil and gas development, so that the people in the
West and all people in this country will know what these land
use plans will be looking at, and how can we go forward given
the conflicts with endangered species, as well as scenic values
that we have to deal with, as well as looking at where these
resources are located.
The Chairman. Now that you have completed the EPCA report,
can you characterize the significant features that the study
brought out with regard to oil and gas availability on Federal
lands?
Mr. Griles. Well, I will give you a quick summary. But I
think that question deserves more than me just trying to do it
from the hip. But I would like to give you a more detailed
response for the record, if I could.
I think that the conclusions I would reach from this is
that, yes, the report showed that a large amount of Federal
land, greater than 60 percent, were open for oil and gas, that
it in fact is under lease, much of it. But what it also points
out is that 40 percent of it is not. And of that 40 percent, it
shows that, I believe the number is in the 30 percent range.
And I would like to make sure we get that submitted to the
record, so my guessing is not incorrect.
The Chairman. Right.
Mr. Griles. But maybe 30 percent of the potential out there
is in these 40 million acres that are closed. And if we are
going to increase domestic oil and gas production, it is going
to be from those areas which are closed, as well as from those
areas that are open. We can do additional infield drilling. We
can do additional leasing from the areas that are not
restricted.
But even in those areas where it is open, we have seasonal
stipulations. We have restrictions imposed in those land use
plans that go way back, Senator, to when I was the assistant
secretary. These land use plans go back, in many instances, 15
to 20 years ago. They do not reflect modern technology. They do
not reflect an understanding of the science. And they do not
reflect better ways in which you can deal with these conflicts.
So we need to update all these plans, incorporate the other
stuff, and try to get a better public acceptance and
understanding of how oil and gas can be done in the West.
The Chairman. When you say we must, you mean if the
administration must do that. Is that correct?
Mr. Griles. Yes. These are administrative decisions that
the Department will reach with these ten high priority land use
plans that are under way right now and should be completed
within the next year and a half.
The Chairman. Various oil and gas industry experts say that
the number of APDs processed under the administration--that is
this administration--has fallen relative to the previous
administration. How do you explain this trend, if it is so?
Mr. Griles. Well, I think that may be an accurate number. I
am not going to dispute the number. I will explain it this way,
Senator. What we found when we came is that we did not have
these documents done. And until you have a land use plan that
authorizes the issuance of APDs, you cannot issue them. We
found that we did not have inspectors in the field to inspect
the oil and gas areas.
This committee and members of this committee have
increased, and asked for increases in, the budget for BLM. That
started even under the previous administration, increasing the
number of inspectors out there. Until you get these land use
plans completed, you cannot issue APDs. And so the numbers
probably are down. But they are down because without the
authority to issue an APD, if you issue it, you will just be
stopped in the court. That is not in the best interest of
anyone.
The Chairman. Thank you very much.
Senator Bingaman.
Senator Bingaman. Thank you very much.
Secretary Griles, thank you for being here. One issue that
I have been concerned about for some time is that it has
appeared to me that we have not had adequate resources either
to process applications, which of course is a major concern of
the industry, or to do the inspection and enforcement, which is
intended to happen, to be sure that people are actually
following the stipulations. Because I come at this with the
idea that not all stipulations are necessarily bad. In fact,
many of them are very important and need to be enforced.
And the extent of the conflict is growing, particularly in
some of the basins we are talking about, in the San Juan Basin,
for example. Your draft statement there that you are still
working on.
Mr. Griles. Right.
Senator Bingaman [continuing]. Indicates that you are going
to intend or expect to issue 10,000 to 12,000 new wells or
permits to drill new wells over the next 10 or 15 years. I
believe that is roughly accurate. And most all of that is
infield drilling.
Mr. Griles. That is correct.
Senator Bingaman. And there is more and more concern by
surface owners and others about the impact of this and the
failure to enforce the stipulations that do exist. Do you have
the resources you need to do this job right? I mean, we have
been going at this. When I asked Secretary Norton whether they
were going to add 13 new people up in the San Juan Basin, she
said yes, they were. I am still not confident that that is
adequate.
Could you give us your opinion?
Mr. Griles. I would say I do not know if 13 is adequate or
not. I will tell you that we are very concerned, as you are. I
would agree with all the sentiments you expressed, Senator.
Before I came back into government, one of the things that I
worked with you and others on the committee on was getting more
resources allocated to BLM to assure we had not only the right
to issue and the people to issue the permits, but to have
people on the ground.
We need to make sure that the landowners and the surface
owners know that we have adequate trained people that are going
to assure that the stipulations are enforced and met. If we do
not do that, the kinds of conflicts we have seen even in your
State that have arisen in the last 6 months will occur. We have
to provide that assurance.
We are going to be looking at that. The President's budget
asks for--and I will use a number, I think it is $15 million.
That may not be right. And maybe Patty can respond when she
comes up, if that number is correct--additional monies for
additional people. And those people are not only APD issuers,
but also inspectors on the ground.
I could not agree with you more that we have to make sure
that have enforced and assured that those stipulations are in
place.
Senator Bingaman. Well, I appreciate your comments very
much, because, you know, one area that is now being looked at
by the BLM for leasing is the Otero Mesa in my State. It is
very controversial, a lot of opposition. One of the things that
I hear from the opposition there is that all of this talk about
how the BLM will require that certain stipulations and
remediation occur, all of that is just hogwash, because, in
fact, they have not been doing it in the San Juan Basin. It
does not matter what the stipulations say. The BLM is not going
to enforce them. I mean, that is the line that we hear from
various of the groups that are opposed to that drilling.
I have not opposed the notion of drilling in that entire
area, but I certainly do hear some validity in their concerns
about whether or not the BLM is going to be prepared to go
ahead and actually enforce the stipulations that they are
saying they would enforce.
Let me ask about another issue, surface use conflicts. We
have a whole bunch of problems. Senator Thomas is, I am sure,
very focused on this issue of conflicts between coal production
and coal bed methane production. What is the department doing
to address those conflicts and get that resolved?
Mr. Griles. Well, two things. Just from a historical
perspective, Senator, this was a big, very big issue in the
late 1990's and the early 2000's. And I do not have any
personal knowledge except what was conveyed to me a few minutes
ago by some of the coal bed methane producers in the audience
and some of the coal companies. I was told that the prior
conflicts had been resolved in Wyoming. I do not know that is
true. I know that is what I was told. I do not have any
personal knowledge except for that information.
It is a fundamental issue that where the Federal Government
has offered and leased coal and offered and leased oil and gas,
that it is provided the rights to two different private
parties. And it did it back in the 1970's and 1980's before
there was a knowledge that coal bed methane had a real value.
So we have a conflict. The BLM adopted a directive about
how it ought to be dealt with. That has helped some. There is a
need potentially for some legislative consideration. Do we need
to find a way, if intractable arguments occur in the future,
about how to mitigate those? I would encourage you to look at
that. We will look at it with you to see if we think
legislative efforts are needed.
As I said to you, some of the problems of the past seem to
be resolved. But it may be something we ought to figure out how
better to assure that it does not occur in the future. The BLM
needs to understand that if it leases for oil and gas and there
is a coal lease there already, it creates an inherent conflict.
And it needs to be sure that that lease reflects some kind of
right of establishment. Those who are first time have the right
for the ones who come second can compensate and find a way that
is reasonable, not through extortion, but reasonable payment so
that values can be acquired.
Senator Bingaman. Thank you, Mr. Chairman.
The Chairman. Thank you, Senator Bingaman.
Before I yield to Senator Thomas, let me just say, Mr.
Secretary and Senator Bingaman, I was out in New Mexico and met
with Linda Rundell, the new Director of the BLM. And we spoke
of the issue that you just raised. And she is very aware of the
conflict that is brewing between the ranchers and the oil and
gas producers with reference to the stipulations and compliance
with them. And she is busy attempting to set up a plan to
figure out just what is needed, so that there is better
compliance so that we do not have this conflict growing into
something that prevents the appropriate use by both.
It is obvious that under multiple use, grazing is supposed
to take place, and ranching and also oil and gas development.
But we cannot have that continue if in fact one of the users,
to wit the ranchers, feel that the production people do not
care about their rights and do not do what they are supposed to
do.
So that is going to get done. If we have to find new money
to give them more inspectors and more field people, we are
going to do that. I assure those who are concerned about it
that I have already spoken to the administration. And I am
going to work personally on some of the appropriation matters
to make sure they have enough people to do it. Thank you for
raising the issue again, Senator Bingaman.
Now, Senator Thomas, would you like to proceed?
Senator Thomas. Yes. Thank you, Mr. Chairman.
I would like to say, as you point out, the two of you,
there are two factors. One is the split, where the surface
owner and the mineral owner are different. And the other, of
course, is where you have leases for coal and gas. So both of
those are very important.
Thank you for being here, Mr. Secretary. Last year Senator
Landrieu and I introduced a bill that had to do with altering
the Federal acreage cap for oil leases. And the productive
aspect of it was not charged against the total. Is the
Department supportive of that sort of an exemption on the cap?
Mr. Griles. Senator, we very much believe that the
chargeability law needs to be updated. It is a standard that
was adopted way back in the turn of the century. And it was
very low acreage. And that acreage every 10 or 15 years is
changed to reflect what is going on.
But the consolidation that has occurred in the oil and gas
industry and with the greater expansion of oil and gas that has
gone on in the West, it seems logical that we need to have a
chargeability number that reflects the current needs of capital
investment, and also to assure that the chargeability does not
inhibit the exploration and development of oil and gas. And I
think it has.
We would support your efforts and that of Senator Landrieu
to change the chargeability standard.
Senator Thomas. Well, the investment issue is really very
much a part of it, as you know. You know, one of the
difficulties, of course, in this whole thing is accessibility
and being able to do it in a fairly timely way. It seems like
at least part of the time the BLM, for example, will go ahead
and do the IS' and start to do the permitting. And then EPA
comes in later and says: Wait a minute. That is not done
properly. And it stalls the whole thing.
It seems like it would make sense if there was a little
more coordination in the production of those permits, rather
than having them observed later and sometimes being turned
back. What is your reaction to that?
Mr. Griles. I agree with you 100 percent, Senator. The
Government needs to coordinate its activities and its efforts.
We have initiated with the EPA and the State and the local
governments. And we are trying to do in each of these land use
plans and EISs a cooperative agency status so all parties are
sitting at the table. And they all have the opportunity to
participate in the decision making and in the writing of the
drafts, so that the final document, when it comes out, we do
not have the dispute, well, I was not at the table.
In the Dagmar Hills EIS that we have here, Senator, that is
exactly what we did. We have all the parties. The governmental
parties became cooperating agencies and gave them status so
that they have a legal and a moral obligation to participate.
So that we can say: You are at the table. You have the right to
participate. We expect you to participate. And we are trying to
do this at all levels of government, so that everyone is there.
And it is the result of those very comments.
Senator Thomas. Yes. I certainly met with Administrator
Whitman yesterday. And she also seems to be interested in doing
that. From the--you know, particularly in the methane area, the
length of time it takes to get permitting and so on has a great
deal to do with how this thing works out.
The other, sometime we talked about coal and how coal is
really our long-term resource for generation. But you have to
have transmission. And you have to have to have right-of-way
And I am told often the most difficult place to get rights-of-
way is on Federal land. How do you react to that?
Mr. Griles. Well, I would say that is exactly right. We are
not easy to deal with. That is probably a great understatement
for those in the audience----
[Laughter.]
Mr. Griles [continuing]. Including the conservation
community. But the fact is, Senator, these are not easy
processes to follow.
Senator Thomas. I know.
Mr. Griles. FLPMA and NEPA and all the other statutes we
have have historical perspective built in, as well as judicial
efforts. So we have to do it right. And doing it right, we
found, takes a lot of time and effort. It is now 2 years to do
one of these volumes, 2 years from the time someone comes to us
and says: I need a right-of-way. Okay. You need an EIS. It
takes a long time, probably 18 months at a minimum, to do an
EIS. Then it takes the decision-making process. A record of the
decision has to be built. And it goes through these processes.
It is 2 years.
One of the things that I mentioned earlier was the
cooperative effort with the Western Governors and the Western
utility corridors, which includes transmission pipelines, as
well as electrical wires. If we can do that in these land use
plans we are doing now, then that cuts that 2 years down to an
application of request and the processing of the application.
So if we can think through where these corridors are going
to be and do it up front, as we do these land use plans within
a swath, then that stops that. And you do not have to go
through the 2 years.
Senator Thomas. Well, the challenge for all of us is to
have access and multiple use of these lands, maintain the
environment, as well as being able to do that. So it is a
challenge.
I just want to commend Kathleen Clarke and the BLM for
working with DOE and the Forest Service on this thing. I think
that was an excellent effort. And I hope it can be worked in.
Thank you, sir.
Mr. Griles. Thank you, Senator.
The Chairman. Senator Alexander.
Senator Alexander. Thank you, Mr. Chairman.
On almost all these issues there is an intersection of the
energy and environment. There is a balance there. And I would
like to get your comments in two areas. You mentioned one.
Would you talk a little more about the new technology that
reduces the risk to the environment? Because that seems to me
to be awfully important. And where that technology might be
used to produce the greatest energy production benefit.
The second area is the idea already used in the law, which
was a part of the--which was a principal, which we talked about
in the mid-1980's, when I chaired President Reagan's Commission
on Americans Outdoors. And that was to take some of our
revenues from oil drilling and use it to fill up the land and
water conservation fund.
I wonder if one way to think about building a broader base
of support for additional drilling in the future is to allocate
more of those funds to particularly the State part of the
program.
Mr. Griles. Senator Landrieu is smiling. I cannot imagine
why.
Senator Landrieu. I am so happy to have a friend over
there.
[Laughter.]
Senator Landrieu. Not that I have favorites.
Mr. Griles. I will respond to the latter question first,
Senator. Obviously, the issue of revenue sharing with producing
States is something that has been before this body for a number
of years, a lot more years than a lot of people have been
senators and longer than I have been in Federal service.
So it is an issue that we struggle with, as to how you
incentivize States and local Government to participate, at the
same time how those resources are going to be shared. I have
seen bills that shared revenue from offshore drilling in 50
States. We do not even have oceans in 50 States. And yet they
are going to get revenues from it.
So the question is, do you put it in the Federal Treasury
and distribute it or do you give it to all the States?
Senator Alexander. Well, you put it in the land and water
conservation.
Mr. Griles. That is one way, sir. That is true. And that is
one that needs to be looked at.
Senator Alexander. As I understand, Federal lands belong to
all the taxpayers.
Mr. Griles. That is correct.
Senator Alexander. So revenues, if they were to be
distributed, would be distributed in some way to all the
taxpayers, would they not?
Mr. Griles. That is true. And the administration is always
willing to consider ways to find means to allow us to be better
neighbors. And also in the conservation field, how do we assure
that our conservation efforts can be enhanced? And that is the
kind of areas that the President is looking at, and how to
better do that.
As you and the other Senators look at how to do this, we
will be more than willing to sit down and discuss it with you.
In the fiscal constraints we have today, these are tough issues
to deal with. And we are not unaware of the need to have good
conservation on also revenue sharing to the States and
communities that are in fact the greatest impacted by the
exploration and development of the activities.
So let me move to the first question, if I could, for you.
Senator Alexander. Yes. And I just want to emphasize that
the--I am sure the recommendation came many years ago for that
kind of thinking. But one place it came from was the commission
appointed by President Reagan in 1985 and 1986. And it was a
unanimous recommendation of the commission.
Mr. Griles. And I was in the Reagan administration. And I
remember you serving as chairman of that. And you did a great
job for us then, and I am sure you will as Senator, too.
Let me just say that on the technology environmental
question, last week, within the last 2 weeks, I had a company
come in and gave me a CD and showed me new technology of how
one can explore and develop in the most sensitive areas,
environmental areas. And if I could best describe it, it would
be like to have ice pilings driven through the tundra. And the
platform would be set on the ice pilings. And it would move
from one set of pilings to the other. And the impact on the
tundra would be almost nonexistent.
The technology growth curve since even in the last 10
years, in the last 5 years, has been phenomenal. So anything we
do in terms of ANWR, we need to make sure we do not limit the
technology. We need to make sure we have the greatest
opportunity for technological advances. And that is going on
today in a pilot program that DOE is funding with the private
sector to see how in fact it can best work.
Many years ago, when we had oil and gas drilling, every
well had its own pad. Today we have a small pad, on which wells
for directional drilling can go out from several miles. So the
impact is greatly minimized. We need to do more of that. We
need to find better ways to do that.
The confluence of good environmental practices and good
technological advances are occurring every day. And we are
working with the industry to make sure those are put in place
through stipulations, as well as good practices that the
industry is doing.
Senator Alexander. Thank you.
The Chairman. Senator Burns.
Senator Burns. Thank you, Mr. Chairman.
Thank you, Mr. Secretary, for coming today. First, to give
you some kind of an idea, as you know, we have extensive coal
bed methane development in the south central part of Montana.
We have completed the EIS up there, which is 900 pages. And we
also have many more pages in the research on how we develop
that in a sensitive way.
Can you give me a time line, or where do we go from here?
It seems like after we complete this EIS and we jump through
all the hoops, it seems like something magic falls out of the
air, and we just--we are stalemated. In other words, there is
just the lack of any activity. There is lack of movement in the
Department.
So what are those challenges? How do we jump over that last
hurdle before we start most of the permittings being done? And
the only thing lacking is the green light to start a--what do
we have to do to get over that last hurdle?
Mr. Griles. Well, Senator Burns, I would like to respond
two ways. First of all, as you probably are aware, in my
private sector I represented a lot of the coal bed methane
companies. So I have a recusal on these particular documents
sitting here. So I do not want to respond specifically to any
of the things relating to coal bed methane, the issuing or
permitting. I am not involved in it.
Generically, I can respond this way: Any time the Federal
Government is involved, there is a process. And these processes
require people. It requires an understanding. And it requires
industry to produce the best document possible to meet the
standards. The confluence of those two in the beginning, in a
new area, takes some time to be done. But we will be happy, I
will be happy to have submitted to the record for you from
other people in the Department who are directly involved and
can respond to your question better than I can, if I could do
that, Senator.
Senator Burns. Now saying that, if you had this big
Christmas tree of things out here of what you think and what is
generally accepted in the scientific community of practices, in
the legislative sense, if you only had a wish for one thing to
happen legislatively, what would it be, so that we might help
you and help this country in its recovery of tremendous energy
resources that we have on our public lands?
Mr. Griles. Pass ANWR.
Senator Burns. Lisa, have you talked to him before this
hearing today?
It is something for--I would imagine in conversation--and,
of course, we have had many of them. But I just want--I want to
really say that the new BLM director is terrific. She is doing
a terrific job for you. And we understand that agencies get
jerked in all kinds of directions. And it took a long time to
get those laws in place. We could identify the misuse of those
laws, the unintended consequences of those laws. But it seems
like getting them changes to fit the times is very difficult.
I look forward to working with you and identifying those
areas and make some progress in some areas. We in Montana, I do
not think there is a State in the Union that is more sensitive
to the environment. But we are also very sensitive in the
prospects of balancing our State budget, as in the past, coal,
gas, oil, timber, all of these great resources in mining paid
for a lot of roads and a lot of schools, a lot of public
services, in the States that have a large amount of public
lands.
Just to give you an idea, I met with a group that said they
were being denied access to their national forest. Now I know
that is not under your jurisdiction. And he said, ``Those are
public lands.'' He says, ``By gosh, I'm part of the public. I
deserve access to that land.''
And I said, ``They also belong to that little, old lady on
5th and Park Avenue in New York City. And she don't want you on
that land. And so you go argue with her.''
That is the conflict. And we have--it seems like we do not
have a framework for dispute resolution. And I would recommend
that somewhere in the bureaucracy that we should form a
special--I know CEQ was supposed to be that answer. But it has
been used for other things, also. But I would recommend that we
find some way, if we have to go outside of government, for
dispute resolution.
That is the way we did on a little border problem called
the Milk River in mining in Canada. Three people from Canada
were assigned to that commission, three people from the United
States. They were from completely outside the industry. And
with no government pressure. We resolved that water issue out
of that mining project in Alberta and its impact on the Milk
River that, as you know starts in Montana, comes up into
Canada, and then comes back into--or up into Canada and then
comes back in Montana.
That has worked pretty well. And those border disputes that
we get into with our friends to the north and the impact that
they may have on the United States, especially in environmental
issues. So I would--we cannot--our only problem is the border
with Wyoming. We do not have any way to take care of that.
Senator Thomas. Do you see that red light out there?
[Laughter.]
Senator Burns. I am going to quit right now. But I wish you
would give us some consideration, though. And we might resolve
some of these areas that we think should either, let us say, if
we are going to say no, let us say no and move on. If we say
yes, let us say yes and move on. And I think that is what the
industry is looking for, is a decision to move.
I congratulate you and thank you for coming today.
Mr. Griles. Well, thank you, Senator. I--within the context
of these decisions, they are never easy. Multiple use is just
that. And it means there has to be a balance reached in all of
these decisions. And yes, you are right. These lands belong to
all Americans. And they need to be protected and managed for
all Americans. And that is a difficult choice that we have to
make every day within the Department of the Interior.
I do not go outside of Interior to get in a fist fight. The
Fish and Wildlife Service and Park Service, the BLM, Bureau of
Reclamation can all be arguing for the exact same piece of land
for entirely different missions. And as they go through the
resolution, all of a sudden the BIA shows up and says it
belongs to an Indian tribe who has a claim on it. So we have
those debates at Interior.
Kathleen Clarke is a wonderful Director of BLM. She is
trying to put the right people in the field in these State
directors and the field offices that can work with all the
stakeholders, so that the issues that each of you have raised,
that you have confidence that we are going to take care of
landowners' concerns. We are going to assure certainty in the
processes. And it is going to be an evenhanded, balanced
approach to decision making.
I just wanted to say, Senator Alexander, I would like to
offer you an opportunity. You should come up, or the entire
committee should come up, and visit the National Petroleum
Reserve, which we are drilling in Alaska, some very sensitive
areas, and see the technology that is now being employed. I
think it would really be an education that is just evolving
almost every day, as to how and what we are doing within these
sensitive environments.
I really would love to accompany you, love to offer you the
chance to come up.
Senator Alexander. Can we come in late June or July?
Mr. Griles. Absolutely, Senator. And I will be there with
you.
Senator Burns. Now is the time to go, right now.
I just want to offer a comment. And I know we have to deal
with some of these sensitive areas. But I want to--we have to
talk about fish and wildlife and my position on the
Appropriations Committee. End of comment.
The Chairman. Are you finished?
Senator Burns. Yes, sir.
[Laughter.]
The Chairman. Senator Landrieu.
Senator Landrieu. Thank you, Mr. Chairman.
I just want to begin by thanking the Senator from Tennessee
for his remarks regarding the land and water conservation fund.
I was really kidding, actually, because every member of this
committee has really contributed in many positive ways to this
debate over the last 6 years. And we represent different States
and different views. But we have made a lot of progress.
I want to thank you for your leadership and, as your
service as governor, leading that effort. I just gave a speech
to about 400 people yesterday from around the country,
Governors and recreational directors and interests, community
activists, environmentalists, business leaders. And the feeling
is very strong out there in this Nation that we need to
continue to pursue more balanced policies that allow us to make
more strategic and significant investments in the conservation
of our land and management of our land that we already own,
which is brought up quite often on this committee, and which I
agree with, in expanding the opportunities for recreation in
urban areas, in small communities, large communities, and to
maintain our wilderness and large national parks.
Senator, you have done an outstanding job, along with many
members. But there is a broad bipartisan grassroots and, my new
phrase top roots, around this country that feel very strongly
about this, Mr. Secretary, as you know.
My second comment, Mr. Chairman, is to thank our Assistant
Secretary Mr. Griles for his comments about the balance that is
required to achieve this and how promising I think--although
prices are high, and we are in the verge of a war, the economy
is in a dip, you would say: How could you be optimistic? Maybe
it is because I think sometimes pain and tightening helps us to
focus on what things we can do.
One of the great things that has happened in these
hearings, at least for me, is clarifying in my mind the
difference between the oil market and the gas market. While we
have limited control over the oil market, we have a tremendous
amount of control, Mr. Chairman, over the natural gas market
here in the United States, and the benefits of natural gas and
clean coal. I am more familiar with natural gas, of course. My
State is a huge producer. But the benefits of natural gas to
the environment, lie in the exciting and extremely promising
new technologies that exist to minimize the impact to the
environment.
So what I want to say and then ask a question is, it seems
to me that it is not that difficult, first, to understand why
it is important to stabilize our gas market, to recognize that
it is within our power to do so. It is not impossible to
streamline regulations, standardize regulations, open some
public lands--we do not have to open all public lands, but some
public lands--and to include revenue sharing with States and
communities, and an increased commitment to stewardship.
I want to show you a couple of charts, Mr. Chairman, if you
will just bear with me, about this stewardship idea. First I
want to show the Gulf Coast drilling in that chart here.
[Chart.]
Senator Landrieu. We have been drilling in Louisiana for a
lot of reasons. One, we have a lot of resources. Two--and you
will see that in the whole continental, Outer Continental
Shelf, $140 billion has come from offshore. You can see
basically where it has come from, off the coast of Texas and
Louisiana. The red shows that. I want, Mr. Chairman, for you
particularly to be able to see that.
There is a little bit off the coast of California. Now I am
not going to get into that debate right now. But I would just
say to you that we are happy to produce this in Louisiana. We
do so for a number of interesting reasons, which would take me
too long. But one of them is that the Government does not
necessarily--they own the land that you see there. But onshore,
private owners own the land and the mineral rights.
There as a great incentive, because the drilling, benefits
of the drilling, not only went to the Government that got
royalties and fees, but also the private landowners benefitted
financially and otherwise, as I believe is appropriate. Because
I think there is enough money to benefit the Government to
benefit the landowners, and to benefit the land itself, to keep
it as pristine as possible and to keep the water clean. I just
believe there is enough money.
With gas at $12, I know there is enough money. But even if
it was at $5, it is a huge amount of money. We are just not
distributing it correctly.
So we have been drilling offshore, of course. The Federal
Government owns the land. And let me just say to my friend from
Wyoming, he and I do this debate. And I am so happy that
Wyoming got $448 million last year from their drilling.
Louisiana sent $5 billion to the Federal Government. And we
did not get anything. Now I am happy for Wyoming to continue to
share in those revenues. But I do think it is important for
other States.
Now I want to show you what happens when you do not spend
your money correctly. Can you all see this picture?
[Chart.]
Senator Landrieu. This is 50 years of stupidity. This
highway, Mr. Chairman, is the highway, the only highway. It is
two lanes. There are 1,000 trucks a day, a day, 1,000 trucks a
day, that try to get, if you could visualize Louisiana from
somewhere like around New Orleans, which is south, but they try
to get from I-10, to this little tiny highway. This is it. It
is LA-1.
When it rains, it goes under water. This is the highway
that 25 percent of the Nation's energy supply depends on. And
while these trucks are trying to get down the highway, children
are trying to go to school. And so when the bridge closes, the
schools close. The people that work there--now you would think,
people in New York would not put up with this for one second.
It is just the way they are, the way people in California. I
mean, you know, we are like well, whatever. We have been
dealing with this for 50 years.
It is ridiculous. So I have asked for a portion of the
money to come back to reorganize this highway, protect the
environment, make it safe for everyone. And that is what this
is all about.
My point of showing you this picture is, I do not blame
people in the West, Mr. Chairman, for being upset about
drilling on land that they are using for other purposes. They
do not see what they are going to get out of it. They think
their land is going to be damaged. This is the Federal
Government's policy. So why would anyone with common sense want
any drilling anywhere?
But it is not hard to solve. You just fix it, revenue share
in the appropriate ways and make sure that a lot of that money
goes for environmental protection. And then we can have a good,
sound market for natural gas that helps us clean the
environment, keeps the air clean, and keeps prices low.
And the final point I will say about this is if we do not
get natural gas prices stabilized and down, this economy will
never recover. We are going to lose jobs. And instead of losing
the 2 million or whatever we have lost, we are going to lose
more, Mr. Chairman.
I thank you for giving me just a few moments. I will pass
on my questions, because you can understand the direction they
might be going. But I look forward to working with you on full
funding for land and water, proper stewardship, streamlining,
and opening up public access where it is appropriate.
Thank you.
The Chairman. Thank you very much. We look forward to
working with you on that, having you work with us on a
comprehensive bill. Thank you very much, Senator.
Now we have Senator Murkowski and then Senator Talent.
Senator Murkowski. Thank you, Mr. Chairman.
Good morning to you, Mr. Secretary. And I appreciate all
the lead-ins that everybody has given me. I mean, you have
given me ANWR. There has been some great pictures on how to do
it wrong. I wish I had the pictures on how to do it right. But
I appreciate the invitation that you have extended to all my
fellow committee members to come up to the great State and
really see how it can be done.
I think most people understand that Alaska is huge. We are
huge in just our geography. We are huge in our natural
resources. But, you know, to put it in perspective in terms of
our ownership, it is important to recognize that of the 586,412
square miles that are in the State, 68 percent of the entire
State is owned by the Federal Government.
I think you need to put that in context of your State,
whether it is Louisiana or Wyoming or Missouri, and say: What
would my State look like if 68 percent of it were owned by the
Federal Government? What would be happening within our State?
Within that makeup, in terms of ownership, we have 76
million acres of wildlife refuges, 51 million acres of national
parks, 26 million acres of BLM lands, and 23 million acres of
national forests. Million acres. This is huge.
When we talk about what is happening in the Federal lands,
and in our opinion the Federal Government's obligation to
manage these resources for not only Alaskans, but for all
Americans, we are talking about just huge numbers. And in terms
of what is available up there for America to meet our energy
needs, when we look at the National Petroleum Reserve and the
reserves that are available there, the mean average estimate
offered by USGS and Minerals Management, NPRA contains 9.3
billion barrels of oil and 59.7 trillion cubic feet of natural
gas. We are assuming these actual amounts. We are anticipating
that they are going to be higher.
As far as ANWR goes, the estimates there are between 3.5
and 16 billion barrels of oil. We are talking about huge, huge
quantities. Our problem, of course, as has been pointed out by
yourself and several other people in the hearings that we have
had over these past few days, is the access to them.
We are glad that we are moving ahead with the leasing on
NPRA. We are looking forward to that and to what we are going
to be seeing out of that. We need to make sure that we are able
to do the same on the coastal plain of ANWR and get moving
there with the recognition that it takes so long to get the
energy down the line to meet the needs across the country. And
we have some serious access issues. But I do not need to tell
you about that.
I would ask you to comment a little bit more. When you were
talking about the land use plans and the need to just re-up
them, make them more current, with the recognition that we have
enhanced in technology, and you hit just on the highlights of a
few. It is amazing. It is incredible what we have managed to
accomplish in terms of how drilling is conducted, at least in
the Arctic, between the time that we constructed the oil
pipeline 30 years ago and where we are now. It is a technology
that I think people could not have even dreamed of.
When you look to that footprint that we leave, whether--it
used to be multiple drilling pads. Now we are down to one
through the directional drilling. You have mentioned the pads
on the tundra. These are huge advantages. How can we make sure
that when we update these land use plans that we do not limit
ourselves to just the technology of that moment? Because this
is going to be critical. We tie ourselves to a technology that
does not exist anymore for all intents and purposes.
I want to know how we can help you in that regard. What do
we have to do? Is it more PR, or how do we get that message out
that we do do it better?
Mr. Griles. Senator, I think that there is--specifically,
the National Petroleum Reserve, we call it the West plan, is
now out for review. It is and has a lot of stipulations in it,
some to address and assure the balance of the environment and
the opportunity to drill for oil and gas are compatible, or at
least we understand the conflicts. The kind of technologies you
talk about, as you say, they are almost space age in comparison
to where we were 30 years ago. And they are.
One of the things that we are encouraging, not only these
land use plans, but in the lower 48 as well, is what I call an
adapted management principle. And how that works is, instead of
making all the decisions black and white, you have to allow for
discovery science and new technology. And you set up an
advisory committee. And you let that advisory committee have
the authority in the land use plan to go back and look at the
stipulations and see, okay, what in fact science has occurred
since that land use plan was completed.
What have we learned? And that advisory committee can set
up a subcommittee of experts and come back to the advisory
committee. And the advisory committee can make a recommendation
to the State director of BLM to modify them without going
through another 2- to 3-year planning period. And all the
interest groups, conservation groups and industry groups, can
participate in adaptive management principles.
And this allows us to assure that modern technology, and if
we find that we have an endangered species that we did not know
it was there, that occurs, we can modify those stipulations to
account for that, without going through this laborious planning
process that we have set in place.
But what that means, it means that all the affected parties
have to be willing to be there and participate and make sure it
happens. And they have to be willing to allow for flexibility.
And that is what we are encouraging in all of these land use
plans.
Heretofore, we said you cannot drill or you can drill. And
in many instances, neither answer was right, because we did not
know what the technology changes were going to be. And we
really did not know what the science was on those sites until
we had a full monitoring of the exact site.
Sometimes an endangered species would never show up during
drilling season. But the stip says you cannot drill from April
to May, because that is when they are supposed to be there. So
we find out they are not there. Let us drill. If we find out
they are there, when we did not think they were going to be
there, you should not drill, but they were authorized to drill.
The adapted management principles, in my opinion, will
create some uncertainty for industry, but it also creates the
certainty that we can do the best way to manage those kind of
activities.
NPREs, there were stipulations imposed in that plan 2 to 4
years ago that are not reflective of the technology today. One
of the things the BLM is going to go back and look at is in the
NPRs land use plan that was adopted, do those stipulations need
to be reflective of new technology? And can we, in fact, not
make them black and white, but ways to look at them so we do
not inhibit the opportunity for exploration, and we assure that
the environment is going to be protected?
So we are going to do those. And we are going to be
reviewing that again. So those are the kind of things
specifically you have asked that I hope respond to your
question.
Senator Murkowski. Well, I just hope they work.
Mr. Griles. I think they can work. I think the responsible
operators that you and I know that are in Alaska can make it
work. They will make it work. We in the Government have to be
partners with them and assure that they are in fact doing it
and they are doing it right. And in that regard, the
environment is protected, and the American people may get the
energy that is there.
Senator Murkowski. Thank you.
The Chairman. Thank you very much, Senator.
Senator Talent.
Senator Talent. Thank you, Mr. Chairman.
Let me just ask the witness, because I have been reading
through the different statements of the witnesses who are to
come. And they present vastly different pictures in a very
broad sense of what is happening on our public lands, which is
not uncommon in terms of these kinds of hearings.
Mr. Bayless is saying that basically most of the land is
unavailable for leasing and exploration either in theory or in
practice or both. And Mr. Alberswerth is going to testify that
most of the land is in fact available for leasing and
exploration, and that leasing and exploration is up and is
increasing. And it is at an intense level of activity.
I think that is a fair summation of both men. I am not
trying to put--they are both going to have an opportunity to
testify. And I am trying to be as neutral as possible in
summarizing them both.
This, of course, is an example of the kind of situation
that people in my position are put in. I cannot go out over all
of the public lands and get a sense of what actually is
happening on my own. Which in your view is correct, if you
would care to speculate? And I am going to ask both those
witnesses that, if I am still here and can do that.
And second, how can we get some kind of a system of
reliable estimations and information? So that people who are in
positions we are in have a reliable basis of facts to go on.
And I am not saying that your department is. And I am sure it.
But, I mean, you see? We get diametrically opposite, at least
in a general sense, statements about what ought to be questions
of fact. These are not opinions about which interest we ought
to weigh more or less. These are statements of fact about the
situation.
So would you care to comment on that?
Mr. Griles. Well, I think that is a legitimate question.
And I am sure both witness will respond to your concern. And
they can----
Senator Talent. If you do not want to comment----
Mr. Griles. Oh, I am more than happy to comment, Senator.
That is one thing you will find about me, unfortunately.
Senator Talent. Okay.
Mr. Griles. You know, I am not going to say either one is
right or wrong. This report says the following, that about 60
percent of the land is open for exploration and development.
Mr. Bayless will say, yes, but the 60 percent, you put
stipulations on them that say 90 percent of the time I cannot
be on the land. So it is not open. It is closed. And it is only
open 10 percent of the time.
Senator Talent. Let me just interrupt for a second. So when
Mr. Alberswerth says that--and he will speak for himself. I am
not trying to--because I like witnesses to comment on other
witnesses are saying. That is the only way we reach any
conclusions here. He says 85 percent of the technically
recoverable oil and 88 percent of the technically recoverable
natural gas resources underlying Federal lands in this region
of the country are currently available to leasing and
development.
He is talking about total amounts of energy. And you are
talking about acreage. Is that the reason for the difference?
Mr. Griles. Well, he is using a resource number of what is
technically recoverable oil and gas. And let me give you a
little bit of information on that.
First of all, on the acreage basis, you know, we can--this
report is as good of information as you are going to get on it
today. If you use a technically recoverable number, 5 years
ago, you would have said the amount of oil and gas that is in
the Powder River Basin was maybe 2 tcf. Today it is maybe 30.
Until you drill, until you open it, until you look at it, it is
all a guess.
So when you get into the numbers of what the resource
number is, is it economically recoverable? Is it technically
recoverable? Is it a resource? So these numbers are science
numbers. But they are science based on intuition, which people
like sit around the table. They say, well, my estimate is this.
Why is that? My estimate is this. Why is that? And they try to
come together with some consensus over the number.
But they will always have a range. And the ranges will be
based on technological considerations and economical
considerations. And science and government uses those kind of
ranges. And so when you ask the question, you can get three
different answers. And guess what? They are all right. They are
all right, based on the assumptions they make, as well as the
question and the way it is asked.
I think the U.S. Geological Survey, the Bureau of Land
Management, and those agencies are the best. And any time you
have a question, I will be happy to have them respond. But they
should never give you one answer. They should give you a range
of answer, because there is not one answer, because we do not
all the answers. We can tell you what our best guess is.
So these gentlemen will be responding. And I hope they will
be fair with you about that. They are always estimates. And
they are based on the assumptions they make. And you should ask
them: What are the assumptions you are making? If you change
that assumption to something else, what would the answer be?
In terms of the lands that are open, a lot of lands are
open. So the sources that we know about have been drilled. They
have been discovered. Where do you find and what do you project
the undiscovered resource? It is going to be in the undrilled
lands. So when you talk about undiscovered guesstimates, they
are going to be on the undrilled land.
So you have to look at that is where maybe 40 percent of
the area is not open. And so that is how these numbers play
out, Senator. And sometime when you have a moment, we will sit
down and we will go through some of these.
Senator Talent. I understand. And hearing formats are not
necessarily the best one for resolving these things. But I
wanted to at least raise the issue.
Mr. Griles. Absolutely.
Senator Talent. I thank you, Mr. Chairman.
The Chairman. Thank you, Senator.
I think we had better proceed to the next panel. Could I
just make one observation, as we change panels, Senator Talent?
One of the problems is, in addition to the one you raised, is
that frequently we think we have done something that we have
not. And so we change the law and assume that this and this and
this is going to happen. And it takes 5 years. And we find out
that we did not because of what is happening in the field, in
the courts, in the interpretations.
It appears to this senator that we have an opportunity
because a lot more studying has been done, as we prepare for
this bill than before, to make some decisions as to whether we
want to streamline some of the processes or not, and to
understand which ones we are streamlining, and they pertain to
which lands. Those will be tough votes, because some people
will assume that if you streamline, you destroy something that
is very sacred.
We have so much land that is not producing that many people
assume could produce, and we have a shortage of both natural
gas and crude oil, that we have to make some decisions on where
should some risks be taken. Should it all be absolutely
certain, or should we take some risks? And which way would we,
in making risks, which way would we move the teeter-totter? And
I think it is time to take a few risks on open public lands,
especially where there is--we are not speaking of a wilderness.
We are not speaking of a national park. We are speaking of
other public lands that are multiple use lands.
Mr. Secretary, appreciate it very much. And our staff will
be working with yours as we prepare to use those documents
which you have given us. We understand they are going to be
very helpful. And we thank all those who worked so hard to
prepare them.
Mr. Griles. Well, Mr. Chairman, thank you so much for the
opportunity to be before you. I look forward to working with
all of you as we go forward.
The Chairman. Yes, indeed.
The next panel is made up of Robert Bayless, Jr., from
Farmington, New Mexico, Independent Petroleum Association;
Steven Leer, Arch Coal; David Alberswerth, Wilderness Society
of Washington.
[Pause.]
Senator Talent, were you going to introduce one of the
witnesses?
Senator Talent. Yes, with your permission. Thank you.
The Chairman. Would you do that, please?
Senator Talent. Thank you. I appreciate that, Mr. Chairman.
We are pleased in Missouri to have the headquarters of Arch
Coal, with produces roughly 6 percent of the electricity used
by Americans each year. And I am grateful to have them there
and appreciate the opportunity to introduce today the president
and the CEO of Arch Coal, Mr. Steve Leer. Steve is an
outstanding industry executive and a member of our community. I
look forward to this opportunity to introduce him and, as a
member of the committee, to hear his testimony on these
important issues. And I thank, Mr. Chairman, for the
opportunity to do so.
The Chairman. Thank you very much, Senator.
Senator Talent. Thank you for being here today.
The Chairman. We will proceed with Mr. Bayless first. Thank
you so much for coming up here and giving us of your time. And
we appreciate hearing from you;. Your remarks will be made a
part of the record, as will the remarks of all the witnesses.
If you could proceed to streamline and make your remarks as
brief as possible, we would appreciate it.
STATEMENT OF ROBERT L. BAYLESS, JR., PRESIDENT, INDEPENDENT
PETROLEUM ASSOCIATION OF MOUNTAIN STATES
Mr. Bayless. I will attempt to do that. May I also, before
I make my remarks, add to the record a brochure that my
organization, IPAMS, has prepared. It has many of the facts
that we have discussed today.
The Chairman. It will be done.
Mr. Bayless. Thank you.
Mr. Chairman, members of the committee, I am Rob Bayless
with Robert L. Bayless Producer, L.L.C., and this year's
president of the Independent Petroleum Association of the
Mountain States, IPAMS. Today I am testifying on behalf of
IPAMS and the Independent Petroleum Association of America.
I would like to thank the committee for focusing its
attention on the significance of Federal land in developing a
sustainable national energy policy. There are three points that
I would like to make today.
First, I would like to call attention to the disconnect
between policies that increase demand for natural gas and
policies that restrict the access to supplies of natural gas.
Second, I would like to address industry's ability to meet
future demand and the important role that Federal lands and
land managers will play in that effort.
And third, I will address some of the misperceptions that I
believe are limiting a constructive dialogue on how to improve
the management of oil and gas and development on public land.
Over the last two decades, there has been a growing
disconnect between policies that encourage demand for natural
gas and policies that restrict access to new supplies. This
policy disconnect is a root cause of the high prices and
volatility currently being expressed in the marketplace.
Further, because many people are unfamiliar with the
impediments that encumber natural gas development on Federal
land, some question the gas industry's ability to meet the
Nation's future demand. Natural gas producers can meet the
Nation's future need for energy. But the Federal Government
must play an important role. It is, after all, the single
largest owner of natural gas reserves through its land
holdings.
The Federal Government must partner with industry to ensure
the efficient and environmentally responsible development of
its resources to meet current and future demand. Largely
considered a frontier with great potential, the Inter-Mountain
West has a strong track record that earns it broad enthusiasm.
The region not only produces nearly 20 percent of the total
natural gas in the lower 48, it is also the only region that
has consistently experienced growth in production over the last
30 years. And the best news is that it still contains more than
40 percent of the Nation's estimated and proven reserves.
My third point is that misperceptions about the Inner-
Mountain West have frequently clouded important policy
discussions. members of Congress have been regularly
misinformed and mislead about what is actually occurring on
public lands. Congress has been told that 95 percent of Federal
lands in the Inter-Mountain West are available for leasing.
This is inaccurate. A recent report by the Department of the
Interior sets the record straight, showing that 36 percent of
the region is off limits to leasing.
Another common misperception is that Federal lands in the
region have seen a rapid influx in drilling over the last 2
years. In reality, 30 percent fewer wells were drilled in 2002
than in 2001. And the number of wells drilled in the United
States in 2002 was approximately 80 percent less than in the
early 1980's.
Reports about an onslaught of development on Federal lands
have been pervasive, but also inaccurate. The Inter-Mountain
West has shown strong production growth over the last decade.
But only 5 percent of the Federal mineral estate in the region
is both leased and currently producing.
There are also misperceptions regarding the rate of new
permitting on public lands. Some groups have claimed that it is
accelerating. Having analyzed the BLM's own data, we find
evidence to the contrary. An application for permit to drill,
an APD, that, according to BLM guidance should take 30 days to
process, takes on average 137 days to be approved.
Despite the best intentions of BLM leadership, agency
performance, in the processing of applications, decreased by 60
percent in 2000. What is worse, the level of uncertainty has
grown. Last year, companies seeking permission to drill waited
as long as 370 days for Federal approval. In just one year, the
average permitting time has nearly doubled.
I mention BLM performance not to disparage their efforts,
but to draw attention to the needs of an agency that is
inadequately funded and desperately in need of additional staff
and new technology.
In closing, I would like to reiterate that our industry can
meet the Nation's growing demand for natural gas. But it will
occur one well at a time. Meeting this future demand will
provide a partnership between industry and Government. Policies
that provide adequate and timely access to the resource will
bring gas to market more quickly and help stabilize gas prices.
IPAMS and IPAA stand ready to aid Congress and the
administration in reducing the barriers to the appropriate
development of the abundant resources on Federal lands.
Thank you.
The Chairman. Thank you very much.
[The prepared statement of Mr. Bayless follows:]
Prepared Statement of Robert L. Bayless, President,
Independent Petroleum Association of Mountain States
Mr. Chairman, members of the committee, my name is Robert L.
Bayless, Jr., Executive Manager of Robert L. Bayless, Producer LLC, and
this year's President of the Independent Petroleum Association of
Mountain States (IPAMS), based in Denver, Colorado. Today, I am
testifying on behalf of IPAMS and the Independent Petroleum Association
of America (IPAA). IPAA and IPAMS represent virtually all of the
independent oil and natural gas producers across the nation.
Independent producers drill 85 percent of the wells, and produce 40
percent of the oil and 65 percent of the natural gas in the United
States.
I would like to thank this committee for focusing its attention on
the significance of federal land in developing a sustainable national
energy policy. Policies that either limit or encourage energy
development on federal land have very real consequences. Policies that
promote the use of a particular energy source, yet fail to provide for
the necessary and orderly development of that same resource are
predisposed to failure. Such has been the predicament of policies that
address natural gas.
There are three main points I would like to make today. First I
would like to call attention to the growing disconnect between policies
that increase demand for natural gas, and policies that restrict access
to supplies of natural gas. Second, I would like to address industry's
ability to meet future demand and the important role that federal lands
and land managers will play in that effort. Finally, I will address
some of the misperceptions that I believe are limiting a constructive
dialogue on how to improve the management of oil and gas development on
public land.
Over the last two decades, a disconnect has grown between
environmental policies that encourage demand for natural gas, and
federal land management policies that restrict the development of new
supplies of natural gas. This policy disconnect is a root cause of the
high prices and volatility currently being expressed in the
marketplace. Furthermore, because most people are unfamiliar with the
many impediments that encumber natural gas development on federal land,
some question the gas industry's ability to meet the nation's future
demand for natural gas.
Natural gas producers can meet the nation's future need for natural
gas, but the federal government must play an important role. The
federal government is the single largest owner of natural gas reserves
through its land holdings. The federal government must partner with
industry to ensure the efficient and environmentally responsible
development of these resources to meet current and future demand.
In the Inter-Mountain West, a gas industry/government partnership
will be critical since more than half of the mineral estate is owned by
the federal government (figure 1).* Largely considered a frontier with
great potential, the Inter-Mountain West has a strong track record that
supports the broad enthusiasm for the region. The region not only
produces nearly 20 percent of the total natural gas production in the
lower 48, it is also the only region that has consistently experienced
growth in natural gas production over the last 30 years (figure 2).
And, the best news is that it still contains more than 40 percent of
the nation's estimated and proven reserves (figure 3).
---------------------------------------------------------------------------
* Figures 1-8 and the appendix have been retained in committee
files.
---------------------------------------------------------------------------
My third point is that misperceptions about the Inter-Mountain West
have frequently clouded important policy discussions. In short, I
believe that Members of Congress have been regularly misinformed and
misled about what is actually occurring on public lands.
For example, Congress has been told that 95 percent of federal
lands in the Inter-Mountain West are available for leasing. So
pervasive is this misinformation that it is often quoted in hearings on
both sides of the Hill. However, a recent report by the Department of
the Interior (See Appendix for more on the EPCA Report) sets the record
straight, showing that 36 percent of the region is off limits to
leasing.
Another common misperception is that federal lands in the Inter-
Mountain West have seen a rapid influx in drilling over the last two
years. In reality, 30 percent fewer wells were drilled in 2002 than
were drilled in 2001. To put this in perspective, the number of wells
drilled in the United States in 2002 was approximately 80 percent less
than in the early 1980s.
Reports about an onslaught of development on federal lands have
been pervasive, but upon further discovery are also found to be
inaccurate. While the Inter-Mountain West has shown strong production
growth over the last decade, only five percent of the federal mineral
estate in Inter-Mountain West is both leased and producing (figure 4).
Much of the recent growth in production from the region is attributable
to development on state and private lands (figure 5). In Colorado,
Utah, and Montana, production from federal land has not even begun to
keep pace with production on adjacent private and state lands (figures
6 & 7). In Colorado for example, per acre production from non-federal
land is six times greater than per acre production from federal land.
A misperception also exists over the level of protection and
environmental analysis required prior to the approval of a drilling
project on federal land. Contrary to popular myth, the time and costs
of preparing environmental studies have increased exponentially in
recent years, reaching a level that prevents many smaller companies
from considering projects on federal land. (See Appendix for more on
NEPA)
Another misperception involves alleged changes or improvements to
the permitting process. Using the Bureau of Land Management's own data,
IPAMS recently examined the permitting performance for all the BLM
offices in the Inter-Mountain West (figure 8). What we found confirmed
our deepest frustrations about the delays associated with working on
federal land. An Application for Permit to Drill, or APD, that
according to BLM guidance should take 30 days to process, takes on
average 137 days to be approved. Despite the best intentions of BLM
leadership, agency performance in the processing of applications
decreased by 60 percent in 2002.
What's worse, the level of uncertainty has grown. In 2002,
companies found it harder than ever to plan their business around BLM
permitting uncertainties. For example, companies seeking permission to
drill waited an average of 137 days, and sometimes as long as 370 days
for federal approval. In just one year the average permitting time has
nearly doubled. I mention BLM performance not to disparage the efforts
of an agency that I believe is truly doing its best in spite of
inadequate funding, limited personnel, and antiquated technology.
Instead, I mention these facts to illustrate that misperceptions and
misinformation often prevent us from focusing on solutions to the many
real challenges associated with developing natural gas on federal land.
In closing, I would like to reiterate that our industry can meet
the nation's growing demand for natural gas, but it will occur one well
at a time. Meeting the nation's future demand for natural gas will
require a partnership between industry and government. Policies that
provide adequate and timely access to the resource will bring gas to
market more quickly and also stabilize prices. IPAMS and IPAA stand
ready to partner with Congress and the Administration to reduce the
barriers in developing the abundant resources on federal lands.
Additional Testimony Regarding Energy Production on Federal Lands
The Independent Petroleum Association of America (IPAA) and the
Independent Petroleum Association of Mountain States (IPAMS) would like
to submit additional testimony for the February 27, 2003 hearing on
energy production on federal lands. Specifically, we would like to
address issues involving assessments of the federally controlled
resource base.
In 2002, RAND released an Issue Paper presenting ``A New Approach
to Assessing Gas and Oil Resources in the Intermountain West.'' This
new approach can be graciously considered as a well-intentioned
misunderstanding of the federal development process or more critically
viewed as a specious effort to further misdirect the issues associated
with access to the resource base by those opposing its development.
Taken to its logical conclusion the RAND approach would vest in the
federal bureaucracy the determination of development decisions that are
now--and properly so--a part of the federal permitting process. The
federal government has never been positioned to make economic judgments
on the development of its resources--nor should it be. That is the role
of the permitting process. The RAND approach should be rejected for
what it is--a theoretical but inappropriate think tank white paper.
In broad terms, RAND inaccurately presents the role of the recently
released EPCA Study that addresses both the location of natural gas and
oil resources underlying federally controlled lands and the federal
restrictions to accessing these reserves. It is essential to put the
intent of the study in perspective, which is stated in the Executive
Summary of the report:
It is important to emphasize that this inventory was prepared
at the direction of Congress. It is not a decision making
document. The inventory identifies areas of high and low oil
and gas potential and the nature of constraints to the
development of those resources in five basins in the Interior
West. Any reassessment of these restrictions on oil and gas
activities will occur in public-land use planning or the
legislative process, both of which are fully open to public
participation and debate over the appropriate balance between
resource protection and resource development.
The primary interest in developing this information relates to
assuring that the debate over access is addressing real issues--land
where the resources are, the restrictions that exist there, and the
basis for those restrictions. It is a valuable tool to get beyond the
false arguments that have been made over the past few years that 95
percent of federal lands are available to leasing. With the SPCA Study,
these efforts at misdirection can be avoided.
However, RAND tries to obfuscate the issue by suggesting new
factors should be considered. Specifically, RAND suggests that the
determination of resources should be based on a new test--viable
resources. To move from the current approach of defining ``technically
recoverable'' resources--the type of analysis in the EPCA study--to
``viable resources,'' RAND proposes three additional factors. These
are: (1) exploration and production costs, (2) infrastructure and
transportation costs, and (3) environmental impacts. All of these are,
in fact, elements that go into the ultimate development decision for a
resource. At issue is not whether they are factors, but how they will
be used.
In the RAND approach, the federal government would assess these
issues. While the environmental impacts of development are an
appropriate issue for the federal government to ultimately address, the
economic determinations are not.
In the RAND theory, the federal government would assess whether the
wellhead price was adequate to justify development. RAND even includes
a simple graph demonstrating that its economic assessment in a specific
basin diminishes the justifiable resource to a negligible volume. The
RAND theory would also have the federal government determine if there
was adequate infrastructure and transportation to move the produced oil
and natural gas to market.
Simply put, the federal government is not positioned to make these
determinations. This is the role of the permit process and capitalism.
Currently, those who believe they can meet the economic challenges of
finding, producing, and transporting oil and natural gas drive the
development decisions. If they believe they can economically develop
the resource, they apply for permits to drill. This is a logical and
proper approach. No U.S. Geological Survey assessment of a resource
will be as robust as those who seriously seek to develop it. They will
look to more extensive information and, if convinced, will take the
risk to find it. Risk is the key issue here. The federal government
does not bear the burden if its assessment is right or wrong. But those
who want to permit an area do. If they fail, they lose the money. So,
they will carefully choose when and where to develop. They will make
the decisions regarding whether the wellhead price is adequate--or will
be. They will make the decisions on whether the infrastructure is
adequate--or will be. This is the proper place for these decisions to
fall--not the RAND approach of tossing these choices to the
bureaucracy.
The final issue of environmental impacts becomes a part of the
permitting process. On a case-by-case basis, the federal government
makes the decisions regarding what environmental requirements must be
met to develop an area. It has been an imperfect process for decades.
But, it should remain a function that is applied through the
development of Resource Management Plans and permits. If the
environmental protection requirements are too severe, they will limit
or stop development. At the same time these decisions should be based
on sound science and pragmatic management of the environmental needs of
each area.
The RAND approach fails a key test--where decisions should be made.
It may be interesting reading, but it is valueless as a policy tool.
Thank you this opportunity to submit testimony. We look forward to
working with the Committee on these important issues in the coming
months.
The Chairman. I think we will proceed to hear the witnesses
and then inquire of them, unless somebody wants to otherwise.
Let us proceed then.
The next witness is Mr. Steven Leer. You have been
introduced, Mr. Leer. Please proceed.
STATEMENT OF STEVEN F. LEER, PRESIDENT AND CEO, ARCH COAL,
INC., ON BEHALF OF THE NATIONAL MINING ASSOCIATION
Mr. Leer. Thank you, Mr. Chairman and members of the
committee. And thank you, Senator Talent, for that gracious
introduction.
As Senator Talent said, I am president and CEO of Arch
Coal. And I am here on the behalf of Arch Coal and the National
Mining Association. I appreciate the opportunity to appear
before the committee and ask that my entire written statement
be made part of the hearing record.
The Chairman. It will be made a part of the record.
Mr. Leer. Mr. Chairman, we want to thank you for holding
these hearings on the important role of resources found on
Federal lands and how those resources will play in a balanced
national energy strategy. We also want to commend your efforts
to produce balanced comprehensive energy policy legislation.
The need for legislation is being driven home daily, as we
witness the stunning run-up in stop market prices for oil and
gas over this winter, prices that will be reflected in the
energy markets as well and will be reflected in our economic
performance.
Affordable and reliable energy is a necessity for economic
growth. One of the foundations of our economy is reasonably
priced abundant energy. Coal is the fuel of choice for over 50
percent of the electricity generated in the United States. Low-
cost coal-fired electric generation has tripled since 1970,
while criteria emissions are only 70 percent of what they were
1970.
The Chairman. Would you state that again, please?
Mr. Leer. Coal-fired electricity is about 50 percent of the
Nation's generated electricity today. Low-cost, coal-fired
electric generation has tripled since 1970, yet criteria
emission, as measured by the EPA, are only 70 percent of what
they were in 1970. The Clean Air Act is working is what that
really says.
The Chairman. Right.
Mr. Leer. With approximately 395 million tons of production
in 2001, the latest available data, coal from Federal lands
constitutes 35 percent of the domestic production. In the
Western United States, 71 percent of the coal is produced from
Federal lands. These mines on Federal lands directly employ
approximately 11,000 workers with annual wages of nearly $500
million. Royalties paid to the Federal Government were an
estimated $337 million in 2001, with many millions more paid
through bonus bids to obtain the leases.
In 2001, my company paid over $145 million in royalties,
bonus bids, taxes, and fees to the Federal and State
governments from a single mine in Wyoming. That is over 40
percent of the total sales realization from that operation. And
it does not include income tax.
Because coal is a domestic energy resource that is
reliable, affordable, and, through the use of clean coal
technologies, increasingly clean, coal can and should continue
to play a major role in meeting the energy needs of our Nation
in the future. Of the known Btus in the ground in the United
States, 85 percent are in the form of coal, 10 percent are
natural gas, and 5 percent are oil.
Coal production will increase. And much of this new coal
will be from reserves located on Federal lands or lands
effectively controlled by Federal policies. BIA estimates that
the Nation will require an additional 300 million tons of coal
production per year by 2020. 90 percent of that additional 300
millions of production will probably be produced from Federal
lands.
With coal from Federal lands projected to play an
increasingly important role in meeting our growing energy
needs, Federal policy should promote efficient and responsible
production of coal resources. To meet this anticipated need and
to fulfill the balance in environmental and economic visions
that I have heard many in this room articulate, demand limited
and focused modifications to the Federal Coal Leasing Act of
1976.
These changes will help enhance our use of domestic energy
in a time of increasing uncertainty. Neither NMA nor Arch
advocate a wholesale reform of the Federal Coal Leasing Act.
However, we do support the focused modification of a limited
number of provisions that, one, no longer reflect the economic
and market realities; two, result in bypass of nearby coal
reserves from existing leases; three, compel inefficient
production; and, four, reduce Federal and State royalties and
bonus bid revenues.
Specifically, we propose eliminating the 160-acre life of
lease limitation on Federal modifications to mines so that
smaller adjacent tracts of noncompetitive Federal coal that
would be otherwise bypassed can be added to a Federal coal
lease. Particularly in the West, the mines have gotten and
larger. And 160 acres is really something that was appropriate,
probably, back in 1976, but is just inappropriate today.
Giving the Secretary discretion to allow consolidation of
leased reserves that will require more than 40 years to mine,
thereby providing long-term efficiency and orderly development
of Federal, State, and private coal and minimizing the
potential for bypassing nearby coal resources and the attendant
loss of Federal and State royalty and tax revenues. Again, the
mines are much larger. Our largest mine has over $800 million
invested and produces over 70 million tons a years, which, to
put that in perspective, is 30 miles of unit trains every day.
It is not a train crossing anybody wants to be at.
Allowing the Secretary to accept the payment of advanced
royalties in lieu of continued operations for a total of 20
years and allowing the lessees to apply those paid royalties
against actual production beyond the current 20-year
limitation, while simplifying the methodology for computing
advanced royalties.
And the last point would be allowing--excuse me, second to
last point--allowing the Federal coal lease to lessee to file
its mine plan with the Secretary later than three years after
the issuance of the lease, but before taking any action on the
lease that might cause a significant environmental disturbance,
so that the coal operator can coordinate his preparation and
submission of its MLA plan, lease plan and mine plan, dealing
with the coal resource recovery with the permit required under
the Surface Mining and Control Act, SMACRA, which addresses the
environmental planning and production measures, as appropriate.
And last point is clarifying that the act does not require
a bond in connection with deferred bonus bid for coal leases
while protecting the Federal interests, but that if a lessee
fails to pay an installment of a deferred bid on or before its
due date, the lease would revert back to the Federal
Government.
These changes recognize the long lead times and the
extremely large capital expenditures necessary to produce
Federal coal in the most efficient low cost and environmentally
sensitive manner.
I have reached my time, but I would like to add just one
last comment on some of the other--really, following perhaps
Senator Talent's point. We talked a bit about coal bed methane
and the Powder River Basin as a huge producer of both coal and
coal bed methane. Really, legislation is urgently needed to
provide a statutory mechanism to resolve the mineral
development conflicts, which have resulted from conflicting
leases issued by the Federal Government and since the 1999
Supreme Court decision that reversed the previous practice in
the Souther Ute case.
This committee has previously reported legislation to
provide a mechanism to resolve these conflicts. And we are
eager to work with the committee to report a comparable measure
as a free-standing legislation or part of a broader energy
package.
My prepared statement also does make some comments on the
poorly developed and, I would argue, legally questionable late
2004 service roadless rule. And I think it is imperative of
expeditiously addressing the need for western regional power
planning process to facilitate the siting and construction of
necessary generation and transmission.
Again, I would like to thank you, Mr. Chairman, for all of
your hard work, and the committee's, because this is very
important to the Nation. Thank you.
The Chairman. Thank you very much.
[The prepared statement of Mr. Leer follows:]
Prepared Statement of Steven F. Leer, President and CEO, Arch Coal Inc.
Mr. Chairman, my name is Steve Leer. I am President and CEO of Arch
Coal, Inc. headquartered in St. Louis, MO. I am appearing here today on
behalf of the National Mining Association (NMA) to testify on the
important role energy resources on federal lands, specifically coal
resources, have in maintaining the reliable and affordable supply of
energy that our nation needs to support our economy. Thank you for the
opportunity to present the mining industry's views on this subject.
summary
Affordable, reliable energy is a necessity for economic growth.
Domestic, affordable and increasingly clean coal provides over 20% of
all the energy that is used in the United States and is the fuel of
choice for over 50% of the electricity generated in our nation today.
Nearly 35% of our coal production is from mines on federal and Indian
lands. Over one-third of the nation's coal reserve is found on lands
owned or controlled by the federal government. Forecasts show that
close to 90% of new production expected to come on line over the next
20 years will be from mines on federal lands. This statement will
discuss the changes in policy needed to ensure that the vast resources
on federal lands can contribute to the goal of energy self-sufficiency
while at the same time ensuring that both the environment and the
economies of the regions in which these resources are located are
protected and advanced.
general introduction
Arch Coal, Inc., headquartered in St. Louis, MO is the second
largest coal producer in the United States. In 2002, our operating
subsidiaries mined nearly 115 million tons of coal--approximately 11
percent of the nation's production--from surface and underground mines
in Wyoming, Colorado, Utah, West Virginia, Kentucky and Virginia. Arch
shipped coal to approximately 140 power plants in 30 states, providing
the fuel for 6% of the electricity used by Americans last year. Arch
owns or controls approximately 3.0 billion tons of coal reserves
including reserves on federal lands.
In 2002, our company mined nearly 70 million tons of low-sulfur,
sub-bituminous coal from our operating mines in the Powder River Basin
(``PRB'') of Wyoming, 7 million tons in our West Elk Mine in Colorado
and 13 million tons from three mines in Utah. This coal is almost
exclusively mined on federal lands. One of Arch Coal's highest
priorities is to operate safe and environmentally responsible mines. We
are very proud of the safety and reclamation performance of our mines
and the national recognition we have received from the Office of
Surface Mining (OSM) and the Mine Health and Safety Administration
(MSHA) for our efforts
The National Mining Association (NMA) represents producers of coal,
metals and non-metal minerals, as well as manufacturers of processing
equipment, machinery and supplies, transporters, and engineering,
consulting and financial institutions serving the mining industry. The
members of NMA produce over 80% of America's coal, a reliable,
affordable, domestic fuel choice used to generate over 50% of the
electricity used in the nation.
coal from federal lands is an important contributor
to a balanced national energy strategy.
Mr. Chairman we would like to commend you for holding these
oversight hearings on the important role resources found on federal
lands play in a balanced national energy strategy. Energy, whether it
is from coal, oil, natural gas, uranium or renewable sources, is the
common denominator that is imperative to sustain economic growth,
improve standards of living and simultaneously support an expanding
population.
There is no question that our nation will require more energy in
the future both for economic reasons and to support a larger
population. We will use energy more efficiently due to technological
advances, conservation and increased efficiency. But, we will use more
energy. Meeting this demand with reliable affordable energy while
maintaining high environmental standards will be a challenge, but a
challenge that can be met with the correct policies that consider and
enhance the role of all energy sources, including those sources found
on federal lands.
the role of coal in u.s. energy
Coal reserves, which are geographically distributed throughout the
US, comprise the greater share of the nation's energy resource base.
The demonstrated coal reserve is over 500 billion tons, a reserve large
enough to support a growing coal demand for over 200 years. In 2002,
1.1 billion tons of coal were produced in mines located in 26 states.
Coal, or electricity generated from coal is used in all 50 states. The
coal industry contributes some $161 billion annually to the economy and
directly and indirectly employs nearly 1 million people.
Last year, close to one billion tons of coal were used to generate
over 50 percent of all electricity used in the U.S. Although this is
more than triple the amount of coal used for electrical generation in
1970, emissions have declined by over one-third. The Energy Information
Administration forecasts show that electricity use will increase by
another 40% by 2020 and that coal use for electricity will total at
least 1.265 billion tons in 2020, some 280 million tons or 28% more
than is currently utilized. Data supporting the EIA Annual Outlook 2002
forecast shows that over 90% of the increase in coal production needed
to meet these new requirements will come from coal reserves located on
federal lands.
Meeting electricity demands will require construction of new power
plants including coal fired power plants and transmission facilities to
move the power to where it is needed. Although beyond the scope of this
hearing, the comprehensive energy bill that is ultimately passed by the
Congress should include provision for incentives that allow companies
building these new plants to assume the risks of commercializing new
advanced clean coal technologies. The mining industry supports
legislation designed to provide a measure of burden-sharing to cushion
the cost of improving the environmental performance of existing coal-
based generating facilities and to stimulate deployment of advanced
technologies to further reduce emissions and improve efficiency in new
generating facilities.
Coal fired electricity is and will remain the most reliable and
affordable electricity available. Electric rates in regions dependent
upon coal for electricity average at least one-third lower than rates
in regions dependent upon other fuels for electricity. Forecasts show
that these differentials will remain in place over at least the next
twenty years.
Because coal is a domestic energy resource that is reliable,
affordable and, through utilization of clean coal technologies,
increasingly clean, coal can and should continue to play a major role
in meeting the energy needs of our nation in the future. Coal
production will increase and much of this new coal will be from
reserves located on federal lands or effectively controlled by federal
land policies.
coal on federal lands
Coal mined on federal lands provides a vital portion of the
nation's domestic energy supply. In 2001 (the latest data available)
approximately 395 million tons of coal, 35 percent of national
production, was mined on federal lands. Considering western production
only, 71 percent came from mines on federal lands and, considering that
the majority of privately held western reserves are on lands that are
effectively controlled by federal land policies one can assume that at
least this much or more of the growing western coal industry depends
upon federal land management policies. Coal mines on federal lands are
found in Colorado (68% of production within the state), Montana (56% on
federal lands and another 13% on Indian lands), New Mexico (26% on
federal and 35% on Indian lands), North Dakota (8%), Oklahoma (46%),
Utah (75%), Washington (53%) and Wyoming (85%). In addition, 100% of
Arizona's coal production occurs on Indian Lands.
Coal produced on federal lands contributes directly to local
economies in a positive way. In 2000, this coal was worth over $3
billion. Production activities provided high paying jobs for at least
11,000 workers in 2000, paying wages of nearly $500 million.
Considering both direct and indirect economic benefits, coal produced
on federal lands provided employment for nearly 110,000 workers with
wages of over $3 billion dollars. Royalties paid to the Federal
Government due to coal produced were an estimated $337 million in 2001.
Additionally, several million dollars annually is received by the
federal government and shared with the public land states from bonus
bids for federal coal tracts.
All the benefits of coal mined on Federal Lands do not remain
within the region as this coal is shipped to electric generators in 30
states. Taken as a whole, coal mined on federal lands is used to
generate over 40% of all electricity generated from coal, or
approximately 20% of all electricity produced in the U.S.
The Federal Government owns about one-third of the Nation's coal
resources, which are located on approximately 76 million acres of land
principally in the Western United States. Western federal lands contain
approximately 60 percent of the total western coal reserve base. An
additional 20 percent of the coal resources in the West are managed or
impacted by the Federal Government by virtue of (1) the commingling of
State and private coal reserves with Federal leases and (2) trust
responsibilities for Indian lands.
mineral leasing act modifications
As stated earlier, over one-third of our coal reserve is owned or
controlled by the federal government. In the western United States 80
percent of the coal comes from federal lands. Further, a majority of
privately held western coal reserves are on lands that are effectively
proscribed by federal land policies, because of the commingling of
state and private coal reserves with federals leases. To meet the
demand described above, limited, focused modifications to the Mineral
Leasing Act of 1920 (MLA) must be made. These changes will also help
ensure the nation's energy independence in a time of increased
uncertainty.
The MLA authorizes the Department of the Interior through the
Bureau of Land Management to lease federally owed coal for development
by private lessees subject to payments and other lease terms and
conditions. Significant leasing of federal coal did not occur during
the first 40 years of the MLA. However, by the early 1970s, the amount
of coal under lease was four times the amount leased prior to 1960, but
actual production had not increased significantly. This raised concern
about the holding of vast coal reserves for speculation and whether the
government was receiving a fair return for the resource.
In 1976, after several administrative moratoriums on coal leasing,
Congress addressed these concerns with the passage of the Federal Coal
Leasing Act Amendments Act (FCLAA). FCLAA imposed a series of
requirements related to development time frames, land use planning, and
royalty rates for federal coal leases. Many of these policies were
based upon forecasts of immediate spikes in coal demand and prices in
the wake of the 1973-1974 oil embargo. For example, FCLAA's legislative
history cites forecasts that predict coal demand reaching as high as
1.4 billion tons by 1980. Although these events spurred development of
western coal reserves, coal demand never reached the level predicted
and coal prices actually declined in real terms by $10 a ton in just 10
years following FCLAA's enactment.
In many respects, the coal leasing policies adopted in FCLAA were
intended to address a coal market and industry structure anticipated in
a different era. In the more than 25 years since FCLAA's enactment, the
coal industry has undergone a substantial restructuring in order to
survive a market and price structure that dictates flexibility and
efficiency. While there are many features of the federal coal leasing
program that present impediments to the most rational and efficient
development of federal coal resources, today we focus our testimony on
modifications to a limited number of provisions that: no longer reflect
economic and coal market realities; result in the bypass of nearby
federal coal reserves; compel inefficient production; and reduce
federal and state royalty revenues.
These changes recognize the long lead times and extremely large
capital expenditures necessary to produce federal coal in the most
efficient, low cost and environmentally sensitive manner. Moreover,
they reflect the very type of flexibility most private coal lessors
retain in order to assure that their coal resource can be fully
developed so they can maximize their return in the form of future coal
royalty revenue.
Coal Lease Modifications: Current law recognizes that it might not
always be possible to determine all the lands to include in an initial
lease due to geologic uncertainty or other reasons. In an effort to
balance the desire to ensure federal coal is competitively bid, with
the realization that an operating mine may need to add unleased federal
coal, it was provided that up to 160 acres in the aggregate could be
added to a federal coal lease. This provision would eliminate the 160
acre life-of-mine limitation on federal coal lease modifications. This
provision would allow the Secretary to add smaller quantities of non-
competitive coal to an existing lease outside the time consuming lease-
by-application process. This valuable tool facilitates the leasing of
small quantities of contiguous coal that might otherwise be bypassed
forever as the coal in question cannot support a stand-alone mining
operation. Certain leases either have met and others are dangerously
close to the current limitation.
The Secretary's discretion in the granting of lease modifications
is not unfettered. 43 CFR 3432 allows the authorized officer to modify
the lease to include all or part of the lands applied for if it is
determined that: (1) the modification serves the interests of the
Untied States; (2) there is not competitive interest in the lands or
deposits; and (3) the additional lands or deposits cannot be developed
as part of another potential or existing independent operation. While
the lands could be added without competitive bidding, the government
would retain discretion to lease these tracts based upon its
determination whether it will receive the fair market value for the
lease of the added lands, either by cash payment or adjustment of the
royalty applicable to the lands added to the lease by the modification.
40-Year Mine-out Requirement: The Secretary should be given the
discretion to allow the consolidation of leased coal reserves into a
logical mining unit (LMU) that will require more than 40 years to mine.
A logical mining unit may include federal leases as well as contiguous
lands where the U.S. does not own the coal. The purpose of an LMU is to
allow the coal lessee to achieve maximum economic recovery of federal
coal, and where mixed coal ownership exists by combining federal and
private tracts of coal into one unit for purposes of meeting MLA
requirements of diligent development and continued operations. Current
law requires that the coal reserves of the entire LMU must be mined
within a period of 40 years.
This change would allow long term efficiency and orderly
development of federal, state and private coal and minimize the
potential for bypassing nearby coal resources and attendant loss of
federal and state royalty and tax revenue. This proposal would not
affect the existing requirement of diligent development or continued
operation.
Advance Royalties: The Secretary should be allowed to accept the
payment of advance royalties in lieu of continued operation for a total
of 20 years, allow the lessees to apply those paid royalties against
actual production beyond the initial twenty year lease term, and
simplify the methodology for computing advance royalties. This change
would permit the Secretary and federal coal lease holders the
flexibility to manage federal coal resources for maximum return to the
federal and state treasuries and avoid the compulsion of production
that is not warranted by market conditions.
LMUs and individual federal coal leases are subject to the MLA's
requirements of ``diligent development'' and ``continued operation.''
To meet the diligent development requirement, a federal lessee must
produce the LMU or federal lease's recoverable coal reserves in
commercial quantities within its initial 10-year period. ``Commercial
quantities'' is defined by regulation as one percent of the lease or
LMU's recoverable coal reserves. Failure to meet diligent development
requirements shall result in the termination of the lease by the
Secretary. The diligent development requirement cannot be postponed or
substituted by the payment of advance royalties. NMA is not suggesting
the elimination of the existing diligent development requirement in the
MLA.
After the diligent development requirement is met, the lessee must
continue to produce coal from the lease or LMU in commercial quantities
defined by regulation as one percent of the recoverable reserves during
the remainder of the lease term. This is referred to as the continued
operation requirement. Any federal coal lease on which continued
operation is not maintained shall be cancelled.
Continued operation is not always possible if the coal producer
cannot mine coal at the prevailing market price. As a practical matter,
a lessee must spend tens of millions of dollars, if not hundreds of
millions, in order to lease federal coal, prepare and process permits,
acquire equipment, hire a labor force, and achieve diligent
development. Obviously, the operator of a mine wishes to continue
operating after the significant costs to open the mine have been
expended. However, a currently operating mine may temporarily lose its
competitiveness, due to a number of factors, including: increased costs
of production due to geology; limited labor supply in rural areas;
changes in prices for competing coals or other fuels such as oil, gas,
hydro and nuclear; changes in transportation costs for coal and
competing fuels, which transportation costs constitute a significant
cost to the coal consuming customer; and shifting state and federal
environmental regulations which periodically affect which coal can be
burned in which power plant. When one or more of these factors arise,
an operation is generally idled and when the market dictates,
operations resume.
Under current law, upon application to and approval by the
Department of Interior, an operator/lessee may pay advance royalties in
lieu of continued operation. This system keeps royalty income flowing
to the government while a mine is idled. Currently however, the
aggregate number of years during the period of any lease for which
advance royalties can be paid in lieu of continued operations is 10.
Thus, a mine which periodically opens and closes as the market
dictates, can add to this aggregate 10 year limitation. Due to the
current age of many currently operating mines exceeding 25 years, and
the potential for many additional years of mining at the same
locations, the 10 year aggregate should be extended to 20 years.
When advance royalties are paid in lieu of continued operation,
those amounts can be used to offset production royalties due when coal
is again produced. At present, no advance royalty paid during the
initial 20-year term of a federal lease or LMU may be used to reduce a
production royalty after the 20th year of that lease or LMU's initial
term. This arbitrary limitation should be removed in light of the
longevity of mines producing federal coal.
When advance royalty is accepted in lieu of continued operation, it
must be paid in the amount equal to the production royalty that would
be owed on the production of 1 percent of the recoverable coal reserves
and shall be computed on the federal recoverable reserve estimated by
BLM at the initiation of the lease. Determining this amount is a long
and contentious process. Changing the calculation to one computed based
on the average price for coal sold in the spot market from the same
region saves considerable federal and industry resources currently
expended over disputes on acceptable valuation methods and more
accurately reflects the current market conditions that idled the mine.
Simply put, if the mine is idled, the coal is marginal and would find
its highest value in the spot market. If the coal actual sale reflects
a higher value, the difference in the royalty is collected at that
time.
Due to the shifting competitiveness of various operations, several
federal coal lease holders have been forced temporarily to curtail
production and idle mines. Without the option of extending the lease by
paying advance royalties, producers will be forced to take one of three
courses of action: 1) prematurely terminating leases and walking away
from the massive existing investment; 2) pay advance royalties on older
leases with no opportunity to recover advance royalties; 3) dump coal
onto the market at distress prices. All of these options will have a
negative impact on the Nation's energy position, disrupt coal and
electricity markets, waste federal coal resources, cost jobs, and
reduce federal and state tax and royalty income.
If leases are terminated, the probability of the location being
mined again is small. Royalty income that would otherwise flow from the
payment of advance royalties would cease. Not only would jobs at the
subject mine be lost, but so would jobs in the mine support sector
(transportation, construction, vendors, consultants, and other jobs in
the community that support the miners and their families.) Coal that
otherwise would fuel electricity generation would remain in the
ground--wasted.
Paying advance royalties without ever recouping the payment would
result in the practical application of a 25 percent royalty on future
production. Even if the market could bear the price of coal burdened
with this levy, which is unlikely, electricity rates would ultimately
reflect this increase.
If federal coal lessees/operators send this coal to market in order
to recover at least a portion of the cost of production, it would
compete not just with other federal coal from the West, but also
private coal in markets shared by private coal from the Midwest and
Appalachia. Failure to address these anachronistic provisions in the
MLA will hurt non-federal coal producers in the Midwest and Appalachia.
Modifications to the advance royalty provisions do not favor Western
coal over Eastern coal or federal coal over private coal. They just
make good sense for America's energy future.
Coal Lease Operation and Reclamation Plan: Under current law,
before causing a significant disturbance of the environment, but no
later than three years of lease issuance a lessee must submit for the
Secretary's approval an operation and reclamation plan. NMA supports
the elimination of the three year mandate.
This change would allow the coal operator to coordinate the
preparation and submission of its MLA mine plan dealing with coal
resource recovery with the permit required under the Surface Mining
Control and Reclamation Act (SMCRA) which addresses the environmental
planning and protection measures. This will eliminate duplication of
resources by both the lessee and the Department while still requiring
the lessee/operator to submit a plan before it takes any action which
might cause a significant environmental disturbance as required
presently by the MLA.
Financial Assurances with Respect to Bonus Bids: This section
clarifies that MLA does not require a bond in connection with deferred
bonus bids for coal leases. However, if the lessee fails to pay any
installment of a deferred bid, the lease would terminate.
A combination of economic conditions and extraordinary events over
the past two years has caused severe constraints in the surety capacity
available to satisfy financial assurance requirements of the coal
mining industry. It is unlikely that in the near term adequate surety
capacity will be available to meet the mining industry's financial
assurance requirements. The mining industry's inability to access
surety for various financial assurance requirements imposed under
federal and state regulatory programs is a product of severe
disruptions to the credit markets, and not a result of any unusual loss
experience associated with mining related projects. Indeed, the surety
industry loss experience for mining related bonds are no more, and
often less, than that for the other surety lines. Between 1989 and
2000, for example, the loss ratio for the entire surety industry was
about 28%, while the ratio for mining related obligations was about
25%. However, substantial losses that began to appear at the end of
2000 through 2002 in the surety industry's other underwriting lines of
business has resulted in the exit of many primary sureties from the
market and caused the remaining ones to limit their underwriting in all
areas. For the mining industry, the inability to access surety
jeopardizes the continuation of existing operations and thwarts
development of new operations since bonds are required as a condition
to receive permits or other necessary government authorizations.
Last summer, the House Resource Committee Subcommittee on Energy
and Mineral Resources conducted a hearing on this emerging crisis in
the surety market. The Subcommittee heard testimony describing how an
investment grade company was unable to access a surety bond at a
reasonable price and terms to secure its deferred bonus bid payments
for a federal coal lease. Companies that cannot access surety bonds for
their financial assurance requirements must use cash or cash
equivalents which compromise their capital and liquidity positions. The
effect of these developments for the federal coal leasing program is
that potentially fewer bidders will participate and bids will be lower
than before as companies factor in the higher expense of posting some
form of financial assurance. At the same time, not requiring a bond or
other form of financial assurance to secure future installments for a
deferred bonus bid does not pose any undue risk. First, bonus bids must
be paid in five installments with the first due upon execution of the
lease. Placing a lease into production typically exceeds five years so
the leasehold will remain largely undisturbed. If the successful bidder
defaults on an installment and is unable to cure that default, the
Department of the Interior can cancel the lease and the cancelled lease
resold to another prospective bidder.
In sum, this provision protects the government in the event of
default without further reducing the limited surety capacity available
to guarantee performance of other regulatory obligations.
coal/coal bed methane conflict in the power river basin
The Powder River Basin of Wyoming and Montana is one of the world's
richest energy resource regions and includes the largest reserves of
low sulfur coal in the United States. Virtually all of the coal and
about 50 percent of the oil and gas reserves in the Basin are owned by
the federal government and managed by the Bureau of Land Management
(BLM) under the Mineral Leasing Act of 1920. Problems have arisen
because BLM issued federal coal leases and federal oil and gas leases
for the same locations in the Basin. When these oil and gas leases were
issued coal bed methane resource development was not contemplated. It
was not until a Supreme Court decision that the law became clear
regarding whether the coalbed methane underlying federal land belongs
to the oil and gas lessee or the coal lessee.
In those areas leased both for coal and oil and gas, disputes over
timing of mineral development have risen. For safety and operational
reasons, concurrent development typically is impossible. No statutory
measure exists to resolve disputes over the sequence of mineral
development in these areas where the federal government has ``double
leased'' its minerals. BLM has yet to provide effective guidance to
reduce the likelihood of these disputes.
In order to achieve optimum recovery of the Basin's energy assets,
legislation that would provide the necessary statutory direction to
resolve these minerals development contests should be enacted. The
statutory provisions should be used only in the conflict areas of the
Powder River Basin and only as a last resort if private negotiations
and BLM administrative policies prove to be inadequate.
Absent a statutory mechanism, coal production could be delayed,
blocked or jeopardized by the inability of the coal producer to meet
FCLAA's diligence requirements and, as a consequence, forfeiting its
lease and/or reducing royalty revenue to federal government and states
if coal is bypassed on active operations. Bonus bids paid to the
federal government, and shared by the state, could also be diminished
as a consequence of the bidder uncertainty over whether the coal leased
can be economically and timely developed.
This committee has previously reported legislation to provide a
mechanism to resolve these conflicts and we are eager to work with the
committee to include comparable provisions either as free-standing
legislation or as a part of a larger energy package.
u.s.da forest service roadless area conservation rule
As the roadless rule was being developed in the late1990s, the
mining industry sought meaningful maps from the Forest Service that
identified the areas affected by the proposed rule. Other than large
scale maps available to the general public on the Forest Service's
roadless area web site, NMA members were given no maps nor descriptions
on which a coal operator could base operational decisions. Ultimately,
coal operators with reserves underlying or adjacent to lands
administered by the U.S. Forest Service developed their own maps for
Colorado and Utah and provided copies to the agency. These maps showed
that in several locations the roadless area boundaries overlaid
existing federal coal leases and other significant coal resources.
The roadless area boundaries are based on a 20-year old inventory
and were never field-verified to establish whether the areas in
question still retained the roadless values the rule supposedly was
designed to protect. Neither the Forest Service nor any other federal
agency has made an effort since the promulgation of the rule to
undertake such verification.
While implementation of the rule was enjoined by the U.S. District
Court in Idaho, operations located on Forest Service administered lands
continued with modest delays as a result of federal agency concerns
about the roadless area boundaries. Since the 9th Circuit Court set
aside the District Court injunction, affected operations on and
adjacent to Forest Service administered lands have been subject to
noteworthy delays and uncertainties.
Many of the coal mines that are impacted by the roadless rule are
underground operations that do not cause the surface disturbance that
is associated with surface mining operations but do need access to the
surface to construct and maintain ventilation and other systems
essential to the health and safety of miners. Many of these systems
must be in place in advance of extraction. Others, such as fire
suppression systems must be accessible instantaneously in the event of
emergency.
Unless unexpected and immediate access to surface areas overlying
operations is certain, no mine operator will develop underground coal
already under lease. Unless it is certain that reserves lying beyond
initial-leased areas will be available for leasing in the future,
capitol for any mine development will not be available. To overcome
these obstacles, a process must be established by policy, rule, or
legislation whereby the roadless area boundaries can be identified and
modified based on currently existing roadless values in a timely
manner. Whatever the mechanism, the process must be flexible,
predictable and timely.
electric power plants built near western coal fields can provide
reliably affordable electricity, but changes need to be made in how
transmission lines cost justifies, funded and permitted.
Low cost coal and hydroelectric generation are the two reasons
electricity is affordable in the U.S., by providing over 60% of the
electricity in the Western U.S. and well as the U.S. as a whole. The
West in particular, and the the U.S. in general, have benefited from
locating this generation where the natural resource is located and
building high voltage transmission lines to deliver the affordable
energy to the load. The West as in most of the U.S. completed the last
of these major low cost generation and transmission expansion over 20
years ago. Since that time, the electric load has grown by 60%, but
little new low cost generation has been added and the transmission
system has expanded by less than 20%. The Western power crisis two
years ago as well as the current price run up that is working its way
through the country but especially the Northeast is significantly
attributable to the lack of transmission to move low cost generation to
the high cost areas which are transmission constrained. In order to
stabilize electricity prices and continue to provide affordable
electricity in the U.S., new low cost coal generation needs to be built
along with the associated transmission lines. The most significant
barrier to adding this low cost generation is getting the necessary
transmission built.
There are three fundamental obstacles to getting transmission built
in the U.S.. The first is having a regional transmission planning
analysis which will show economic value via reduced power prices by
adding major transmission lines in conjunction with new and existing
low cost generation. Such planning and cost/benefit analysis does not
currently exist but is sorely needed to convince and provide support to
the State regulators and public officials of the need for these new
and/or upgraded transmission lines. This is especially true in the West
where three Regional Transmission Organizations bifurcate the West. The
Western Governors have proposed a voluntary region wide planning
process, however the effort is sorely in need of funding and, without
official standing, is unlikely to make timely or useful progress.
The second obstacle to getting new transmission built is having a
mechanism to allow customers who are hundreds if not over a thousand
miles away from the low cost generation fund on a long term basis part
of these transmission lines so they can receive the benefits of this
low cost remote generation. The lack of a truly regional and in the
West, Westwide transmission planning and rate setting entity prohibits
customers far away from low cost generation to advocate and pay for
these valuable transmission projects which are associated with new
affordable generation.
The final obstacle to getting new transmission built is the timing,
siting and permitting processes. This obstacle will only be apparent
once the first and second transmission obstacles are removed. No
project will get to the siting and permitting phase unless it has
recognized cost/benefits and can be funded, hopefully in part by those
who will benefit from the lines being built. While siting and
permitting is difficult, the West appears to have a protocol developed
by the Western States and the Federal land and environmental agencies
that have jurisdiction over some element of siting and permitting
transmission lines. This joint protocol is intended to enable a single
coordinated review of the siting and permitting issues to timely
process transmission applications. I would add that it may useful to
have the DOE take the lead moving these projects through the siting and
permitting phase similar to what occurred via Executive Order to
address the California energy needs.
The Chairman. You know that the issue you raised is very
sensitive to some of the Senators for their respective States.
And we are going to try our best to resolve that issue.
Mr. Leer. Thank you.
The Chairman. Mr. Alberswerth, we welcome you here. Would
you please note that your testimony is going to be made a part
of the record and proceed, please?
STATEMENT OF DAVID ALBERSWERTH, DIRECTOR, BUREAU OF LAND
MANAGEMENT PROGRAM, THE WILDERNESS SOCIETY
Mr. Alberswerth. Thank you very much, Mr. Chairman, for
inviting me today. As predicted by Senator Talent, my views on
the new EPCA report are quite different from Mr. Bayless'. And
I will briefly try to describe those differences. And my
remarks today focus on the availability of onshore Federal oil
and gas resources in the Rocky Mountain States.
The vast majority of Federal oil and gas resources within
the Rocky Mountain States is currently available for leasing
and development and has been for a long time. That is the
inescapable conclusion to be drawn from the Interior
Department's recently released EPCA report. It concludes that
85 percent of the technically recoverable oil and 88 percent of
the technically recoverable natural gas resources underlying
Federal lands in this region are currently available for
leasing and development.
Interesting, if you add to those amounts of technically
recoverable oil and gas estimates, the oil and gas on non-
Federal lands, that would be State and private lands, the
amount of technically recoverable oil and gas is even greater.
The Chairman. Why has it not been recovered? Why has it not
been used?
Mr. Alberswerth. I believe that a lot of it is being
developed. I think the estimates include resources that are
currently under development. There are several different
categories that that report discusses, including those lands
that are currently under development, sir.
The Chairman. Those numbers are not the same. The amount
that is available is not the amount that is producing, is that
not right?
Mr. Alberswerth. That is correct.
The Chairman. I am asking why, if there is so much, why is
so little producing?
Mr. Alberswerth. I believe that there is--well, as I
understand it, there are about--about 11 percent of our natural
gas is coming from Federal lands. I think that includes the
OCS.
The Chairman. That begs the question: How much of the
Federal land is not producing natural gas that is available for
natural gas? And how much of it that is available for oil is
not producing oil? Do you know?
Mr. Alberswerth. That, I cannot tell you, sir.
The Chairman. Would it not be a lot?
Mr. Alberswerth. I think that the point of the EPCA report
was to report that there is a great deal of Federal oil and gas
that is in fact available for development. And in fact there is
a lot that is being developed and explored for currently.
The Chairman. I guess my question is: Is the industry not
interested in developing that that is not currently being used,
or why is it not developing it?
Mr. Alberswerth. Oh, no, sir. I believe the rest of my
statement goes into how much development is--to give you a
sense of how much development is taking place. We believe
that--it appears to us that oil and gas development is a very
robust activity on the Federal lands.
The Chairman. Proceed.
Mr. Alberswerth. Okay. Thank you, sir.
For example, according to the Bureau of Land Management,
there are currently over 94,000 producing oil and gas wells on
the public lands that it manages. In 2001, the BLM permitted a
record 4,850 drilling projects on BLM lands, which was up from
3,400 permits issued in fiscal year 2000. The recently released
Powder River Basin environmental impact statement projects
development of over 39,000 new wells in the Wyoming portion of
the Powder River Basin--this was one of the documents that Mr.
Griles is submitting for the record--and between 10,000 and
26,000 new wells in the Montana portion over the next 10 years.
The new reasonably foreseeable development scenario for the
Farmington resource area in your State projects a development
of close to 10,000 new wells during the next 20 years, an area
that already has 19,000 producing oil and gas wells. I think
the point, sir, in response to your question is that the oil
and gas program of the BLM is a very robust one on the public
lands.
These facts and trends and the recent findings of the EPCA
report contradict claims that there are too many restrictions
or impediments that inhibit industry access to oil and gas on
the public lands. For instance, the Bush administration's
National Energy Policy claimed that about 40 percent of the
natural gas resources on Federal land in the Rocky Mountain
region have been placed off limits to development. However, the
new EPCA report, based on the most recent information that we
have, indicates that it is about 12 percent.
If you view that from another perspective, and that is the
estimates of gas resource base published in the National
Petroleum Council's 1999 study, that 12 percent amounts to
about 1 percent of the total gas resource base that we have in
the Continental United States and the Outer Continental Shelf.
Because it is now established from the Interior
Department's new analysis of Federal onshore research that very
little publicly owned natural gas is off limits to development,
the industry's focus, lobbying focus, may shift to that
category of lands in the EPCA report that is called available
for leasing with restrictions in oil and gas operations beyond
standard stipulations. And there was an earlier discussion
about stipulations.
I have a list of the basic categories of stipulations in my
written statement. I will not go into those now. But I think a
point to keep in mind--and I notice I am out of time here--is
that these stipulations are very flexible. And they are
frequently waived. The BLM in some field offices actually
publishes the record of waivers of protected stipulations for
oil and gas leases. And if you look, for instance, on the
Pinedale and Rawlins field office web sites, you will find that
during the 2001/2002 season, stipulations were granted about 77
percent of the time, in 2002/2003 about 86 percent of the time,
et cetera. So those are very flexible stipulations.
In conclusion, in light of the new information from the
Department of the Interior's EPCA study that most Federal
lands, most Federal oil and gas resources, within the Rocky
Mountain region are available for leasing and development, the
question policy makers should be asking is not: Are too many
Federal oil and gas resources unavailable?
Instead, we should be asking such questions as: Have we
adequately protected the scenic, ecological, environmental, air
and water resources, wildlife habitat and wilderness values of
our public lands and natural forests? Are farmers and rancher
with split estate lands being treated fairly when it comes to
coal bed methane development? Are we being careful enough to
protect the precious surface and groundwater resources of the
rural communities where the coal bed methane boom is in full
swing?
Should we be more careful in waiving leasing provisions
designed to protect wildlife resources? And are reclamation
bonds imposed upon operators adequate to the task of assuring
post-operation cleanups?
Thank you again for this opportunity to present our views.
And I will be pleased to answer your questions.
The Chairman. Thank you very much.
[The prepared statement of Mr. Alberswerth follows:]
Prepared Statement of David Alberswerth, Director, Bureau of Land
Management Program, The Wilderness Society
Mr. Chairman and Members of the Committee, thank you for the
opportunity to present the views of The Wilderness Society on the
subject of oil and gas development on onshore federal lands. My name is
David Alberswerth, and I am The Wilderness Society's Bureau of Land
Management Program Director. My statement will focus on the Bureau of
Land Management's onshore oil and gas program affecting the public
lands of the Rocky Mountain States.
The vast majority of federal oil and gas resources within the Rocky
Mountain Overthrust Belt states is currently available for leasing and
development, and has been so for a long time. Despite industry claims
to the contrary, and earlier assertions by the Bush Administration, the
Department of the Interior's recently released ``EPCA'' report
concludes that 85 percent of the ``technically recoverable'' oil, and
88 percent of the ``technically recoverable'' natural gas resources
underlying federal lands in this region of the country are currently
available for leasing and development. Interestingly, if one includes
the EPCA estimates of ``technically recoverable'' oil and natural gas
from non-federal lands in the analysis, only 7 percent of natural gas
and about 9 percent of oil within the study region are unavailable for
development (see attachment).1,* The inescapable conclusion
to be drawn from the most recent data available is that over 90 percent
of the region's oil and gas resources, on federal and non-federal
lands, are available for leasing and development.
---------------------------------------------------------------------------
* All attachments have been retained in committee files.
---------------------------------------------------------------------------
Oil and especially natural gas development is a robust activity on
federal lands within the Rocky Mountain West. For example, according to
the Bureau of Land Management, there are currently over 94,000
producing oil and gas wells on the public lands that it manages. In
fiscal year 2001, the BLM permitted a record 4,850 drilling projects on
BLM lands, up from 3,400 permits issued in fiscal year 2000 (see
attachment).\2\ The recently released Powder River Basin environmental
impact statement projects the development of over 39,000 new coal bed
methane wells within the Powder River Basin within the next 10
years.\3\ The new ``reasonably foreseeable development scenario''
published for the BLM's new draft Farmington Resource Management Plan
projects the development of 9,970 new wells during the next twenty
years within that planning area, which currently has over 19,000
producing oil and gas wells.\4\ During the Clinton Administration,
leases were issued on 26.4 million acres and 19,310 drilling permits
were issued (see attachment).
These facts and trends, and the recent findings of the EPCA report,
contradict claims by industry advocates that there are too many
``restrictions'' or ``impediments'' that inhibit industry ``access'' to
oil and gas resources on public lands. For example, the Bush
Administration's ``National Energy Policy'' claimed that, ''. . . about
40 percent of the natural gas resources on federal land in the Rocky
Mountain region have been placed off-limits'' to development.\5\
However, the EPCA report concludes that, of the 138 trillion cubic feet
(TCF) of ``technically recoverable'' gas resources within its study
area, only 15.9 TCF is actually off-limits to development, or 12
percent.\6\
Viewed from another perspective, this 15.9 TCF is about 1 percent
of the 1,466 TCF ``gas resource base'' within the continental U.S.
(exclusive of Alaska) identified by the National Petroleum Council in
its 1999 study, Natural Gas: Meeting the Challenges of the Nation's
Growing Natural Gas Demand.\7\
Because it is now established from the Bush Administration's own
analysis of federal onshore resources that very little publicly-owned
natural gas and oil is off-limits to development, the industry's
lobbying focus may shift to that category of lands identified in the
EPCA report that is ``Available for Leasing With Restrictions on Oil
and Gas operations Beyond Standard Stipulations.'' Just what is the
nature of these ``special and seasonal stipulations'' of such concern
to industry?
This category of available lands often encompasses areas where
evidence indicates the presence of sensitive wildlife habitats, such as
elk calving or winter range areas, or big game migration corridors, or
sage grouse leks, or critical raptor habitat where oil and gas
activities at certain times of the year could pose severe threats to
wildlife. In such cases, the BLM may require that operations only occur
at certain times of the year, when such areas are not in use by certain
wildlife species. In some cases, the BLM imposes ``No Surface
Occupancy'' leases, whereby the lessee is required to access the oil
and gas resource from off-site. Such ``NSO'' stipulations are also
designed to protect wildlife habitats, while making the resource
available for extraction. The types of special imposed to protect
environmental values can be summarized as follows:
``Standard Stipulations''--These are provisions within
standard BLM oil and gas leases regarding the conduct of
operations or conditions of approval given at the permitting
stage, such as: prohibitions against surface occupancy within
500 feet of surface water and or riparian areas; on slopes
exceeding 25 percent gradient; construction when soil is
saturated, or within 1/4 mile of an occupied dwelling. These
are generally applied to all BLM oil and gas leases, regardless
of special circumstances.
``Seasonal'' or other ``Special'' Stipulations--``Seasonal
Stipulations'' prohibit mineral exploration and/or development
activities for specific periods of time, for example sage
grouse strutting areas when being used, hawk nesting areas, or
on calving habitat for wild ungulate species. These are often
imposed at the request of state wildlife officials, as well as
in compliance with U.S. Fish and Wildlife Service requests to
protect sensitive species.
``No Surface Occupancy''--NSO leases prohibit operations
directly on the surface overlaying a leased federal tract. This
is usually done to protect some other resource that may be in
conflict with surface oil and gas operations, for example,
underground mining operations, archeological sites, caves,
steep slopes, campsites, or important wildlife habitat. These
leases may be accessed from another location via directional
drilling.
Representative of the oil and gas industry have voiced criticism
regarding why such provisions are imposed on federal oil and gas leases
at all, or why certain areas of our public lands and national forests
are off-limits entirely to oil and gas development, when in their view
energy extraction is such an important activity on federal lands. The
answer is that the federal land management agencies' primary obligation
is not to satisfy the wants and desires of the oil and gas industry.
Instead, they are statutorily mandated to balance the wishes of the oil
and gas industry with the protection of a multitude of environmental,
ecological, scientific, and cultural values harbored by our public
lands.
For example, Congress mandated in the Federal Land Policy and
Management Act that the Secretary of the Interior manage the public
lands,
``. . . in a manner that will protect the quality of
scientific, scenic, historical, ecological, environmental, air
and atmospheric, water resource, and archeological values; that
where appropriate, will preserve and protect certain public
lands in their natural condition; that will provide food and
habitat for fish and wildlife and domestic animals; and that
will provide for outdoor recreation and human occupancy and
use.'' (43 U.S.C. 1701(a)(8))
Similar statutory requirements pertain to the National Forests. The
imposition of special, seasonal, or NSO stipulations in certain
circumstances is the result of a policy developed in the 1980s by the
BLM to balance the industry's desire for access to oil and gas deposits
with the BLM's responsibility to manage the other resources and values
enumerated in FLPMA. Although characterized as ``burdensome'' by some
industry representatives, these stipulations can--and frequently are--
waived at an operator's request.
Attached to my statement are tables published and available on the
Pinedale and Rawlins BLM Field Office websites. Both areas are subject
to intense contemporary exploration and development activities. What
the tables clearly indicate is that wildlife stipulations on oil and
gas leases are frequently waived at the request of the operator to
accommodate activities not otherwise allowed during the period of the
seasonal restriction, or within an area ordinarily set aside from oil
and gas activities. For example, the table listing ``Winter Range
Exceptions 2001-2002'' for the Pinedale Field Office indicates that of
40 requests for stipulation waivers, 31 were granted, or 77 percent.
During the 2002-2003 season, of 52 requests for waivers received by the
Pinedale Field Office, 45 were granted, or 86 percent. Rates of waiver
approval are similar from the Rawlins Field Office for fiscal year
2002: Of 128 requests recorded, 103 were granted, or 80 percent (see
attachments). Instead of focusing on instances where the BLM may not
have issued a particular drilling permit application in a timely manner
satisfactory to the operator, it seems to us that the frequency of
stipulation waivers in areas where there is intense development raises
the question as to the effectiveness of stipulations as a means of
protecting key environmental values.
For example, we know that sage grouse populations in the U.S. are
in severe decline, in fact, their distribution has declined by about
50%, while estimated population size has declined by about 90%. As a
population they are very sensitive to habitat fragmentation. Given the
frequency of the waivers indicated on the attachment for sage grouse
habitat, it seems to us the question we should be asking is not, ``Why
does the industry have to put up with seasonal restrictions for sage
grouse habitat?'' Instead, we should ask, ``What impacts are occurring
to sage grouse populations as a consequence of the BLM's frequent
waiver of stipulations designed for their protection?''
Finally, in our view it is entirely appropriate that some federal
lands should be off-limits to oil and gas leasing and development.
Lands identified as off-limits in the EPCA Report include National
Parks, National Monuments, designated Wilderness Areas, and Wilderness
Study Areas. One specific area that has been placed administratively
off-limits to future leasing and has drawn especially harsh criticism
from the oil and gas industry is the Rocky Mountain Front area of the
Lewis and Clark National Forest in Montana. In 1997, following an
extensive public involvement process, the Forest Service adopted a
Forest Plan amendment for approximately 356,000 acres of the Front that
effectively prohibited leasing for the duration of the Plan amendment.
The area in question--the spectacular and dramatic uplift of the Rocky
Mountains from the Northern Great Plains--is a region of remarkable
scenic beauty, and harbors a multitude of extraordinary wildlife,
scenic, and recreational values. It has been the focus of preservation
efforts by Federal, State and private entities for almost a century.
The Lewis and Clark National Forest Plan adopted in 1986 emphasized
management of the area in question for its special wildlife,
recreation, and scenic attributes. The Plan Amendment adopted in 1997
implemented that earlier management direction by prohibiting oil and
gas leasing for the next 10-15 years. It should also be noted that the
1997 Plan Amendment enjoys widespread support within the State of
Montana. Although the oil and gas industry has attempted to
characterize the Forest Supervisor's decision as essentially
``arbitrary and capricious'', the Supervisor's decision has been upheld
upon administrative appeal and at the District and Appeals Court
levels. As the Bush Administration pointed out in its brief to the
Supreme Court in opposition to the industry's request that the Supreme
Court review the Court of Appeals decision, ``. . . the Record of
Decision approving the [1986] Forest Plan acknowledged `people's
apprehension over the effects of oil and gas development and their
desire for the land to remain unchanged,' and concluded that
`management of the Rocky Mountain Division should emphasize wildlife,
recreation, and scenic values.''' (Brief for the Federal Respondent in
Opposition at 5, Independent Petroleum Association for America v. U.S.,
279 F. 3d 1036 (9th Cir.), cert denied, 123 S. Ct. 869 (2003).)
In conclusion, in light of the new information from the Department
of the Interior's EPCA study that most federal oil and gas resources
within the Rocky Mountain region are available for leasing and
development, the question policy-makers should be asking is not, ``Is
too much federal oil and gas unavailable for leasing and development?''
Instead, we should be asking such questions as: Given the extensive
availability of our publicly-owned onshore oil and gas resources for
development, have we adequately protected the scenic, ecological,
environmental, air and water resources, wildlife habitat, and
wilderness values of our public lands and national forests? Are surface
owners with split estate lands being treated fairly when it comes to
coalbed methane development? Are we being careful enough to protect the
precious surface and groundwater resources of the rural communities
where the coalbed methane boom is in full swing? Should we be more
careful in waiving leasing provisions designed to protect wildlife
resources, especially when it comes to declining species, such as sage
grouse? And, are reclamation bonds imposed upon operators adequate to
the task of assuring post-operation clean-ups?
Thank you again for this opportunity to present our views.
End Notes
1. BLM, January, 2003, Scientific Inventory of Onshore Federal
Lands' Oil and Gas Resources and Reserves, etc., pp. xii-xiii, xv.
4. Engler, Thomas W., et.al., BLM, July 2, 2001, Oil and Gas
Resource Development for San Juan Basin, New Mexico.
6. Op. cit., p. 3-5.
7. Domestic Petroleum Council, December, 1999, Natural Gas--Meeting
the Challenges of the Nation's Growing Natural Gas Demand, Volume I.,
Summary Report, pp.7-8.
addendum
Alaska's North Slope and the Arctic National Wildlife Refuge
The Congress will soon have before it yet another proposal to open
the magnificent Arctic National Wildlife Refuge to oil and gas leasing
and development. What has not received much attention, however, is the
fact that the vast majority of Alaska's North Slope is legally
available to oil and gas exploration and development.
In 1999, Secretary of the Interior Bruce Babbitt opened 4.6 million
acres in the northeast section of the National Petroleum Reserve-Alaska
on the North Slope. More than 85 percent of this area is open to
leasing under this decision. The Bureau of Land Management has just
began the process of preparing an Environmental Impact Statement to
allow full field development of three successful exploration wells
drilled by Phillips Petroleum in the area. The Bush Administration has
indicated that it will reopen the Northeast NPR-A plan this spring to
consider offering more acreage for leasing.
Last month, the BLM released a draft Environmental Impact Statement
on a plan to open 8.8 million acres in the northwest section of the
NPR-A. The Administration is expected to open most, if not all, of this
vast area for leasing. This would constitute the largest single onshore
offering to industry in the history of America's Arctic. A Final EIS is
expected in late summer.
Earlier this month, the Minerals Management Service issued a Final
EIS for the Beaufort Sea Outer Continental Shelf, off the coast of
Alaska's North Slope. This action opened 9.8 million acres to oil and
gas leasing--virtually the entire Arctic Ocean off Alaska's North
Slope.
The state of Alaska is pursuing an aggressive lease sale program
under what it calls ``Areawide'' leasing on state lands and waters on
Alaska's North Slope. Each year the state offers for lease all of the
unleased state-owned acreage between the Canning and the Colville
Rivers, and state-owned waters offshore between Barrow and the Canning
River. On state lands alone, the oil industry has access to an
additional 14.7 million acres.
The Arctic National Wildlife Refuge--which constitutes just five
percent of Alaska's North Slope--now stands as the only stretch of the
North Slope that is closed by law to oil and gas exploration and
development. Oil development would severely damage this national
treasure. The Arctic National Wildlife Refuge is truly one-of-a-kind.
The refuge's diverse wildlife includes significant populations of polar
bears, brown (grizzly) bears, muskoxen, caribou, and wolves. Millions
of migratory birds nest or feed on the refuge each spring and summer
between annual migrations that bring them through the backyards and
nearby parks and refuges of Americans throughout the rest of the
country. The area should remain closed to oil and gas development. We
will continue to oppose efforts to open this rare and special place to
oil and gas development.
The Chairman. Senator, would you like to lead off with
questions of your witness from your State, Senator Talent?
Senator Talent. Actually, Mr. Chairman, I can afford to
stay. So if the other Senators want to go, that is fine.
The Chairman. Mr. Bayless, let me start off with you.
First, let me thank you again for coming and also thank you for
the time and effort that your family has put forth in the basin
in terms of community activities and being the good corporate
citizens that you have been.
Now let me raise an issue that I think cannot be avoided.
It was raised by Senator Bingaman briefly in his remarks. There
is a growing concern in the San Juan Basis by the ranching
community that the issues related to the responsibility of the
oil and gas producer on the split estates where the ranchers
have surface rights, that you also have the right to go in and
use that, produce access, use access and produce wells that the
independent producers are not adequately complying with the
rules and regulations regarding cleanup, regarding notice,
regarding minimizing the damages.
Can you express to us what you know about that and what is
being done and by whom to see if these issues can be resolved?
Mr. Bayless. Yes, sir. I will address that.
First, let me say you introduced me from Farmington, New
Mexico. And although I have lived in Denver for 25 years, I
view myself as a New Mexican.
The Chairman. Right.
Mr. Bayless. And I appreciate your willingness to continue
to claim me as such.
The Chairman. You have a lot of family there.
Mr. Bayless. Yes, I do. And I still spend a lot of time
there. Thank you.
We have also read about the difficulty of the split
estates, these issues. But the reality is, in the vast majority
of instances, the partnership between the surface owner and the
mineral owner works pretty well. The two groups are kindred
spirits. They earn their livings from developing the natural
resources of the land.
I am also in the cattle ranching business and know that it
can be a fragile relationship between mineral owner and the
surface owner. It must be approached with sensitivity, honesty,
and patience on all sides of the table. And usually there is
resolution to be found.
The Chairman. Mr. Bayless, let me suggest for you, your
information is different than mine. And I would suggest that
you had better go take a look. Because the kindred spirit is
falling apart. It is falling apart very rapidly.
Mr. Bayless. Okay.
The Chairman. And somebody had to put it together. It will
either be put together in a friendly basis, or we will have a
lot of problems that we do not have to have. So whatever your
experience in the field is, I submit to you that you had better
be asking some people that are down there and be asking the
BLM, because there are some very ruffled feathers that are
about to rupture the kindred spirit that existed between the
two groups, to the extent that they are preparing for the
ranchers a set of proposals that would generate a different set
of rights than have existed heretofore that they are submitting
to us, asking that we create more rights for the rancher that
should be enforced by new laws.
So I think it is important that people like you know that.
I am trying to get the information to the other people in New
Mexico. Some of them have it already. But they had better get
it very quickly.
Mr. Bayless. I appreciate that. I know that there is a
problem. The producer inherited the problem. We did not create
this split estate. It is something we must live with and we
must address and come up with solutions.
The Chairman. There is no question.
Mr. Bayless. And we certainly welcome your help in arriving
at those solutions.
The Chairman. Now, Mr. Bayless, let me just ask two
questions. We seem to have some use of language that is
creating a situation where something is falling between the
cracks here that we are not understanding. Because on the one
hand the reports seem to be saying one thing and the
independent producers seem to be telling us another thing about
the production of oil and gas on the public domain, in terms of
how long it takes, in terms of what is really available.
So what we understand is that maybe EPCA does not report
the full story when it comes to the impediments and delays
associated with oil and gas leasing on the Federal lands. Is
that a true statement that I have just stated? And if so, can
you for the record supply us with information regarding that?
Mr. Bayless. Yes, sir. Your statement is accurate. The EPCA
study talks about lands available for leasing.
The Chairman. Correct.
Mr. Bayless. It is certainly accurate. Going back to my
earlier statement, when we looked, that 5 percent--and maybe
this is where the facts speak for themselves--5 percent of the
Federal mineral estate is both leased and currently productive.
More than that is leased, is yet to be productive. Hopefully it
will be explored, and productive reserves will be found.
There are many impediments for oil and gas development. A
big one is the timely processing of APDs that I discussed. The
EIS process, the inadequate funding of the EIS process in most
instances, although that is a congressional mandate to do an
environment impact statement, that ends up being funded by
companies that are interested in working in that area, all
those delays that Mr. Griles was discussing earlier in the
morning.
The Chairman. Okay. Very good. And if you have any further
details on the delays, we would like to know about them. And if
there is funding, let us know that there is inadequate
resources. If it is the rules and regulations, if you will let
us know, either you or through your association, we would like
to try to work with the group of people to see if we can
expedite them from the standpoint of changing rules or
providing more resources so the job can be done better and more
expeditiously.
Mr. Bayless. I think providing more resources is a key part
of it. I think providing some direction to the Department of
the Interior that we need to look for, you know, and this is
very global, but need to look for ways to say yes, development
can be done in an appropriate fashion and get away from the
mindset of no, not here, not now, not yet, without more study.
The Chairman. Yes. Great.
Mr. Leer, let me talk to the Wilderness Society first. Your
testimony seems to me to indicate that you express a certain
amount of satisfaction with the findings in the EPCA report.
Does this represent a new philosophy that accepts leasing and
development in those areas already open to oil and gas leasing?
Mr. Leer. Mr. Chairman, we think that that report is a very
useful document for the reasons that Secretary Griles said it
would be used for as a basis for land use planning. I am not
sure that we do agree necessarily that all of the areas that
are identified in the report should be available for leasing.
I mean, well, for instance, some of the areas identified as
not available for leasing, I do not think there is any dispute
about. There are national parks, designated wilderness areas,
national monuments. Perhaps there is--I am sure that there is
more detail in the background documents about, you know,
specific areas that are listed as available for leasing that we
might not agree with. But from the written report, we were not
really able to tell that. But by and large, as a planning
document and as a useful guide, we think that this is a very
useful report.
The Chairman. Thank you very much.
Senator, do you want to go now?
Senator Bingaman. If you are through.
The Chairman. I am finished. Go ahead, Senator.
Senator Bingaman.
Senator Bingaman. Thank you very much, Mr. Chairman. I
apologize to everybody for having had to duck out for another
hearing.
Let me just ask a couple of questions, one on the subjects
that I was focused on before with Secretary Griles. Maybe I
will ask you, Mr. Bayless, on this issue of adequate personnel
with the BLM to actually do the process applications for
permits to drill and also to do the inspection work and the
enforcement work there in the San Juan Basin, what is your
perspective on whether or not they are adequately staffed there
in the San Juan Basin to do that, or whether this is an issue
that requires more attention?
Mr. Bayless. I do not know whether the additional 13 people
that you discussed, I do not know whether they are all on board
and whether that will be adequate or not.
Senator Bingaman. I do not think they are yet.
Mr. Bayless. But it is certainly moving in the right
direction. The permitting delays in the--out of the Farmington
office have not been--are middle of the road, are not as bad as
they are in some parts of the Rockies. It certainly takes much
beyond the 30 days that is specified to receive an APD to go
through that process. But things certainly are moving in the
right direction.
Senator Bingaman. Okay. Let me ask on the other issue,
which I also asked Secretary Griles about. That is, this
conflict between coal leasing and coal bed methane production.
He indicated that he had just heard this morning that all those
problems have gone away. Is that your impression, Mr. Leer?
Mr. Leer. No.
Senator Bingaman. What do you think the extent of the
problem is? And what is needed to fix it?
Mr. Leer. I think what the Secretary had been referencing
was perhaps that in the latest round of Federal coal leases and
methane leases, coal bed methane leases, that there probably
have--we probably worked out some arrangement, very difficult.
I can speak to my own company. We bid on the coal leases under
the old law. The law changed. And all of a sudden found
ourselves in conflict with the then-coal bed methane holder.
And we had an $800 million coal mine that basically cost $1
million a day that does not run, a little over, actually. And
for a $30,000 coal bed methane well, we could stop the coal
mine.
And we ended up working out an unfavorable fee to start
buying the wells, as we came to them. But nonetheless, that was
done.
I would refer back to the Department of the Interior's
legislation and testimony back last year, I believe, under
H.R., on the House side, 2952, I think, to Congresswoman
Cubin's coal CBM bill. And the Department of the Interior
testified that it supported legislation to resolve the CBM coal
mine conflicts and provide for timely--to provide for timely
conflict resolution, where the inability to reach a settlement
agreement could result in bypassing vast amounts of valuable
coal or possibly even the premature closing of major mining
operations.
That testimony was Tom Fulton, Deputy Assistant Secretary
of Land and Minerals Management, U.S. Department of the
Interior, on October 11, 2001, before the House Subcommittee on
Energy and Mineral Resources.
There is another round of major coal bids coming up, bonus
bids coming up, in 2004. I think the revenues for the Federal
Government will certainly surpass several hundred million
dollars for those bids. I will suspect we will go into another
major conflict with the coal bed methane producers in those
rounds and bids.
And from a very practical point, when we are looking at a
bonus bid to the Federal Government and ultimately the State
who shares in that, we do a calculation of what we think it is
going to cost to mine the coal, what we think that it is going
to--what the pricing of the coal might be. And we calculate a
value that we think the coal lease is worth. And if we do not
think we can get a reasonable number for buying out coal bed
methane or resolving the conflict, we will put in a high
number. That high number lowers the value we can pay for the
bid.
I mean, that is just the reality of how the financing
works. And I can assure you our bids are lower under the
current setup than they would be under one where we would have
a finite resolution mechanism to solve that.
Senator Bingaman. Thank you very much, Mr. Chairman.
Senator Thomas. Let me very quickly--I am sorry. I had to
step out, also.
The fact is, however, there is less conflict than there was
2 or 3 years ago.
Mr. Leer. Yes, sir, there is.
Senator Thomas. And moving in that direction. Let me just
very briefly, each of you, what we are talking about, the
access, the use, proper use of Federal lands. What is the major
issue that you think--what issue would you change, if you were
sitting here? Very quickly. Just go down the line.
Mr. Alberswerth. There are a number of areas in the West.
Senator Thomas. Give your best one.
Mr. Alberswerth. Okay. There are a number of areas in the
Western States that we think should be considered for
protection as wilderness or other national protective
categories that we would like considered in the new BLM
planning process.
Senator Thomas. Okay. Would you also agree that when they
have wilderness studies, there ought to be some conclusion to
it? It either ought to be made wilderness or get out of the
study category?
Mr. Alberswerth. Well, sir, we would very much like those
wilderness study areas designated as wilderness.
Senator Thomas. I agree. But they should not go on the
study forever.
Mr. Leer.
Mr. Leer. I would really ask that the amendments, the
limited amendments, to the coal leasing act be enacted and
clarified, because it covers three or four points. But each
point is specifically impacting either Federal revenues or the
ability to efficiently mine coal in the most responsible
environmental and economic manner.
Senator Thomas. Thank you
Mr. Bayless.
Mr. Bayless. I would ask that you direct the BLM to have
greater accountability for management under the multiple use
concept.
Senator Thomas. Okay.
Ms. Morrison. Senator Thomas, I think that I would have to
second Deputy Secretary Griles' request to pass ANWR. I would
highlight, however, that our proposal for that Reserve to be
open does include funds that would be rolled back into
conservation and land and water resources. We wanted to provide
for conservation efforts with the funds, the monies, the
royalties, the bonus bids that could be had from that area.
Senator Thomas. Okay. Thank you. Appreciate you all being
here. As you know, we are probably in the time when the energy
production and so on--we had--all this week we have been
talking about that gas, specifically yesterday, the coal, the
clean, clear air thing, and so on. And it is going to make a
real impact on people in this country and the availability of
energy. And at the same time, all of us particularly who live
in the West, I think, and live there with the public lands,
want to preserve those as well. But most of us are dedicated to
multiple use. And we can do that.
Senator Alexander.
Senator Alexander. Thank you, Mr. Chairman.
My question is about clean coal technology and specifically
coal gasification. Mr. Leer, let me start with you. But if
other shave any comments on it----
Is coal gasification a realistic, as we look toward the
future? What are the limits on it? And what are the incentives
that you specifically were referring to in your testimony, that
you would suggest we consider for clean coal technology, to
encourage clean coal technology?
Mr. Leer. Yes, Senator. Coal gasification is realistic. In
fact, if we go back 50 years, we have seen coal gasification
processes primarily in Europe and South Africa. We do have
demonstration plants currently running in the United States.
Now in terms of pure economics, the economics have not been
competitive against current coal fired generation or hydro or
some of the other generations.
Senator Alexander. How far apart are they? And what would
it take to make it competitive?
Mr. Leer. I think it is getting into the technologies. And
you are going to get beyond my expertise here pretty quickly.
But you get into the technologies of raising the heat
efficiencies within the plant itself. The combined cycle
natural gas plants, which are the most efficient powerplants in
the United States, or currently in the world, have about a 60-
percent heat rate, as they call it, or efficiency rating, where
a normal single cycle coal plant might be in--a modern one
might be in the very low forties.
As we take coal gasification forward, I think we can, with
ceramics and some of the other technologies that might be out
there, we could raise that. And for each increase in
efficiency, you are going to get a tremendous lowering of the
total cost.
And again, the demonstration plants, by their very nature,
are high cost, high capital, because you are still
experimenting. You are still changing and tweaking things as
you are going along. But as the technologies develop, I think
it is tremendous.
The incentives that I was referencing were really the
incentives that were contained in the energy legislation of
last year on both the House and Senate side, and the
administration, for that matter. The numbers were a bit
different, but basically it comes down to a simple fact. And I
am an engineer. And I am a pretty simple guy. When I look at
the indigenous energy in the United States of known fossil
fuels, 85 percent of them are coal. And if I have 85 percent of
anything within our company, I want to figure out how to use it
better and more efficiently, because I know I have a lot of it.
As we move forward, if we move forward towards a hydrogen
economy, I mean, there are two ways to generate hydrogen,
basically. There is electrolysis through water, or it is
capturing the hydrogen atom that is combined with a carbon
atom. Again, it is a fossil fuel. And I think coal is going to
play that important role in that process.
So to me it is the public-private partnership to develop
these technologies. We, as Arch, support some clean coal
technology removal, a group called ZEBCO, which is zero-based
emissions powerplant. It is probably 20 or 30 years off. But
when you do the math on the math balances, the energy balances
on paper, it works.
But gasification exists. It is just the highest cost kind
of electric generation before you get to the subsidies of
renewals that exist out there, if you rank order. And again,
our economy, we are going to see the impact of the energy
prices on our economy right now. It has me concerned that the
current energy spike is going to maybe move us in the wrong
direction on economic growth.
Senator Alexander. Thank you, Mr. Chairman.
The Chairman. Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman. I would like to
direct my comments or questions to Mr. Alberswerth here.
Looking at your written testimony, you have an addendum,
which is highlighted, Alaska's North Slope and Alaska National
Wildlife Refuge. And I read through it. And quite honestly, I
was confused. And if I am confused, and I think I know a fair
amount of what is going on with Alaska's resources up there, I
cannot imagine what the public thinks.
You stated that, and I quote, ``the vast majority of
Alaska's North Slope is legally available to oil and gas
exploration and development.'' You further go on to state that
more than 85 percent of this area, now we are talking about
NPRA, is open to leasing under former Secretary Babbitt's prior
decision.
You then go on in the very last statement, as we are
talking about ANWR, to state that ANWR, which constitutes just
5 percent of Alaska's North Slope, now stands as the only
stretch of the North Slope that is closed by law to oil and gas
exploration and development.
So we have a situation. We have 1,000 miles of coastline up
there in Northern Alaska. And your statements would seem to
indicate that virtually all, or a vast majority, or
approximately 85, is open to oil and gas exploration and
development. You have used the term legally available. And
maybe this is where we are splitting hairs or mincing words.
But then you go on to say that only 5 percent is closed by law.
I am more than just a little bit confused. And I think it
is these types of statements that do confuse the public in
terms of what is open and what it actually means to say that
these are open for development. We may have it available for
leasing. But leasing cannot take place because of the
environmental impact statements, because of the regulations.
Statutorily it may be--you can go in there, but in terms of the
science, in terms of the environmental impact, and in terms of
the regulations, it is not physically possible to do.
We have incredible coal reserves available in the North. We
have 120 billion tons of coal in the Northwest Arctic. But we
are subject to restrictions and regulations and permitting
requirements that say you have to replace the land to its
natural condition. We have permafrost. We have ice lands. It is
scientifically, physically impossible.
So is that open in terms that you are considering open? Is
this what we are talking about when we say legally available?
The information and the word that we are trying to get out
to the public is that when you look at that thousand miles of
coastline, there is approximately 14 percent of Alaska's
northern coastline that is available and is possible to open,
and is open currently for drilling and development. 14 percent
is a far cry from the 85 percent, or possibly 95 percent, that
you have referenced. And I guess I would like to hear your
comments when you say that the vast amount of Alaska is open
for oil and development.
Before I have you respond to that, I would go down to,
again, your last paragraph, where you are discussing ANWR. And
you state, ``Oil development would severely damage this
national treasure.''
Now we have had testimony here earlier today. We have had
testimony in this room over the past several weeks and years
prior to this, talking about the available technology that is
out there that does focus on the environment and how we can
allow for the drilling in these environmentally sensitive
areas.
And I will grant you that all of the North Slope is in a
sensitive area. But we have been working on the technology to
allow for this in a manner that is not going to severely
damage. These are the types of arguments that we are up against
consistently. And it is very difficult to get the facts across
to a public who has never seen, and most Americans will never
see, never have the opportunity to go up there and see
firsthand what we are talking about.
So when we are using statistics, when we are using facts,
it is important that we do not over exaggerate. And I would
state that an exaggeration of the vast majority of Alaskan
lands, upwards of 85 percent to 95 percent, open, when in fact
what we are talking about is 14 percent, is a far cry.
Mr. Alberswerth. I believe that percentage, that is
referring to the Arctic coastal plain, the so-called two areas,
which, of course is off limits to development and the whole
debate we are having as to whether or not Congress should
change that statutory protection or not. So that is what the 5
percent comes from.
In just reviewing the statement that we did enter into the
record here, it appears to us that there is a great deal of
activity under way in Alaska by the Federal Government to open
up large areas of the Arctic Slope.
As to the 14 percent, I am not aware of the basis for that
figure. I can get you the 85 percent figure for the record, if
you would care for that.
Senator Murkowski. I would. And I will provide you with a
copy of our map that shows how we have arrived at the 14
percent.
Let us see. I had another point that I wanted to make here,
but----
The Chairman. You indicated you would supply a copy. What
would you like him to do, analyze your copy and comment on it?
Is that the purpose for submitting it?
Senator Murkowski. Well, what I would like to submit, and I
will give this to Mr. Alberswerth, is our map that details what
is open, what is not open. And as you rightly point out, it is
the 1002 area that is specifically closed for exploration. That
is 5 percent of that coastal area, as we go across. So I will
be happy to provide this to the committee for the record, as
well as Mr. Alberswerth.
The Chairman. Thank you very much, Senator.
Senator Talent.
Senator Talent. Thank you, Mr. Chairman.
Let me start with you, Mr. Bayless. Mr. Alberswerth says in
his statement, ``As evidence of the fact that oil and natural
gas development is a robust activity on Federal lands, in
fiscal year 2001, the BLM permitted a record 458 drilling
projects on BLM lands, up from 3,400 permits issued in fiscal
year 2000.''
Now would you agree, if you know, that that statement is
factually correct or not?
Mr. Bayless. I could certainly--I believe more permits were
issued in 2001 than in 2000. Fewer permits were issued in 2002.
All of these are a much smaller number than using, just
grabbing a baseline at a busier time in the industry, back to
the early 1980's, a much, much higher level of drilling
activity at that time.
Senator Talent. So you are saying it could be true, but it
is not significant, in your view, evidence of whether robust
activity is occurring.
Mr. Bayless. That is correct.
Senator Talent. Now in the appendix, Mr. Alberswerth
provided applications for permits to drill going back to like
the year 1985, in which it appears--and you may not have this
in front of you. But it appears----
Mr. Bayless. I do not.
Senator Talent [continuing]. In this that permit approvals
have varied pretty wildly since 1985. You know, 1985, 3,300;
1986, 1,800; 1987, 1,400. Does that shed any light, in your
view, on whether this is a significant statistic? I mean, why
is it not a significant statistic? I mean, it would seem to me
that if they are granting a record number of applications for
permits to drill, that is some sign that the activity on
Federal lands is pretty robust.
Mr. Bayless. I do know the drilling level in the Inter-
Mountain West is much less than it was 25 years ago.
Senator Talent. Okay.
Mr. Bayless. Is it robust? It is moderately robust. I think
part of what really impacts this, and certainly we have alluded
to it before, activity in the Powder River Basin, where there
are a large number of very shallow, small, high-density wells.
I think that can skew the statistics at times, depending on
which year you grab, deleting those or including those.
Senator Talent. So some of the applications may be for
drilling projects that are pretty small in nature and do not
affect the--is that what you are saying? That could be it?
Mr. Bayless. They certainly have an impact. But some of
those permits may be for 300-foot wells. Some may be for
14,000-foot wells.
Senator Talent. Ms. Morrison, do you have a comment on any
of this? Do you want to help clarify this for me at all?
Ms. Morrison. Thank you, Senator. I cannot tell you
offhand----
Senator Talent. Start with the Chairman. Well, I guess it
is okay.
[Laughter.]
Ms. Morrison. I think I would say in the most recent years
what you have seen are coal bed natural gas or coal bed methane
wells. Those are more frequently drilled than, say, a
conventional oil and gas well.
Senator Talent. Okay.
Ms. Morrison. So the numbers may be, as Mr. Bayless has
indicated, may be skewed from that standpoint. Because in
Wyoming in particular, Colorado, New Mexico, we have seen the
coal bed methane wells increase. You are going to have
shallower, more wells than you will with conventional drilling.
That could be one of those items, if you would like the BLM
to analyze the numbers that Mr. Alberswerth appended to his
testimony, we would be happy to do that.
Senator Talent. Yes. I think that would be good.
Mr. Alberswerth, do you have a comment? Is that possible,
what she is saying?
Mr. Alberswerth. Yes, I think that----
Senator Talent. There are more permits but actually less
significant activity. Is that----
Mr. Alberswerth. Well, I am not sure what she means by less
significant activity. There has been a big boom in coal bed
methane development in, you know, the Powder River Basin of
Wyoming, in particular in the San Juan Basin. I have a
speculative answer to part of your question and I think a
factual answer to part of it, as well.
I think if you look at the--if you were to track these
drilling permit numbers with the fluctuating price of oil and
gas, that might tell you something about why that fluctuates so
much from year to year. And I think that it is worth looking
into, whether or not this is evidence more of price variability
for oil and gas or whether it is availability of land for
drilling. And I think that is part of the answer.
Senator Talent. Well, let me get one thing. I do not have
time to get all the comparisons I would have liked to. But Mr.
Bayless raised an issue, which seems to me to make sense. And I
would like you to comment on it. He says that an application
for permit to drill, that, according to BLM guide, should take
30 days to process takes on average 137 days to be approved and
does not blame BLM leadership, but it says that their
performance decreased by 60 percent. Companies seeking to drill
waited an average of 137 days and sometimes as long as 370 days
for Federal approval.
Now is that a fair statement, in your view, if you know?
Mr. Alberswerth. It may well be. And I do not know, but it
may well be.
Senator Talent. Okay. Now here is the point they are
getting at. And I would just like you to comment on this.
And then, Mr. Chairman, I am over my time, but----
The Chairman. That is fine.
Senator Talent [continuing]. I just want to follow up on
this point.
Would you agree that, in principle, anyway, whether this is
actually what is happening now, that in principle this could
happen, that land could be open for leasing and development and
drilling and the rest of it, in theory, I mean legally open,
but in practice the difficulties and delays in getting it
permitted and being able to use it are so great that, as a
practical matter, it is closed? Would you agree in principle
that could happen, whether you think that is happening now or
not?
Mr. Alberswerth. I agree in principle that that could well
happen. But you should understand that those lease terms are
out there. I mean, when you purchase the lease, you know what
the stipulations are that are on them. And so you are going
into this deal with the Federal Government, you know, eyes
open.
Senator Talent. Right. And that actually--one of the points
you made is that--and I wanted to bring this up with you--you
keep focusing on whether it is fair or unfair to these
companies, which I guess is, to me, a tertiary-type thing. You
say the answer is the Federal Land Management Agency's is not
to satisfy the wants and desires of the oil and gas industry,
which I think we would all agree with.
But what I want you to see the connect in, and maybe
comment on this, is I am not worried about the oil and gas
industry, except insofar as they are employing people in my
State. I am worried about when business people tell me that one
of the big reasons they are thinking of leaving the country is
because of high energy prices. Do you see what I am saying?
Mr. Alberswerth. Yes.
Senator Talent. It is not a question of fair. Well, they
knew going in that they should not have tried to lease it,
because--you see, I want the energy produced, if we can do it
in a way that is environmentally sound. It is in all our
interests to do that.
And so maybe you can consider whether what they are saying
is not true to some extent, that these long delays are making
it financially impossible for them to explore and use this,
even though in theory that there is--you see the loss to the
country, if that were the case?
Mr. Alberswerth. I can certainly sympathize with the
experiencing long delays in getting a drilling permit. The
focus of our concern more, though, has been some of the
criticism leveled at these stipulations that are imposed on
leases to protect wildlife. And it may take awhile in some
instances for the BLM to determine whether or not it is a good
idea to allow a certain type of operation to take place on
sensitive lands like that.
That is all I can tell you. I believe that from the data
that we have seen here in this EPCA report that it is really
quite clear that most of these federally owned resources are in
fact available. There are conditions that attack to Federal
leases to protect these other resources that you mentioned.
Senator Talent. Right.
Mr. Alberswerth. And I think that is fair.
Senator Talent. I think what we have narrowed this down to,
they are in law available. And then the question over which
there is obviously disagreement here is whether they are in
fact available. Because whether the delays or the other
problems puts them, in effect, you know, off reach. And if
anybody wants----
Mr. Alberswerth. Well, I would like to draw your attention
to another aspect of my statement, which is that those
stipulations are frequently waived. Seventy, 80, 85 percent of
the time that the companies ask for them to be waived, at least
in the three field offices that have published data on their
website. Now this may be different in other places, but that is
the data that we were able to get.
Mr. Bayless. Senator, if I could follow up, not only is it
an issue of whether those lands are available, but as you
pointed out, the timing, if there is a long delay, it impedes
industry. You are not worried about the industry; you are
worried about gas supply. There are signals that come out of
the market, price signals, that say we need more gas. We need
greater--the price has gone up. Where is the supply?
With these long delays, it creates uncertainty for
companies to be able to drill those additional wells, to budget
for drilling those additional wells. It really puts a bad
filter on those price signals.
Senator Talent. Thank you, Mr. Chairman.
The Chairman. Thank you very much, Senator. Might I say
that I think your last line of questions, with a couple more
problems added to the approach you have taken, are the essence
of the argument. Available as a matter of law versus available
in fact. And it is not all just the stipulations that are at
issue in terms of whether or not in law and in fact are getting
close together or are getting farther apart.
It would appear that in the eyes of the industry which
produces the energy for the country it is getting farther
apart, not closer. And I think we are going to get to that in
terms of the kind of bill we right, the kind of work we do with
the BLM, in an effort to get them to solve this problem in a
better way, with the environment taken into consideration.
Let me just ask one additional question of the
administration. Mr. Leer spoke of the conflicts that have
arisen in recent years between Federal oil and gas leases and
Federal coal leases. Now I have been in and out a couple of
times for other matters. Has this issue of what are the
department's plans to resolve this, has that been asked? And
have they answered that? Could you answer that, please, either
now or for the record?
Ms. Morrison. Yes, Mr. Chairman. I would be happy to answer
that for you, if I can turn to my materials on that. In
September 2001, the BLM's policy on the coal versus coal bed
methane or coal bed natural gas conflict expired. We are
currently, as you had mentioned, with Director Clarke looking
at taking a more aggressive stance through our policy on that
very issue, working through the lease terms that we can enforce
on these properties, that we do know there is a conflict.
We will do everything we can to work with both of those
factions of the industry in order to come up with the best
policy that the BLM can use to help that situation. I think we
can all probably agree that we want to conserve and to promote
the production of both of those resources. But it does come at
a time when they are in conflict in production.
I think there are ways to do it. I think there are
voluntary agreements. What the BLM is looking for is what can
we do through our own lease stipulations to encourage that
conflict to be resolved in a more amicable way.
The Chairman. Mr. Leer, is that one of the issues that is
around now that must be resolved?
Mr. Leer. I do believe it is, Senator, that the issue--
again, there have not been many big fed releases of coal bed
methane and coal in the last year. But there is a large number
scheduled for next year. And I think it is going to rise and be
a major issue in 2004.
So if we can get that resolved this year, it will be a plus
to public policy and clearly a plus to the interested parties.
The Chairman. Very good. Just a couple more.
Mr. Bayless and perhaps Ms. Morrison, what is the reason
for the new surge of well activity in the Four Corners area,
the new infield drilling? Is that a new rule, a new regulation,
a conservation change, or what is it that brings that on?
Mr. Bayless. A lot of it is a new rule from the State
Conservation Commission allowing a second well in the Fruitland
coal formation to be drilled per 320-acre spacing. So
essentially, it is down spacing from 320 to 168-acre spacing.
This is not--throughout the basin, it is--scientifically it was
addressed. And there are different areas of the basin where
this makes sense. But that is one of the--that is impetus for
some of the drilling. Other is a continued Mesa Verde drilling
and down spacing.
The Chairman. Is the activity in that basin, will it be on
an accelerated pace for a number of years, as a result of what
you have just described?
Mr. Bayless. There is going to be a lot of activity for
several years. There are many thousands, as you have pointed
out, there are many thousands of wells to drill. That basin
produces about four billion cubic feet of gas per day. It takes
a lot of continual drilling to maintain that production.
The Chairman. Well, that is why I repeat it has become
very, very urgent, in light of the fact that this drilling will
be very close in proximity one well to another, that there be
some arrangements made to assure the ranchers that in fact this
is not going to be done without regard to their particular
interests. Because they are all aware of that, and they are
very concerned that that is going to cause environmental
degradation, that it impacts on their right to use the ranch
land, the surface, in a manner that they have leased it for.
So I urge you again to get started in your community. And
we will be doing that, too, to get some people working on it.
Mr. Alberswerth, have you had a change in perspective with
reference to more renewable energy development on Federal
lands?
Mr. Alberswerth. Have we had a change?
The Chairman. Yes.
Mr. Alberswerth. If you are referring to the new study that
was----
The Chairman. No. Do you have some concern with wind as a
renewable on public lands that you did not have a few years
ago, when you were generally in favor of renewables?
Mr. Alberswerth. Well, we think that there are probably
places on the public lands where renewable, you know, wind
farms are appropriate. I think in terms of an overall direction
on this, Senator, that it would be a wonderful thing if our
energy policies were to encourage that activity on private
lands. I mean, it would be a real win-win situation for
agricultural communities. Farmers and ranchers have experienced
economic distress----
The Chairman. How do we encourage it?
Mr. Alberswerth. Perhaps with tax credits. I am not
familiar with the current programs, to tell you the truth. But
I know that there was a witness here the other day from the gas
industry talking about the boon that section 29 gas credits
were for the coal bed methane industry. Perhaps you could
develop something like that similar that would benefit private
ranchers and farmers in the Northern Plain States and
elsewhere.
The Chairman. One last observation for you and your
members. There is a very large and beautiful ranch in northern
New Mexico owned by Ted Turner, the Vermejo Ranch. Have you
heard of it?
Mr. Alberswerth. I believe I have heard of it, but I am not
familiar with it.
The Chairman. I think it is probably one of the best and
most beautiful multiple use ranches in the United States. And
the reason it comes to mind is because I heard the testimony, I
heard you talking about Alaska and how damaging drilling might
be. Do you know that on that rather fantastic ranch there are
1,500 gas wells that have been drilled and are producing on
private property that Mr. Turner says has caused no damage
whatsoever to this ranch, in terms of its multiplicity of uses?
It would seem to me that somehow or another there is an
inconsistency when somebody like that has found a way on
private property and--I am almost certain that if that property
were Federal, you would be sitting here saying: Do not drill a
well on it, almost certain. Not sure, but almost certain. And I
think that is--if that is possible, probable, then I think that
is very, very discouraging from my standpoint, because I do not
think you ought to have a policy that is different than Mr. Ted
Turner with reference to preserving his ranch. I think he is
preserving it as well as we ever would. And he thinks you can
drill gas wells on it. In fact, there may be more than 1,500
before you are finished.
Now we have been at it since 10 o'clock. But I will stay
here for a few questions, if you would like.
Senator Cantwell. Thank you, Mr. Chairman.
The Chairman. You are welcome.
Senator Cantwell. I appreciate the opportunity to
participate in this hearing. I am particularly interested in
this area as it relates to further developing alternative
energy supplies, which I believe our State of Washington needs
to look at, natural gas specifically. We are very hydro reliant
and have had lots of challenges because of that hydro system,
both in the short-term as it relates to droughts and supply and
complications of the spot market, as well as long-term issues
on the environment and impact on saving our wild salmon.
So we certainly want to diversify. And we want to invest
more resources in developing natural gas, particularly in
northwest areas of Alaska and possibly even Canada. I do want
us to think wisely about where we get those resources. And so I
have a question as it relates to national forest roadless areas
and information that has been published by both the U.S. Forest
Service. And I think the Wilderness Society might have
published something, too, as far as reports.
I am trying to understand what resources we might actually
get out of what has been protected as roadless areas and what
amount of natural gas or oil might actually be there. Because
when I look at what we have allowed within the roadless area
rule, roadless areas accounted for 0.4 percent of the total
domestic natural gas production, according to the U.S. Forest
Service. So, it was a very small number.
But the roadless area rule obviously allows for existing
leases. It allows for continuation or extension of renewal of
existing leases. It also allows for lease extensions on
previously leased land, if the application for the extension is
made before the termination of an existing lease. So there is a
lot of flexibility as it relates to current leases, which
really has, in my understanding of the issue, been those areas
that you would want to most access for gas development.
I want to make sure that we are clear for this hearing what
natural gas is available in areas that are protected as part of
the roadless area rule.
So Mr. Alberswerth, I think you might know some of that
information as it relates to a similar report that the
Wilderness Society did that might have similar information to
what the U.S. Forest Service has provided.
Mr. Alberswerth. Thank you, Senator. You are correct. The
Forest Service's environmental impact statement on the roadless
rule indicated there was about .4 of 1 percent of the natural
gas resources of the United States in the roadless areas
affected by that rule. Existing and, under the rule, exiting
leases would be honored. They had valid existing rights.
And we did do recently an analysis of the amount of oil and
gas beneath forest lands in the five or actually six-State area
of the Rocky Mountain West and came up with the following
numbers. Now the analysis was somewhat different than the
analysis performed in this recent EPCA report by the Interior
Department. So there is probably--and it was based on somewhat
different data.
So we could get into an apples and oranges type of
discussion here. But the bottom line is that there is not very
much gas in those roadless areas. I am not sure how the EPCA
report treated roadless areas in its analysis. You might wish
to ask the Interior Department how they did so. But the bottom
line was that our analysis indicated, based on U.S.GS
estimates, that there was only about a two to 2\1/2\ month
supply of natural gas in those roadless national forest areas.
Senator Cantwell. Plus they are hard to get to and they
lack the current infrastructure. Is that of interest to the
other panelists, looking at those particular areas for such a
small supply?
Mr. Leer. I am going to address it from a coal perspective.
And I think, at least my perception is there is some
misunderstanding in what happened in the late 1990's, when the
roadless rule was promulgated. Also, even some of the ways it
was promulgated, some questions. But when you looked at what
was happening, we were aware in the 1990's that the U.S. Forest
Service was trying to develop, you know, roadless rules. And
the mining industry did ask for what are the maps, where can we
go, how is it going to overly? Because, again, most of the
western coal is being produced, and a lot of the coal bed
methane gas is being produced, from Federal lands.
And we never could get the maps. The maps were never drawn.
In fact, the industry ultimately developed its own maps and
gave them to the Forest Service. And then the roadless area
boundaries were based on a 20-year-old inventory that were
never field verified and established whether there is in
question still retained roadless values that the rule
supposedly was trying to protect.
I mean, I can speak to one particular mine that we own and
operate in Colorado that is a deep mine. In fact, most of the
mines in the roadless areas that are affected are deep mines.
They do not particularly affect the surface at all, except for
when you do have--sometimes you need to run a ventilation shaft
to the mine, or if you have a mine accident, you may need
access to wherever the mine is under the proposed roadless
area.
The area that they have outlined, I have been up on it.
There are roads everywhere. But it is in the roadless area. It
is not a--20 years ago, perhaps, it was a correct map. Today I
would be happy to take any of the Senators and show them at
least one little area that certainly was drawn incorrectly.
I am not sure the data on the oil and gas side is
reflecting the coal bed methane piece of that, as well. And
again, in the roadless areas we are talking more about deep
mines. And they do not have a footprint on the surface, except
for emergency situations or you can have, if you get far enough
away, you do need to run an air shaft down it.
So, you know, to me the whole process, when it was base don
20-year-old data, it needs to be updated. And I think the late
midnight promulgation of the rule, it just did not feel right.
And I do not think it was right. So it deserves more study than
just making a rule. And I think the Forest Service even agreed
with that at one point. But then the 9th Circuit obviously
overturned that. So----
Senator Cantwell. Right. I would say probably the tens of
thousands of people from my State that wrote in over a year and
a half do not exactly think it is a late night rule. I can
think of other examples in the Congress where riders were
attached to bills that they would define as late night. I do
not think that this one necessarily qualifies as such.
So you are saying that it is not so much that you disagree
with where the oil and gas supply might be as much as maybe
some of the areas might not have been reflecting of what coal
supply is. That is your main point.
Mr. Leer. That would be my main point, but that is my
experience and what I have followed. And you know, the coal bed
methane operations that were seen developed in the West are
going obviously into the coal seam. So you do have that from a
gas supply. And I do not know if the data that David here has
referenced is reflecting that or not. And I will not try to
find on that.
Senator Cantwell. Well, I care deeply about the roadless
area rule, because I think it is good natural resource
management policy. So I probably will take you up on that offer
to go out and see the specific----
Mr. Leer. We will follow up.
Senator Cantwell [continuing]. Lines and where this was
drawn, because I think it is--I think there is much more
consensus about what is good forest management in areas that
really are not going to give us the gas supply. But maybe we
can make some headway.
Mr. Bayless, did you want to comment on that?
Mr. Bayless. Yes. Based on the Wilderness Society
information, I believe the National Forest Service land under
lease today has declined by 85 percent over the last 15 years.
So kind of much less of land is really in play. Today less than
five million acres of national forest lands are leased. So we
are moving away from the direction of oil and gas development
on national forests.
Taking your question in a slightly different direction, we
have--I have experience on a recently formed national monument
where part of the formation of that was that existing and
active oil and gas leases would remain valid. This was--this
contains a 50-year-old producing oil and natural gas field.
Both the BLM and my company were co-defendants in a suit filed
by Mr. Alberswerth's organization for trying to develop a
shooting seismic survey across those existing leases.
So sometimes there is a jump between what is promised and
really how it works out in practice.
Senator Cantwell. Well, I see the red light is on. I do not
want to take up more time, Mr. Chairman. But I do think the
issue, when put in the context of the U.S. Forest Service, if
it is 0.4 percent of the supply, and yet I look at the National
Petroleum Reserve in Alaska, where we might get something like
59 trillion cubic feet of gas or the Gulf of Mexico in the deep
water areas, I think why are we focusing on roadless areas.
My State would love natural gas. It would love to diversify
off of hydro. We want to get natural gas from Alaska or Canada
or various places. But it seems as if this particular supply,
as it relates to the roadless areas, is not worth the
investment, especially in light of the disruption that it would
provide to the environment.
Thank you, Mr. Chairman.
The Chairman. The only comment I would make, if you cannot
do either of the other two, then either of them----
Senator Cantwell. Well, we certainly want to get that
natural gas from Alaska.
The Chairman. Okay. Thank you.
Senator Cantwell. Thank you.
The Chairman. We stand adjourned.
[Whereupon, at 12:42 p.m., the hearing was adjourned.]
APPENDIXES
----------
Appendix I
Responses to Additional Questions
----------
National Mining Association,
Washington, DC, March 13, 2003.
Hon. Pete V. Domenici,
Chairman, Committee on Energy and Natural Resources, Dirksen Senate
Office Building, Washington, DC.
Dear Chairman Domenici: Thank you for the opportunity to testify
before the Committee on Energy and Natural Resources on the subject of
energy production on federal lands. The following are answers to the
questions which have been submitted for the record.
Responses to Committee Questions
Question. How will the coal leasing amendments you suggest benefit
the country in terms of new coal production?
Answer. The suggested changes recognize that long lead times and
capital investments as high as $1 billion require a predictable but
flexible leasing program that allows federal coal lease holders to deal
with operational, regulatory and market variables throughout the life
of a lease. Uncontrolled increases in the cost of production due to
geology, limited labor supply in rural areas, changes in prices for
competing fuels, changes in transportation costs, and changes in state
and federal environmental regulations which affect either production
costs or the ability to customers to use the coal from the lease are
examples of occurrences that can chill investment in federal coal
resources and new coal production. If the recommended targeted
modifications to the Mineral Leasing Act are enacted, investment in new
coal ventures will be encouraged with the assurance that operations
will be able to adjust to meet these variables.
Question. You have indicated there are problems with the coal
industry's bonding requirements. Can you explain why you are suggesting
the elimination of financial assurances with respect to bonus bids?
Answer. The limited availability of financial assurances
jeopardizes the continuation of existing operations and thwarts
development of new operations since bonds are required as a condition
to receive permits or other necessary government authorizations.
The Department of the Interior's requirement that successful
bidders for federal coal leases post a financial assurance to guarantee
the payment of deferred bonus bids is unnecessary and duplicative. The
suggested elimination of this particular requirement will free up
surety capacity while protecting the federal government by providing
that if the successful bidder defaults on a bid installment the
Department of the Interior can cancel the lease and the cancelled lease
resold to another prospective bidder.
Question. Do the Mineral Leasing Act provisions you are proposing
eliminate the diligent development requirement?
Answer. There is nothing in the suggested changes that NMA
recommends that would in anyway eliminate the diligence requirement
established in the Act.
Steven Leer,
Arch Coal, Inc.
______
[Responses to the following questions were not received at
the time the hearing went to press.]
Responses of Deputy Secretary Griles to Questions From Senator Bingaman
epca study (stipulations)
Question 1. As you know, I was one of the authors of section 604 of
EPCA, requiring the Department to undertake the oil and gas resource
inventory.
The report attempts to quantify leasing stipulations. Does the
report take into account the frequency of waivers of leasing
stipulations by federal land managers?
Does the report address the fact that directional drilling is a
viable option in some instances where no surface occupancy stipulations
are in place?
lease stipulations
Question 2. Energy development on our public lands is essential.
Yet, these are by law multiple use lands. I understand that many of the
oil and gas lease stipulations are timing limitations relating to fish
and wildlife concerns, but am I also correct in my understanding that
leasing stipulations also can relate to:
coal mining
ranching (such as cattle movement)
recreational use (camping and snowmobile use)
water quality and quantity
paleontological and historic resources?
What other matters are covered by leasing stipulations? What are
the Department's intentions with respect to existing stipulations? Are
there alternative ways of protecting the environment and other land
uses, and if so, what are they?
surface use conflicts
Question 3. What is the Department doing to address the issue of
conflict between coal production and coalbed methane production?
What is the Department doing to address the conflicts that can
arise between the ranching community and those who seek to develop
federal oil and gas resources?
What is the extent of these problems?
coalbed methane in the san juan basin
Question 4. I understand that the BLM is working on an
environmental impact statement relating to oil and gas resource
development in the San Juan Basin. Many expect that this document will
project a tremendous increase in coalbed methane development. What is
the status of the work on this analysis?
funding for i&e and environmental compliance
Question 5. I have had a long-standing concern over what I consider
to be inadequate resources being devoted by the Department to both the
Inspection and Enforcement Program and to processing oil and gas
applications, including environmental compliance.
I am pleased that the Secretary reiterated the Department's
commitment to hire additional personnel for the I&E program in the BLM
Farmington field office when she appeared before the Committee
recently. Can you give me a status report on that matter?
What else does the Department do to ensure that the BLM has
adequate resources to do their job with respect to energy development
on federal lands?
economically recoverable resources
Question 6. The EPCA report bases its analysis on U.S.GS
technically recoverable oil and gas resources and EIA proven reserve
estimates. This is helpful information. However, I was disappointed
that the EPCA report did not also address economically recoverable
resources, which I believe would also be useful information if the
underlying assumptions are clearly set forth. The Department has
provided this information for both the Arctic National Wildlife Refuge
and the National Petroleum Reserve-Alaska. I have received a letter
saying you will provide it for the basins studied in the EPCA report,
but not unti1 2005. Is there any way to speed up this work?
renewable energy
Question 7. I have been concerned that those seeking to develop
wind and solar energy on our public lands do not get adequate
assistance or information on availability of public lands from federal
land managers.
What policies, guidelines and procedures does BLM have in place to
facilitate the development of wind and solar energy on public lands
appropriate for such development? Please provide a copy for the record.
Under what legal authorities are wind and solar energy on public
lands allowed?
What regulations, guidelines or policies do you have relating to
such authorizations? Please provide a copy for the record.
royalty relief for marginal onshore gas
Question 8. The Department has a regulation in place providing
royalty relief for production of oil from marginal stripper wells. I
believe that we need a comparable provision for production of natural
gas from public lands. Last Congress, I worked on such a provision
during the energy bill conference.
Will you assist us as we continue to work on this measure?
federal coal leasing
Question 9. Do you believe that the Federal coal leasing provisions
of the Mineral Leasing Act need to be amended? Please provide the
Administration's position on each of the recommended amendments to the
Federal coal leasing provisions of the MLA contained in the testimony
of the National Mining Association. Provide your rationale and also
provide information on the number of leases, lessee and location of the
leases that would be affected by the amendment.
Question 10. How many orphaned and abandoned oil and gas wells are
there on lands administered by the BLM? Does BLM have a plan to
remediate the sites? How much would it cost?
Question 11. What is the processing time for applications for
permits to drill? When delays occur, what are the reasons?
Question 12. You indicate that the Department is reviewing right-
of-way corridors. Please describe more fully what this review entails
and what your timeframe is?
Question 13. The Department has a task force reviewing the issue of
bonding. What issues specifically are being reviewed? Is the Department
looking at bonding issues related to onshore oil and gas? Offshore oil
and gas? Coal? Hardrock minerals? When can we expect to see the
recommendations and report of the task force?
Question 14. The oil and gas industry witness testified that oil
and gas permitting time has doubled in one year. Is this correct? If
so, what accounts for this?
______
Responses to Questions From Senator Bunning
Question 1. What is the potential for coal mining on federal lands?
How much coal is available to be mined on federally owned land? Is coal
on federal lands available for mining in the eastern United States? If
so, where is it available where the Federal Government owns the rights
to the coal?
Question 2. How do you think federal laws should be changed to best
bring about a balanced energy policy that will boost domestic energy
production while also promoting conservation?
Question 3. What are some of the obstacles in current regulations
that have prevented the United States from boosting its energy
production on federally owned lands?
Appendix II
Additional Material Submitted for the Record
----------
American Petroleum Institute,
Washington, DC, March 12, 2003.
Hon. Pete V. Domenici,
U.S. Senate, Washington, DC.
Dear Senator Domenici: On February 27, 2003, the Senate Committee
on Energy and Natural Resources held a hearing on Energy Production on
Federal Lands. The American Petroleum Institute, which represents all
sectors of the U.S. oil and natural gas industry, appreciates the
opportunity to submit this letter and its attachment for the written
record.
importance of federal lands
The importance of multiple-use federal lands to domestic energy
supplies cannot be overestimated. Set aside by Congress to help provide
energy to the nation, these lands comprise about 31 percent of total
U.S. land area and a large part of the Outer Continental Shelf.
According to the U.S. Geological Survey and the U.S. Minerals
Management Service, federal lands contain about 77 percent of the
nation's estimated undiscovered oil and 59 percent of its estimated
undiscovered natural gas. The remainder is on state and private lands.
The federal lands holding undiscovered oil and gas resources lie
mostly in frontier areas such as Alaska, the Outer Continental Shelf,
and the Rocky Mountain States. Federal lands contain an estimated
undiscovered 99 billion barrels of oil and 577 trillion cubic feet
(Tcf) of natural gas. Put in perspective, that is enough oil to fuel
more than 166 million automobiles for 20 years and heat more than 67
million homes for 20 years. It is enough natural gas to meet the needs
of 10 million residential customers for 664 years. These lands can play
a vital role in meeting our growing needs for oil and natural gas--if
opened to development in a timely fashion.
The Energy Information Administration (EIA) projects that between
1999 and 2020 oil consumption will increase 39 percent in the U.S. and
58 percent globally. U.S. natural gas demand is expected to grow by
more than 50 percent by 2025. To ensure both adequate and secure
supplies, the United States must continue to diversify its foreign
sources of supply, which already provide 58 percent of the nation's
oil, and increase domestic supplies through oil and natural gas
development activity on federal lands.
The attached paper highlights the importance of federal lands to
meeting our energy needs.*
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* Retained in committee files.
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all impediments to development need to be reviewed
A January 2003 study by the U.S. Department of the Interior and
other agencies, evaluated oil and gas resources on federal lands and
examined the restrictions and impediments to developing oil and gas
resources in five important oil and natural gas bearing basins in the
Rocky Mountains. The study (Scientific Inventory of Onshore Federal
Lands' Oil and Natural Gas Resources and Reserves and the Extent and
Nature of Restrictions or Impediments to their Development) shows that
some lands are not leased because Congress has designated them as
Wilderness or National Parks. Administrative actions, such as the
Bureau of Land Management designating lands as Wilderness Study areas,
have also prevented leasing. Other lands are not leased because
requisite federal land use planning or NEPA analysis has not been
undertaken or completed. Additionally, many areas are leased but with
very restrictive stipulations such as ``No Surface Occupancy'' or very
limited timeframes allowed for operations, essentially making them
unavailable for development.
However, restricted leasing of public lands is only part of the
access problem. Major stumbling blocks arise after a company obtains a
BLM lease. After leasing, producers must obtain a wide variety of
approvals and permits (federal, state and local) before drilling can
commence. The first step is usually to obtain BLM approval of the
``Application for Permit to Drill'' or APD. To do this, an applicant
must first obtain other permits, reviews, and approvals (often called
Conditions of Approval). For example, the applicant very likely will
have to conduct an Environmental Impact Study, a Cultural Survey, and
an Endangered Species Survey. The applicant will also likely have to
obtain a Private Landowner Agreement and a Right of Way permit. These
permits are often difficult to obtain, and delays--sometimes very
significant--are common.
While the EPCA study provides an up-to-date estimate of resource
potential and important leasing and pre-leasing impediments, it,
unfortunately, does not examine the numerous permitting and other post-
leasing problems that can delay otherwise viable projects by many
months or years. As noted later in this letter, Congress should require
an evaluation of post-leasing impediments in the five basins already
studied and require a comprehensive study of pre- and post-leasing
issues for all other federal lands.
technology protects the environment
Because of advanced technology, energy resources on federal lands
can be developed with little or no impact on the environment.
Advanced technologies such as 3-D seismic imaging provide the
ability to better ``see'' underground oil and natural gas deposits,
greatly improving the ability to find oil or gas. This reduces the
number of wells necessary and dramatically reduces the ``footprint,''
or surface disturbance, of the exploration and production activity.
Highly sophisticated directional drilling systems can travel deeper
and in various directions--even horizontally--to reach potential oil
and natural gas resources more quickly and more precisely.
According to a 1999 U.S. Department of Energy study (Environmental
Benefits of Advanced Oil and Gas Exploration and Production
Technology), innovative technologies have led to environmental
benefits. Among them:
``Smaller, lighter rigs and advances in directional and
extended-reach drilling shrink the footprint of oil and gas
operations and reduce surface disturbance.''
``Continuing improvements in recovery efficiency per well
translate into fewer wells . . .''
``Resources underlying arctic regions, coastal and deep
offshore waters, sensitive wetlands and wildlife . . . can now
be contacted and produced without disrupting surface features
above them.''
``From coast to coast, innovative E&P approaches are making
a difference to the environment. With advanced technologies,
the oil and gas industry can pinpoint resources more
accurately, extract them more efficiently and with less surface
disturbance, minimize associated wastes, and, ultimately,
restore sites to original or better condition.''
actions congress can take to improve responsible oil and gas
development
Mandate an Energy Policy and Conservation Act (EPCA) Phase
II study assessing post-leasing impediments to development in
five resource basins addressed in 2003 report.
Initiate EPCA evaluation of resources and both pre- and
post-lease impediments to development for other federal lands,
including the Outer Continental Shelf.
Require DOI to act promptly to complete all outstanding
resource management plans needed to allow thousands of
permitting decisions to proceed.
Provide specific oil and gas leasing and permitting reform
measures as identified by the federal government's Applications
for Permits to Drill (APD) Project Team.
Direct funds to agencies involved in public lands
development, requiring timely preparation of necessary
environmental documentation for such activities.
Provide additional funding for MMS/BLM permitting/management
activities from bonus bid/royalty stream.
Codify Executive Orders (EO 13212 and EO 13211) to expedite
increased energy supply and availability to the nation by (1)
considering the affect of federal regulations on the nation's
energy supply, distribution and use, and (2) ensuring ``energy
accountability'' within federal resource management agencies.
Accountability may include requiring internal agency audits to
establish performance measures and benchmarks for addressing
permit backlogs and Resource Management Plan updates.
Provide support for pending CEQ-led administration pilot
program, Northern Rocky Mountain Energy Policy Program, to
foster early collaboration of federal and state decision-making
and effective management of energy policy issues on public
lands in the northern Rocky Mountains.
We appreciate the opportunity to offer these comments. Please let
us know if you have any questions or need additional information.
Sincerely,
Charles E. Sandler,
Vice President.
______
Statement of the Geothermal Energy Association
Thank you for the opportunity to present the views of members of
the Geothermal Energy Association (GEA) regarding geothermal energy
potential on public lands and the obstacles to developing this
important national energy resource. GEA is a trade association that
represents 80 companies and organizations involved in the U.S.
geothermal industry, from power plant owners and operators to small
drilling and exploration companies.
geothermal energy's potential
Geothermal energy provides a significant amount of the energy and
electricity consumed in the Western U.S. Geothermal heat supplies
energy for direct uses in commercial, industrial and residential
settings in 26 states. Geothermal resources furnish substantial amounts
of electricity in California, Nevada, Utah and Hawaii. Indeed, 6
percent of California's electricity comes from geothermal energy.
There has been renewed interest in geothermal power. A small-scale
power facility has started operation in New Mexico, and the BLM reports
that there is an active interest in leasing and permitting in eleven
western states. In part this is due to the adoption in many states of
renewable production standards to ensure a market for new renewable
power. We believe it is also due to the interest shown in the Congress
in expanding the Section 45 production tax credit to include geothermal
energy. Further, the high-level interest shown in expediting the
processing of geothermal leases and permits by federal and state
governments has contributed as well.
Today, Senators Harry Reid (D-NV) and Gordon Smith (R-OR) will be
reintroducing legislation that they sponsored in the 107th Congress to
expand the Section 45 production tax credit to geothermal and other
renewable energy sources. Many of the Senators on this Committee
supported one of several bills in the last Congress that proposed
taking this action. We hope that you will again support Senators Reid
and Smith in this effort and consider adding you name as a co-sponsor
of their bill. This is the single most important measure before
Congress to stimulate new investment in new renewable power production
in the United States.
Expanded use of geothermal resources will provide additional clean,
reliable energy to the West. Thousands of megawatts of new geothermal
power, and an equal amount of direct-use energy, could be developed in
the immediate future; however, obstacles created by public land
agencies must be removed.
Geothermal energy contributes directly to both state and local
economies and to the national Treasury. To date, geothermal electricity
producers have paid over $600 million in rentals, bonus bids and
royalties to the federal government. Moreover, according to an analysis
performed by Princeton Economic Research, it would be reasonable to
estimate that the geothermal industry has paid more than 6 times that
amount in federal income tax, for a combined total of over 4
billion.\1\ If the economic multiplier effects were considered, the
total contributions of geothermal energy to the local and national
economy would be substantially greater.
---------------------------------------------------------------------------
\1\ Princeton Economic Research, Inc., Review of Federal Geothermal
Royalties and Taxes, December 15, 1998. (Figures expressed in 1998
dollars.)
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What is the potential for geothermal energy on public lands? What
are the benefits of developing these resources? These questions are
difficult to answer, in part because the efforts of the U.S. Geological
Survey (``U.S.GS'') and the Department of Energy to define the U.S.
resource base have not been funded for many years. In fact, as the
U.S.GS pointed out in its testimony before the Energy Subcommittee in
May, its last assessment was undertaken roughly 30 years ago.
In order to produce a more current picture of the near-term
potential of the geothermal resource base, GEA Executive Director Karl
Gawell together with Dr. Marshall Reed of DOE and Dr. Michael Wright of
the Energy and Geosciences Institute at the University of Utah,
conducted a systematic survey of known geothermal experts from
business, academia and government in 1999. The results of this survey
were assessed and a brief report was released in April of that year
entitled ``Preliminary Report Geothermal Energy: The Potential for
Clean Power from the Earth.''
That report concluded that the U.S. geothermal resource base could
support significantly increased production. U.S. geothermal electric
capacity, now at about 2,600 MW, could triple and, with expected
improvements in technology, could reach nearly 20,000 MW in 20 years.
These figures would appear to be fairly consistent with the
estimates presented to the Subcommittee on Energy and Minerals by the
U.S. Geological Survey. Their testimony indicated a potential for
22,290 MW of geothermal electricity production (see Attachment #1). As
GEA's Executive Director testified before the Energy and Minerals
Subcommittee, these figures also concur with the results of the
planning workshop that helped produce the current DOE Strategic Plan--
an effort that brought together many of the leading experts from
industry, laboratories and academia. At that workshop, there was a
consensus that, with market support, as much as 10,000 MW of electric
capacity could be brought on-line in the West by 2010 by expanding
existing resource production and developing new facilities.\2\
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\2\ U.S. Department of Energy, Office of Geothermal Technologies,
Strategic Plan for the Geothermal Energy Program, June 1998, page21.
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Achieving this additional geothermal production would have
substantial economic and environmental benefits in the western United
States. If the goal of the DOE Strategic Plan could be reached, the
cumulative federal royalties from the new power plants would reach over
$7 billion by 2050, and estimated income tax revenues would exceed $52
billion in nominal dollars.\3\ The state share in these royalties alone
would result in an additional investment of $3.5 billion in schools and
local government facilities in the western states.
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\3\ Princeton Energy Research Inc., Op. Cit., Volume I, page 17.
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Expanded use of geothermal resources can also contribute to the
President's goal of a hydrogen future.Using geothermal resources to
drive catalytic processes is ideal for generating hydrogen. In fact,
Iceland is expected to be the first country in the world to make a
significant transition to hydrogen fuels, which it will achieve by
using its geothermal and hydropower resources.
recent efforts to address barriers to geothermal energy use
We were very pleased by the administration's interest in enhancing
the use of renewable resources on public lands. Vice President Cheney,
Secretary Norton, and Secretary Abraham have all shown a strong
interest in promoting renewable energy use, and addressing the problems
the geothermal industry has experienced.
Vice President Cheney met with leaders of the renewable energy
industry. The National Energy Policy release in May of 2001 by the
National Energy Policy Development Group included several key
recommendations. The NEPDG recommended that the Secretaries of the
Interior and Energy re-evaluate access limitations to federal lands in
order to increase renewable energy production. It also recommended that
the Secretary of the Interior determine ways to reduce the delays in
geothermal lease processing and permitting.
Twelve days after the release of the Vice President's report, the
President signed Executive order 13212--Actions to Expedite Energy-
Related Projects. This order established the White House Task Force on
Energy Project Streamlining, to ensure interagency collaboration.
In response to the Vice President's report, the Secretaries of the
Interior and Energy convened at a conference entitled ``Opportunities
to Expand Renewable Energy on Public Lands'' in November 2001. This
meeting brought together over 200 senior executives from industry with
state and federal agency representatives as well as a wide range of
other interested groups.
This interest and initiative from the Administration has been
supported by Congressional action. The House Resources Committee and
its Energy Subcommittee have held hearings on renewable energy
development on public lands, and specifically on geothermal energy
issues. The Congress has included funding for key activities by the
Bureau of Land Management, U.S. Geologic Survey and Department of
Energy.
We appreciate the interest and attention of the Senate Energy
Committee, and hope that these hearings will build upon the progress
being made. We are pleased to say that there is progress being made,
although we must report that there are still problems and obstacles to
overcome.
geothermal energy on public lands
Whether and when the economic benefits of further geothermal
development are realized will greatly depend upon the action, or
inaction, of the federal land management agencies. Today, about 75% of
U.S. geothermal electricity production takes place on federal public
lands since that is where most of the resource is located. If we expect
to see significant increases in geothermal energy production in the
United States, we will have to access resources yet to be developed on
public lands.
New geothermal development requires the timely and reasonable
oversight of federal leasing, permitting, and rights-of-way and
environmental reviews by public land management agencies.
Unfortunately, the previous administration's management of federal
geothermal resources was marked by bureaucratic delay and indecision by
public land agencies; as a result, there has been a rapid decline in
new geothermal energy development.
To understand the impact that delays can have, it is important to
recognize that all of the estimates discussed earlier are nothing more
than that--estimates. A company interested in developing a geothermal
resource will have to invest millions of dollars in defining the
resource before construction of a power plant can even begin.
Unfortunately, there are few reliable surface exploration techniques
for geothermal energy that can provide any degree of confidence.
Confirmation and definition of the resource involves drilling, which
means the investment risk is high and may remain high until after
several wells have been drilled.
Geothermal wells are more expensive to drill than oil and gas
wells, and if successful have a payback period substantially longer
than oil and gas wells. They are drilled in hot, hard, fractured,
abrasive rocks where problems are frequent and expensive. For ``green
field'' development, resource definition work may account for as much
as 40% of the cost of the project, and that considerable expense must
be borne before the resource is sufficiently confirmed in order to
secure financing for a project--making the risk to the developer even
greater.
Companies will not take on such a considerable expense and risk
without assurance that if then are successful they will be able to
develop a power plant. To begin with, they need a lease to ensure their
rights to develop the particular resource identified.
This brings us to bureaucratic problem number one: tens of
thousands of acres of geothermal leases were applied for in the West,
to which federal agencies failed to respond. Lease applications
languished, often for years.
Because this Administration has made renewable energy development
on public lands a priority, and with Congress support, we have seen
some progress. The de facto moratorium on geothermal development on
public lands appears to be lifting. Last year, BLM was able to make
substantial inroads on the lease backlog in Nevada, and the Secretary
of the Interior has committed the agency to eliminating the backlog
entirely.
But while progress is made in some areas, BLM clearly still lacks
the resources to eliminate the problem. In addition to a lack of
resources to complete lease processing, and the necessary land-use
planning and environmental reviews, BLM is still seeking the active
cooperation of other agencies, particularly the Forest Service. Lease
applications that have been pending for years, some for as long as a
decade, still await action in Washington and other states. We
understand that persistent pressure from the BLM has resulted in some
progress being made on pending lease applications on Forest Service
lands, but still, new leases are not being issued.
If you wonder why there are not more geothermal projects being
developed in the West, these delays are a big part of the answer. If a
company cannot obtain a lease, it will not spend millions of dollars on
the exploration needed to determine whether or not there are adequate
subsurface geothermal resources to support a geothermal power project.
Furthermore, once a company obtains a lease, the administrative
processing of permit applications and environmental reviews can be
expected to take years. As GEA testified before the House Resources
Committee's Energy Subcommittee, it has been our members' experience
that ``environmental reviews have been unnecessarily extensive, costly,
and repetitive; and in areas where an EIS has been completed, decisions
by federal agencies have been subject to years of delay and appeal.''
During the House Resources Energy Subcommittee hearing in May of
2001, an official from Calpine Corporation, the largest geothermal
energy company in the United States, testified about his company's
experience in trying to develop geothermal resources on Forest Service
land in Northern California. The area in question was leased by BLM in
the 1980s, with the approval of the Forest Service, for geothermal
development. In fact, the area is situated in the Medicine Lake Known
Geothermal Resources Area, one of the first KGRAs to be designated
after the Geothermal Steam Act was passed in 1970.
Despite the fact that BLM and the Forest Service encouraged
development in this area for more than two decades, and the Bonneville
Power Administration supported the project and agreed to buy the
electric power, it took over seven years to complete the initial
permitting and EIS on the project. The project was approved with some
of the most extensive and onerous conditions ever imposed on a
geothermal project. Despite approval of the project, the Calpine
official declared in his statement before the Subcommittee ``. . . if
Calpine knew in 1994 what it knows now, it is safe to say that it never
would have invested its time and capital in the Fourmile Hill
project.'' He continued: ``. . . Unless the situation changes, Calpine
is unlikely to embark on a similar project ever again. This should
concern this Subcommittee because many of the geothermal resources in
the United States are located on federal land. As long as the federal
permitting process remains as time-consuming and costly as what Calpine
has experienced, private companies will be severely discouraged from
developing these resources.''
The message is clear: Extensive and expensive administrative
processing is having a significant negative impact on geothermal
development on public lands. The Years of delay and uncertainty in
moving forward at these sites sent shock waves through the geothermal
industry. It sends the message to every company considering a new
geothermal project on public lands--expect many years of arduous and
expensive bureaucratic processing.
geothermal energy on military lands
In addition, there are millions of acres of public land in the West
that are reserved for use by the military. These lands potentially hold
significant geothermal resources. GEA fully recognizes the importance
of the military's use of public lands, and believes that leasing or
development should occur on military lands only with their consent, and
under such terms and conditions as they deem necessary and/or advisable
to meet the military mission.
However, where development occurs, GEA believes geothermal leasing
and development on lands subject to military reservation there should
be:
(1) Uniform policies on securing and maintaining the
leasehold estate;
(2) Uniform royalty structures and consistency with policies
affecting development on non-military lands; and
(3) Centralized administration of the lease and royalty
programs.
What we are asking for is that standard, uniform policies be
developed regarding leasing and royalties on military lands so that a
potential developer knows what to expect. The current situation, which
allows ad-hoc decisions to be made on a case-by-case basis, deters
geothermal development on military lands. Essentially, we believe
geothermal resources should receive treatment similar to other oil, gas
and mineral activities on military lands.\4\
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\4\ See 43, U.S.C. 158. The Engle Act of 1958 placed mineral
resources on withdrawn military lands under jurisdiction of the
Secretary of the Interior and subject to disposition under the public
land training and mineral leasing laws.
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a new national resource assessment is needed
One of the proposals made during the last Congress was to direct a
new national resource assessment by the U.S. Geologic Survey, and we
strongly support this proposal. The importance of U.S.GS resource
assessment was affirmed by the National Research Council, ``effective
and timely scientific information from [the U.S.GS] programs is needed
to help the nation determine its enemy options through the year 2000
and beyond.\5\
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\5\ Energy-Related Research in the U.S.GS. National Research
Council, 1995, National Academy Press. Washington, DC.
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The last assessment of the U.S. geothermal resource base was
conducted in the late 60s and early 70s. A lot has happened in thirty
years, including our fundamental understanding of the earth's geology.
The lack of an up-to-date resource assessment is a fundamental barrier
to expanded geothermal development in the United States. The U.S.GS has
initiated a new assessment for the Great Basin with funding and support
from Congress. This assessment should be expanded, and the U.S.GS
should be authorized, directed, and funded to complete an entire
national resource assessment over the next three years.
updating the geothermal steam act
While we applaud the efforts made to date by the Administration to
promote the development and use of geothermal resources on public
lands, industry has begun to recognize that there are some fundamental
problems with the Geothermal Steam Act that need to be addressed. The
House Resources Committee proposed a series of amendments to the Steam
Act during the 107th Congress that have been the basis for an on-going
discussion about how to improve the underlying law. Following is a
summary of our views on some positive amendments to the Steam Act that
would help encourage new geothermal development.
KGRAs and Competitive Leasing
To begin with, the Steam Act was written at a time when government
experts were expected to determine where the best resources were
located. The federal government would determine what areas would be
designated ``Known Geothermal Resource Areas,'' and these would be
subject to competitive bidding. This method is not too different from
the approach taken by the oil and gas leasing laws prior to their
modification by Congress in the 1980s. Similar modifications should be
made to the Geothermal Steam Act.
We recommend that KGRAs be eliminated as a criterion for
determining where bidding is held on a competitive basis, and that the
law should be modified to resemble the current oil and gas leasing
statutes where lands are offered first for competitive bidding and then
made available on a non-competitive basis. In states where there are
expressions of interest in bidding, BLM should hold a competitive lease
sale at least once every two years. Prior to scheduling the sale,
companies should be asked to submit any nominations they may have for
specific lease blocks upon which they wish to bid.
Royalties
The current royalty requirements should be modified to reduce
administrative costs and promote new power and direct use development.
Instead of the complex and administratively expensive net back formula
now used, royalties should be based upon a simple percentage of gross
proceeds. We estimate that currently that would be roughly a 3\1/2\%
gross royalty.To encourage new development, federal royalties could be
``stepped,'' or be set at 2% of gross revenues for the first four years
of production with an increase to 3\1/2\% for the remaining term of the
lease. Recognizing that local governments rely upon royalty payments
for essential services, if a stepped royalty is adopted, we would
further recommend that the state share of the royalty should be
increased to 100% for the initial period.
For direct use operations, there should be no royalty or a simple,
nominal fee. Experts on direct use operations believe that the current
royalty requirement is perhaps the major impediment to greater direct
use of geothermal energy in commercial, mining, ranching and similar
operations in the West. Kevin Rafferty of the Geo-Heat Center in
Klamath Falls, Oregon states, ``The really telling statistic in my
opinion is that we now have hundreds of direct use projects in
operation across the West and we are only able to identify 3 that use
resources on the public lands. The users are out there and so are the
Federal resources but no one is using them. It seems pretty obvious
that something is wrong.'' According to Mr. Rafferty, the high cost of
direct use royalties was the most commonly cited problem at a recent
meeting held to discuss how to expand geothermal energy use in the
West.\6\
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\6\ Email communication from Kevin Raffert, Associate Director,
Geo-Heat Center, Klamath Falls, Oregon, February 24, 2004.
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Similarly, co-production of mineral by-products from geothermal
sites should be subject to no royalty or a nominal fee. Mineral
production from geothermal sites should be treated the same as mineral
production elsewhere on the federal lands. It is sadly ironic that
under the existing law a federal lessee producing metals from the fluid
used in a geothermal plant would have to pay the federal government a
royalty on the mineral (in addition to a royalty on the power), but
producing that same metal by open pit mining on the public lands would
not be subject to a royalty. There is significant potential to produce
minerals from geothermal sites that should be encouraged. Doing so will
not only help the economy and national security but will reduce the
overall environmental impacts of mineral production.
Royalty Revenues
A fundamental problem facing the federal governments' efforts to
promote geothermal production on federal lands is the lack of resources
to support the efforts urgently needed by the BLM, U.S.GS, and others.
To help address the substantial backlog of leasing, permitting and
related environmental and land-use reviews and to support a new
geothermal resource assessment we would propose that the federal share
of geothermal royalties be dedicated to these efforts on a temporary
basis.
For the next five years, the federal share of geothermal royalties,
bonus bids, and rentals should be used to fund the U.S.GS resource
assessment above, to eliminate the backlog in BLM planning, leasing and
permitting activities, and to complete targeted environmental reviews
for areas with significant new development potential. These
environmental reviews should be conducted cooperatively with state and,
as appropriate, tribal land authorities and should seek to minimize
subsequent permitting and related project delays. For military lands,
the share of federal royalties should be dedicated for their geothermal
development efforts.
Payments/Due Dates Lease/Reinstatement for Inadvertent Lapses
Again, unlike the oil and gas leasing law, there is no flexibility
in the existing geothermal statute for inadvertently late lease rental
payments. If a payment if even one hour late, the law would impose
termination of the lease. This is not only unreasonable, it can
seriously disrupt lease development.
We would recommend that a standard 30-day grace period be applied
for all payments due to the BLM, with a penalty as prescribed by
regulations, similar to oil and gas.
Lease Consolidation, Unitization/Pooling
For a number of reasons, including efficient development of the
resource, a geothermal area should be developed under common terms and
agreements. In some cases, this would mean lease consolidation where a
single company has multiple leases. In other cases, this could mean
unitization or pooling where there are multiple leaseholders or perhaps
a mix of federal, state or other leases.
The current law and regulations do not facilitate these
developments. For example, the BLM cannot unitize a group of leases
unless they have exactly the same lease terms. Also, they do not have
the same degree of authority to prompt pooling arrangements or unit
agreements as they have for oil and gas leases.
We would recommend that the law be modified to provide BLM the
authority to consolidate leases that do not have exactly the same terms
(issued same day, same royalty rate, etc. . . .) BLM should be
authorized to renegotiate lease terms in order to have common terms for
a lease block. BLM should also be given broader authority to initiate
unitization or pooling agreements when it would facilitate development
of the resource.
BLM as Lead Federal Agency
There continues to be significant problems with leasing and
development of geothermal resources where there are multiple agency
jurisdictions involved. We applaud the efforts of the BLM to work
cooperatively with the Forest Service and the Navy, and encourage all
parties to work together. However, the law should be amended to provide
BLM greater authority to ensure timely decisions are made.
We would recommend that the Steam Act be amended to make it clear
that BLM has lead status for all decisions under the Steam Act. BLM
should be authorized to establish, by regulation, specific timeframes
for actions by other agencies where their consent or consultation is
required.
Agency Appeals Process
Finally, appeals of agency decisions under the Steam Act should be
expedited. The U.S. Forest Service has a more expeditious process
governing appeals of their actions as compared to the BLM. The BLM
should consider modifying its regulations to be more like the Forest
Service.
Specifically:
1. The BLM should adopt regulations similar to those of the Forest
Service whereby only National Environmental Protection Act (NEPA)
decisions can be appealed, such as a Decision Notice or Record of
Decision. Implementing actions, such as the issuance of a permit or
sundry notice, cannot be appealed. The current BLM regulations allow
for the appeal of the NEPA decision, and then for the further appeal of
any permit that is issued subsequently. The delays can be endless.
2. Regulations should be modified to set a time limit for the
Interior Board of Land Appeals (IBLA) to decide appeals. The
regulations should provide that if the IBLA does not make a decision
within the time limit, then the appeal is deemed denied. The Forest
Service regulations set a 45 day time limit for deciding an appeal. In
contrast, an appeal of the BLM Record of Decision for Calpine's
Fourmile Hill geothermal project (referenced earlier) took 22 months
before a decision was reached to deny the appeal.
transmission
Since most geothermal power facilities must be located where the
resource occurs, they are often in rural areas. The benefits of this
coincidence for rural economic development are substantial and
positive. In nearly every county that currently has a geothermal power
plant, it is the largest taxpayer in that county and provides
substantial long-term employment as well.
However, for the developer this adds a potentially significant
problem--the location may or may not be near transmission lines. This
obstacle needs to be recognized by the federal agencies, and they need
to place a priority on processing rights-of-way and permits for
transmission lines. It also raises the need to plan transmission
systems to optimize their availability for power production from
geothermal and other renewable resources.
Just this week, the Departments of the Interior and Energy issued a
report entitled Assessing the Potential for Renewable Energy on Public
Lands. This is an important and positive step forward for agency land-
use planning efforts, and should provide important information for
state, regional and federal agencies that are undertaking transmission
planning. When the U.S.GS completes a new geothermal resources
assessment, we expect its findings will provide even more reliable
resource information for transmission planning purposes.
conclusion
Geothermal resources on the public lands can contribute
significantly to our Nation's energy supplies. Solid progress is being
made through the initiatives of the White House, Secretary Norton and
Secretary Abraham to achieve the expanded use of our geothermal
resources. Congress' support for these efforts, and for funding these
efforts, will be critical to their success.
We urge this Committee to consider amendments to the Geothermal
Steam Act that will build upon the Administration's efforts. These
amendments could help streamline the existing law, and ensure that the
resources are available to eliminate the backlog of leasing and
permitting decisions, and to complete a new national geothermal
resource assessment.
Geothermal energy can help address the critical energy problems of
our Nation. With the tax, regulatory and legal changes we have
discussed, there would be a dramatic revival in the use of geothermal
energy use for electric power production, greenhouse heating,
aquaculture, and other purposes. This would reduce our dependence upon
foreign oil, reduce our spiraling demand for natural gas, and provide a
substantial and immediate stimulus for the economy.
Thank you.
______
Statement of Roger Zion, Honorary Chairman, 60 Plus Association
In 1973, I served as the Chairman of the House Republican Task
Force on Energy and Resources.
I gave a speech on the House floor in which I said: ``If we don't
make maximum used of domestic energy sources, we will be held up by the
Arabs and our National Defense will be threatened.'' At that time we
were importing 35% of our oil. Now it's over 60%.
As the 108th Congress resumes debate on comprehensive energy
legislation we believe that the following issues must be addressed:
The U.S. must increase its domestic production of natural
gas.
Congress should also enact legislation to streamline natural
gas pipeline construction to enable gas to enter the mid-
continent and Northeastern markets, enhance gas supply and
distribution capabilities, and relieve system constraints.
The Inupiat Eskimos of Alaska have this to say, ``In 1969, when oil
was first discovered on our lands, we sought for self-determination in
order to be able to protect our resources. Since then, we have had over
twenty years of working with the oil industry here. We enacted strict
regulations to protect our land and the oil companies have consistently
met the standards we imposed.''
The Arctic Natural Wildlife Refuge provides a valuable source of
domestic petroleum that significantly enhances the national security of
the United States.
Political instability in the oil producing regions of the world,
particularly the Persian Gulf area, creates considerable uncertainty
regarding the reliability of imported sources of oil. As part of a
sound national energy policy, it is imperative for the federal
government to refrain from restricting development of domestic supplies
in cases where the necessary resources are amenable to commercial
development.
______
Statement of Dr. Rollin D. Sparrowe, President,
Wildlife Management Institute
introduction
Mr. Chairman, I write to you on behalf of the Wildlife Management
Institute (Institute) to express our concerns regarding the orderly
development of energy resources on public lands. Our Institute,
established in 1911, is staffed by professional wildlife scientists and
managers. Its purpose is to promote the restoration and improved
management of wildlife and other natural resources in North America. We
commend your Committee for initiating this dialog and for attempting to
address the social, economic and environmental impacts of energy
development. We are concerned that the seriousness of the impacts
energy development may have on wildlife and other natural resources may
be underestimated, and we urge your Committee to lay the groundwork
that will lead to a plan for long-term and orderly development of
energy resources with the least amount of impact on wildlife and other
natural resources. We request that our written testimony be included in
the record of the hearing to examine issues related to energy
production on federal lands held on February 27, 2003 by the Senate
Energy and Natural Resources Committee.
Our Institute believes exploration and development of energy
resources may seriously impact wildlife and other natural resources.
Though many site impacts are not fully understood, it is clear that
energy development projects represent a major hazard to wildlife in
some of the nation's most imperiled habitats. For example, it is
estimated that coalbeds already provide at least six percent of the
nation's natural gas, and geologists predict that contribution could
double as new fields are developed. Potential coalbed methane (CBM)
deposits exist in widespread locations in Alabama, Arizona, Colorado,
Indiana, Illinois, Iowa, Kansas, Kentucky, Michigan, Montana, New
Mexico, Oklahoma, Ohio, Pennsylvania, Texas, Tennessee, Utah, West
Virginia and Wyoming; and there are thousands of proposed CBM
development projects across the United States. The process of
extracting methane gas from coalbeds involves de-watering the saturated
coal beds to reduce pressure that traps methane vapors. Once the
pressure is released, well rigs extract the liberated gas. This process
results in huge amounts of water of varying quality being brought to
the surface at each well site. This massive amount of ground-water
removal can negatively influence amount and quality of important
underground aquifers. In addition, infrastructure, including roads,
pipelines, and electrical power to support CBM extraction, also
threatens wildlife habitats and movements among those habitats. Often
thousands of miles of roads, pipelines and powerlines are needed to
fully develop CBM deposits, which increase the fragmentation of already
modified wildlife habitats. We are concerned over the lack of reliable
estimates regarding the impacts these proposed developments will have
on wildlife and other natural resources.
A responsible approach to energy development must include a more
comprehensive program to manage fish and wildlife. Neither the Bureau
of Land Management or Forest Service, nor the individual states
involved have the data or staff and money to do all the work necessary
to take care of renewable fish and wildlife resources, considering the
pace and magnitude of proposed and future developments.
We hear from energy companies, the Administration, and many in the
Congress that we must remove restrictions on exploration, development
and operations and open new areas--without specifying which ones.
Please keep in mind that these mule deer, elk, and pronghorn are
important wildlife populations that support local businesses and
culture, and whose recovery from past over-exploitation at the turn of
the century was paid for over the past 65 years by sportsmen's dollars.
It is simply unfair to expect American sportsmen and women to foot the
bill to recover wildlife populations a second time.
We are not opposing orderly development of energy resources to meet
our country's needs. However, not all of the restrictions on energy
development are products of last minute decisions of the departed
Administration. In fact, many of them occurred over several years, with
lots of input from wildlife and fisheries organizations. Neither the
Congress nor the Bureau of Land Management should make hasty decisions
to roll back processes and procedures currently used to conserve
wildlife while development occurs.
Decisions on energy development should be made carefully, based on
specific consideration of geographically distinct areas and impacts on
wildlife populations and their seasonal ranges. So far, wildlife
interests are not at the table as discussions occur about plans and
proposals to open important more exploration. Recent hearings in the
Congress on developing our energy reserves have not included invited
testimony from any and fish interests. Also, planning for accelerated
development with energy producers has not included our interests.
Representatives from the Fish, wildlife, ranching and energy
communities met in June 2002 to share concerns and began an overdue
dialog. The Department of the Interior helped support the dialog, which
prompted another meeting on March 5, 2003 to focus on the needs of big
game herds. We are hopeful that this dialog will result in specific
recommendations for their welfare.
The problems that would be caused by precipitous action on existing
protections for wildlife are shared not only by hunters and anglers.
For example, rural towns in the Green River Basin of Wyoming tell us
that half of their annual income is collected during hunting season to
motels, restaurants, grocery stores and the like. The Fish and Wildlife
Service's 2001 National Survey of Hunting and Fishing indicates that
annually $1.8 billion in retail sales and 43,000 jobs are realized by
the states in the Northern Rocky Mountains from hunting alone; add
fishing and observing wildlife, and the value is about three times that
figure. It is important to note that these are long-term, substantial
benefits that accrue regularly to local communities only if wildlife
and their habitats are secure. Local people will need to rely on
wildlife and fishery resources to sustain their local economy and
culture long after energy development is gone.
Accelerated energy development must be done with much more
attention to detail, and careful evaluation of costs and benefits, than
is evident in much of the recent dialogue. Importantly, organizations
representing hunters and anglers have a lot to offer that has not yet
been used by government or the Congress. The diverse array of wildlife
and fishery organizations can provide evaluation and analysis of
important resource values, and we are ready to help. The generalized
calls to ``open things up'' must get back to reality and deal with
specific, geographically identified areas to which we can all relate.
We suggest a reasonable platform for the consideration of energy
development on public lands: (1) development and production of energy
on public lands should be conducted with as much care as such
development on private lands; (2) renewable resources such as mule deer
and cutthroat trout require equal consideration under law along with
mineral extraction; (3) scarce hunter and angler dollars from excise
taxes should not have to pay to monitor the effects of development nor
fund remedial action, but those tasks must be done and paid for as a
required cost of development; and (4) where development occurs, it must
be authorized carefully on a site by site basis with specific attention
to the fish and wildlife resources.
the key question for the future
The real question is: at what cost do wildlife and fish adapt to
further intrusions on the landscape? Neither wildlife managers nor the
energy industry has the answer, and BLM as the responsible agency for
energy development has not been willing to consider the large issues of
incremental effects and habitat fragmentation. The issue in most cases
will not be that a single road or a single development or a single
industry should be blamed for its effects on wildlife. Our mule deer,
elk, pronghorn and sage grouse have been affected by roads, fences,
ranching and farming, towns, second home development and long-term
reduction in habitat quality. Migratory herds in Wyoming live on the
National Forest in summer where accelerated development is proposed,
and migrate over 100 miles to the sage desert where accelerated
development already is underway. Can they persist as we know them with
major changes on all parts of their annual range? Herds of elk that
previously migrated even further from Jackson Hole to the sage deserts
along the Green River can no longer do so because of those multiple
influences. At some point the next new activity will be the one that
leads to a potential irreversible reduction in the ability of some of
these herds to survive and certainly to sustain the current level of
public use and local economic benefit.
A critical need for coping with these changes as they occur is for
effective, science-based monitoring to answer specific questions. Many
of the potential effects of accelerated energy development are subtle,
long term in nature, and difficult to measure. This results in a
continuing standoff where wildlife managers say ``look at those roads,
structures and activities, they have to have an impact'', and
development interests say ``look at those wildlife standing around the
structures, they don't care at all''. Our wildlife and fish resources
cannot stand this impasse while development occurs.
Energy and mineral exploration and development involve significant
outlays of funds by state wildlife, fish and natural resource
management agencies for environmental studies, planning, development,
monitoring, mitigation and management of fish and wildlife resources.
State wildlife, fish and natural resource management agencies are
funded primarily through permit and license fees paid to the states by
the general public to hunt and fish, and through federal excise taxes
on equipment used for these activities. Revenues derived from sales,
bonus bids, royalties, and rentals under the mineral leasing laws of
the United States are paid to the United States Treasury through the
Minerals Management Service of the Department of the Interior, yet none
of these revenues are returned to the states specifically to manage the
impacts of energy and mineral exploration and development on the
wildlife, fish and other natural resources for which they are
entrusted.
We propose a wildlife and fish funding concept for your
consideration. Revenues from energy development are substantial and
likely to increase, and those already collected from onshore oil and
gas producers that go into the U.S. Treasury offer a logical source of
funding for wildlife. This wildlife and fish funding concept would not
interfere with the revenues that go to the states or elsewhere. The
funds designated for wildlife and fish in proportion to the development
activity would go back to the states to fund programs designed to
manage these wildlife for monitoring and evaluating impacts, and for
habitat protection and enhancement of fish and wildlife populations
influenced by development. In this manner, the long-term nature of
development and necessary active management can be accommodated. All
appropriate property rights and other concerns could be dealt with
directly in legislation. We envision distribution of funds proportional
to the amount of development occurring in each state involved in
onshore production.
In conclusion, Mr. Chairman, we urge your committee to provide
leadership on this important nationwide issue. A wide array of wildlife
and fishery organizations and our hunters and anglers across America
have a stake in the outcome of any decision to accelerate energy
development on public lands. It is not enough to proclaim that energy
development can occur in all areas in an environmentally sound manner.
Some areas are so important, and the alternatives for wildlife in harsh
climates are so few, that such sweeping statements likely are
incorrect. There is not the current knowledge base that will allow such
action to be taken and still assure that wildlife will be sustained,
unless a long-term investment is made for the welfare of affected fish
and wildlife. We suggest that implementing this funding concept would
reflect positively on the Congress, Administration and the energy
industry. It would bring the solutions back to the states where the
issue arose.
Thank you very much for considering our view on this important
nationwide issue. We look forward to working with your Committee on
this matter, and we are available at your convenience to discuss our
concerns and recommendations. I am available at (202) 371-1808, as is
Terry Z. Riley, our Director of Conservation.
______
Statement of The Lincoln Heritage Center for
National Security Studies, Evansville Indiana
The Lincoln Heritage Center for National Security Studies urges the
United States Congress to approve leasing the Arctic National Wildlife
Refuge for commercial production of oil.
summary position
The Arctic Natural Wildlife Refuge provides a valuable source of
domestic petroleum that significantly enhances the national security of
the United States.
Political instability in the oil producing regions of the world,
particularly the Persian Gulf area, creates considerable uncertainty
regarding the reliability of imported sources of oil. As part of a
sound national energy policy, it is imperative for the federal
government to refrain from restricting development of domestic supplies
in cases where the necessary resources are amenable to commercial
development.
The role of the federal government should be limited to proper
execution of leases, in particular assuring that leases be granted at
fair market value, and enforcing existing statutes to assure orderly
development and compliance with legal standards for environmental
protection.
The accompanying position paper describes the rationale for this
recommendation.
This position paper is produced by the Lincoln Heritage Center for
National Security Studies (hereafter the Center). It is intended to
support the Center's position in favor of opening the Arctic National
Wildlife Refuge for commercial development.
introduction
The Arctic National Wildlife Refuge (hereafter ANWR) is an area
encompassing 19 million acres in northeastern Alaska. Its status as a
wilderness refuge wad established in 1980 by the Alaska National
Interests Lands Conservation Act. The coastal plain area, encompassing
1.5 million acres, is one of the most promising onshore areas for oil
exploration in the United States. Located approximately 75 miles east
of the Prudhoe Bay commercial development, the coastal plain is
potentially accessible to the Trans Alaskan Pipeline System. Estimates
of total ANWR reserves range from 7.0 billion barrels to 13.8 billion
barrels. By comparison, the total potential capacity of the Prudhoe Bay
operation is estimated to be 10 billion barrels.
In 1987, the U.S. Department of the Interior, in an assessment of
ANWR's economic potential, estimated the probability of successful
commercial development to be 0.19.\1\ The study projected that oil
operations would affect less than one percent of the coastal plain
area. After determining that development could be managed in such a way
that adverse effects on wildlife and the environment would be sustained
at acceptable levels, the Secretary of the Interior recommended full
scale leasing of the ANWR coastal plain for commercial development.
That action requires approval by a vote of the U.S. Congress.
oil as a resource in the u.s. economy
Petroleum and natural gas account for 65 percent of the U.S. energy
supply. Domestic production of oil totaled 5.7 million barrels per day
as of November 2002, an amount that includes 0.97 million barrels per
day from Alaskan production. As a consequence of domestic production,
the United States derives approximately 40 percent of its oil supply
from American sources. The remaining 60 percent share of imports is
distributed as follows: Canada, 10.6 percent; Saudi Arabia, 8.6
percent; Venezuela, 8.2 percent; Mexico, 8.0 percent; United Kingdom,
3.0 percent; Nigeria, 2.9 percent; Norway, 1.6 percent; Russia, 1.5
percent; Angola, 1.3 percent; Algeria, 1.2 percent; and all others
(none exceeding 1.2 percent), 12.9 percent. The sum of all Persian Gulf
sources accounts for 10.9 percent, and the sum of all sources within
the Organization of Petroleum Exporting Countries (OPEC) accounts for
23.7 percent.\2\
These data establish the relative diversification of import sources
for American oil. In particular, the U.S. is not strongly reliant on
any individual supplier from the Persian Gulf or OPEC. The Centers
advocacy of ANWR leasing therefore does not rest on the objective of
relieving its ``dependence'' on any single foreign supplier. Rather,
the ANWR development offers potential to further increase
diversification in the portfolio of potential energy sources, thereby
reducing the risk associated with future supply disruptions. The
significance of ANWR is that it will be relatively free of the
vicissitudes of geopolitical instability both present (Venezuela, Iraq)
and future (Saudi Arabia, Iran) among America's sources of supply.
anwr leasing as a venture of the private sector
The defining principle of American civilization is its embrace of
political and economic freedom. The culture of free enterprise, based
on protection of private ownership, restrained government, and the rule
of law, has produced the most dynamic and prosperous economy in
history. It is the Center's position that the proposed leasing of ANWR
should not be an exception. Applied to the ANWR development, the
principle of freedom requires developers to pay fair market value for
leasing rights, using capital provided by private investors.
Since the 1980's the price of oil has been determined in the world
commodity market. Oil prices are the outcome of powerful forces that
transcend the influence of any single country. The commercial potential
of ANWR, depends on the long-term price. Powell (1991) estimated that
the economic success of ANWR would require a price in excess of $20 per
barrel.\3\ It is the Center's position that the price contingency is
for private investors to deal with. An important reality is the
relative cost disadvantage of Alaskan oil. Chapman and Khanna (2001)
estimate that the average per-barrel production cost of Persian Gulf
oil equals $2.50; the comparable cost for Alaskan oil is $15.\4\ The
best prospect for ANWR development rests on free market forces that
determine the market price. The prospect of higher prices appears to be
present, due to unstable political conditions among the world's leading
producers. Current instability exists in Venezuela and Iraq. Conditions
for future unrest exist in Saudi Arabia, where popular resentment of
the Saudi royal family is increasing, and Iran, where dissent is
mounting against the ruling Islamic theocracy. The possibility of
political instability not only increases the prospect of ANWR as a
successful economic venture, but also highlights the need for
additional sources of petroleum for the American economy.
In the event that future world events cause disruptions in oil
supply, the optimal government policy is to encourage domestic supply.
The current restriction of ANWR development constitutes a major
obstacle to supply. If development is allowed to proceed, it will
mitigate price increases in the U.S. market. However, the extent of
ANWR reserves is not sufficiently large to offset major supply
disruptions. In that event, the optimal policy is to allow the forces
of free markets to stimulate conservation on the part of buyers. There
is a history of significant conservation in the U.S. During the past
two decades, real Gross Domestic Product has increased 75 percent,
while energy consumption has increased 25 percent. The relative decline
in energy consumption was occasioned by higher energy prices in the
1970's and 1980's.\5\ In addition, significant price increases will
have the effect of stimulating development in alternative fuels, such
as coal gasification and derivation of petroleum from oil shale and tar
sands.\6\
In summary, it is increasingly clear that future episodes in the
world oil market will result from powerful forces that defy the control
of any individual country. The most rational way to face future is
apply the time-honored lessons of free markets. The Center's position
is that those lessons instruct us to proceed with private development
of the ANWR coastal plain.
environmental concerns
The Center shares with all concerned Americans a desire to assure
the environmental protection of the ANWR coastal plain. It is in
America's best interest to take all reasonable steps to minimize the
environmental impact of exploration and drilling. The Center regards
environmental protection in all aspects of U.S. energy policy to be an
important issue of national security and public health.
Existing federal law requires petroleum companies to protect the
environment during oil and gas operations on federal land. An example
is the Marine Mammals Protection Act, which protects polar bears in the
North Slope area of the Prudhoe Bay operation. Evidence of success in
wildlife preservation is found in the population of the Central Arctic
caribou herd, which has increased from an estimated 3,000 in the 1970's
to more than 23,000 today.\7\ The Center's position is that in the case
of ANWR development the federal government should enforce existing
environmental statutes.
Recent developments in petroleum technology have improved the
prospects for environmental protection. Improvements in transportation
methods and containment of residuals and wastes have combined to
minimize impacts on the Arctic surface and the underlying permafrost.
New advances in extraction technology include horizontal drilling,
which permits exploration and recovery in subsurface areas that are far
removed from the wellhead. Using directional technology, it is possible
to develop 80 square miles from a single two-acre drill site.\8\ If the
Prudhoe Bay operation was developed from inception today, its
``footprint'' would be 64 percent smaller, drilling impact would be 74
percent smaller, roads would consume 58 percent less surface area, and
operating facilities would require 50 percent less space.\9\ An
illustration of the technical advance is the Alpine field in the North
Slope development, which uses 97 acres of surface area to produce
100,000 barrels per day from a field underlying 40,000 acres of surface
area.
There is abundant evidence that oil and gas production are
compatible with responsible environmental policy and protection of
wildlife. For example, the Audubon Society owns the Rainey Wildlife
Sanctuary in Louisiana, a preserve encompassing 26,000 acres that
provides habitat for an exceptional variety of wildlife. In addition,
the preserve contains substantial reserves of oil and natural gas. The
Audubon Society has permitted private production of the petroleum in
exchange for annual royalties, which in turn support the Society's
other activities. These actions of the Audubon Society, one of the
foremost advocates of wildlife protection in the United States, clearly
indicate the compatibility of petroleum production and environmental
interests.\10\
In summary, there is ample reason to believe that ANWR development
can proceed without violating the environmental integrity of the
coastal plain area. Recognizing that the federal government controls
one third of all land in the U.S., including 322 million acres in
Alaska, the encroachment caused by development of ANWR is miniscule by
any standard of measurement. Opponents of ANWR development might argue
that any commercial presence in the coastal plain, however small, is
not acceptable. The Center's position is that the benefits in terms of
national and economic security exceed the modest environmental costs by
a substantial margin.
notes
1. Clough, N.K. P.C. Patton, and A.C. Christiansen, editors (1987).
``Arctic National Wildlife Refuge, Alaska, Coastal Plain Resource
Assessment.'' Washington, D.C: U.S. Fish and Wildlife Service, U.S.
Geological Survey and Bureau of Land Management.
2. United States Department of Energy, Petroleum Supply Monthly,
December 2002.
3. Powell, S.G. (1991) ``A Risk Analysis of Oil Development in the
Arctic National Wildlife Refuge''. Energy Journal, Vol. 12, Issue 3,
pp. 55-77.
4. Chapman, D., and N. Khanna. (2001) ``An Economic Analysis of
Aspects of Petroleum and Military Security in the Persian Gulf . . .
Economic . . . Vol. 19, No.4 (October), pp. 371-381.
5. Brown, S.P. (1996) ``Directions of U.S. Energy Conservation and
Independence' Business Economics (October), pp. 25-30.
6. Chapman, D., and N. Khanna. (2000) ``World Oil: The Growing Case
for International Policy''. Contemporary Economic Policy, Vol. 18, No.
1 (January), pp. 1-13.
7. Lee, D.R. (2001) ``To Drill or Not to Drill: Let the
Environmentalists Decide''. The Independent Review, Vol. VI, No.2
(Fall), pp. 217-226.
8. American Petroleum Institute: www.api.org (2003) ``Exploring for
Oil and Gas.''
9. American Petroleum Institute: www.api.org (2003) ``Exploring for
Oil and Gas''.
10. The Audubon Society has adopted a position in opposition to
development of ANWR. For a discussion of this point, see Lee, D.R.
(2001) ``To Drill or Not to Drill: Let the Environmentalists Decide''.
The Independent Review, Vol. VI, No.2 (Fall), pp. 217-226.